I don’t always link to or embed videos on this blog but when I do it’s because they’re good. This one is no exception. Franco-Italian journalist Enrico Porsia led an in-depth inquiry into the different mechanisms at work in Ryanair’s success. The result is very instructive.

Of course, for most people familiar with low-cost airlines and Ryanair’s business model (and I’m guessing most readers of this blog are) a lot of things here shouldn’t come as that much of a surprise. However, I believe the merit of Mr Porsia’s documentary lie with his capacity to gather many different voices to talk about the company: Crew members, activists, union leaders, industry specialists, airport managers, regional authorities, Ryanair marketing manager, journalists and even a professor of Economy at Trinity College.

For now the documentary is only available in French, which is too bad. I’m hoping for a subtitled version soon but no dates have been made public yet. Among the subjects discussed are a few of the nasty hot topics surrounding Ryanair: Airport subsidies, cabin crew working conditions, for-profit terminations and borderline safety practices…

La face cachée du lowcost : Enquête sur le système Ryanair from CGT CadresTechs on Vimeo.

So apparently I overestimated Ryanair’s wisdom a little recently. Yes, I know, I should have never forgotten the company’s obsessiveness. Anyway, it appears that, after coming up with a new security system, immediately losing a sizable part of its internet traffic and quickly turning the system down again, Ryanair has eventually decided to keep the captcha online.

Needless to say, the airline was quick to celebrate the sucess of its new security system, boasting the fact that its flights were no longer listed on popular screen-scaping websites eDreams and Bravofly. However, in a sadly comic turn of event, it only took a few hours for the websites to find a new way into the airline’s booking/quoting system and get back to displaying prices online.

Apparently a little humbled by the situation, Ryanair has taken a low profile and declared in an update to its previous announcement that it would now try to update its security system after screen-scrapers had found a way back into the website. It’s not particularly surprising seeing how quickly offers for free-lance programmers capable of side-stepping Ryanair’s new security system recently spawned on the internet.

Well, it seems I really did talk a bit fast the other day. Ryanair’s nowhere near ending its war with screen-scrapers, apparently believing it will manage to preserve its internet revenues without losing any potential customers. And as far screen-scrapers, it seems pretty clear they’re not going to let their biggest source of business get away so easily either.

EasyJet has been performing quite smoothly this last semester: No volanic ashes, little in the way of massive strikes, decent passengers volume in spite of a looming economic crisis. Yet, one person was determined to not let anyone in the airline’s management enjoy a bit of fun. That person, you might have guessed, is Sir Stelios. In fact, the airline founder and – since then – billionaire has decided that even if he’s not in charge of managing the company anymore, this shouldn’t mean he can’t make decisions.

Since the end of this summer, Sir Stelios has drawn his old company into a long an embittered battle. While the founder has repeatedly openly criticized easyJet’s management decisions, it quickly appeared that he was really in the battle for the money. It cost easyJet two non-executive directors before the board decided to tame the lion with the appetizing promess of a special dividend.

Sadly, it seems Carolyn McCall’s team underestimated Sir Stelios’ ambitions, as the team made the minor mistake of upping twice in a short time its profit forecast. That had an effect very similar to pulling a bag of candy out of your pocket right after a bully took your lunch, and it didn’t miss: within a weeek, information “leaked” that Sir Stelios was planning to launch a new airline. He even went so far as to call himself the victim of a smear-campaign (albeit a poorly executed one).

That last claim will be hard to maintain much longer now though. After easyJet announced more than decent results and handed out the promised the dividend, Sir Stelios came back full canter to rant against the company’s strategic choices. In a letter to a select lot of investors, Sir Stelios claimed easyJet’s strategy was irrational, likening to troubled holiday company Thomas Cook. More precisely, Sir Stelios appears to be strongly against any new aircraft order – in spite of the board’s approval of a 15 aircraft order for next year – and laments the fact that Carolyn McCall is turning “his” airline into a holiday airline by operating summer-only route – a move that more or less every other low-cost makes come the summer.

Sir Stelios has called for an Extraordinary General Meeting, promising he would go as far as voting against the entire board, putting the weight of his 37,4% shareholding of the company against any decisions he may not find to his liking. Another more direct threat is that he will throw out yet another non-executive director. This time Adele Anderson seems to be on top of his list. Let’s hope for easyJet he’s not after after another dividend because, by the time the airline gets enough money, it might cost it a few more directors. Or perhaps, hopefully, Sir Stelios will see that his strategy is bound to be completely counter-productive and may only slow easyJet in the end.

