Europe’s Top Airlines Squeezed by Emirates-Ryanair Growth

European network carriers including Air France-KLM Group and Deutsche Lufthansa AG face a heightened challenge from both local discount airlines and Gulf operators serving routes to Asia, analysis by Amadeus IT Holding SA shows.

Low-cost carriers led by Ryanair Holdings Plc lifted their share of European traffic 4 percent to 38 percent in 2012, while travel from Europe to Asia via the hubs of Emirates, Qatar Airways Ltd. and Etihad Airways PJSC grew 20 percent, according to data from Madrid-based Amadeus’s global booking system.

Air France, Lufthansa and Iberia of Spain are among former flag-carriers revamping short-haul operations in an effort to end losses and stave off the advances of Ryanair and its peers. Cologne-based Lufthansa said last month it might also establish a low-cost operation to Asia in response to airlines that have exploited the Gulf’s geographical position to grab a growing share of lucrative inter-continental transfer traffic.

“These figures are quite worrying for the network carriers,” said Yan Derocles, an analyst at Oddo Securities in Paris with a “neutral” rating on Lufthansa and IAG SA, parent of Iberia and British Airways, and a “buy” on Air France-KLM. “They’ve begun to take action in Europe, where the challenge is crystal clear, but they’re going to have to do more to maintain market share in long-haul, which has been quite profitable.”

More Competition

Low-cost penetration is greatest in Europe, according to Amadeus. The nations there with the highest proportion of departing passengers using discount airlines are Spain, on 57 percent, and the U.K., home country of EasyJet Plc and the location of Ryanair’s biggest base, with 52 percent.

In the long-haul market, Gulf airports in Dubai, Doha and Abu Dhabi have already grabbed a 15 percent share of air traffic from Europe to the Asia-Pacific, according to the report.

“The Middle East airlines have been successful at delivering high levels of service to cater to the needs of premium passengers,” Cyril Tetaz, Amadeus’ head of marketing, said by e-mail.

While IAG’s British Airways has maintained some room for maneuver by recruiting Qatar Airways to its Oneworld alliance, Air France-KLM and Lufthansa will “have to fight” to stave off the Middle Eastern challenge, Oddo’s Derocles said.

Airlines everywhere face heightened competition, Amadeus said, with 38 percent of total traffic involving routes served by four or more airlines, rising to 75 percent in Asia, where 27 percent of travel involves markets with at least five carriers.

Only 35 percent of traffic worldwide is on routes with one or two operators -- a four-point drop in the past two years -- falling to 25 percent in Asia.

Seven of the world’s 10 busiest routes by passenger volume are in Asia, according to the report, with the globe’s busiest link being between the South Korean island of Jeju and Seoul, followed by flights between Sapporo, Japan, and Tokyo.

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