Routes News Magazine, Issue 3, 2014 by routesnewsmagazine

ROUTES NEWS ISSUE 3 VOLUME 9 2013

routesnews

The world air service development magazine

Wizz kid: J贸zsef V谩radi THE WORLD AIR SERVICE DEVELOPMENT MAGAZINE

Interviewed: AirBaltic, Lufthansa & ERA Airport spotlight: St Petersburg, Amsterdam & Budapest Special reports: Nerd birds & bilaterals Issue 3 Volume 9 2013 www.routesonline.com

Destination report: Switzerland Plus: All the highlights from Routes Asia

Foreword L

osing your national carrier overnight is probably the biggest commercial challenge an airport can ever face. At a stroke, your revenues, network and traffic are slashed and even if your home carrier is reconstituted at a later date, it’s likely to be a shadow of its former self, focusing on a limited number of profitable routes. This was the stark reality facing Budapest Airport following the collapse of Malev in early 2012, so it is astonishing to see that, despite the poor economic outlook in Europe, the gateway has managed, without a national carrier, to restore passenger traffic to near 2011 levels, attract new airlines and even launched routes to previously unserved markets. Today, the airport boasts links to Doha through Qatar Airways, a new St Petersburg service and it will be linked to the new Dubai World Central courtesy of Wizz Air from October. Budapest has also managed to restore 80% of its point-to-point traffic and is now targeting new long-haul routes to North America and Asia. How Budapest achieved this dramatic reversal in fortune is told in an exclusive interview with airport director Kam Jandu in this edition, while hosting this year’s Routes Europe will give delegates the opportunity to see why Budapest Airport is an attractive prospect and why it, and the cosmopolitan city it serves, deserves to be on any airline’s route map. And the Hungarian theme continues, as we have interviews with Wizz Air’s

Editorial

Editor Oliver Clark +44 (0)208 831 7514 oliver.clark@routes-news.com Deputy Editor Piers Evans +44 (0)208 831 7508 piers.evans@routes-news.com Group Editor Joe Bates +44 (0)208 831 7507 joe@aviationmedia.aero Reporter Steven Thompson +44 (0)208 831 7560 steven.thompson@routes-news.com

Sales CEO József Váradi and airBaltic’s Martin Gauss, both ex-CEOs of Malev and both pursuing very different, but equally successful, visions for their respective carriers. We profile the network development plans of Lufthansa, St Petersburg, Amsterdam Schiphol and Newcastle, and we talk to Carolyn McCall, CEO of easyJet, about the carrier’s recent launch of services between the UK and Russia. Elsewhere, we explore the tourism market of Switzerland, the benefits of so-called ‘nerd bird’ routes and the opportunities afforded by the relaxation of rules restricting Romanians and Bulgarians from travelling and working across the EU from the beginning of 2014. I hope you enjoy this issue.

Editor Oliver Clark

R™ is a registered Trade Mark of UBM Aviation Routes and is used under licence. © Copyright 2013. The content of this publication is the copyright of UBM Aviation Routes Ltd and shall not be copied or stored in digital format without the written permission of the Copyright holder. Content is correct at time of printing. UBM Aviation Routes shall not be liable for any errors or omissions contained herein.

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Advertising Manager Rebecca Randall +44 (0)208 831 7513 rebecca.randall@routes-news.com Sales Manager David McCauley +44 (0)208 831 7515 david.mccauley@routes-news.com

Production

Design, Layout & Production Andrew Montgomery andrew.montgomery@routes-news.com Elaine Harris elaine.harris@routes-news.com Mark Draper mark@aviationmedia.aero Erica Cooper erica@aviationmedia.aero Website Jose Cuenca jose@aviationmedia.aero

Publisher

Jonathan Lee +44 (0)208 831 7563 jonathan@aviationmedia.aero Published by Aviation Business Media Ltd Sovereign House, 26-30 London Road Twickenham, TW1 3RW, UK T: +44 (0)208 831 7500 F: +44 (0)208 831 7501 The opinions and views expressed in Routes News are those of the authors and do not necessarily reflect any policy or position of UBM Aviation Routes or Aviation Media. Printed in the UK by The Magazine Printing Company using only paper from FSC/PEFC suppliers www.magprint.co.uk

Contents 22

3 Foreword

World news

Cargo news

On the move

Airport one2one Véronique Lemée-Alexandre, network development manager, Marseille Provence Airport.

Airline one2one Dr Sebastian Hollmeier, director network planning, Frankfurt, Lufthansa.

Simple but effective

The bigger picture Peter Kenworthy analyses recent changes to the UK regional aviation market.

Northern lights Martin Rivers reports on how St Petersburg’s Pulkovo is seeking to become the Russian airport of choice for long-haul and low-cost airlines.

A route in focus Routes News spoke to easyJet CEO, Carolyn McCall, about the carrier’s new Moscow service.

Going Dutch Stuart Bowden finds out how Amsterdam Schiphol intends to remain one of Europe’s foremost hubs.

Richard Maslen profiles one of Europe’s fastestgrowing carriers, Wizz Air, as it continues to build its network across Central and Eastern Europe.

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Contents

48 54

45 60 45 Turnaround

Oliver Clark finds out how airBaltic hopes to make a profit next year as its restructuring and new network structure begin to yield results.

Switzerland realigns to global markets This year, Switzerland held the top spot in the World Economic Forum (WEF) ranking of countries by tourism competitiveness, yet amid Europe’s downturn it is extending its welcome to maintain growth.

Come back Victoria Moores investigates Budapest Airport’s phoenix-like recovery following the collapse of national airline Malev.

No brainer? The term ‘nerd bird’ has been around since the 1990s, but is it just a clever catchphrase or a compelling niche market? Adam Coulter finds out.

Free movement Oliver Clark and Mark Smulian analyse the potential impact of the lifting of restrictions on Romanian and Bulgarian citizens within the European Union.

The HUB, your weekly, central source of information for everything related to Routes and Routesonline, is delivered to your inbox every Friday. It includes event updates, airline and airport profiles and news and analysis. Sign up to receive The HUB at www.routesonline.com/register/

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Contents

70 68

Firm footing

80 78

70 Teamwork Valencia Airport says the doubling of its passenger traffic over the last 10 years is down to successful partnerships with the tourism authority and airlines, writes Steven Thompson.

74 Dealmaker Piers Evans reports on how the EU is pressing ahead with open skies agreements with Israel, Ukraine and Azerbaijan and eyeing other emerging markets.

Routes News is tweeting @routesnews Follow us at www.twitter.com/ routesnews Find out the latest news and let us know what you want to hear from us.

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Being social Routes News takes a look at the latest innovative ways airlines and airports are using social media.

On the back of its success in attracting an Emirates service last year, Richard Maslen reports on Newcastle Airportâ&#x20AC;&#x2122;s future route development plans.

Routes Asia report back

Routes update pages

View from the top Routes News speaks to European Regional Airlines Association director general, Simon McNamara.

Routes News online www.routes-news.com for all the latest news, views and developments from the global network planning community and read airport and airline feature interviews.

World news London–Jakarta to be connected by Garuda Garuda Indonesia will link London and Jakarta with a new service from November 2, while also seeking to draw traffic from traditional kangaroo routes between Australia and the UK, operated by Singapore Airlines, Qantas and Emirates. Flights from London Gatwick’s redeveloped South Terminal will fly five times a week with the airline’s new B777-300ERs to the Indonesian capital and then fly on to Sydney, while streamlined connections from Perth and Melbourne will also feed the Jakarta–London leg. From Jakarta (CGK), the service to London will take off at 12.55am on Mondays, Tuesdays, Thursdays, Saturdays and Sundays, touching down at 8.30am the next day.

Flights from Gatwick (LGW) will leave at 8.30am and land in Jakarta at 6.15am the next day. But a schedule overhaul will enable Australian passengers to fly the service to London with a maximum stopover in Jakarta of 3.5 hours, said the carrier. Flights from Sydney, Melbourne and Perth have been adjusted for more convenient onward flight, said Garuda. A B777-300 will fly from Sydney five times a week, while connecting flights from Melbourne will leave four times a week and from Perth five times weekly. Bagus Y Siregar, vice president for Garuda Indonesia Australia, said the flights are timed so Australians can arrive in London in the morning.

Sir Richard Branson.

