Brussels Airlines future and financial perspective

[airazurxtror]

Just a little bit more of your patience and you'll be able to check and go (sic) to our numerous European destinations for as little 69 euro return, including airport check-in (so no need to waste your own colour cartridges at home printing off pages of advertisements of others), free seat selection, unrushed jet bridge boarding, a complementary newspaper, quiet flights throughout the day and the most generous hand luggage allowance of all, offered in a cabin with more personal space than that of the competition too.
Understandable you are excited to switch to us for your frequent leisure travel; millions more are expected to do so too.

Yes, I am impatient to look at those 69 euros fares and the exact conditions of use. It seems almost too good to be true, but we'll see. If they are to begin on 1st september, it's perhaps as well to publish them now.

Just a detail : one may print the Ryanair embarcation cards in B&W, and it's only one page per flight. I prefer to print it at home rather than queuing at an airport check-in desk.

[White Light]

a complementary newspaper

Are you sure there will be complimentary newspapers for everyone in every class of service ? (sorry, cannot remember the names of these new classes, it would have been so simple to call the 4th class "b.basic".
But as our German friends say : warum es einfach machen, wenn es auch kompliziert geht ? (google translation for the curious ones).

[OO-ITR]

a complementary newspaper

Are you sure there will be complimentary newspapers for everyone in every class of service ? (sorry, cannot remember the names of these new classes, it would have been so simple to call the 4th class "b.basic".
But as our German friends say : warum es einfach machen, wenn es auch kompliziert geht ? (google translation for the curious ones).

Yes a free (digital) newspaper (Belgian and Dutch titles)

[RoMax]

a complementary newspaper

Are you sure there will be complimentary newspapers for everyone in every class of service ?

Yes a free (digital) newspaper (Belgian and Dutch titles)

Indeed, when you check-in online or through your mobile phone, you can access a free online newspaper, in the two higher classes you get a printed newspaper (in addition to a digital one in case you would like to read two different ones).

[FlightMate]

69eur return is actually very good.
Any idea if it's going to be possible to book one-way for half the price?

I suppose they will only offer such low prices on directly competing flights with Ryanair or Vueling. The aim being to 'steal' pax, not offer too low prices to your existing customers (that's what I'd do).

[tolipanebas]

Yes, I am impatient to look at those 69 euros fares and the exact conditions of use.

No need to put on your glasses, airazurxtor, there's not going to be any small print like you expect:
69 euro return for the preferred seat of your own choice, period.

Oh, and should you wish to add say some checked luggage to a check&go ticket after all, you can easily do so, at way cheaper rates and with a more generous allowance than at our competitors too, of course.

But don't worry, in case you are so used to getting fooled at those rates that you still prefer to spend a few hours reading though the terms and conditions first, we'll even let you lock your reservation while you try to find a better deal elsewhere: our idea of product improvements is not about giving a small discount on ridiculously high service charges.

[Lysexpat]

No need to put on your glasses, airazurxtor, there's not going to be any small print like you expect:
69 euro return for the preferred seat of your own choice, period.

Oh, and should you wish to add say some checked luggage to a check&go ticket after all, you can easily do so, at way cheaper rates and with a more generous allowance than at our competitors too, of course.

But don't worry, in case you are so used to getting fooled at those rates that you still prefer to spend a few hours reading though the terms and conditions first, we'll even let you lock your reservation while you try to find a better deal elsewhere: our idea of product improvements is not about giving a small discount on ridiculously high service charges.

As ridiculous as charging 86€ service charge (and 53€ taxes) on a FREE M&M ticket you mean?
Even Ryanair can't beat this.

[Inquirer]

The new tariff structure for the low end market segment sounds very promising: it looks like they will systematically undercut their competitors on allthe lucrative possible extras they sell, to the point where passengers might start to question the validity of the competitors prices and the alleged good deal they offer.

FWIW- aren't they also not going to launch a dedicated loyalty program for this class?
Any news on that, tolipanabas?

[airazurxtror]

No need to put on your glasses, airazurxtor, there's not going to be any small print like you expect:
69 euro return for the preferred seat of your own choice, period.

I don't speak about small prints; I ask : on what flights, to what destinations, and, if any, what lenght of stay (if there is no lenght of stay, why not offer one-way fares at 35 euros ?).

If the whole deal is as good as you boast, yes, I will take advantage of it - no sentiment, the airline which gives me the best bargain gets my custom.

[RoMax]

As ridiculous as charging 86€ service charge (and 53€ taxes) on a FREE M&M ticket you mean?
Even Ryanair can't beat this.

Hence why SN will come with a second frequent flyer program that's supposed to be much more attractive for intra European passengers, M&M is long pas that stage (but SN has no power in that program, they use it like they are told to use it). Germanwings also uses M&M besides their own FFP.

[Lysexpat]

The new tariff structure for the low end market segment sounds very promising: it looks like they will systematically undercut their competitors on allthe lucrative possible extras they sell, to the point where passengers might start to question the validity of the competitors prices and the alleged good deal they offer.

