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Ryanair Hopes to Win Collapsing European Travel Market - 2002-01-17

Aviation analysts say the European Union (EU) could lose more than half of its 14 national airlines as the air industry suffers through one of its worst slumps ever. But the prospects are not gloomy for all the air carriers. Discount airline Ryanair says it could become Europe's largest airline, for travel within Europe.

Ryanair is opening up another front in the battle for European flyers. Next month, it launches service from Germany's Hahn airport just 100 kilometers from Frankfurt - flying to locations in France, Italy, Britain and Norway. Its initial offering features some fares as low as $9 one-way.

This will be Ryanair's second major continental European base, after Charleroi airport in Brussels last year. Ryanair picks secondary airports, which are inexpensive and relatively uncrowded.

Tim Jeans, Ryanair's sales and marketing director, says the company is going into direct competition with the German carrier, Lufthansa.

"Clearly there was a huge debate in the company on where the next base should be," he said. "So I think it was clear to us that we needed to take Lufthansa on in their home market at some point in the future. And there was clearly no question that Hahn was the place at which we should do it. Hahn is a fantastic, underutilized, but very centrally located facility. And of course, it draws from a wide catchment [area with lots of potential customers], including of course, where we are in Luxembourg today."

The small nation of Luxembourg is in the heart of Europe, and a one-and-a-half hour drive to Hahn. With some low fares, Ryanair feels many will make the trip.

In the past several years, thanks to deregulation, Ryanair has opened up new routes in continental Europe and won a strong position in the market. Mr. Jeans predicts Ryanair could eventually become the leader in Europe.

"You'll see there that Ryanair now stands shoulder to shoulder with many of Europe's largest and better known flight carrying airlines and it's not unfair to say if Ryanair is successful in continuing to grow its business at 25 to 30 percent per annum for the next five years, we will be Europe's largest airline, overtaking Lufthansa and British Air on intra-European traffic," he said.

But there are dissenting views. A senior manager of Luxembourg's national airline, which faces heavy competition from Ryanair, says the discount carrier's initial success in the British market was based on unique conditions. Jean-Marc Fandel, executive vice president of Luxair, says the larger European market poses problems.

"I think the basis for development of Ryanair was the Dublin-London route, which quite a number of people traveled on the bus, on the ferry," he said. "Because it was an existing market with a huge, huge volume, with that they succeeded. If we're talking about routes between Hahn and say Pescarra, Italy. I mean these are enormously thin routes."

Meanwhile, Ryanair and Lufthansa are fighting in German courts and before European Union regulators over advertising issues. Lufthansa says fare comparisons are distorted, and Ryanair says Lufthansa is trying to block its advertising.

In the background is the collapsing European air market where long-subsidized national airlines are finding they can not compete. Many carriers have been in financial trouble for some time and the September 11 attacks caused even greater losses, through reduced travel and increased insurance costs.

Belgium's Sabena collapsed last November, an event that analysts say marked the start of the restructuring of the European market.

European Commission Transportation spokesman Gilles Gantelet says there could be a dramatic fall in the number of European national air carriers. "It's the first step in the European Union in which there will be a reduction of national carriers. We will have maybe half of the 14," he said.

Other industry analysts go further and say only three major carriers could be left - Germany's Lufthansa, British Airways and Air France. In the meantime, discount airline Ryanair continues with its plans to attract business from the national carriers.