Wizz switches Rome routes to Ciampino Wizz Air axed 50% of its routes to Rome’s Fiumicino Airport on May 7 and redeployed them to Ciampino in response to what it called “unreasonable” levels of airport charges. The low-cost carrier moved four routes to Gdansk, Poland and Cluj-Napoca, Timişoara and Târgu Mureş in Romania to Rome’s alternative airport, Ciampino, which is a base for Ryanair. “Our Rome routes to Gdansk, ClujNapoca, Timişoara and Târgu Mureş carry over 140,000 passengers per year on very

Lufthansa will deploy an A380 five times a week on its Frankfurt–Shanghai service from September. The daily service, leaving Frankfurt (FRA) at 5.20pm to touch down at 9.55am, will continue to run with a B747-400 on Mondays and Wednesdays. Lufthansa will continue to fly a second Frankfurt–Shanghai link on an A340-600 to offer twice-daily flights on the route. 10

low fares. One airport’s loss is another airport’s gain,” said Daniel de Carvalho, corporate communications manager at Wizz Air. “After Fiumicino airport charges have been increased to unreasonable levels, that do nothing to promote tourism and protect jobs, we will now bring this business to Rome Ciampino airport,” he added. Wizz has announced a tranche of new routes recently, including Budapest to Dubai World Central and Baku and Bucharest to Tel Aviv, and has agreed to lease eight A320s from China’s ICBC Financial Leasing.

Virgin’s Little Red takes off Sir Richard Branson travelled to Edinburgh dressed in a bright red kilt to publicise the launch of Virgin Atlantic’s new domestic operation dubbed Little Red. The Virgin boss arrived on the first Heathrow–Edinburgh A320 with other celebrities in tow, including Jonathan Ross.

EVA Air has launched a new Taipei– Okayama service and added Asahikawa to its network from May 2. It has also increased frequency on its Taipei–Hakodate route from two to four flights a week from May 1.

between Perth and Christchurch. Operating twice-weekly from December 2013 until late April 2014, Air New Zealand will use a B767 to fly the route, under a codeshare with Virgin Australia.

Air New Zealand is to revive a transTasman route abandoned for 20 years from December, with a new service

Jet Airways has signed a codeshare with South African Airways (SAA). Under the agreement, Jet will place its code on SAA

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News Israel passes Open Skies despite protests An agreement to allow unrestricted air services between Europe and Israel has been passed by the country’s parliament, despite angry protests from airline workers who claim it could lead to job losses. Israel ratified the country’s entry into the European Common Aviation Area (CAA), despite protests by workers from Israir, El Al and Arkia outside the Israeli parliament. “The goal of the reform we approved today is to reduce the costs of flights to

and from Israel and to increase incoming tourism,” Prime Minister, Benjamin Netanyahu said in a statement, adding that the deal had been under discussion for “many years”. The agreement, which was signed in March 2012, gives European carriers unrestricted access to points in Israel and affords Israeli carriers the same blanket access to the airports of all European states.

Virgin’s Tiger Australia takeover cleared The Australian Competition and Consumer Commission (ACCC) will not oppose Virgin Australia’s proposed acquisition of 60% of domestic low-cost carrier Tiger Airways Australia. The carrier, which flies 16 domestic routes and targets price-sensitive leisure travellers, is currently owned by Singapore-based Tiger Airways Holdings. The acquisition will give Virgin Australia a just under 27% combined share of the Australian domestic aviation market, according to data from OAG. Virgin Australia CEO John Borghetti said the ACCC’s clearance presented an opportunity to provide “strong competition in the budget travel segment”. Tiger Australia and Virgin Australia are committed to investing up to

flights to Johannesburg, Cape Town and Durban, while SAA will have access to Jet’s operations to Mumbai and beyond to Delhi, Bangalore, Hyderabad, Chennai and Thiruvananthapuram. Hawaiian Airlines is to launch services between Honolulu and Beijing from April 2014, pending approvals. The carrier also

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A$62.5 million into the business, according to Virgin Australia. Koay Peng Yen, group CEO of Tiger Airways, welcomed the ACCC’s green light. “With this approval in place, we can now look forward to commencing discussions with Virgin on our plans to grow Tiger Australia,” he said. “With two strong shareholders, Tiger Australia will be better positioned to tap opportunities for further expansion in terms of fleet and market reach.” Since it started operations in 2007, Tiger Australia has never made a profit. ACCC chairman Rod Sims said its current losses “remain a big drag on the entire Tiger group”.

announced it was ending its route to Manila due to high fuel costs and competition.

Turkish Airlines – orders 117 Airbus aircraft.

Alitalia – confirms Gabriele del Torchio as its new CEO.

Virgin Atlantic – launches its new domestic offshoot ‘Little Red’.

etihad – acquires minority stake in Jet Airways.

Take off, NOT Armavia – Armenia’s national airline, suspends operations.

Lufthansa – hit by one day strike.

EC –

extends Estonian Air loans investigation.

Lion Air – investigation is launched into Bali crash.

Flydubai launched a new route to Juba, the capital of South Sudan, in April, operating four times weekly. The carrier now serves six points in Africa: Addis Ababa, Alexandria, Djibouti, Juba, Khartoum and Port Sudan. 11

News

Air France launches Kuala Lumpur route Air France launched a new three times weekly service from Paris to Kuala Lumpur on April 22, becoming only the fourth carrier to operate services between Europe and the Malaysian capital. The night-flight service, which was announced last year, is operated with a B777-200 equipped with 246 seats in three classes. The new service complements KLM’s existing 14 weekly frequencies from Amsterdam. The new route puts Air France in competition with Malaysia Airlines, which operates daily flights to Kuala Lumpur from Paris, London and Frankfurt. Turkish Airlines also operates a service from Istanbul. “The strong economic ties between Malaysia and France, the high growth rate in this region of the world as well as its tourist attraction make Kuala Lumpur a choice destination for increasing Air France and KLM’s presence in South East Asia,” said Alexandre de Juniac, the new chairman and CEO of Air France, on the arrival of the inaugural flight at Kuala Lumpur International Airport.

Qantas has signed a codeshare with China Eastern. The new agreement will open up an additional 10 Chinese cities to Qantas and give China Eastern access to the Australian carrier’s network. Dniproavia will resume operating services to Moscow Domodedovo as it reveals plans to operate routes to Dnepropetrovsk, Lvov and Sevastopol. 12

Partnership deal Qantas and the government of New South Wales (NSW) have agreed to jointly fund a $30 million marketing campaign to promote the region to the rest of the world. NSW Premier, Barry O’Farrell, and Qantas Group CEO, Alan Joyce, signed the three-year agreement at the airline’s HQ at Sydney Airport which pledged them to invest $15 million each in international advertising, joint marketing campaigns and pooling public relations. “This partnership with Qantas is the cornerstone of our strategy to increase tourism to NSW, providing a boost to our economy and helping to create more jobs,” said O’Farrell. “We will be aggressively targeting big spending leisure and business travellers from overseas, which will be a boon for our hotels, restaurants and retail sector.”

IAG confirms BA A350 order plans International Airlines Group (IAG) has confirmed it intends to place an order for 18 A350 1000s with options for 18 more to strengthen British Airways’ long-haul fleet. The A350 and previously announced Boeing 787 orders will be used to replace 30 Boeing 747-400 aircraft between 2017 and 2023, while the options can be used to replace aircraft or provide opportunities for growth, the airline said. Future orders of the aircraft for Iberia will be contingent on the airline

restructuring successfully and being “in a position to grow profitably”. Reuters has estimated the deal is worth $6 billion on listed prices. The order is in addition to options for 18 B787s, which IAG announced previously that it plans to convert into firm orders. The confirmation of the order follows media reports of talks between the UK airline and Boeing to purchase the new aircraft, which is due to come into service in mid 2013.

Starting April 22, the carrier will begin a daily Dnepropetrovsk–Moscow rotation operated by an Embraer 145 in a twoclass configuration.

service and to 21 destinations on Etihad’s network, while Etihad will also have access to Jat’s European network.

Etihad is to launch A319 flights from Abu Dhabi to Belgrade, the capital of Serbia, from June 15 under a codeshare with JatAirways. JatAirways, Serbia’s national carrier, will place its JU code on the new

New South Korean cargo carrier Air Incheon launched operations in March. Using a single B737-400, the carrier operates routes from Incheon and Haneda, Yuzhno-Sakhalinsk and Ulaanbaatar Chinggis Khaan.

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Cargo news North American hubs to dwindle In a report on the impact of the planned Panama Canal expansion for North America ports, Colliers International forecasts that only a handful of air cargo centres will survive. CapEx or Capsize predicts that air cargo in the US will develop a hub-and-spoke model, with airports with port partnerships capturing much of the market. Another pivotal factor will be e-commerce, writes author K C Conway. Memphis has become North America’s top air cargo port through its suitability for e-commerce, he argues.

