We're All Going on a Summer Holiday! Impact of the Low-cost Scheduled Airlines on Charter Operations and the Inclusive Tour Holiday Market
N Dennis, University of Westminster, UK
This paper examines the impact of low-cost airlines on holiday markets between the UK and Europe. Cost and pricing factors are analysed along with trends in demand and passenger characteristics. Future prospects for charter operators are discussed.
The initial focus of the low-cost scheduled airlines in Europe (such as Ryanair and easyJet) was on short distance routes with a business, short breaks or visiting friends and relatives (VFR) focus. These destinations were historically the preserve of the traditional scheduled airlines with high average fare levels. In the last few years however, the low-cost carriers have encroached on the inclusive tour holiday market by launching scheduled services to holiday centres in the Mediterranean and Alpine regions and also lake resorts in Eastern Europe.
In their heyday, charter airlines accounted for one-third of total UK air traffic (and two-thirds at airports other than Heathrow). This is a position not far removed from that enjoyed by the new wave of scheduled low-cost carriers today. The charter airlines have always been some of the lowest cost providers of air travel. The cost differentials between the charter and low-cost scheduled airlines are assessed and it is demonstrated that the low-cost airlines cannot achieve much advantage. Their main selling point is greater flexibility. They may also have employed a higher level of differential pricing than is effectively applied to the air component of package holidays. Growing experience of international travel coupled with the spread of the internet means many passengers are now able to book travel independently.
Tour operators have reacted by expanding into long-haul markets and offering flight or accommodation only bookings, while making use of scheduled flights as well as charters for their package arrangements. Nevertheless, 16 million British people continue to take a traditional package holiday each year - a figure only 1 million below the peak recorded in 2001/02 and more than in any year of the 1990s. It is the growth in the market that has gone elsewhere. This paper aims to trace the shift between charter and low-cost scheduled airlines in the UK-Europe leisure air travel market and identify some of the geographic, commercial, economic and sociological factors that lie behind the headline figures. UK CAA traffic statistics are used along with International Passenger Survey data on journey purpose, seasonality and length of stay. The extent of diversion versus new trip generation is investigated (e.g. through second home ownership, more short breaks or a shift from surface modes).
It appears that the low-cost airlines have enabled the more affluent part of the population to take additional holidays abroad each year. As air travel becomes a smaller proportion of the total holiday cost then there is less of a penalty from making more frequent trips of shorter duration. Many people still travel rarely or never by air however. The declining importance of the business market has also changed the product priorities. Frequency and schedule are becoming increasingly irrelevant from many regional airports as the leisure market is driven primarily by price - which necessitates larger aircraft rather than convenient timings. This is further reflected in the shift of passengers between UK airports. Dramatic growth at many of the secondary and regional airports is not necessarily newly generated traffic but a re-allocation from airports which are capacity constrained (such as Heathrow and Gatwick) or perceived to offer more expensive services (Manchester, Birmingham, Glasgow). It is likely that much of the growth in demand would have taken place anyway and been carried on traditional scheduled and charter airlines from major airports in the absence of the low-cost alternatives.
N.B. This paper could also be suitable for the Leisure and Tourism Transport Committee.
Association for European Transport