Airlines implement strategies to compete with low cost carriers
Analyst Insight by Olivier Hofmann.
The sale of Spanair by SAS is the latest strategy implemented by a major airline in the growing battle between low cost carriers and legacy airlines, according to Euromonitor International.
Both SAS and Marsans, a potential buyer for Spanair, are undertaking serious steps to counter the increasing threat from low cost airlines.
Angelo Rossini, European Research Analyst from Euromonitor International comments, “SAS has decided to face the competition by concentrating its resources on its core Northern European market. Conversely, the Marsans Group has decided to turn to the more profitable long haul market where it does not need to face competition from low cost carriers”.
Low cost carriers are witnessing booming growth, with global sales increasing by a staggering 250% between 2001 and 2006, according to Euromonitor International's newly published research, generating US$42.7 billion of the total US$443.6 billion global market.
| Growth of global airline industry value sales |
| 2001-2006 | % |
| Schedule | 36.4 |
| Charter | 18.1 |
| Low cost | 250.6 |
| Total | 43.4 |
| Euromonitor International |
Spanair set to compete with Iberia
Gonzalo Pascual, president of Spanair and owner of Marsans Group, announced that he will present an offer to buy 100% of the Spanish airline. This deal would enable the airline to compete for long haul flights with Iberia, rather than competing with low cost carriers. Euromonitor's Rossini comments, “Pascual's strategic plans see Spanair playing an important role in the expansion of his group in Latin America, which he is already rolling out in the region through the other airlines owned by the group, Air Comet and Aerolineas Argentinas”. According to Rossini, “The objective of the Marsans Group is to become Iberia's main competitor on flights between Europe and Latin America”.
Spanair currently accounts for 14.8% of value sales within the Spanish airline industry, while Iberia accounts for a 62% share.
| Airlines in Spain - % share of value sales |
| 2001-2006 | % |
| Iberia | 62.0 |
| Spanair | 14.8 |
| Air Europa | 8.2 |
| Vueling Airlines | 3.4 |
| Futura International Airways | 3.0 |
| Others | 8.7 |
| Total | 100 |
| Euromonitor International |
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