AA launches Chicago–Düsseldorf Etihad Cargo has added Washington DC (IAD) as its fifth North American destination while also expanding its cargo capacity between Abu Dhabi (AUH) and Hong Kong (HKG). Cargo capacity on both routes consists of bellyhold capacity on new passenger services. Etihad is now flying an A340-500 on a daily Abu Dhabi–Washington DC flight. Air Seychelles – in which Etihad holds 40% – flies an A320-200 three times a week between Abu Dhabi and Hong Kong. Etihad Cargo already offers belly-hold cargo capacity daily from Chicago and

New York to Abu Dhabi, and three times a week from Toronto to Abu Dhabi. A twice-weekly freighter service flies from Houston to the UAE capital. Additional belly-hold capacity from Air Seychelles’ service between Abu Dhabi and Hong Kong will strengthen a four-times-a-week Etihad Cargo freighter service between the two cities. Etihad Cargo currently offers both belly-hold and full freighter capacity to Beijing and Shanghai, belly-hold capacity to Chengdu and a freighter operation to Guangzhou.

An American Airlines B767-300 freighter is now flying between Chicago O’Hare (ORD) and Düsseldorf (DUS). The new daily service is targeting pharmaceutical products, automotive and aircraft parts, and medical instruments. Arriving in Düsseldorf at 7am, the service is the earliest direct flight from Chicago, providing interline connections to the Middle East, as well as trucking to Belgium, Luxembourg and the Netherlands, said AA Cargo. Düsseldorf also offers connecting opportunities to Moscow, Munich and Vienna with oneworld and codeshare partner airberlin, said American Airlines.

China Southern has started Zhengzhou– Chicago as its second all-cargo route from Zhengzhou, following a Los Angeles–Zhengzhou–Guangzhou service. The B747 freighter flight runs on Wednesdays and Saturdays, with a weekly capacity of more than 200 tonnes. China Southern’s trucking and air-to-air network covers more than 10 cities in the US and 19 South American cities.

Polar Air Cargo Worldwide launched a daily freighter service between Cincinnati and Tokyo in April 2013. The carrier is also aiming to double the frequency of its freighter connections with Australia, routed via Japan, to four flights a week. Japanese manufacturers in the Midwest, especially the Ohio Valley, require increased and reliable daily services, said Thomas Murphy, executive vice president and COO.

Southern Air Holdings has completed a financial restructuring to exit from Chapter 11 protection. CEO, Daniel J McHugh, said the airline had substantially cut its debt and improved its operations and resources as well as financial flexibility. “From our new headquarters at the Cincinnati/Northern Kentucky International Airport, our largest air operating hub, we are even better able to grow profitably,” he said.

Etihad adds Washington DC to network

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ON THE MOVE

Rafael Sánchez-Lozano has stepped down as chief executive of Iberia. Parent company IAG said SánchezLozano, who has been CEO since January 2011, had left by “mutual agreement”. Sánchez-Lozano’s successor is Luis Gallego [pictured], the CEO of the airline’s low-cost subsidiary Iberia Express. Iberia Express is now in the process of choosing a new CEO. Aviation consultancy InterVISTAS has hired ex-Continental Airlines network planner Buddy Anslinger as its new vice president, airline network strategy. For more than 20 years, Anslinger has held a number of positions at Continental and Continental Express Airlines, including airport services, alliances, government affairs, scheduling and network planning.

Former Cardiff Airport managing director Jon Horne [pictured] has returned as CEO following the acquisition of the airport by the Welsh Government. Horne, who was MD of Cardiff from 2001 to 2007, replaces a team of three directors who had managed the airport since Patrick Duffy quit last year. Finnair has appointed Pekka Vauramo, a COO at Cargotec, as its new CEO. Vauramo, who takes over on June 1, replaces Mika Vehviläinen, who left at the end of February 2013 to join Cargotec as its CEO. Air Uganda has named Cornwell Muleya as its new CEO. Muleya, who has worked as a CEO and CFO for several African airlines, including Air Mauritius, Air Botswana, Air Tanzania and Zambezi Airlines, replaces Kayle Haywood, who has moved to Fastjet.

Guernsey-based airline Aurigny has named Mark Darby, a non-executive board member, as its interim CEO until a replacement is found for outgoing boss Malcolm Hart. Hart left the Guernsey state-owned carrier in April to pursue other interests after 13 years at the helm.

Swiss has appointed a new CCO and will welcome a new CFO later this year. Markus Binkert, previously head of sales and marketing for Switzerland, Germany and Austria, was named COO on May 1, replacing Holger Hätty who left at the beginning of the year. Roland Busch will replace CFO Marcel Klaus.

Merren McArthur has been appointed group executive of Virgin Australia Regional Airlines following Virgin’s 100% acquisition of Skywest Airlines. McArthur was previously Virgin’s group executive for alliances, network and yield, with responsibility for revenue, pricing, network planning, scheduling and alliances.

Monwabisi Kalawe, 51, is taking over as CEO of South African Airways (SAA). Kalawe is moving from the Compass Group, a contract food services company, but was general manager of Cape Town International Airport for six years. He takes on the role from acting CEO Nico Bezuidenhout, head of SAA’s low-cost airline Mango.

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Alexandre de Juniac [pictured] is to head Air France-KLM as chairman and CEO, following the departure of Jean-Cyril Spinetta and his vice chairman and deputy CEO Leo van Wijk. From July 1, Air France-KLM will be led by de Juniac, while Peter Hartman steps in as vice chairman and deputy CEO. Ange Croci has left his position as network development manager at Lyon Airports to become director of marketing and network development at SNC-Lavalin Airports. SNC runs a number of airports, including several regional gateways in France, and has a stake in Malta International Airport. Delta Air Lines has appointed Robert S Rivkin as senior VP and deputy general counsel for international and regulatory affairs. Prior to joining Delta, Rivkin spent four years as general counsel at the US Department of Transportation as chief legal officer, counsel to Secretary Ray LaHood. The Volga-Dnepr Group, the owner of AirBridge Cargo, has appointed a new vice president of unique air cargo for the US. Sergey Reznikov will become VP for sales and marketing, charter operations, succeeding Konstantin Vekchine. Mike Cotterill has taken up the role of finance director at Durham Tees Valley and Doncaster Sheffield airports. Cotterill’s appointment follows the Peel Group’s re-acquisition from the Vantage Group of shares in both airports. 17

Which regions top your wish list for new routes? Central Europe, Scandinavia and the Middle East are the top under-served regions out of Marseille Provence Airport (MRS), and on the top of the list in network priorities. Historically speaking, Africa has always been well-served from MRS with direct flights, which is no longer the case due to the difficulties many African airlines have faced. China is a focus in the medium term.

What are the latest developments in expanding the Marseille network? The latest announcement is Istanbul with Turkish Airlines. In parallel, five new routes are to be launched by Ryanair (Warsaw, East Midlands, Chania, Rabat and Essaouira), as well as New York JFK with XL Airways.

How much of your traffic is low-cost? 23% of our traffic is defined as low-cost. LCC activity represented by six airlines (Ryanair, easyJet, Pegasus, Jetairfly, Vueling and Norwegian) reached 1.9 million passengers in 2012, out of a total of 8.3 million. In 2013, Ryanair, easyJet, Vueling and Norwegian will continue to increase their capacity out of MRS.

How did your career in aviation begin? Name:

Véronique Lemée-Alexandre Company:

Marseille Provence Airport Job title:

Network development manager Hometown:

Aix-en-Provence

How many airlines are already at Marseille and which are the most important?

As France’s second most populous city, is Marseille well understood as a destination?

In 2013, 28 scheduled airlines will be operating at MRS. The top five carriers in terms of pax volumes are Air France, Ryanair, Air Corsica, Lufthansa and Air Algerie.

In spite of all of its assets, Marseille is unfairly overlooked, while Provence is very well known. The region has been renamed Marseille Provence, as has the airport for many years. However, as Marseille Provence is one of the European Capitals of Culture in 2013, we can expect a lot of international interest in our region this year. Many recent articles in the press have been positive about the region; the New York Times, for example, picked Marseille Provence as the second best destination to visit worldwide in 2013, just after Rio! Tourist arrivals at MRS increase each year, thanks to tourism development in Marseille, with new hotels and new museums, and the famous region of Provence.

What sets Marseille apart from its regional rivals? The airport’s three main assets are: the size of its local market as France’s second most populated city; great surface accessibility with 190 daily departures by bus or train; and well-balanced traffic between business, leisure and VFR travellers, as well as between inbound and outbound passengers, meaning the airport is not dependent on a single component of traffic, unlike most of its rivals.

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My career began at Air France, as a statistical engineer. I first worked in the marketing department and soon got involved in operations research projects. After five years at Air France, I moved to Marseille Provence Airport, where I enjoy the combination of commercial and technical/mathematical aspects of route development.

Which of the routes from Marseille mean most to you and why? There are two routes that mean most to me: Marseille–Istanbul, because that was my first project when I arrived at MRS almost seven years ago, and Marseille–New York, due to the size of the market – fortunately the route will open next May!

