Business Chat

AUDIO BUSINESSCHATANSWERS ON PAGE 46

BUDGET AIRLINES

Hi, and welcome to Business Chat. Today we’ll be talking about low-cost airlines with Jeff Dett, the editor of Aviation Weekly.

Jeff, in the past couple of years, more than 20 low-budget airlines have gone out of business. Why is this? Well, a lot of low-cost airlines are being squeezed out by the price-war, and the increases in aviation fuel. And have any of the major companies been able to, erm, react in any way? Yeah, well they’ve been forced to lower their prices too, just to try and attract, kind of, casual travellers. But I suppose they’ll hope to be able to increase those prices later on in the future.

And who’s responsible for this price war? Well, mostly companies like easyJet and Ryanair and, erm, well, the, the thing responsible for the increase in the cost of aviation fuel is probably the Iraq war. And the fact that a lot of these companies have been reducing their prices even, you know, all through the year, and not only in peak months like, er, February or November.

Right, well, surely this is affecting easyJet and Ryannair as well, isn’t it? Yeah, well their share price has been, has plunged by about 15% but, erm, basically they’ve got healthy balance sheets so they’ve been able to, erm, hold out while other companies are falling.

Well, so how can they afford to do it? Well, basically they’ve been sacrificing short-term shareholder value for longer term benefits. They’ve managed to convince their shareholders that it’s worth making life difficult for other companies while they can try and survive. Right. So the message really is to enjoy these low fares while we can. That’s it. That’s it. Yeah.

So, thank you, Jeff. That was very interesting. Thank you.

So, you’ll be flying back to Dublin tonight then, will you? Yeah, that’s right. Yeah.

I suppose you’ll be going on one of the low-budget airlines then, that you’re always writing about and telling us all about? Oh, no. First class in a British Airways jumbo jet for me. Complimentary champagne, lobster thermidor, and the personal attention of a beautiful air hostess. Can’t beat it!

That must cost a fortune! Yeah, I suppose it does. But I’m not paying. Firm pays.

So, who has been affected in the short term? Well, just recently this company called JetGreen. They were doing flights from Dublin to Rome and Nice and Alicante. Er, they had to suspend their operations. They’d been trying to market themselves as the finest, most stylish low-fare low-cost airline. But they just couldn’t afford to stay in the field.

Right, OK. So what is situation at the moment? Well, there’s lots of companies just ready to jump in where those, er, you know, where the other companies have gone bust.

Really? Yeah, and there’s lots of, erm, people prepared to put up capital for these new companies. And, yeah, there’s basically a lot of people who think the market is still quite open for new business.

Right. And how do you see the future developing? Well, at the moment there are about 50 airlines operating in Europe, charging low fares. And, erm, frankly, many of these companies just won’t be able to survive. They’re, they’re charging too little, and it’s just impossible to keep going at those rates. Yeah, right.

G L O S S A R Y

a low-cost airline n an airline that sells cheap plane tickets to go out of business exp to stop functioning as a business; to close to squeeze someone out exp to force someone to leave a particular market a price-war n a situation between companies in which they all try to offer the lowest prices a peak month n a month when there is a lot of business and activity in a particular business sector to plunge vb to fall quickly; to decrease quickly a healthy balance sheet n if a company has a “healthy balance sheet”, the relationship between cost and profit is very good to hold out phr vb to survive to sacrifice vb if you “sacrifice” something, you eliminate that thing, or stop using it short-term adj immediate; in the near future shareholder value n the money given to shareholders for having shares (legal bonds) in a company a shareholder n a person who has shares (legal bonds) in a company to make life difficult for someone exp to do things that causes problems for another person to suspend operations exp to stop functioning as a business; to stop doing business for a limited period finest adj the best most stylish adj most fashionable to stay in the field exp to remain in the market; to continue doing business to jump in phr vb to enter a market quickly to go bust exp to close to put up capital exp to offer finance to keep going exp to continue working; to continue functioning at those rates exp at those prices to lower your price exp to decrease your price lobster thermidor n a way of cooking lobster (an animal with a red shell that lives in the sea) with béchamel sauce and parmesan cheese can’t beat it! exp this means: “there is nothing better” a firm n a company