The low-cost industry industry has reinvented a lot of the traditional ways in which carriers led their business. Among the low-cost carriers which developped in the 90′s (and are still around today) many have been the first to heavily emphasize only sales. The development of the internet allowed for much cheaper sales and reservation system and greater economies of scale for companies betting on passengers volume rahter than passenger’s satisfaction. The most extreme example would have to be Ryanair which, starting 2009 moved even further with an online-only check-in system.

 But, parallel with the focus on online sales, a problem quickly arose for low-cost airlines. If they were to make their websites their main sales platform, this meant they had to avoid customers getting sidetracked from their websites. All the more as, with growing traffic, airline websites themselves became a source of profit – one only has to look at Ryanair’s homepage to know plane tickets are not the only thing being sold there.

 As a consequence, low-cost airlines have been, for the past few years, waging an almost permanent and seemingly never-ending war with travel agents. These were accused of “screen scraping” low-cost websites: automatically recording prices and selling bookings with a commission. As low-cost carriers main selling point is their price, it’s been vital for them to get rid of travel agents. Consequently, Ryanair and easyJet have been waging a ferocious war against them, frequently taking travel agents to court (and winning) over the matter.

 Ryanair even went so far as to arbitrarily cancel tickets sold through screen-scrapers. However, it seems that recently the tide has been starting to turn. First Ryanair lost a case against Spanish screen-scraper eDreams, after a two years trial. And now, the company’s last attempt at getting rid of screen-scrapers is turning against it.

A few days ago, to block automated scraping of its pages by travel agents, Ryanair introduced a new security feature on its website. No more than a capcha like many other websites use, it blocked the booking process unless correctly answered. The feature seems basic, it has been proven to be incredibly efficient. And indeed it was, but maybe not how Ryanair intended it.

 According to various industry specialists, while traffic to the website remained relatively unmoved, business plunged by as much as 80%. This proved that screen-scrapers did indeed have a very good reason for risking the wrath of Ryanair and that the airline still can’t afford to live without them… Needless to say the security feature was taken off the website in a matter of hours. Now what remains to be seen is whether low-cost airlines will radically change their stance on screen-scraping or if they’ll continue acting like it’s really ruining their business.

Ryanair lovers and Spanish aficionados, rejoice, the airline recently announced that it was to restart service to and from Girona and Reus. After months of bitter fighting, the leading low-cost airline in Spain finally found common grounds with Spanish authorities. Or did it?

 The thing is, Ryanair may display a form of good will in reopening Girona and Reus, the two airports paly absolutely no part in its strategy. In fact they’re more of a liability for the airline than anything else. The reason is that, with the development of the low-cost Spanish market, raging competition has made any route choice a crucial matter for airlines. While starting with Girona and Reus – both relatively stranded airports in the north-east of Spain – may have been a good idea at the beginning of Ryanair’s implantation in the country, the airline has had to shift strategy recently.

 With the unrestrained growht of Spanish tourism, competing low-cost airlines have increased the span of their offer and it quickly became necessary for Ryanair to adopt a more aggressive stance. That’s why the airline choose to focuse its ressources on El Prat. An uncommon choice for Ryanair, as the airport was already relatively important and close to a major city. But it allowed for increased pressure on Vueling, giving Ryanair the opportunity to smother this growing threat before it was too late. This move was done at the detriment of routes serving Girona and Reus which were fast losing commercial appeal compared to El Prat.

 However, Ryanair’s strategic choices received a lukewarm welcome from Spanish authorities. As usual with Ryanair, the company hadn’t been flying to Girona and Reus out of sheer goodwill and passion for air travel and Spanish taxpayers had – not really knowningly – been fueling the airline’s financial result out of their own pocket through sizeable public subsidies. Well it seems they’re set to get back to it, whether they like or not.