What are your own favourite places or things to do in Marseille? There are so many things to do in Marseille Provence: spend half a day in Aix-en-Provence to visit the famous Mont Sainte-Victoire, a mountain painted so often by Paul Cézanne, then drive to Marseille, cross the city to reach the Calanques National Park for amazing hiking along the Mediterranean, then come back to Marseille old port to have an aperitif at sunset. And you will never leave.

one2one Which markets is Lufthansa expanding into? We are expanding in most of the markets that we are active in. We have seen constant growth over the last couple of years despite the challenging macroeconomic environment. This comprises frequency increases as well as growth from using larger aircraft like our growing A380 fleet in long-haul markets or the A320 family in Europe.

Is China going to remain a focus for you in the future? Sure. China is a high-volume/highgrowth market that has always been in our focus. With our three daily services to Shanghai, two to Beijing and two to Hong Kong, we are very well positioned in those markets. We are sending our largest and most modern aircraft, the A380, to Beijing and very soon also to Shanghai and the new 747-8 to Hong Kong. On top of that, we do have a deeper, strategic interest in China. We also fly to the secondary markets Nanjing, Shenyang and Qingdao, providing the first and only direct link to Europe. In China we can build on our long-lasting successful partnership with Air China.

How does the shift of many shorthaul operations from Lufthansa to Germanwings impact on your network planning – does it allow you to focus on long-haul routes? Already a number of years ago, we had separated our non-hub from our hub production systems, from both an operational and a commercial/planning perspective. It had been obvious that planning a hub-and-spoke system and transfer traffic flows is a somewhat different business than organising

NAME: Dr Sebastian Hollmeier Company: Lufthansa Designation: Director network planning, Frankfurt Hometown: Königstein im Taunus

point-to-point traffic. You simply face different challenges, and also different competition. In our hubs, we have two priorities: serving the local demand and connecting markets, both long- and short-haul.

It has been reported that Lufthansa may launch a low-cost carrier in Asia; what could be the potential network benefits? It might be bilateral codeshares, alliances or a joint venture concept like SunExpress or A++ (our revenue joint

venture with United and Air Canada). Lufthansa pursues multiple options for exploring new market opportunities in different regions, including Asia. But there are no plans to launch a low-cost carrier in Asia. This theoretical option was taken out of context.

How might Lufthansa’s collaboration with Turkish Airlines evolve? We constantly explore new ideas to improve service for our customers, with various partners, including but not limited to Turkish Airlines. We already

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Airline one2one

have a successful joint airline together with them, called SunExpress. But we have no concrete news to announce.

What challenges does Lufthansa face? Although Lufthansa is pretty well positioned compared to other European carriers, we do suffer from the same challenges as all airlines do: pressure on yields and revenues combined with cost increases at all ends – fuel price, state taxes, airport and ATC charges, personnel cost, spare parts, just to name a few. Maintaining competitiveness is a constant challenge; cost management and increasing productivity is our daily job.

How was Lufthansa’s network affected by the sale of bmi to IAG? With the sale of bmi, obviously, our presence in the UK and Heathrow has been reduced. However, we still feel well positioned in the UK and also in Heathrow, where we continue to be a significant player.

You recently signed a major order for more than 100 new Airbus and Boeing aircraft. How will they impact on your network and plans? Efficient, new-technology aircraft are one important factor in maintaining competitiveness and increasing productivity. One part of this order will be used to replace older and less efficient aircraft. As the new aircraft tend to be larger in size than the ones that they replace, this will mean growth potential for us as well as for airports and regions. The other part of the fleet is designated for frequency growth, both in our current network and in new markets. We certainly have an idea what those markets could be, but of course we are open for proposals.

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How has the euro crisis affected your network in Europe? Fortunately, we were able to even grow our network despite the challenging macroeconomic environment. We only had to leave a couple of markets. It is our aim to be a reliable business partner for our customers and our suppliers. But we have to join forces to achieve this goal.

What are the core principles with which Lufthansa approaches network decisions? Profitability. Sustainable profitability.

What support do you look for from airports and tourism authorities? From the commercial perspective, we expect airports to support us in our daily cost management. Just like anyone else in the supply chain, airports need to be efficient and competitive, otherwise network business cases will hardly work. From our joint customers’ perspective – the passenger – the quality of the product must also be good and competitive. Passengers simply expect a functioning, high-quality airport. But they also take it for granted. Don’t expect anyone to pay extra for that. The importance of tourism authorities has significantly increased over the last couple of years. Much of today’s air traffic growth is stimulated traffic: capacity supply creates demand. Marketing plays a vital role to make this a success and tourism authorities can support big time.

Has the delay in opening Berlin’s Brandenburg Airport impacted on your plans? We have been able to fully implement our planned increase of Berlin routes at Tegel last year. But, of course, it is a very

uncomfortable situation for customers as well as our staff, because Tegel is not the most efficient airport in Europe. The delay is certainly not pleasant and expensive, but in the end we will see a modern and efficient airport in Berlin.

What forecasts would you make about Lufthansa’s network and operations in five years’ time? Five years are not a very long time, although we have seen quite significant changes in the industry over the last decade. I am convinced that we will see even more consolidation in the industry with all its challenges and opportunities for Lufthansa’s network. Lufthansa is well positioned to continue to be one of the leading airlines in the world. Our various network scenarios, however, depend on market developments, competitors and, last but not least, cost development, both globally – like the fuel price – and locally.

Why did you choose a career in aviation? Despite, or probably because of, all these challenges, the airline industry offers a very dynamic and diversified work environment. I haven’t had a boring day in my entire career; there has hardly been a week that passed as planned on Monday. In such an environment you can truly add value and make a difference. And that’s what I like.

GET INVOLVED! Do you want the global route development community to hear what you have to say? Let us know at: oliver.clark@routes-news.com

Simple but effective

Richard Maslen profiles one of Europe’s fastest-growing carriers, Wizz Air, as it continues to build its network across Central and Eastern Europe.

he arrival of low-cost and low-fare airlines has certainly changed the way we fly. And in markets in Central and Eastern Europe it has been the arrival of Wizz Air that has brought a significant growth in connectivity from the region, an area that historically has had limited connections with other parts of the European Continent. The airline was established in September 2003 and launched operations in May 2004 shortly after Hungary and Poland entered the liberal skies of the European Union. In less than 10 years it has grown from a single route and just one A320 to operating a fleet of 40 aircraft (including those with its Wizz Air Ukraine offshoot) and a network that covers 85 destinations across Europe and into the Commonwealth of Independent States (CIS). In the past month the carrier has revealed plans to extend its operations in Georgia and introduce its low-cost brand into the Azerbaijan market, while in an

exciting development Wizz Air is to become one of the first passenger airlines to serve the new Dubai World Central Airport, with new services from Bucharest, Budapest, Kiev and Sofia from October this year. When Wizz Air launched operations it was able to take advantage of the success of the business models adopted by some of Europe’s pioneering low-cost ventures. With the added bonus of cheaper labour costs across Central and Eastern Europe, it has been able to develop a cost structure much lower than rivals such as easyJet, Norwegian and Vueling, being beaten only by Ryanair, which is its main competitor. While the likes of Malev Hungarian Airlines have failed and Czech Airlines and LOT Polish Airlines have restructured and downsized, Wizz Air has been able to expand and is now the de facto flag carrier for some of the region’s smaller nations. For chairman and chief executive, József Váradi, the success of the carrier comes down to its simple but effective business model focusing on strong

point-to-point markets, serving mainly secondary airports where costs are considerably lower. Váradi understands the industry and understands the dynamics of how the industry has changed and continues to change. He was chief executive of Malev prior to joining Wizz Air and his knowledge of the local market has certainly helped Wizz Air to establish itself as the market leader across the region. The collapse of Malev in its home Hungarian market last year was a good example of how the industry has adapted and Wizz Air has emerged the stronger for it. And, although the carrier has established operations across almost 30 international markets, it has been careful to maintain a ‘Home Town Airline’ feel – across its 16 bases in Central and Eastern Europe (Belgrade, Bucharest, Budapest, Cluj-Napoca, Gdańsk, Katowice, Kiev-Zhuliany, Poznań, Prague, Skopje, Sofia, Târgu Mureș, Timișoara, Vilnius, WarsawModlin and Wrocław) it seeks to hire

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Wizz Air Main points in Wizz Air’s network (direct departures, 2012) Rank

