Competition with the incumbent operator becomes the front

Long indented, low air cost growth three years marked in our country, to now represent 30 of the short/medium-haul traffic. But this growth refers to two separate realities, including the impact on consumers is very differentiated.

A first model, embodied by Ryanair, is based primarily on the creation of new markets, by opening-closure of lines on which no airline operates. In this case, competition is almost non-existent and the low price of the ticket by the low cost is essentially a drastic decrease in unit costs, the order of 40 to 50 per seat mile offered.

But a second type of companies low cost, embodied by easyJet, chooses deliberately enter existing lines and is sometimes even to locate in the heart of the hubs. Competition with the incumbent operator becomes the front. The case of the France is instructive here: at the outset of Paris's two major airports, on 80 lines operated by a low cost, 72 are now in competition with incumbent operator. At the outset of the cities of province, major - most often Air France or its franchisees - must now confront companies low cost not less than 39 lines.

A benefit this new competition To answer this question, we measured the impact of the entry of a low cost on passengers purchasing power, taking the case of the airport of Lyon Saint-Exupéry (1). Low cost easyJet is indeed opened 11 lines in competition with an operator, who was so far in a situation of monopoly. The first winners are of course the former clients of the historical operator, who joined the low-cost company. American studies, the decline in price of the ticket on average reached 49. In the case of Lyon, from historical prices and traffic data, we believe gain purchasing power to EUR 67 million over the period 2007-2009.

But competition from low-cost air benefit also, and above all, to those who do use it not: the winners are in reality have remained faithful to the historical operator customers. Indeed, the threat of low cost, the company installed had to adjust its prices down. Of after what has been seen in the United States, the reduction in the price of tickets would be of the order of 30 and occurs often in a preventive manner, before even the low-cost entry. In the case of Lyon, we believe this indirect gain purchasing power to more than 86 million in the period 2007-2009. If one extrapolates results on all the lines in France with a low-cost competition, it is likely that the total gain purchasing power exceeds 1 billion euros over the period 2007-2009.

Low cost competition also helps to expand the size of the market: the price decline provides access to the aircraft to customers that travelled little until now or using other alternative modes of transport. Lyon, the entrance to the low cost has led to an increase of 112. This induction effect has benefited the company low cost but floundering at the historic company, which has captured a portion of this additional customer. Beyond the gain purchasing power, low cost competition is thus involved in some form of democratization of air transport.