Do planes have a home airport?

Discounters of the skies

Vienna-Nice for € 9.99? At whose expense the low-cost airlines' business model works.

DATE December 2019 edition

Lena Berger * is at the beginning of her adult life when she begins to work at ›Niki‹. Her dream job was never a flight attendant: She saw a job advertisement and applied more by chance. Now she puts on jeans and a pink blouse every morning, gets into her car and drives 45 minutes from her home in Lower Austria to Vienna International Airport. To get to the gate, she crosses the halls every day, which many only see on summer vacation. An hour before the guests, she gets on the plane and discusses the flight that is ahead of them with the pilot and her colleagues. This time it goes to Berlin. After the plane has landed, she waits until everyone has disembarked and clears away any packaging that has been left behind, knocks crumbs from the seat cushions. There is no time to rest in the half hour before the return flight.

There are many airlines in Europe. Too many. The competition for survival is fierce, every year low-cost airlines go bankrupt. This competition in European aviation can be viewed like through a magnifying glass in Vienna-Schwechat: After the insolvency of the German Air Berlin and its Austrian subsidiary Niki in 2017, several airlines rushed to the location. Easyjet Europe started its service from Vienna in the same year. The Hungarian Wizzair and Level, the low-cost brand of the Spanish International Airlines Group (IAG), opened a base in Vienna in 2018. The Irish Ryanair also saw an opportunity and bought Niki as Laudamotion. The passengers are happy about the price war, because if you want to go to Paris, you don't have to sit on the bus for 18 hours, but can fly there in two hours for the same price. Just: How do the low-cost airlines do this cost calculation? The currently fifth low-cost airline in Vienna, Lufthansa subsidiary Eurowings, will be relinquishing its base here from 2020. How can that pay off for the others? How does this business model work that drives us passengers into flight shame and traditional lines like the AUA into the red and into downsizing? And do you actually save on your own flight security as a buyer of a cheap ticket?

Let's look back briefly: 40 years ago there was neither Niki, nor Level, nor any other low-cost airline in Europe, national airlines had hardly any worries. Bilateral air transport agreements stipulated that only state airlines were allowed to operate agreed routes. They agreed the ticket prices with each other at tariff conferences, and the number of tickets they were allowed to offer for the respective routes was stipulated in the agreements. The year 1987 marked the beginning of the end of the ideal world for the national airlines, because the EU began to liberalize the market. In 1993 it was largely open to other airlines and heralded the era of low-cost airlines. Easyjet was founded two years later, and a little later Ryanair expanded to mainland Europe. Their concept was simple: They concentrated flying on the essentials, namely on the seat on the plane. Every additional service - luggage, sandwich or the tomato juice on board - had to be paid for separately. In this way, they saved almost half the costs of traditional airlines. They weren't the only ones who saw an opportunity: In the 1990s, dozens of new airlines were founded, many of which were also discontinued. Nevertheless: The pressure they put on the classic airlines was enormous. Soon they too began to cut their service level in order to keep up with the prices of the competition.

What distinguishes low-cost airlines from classic airlines is not just the service, as the common myth leads one to believe. They are extremely cost-effective: low-cost airlines have numerous bases with locally employed crews, Ryanair alone has 86 bases in Europe and North Africa. Since their planes and crews are stationed at airports across the entire network, they can offer numerous direct connections. Classic airlines, on the other hand, usually only have one home airport and manage many transfer flights from there. With low-cost airlines, you can often only book direct flights, which means that they can use their aircraft more efficiently: if one aircraft is delayed on a transfer flight, the other has to wait. In addition, a direct flight is cheaper to produce than two flights with a stopover for the same destination. In addition, the lines save their own travel costs, as the staff usually returns to one of the many home bases and does not have to stay overnight in a hotel. Traveling to and from the hotel would also count as working hours, and unproductive working hours would also be eliminated. With all this, low-cost airlines are increasing the pressure on national airlines. They try hard to keep up with the prices of the competition.

