Vueling develops first foreign base in Paris

Welcome back Barbara! Five years after Cassani ‘retired’ from the airline business folowing easyJet’s acquisition of Go in May 2002 she’s back as the boss of an LCC. Following her recent appointment to the Vueling board, earlier this week it was announced that Cassani would be taking over as Board President after the resignation of several Board members over ‘managerial differences’.

Since mid-May Barcelona-based LCC Vueling has had three A320s based at Paris CDG. The airline, which celebrated its third anniversary at the beginning of July, is Europe’s fastest growing LCC with traffic up 79% in the first half of 2007 to 2.5 million passengers. The Paris base is the airline’s third after Barcelona and Madrid and its first outside Spain. A fourth base at Seville opens in December.

Vueling has served the Paris market since it launched in 2004 when it offered daily flights to Barcelona and Valencia. Madrid was added in December 2005 and Santiago de Compostela in September 2006. During this summer another eight destinations were started including flights to non-Spanish destinations such as Amsterdam, Milan, Rome and Venice.

Three more routes for winter; Amsterdam doubtful?

Starting at the end of October there will be two further new routes to Bologna and Granada (each operated four times weekly) and a thrice-weekly service to Jerez begins in December. Only on routes to Granada and Santiago de Compostela does the airline not face competition in the Paris market as the following table shows.

In addition to the competition listed above there are also services from the main Paris airports to Milan Linate and Rome Ciampino. Not to be ignored are the alternative flights that Ryanair offers from Paris Beauvais (BVA) to Alicante, Barcelona Girona, Madrid, Milan Bergamo, Rome Ciampino, Valencia and Venice Treviso.

Apart from competing against flag-carriers such as Air France, Alitalia, KLM and Iberia, Vueling also lines up against other LCCs such as Click Air, easyJet and MyAir.

For the winter season Vueling has upped its frequency to Barcelona from three flights per day to five flights per day as Valencia frequency is reduced from double-daily to daily. The fate of the daily Amsterdam service is currently unclear as it is only bookable to the end of the summer season.

Rapid growth impacts profitability

Vueling’s rapid growth is not helping its financial situation. In the first half of 2007 revenues were up only 57% despite traffic being up 79% thus reflecting a decline in average fares. In the second quarter of 2007 average fares were just €39.71 down 23% on the previous year. Despite ancillary revenues of over €20 per passenger revenue per passenger fell 12% from €68.01 in 2006 H1 to €59.88 in 2007 H1.

Average load factors of 70% for the first six months of 2007 are around 10 percentage points lower than for Vueling’s more mature low-cost rivals, but still an improvement on last year’s 67%. Overall net income worsened from a €6.5 million loss in 2006 H1 (-6.9% net margin) to a €33.7 million loss in 2007 H1 (-22.5% net margin). The launch of the Paris base contributed to a 179% increase in advertising to nearly €15 million, or around €6 for every passenger flown during the period.

Recent changes have seen the appointment of Barbara Cassani (former CEO of Go) and Jacques Bankir (former CEO of City Regional in France) to the Board Of Directors. Earlier this week it was announced that Barbara Cassani would be taking over as Board President after the resignation of several Board members over ‘managerial differences’. It is five years since Cassani ‘retired’ from the airline business after easyJet’s acquisition of Go in May 2002. Welcome back Barbara!

Source: airliners.net Vueling in Paris: Apart from competing against flag-carriers such as Air France, Alitalia, KLM and Iberia, Vueling also lines up against other LCCs such as Click Air, easyJet and MyAir. Not to be ignored are the alternative flights that Ryanair offers from Paris Beauvais (BVA).