Network point

Available seats

% total seat capacity

London Luton

1,513,080

10.6

Budapest Liszt Ferenc International

1,034,820

7.2

Katowice Pyrzowice

750,780

5.3

Bucharest Henri Coanda

724,860

5.1

Gdansk Lech Wałęsa

709,740

5.0

Dortmund

563,400

3.9

Bergamo Orio Al Serio

432,000

3.0

Sofia

418,320

2.9

Warsaw Fryderyk Chopin

398,340

2.8

Eindhoven

393,660

2.8

Network total

14,287,140

Source: AirportIS. Note: Includes activities of Wizz Air and Wizz Air Ukraine.

local staff to support the local market, according to Váradi. Interestingly, an analysis of Wizz Air’s network in 2012 reveals London Luton Airport as the largest destination across the company’s network by seat capacity. Although not an official base for the carrier, the UK capital is served from most of its stations and, alongside Dortmund in Germany, Bergamo in Italy and Eindhoven in the Netherlands are key points for traffic in and out of its Central and Eastern European markets. London Luton accounted for 10.6% of Wizz Air’s total network seat capacity last year and the low-cost carrier was actually the second largest operator at

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the London airport with a 26.3% capacity share. Its routes from Budapest, Katowice and Gdansk were actually the second, sixth and seventh busiest airport pairs respectively in the London Luton network in 2012. Last year, Wizz Air carried over 12 million passengers, a year-on-year growth of 12%, a period during which it grew its network from 203 to over 250 routes and extended operations to 29 countries with flights to Georgia, Israel, Slovenia and Switzerland. The average load factor on its almost 80,000 flights reached over 85%, which underlines the popularity of the airline’s low fares formula.

The carrier forecasts a growth of around 13% to 13.5 million passengers during the current year as continued fleet development provides a platform for network expansion. Despite high jet fuel prices and rising government taxes such as the APD in the UK, Wizz Air continued to stimulate demand for low-cost air travel and grew by 12% in 2012, one of the highest growth rates in the European airline industry. “Wizz Air positioned itself successfully as a consumer champion by coupling great customer service with low fares, making low-cost air travel more attractive to comfort-conscious travellers and business passengers,” said Váradi.

Wizz Air

For this summer Wizz Air has added a number of routes around its bases, and switched operations in Scotland from Prestwick to Glasgow and in Italy from Forli to Bologna, while it has begun a planned transition of routes in the Italian capital, Rome, from Fiumicino Airport to Ciampino Airport in response to rising costs. The low-cost carrier has also revealed plans to expand into Bosnia and Herzegovina with flights to Tuzla from Basel-Mulhouse, Gothenburg and Malmö. “This is a new chapter in BosniaHerzegovina’s aviation history,” said Váradi. “By partnering with Tuzla Airport in launching our first low-fare route from Bosnia-Herzegovina, we are confirming Wizz Air’s confidence in the Tuzla region’s ability to attract tourism and generating much needed low-cost air traffic. We expect to carry over 60,000 passengers through Tuzla Airport in the first year of operations. “The Bosnia and Herzegovina Directorate of Civil Aviation and the Government of the Federation of Bosnia and Herzegovina have shown vision by not taxing visitors and travellers to stimulate air traffic and to benefit consumers and the economy. We believe that our strong capacity growth in Bosnia Herzegovina can be seen as a case study of how not taxing travellers contributes to traffic and job growth, and we look forward to further invest in our low-cost structure in the country,” he added. Although Wizz Air continues to explore new markets across Europe, including a likely return to Slovakia later this year, the carrier is also looking further east at the tremendous market opportunities across the CIS and even into parts of the Middle East and North Africa regions.

Wizz CEO József Váradi

In December 2012, it inaugurated flights to Tel Aviv in Israel from Budapest and has now confirmed a new Bucharest connection from June 15, while new connections to the Georgian city of Kutaisi have been or will be added from Donetsk, Kharkiv and Warsaw, adding to an original route from Kiev. “This growth underpins Wizz Air’s commitment to Georgia. Our landmark Warsaw–Kutaisi route brings Georgia closer to the European Union, with Poland as a natural springboard to connect between East and West on Wizz

Air’s extensive low-fares network. Our Georgian routes will boost the economic development of the respective regions, contribute to the rise of tourism and create much needed jobs,” said Váradi. Georgia will be followed by Azerbaijan, with the carrier’s ‘Go East’ strategy taking it into one of the fastest-growing economies of the region. The airline will introduce a twice-weekly link from Budapest to Baku from June 17, 2013, a route it expects to carry around 30,000 passengers in the first year of operations.

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Wizz Air

The Azerbaijan capital is also a cultural, trading and economic centre of the Caspian Sea and Caucasus because of its sub-tropical climate, historical heritage, favourable location and wealth of natural resources, and has been termed ‘the most European city in Asia’. “Wizz Air is pursuing a ‘Go East’ strategy to stimulate low-cost flying in one of the most dynamically growing regions in the world,” explains Váradi. “The expansion of our Budapest network to these economies reflects on Hungary’s appeal to the ever growing potential of incoming tourism from Eastern markets.” However, perhaps the most notable of recent announcements from Wizz Air has been its expansion to Dubai and the news that it and fellow low-cost carrier nasair will be the initial tenants when passenger operations commence at Dubai World Central this winter. Wizz Air will launch four times weekly links to Budapest and Kiev and three times weekly services to Bucharest and Sofia, enhancing air connectivity between the Eastern European capitals and the developing UAE metropolis. Two

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of the four Wizz Air routes will place it in indirect competition with UAE low-cost carrier flydubai, which currently operates from Dubai International Airport, although it will be the sole carrier to serve two markets. The Dubai–Kiev city pair is the busiest of the four, with an estimated bi directional O&D demand of 98,000 passengers in 2012. This route has been served by Ukraine International Airlines since October 2005 and up until last year by fellow Ukrainian operator Aerosvit Airlines, while flydubai introduced its flights in September 2011. These airlines all serve Borispol Airport in Ukraine’s capital city, but Wizz Air has its base at Zhuliany and will hope its unique offering will help to attract custom. Wizz Air will also face competition in the Dubai–Bucharest market, which has been served by flydubai since October 2012 and is also a key route of Romanian national carrier and SkyTeam alliance member Tarom. In 2012, an estimated 47,000 bi directional O&D passengers travelled on the route, up 21% on the previous year. Interestingly, although flydubai only served the route

for the final quarter of 2012, it managed to secure a 16% share of the traffic and helped to push down average annual fares by 8.4%. The Budapest and Sofia routes, markets of around 14,000 and 10,000 bi directional O&D passengers from/to Dubai in 2012, will see Wizz Air as the sole operator. The airline would expect to stimulate these markets with the introduction of direct flights and a low-fare product. Presently, the majority of customers between Budapest and Dubai connect on the flights of Qatar Airways via Doha, while passengers flying between Sofia and Dubai are mainly flying with Turkish Airlines via Istanbul or Austrian Airlines via Vienna. “I am honoured to announce Wizz Air as a launch customer and first international low-fares airline operating at Dubai World Central. For us this is a hugely significant milestone, with our 10-year European success story now crossing borders far beyond Europe, sharing the benefit of efficient airline operations and low fares with many more international customers,” said Váradi.

The

bigger picture Peter Kenworthy analyses recent changes to the UK regional aviation market.

ith so much of the current aviation debate in the UK focused on the London airport system, route development outside the capital has received less coverage. Strong growth in passenger traffic was achieved at most UK regional airports for much of the last decade as LCCs responded aggressively to perceived demand, but recently growth has fallen well below that of the London’s airport system, particularly Heathrow. After a period of strong growth in direct connectivity to overseas hub airports and reducing connectivity from the UK regions to Heathrow, 2013 could see a change in this trend, with a new operator – Virgin – entering the Heathrow domestic scene and additional frequencies launched by British Airways from the UK’s primary hub airport to UK regional points. In contrast, frequencies from the UK regions to European, Middle East and US hubs appear to have stalled, while LCCs show some growth after a period of consolidation.

weakening demand caused by seasonality, the impacts of rising fuel prices, APD and taxation. The flexible labour contracts of some airlines allow them to ground significant parts of their fleets in the low season, something not enjoyed by legacy airlines. In the five years to the 2007 peak, annual growth at UK regional airports was double that of London but has since reversed, with regional airports declining faster than London airports since 2008. Over the past few years, some regional airports have closed and others are shadows of their former selves. Many regional airports are fighting for survival and the recent re-nationalisation of Cardiff Wales Airport has triggered further debate about some regional airports attracting LCCs with route development support but with no realistic

expectation of long-term continuity of tenure if the markets failed to materialise. As the graph below depicts, UK regional airports achieved their best share of the UK passenger total in 2007/08 (42%), but this has since fallen to 39%, the lowest share for 10 years. Heathrow has already reached its movement capacity and Gatwick has been full in the peak hours year-round for many years. This is already evident in the latest 2013 traffic result being issued by Heathrow as BA re-allocates the use of former bmi slots. Passenger throughput at London airports totalled 135 million in 2012, a 1% increase on the previous year, and accounted for all UK passenger growth in 2012; half of the London growth came with the opening of London Southend.

