PARIS — With Europe’s economic slump threatening to further crimp company budgets, the battle for business travelers is growing ever more heated among the region’s airlines.
This is particularly true on short-haul routes, where incumbents like Lufthansa, Air France-KLM, British Airways and Alitalia — with their comfortable lounges, frequent-flier programs and shuttle-like frequencies — were once the preferred, and in some cases, the only option for busy executives jetting between European capitals.
But in recent years, most of those same legacy carriers have gradually pared back those perks on European routes as they have struggled to cut operating costs amid years of losses. Meanwhile, the region’s largest budget carriers have continued to add capacity, to expand into more cities and, increasingly, to move into the big airports where many business travelers want to fly.
The low-cost airlines have also made a more direct play for a higher-spending clientele, offering add-ons like reserved seating, flexible tickets and priority boarding that, on some routes, make their service almost indistinguishable from their higher-fare rivals.
On Tuesday, easyJet showed how well this strategy was paying off. The British budget carrier said net profit for the year that ended Sept. 30 rose 13 percent to 450 million pounds, or about $705 million, from a year earlier. Pretax profit, a more closely watched measure of earnings, rose 21.5 percent to £581 million. Revenue rose 6 percent, to £4.5 billion.
EasyJet’s larger rival, the Irish carrier Ryanair, has also expanded aggressively throughout the economic slowdown, with similarly beneficial results. This month, Ryanair reported a 32 percent jump in earnings for the six months to Sept. 30 and raised its outlook for the current financial year, citing robust bookings for the coming winter months, as well as a strong increase in demand from business travelers.
As part of efforts to shed a reputation for gruff and inflexible service, Ryanair has introduced a series of changes, including a revamped website, a new mobile booking application and reductions in certain charges like baggage fees.
To attract more business customers, and to compete better with easyJet, Ryanair in October also added flexible tickets, fast-track security and reserved seating.
“What you’re looking at is a structural change in business-class travelers in Europe today,” said Chris Tarry, an independent airline consultant in London. “What is the difference between sitting in a single-class airline like Ryanair or EasyJet and a full-service airline — besides maybe a free bread roll of indeterminate quality?” he said. “From a passenger point of view, you’ve got convergence.”
Both Ryanair and EasyJet claim that 20 to 25 percent of their passengers are flying on business, a figure that has increased significantly as the European economic downturn has dragged on.
Analysts said a prolonged regional downturn could continue to play in the favor of low-cost airlines with the biggest networks.
“If I’m a company, the two easiest things for me to cut are marketing and travel costs,” said Mr. Tarry. “So intra-Europe, you are going to keep looking for even better value from a corporate travel point of view.”
Carolyn McCall, easyJet’s chief executive, said on Tuesday that the carrier was seeing increasing repeat business from corporate travelers, which she attributed to the new features of flexible tickets, allocated seating and priority boarding. The airline said that 62 percent of passengers who booked a flight for business in the past year had booked again with easyJet, better than the 57 percent rebooking rate for leisure passengers.
Over the past year, easyJet, which is based in Luton, England, has also increased its presence at several airports popular with business travelers, particularly at Gatwick Airport near London, where a quarter of its total fleet of 226 single-aisle Airbus planes is based. The carrier has increased capacity at Gatwick by 15 percent over the last six months with 25 new takeoff and landing slots that it acquired in March from Flybe, a struggling British regional carrier.
EasyJet’s earnings also benefited from recent labor unrest at Lufthansa and Air France. A two-week pilots’ strike at the French carrier in September forced the cancellation of more than 8,500 flights and disrupted the journeys of nearly one million passengers. EasyJet said it had reaped £5 million in additional revenue in September from passengers who had been unable to fly on Air France.
Ms. McCall said the strong annual profit had prompted easyJet’s board to recommend increasing the airline’s dividend to 40 percent of annual profit, or 45.4 pence a share, from 33 percent, in line with a proposal this year to return more cash to shareholders.
EasyJet said it carried 65 million passengers over the year, up 7 percent from a year earlier, and planned to expand seating capacity by a further 5 percent over the next 12 months. The recent decline in global oil prices is expected to reduce the carrier’s fuel bill £22 million to £77 million over the next year, the company said.
However, the group warned that nonfuel operating costs were expected to rise by around 2 percent, driven mainly by higher maintenance costs on some of its older planes, as well as investments linked to new bases it plans to open next spring at Schiphol Airport near Amsterdam and in Porto, Portugal’s second-largest city.
In an attempt to remain one step ahead of Ryanair’s business-friendly initiatives, easyJet also revealed on Tuesday that it had been testing a new loyalty program with roughly 15,000 passengers in Britain, France and Switzerland. The trial program, which has been operating for the last three months, offers members increased booking flexibility, ticket price guarantees and a dedicated customer service hotline.
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