Low-Fare, Low-Cost Airlines poised to Change Dynamics of Mediterranean Tourism

For around 30 years, charter airlines have played a major role in stimulating demand for many Mediterranean destinations. Now their counterparts and competitors, the new wave of low-fare, low-cost airlines are set to change not only the face of air travel to the Mediterranean, but also the region’s product and source markets. How and where these new entrant airlines will affect tourism in the region is a key theme of the 1st Mediterranean World Tourism Conference being held in Malta on 26th & 27th February.

According to the 2003 Guide to Global Travel Trends, demand for low-fare airlines is projected to grow faster than GDP and will stimulate greater expenditure at airports and in local communities. In Europe, the low-fare, low-cost airlines' share of trips is forecast to double in the six years to 2007. Much new-wave travel is additional to charter volumes although the charter sector is unlikely to experience the growth rates of previous years.

A question facing some Mediterranean destinations must be whether they can cater for any surge in tourist numbers brought about by the arrival of these new, low-cost carriers. The rise in number of low-fare carriers should stimulate demand from a number of new source markets, such as the former eastern European bloc. Low-fare carriers are also spreading tourist arrivals throughout the year thereby helping many destinations boost all important shoulder and off-season arrivals. The first results of the European Travel Monitor 2003, part of the World Travel Monitor, produced by Munich-based IPK International, a co-host of Medworld, show that for example in UK more than 25% of all outbound trips have been realized by low-fare flights. Also in Germany, the low-fare flight travels have already reached 2 digits market share of total outbound trips.

Medworld speaker Peter Morris, chief economist and head of international transport and tourism consultancy Airclaims (UK), sums up the trend: “The low-fare, low-cost carrier model has flourished where there have been deregulated markets, high prices for short-haul and short-stay travel, and spare airport capacity. Markets with 'low-fare' transport options have grown much faster than they otherwise would have done.”

What of the prospects for low-fare, low-cost airlines operating to and in the southern Mediterranean? “Successful low-cost carriers such as Ryanair and easyJet have multiple hubs operating with staff recruited from many countries, and have many home markets. With their large source markets and regional reach, they are poised to make further entry into charter airline territory. They have already stimulated point-to-point leisure demand through low prices,” says Morris.

The Mediterranean is also spawning its own low-fare, low-cost carriers, mostly as spin-offs from national carriers. Royal Air Maroc is to launch a low-cost subsidiary, currently known as RAM Lite. Morris is more sceptical about such strategies: “The model has yet to be successfully developed by an existing network carrier. However, different market niches exist. There doesn’t have to be only one model so long as new entrants are adept at identifying markets and routes, and earn more revenue than their costs.”