easyJet To Establish Lisbon Base

Luton based low-cost carrier easyJet has announced that it will create its latest base in the Portuguese capital of Lisbon. The new base is slated to open in winter 2011.The Hub looks at why easyJet has chosen Lisbon and evaluates markets of potential interest.

THE LISBON MARKET

easyJet's decision to base up to seven A319 aircraft in Lisbon in winter 2011, will see the carrier able to develop a number of new routes. Lisbon will become easyJet's 20^th base, its first in Portugal. Already operating nearly 100 weekly flights, and according to November flightbase data, to 16 scheduled destinations. easyJet has established itself as the second largest operator in the Lisbon market, second only to the national airline of Portugal, TAP.

TAP largely dominates the Lisbon market operating 66% of scheduled weekly flights, with easyJet 8% (Flightbase 14-20 November, 2010)

easyJet operates some non-based flying from Lisbon with services to Toulouse, Barcelona and Funchal. Lisbon is still largely dominated by flag carriers as the table below demonstrates;

Source: Flightbase 14-20 November, 2010

With the exception of easyJet, there is limited low-cost presence in the Lisbon market. Vueling operates a twice-daily from Barcelona, Germanwings a six-weekly from Cologne and Blue Air, a twice-weekly from Bucharest Baneasa. With the low-cost operators having a small presence in Lisbon, easyJet's developing business model will allow it to continue to grow and create new routes as it continues to focus its model on major airports. With bases outside the UK in capital city markets such as Rome, Madrid and Berlin, Lisbon will allow easyJet to chase the higher yields on offer in Lisbon.

WHY EASYJET HAS CHOSEN LISBON AS ITS LATEST BASE

easyJet will be able to provide volume into the Lisbon market and will deliver new routes with the basing of aircraft from winter 2011. With TAP still 100% government owned, the low-cost presence in Lisbon has naturally been low as low-cost operators have struggled to obtain the type of incentives needed for significant growth. It would appear, however, that a mutually beneficial deal has been struck between ANA and easyJet.

Lisbon is an interesting choice of location for easyJet's latest base. It has the ingredients for a good base, providing two-way traffic from numerous European destinations, and is not dependent on one core market, in the way that Faro could be viewed. Lisbon can still be viewed as a seasonal market however there does not appear to be a huge variation in yield between winter and summer. Business class passengers only account for about 8-10% of the total market indicating that the Lisbon market is comfortable with the all economy cabin, so there will not be much trade down to economy class.

TAP PORTUGAL NETWORK

With easyJet adding up to seven based aircraft, TAP Portugal will have concerns over the impact that easyJet will have on its short haul network. With TAP providing a strong Latin America and African network for Star Alliance, it nevertheless, also has a strong network within Europe with 43 destinations served in Europe (Flightbase 14-20 November).

easyJet currently competes with TAP Portugal on eight destinations from Lisbon; Barcelona, Rome, Funchal, London Gatwick, Lyon, Madrid, Toulouse and Geneva. It is likely that easyJet will now provide more competition to the TAP network. Whilst markets such as Warsaw and Moscow Domodedovo will not be served by easyJet, TAP could well face competition on strong markets where it has a stranglehold in the market, as well as operating new unserved destinations.

WHERE COULD EASYJET FLY?

easyJet will continue its join the dot strategy of liking markets where it already has a presence. Lisbon will offer opportunities for Spanish connections which will help maintain revenue productivity and schedule efficiency on short sectors.

Prague would be an interesting choice for easyJet, currently only served by TAP on a four-times weekly basis, there appears to be pent up demand on the route with IATA BSP data demonstrating that over 60,000 O+D passengers flew the route between July 2009 and 2010. TAP has a 64% share of the market, coupled with CSA Czech Airlines focusing on eastern markets, Prague could be a good choice for easyJet.

Nice would be a strong candidate for easyJet service. A strong easyJet market, TAP currently operates a double daily service from Lisbon and between July 2009 and 2010, over 46,000 O+D passengers flew the route and this market would provide strong two-way traffic with a mix of leisure and business.

In terms of potential for unserved markets, Athens could be an interesting opportunity for easyJet. easyJet currently serves Athens from six markets. With an annual O+D market from Lisbon of over 40,000 passengers, travelling primarily with Iberia, (34% of market flew with Iberia), there is certainly scope for new non-stop service.