UK airports

Terminal passengers

Growth VLY

300,000,000

15%

250,000,000

10%

200,000,000

150,000,000

100,000,000

-5%

Airports in 2012 Traffic at the UK’s regional airports peaked in 2007 at 100mppa, with a further 3 million at the Channel Islands and Isle of Man airports. Since the recession, passenger traffic at regional airports has fallen, with total volumes in 2012 some 15% below the 2007 peak. In contrast, passenger volumes at London airports over the same period fell 8%. The scaling back of capacity (primarily by LCCs) has become more common as airlines adjust to the

50,000,000

-10%

2002

UK regions

2003

2004

London

2005

2006

2007

UK regions growth

2008

2009

2010

London growth

2011

2012

-15%

Source: CAA.

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UK regional airports

Manchester Airport.

Traffic at Stansted fell, and across all remaining London airports (Heathrow, Gatwick, Luton and City) growth was 1%. Manchester, the largest UK regional airport, achieved nearly 20 million passengers and ranked third of all UK airports. The five largest regional airports by passengers (Manchester, Edinburgh, Birmingham, Glasgow and Bristol) continue to increase their share of the regional total, accounting for 57% in 2012 (up from 56% in 2011), with these airports achieving average growth rates of 3% last year. This is in stark contrast to smaller regional airports where traffic in 2012 was down by -4%. By 2012, most UK regional airports had failed to return their passenger levels to their respective peaks, with only five of the largest 20 regional airports achieving limited growth over the past five years – Edinburgh, Bristol, Aberdeen, Leeds/ Bradford and Belfast City. The UK regions continue to have significant spare capacity but this isn’t going to solve the London capacity

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issues, nor help Heathrow’s declining position as a global transport hub airport.

After bmi Subsequent to the sale of bmi to British Airways, bmibaby’s closure in 2012 temporarily dented the LCC frequencies offered on a number of routes from Belfast, Birmingham and East Midlands, and well before its closure it had withdrawn services from Cardiff and Manchester. The sale of bmi regional conversely had a positive impact by increasing the routes served from the UK regions. Using aircraft previously leased to bmi mainline, bmi regional has added six routes at Bristol and four at Birmingham. Another consequence of the BA takeover has been the re-introduction of a second carrier on three domestic routes from Heathrow and frequency increases by BA on some existing domestic routes. Three UK regional airports were served by BA and bmi and the terms of the BA takeover required BA to relinquish

seven slot pairs for services between Heathrow and Edinburgh/Aberdeen. Virgin has subsequently launched services to both Scottish airports and four daily flights to Manchester with its ‘Little Red’ short-haul brand, but time will soon tell if the routes can achieve profitability – the high cost base of operating into Heathrow requires Virgin to achieve high yields from the point-topoint market and achieve transfer volumes from its new domestic links to its long-haul operation at yields higher than those passengers displaced. With 42 remaining bmi slot pairs transferred to BA ownership, the airline has re-launched services to some destinations previously served by BA and bmi and ended duplication of destinations. One of the reinstated destinations was to Leeds/Bradford, previously served by bmi in 2009. Several UK domestic destinations served by BA are seeing increases in frequency as a probable short/medium-term use of slots ahead of BA adding capacity to long-haul markets in the Far East.

UK regional airports

Will new routes help to restore passenger growth in 2013? Despite its own capacity cuts, flybe launched services on five former bmi baby routes and continues to add new international destinations from some of its existing UK regional bases. Connections from the UK regions to Scandinavia are also improving, with new services by Norwegian, BA franchise Denmark-based Sun Air, SAS and easyJet. Basing additional aircraft at a UK regional airport can be a significant catalyst to new route development and Ryanair has done this at Edinburgh following its change of ownership, with six new routes launched this year. In addition, new destinations are being served from other airports, including Birmingham, Bristol, East Midlands, Liverpool and Manchester. Jet2 has also plugged some of the gaps at East Midlands, as well as continuing to expand its operations from most of its UK bases. It is noteworthy that many of the new destinations of LCCs are being focused on longer sectors in new markets, suggesting that capacity on shorter EU routes may be reaching saturation point. EasyJet’s UK 2013 regional expansion appears focused on Manchester and Edinburgh, again with additional based aircraft. One of the routes from Manchester is the airline’s entry into the Russian market to Moscow. Iceland is also now part of the easyJet route portfolio. Charter passengers from the UK regions continues to decline, with traffic down 5% in 2012, with the continuing expansion of LCCs from UK regions to holiday destination, impacting on charter capacity. Monarch continues to grow its scheduled capacity and has launched

new bases at East Midlands and Leeds/ Bradford, as well as expanding its Birmingham base with new destinations. Thomson continues to build capacity following the Arab Spring reductions to Egypt from a number of UK regional airports and to Tunisia from Bournemouth, Edinburgh and Glasgow. The divide between low-cost and charter short-haul routes continues to narrow. Monarch has moved to a primarily scheduled operation and Thomas Cook has also contracted some of its European flight capacity to easyJet for the coming summer, with easyJet heavily promoting its hotel packages linked with its flights. The wider global economic downturn is forcing foreign-based carriers to focus on primary markets, consolidating network development away from the regions, with one exception – the expansion of Turkish Airlines. It added Edinburgh as its third UK regional point in July last year, initially four per week increasing to daily; however, we are seeing a contraction or levelling off in frequency from UK regions to other overseas hubs in Europe, the Middle East and US. The impacts of higher taxation, the fall in the value of sterling and the declining disposable incomes of UK residents would appear to be contributing to this. While KLM has added Manston to its Amsterdam hub, overall KLM’s frequencies to Amsterdam from the UK regions are only marginally ahead of last year. Increases to Amsterdam from Norwich (three to four daily) by KLM, contrast with daily reductions from Aberdeen and frequency reductions at Cardiff, Edinburgh and Humberside.

Air France and Lufthansa are showing no increases to their regional operations this year, with the latter switching its Düsseldorf flights to Glasgow from Edinburgh and cutting flights from Newcastle, Birmingham and Inverness; much of Lufthansa’s non-hub flights are being switched to Germanwings. Air France has reduced its frequency on Bristol–Paris. Perhaps as a consequence of the current state of Iberia, or the increased BA capacity to London, all of Iberia’s direct links from the UK regions to its Madrid hub have disappeared in 2013. While bmi regional continues to serve European Star Alliance hub airports such as Brussels, Copenhagen, Frankfurt, Munich and Zurich, its new independent ownership has meant a loss of codeshare with its previous partners and some routes are due to cease in the near future. Brussels Airlines has recently scaled back its UK regional connectivity to Brussels, with the loss of direct flights from Newcastle. The big three Middle East carriers schedules remain static in 2013 compared with 2012, with only minor changes in capacity through deployment of larger aircraft on some rotations. Early indications for 2013 show traffic at UK regional airports continuing to fall, but with wide variations between individual airports. However, severe weather conditions will have played their part in this decline and the UK barometer will be worth checking again in a few months’ time. About the author: Peter Kenworthy is Mott MacDonald’s aviation projects director.

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Northern lights A CAD of Pulkovo’s new international airport.

Martin Rivers reports on how St Petersburg’s Pulkovo is seeking to become the Russian airport of choice for long-haul and low-cost airlines.

s the gateway to Russia’s cultural capital, it is perhaps no surprise that St Petersburg’s Pulkovo Airport consistently posts double-digit growth in annual passenger numbers. Footfall at the airport grew by 16.1% last year to 11.2 million, and director general Sergey Emdin says he is confident that figure will reach 12.5 million in 2013. But rapid year-on-year growth has placed renewed pressure on the hub to expand its facilities and improve passenger experience. Mindful of this, operator Northern Capital Gateway, a consortium comprising Fraport (35.5%), VTB Bank (57.5%) and Copelouzos Group (7%),

has since April 2010 overseen a $1.2 billion modernisation project. The 30-year public-private partnership focuses on constructing a new international terminal, expanding the apron areas, and developing a hotel and business centre. With Grimshaw Architects and retail specialist Nuance Group also commissioned for the project, it is hoped that Phase 1 – targeted for completion in December 2013 – will advance the airport’s dual focus on attracting established long-haul carriers and emerging low-cost operators. But Emdin stresses that some final strategic decisions have yet to be taken by government officials, who will convene at the G20 winter summit in

St Petersburg’s Constantine Palace this September. “The project is more or less on schedule,” he tells Routes News. “We have some deviations which are mostly related to government events. We will not touch significant portions of the apron before the G20 summit… but in the terminal, landside development and all other airside objects are on schedule, and we are still planning to open the terminal in December of this year.” When the new facility begins operations, it will initially have an annual capacity of 14 million. This will then be expanded to 17 million with the addition of four more contact stands, bringing the total to 18. “According to our concession we have to ensure that 80% of our

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St Petersburg

passengers have the possibility to go from contact stands,” Emdin notes. “Once we see that 14 stands becomes a limitation – and it will not be a limitation at the opening – we can easily add another four.”