How the sometimes absurdly low prices for flight tickets - around 9.99 euros for Vienna-Nice at Wizzair at the end of November - actually come about is not transparent, says Sebastian Kummer, director of the Institute for Transport Economics and Logistics at the Vienna University of Economics and Business. Every airline is pursuing a different strategy. In general, airlines want to pick up every customer where they stand: sell those with a high willingness to pay an expensive ticket, those with a low budget a cheaper one. Dynamic or personal pricing is the name of this difficult to prove method, in which prices are also adjusted to the device used for booking and the data collected: ›There are user reports that it is more expensive to book a flight with a MacBook or iPhone than with an Android device, because the systems recognize who is visiting the site, ”explains Kummer. ›There should also be algorithms that cause the price to rise the more often the person visits a page. Because the higher the probability that she actually wants to book. ‹Selling only cheap tickets, but even cheap airlines could not afford, says Holger Friehmelt, head of aviation studies at the FH Joanneum. ›An airline that sells cheap tickets will also have people on the plane who have paid more. ‹An EU law regulates how many tickets must be available at one price, but sometimes there are only a handful of tickets at the lowest price that are intended to attract passengers. The business model of the low-cost airlines is based on yield management: This involves dynamic price adjustments that not only take into account the willingness of customers to pay, but also take into account the occupancy of individual flights - and thus the average revenue per seat on the aircraft for the airline maximize.

When Niki was taken over by Ryanair and renamed Laudamotion, Lena Berger stayed. For the time being. Her service uniform - jeans and pink blouse - remains the same, but not everything remains unchanged. The number of their flight missions that take off from Germany is increasing. Dissatisfaction is widespread in her: she now stays in Düsseldorf hotels more often than at home.

When the new low-cost airline Level opened a base in Vienna a few weeks later in the summer of 2018, Berger and many of her colleagues changed employers. Her new uniform consists of a skirt and a blazer, both black with green applications. She is now a senior flight attendant herself. ›The female colleagues in the first salary level who are starting over earn very little and barely make ends meet,‹ she explains. Junior flight attendants earn 1,261 euros gross per month at Level, and they receive six euros in expenses for each flight hour.

According to the International Civil Aviation Organization (ICAO), around 4.3 billion airline passengers took off into the air in 2018 alone. In the future, there will be many passengers from countries that are currently experiencing an economic upswing - for example from the Asian market: Within China, the number of passengers will triple by 2039, according to forecasts by aircraft manufacturer Boeing. The market is growing, the competition remains. It has a particular impact on wages, which have plummeted in the industry over the past few decades. Neither Wizzair nor Level have a collective agreement at Vienna Airport. The Vida union assumes that the Wizzair base salary is less than a thousand euros; the airline states that the basic salary for cabin crew is ›1,400 euros net per month‹. The Lufthansa subsidiaries Eurowings and AUA have collective agreements and pay at least 1,742 euros a month gross. Level argues that the salary including the expenses, which are paid from the 65th flight hour per month, increases to the monthly € 1,700 gross demanded by the Vida union. However: ›If the company pays out the salary in the form of expenses, it smuggles past the social security contributions. As a result, no contribution is made to the pension or unemployment benefit for the employees, 'criticizes Daniel Liebhart, chairman of the aviation division at the Vida trade union and air traffic controller at Austro Control. ›In addition, the entrepreneurial risk is transferred from management to the employee. ‹

There is no minimum wage in Austrian aviation, the reason for this is a lack of an industry collective agreement. Currently, however, the Federal Unification Office in the Ministry of Social Affairs has submitted a statute application from the union, which means: If the statute is approved, parts of the AUA collective agreement would have to be taken over by those airlines that do not have a collective agreement. There is currently no date for the negotiation of the statute proposal.

In any case, the Chamber of Commerce rejects an industry collective agreement. ›The problem in aviation is that the companies operate internationally,‹ says Manfred Handerek, managing director of the aviation professional group at the WKO. ›It is not necessary that you have a location in every country, it is sufficient to fly in and out. If we have an industry collective agreement, some airlines would dissolve the base in Vienna. The effect that the union wants to achieve would therefore not be there. The employees would lose their jobs or would have to work abroad and from there. ‹