 Ryanair has come to an agreement according to which it will restart service at Girona and Reus in exchange for subsidies in excess of 8 million Euros. The company had initially said it wouldn’t consider returning to Girona for anything less that 7,5 million euros. In spite of Spanish authorities’ outrage at first, Ryanair actually managed to get over 8 million euros by agreeing to also reopen routes at Reus. Total subsidies actually amount to almost the entire 9 million euros combined promotional budgets of both airports (Reus has 3,2 million and Girona a little over 5 million).

 The only conditions are, on the Spanish side, that Ryanair brings 3 and 4 million passengers to Girona and around 400 000 and 500 000 in Reus. The airline should also build an hotel on an emplacement that’s been given for free by the authorities. The agreement, which is supposed to last five years but includes provisions for yearly revisions may still hand on Ryanair’s condition that AENA doesn’t raise its landing fees. Quite the irony coming from a company that regularly increases its own fees, but also something that should be a bit of a snag as local administrations supposedly don’t have any control over AENA’s management.

 All in all the agreement seems like more of a temporary stopgap than a real solution for a region suffering from the attractiveness of neighboring Barcelona. It’s hard to blame local authorities for being tempted to “buy” an increase in tourists, yet it’s quite puzzling to see such sums being laid down in front of Ryanair at a time when the Spanish government is struggling to make ends meet.

A French appeal court in Aix-en-Provence officially rejected Ryanair’s request to stop the inquiry around the company’s employment practices. The airline is being investigated under pretense of “concealed” or “illicit” employment, in France. The inquiry may now continue until a definitive ruling condemns the company or it is cleared of charges.

 Ryanair has been under inquiry by French authorities since September 2010, when it came under attack at its Marseille base – which it had opened in 2007. The attacks were focused on allegations of “concealed employment, obstacle to the functioning of the Worker’s Committee and illicit employment” (translated from the French) after a formal complaint was deposited by several unions.

 If you remember well, Ryanair had vehementely denied the allegations, claiming its employees were Irish workers and rightfully declared under Irish law. To do so, the company alluded to an obscure piece of European legislation, claiming the status of its employees fell under European directive 96/71/CE. The directive, originally designed for workers travelling frequently abroad states that employees may be declared in any State they spend most of their time working in baring that they lose any social protection. Ryanair claimed its aircraft were Irish property and could be considered Irish soil, making its employees Irish workers.

 This is where Ryanair’s own business model perversely set it back. As the company strives to avoid all overnight stay for cabin crews and pilots, most of them actually never spent a night outside of Marseille. After a French PM brought the case to European Commission for a close examination, the Commission declared Ryanair employees did in fact not fall under directive 96/71/CE. The rest is history, Ryanair left Marseille in uproar, swearing never to come back and spelling ominous doom for jobs at the airport and a few months later everything was back to normal, with all pre-existing Ryanair routes recreated albeit for the fact that no Ryanair employees live there anymore.

 Since the opening of the inquiry, Ryanair never stopped denying it had anything to reproach itself with, and set its team of lawyers to derail all legal proceedings. Its formal demand to put a halt to the inquiry claimed it was unduly motivated, searches were overly extensive and the legal framework of the inquiry wasn’t properly set. Yet, in a court ruling on the 8th of November, judges at Aix-of-Provence decided none of Ryanair’s claims stood and that the investigation could continue. Still, no official date has been set of the trial yet, and the affair is still far from being closed.

Ryanair brought to Spain 22.6 million passengers between January and September, 14.1% of the country’s 160 million passengers of the same period, according to the AENA. Iberia-British (IAG) represents 9.25% of Spanish travellers. EasyJet, Spain’s third airline per passengers transported, has a hold of 5.6% or 9 million passengers, a volume similar to Vueling.

And now, in the same newspaper today:

EasyJet, Spain’s third airline per passenger volume, makes 20% of its total profits in Spain, according to the company’s regional director in the country, Javier Gandara.

[...]

For 2012, the airlines is hoping for an annual increase between 5% and 6% in the country. Business passengers represent, nowadays, 20% of easyJet‘s clients in Spain.

In case anyone was still wondering why low-cost airlines seem to be all over the Spanish market, why Iberia wants a new lower-cost company, why Vueling has a solid chance of surviving the next few years (unless it merges) and why Ryanair’s discourse with Spanish airports is nothing short of blatant mockery.