‘Venice of the North’ Grimshaw has tailored the building’s design to the unique characteristics of St Petersburg, which is often dubbed the ‘Venice of the North’. The terminal’s reflective golden ceiling is intended to be reminiscent of the city’s cathedral domes, while bridges connecting separate bays within the building seek to invoke the city’s own mishmash of canal structures. Nuance has meanwhile secured a seven-year concession for the 3,183sqm retail space, including 1,910sqm of walk-through duty free stores. There is no firm timeframe for Phase 2 – which centres on a new domestic terminal – but Emdin says he expects design work to begin next year or in 2015. “Because both terminals will be in very close proximity, we will not lose the capability to arrange transfers,” he notes. The project is scheduled to be signed off by 2025, although this could be expedited as “we never expected to have such strong growth”. Pulkovo’s masterplan also refers to a sprawling ‘Airport City’ surrounding the gateway, but the director general says city officials have yet to finalise plans for that development. “At some point the city will auction this land with a particular obligation for new owners about what has to be developed,” he explains. “There will be clear targets and purpose.” In the meantime, the airport’s focus is on constructing a 200-room hotel and business centre in front of the international terminal.

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While Emdin leads the way in modernising Pulkovo’s infrastructure, Northern Capital Gateway is also engaged in a strategic review of the airport’s route development plans. To this end, expanding long-haul and introducing low-cost services are the priorities.

Long-haul focus Moscow’s three main airports account for 27% of seat capacity from Pulkovo. Germany is the next largest destination, with Lufthansa, Rossiya Airlines and airberlin collectively operating 300 flights per month – equivalent to 8.8% of capacity. Egyptian and Turkish holiday resorts are also growing. Describing Rossiya as Pulkovo’s “most important home carrier”, Emdin credits the Russian airline with driving much of the growth in recent years. It presently operates 38.9% of flights at the airport, dwarfing nearest rivals Aeroflot (9.7%), UTair (4.7%), S7 (4.3%) and Transaero (4.2%). However, while Rossiya focuses on destinations within three hours’ flying time, Pulkovo is also looking to grow long-haul routes. In June 2011, Northern Capital Gateway unveiled a strategic partnership with Transaero to develop new links with South East Asia and North America. The Russian carrier now operates two seasonal Caribbean services, to Varadero, Cuba, and Punta Cana, Dominican Republic, as well as flying to Phuket and Beijing. Connections with the Russian Far East include Vladivostok, Khabarovsk and Petropavlovsk-Kamchatsky. “Transaero is really a strategic partner for us, because they bring destinations which we wouldn’t otherwise have,” Emdin affirms. “They are gradually increasing the number of aircraft [based

at Pulkovo], and what is really important for us is that they are bringing not just narrowbodies but also B747s… two years ago it was just occasionally that we greeted such airplanes, but now it has become part of our everyday life.” Emdin talks of “huge interest” among Chinese companies in developing trade with Russia. Although Pulkovo is already served by Hainan Airlines and Korean Air, he says he “would like to expand this”. A direct link to a major US hub, such as New York, is also actively being sought.

St Petersburg–New York The airport’s long-standing talks with US start-up carrier Baltia continue, but amid slow progress it has opened parallel discussions with several “big players” in the transatlantic market, adding: “We are talking to US carriers and Russian carriers about summer 2014.” A wholesale expansion of widebody operations at Pulkovo inevitably raises the prospect of future Airbus A380 flights. While none of the airport’s carriers have plans to introduce the double-decker jet, Emdin emphasises: “We can accommodate A380s very quickly. It would require some additional re-location of our taxiways and apron, but that could be done quite easily.” Despite its new long-haul focus, the airport is not looking to challenge established inter-continental hubs. Emirates started serving St Petersburg in November 2011, hoovering up Russian traffic and redistributing it via its Dubai hub to Africa, South Asia and the Far East. Emdin describes that relationship as mostly “one-way”, but he believes this could change in the future, especially if Emirates selects a wellpositioned partner at Pulkovo.

St Petersburg

Interior of the new terminal.

Low-cost aspirations Amid all the talk of long-haul expansion, the fact remains that about 90% of Pulkovo’s connections are with Europe, but efforts to develop these links further have been hindered by Russia’s bilateral restrictions. Whereas markets such as Germany and Italy have benefited from relaxed regulations, Emdin says that France “still more or less looks like a monopoly” with just two airlines – Air France and Rossiya – serving one destination, Paris. London is also restricted. There are hopes that easyJet’s recent entry into the London–Moscow market could be a catalyst for change. Links between St Petersburg and London are currently restricted to seven flights per week by one carrier from each country. British Airways uses all the available UK capacity with a daily service to Heathrow. But Emdin says talks are nonetheless under way with easyJet. “There is a good possibility that they will start operating from St Petersburg,” he confirms. “It might be not just London but also some other destinations

as well. We are in talks about Manchester flights, and Geneva flights too, because they have a company registered in Switzerland. Bilaterals definitely create a problem, but they are trying to work around them.” Emdin stresses that talks are at an early stage and easyJet will likely wait to assess the profitability of its new Moscow connections. But he reiterates that “when you have only one airline flying [on a route], that is a significant opportunity to relax bilateral agreements”. Geneva faces the same restrictions as London, although bilaterals are not an issue as the route is vacant. There are no restrictions on Manchester–St Petersburg flights. Russia’s own low-cost sector remains in the doldrums, as evidenced by the collapse of Avianova. Minimum service legislation combined with a lack of secondary airports has made domestic no-frills flying all but impossible. “Until new regulations are a reality, it will be very difficult for low-cost airlines to develop in Russia,” Emdin admits.

But he adds that foreign carriers such as Vueling, Wizz Air and Air One have made headway at Pulkovo. Instead of lobbying the Russian government for change, Northern Capital Gateway is quietly laying the foundations for future growth in the low-cost sector. Its redevelopment project includes the construction of a new fuel facility that will be “open to all major oil companies active in the St Petersburg market”. This will introduce competition among the airport’s fuel suppliers, Emdin says, adding: “If you look elsewhere in Russia, for any airport which has at least two operators usually the price is at least 10%–15% cheaper.” With Transport Minister Maksim Sokolov throwing his weight behind reform, Pulkovo is doing its bit to help to modernise Russia’s domestic regulations and ease bilateral restrictions. “Definitely the direction under the new transport minister is very clear – we are liberalising,” Emdin concludes. “It’s just an issue of how fast, and what will be the intermediate steps.”

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A route

in f

cus

Moscow

Routes News spoke to easyJet CEO, Carolyn McCall, about the carrier’s new Moscow service.

arch 18 was an historic day for easyJet. Not only did the budget airline enter the FTSE 100 (the top 100 companies listed on the London Stock Exchange) as the second airline to do so – but it also launched its first flights to Russia. The carrier now flies twice daily between London Gatwick and Moscow Domodedovo and, later the same month, it launched a daily service from Manchester to Moscow. Routes News spoke to easyJet CEO, Carolyn McCall, about the new service.

What have bookings been like on the two Moscow routes so far? Moscow is a landmark route and one we are delighted to be able to serve. Russia is the world’s largest country with a growing economy. Offering frequent and affordable flights enables easyJet to play a key role to aid trade links between the two countries. Bookings for both of our Russian routes have surpassed our expectations and we look forward to flying hundreds of thousands of passengers in the coming months and years.

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Why Manchester as well as Gatwick? Manchester is the gateway to the north west. It’s a great airport, we work well with the operators there and we absolutely believe that we can make the route work from there as well. It’s very much part of our strategy – we call it join the dots. It helps boost saliency and awareness if you can do the route from two points in the UK rather than just one. It was an opportunity that we wanted to implement.

Visitors from the UK will need a visa to travel to Moscow. How will you help your customers through this process? With the help of the UK Government, we have spoken to the Russian embassy here and they’ve been very helpful to us and we will continue working with them. We really believe that the more information our passengers have about everything, the better, and we will give our passengers a lot of information up front, managing their expectations about visas and the cost and the process. As much as we can help we will in terms of the information we put on the website and I think that’s all we can do.

