Low-cost airlines get set to challenge European carriers

European network carriers including Air France-KLM Group and Deutsche Lufthansa face a heightened challenge from Ryanair-led discount airlines and Gulf operators serving routes to Asia, analysis by Amadeus IT Holding SA shows.

Low-cost carriers, led by Ryanair, lifted their share of European traffic 4% to 38% in 2012, while travel from Europe to Asia via the hubs of Emirates, Qatar Airways and Etihad Airways PJSC grew 20%, according to data from Madrid-based Amadeus’s global booking system.

Air France, Lufthansa and Iberia are among former flag-carriers revamping short-haul operations in an effort to end losses and stave off the advances of Ryanair and its peers.

Cologne-based Lufthansa said last month it might also establish a low-cost operation to Asia in response to airlines that have exploited the Gulf’s geographical position to grab a growing share of lucrative inter-continental transfer traffic.

“These figures are quite worrying for the network carriers,” said Yan Derocles, an analyst at Oddo Securities in Paris with a “neutral” rating on Lufthansa and IAG SA, parent of Iberia and British Airways, and a “buy” on Air France-KLM.

“They’ve begun to take action in Europe, but they’re going to have to do more to maintain market share in long-haul, which has been quite profitable.”

Low-cost penetration is greatest in Europe, according to Amadeus. The nations there with the highest proportion of departing passengers using discount airlines are Spain, on 57%, and the UK, with 52%.

In the long-haul market, Gulf airports in Dubai, Doha and Abu Dhabi have already grabbed a 15% share of air traffic from Europe to the Asia-Pacific, according to the report.

Seven of the world’s 10 busiest routes by passenger volume are in Asia.

— Bloomberg