So Ryanair is upping the ante once again. As the european economic crises unravels, Michael O’Leary’s company, true to its words, seems to make a point of showing how it thrives on difficult economic situations. There have been many comments on the news, but Aeromorning.com‘s very own aero-specialist Pierre Sparaco signed what has to be the most comprehensive opinion on Ryanair’s recent performance today. For those of you who don’t speak French (I can’t blame you), here’s a quick recap of what he had to say:

 - In spite of Michael O’Leary’s declarations that Ryanair doesn’t impose any oil surcharges, the main cause for Ryanair’s results lies in a constant augmentation of its prices. The carrier’s fares have followed a stupendous growth, reaching the symbolic 50€ mark on average. That’s a 13% increase year-over-year for the fares alone. Simultaneously, Ryanair has further increased its ancillary revenues, reaching a 61€ per-passenger average, for a 11% year-over-year increase.

 - With a fleet close to 300 aircraft, Ryanair benefits from exceptional economies of scales. The airlines also retains a very simplistic structure, having no commercial network, apart from its website. This [and a wealth of other cost-cutting measures] allows for an alleged average cost per passenger around 23€. Still according to Ryanair’s very own finance guys, easyJet’s per passenger cost is around 62€.

 - Ryanair suddenly stopped talking about slowing or staling its growth for a few years. On the contrary, it’s now shouting from every rooftop that it will be aiming for intense growth rates over the next few years. The company’s also very openly talking about buying new planes [something which I've already discussed at length on this blog]. Seeing as Comac may very well be going for the same parts Airbus and Boeing use in their aircraft, this could translate to lower transition-related costs for Ryanair.

 - Ryanair may be bragging about its 75 million passengers, its 47 bases or its capacity to “negotiate” by slamming doors and stomping its feet, but it will never turn away from an appetizing opportunity. The best example? Ryanair’s behaviour at Marseilles. A base it closed with much ado, even if, almost a year later, apart from its planes not staying on the tarmac overnight, absolutely nothing else has changed.

I must say Pierre Sparaco pretty much nails it here. However, I feel he missed on a few additional factors in Ryanair’s cost-cutting strategy. Such as the company’s particular relations with its workforce, its deep affection for tax havens or its rule of use for aircraft. Things that are explored much more at depth in Air Scoop‘s latest report, which I’ve finally come around to reading and can’t recommend enough.

With Ryanair, it seems that summer is all business and the rest of the year is all talk. After recently annoucning for the empteenth time that it was considering plans ot scrap two toilets from its planes, Ryanair is talking about planes again this week. Except this time, the project seems a little more sensible, instead of trying to cram more passengers into its aircraft, the airline is talking (again, I know) about getting new aircrafts for its passengers. In a recent interview with the Financial Times, the airline’s CEO, Michael O’Leary, expressed his desire to take his company into a new phase of growth.

 It’s not just about kicking it up a notch a little. The mercurial boss is actually talking about making his company the biggest in the world by passengers transported, envisioning to reach 120m, 130m passengers. Ryanair doesn’t seem to see itself as having reached a growth peak. On the contrary, Mr O’Leary talks as if demand will naturally follow offer and every new plane will be filled by passengers as they come along. I won’t be the one to say the contrary, passengers have always been more of a commodity for Ryanair than an end in itself.

 Nonetheless, the article is instructive, if only because it puts numbers, dates and goals on what seemed little more than a whimsical project back at the Paris Air Show. In spite of the MoU Ryanair signed there with Comac, Michael O’Leary is still talking about several potential aircraft makers he might go with. Airbus is still out of the question, though – as we all know – it’s not really of Ryanair’s choice. But who could say if Irkut and Comac are really what Ryanair has in mind?

 My guess is that Michael O’leary’s secret hope would be to snag a few hundred Boeing 737 with new motors. It would allow the company to maintain economies of scale that come with a single aircraft fleet. Getting newer aircraft and less fuel-thirsty motors would also provide some coverage against the impending doom by rising fuel prices that looms over the airline industry. Lastly, it would ensure that Ryanair actually got its planes within the time frame it needs them.