Sebastian Kummer from WU finds it understandable that low-cost airlines have lowered wages. ›Flight attendants simply have a service job. It used to be extremely well paid and attractive, now it is paid normally. I don't know whether this is so dramatic. ‹For Daniel Liebhart, on the other hand, flight attendants are more than› prettiness for the passengers ‹. In an emergency, they would have to evacuate an aircraft within 90 seconds. If that doesn't work out, it costs human life, because an airplane burns out completely in two minutes. And cosmic radiation - which from a thousand flight hours per year is as stressful as radiation for the maintenance personnel in nuclear power plants - comes with great responsibility. The consequences of frequent flying range from insomnia, digestive problems and headaches to a significantly increased risk of stroke, heart attack, pulmonary embolism and thrombosis. The constant change of time zones and the lack of acclimatization affect the biorhythm. ›The flight attendant isn't paid according to the business risk‹, says Liebhart. ›Even if it is 1,700 euros gross, that is in no relation. ‹

In the summer of 2019, Lena Berger flies six to seven days a week for Level. She receives a duty roster every 15 days, but it is seldom adhered to. Almost every second working day a flight is carried out significantly early or delayed. ›There are no rules at the moment,‹ she says. ›In principle, we have to fly everything that is assigned to us. Even if it turns out to be a late flight instead of an early flight, we have to accept it that way. If I say I'll be back home at noon, it won't be foreseeable. ‹It is also often allocated for an additional flight, up to an hour before departure. The working atmosphere suffers from the constant changes to the roster. The works council demands that a flight can be postponed a maximum of three hours forwards or backwards. Level argues that roster changes would only be made within the legal framework. Delayed flights would have to be carried out, but not beyond the date line. They also have replacement crews in case of illness or other failures.

In Austria, flight personnel are exempt from the Working Hours Act, airlines “only” have to adhere to the standards of the European Aviation Safety Agency EASA. These are quite loose; according to them, the maximum working time per day can be nine to thirteen hours, depending on a number of factors, and can be extended under certain circumstances. In the summer, six days of work per week are the norm in the aviation industry, breaks are not regulated between short-haul flights. In addition to all the effects on the crew, this also has a disadvantage for the passengers on board: According to a study by the European Cockpit Association, little sleep and irregular working hours of the crew have a negative effect on the safety of flights. In 2012, 6,000 pilots across Europe were surveyed for the ›Pilot Fatigue Barometer‹. The survey found that more and more pilots and co-pilots doze off while on duty. Pilots are reluctant to stop working because of fatigue, which leads to more mistakes. WU Professor Sebastian Kummer, on the other hand, sees no reason to worry: no means of transport is as safe as the plane.

Markus Strauch * is sitting in a Viennese café. It's a hot summer day and he's ordering large lemonade after large. Strauch has been a pilot for decades, he has seen how the aviation industry gradually changes, and most recently worked for Wizz-air for a year. His answers are never just a sentence, but entire narratives. He imitates the bad English of his former bosses and recreates dialogues. He has a lot to criticize at Wizzair, but at the same time does not want to condemn it. Much of what Wizzair does contradicts his ideas, for example that pilots are not paid for it if they cancel a flight. With traditional airlines, pilots would be paid regardless of whether they operate flights or not. Pilots must check their aircraft for airworthiness before take-off - just like a learner driver learns to inspect his car before it is put into operation. ›If, as the captain, you discover that the aircraft is not airworthy, you will earn nothing that day except the basic salary. A person who is not strong in character and says he needs the 700 euros could interpret what he has found to mean that the aircraft is airworthy. ‹

During his time at Wizzair, Markus Strauch is stationed in Hungary. When he boarded a Wizzair plane at Budapest airport at 4:30 on the first day of work, he shook hands with all the flight attendants and introduced himself - the cabin members were amazed. ›We don't do that here,‹ says his colleague to him. ›Because you're the captain. You are the authority. ‹From then on he’s just a“ captain ”. 'Good morning, Captain', 'Good evening, Captain', nobody knows his name. When he wants to chat with the flight attendants, they are amazed. If someone on the plane picks up the phone to call them in the cockpit, then only the senior flight attendant. Normally, the hierarchies in aviation are very flat, says Strauch, an amikales climate is standard. Every cabin member must always dare to report the suspicion that something is wrong with the aircraft. ›Just-Culture‹ is the name of this safety culture. It helps to reveal weak points in aviation and prevent accidents. Fear is not good for you, because when the fear of punishment comes to the fore, grievances, problems or mistakes are more likely to be covered up than addressed.

