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Home / Business / Companies / Airlines

Budget air fares make a reality of one Europe

By Vernon Silver
27 Feb, 2007 04:00 PM7 mins to read

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KEY POINTS:

Andrzej Majewski, a Pole who works as a thoracic surgeon in England, catches a ride to the airport in Wroclaw on Sundays and hops a Ryanair flight to his hospital in Nottingham. Most Fridays he commutes home to southwest Poland. The flights cost him about $70 each way.

"It takes about three hours and I'm eating lunch at my house," he says.

Dublin-based Ryanair, Europe's biggest budget airline, and its main rivals, EasyJet and Air Berlin, are drawing a new map of how people and money travel in Europe.

Fares as low as €1 ($1.85) plus tax encourage workers to jump borders for jobs, pump up real estate prices in France and - to the horror of residents of towns newly served by the carriers - spur British bachelors to shop for cheap beer and strippers in Prague and Riga, in Latvia.

No-frills airlines also let Europeans seek cut-rate health care in Malta, Poland and Spain. An implant and crown that cost $4600 in Britain go for $2600 in Poland.

Cross-border job commutes and international dental visits were impractical a few years ago. In July 2000, airlines ran five routes between Britain and Poland, serving Gdansk, Krakow and Warsaw. Poland joined the European Union in 2004. Last year airlines had 37 routes linking 10 Polish cities to 13 British airports.

Today's cheap air travel has its roots in the birth of the EU and the goal of a united Europe. Government officials wanted to phase out trade barriers and create a common economic market as Western Europe rebuilt after World War II. The 1957 Treaty of Rome formed the European Economic Community, which in 1992 became the EU. That year the airline industry was deregulated, allowing carriers from any member state to fly any route in the EU.

Ryanair, started in 1985 to fly between Ireland and Britain, jumped at the opportunity. Founder Tony Ryan, 71, and chief executive Michael O'Leary, 45, borrowed the low-cost tactics of Herb Kelleher, the CEO who built Southwest Airlines into the most profitable US airline.

Ryanair takes Southwest's no-frills mantra a step further. It makes money by charging for every imaginable extra - from $4.60 for a bottle of water to as much as $18.50 for each piece of checked luggage.

Ryanair keeps planes in the air where they make money. It pulls off 25-minute turnarounds at tiny, far-flung airports such as Treviso, Italy, outside Venice, and Beauvais Airport, 80km from Paris. It saves time by shuttling passengers through the front and back doors of a jet and encouraging them to race for unassigned seats.

Travellers love Ryanair's prices. The number of passengers surged 26 per cent to 34.8 million in the fiscal year ended last March 31. The increase helped profit jump 9.5 per cent to $570 million.

Ryanair's success is spurring changes in both Europe's airline industry and the way people live, says Guy Lerminiaux, a managing director at Petercam Asset Management in Brussels. "It's a transformation. They've made people much more mobile and opened up new countries."

But not everyone is happy with Europeans' unchecked mobility. People in countries newly served by budget airlines complain that British bachelor and bachelorette parties are taking over eastern European cities like Riga.

European Weekends, a Nottingham events co-ordinator, offers one package that features a "Soviet nurse banquet", with prices starting at $152 a person. That cost covers five shots of vodka, five female entertainers, a "lesbian nurse show" and a meal.

However, Britons with holiday properties abroad have been burned when airlines change the cities they serve.

From 2000 to 2005, Ryanair and other carriers flying from budget travel hub Stansted, just north of London, cut 65 routes. They added 123 new ones, reflecting a willingness to chuck unprofitable segments and go where the money is.

Ryan, who began his career in aviation by leasing planes to airlines through his Guinness Peat Aviation, has a history of shaking up air travel. He and his family founded Ryanair, starting with flights between Waterford in southeast Ireland and Gatwick Airport, south of London.

In 1990, five years after Ryanair's founding, Ryan and O'Leary visited Southwest Airlines' Kelleher in Dallas to learn how to profit from cutting frills. By the end of the year, they had begun overhauling Ryanair, scrapping free drinks and meals and rebranding it as a low-fare airline.

Today, at least two dozen budget airlines serve Europe and are the dominant carriers between Britain and other EU cities. No-frills airlines carried 51.5 million passengers in 2005, a 16-fold surge from 3.1 million in 1996.

O'Leary says his new competitors - "all these idiots starting up low-fare airlines," as he calls them - are doomed.

Many don't offer low-enough prices. And they've missed the boat on buying aircraft, which have to be ordered years in advance, he says.

"You're not going to survive in competition with Ryanair over the next several years," he warned rivals.

For Majewski, the Polish surgeon, Ryanair might as well be a commuter railroad. When Poland joined the EU, Britain gave Poles the chance to seek work in the country. Ryanair made cross-border job hunting practical by adding its first flights between the two nations that year.

"In Poland, I could make £500 to £700 ($1385-$1936) a month," says Majewski. "Here, it's 10 times better."

Commuting by air had never entered his mind until he was scanning the classified ads in a British medical journal. He spotted a hospital in Nottingham seeking a thoracic surgeon. "I sent my CV," he says.

He got the job and started in August 2005. At first, each time he went home to Poland, he had to drive south to London and catch a plane to Warsaw. From there, he'd commute five or six hours to Wroclaw.

Ryanair relieved Majewski's longing to be with his family seven months into the job when it started four weekly flights between Wroclaw and East Midlands Airport, about 20km from the hospital. Door to door, the trip takes at most 3 1/2 hours, he says.

As Majewski heads to Britain to work, planes flying in the opposite direction carry British investors and tourists to continental Europe. These travellers are snapping up holiday homes, aided by a pound that's worth about US$2.

The international influx is distorting the housing markets in the seaside villages and mountain hamlets newly served by discount airlines.

And some central and east European countries have already had it with foreigners, particularly stag and hen parties for the soon-to-be-married. Drunken behaviour has provoked local authorities and, in one case, intervention by British diplomats when a Briton urinated on the Freedom Monument in Riga on what happened to be a Latvian national day of remembrance for a World War I battle.

Three weeks later, the British Embassy in Riga cited the growth of low-cost airlines when it issued a notice on its website warning travellers to behave.

That hasn't stopped promoters such as European Weekends. Some packages include "mud fighting" from $110 a person, depending on whether two or four women will wrestle the men - and whether the women will wear bikinis or be naked.

But welcomed or not, the discount airlines and the changes they bring are linking the 27 EU member countries.

Jet-setting commuters like Majewski and, yes, bands of drunken revellers off to Latvia for a weekend, are further signs that the unification dreamed of half a century ago is becoming a reality.

- BLOOMBERG

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