 Speaking of that time frame, Michael O’Leary says 2015-2021. This seems perfectly reasonable, even though it would leave Ryanair without deliveries for two full years (the last of its current order with Boeing will be delivered in 2013). I’m willing to bet, the company could easily bridge that gap with short-term leases. However, if Mr O’Leary is serious about getting planes as soon as 2015, then it seems I was right to say Comac is out of the question. Mr O’Leary might also want to reconsider announcing two further dividends, the company will need funds for its new planes, especially if it wants to stop repairing the old ones with duct tape…

It’s almost amusing how most low-cost airlines seem to be stuck between Ryanair and traditional carriers when it comes to prospective customers. While these two extremes completely ignore their problems. Traditional carriers because they have hyper regular schedules, multiple-class seatings and elaborate reward programs and partnerships that allows them to keep a relatively solid fanbase among business and international travelers (not that these categories are mutually exclusive, mind you). At the other end of the spectrum, Ryanair can’t care, because anytime it enlarges its customer base toward the bottom, where the cheapest potential travelers are.

 Squeezed in between these two extremes, the competition is fierce, price is not the only discriminating factor, but matters of scale and costs and limit the possibilities for reward programs, more comfortable cabins or advantageous alliances. It seems that a few carriers are trying their hands at a new game: the point is to open up their customer-base and capture business travelers.

 As a matter of fact, a few months ago, easyJet announced its new flexi-fare tickets, promising easy exchange and rescheduling for business travelers. A tantalizing offer, all the more as the company also swore it would work on intensifying its flights between major destinations. Now, it appears that Vueling is ready to take a similar turn. The company recently announced it would offer a, so-called, “Duo” service, selling tickets for 60€ with the promess that the middle-seat will stay empty, thus offering more room and overall comfort.

 At first, this would seem to hardly justify the increase in price. However, it makes it almost sure you won’t have a crying and kicking right next to you for the duration of the flight. Other perks include, a reserved check-in counter, priority boarding and a free snack on board… Well almost everything traditional carriers usually offer on short distance business class seats. It remains to be determined whether that offer will be enough to drag business travelers. Especially since you’d think they’d be more sensible to routes and schedules than perks.

 It also remains to be seen whether Vueling’s offer won’t fall victim to exagerated rules and limitations, as is already the case with easyJet’s flexi-fare. More importantly, it’s quite awkward to see Vueling chase after business travelers when its majority shareholder recently announced it was to launch a competing low-cost carrier to compete on that exact same market. Can somebody spell revenge?

I keep saying that Spain is the place to be for low-cost carriers this year. It also seems like carriers keep on having difficulties over there. This past semester, it’s been mainly trouble for Ryanair. Even though the company’s had some impressive results passenger-wise. But it seems that Spanish airports just can’t keep quiet. This week, it appears to be easyJet’s turn to be the target of Spanish airports.

In the province of Asturias, the company is being accused of abusing the terms of its contract with airports. The contract was set between the company and local authorities. Under the terms of the contract, easyJet was to ensure adequate promotional efforts over five years as well as a minimum amount of passengers in each airports it served. On the other side, the company was to be paid for its services and the promotion of the region.

But according to local director of Tourism, Ana Garcia Pando, “In exchange for the money paid over the past five years, all we’ve had were a commercial on [easyJet's] web page for a week, a promotional article in [the airline's] magazine and a news story once a year”. For, the region paid a hefty 8,6 million during the same period, and all the company brought it was 130 000 passengers (total, not per year). Needless to say, spanish authorities are not happy.

Even though it’s not directly under her jurisdiction, Ana Garcia Pando is calling for a radical revision of the contract with the airline. According to her, the airline has awkwardly dodged its engagements, closing routes (such as teh Santiago del Monte – Madrid) under dubious pretenses and leaving passengers with no other options than to fly Iberia.

I suspect the reason this whole affair is unfolding right now can be linked with the publication of a report on State-Aids in Spain a few days ago. While the report singled out Ryanair as the companty benefitting from the most subsidies by a wide margin, on a case-by-case approach, there appears to have been a lot of spent money on low-cost airlines in Spain. Something, not all local officials may be willing to account for.

It’s too bad that the Spanish low-cost market is lightly covered by the english press, as it is probably one of the most active. Booming, would actually be the word, with low-cost airlines fighting nasty for every possible market shares and even airports and ATC sporadically joining in the fun. Actually, Spanish airports have a bit of a love-hate relationship with low-cost airlines – particularly Ryanair. They desperately need the passengers they bring, but can hardly withstand their demands.

