EasyJet Exec Predicts Cull Of Budget Airlines

Oil prices well above $100 a barrel will drive most of Europe’s low-cost airlines out of business, the head of easyJet’s French subsidiary said on Wednesday.

The stark warning of a cull of low-cost airlines came as the British budget airline’s shares fell more than 4 percent after another increase in oil prices towards $120 a barrel.

“There are currently about 50 low-cost carriers on the European market –that’s absurd,” Francois Bacchetta, managing director of easyJet France, told a news conference. “In a few years’ time there will be no more than about three or four of us left in Europe,” he said.

He was speaking at a briefing about a new easyJet service between Toulouse and Lyon. Traditional network carriers such as Air France KLM have added extra fuel surcharges to ticket prices in recent months to help compensate for rising crude oil prices.

“If we ourselves passed on these increases completely we would have to raise ticket prices by 10 percent in one go and our payload factor (the proportion of seats sold) would fall from 85 percent to 60 percent. Our whole low-cost business model would be thrown into question,” Bacchetta said.

“The most competitive companies like Ryanair or ourselves will survive, along with one in Germany and perhaps one more in Europe. The others will die or merge as cripples. This phenomenon will even touch so-called normal carriers,” he concluded.