Transport Airlines

EasyJet continues move into European business routes with Rome-Milan launch

Mar 25, 2013 7:17 am

Skift Take

Legacy carriers are losing capacity to low-cost carriers as businesses cut travel budgets and flyers opt for cheaper fares with no-frills service.

— Samantha Shankman

Free Report: The State of Student Travel

Alitalia SpA’s monopoly over flights linking Rome Fiumicino and Milan Linate airports ends today as discount operator EasyJet Plc commences services between Italy’s capital city and its biggest financial center.

Europe’s second-largest low-cost carrier will offer five daily services with a lead-in fare of 59.50 euros ($77.19) per round-trip. Alitalia averages 60 weekday connections, every 15 minutes at peak times, with return fares starting at 89 euros.

The Italian flight comes a week after EasyJet began services from London’s Gatwick airport to Moscow. Both routes are expected to attract a high proportion of business clients, advancing Chief Executive Officer Carolyn McCall strategy of boosting profit by tapping markets in which people tend to book later — and pay more — than the company’s leisure passengers.

“Routes like this have been dominated by the old flag carriers, so for an airline like EasyJet to come in is a pretty big step-change,” said Donal O’Neill, an analyst at Goodbody Stockbrokers in Dublin with a “buy” rating on the stock. “The nature of the market is corporate and it expands their direct links with corporates, which is the angle they’re going for.”

While ranking behind Dublin-based Ryanair Holdings Plc among the region’s discount airlines, EasyJet began trading on Britain’s benchmark FTSE 100 Index last week after its stock surged 35 percent for the year, valuing the company at 4.09 billion pounds ($6.3 billion).

Five Bidders

The entry of EasyJet onto Italy’s key business route ratchets up pressure on Alitalia, where Andrea Ragnetti quit as chief executive officer last month after the 12-month loss widened to 280 million euros from 69 million euros in 2011. The Rome-based company is targeting break even this year.

EasyJet was one of five airlines that bid for the Milan- Rome connection last year. Italy’s AGCM competition authority said Oct. 25 that the U.K. carrier was “most likely to ensure an effective competitive constraint” on a route where Alitalia had been ordered to give up seven slots at Linate as part of the price for approval of its 2008 merger with Air One SpA.

The route is Italy’s second busiest after that between Fiumicino and Catania on the island of Sicily, according to figures from the Enac, Italy’s civil aviation authority.

The average one-way ticket cost between 100 and 130 euros in the summer 2011 season, according to AGCM documents cited by Luton, England-based EasyJet. Alitalia has since rolled out a new pricing structure with fares spanning 89 euros per round- trip to 289 euros for a fully flexible, refundable booking.

Rail Option

Competition on the route has also been heightened by the introduction last year of trains operated by Nuovo Trasporto Viaggiatori on a high-speed network also used by Trenitalia, the main operating unit of government-owned Ferrovie dello Stato.

EasyJet attracted 10 million corporate travelers in 2012, or 16 percent of its total traffic, with new opportunities arising as it gains credibility with business passengers and regulators, according to McCall. Full-service carriers like Alitalia and Deutsche Lufthansa AG are also trimming capacity, dropping 800,000 seats on EasyJet routes in the first quarter.

EasyJet aims to carry about 350,000 people in the first 12 months of operations between Rome and Milan using 156-seat Airbus SAS A319 planes. Alitalia flew 1.4 million people on the route in 2012, spokeswoman Speranza Giovanna said by e-mail.

“As legacy carriers retrench you’ll see more and more of this,” O’Neill said. “EasyJet has a track record of delivering so you can bet that they’ll run that route profitably.”

Editors: Chris Jasper and Benedikt Kammel.

To contact the reporter on this story: Kari Lundgren in London at klundgren2@bloomberg.net. To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net.

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