 Well, in case you found the subject boring, don’t worry, the Spanish National Commission on Competition (Comision Nacional de la Competencia, CNC) is here to put some salt on airport wounds. The commission is preparing the release of an in-depth report on airports and state-aids in Spain, and apparently the conclusions won’t please everybody. From what is known of it now, a few salient points stand-out:

 1° The most subsidized airports are not the largest. Spain’s largest airports in terms of passenger volumes (Madrid’s Barajas and Barcelona’s El Prat) are hardly the ones to receive and spend the most State-aids. Instead, the bulk of subsidies is concentrated among sixteen mid-size regional airports with traffic figures around 1,5 million yearly passengers.

 2° Not all companies benefit from those subsidies in the same extent. Unsurprisingly the most voracious ones are low-cost and regional airlines. Out of the 250 million euros distributed between 2007 and 2011, Air Nostrum took home a hefty 3€ per passenger transported. Second only to Air Nostrum is Ryanair which, during the same period, got 0,6€ for each passenger it transported. It might not sound like much but, if you take into account the fact that Ryanair has refocused much of its business on El Prat, and seeing the sheer volume of its traffic in Spain, I wouldn’t be surprised if Ryanair took the crown in terms of total subsidies engrossed. Apart from Ryanair, the only companies to get hold of a sizeable ratio of subsidies (around 0,4€ per passengers) were smaller scale low-cost and regional airlines such as Lagunair and Vueling.

 3° Most other low-cost airlines don’t get that much subsidies. Between 2007 and 2011, Air Berlin, Air Europa, Spanair, Wizz Air and easyJet got subsidies below the 5 million euros bar. This is probably due to the fact that most of these airlines compete on international routes landing in Spain’s major – and less subsidized – hubs.

 4° On a case by case approach of airports state-aids, the degree of subsidization can reach absurd levels. On the period 2007-2011, Burgos has been paying a mean 226,62€ per passenger, Albacete 98,36€ per passenger and Salamanca 82,24€ per passenger. This has led the National Commission on Competition to the conclusion that subsidies are counter-productive and artificially sustain airports that are miles away from profitability while destroying competitiveness.

 5° Unsurprisingly, the Commission found that not a single case of subsidization had been declared to the European Commission, even though European regulations stipulate subsidies must be notified beyond a certain sum. This puts most Spanish airports in violation of European regulations and Spanish authorities in an awkward situation regarding the EC.

 It’s hard not to agree, even a little, with the conclusions drawn by the National Commission on Competition. The staggering amount of subsidies distributed clearly represents a distortion of competition. The problem is, by artificially sustaining demand for some routes, the subsidies system has profoundly distorted the distribution of ressources and airlines on the Spanish market, something which will probably end up durably hampering the optimal allocation of players on the market. Worst, they’ve put some regional airports on life support at the expenses of Spanish taxpayers, at a time when the Spanish government is recounting every penny it spends, it remains to be seen whether the national government itself will do anything.

After much rumouring, IAG, British Airways and Iberia’s parent company, announced yesterday it will launch a new airline. The subsidiary will be called Iberia Express, and start operating sometimes next year. According to the international group, the goal is to create a low-cost airline competitive with major players Ryanair and easyJet on short and medium-haul routes.

 From that point of view, the move is reasonable from the point of view of IAG. Spain is still one of the biggest and fastest growing markets for low-cost carriers and these have already seized a significant portion of the market. According to the CAPA, low-cost carriers control “around 36% of the domestic Spanish market and 55% of international routes”. At this point, it’s not just that carriers have succesfully managed to penetrate the market but the market that is clearly very price-sensitive.

 What’s a bit more puzzling is that IAG, through its subsidiary, Iberia, already owns part of low-cost company Vueling and regional carrier Air Nostrum. Apparently partial ownerhsip does not provide it with enough control over Vueling, and the group wants to move on faster. IAG’s stated goal with Iberia Express is to feed into Iberia (and possibly British Airways) long-haul network. For that, the company will start with a small fleet of A320s in a (old habits die hard) two-class configuration.

 Questions remain regarding IAG’s participation in Vueling. Officially everything is good. According to the group, its partial ownership of the fast-growing low-cost carrier is “a strategic investment, not a financial one”. On the other side, words are sweet as honey too, the low-cost’s CEO, Alex Cruz, can’t spare good words regarding its relationship with Iberia. However, the evolution of that relationship remains to be observerd as Iberia Express starts to compete with Vueling.

