Hailing Europe's Flying Taxi for Under €20

The already burgeoning low-cost airline market will add another name to the list of no-frills operators on Tuesday when travel agency giant TUI launches Hapag-Lloyd Express, the latest carrier to offer bargain flights from German airports to destinations across Europe.

TUI, in partnership with regional airline Germania, launches the new cheap and cheerful company from its home hub of Cologne/Bonn with flights starting on December 3. Internal flights within Germany and European routes will be offered for a starting price of €19.99 ($19.84) per person, one-way, with taxes and charges included in the flight price.

The airline states in its fare information that prices will increase proportionate to demand until the departure of the flight. According to the company's Web site, the last seats on any flight will be sold "at prices which on average correspond with the level of regular conditional one-way economy rates offered by established airlines."

Express offers some of Germany's lowest prices

The airline has advertised flights on some inter-European connections for as cheap as €10. This makes the entry-level prices for Hapag-Lloyd Express some of the lowest ever offered on the German market.

The latest no-frills airline to enter the German market will fly to Hamburg and Berlin within Germany while its European route network will include Milan-Bergamo, Venice, Naples, Pisa/Florence and London-Luton. Hapag-Lloyd Express intends to fly to these destinations several times a day with more European destinations being added from spring 2003. The company's services start with four Boeing 737-700 aircraft provided by Germania.

"With Hapag-Lloyd Express, we hope to become the most popular low-cost airline in Europe, and evolve into the No. 1 quality carrier in the new airline market segment. Our motto will be: Flying with us is as easy as taking a taxi," said Hapag-Lloyd Express CEO Wolfgang Kurth at a press conference in the Cologne-Bonn airport in October this year.

CEO forecasts over 1 million customers in first year

Kurth forecasts around 1.3 million passengers during the first year after targeting around 16 million inhabitants within the North Rhine-Westphalia area of Germany with a broad based marketing and advertising campaign

Hapag-Lloyd Express is the second new low-cost carrier aiming to start offering services from Cologne-Bonn from the end of this year. It joins Germanwings, a unit of Lufthansa’s partner Eurowings, which began flights this autumn. Its addition to the growing list of bargain basement airlines increases competition. But while this may seem good news for customers, it may signal bad news for other companies.

Though currently claiming only 5 percent of the German airline market, analysts say no frill airlines’ business will only grow, claiming a market share of up to 20 percent in some European countries in the coming years. The cheap airlines have already wreaked havoc in the inland German market for Lufthansa and Deutsche British Airways, which had to completely restructure its operations earlier this year following erosion of customers.

Taking a bite out of Lufthansa

Before launching Germanwings, Lufthansa was punished by Germany’s Federal Cartel Office for trying to keep up with low-cost carriers. The office ruled the airline giant was dumping when it lowered its prices in the spring to remain competitive.

But larger airlines may not be the only ones to lose out due to an influx of low-cost carriers. Virgin Express, Virgin Airlines’ lower-fare carrier, recently announced it was shelving plans to open up shop at the Cologne-Bonn Airport in light of the increasing competition. Still, others are continuing with their expansion plans undeterred despite analysts' fears that the current boom will result in too many planes and not enough passengers to fill them.

Current boom may give way to over-saturation

A report in this month's McKinsey Quarterly showed that low-cost carriers average between two and three flights a route, seven days a week, mostly to airports in cities such as Amsterdam, Madrid, Paris, and Zurich. The financial magazine stated that although the established low-cost airlines have lower costs than the flag carriers -- on average 40 percent below those of the major international airlines -- most have to fill more than 75 percent of seats to turn a profit.

With the rate of new airlines joining the market, many wanting to use the popular routes favored by leaders such as easyjet and Ryanair, the bargain basement industry could suffer from the effects of over-saturation.