Since the Ryanair takeover, Laudamotion insiders have also reported a culture of fear there. It was not until the end of August that four pilots were dismissed. Before that, they had completed their additional functions as flight operations manager, training manager, deputy training manager and technical pilot - for lack of resources, so their argument. As a supervisory body, Austro Control regularly checks airlines for their operational suitability and compliance with safety standards - including Laudamotion. Austro Control reports that the airline's flight license could be withdrawn, as has been rumored, is only an option if there is a specific risk of an accident, for example if an aircraft is damaged.

Trade unionist Daniel Liebhart is particularly critical of the pay-to-fly system, for which Wizzair is known in the industry. Young pilots who have invested 80,000 to 90,000 euros in their pilot's license and want to start at Wizzair would initially have to continue paying.The airline would ask for expensive additional certificates for a certain type of aircraft, such as the Airbus 320. ›They say: We can offer you that for 30,000 euros. You fly the first thousand hours for free, and then you can become a pilot with us, 'says Liebhart. The airline denies this practice.

Further savings potential: The low-cost airlines let other companies fly for them. These include wet leasing companies that provide aircraft and staff. ›The basic principle of leasing is to outsource in order to reduce costs and not have any problems with the works council,‹ says Sebastian Kummer. Ryanair, for example, employs cabin crew through personnel leasing companies; This option has already been considered for the subsidiary Laudamotion due to the expected poor business results in 2019. In Austria there is no time limit for temporary work. According to Strauch and Liebhart, Wizzair is employing flight attendants and pilots at Swiss personnel leasing companies, thereby saving ancillary wage costs. In a statement, Wizzair states that it employs its crew members and office workers with employment contracts that would always comply with the regulations of the respective country in which the employment relationship is entered into.

According to Strauch, the company is not only moving in a legal gray area towards its employees, but also towards its customers. If you buy a ticket for 29.90 euros, you can neither expect food nor hotel accommodation if the plane fails, nor compensation if the luggage does not arrive. There are strict regulations on passenger rights in the EU that provide for benefits such as compensation payments. However, as an analysis by the AirHelp portal has shown, every second passenger with compensation claims is unjustifiably rejected by airlines in Austria. Passenger rights portals such as AirHelp and Flightright have therefore made claiming compensation payments their business model.

With the consistent cost reduction, especially in terms of personnel, Wizzair is successful. Last year the airline made a profit of 292.6 million euros. In the future, according to Strauch, it will expand to the federal state bases, from which the AUA has withdrawn. Wizzair denies this. In contrast to Wizzair, difficult times have broken for the AUA again. Last year, their profits fell for the first time since 2014. Wizzair now has almost 30 bases, mainly in Eastern European countries. For them, the Austrian market is just a side profit, for AUA the main source of income. So far, AUA has tried to position itself as a long-haul airline, says Kummer, and now the low-cost airlines at Vienna Airport are increasingly offering long-haul flights. This is very problematic for the airline, because despite the reduction in service, they cannot offer tickets as cheaply as their competition.

In contrast to the low-cost airlines, who have relied on uniform fleets from the start, the AUA has different types of aircraft. This puts them at a disadvantage, as flight attendants and pilots cannot be deployed so flexibly. ›The AUA employees have to be prepared for the fact that existing privileges will be removed, because otherwise the AUA will no longer be able to survive. From the employees' point of view, the good times in aviation are over, ”says Kummer. At the beginning of November a savings plan was announced for the AUA because the Lufthansa managers know about the ›brutal competition‹ in Schwechat. A job cut of up to 800 employees was rumored.

Lena Berger doesn't know how things will go on either. Her uniform is now hanging in a closet in a northern European metropolis, where she is stationed at the level base there. Markus Strauch is certain that without an industry collective agreement, working conditions in the aviation industry will deteriorate. Airlines with a collective agreement, such as Laudamotion, would also begin to relax the restrictions imposed by collective agreements. And even if the working conditions for flight personnel in Austria were legally improved, the low-cost airlines with their close-knit network of home bases would probably find a cost-saving way to circumvent the regulations. Where is that going? ›Aviation is a system that reacts to accidents,‹ says Stübers. Before the two crashes with the Boeing 737 Max, the system was supposedly in order. ›But when something happens, even the people who only paid 29.90 euros for their ticket feel harassed, insulted, intimidated and insecure. They are not aware that they are jointly responsible for this because they only paid 29.90 euros for their ticket. ‹

* Name changed by the editor