Earlier this week, Air France officially launched its new formula at Marseille airport. In a move clearly designed to compete with low-cost offers, the French legacy carrier is opening an entirely new base in France’s second largest city and offering low-priced flights to major cities as far as Moscow and Beirut. The company’s target baseline price is 50€ for destinations closest to France and 110€ for the furthest destinations.

 The move has been interpreted by many as Air France’s attempting to imitate low-cost companies. In some aspects it is clearly an answer to low-cost airlines. But looking at Air France’s new base in Marseille and saying the company is a threat to Ryanair is clearly a mistake. First because the company is not even trying to undercut the Irish low-cost and second because it would have the hardest time doing so.

 One thing is sure though, Air France’s move is making other low-cost carriers nervous. Barely a day or other after Air France’s new venture started operations, easyJet announced it would open two new bases in Nice and Toulouse. Now, on easyJet’s behalf, the projects had been a long time coming. But, according to the company’s management, Air France’s new offer clearly contributed in accelerating easyJet’s decision.

 EasyJet’s reaction is not senseless. On the contrary, Air France’s new offer clearly represents a bigger threat to easyJet than Ryanair. If only because, in combination with a low baseline price, Air France maintains all service and amenities passengers are used to (reserved seating, free luggage check-in, refreshments on board, flight change at no cost, etc.). EasyJet may be able to undercut Air France’s prices but, taking it all into account, the two company’s offers are very close to each other in terms of price range and value for money. EasyJet still has a few tricks up its sleeve with its new FlexiFare tickets and high frequency routes for business travellers.

 EasyJet’s decision to rush base establishment at Nice and Toulouse doesn’t mean that the company has its back to the wall though. Considering that Air France has openly stated that it planned on repeating its Marseille experiment in those very same cities sometime in the near future (2012 or so…), easyJet may actually very weel be leapfrogging past Air France here. In the end the result may heavily depend on route developments and strategy. At Marseille Air France has chosen to focus on very large cities with high touristic and business potential. EasyJet tends to make the same route choices and it will be really interesting to see how head-to-head competition, on similar routes, at the same bases, with similar offers, will unfurl.

You’d think that after it’s not-so-discrete closure of its Marseille base at the beginning of the year, Ryanair would be pretty much over Ryanair. Well, whether the airline likes it or not, a new controversy is slowly erupting around the low-cost’s presence at the airport.

 Once again, Ryanair is being accused of illegal wrongdoings at the airport. Last December, Ryanair came under attack after it appeared that it was employing its flight attendants and pilots under Irish law when those lived and worked from France. The news spurred uproar among French politicians and medias who accused Ryanair of abusing European rules and infringing on a 2006 decree.

 But this time, it’s different – and I must say – Ryanair should have seen it coming. French national newspaper Libération accused Ryanair of having benefitted from unlawful subsidies at Marseille airport since 2006. According to the newspaper, the alleged infraction would still be ongoing, as even if Ryanair has closed its base, it maintains a number of routes to and from the city.

 A EC directive following a trial over unlawful subsidies at Charleroi airport had created a very narrow framework for subsidies, limiting them to three years duration and requiring they diminish over time. But Ryanair has shown, time and time again, that it cannot afford to operate without subsidies and generally struggles to have maintained, and increased, year after year.

 Ryanair is not the only target of the journal’s accusation. Ryanair’s accomplice in the deal, Marseille’s Chamber of Commerce, is the subject of heavy criticism. It’s not the first time French Chambers of Commerce are at the center of controversies regarding illegal subsidies to Ryanair. The local authorities are in charge of spurring business and have often been found to abuse their financial liberties in dealing with Ryanair. A State mandated inquiry launched in 2006 found evidences of abuse of public money in all regional Chambers of Commerce dealing with Ryanair.

 So it shouldn’t really come as a surprise that Marseille is being accused of abusing tax payer’s money. In fact, a second inquiry in 2008 had found evidence of such subsidies. The fact that Air France cancelled its official complaint against those subsidies in 2011 is apparently reason enough for the airport’s management to feel its legitimate. And, according to Airport Director Pierre Régis, why bother with Ryanair as the airport is handing out disguised subsidies to other airlines now?