You simply cannot have missed it. Germany has become the place to be for low-cost carriers: Ryanair flying to Cologne, easyJet sitting tight in Berlin and Hamburg, Vueling massively developing in Germany in general…
Media has tried to link this newfound interest to Germany’s status of growth engine of Europe. While certainly true, this explanation still misses the point. The reason why all the transporters choose Germany lie in two words: business travel.
How does the German front look like?
Before going deep into strategic considerations, let’s take a look at German aviation market. Repeatedly pictured as “dynamic” before 2010, it suffered however a relatively weak low-cost penetration (32%) compared to countries such as Spain, the UK or France. According to the data found in the 2013 “Low Cost Monitor report” published by German aerospace center (Deutsches Zntrum für Luft – und Raumfahrt), the market share of the low-cost segment has been plateauing for some years.
This might be subject to change with the latest demise of Air Berlin, which has been struggling for cash and which may end up taking strategic decision… that is to say slashing into the less profitable routes. One has to consider that 96% of the German low-cost market is divided between Air Berlin, Germanwings, Ryanair, easyJet, Intersky and Flybe (in order of importance). Air Berlin had by far the most important low cost offer in Germany, that is to say 746 flights a week.
Long accustomed to a static low-cost market, a reduction of routes for Air Berlin represent fresh air for the rivals and a potential goldmine. Without a doubt, they shan’t wait to feast on the remnants of Air Berlin’s old empire.
The reason why Germany could prove to be a reasonable investment though is its status of “growth engine” in Europe. I suspect carriers to attempt reaching to business travelers who commute between German cities and other countries. It was already the reason why easyJet chose Hamburg (2nd largest city, biggest port in Germany), a destination set to explode in the coming years, and which is a key place to do business according to Business Travel. And make no mistakes: all the lights are green for business travel to explode in Germany, as this graphic made by IATA and other professionals show.
Of course, this does not mean that tourists will be left behind, although they are less valuable than what they are today. However the relative weakness of Germanwings and the change of strategy of Ryanair to business travel are, according to me, sound evidence that the battle for Germany will be about business travel.
The war promises to be bloody: in response to Ryanair’s surprise opening in Cologne, Germanwings decided to take on the Irish company on a Dublin-to-Cologne route. On the other hand, ailing Flybe chose to close its routes. A fair choice considering its bad financial health.