Indeed, it looks promising for the customers, BUT is it financially viable for the airline?
If the 53€ taxes on a M&M do reflect the reality, each 69€ ticket will bring 16€ revenue for BAir. Fuel cost of a passenger is in the region of 3-4€ on the A320 and close to 5 on the Avro, so if they offer the 69€ on MAD they will loose money. If they are going to offer millions of these tickets, as promised by Tolipanebas, the will loose millions.
Another danger is high end custumors swapping to the low end ticket. Why pay 300€ for a monday to friday return when you can book two tickets at 69 to cover the same journey? If 10% of lets say 1 million B-cheap tickets are existing passengers swapping to a lower fare BAir might be cutting his own legs off.

[RoMax]

Indeed, it looks promising for the customers, BUT is it financially viable for the airline?
If the 53€ taxes on a M&M do reflect the reality, each 69€ ticket will bring 16€ revenue for BAir. Fuel cost of a passenger is in the region of 3-4€ on the A320 and close to 5 on the Avro, so if they offer the 69€ on MAD they will loose money. If they are going to offer millions of these tickets, as promised by Tolipanebas, the will loose millions.
Another danger is high end custumors swapping to the low end ticket. Why pay 300€ for a monday to friday return when you can book two tickets at 69 to cover the same journey? If 10% of lets say 1 million B-cheap tickets are existing passengers swapping to a lower fare BAir might be cutting his own legs off.

That's the danger of course, but SN has a very low average loadfactor (though increasing) compared to the current industry standard. If SN makes sure they can significantly increase their loadfactors by selling 69 euro tickets to people that otherwise wouldn't fly with SN, they already win, because even when selling at a small loss, it's better than having these seats empty (you fixed costs per seat barely increase with an actual passenger on that seat). Of course, the danger is that too many passengers that are now willing to pay more, will transfer to the new basic fare. That's also why SN made the current b.light more attractive with things like a limited option to change your flight free of charge, free seat selection when making your reservation (instead of just 24h before the flight during online check-in) etc.

It's all about finding the right balance and pushing (potential) passengers to the fare you want them to buy and you thing they are willing to pay. Ticket sales certainly includes a certain level of psychology

[Inquirer]

if they offer the 69€ on MAD they will loose money.

A few thoughts:

1- The above remark can be directed towards basically every low fare carrier, doesn't it?
The obvious answer to that is that not everybody is paying that kind of money.

2- It's something we'll have to get used to, but ticket price is no longer their entire revenue now.
I bet that just like other low cost carriers, they will try to generate quite a lot of money from the extra's they are offering: in this perspective, it's interesting to note what isn't given for free.
They can undercut competitors on all of their well-known fees and make a huge blockbuster out of them doing so, while still generating significant extra revenues from those lower fees: don't forget they basically offer everything for free today, even on the cheapest tickets, so this is a cost free revenue increase to them.

3- If they succeed in segregating existing corporate customers from the new leisure customers by reserving some of the must-have perks to the higher fares only, the increase in revenues can very well offset any yield erosion there may be in the mid-price range.
Will be most interesting to watch how they pull it off, but it's not impossible: in fact it is done on a daily basis by hotel chains for instance, just to give one example.
IMHO, the top end isn't likely to convert to these kind of booking classes anyway for the simple fact these kind of tickets just don't come with the right kind of perks those customers absolutely require and i don't think they will offer those as an add-on.


In short:
My take is this new commercial strategy is it is a clever method to fill their empty seats and generate a significant additional revenue from them which will basically be all profit, whereas low cost competitors will have a hard time fighting back for the simple reason they have no empty seats left to throw in, so they can only cut prices and fees and thus also their revenues, exactly what they do not wat to do.
It's difficult, if not impossible, to beat a basically cost free seat, in a way.

Did I already mention I predicted they were somehow testing a new strategy at the beginning of the year, when we suddenly saw their passenger numbers explode?
I bet they have gathered enough information on exactly where they should draw the lines so as to attract enough new customers while preventing all too many defections within, those lines being the different features of the new classes.

[JAFflyer]

Remarkably, Brussels Airlines has not yet received the promised 15 million euros for security costs that will be paid through Brussels Airport. However, that amount is well included in the financial statement in 2013, which was adopted on 10 March and was deposited at the National Bank on 27 June. Earlier this year the government made retroactively the amount of 30 million euros available for the biggest airlines in Zaventem, all Belgian, to compensate for the discrepancies on social and fiscal charges of foreign competitors.

After De Tijd and L'Echo.

What I find remarkarble, is the fact that nobody is bothered by this last statement.
Will they do this again this year, artificially adapt the results so they can announce they did a good job?
This money had not yet been transfered, nor approved. Brussels airlines is the only airline that added this already into their results. They are just cheating the public in my opinion.

[Lysexpat]

if they offer the 69€ on MAD they will loose money.

In short:
My take is this new commercial strategy is it is a clever method to fill their empty seats and generate a significant additional revenue from them which will basically be all profit, whereas low cost competitors will have a hard time fighting back for the simple reason they have no empty seats left to throw in, so they can only cut prices and fees and thus also their revenues, exactly what they do not wat to do.
It's difficult, if not impossible, to beat a basically cost free seat, in a way.
Did I already mention I predicted they were testing this new strategy at the beginning of the year, when we saw their passenger numbers explode?

