Vueling Opens French Base

Barcelona based Vueling announced a number of new planned routes this week, as it revealed plans to create its only base outside Spain, at the home of Airbus, Toulouse. Stationing a single A320 unit, Vueling will offer non-stop service to Amsterdam; Barcelona; Ibiza; Malaga; Paris; Pisa and Venice.

VUELING’S FRENCH EXPERIENCE

The carriers foray into the international market will be its first base outside of Spain since its merger with Click, however before the merger of Vueling and Click, Vueling as a single entity did operate a base at Charles de Gaulle, Paris which was ultimately closed due to poor performance. The poor performance could not solely be attributed to operating in what is a highly regulated and competitive market place but also due to the lack of local branding, which mean source passengers were difficult to obtain. This coupled with expensive fees and charges meant that Vueling was not able to sustain its base in Paris Charles de Gaulle.

ITS DOMESTIC POSITION

The combined, Vueling and Click entity has created a strong market and brand at its home base in Barcelona where it operates 547 weekly flights (November 14-20, 2010 Flightbase) which accounts for 37% of its total network.

It is now the largest operator in Barcelona but has come under low-cost pressure from easyJet and more recently, Ryanair which opened its base in Barcelona in September of this year. Ryanair now competes on five routes from Barcelona (Malaga, Ibiza, Palma de Mallorca, Santiago de Compostella, and Seville) and easyJet two routes (Amsterdam and Lisbon) adding pressure on already soft yields.

Its decision to open a base away from Spain will allow Vueling to shift some of its focus away from a highly competitive Spanish market. The low-cost sector now has a significant share of the Spanish market as the table below indicates

Source IATA BSP DATA (July 2009-2010)

LOW-COST MARKET UNDERSERVED IN FRANCE

With four low-cost carriers amongst the top six in Spain, in terms of passengers carried between July 2009-2010, the Spanish market has clearly seen a large rise in low-cost traffic. By comparing this with France, Air France has a 34% share of the market with easyJet 10% and Ryanair 8%. In fact Vueling is the third largest low-cost operator in France with just a 1% share of the total passenger market.

Vueling’s decision to open a new base in France will be helped by the experience of its previous base at Paris Charles de Gaulle. In fact Vueling still operates over 100 weekly flights from Spain into both major Paris airports (CDG and Orly) from seven points, including non-based flights from Rome to Orly which it operates 20 times per week.

WHY TOULOUSE?

The Toulouse market is largely underserved in terms of low-cost traffic with national carrier Air France having a 46% share of the local market. With Toulouse having invested heavily in promoting itself to new carriers, Vueling will see an opportunity to invest in a destination that has potential as a tourism destination, but also as a business destination. Vueling focuses on serving primary airports and its new destinations seem to highlight a strategy that will largely serve a mix of business and leisure.

easy Jet is the only low-cost airline to have any significant traffic in Toulouse with 88 weekly flights to Bristol, Charles de Gaulle, Rome (FCO), London Gatwick, Lisbon, Lyon, Madrid, Milan Malpensa and Orly.Vueling will only compete directly on one sector, Paris CDG.

For Vueling, Toulouse will offer a new market that has scope for development and represents a shift in strategy to create a pan European brand and take away the reliance of their home market. Finally with Toulouse not considering itself an LCC airport and unwilling to slash charges, Vueling will be confident that the ultra low-cost carriers Wizz and Ryanair are unlikely to enter the Toulouse market.