Filling te empty seats is a great idea especially if it can be done by stealing passengers from the competition. Selling last minutes at 69 will hurt the LCC's, but it will come at a cost as the revenue will not even cover the variable cost for the seats. On top of that it will increase the fixed cost of the other seats and put more stress on the day to day operation. On time departure is a lot more difficult to achieve with a full aircraft than with an half empty one. You will need more loaders, cleaners, check in staff, gate agents,...
We saw indeed a significant increase (wouldn't call it explosive though) in passenger numbers, but despite that Mr Gustin predicts a loss and that is what really worries me. I have a "deja vu" feeling: Sabena was flying full aircraft but couldn't make any money.
In fact Air France is fighting the same war against easyJet in France. You can fly AF for 49€. Passenger numbers are increasing significantly, but at huge cost, they will have to reduce the shorthaul fleet by 30-40 aircraft in order to survive.
Vueling, Ryan and EZY have the money to fight such a war in Brussels, BAir doesn't!

[FlightMate]

I think the price war will actually hurt every player in Belgium.
example:
If SN steals pax from FR by offering a cheaper (69eur) ticket for their first 10 pax, this means the next 10 will have to pay more (let's say 89eur).
But in the mean time, FR still has 10 seats at 72eur.

I think there is just no market in BRU for 3 or more airlines offering european flights at 60-70% load factor.

The reason I see for offering cheaper seats (at a loss) would be to drive the competition out of business.
FR has got deep pockets.

I wonder how long the wat will last?
all good for the customer, until the winner gets monopoly...

[airazurxtror]

If SN steals pax from FR by offering a cheaper (69eur) ticket for their first 10 pax, this means the next 10 will have to pay more (let's say 89eur).

Hold on. Don't believe that 69 euros return is always cheaper than Ryanair.
One can easily find Ryanair one-way tickets at between 20 and 30 euros, meaning return at around 45-60 euros, from Charleroi as well as from Brussels.

[Inquirer]

the revenue will not even cover the variable cost for the seats.

What are the extra costs of a no frills ticket, other than the fuel and the taxes?
At 69 euro, they got those more than covered, if you are right that fuel is just 3 euro?
And as already said, total revenues will likely be higher.

On top of that it will increase the fixed cost of the other seats

Remember they are flying those seats today as well, but empty, so it's exactly the opposite in fact!

You will need more loaders, cleaners, check in staff, gate agents,...

Again, remember we're talking about a no frills class here, so additional manpower is limited, although the workload for those on the job already might increase indeed. But again, that reduces the unit costs.

We saw indeed a significant increase (wouldn't call it explosive though) in passenger numbers, but despite that Mr Gustin predicts a loss and that is what really worries me.

Actually, since semantics is important, have you read exactly what he says?
I read in De Tijd he says they are in line with their budget, and expecting improved figures vs last year.
It would be very interesting to know what is their budget target for this year and whether it got revised after the increased offer by competitors at BRU, but I remember they originally expected a small profit.

Vueling, Ryan and EZY have the money to fight such a war in Brussels, BAir doesn't!

Don't overestimate the financial strength of those airlines.
Even Ryanair is poorly rated by investors, despite it bragging about holding the highest rating of all.
It's because low fare airlines have low turnover and are thus very vulnerable to result volatility.
On top of that, they have very nervous shareholders, which hate to see setbacks or long horizons.
Combine that with BRU not being their only growth market and the appetite to bet their entire farm on BRU alone is obviously non-existent. If the headwind is too strong on certain destinations, they will simply head elsewhere, driven there by their shareholder's profile. It's just a reality.

[Flanker2]

I think that SN will do the same or marginally better than last year, ie 40-45 million loss or 25-30 million with subsidies. But the environment is very volatile, with Ebola and LCC competition as the main challenges. Also, whether the EU will approve last year's subsidy.
Also the economy, which is expected to cool down towards the end of the year.

I think that SN can't afford to broaden its losses without risking consequences, so they should avoid that at any cost. Unfortunately, the initiatives and measures they can take are limited in scope, without additional funding.
FR also know that they have an opportunity to drive SN out of one of their main leisure markets, so I think that they won't mind investing a couple hundred million euro's to achieve that, as a long-term investment.
They're going to strangle SN tighter and tighter until SN loses the energy to fight back. They already have a firm grip, so I don't see them releasing that anytime soon.

It will happen sooner or later, there's no way they will co-exist in BRU.

You can't really blame FR for doing that, after SN made itself vulnerable with years of straight losses.

[airazurxtror]

Since this morning on the Brussels Airlines website :

Due to technical issues you might experience problems during your online booking.
If you experience any difficulties, please book your flights through our Service Center on +32 (0)2 723 23 62 of try again later.
Our sincere apologies for the inconvenience. We're working hard to solve the problem as soon as possible.

Perhaps they are trying to put the new fares online ?