What percentage of your passengers will be business on this route? We have a lot of business destinations in our portfolio already, so if you just think about London–Edinburgh, London– Geneva, London–Amsterdam, we have a huge number of commuters on those routes. Our profile on those routes will be 40%–45% business and we do that already. On the Moscow route, we think you’ll find the same profile. At least a third will be travelling on business and the remainder for leisure, and I think that will be a mix of weekend and long weekend breaks – it’s a great city break destination. I think it will also be an access point into doing longer holidays in Russia, so I think we’ll capture both. I think it will be a year-round destination.

Will you be codesharing with Transaero? There’s nothing in the bilateral agreement that specifies what the agreement between the two airlines should be. It might not involve codesharing or interlining. We don’t codeshare; our systems just don’t do that. So, actually, we have come to a very good and very constructive mutually beneficial commercial agreement with Transaero. I can tell you it’s not a codeshare but that’s about all I can tell you because it’s commercially sensitive information.

Sponsored statement

Amsterdam Schiphol’s international terminal.

Going Dutch Stuart Bowden finds out how Amsterdam Schiphol intends to remain one of Europe’s foremost hubs.

ne of the most popular arguments among the pro expansion lobby in the UK as to why London Heathrow needs a new runway can be encapsulated in two words – Amsterdam Schiphol. Schiphol, along with other European hubs such as Frankfurt and Paris Charles de Gaulle, is regularly used as an example of the dangers of allowing Heathrow to fall behind its continental neighbours. If airlines find it difficult to obtain slots at Heathrow because of a lack of

capacity, the argument goes, then they will simply choose to fly from one of its rivals, and, looking at the statistics, they may have a point. That’s because, although Amsterdam Schiphol Airport (AMS) nominally serves the Netherlands capital, Amsterdam, its biggest passenger market, according to Wilco Sweijen, the airport’s director of aviation marketing, is in fact the UK. Of the more than 51 million the gateway handled in 2012, around one-seventh originated from the UK. AMS is an important connector point for UK

airports such as Liverpool, Bristol, Leeds and Durham that lack service to Heathrow. “For many years we have promoted Schiphol in the UK market as an ideal hub for traffic flows via Amsterdam,” says Sweijen. “The UK is our largest market, and it therefore makes sense to have a consumer presence there”. The UK transfer market has become something of renewed interest for Schiphol of late – most recently with a new route to Manston, Kent – underlining a need for more options among British travellers, particularly those wishing to connect to long-haul destinations. Indeed, Schiphol chief executive Jos Nijhuis went on record in February as saying that passengers are increasingly choosing to fly through Amsterdam rather than via Heathrow, due to a better choice of destinations and services, particularly to and from the important China region.

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Top European airports for Chinese inbound traffic Capacity share – March 1–7, 2013 Paris Charles de Gaulle

Amsterdam

Frankfurt

Amsterdam Schiphol London Heathrow Istanbul Atatürk Helsinki-Vantaa Munich Rome Leonardo da Vinci Zurich Copenhagen

It can be considerably more convenient for a passenger flying from a UK regional airport, as an example, to the Far East, to make the short hop to Amsterdam for his or her connection than to go via Heathrow. On average there are more than 800 flights each week between AMS and 27 UK airports, Sweijen says, with many passengers using these to connect to long-haul services to Asia, Africa, South America and the Middle East.

Connecting hub But Amsterdam is not just a connecting hub for the UK. For decades the airport, in close cooperation with its home carrier KLM and its SkyTeam associates, has been building a global network which links it to the world’s most populous and economically powerful cities. In 2012, transfer traffic increased by 3.4% to 20.9 million, making up 41% of the total number of passengers using the airport. While rivals Heathrow and Paris each serve 117 and 315 global cities respectively, Amsterdam boasts a network of 317 destinations worldwide. “Our goal,” says Sweijen, “is to connect the world via Amsterdam, and to be Europe’s ‘preferred airport’. This is also achieved by developing the

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Source: OAG Analyser.

marketplace, and by working closely with airlines to develop new routes and to increase frequencies and capacity. “A strong point of Schiphol is the network we have in Europe. In fact, Amsterdam has more UK destinations and flights than any other airport in Europe. Also, our network in the Nordic countries is rather unique. Besides that, we are currently connected to seven Chinese destinations.” Three of those Chinese routes, to Hangzhou, Chengdu and Xiamen, are served in Europe only from Amsterdam with KLM, Sweijen adds. Other ‘unique’ destinations include Bali, Manila and (from April) Fukuoka in Japan. Already also confirmed for 2013 are new services to Abu Dhabi, Kent/ Manston, the Channel Islands, Albania and Istanbul, as well as several other European destinations.

Three principles for growth Schiphol’s success in attracting new services is based on three basic principles, says Sweijen. “First, we listen, and think along with your business. We present you with route opportunities, and we share useful market insights based on objective data,” he explains.

“To be competitive, we continuously follow developments in the market, improve our facilities, and offer our services at a competitive price,” he points out. “Special points of Amsterdam Airport Schiphol are its vast network, with unique destinations in comparison to other European hubs.” Connectivity is central to Schiphol’s business model and the airport prides itself on smooth transfers through its single terminal and a quick transfer time of 45 minutes. Signage in multiple languages and even a Chinese language app have also been designed to ease the process. “Connection times at Schiphol are short in comparison to other major airports. However, in the case that the passenger does have a longer connection wait, he or she will love the airport for its variety of shopping, food and beverage, and many other facilities,” says Sweijen. “Just to name a few: the casino, the airport library, museum and airport forest.” The layout of AMS’s terminal means passengers are never far from their next flight – or from easy and fast public transport connections into the city (the railway station is directly underneath the airport). However, Amsterdam is fast becoming a victim of its own success. With traffic expected to increase by 25% over the next 9–10 years, Schiphol is creaking under the burden of ever more passengers and flights, and while it has six runways, flight movements restrictions and terminal capacity limitations are being keenly felt. “Total aircraft movements at Amsterdam Airport Schiphol amounted to over 423,000 in 2012,” says Sweijen. “The environmental capacity at Schiphol has been capped by the Dutch

Amsterdam

More than just an airport

msterdam Schiphol is just one part of a much wider international aviation business run by its operating company, the Schiphol Group. The group is a global airport operator with a 100% stake in Rotterdam The Hague and Lelystad airports, a 51% interest in Eindoven Airport and an almost 19% stake in Brisbane Airport. It also manages John F Kennedy International Airport’s Terminal 4 and appoints senior executives at Reina Beatrix Aruba Airport through a management contract with the government. Surrounding the terminal is Schiphol’s vast development of offices, storage buildings and cargo and logistics facilities and intermodal transport links dubbed the ‘AirportCity’. This real estate project is separately run from the airport and generates millions of euros for the group every year. Having pioneered the airport city concept, Schiphol now offers its expertise to other airports around the world, including working with Italian authorities to develop real estate around Milan Malpensa Airport. Other projects include a joint venture with Swedavia to develop commercial revenues at Stockholm Arlanda Airport and a joint venture with Hong Kong Land, China National Aviation Corporation and Fraport AG to run Hong Kong International Airport’s Tradeport Logistics Centre.

Top: Amsterdam’s Lounge 3. Left: The airport’s Rijksmuseum. Right: Relaxation zone.

government at 580,000 yearly movements up to 2020. After 2020, the capacity is allowed to increase based on a 50/50 basis (i.e. no capping, but burden sharing with the neighbours). “Our airport has the highest hourly capacity of all European airports, with 108 movements an hour in peak times. This is vital to maintain our hub status in Europe and serve KLM, SkyTeam and other airlines at our airports,” he adds. To deal with the issue, Schiphol is putting the final touches to a new masterplan. Phase 1 will see the nonSchengen security gates centralised to speed processing and the construction of a new pier, which will increase the airport’s capacity by some 3 million per year.

“At the end of 2012, Schiphol kicked off a project which will bring to an end security checks at non-Schengen gates,” says Sweijen. “These security checks at the gates will disappear, and be replaced by central security filters. This means we will employ central security filters at Schiphol, in all three departure halls, as well as two filters for transfer passengers. “This is necessary to ensure the comfort for the passengers while moving through and staying at the airport. It will benefit the efficiency at the airport, and will mean compliance with the European laws and regulations into the future,” he says.

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Turnaround Oliver Clark finds out how airBaltic hopes to make a profit next year as its restructuring and new network structure begin to yield results.

artin Gauss had some good news to tell delegates at this year’s ITB travel trade show in Berlin. The airBaltic CEO was able to report that, thanks to a cost-cutting programme initiated last year, the Riga-based carrier had slashed its heavy losses of 2011 and is expecting to make a modest profit in 2014. This was confirmed in mid April when airBaltic’s 2012 financial results revealed losses had fallen to €38 million, a 75% improvement on 2011. It is now expecting to make a profit of some €5.7 million in 2014. “I am very happy. I was not expecting to close last year that well and we are already performing this year better than our own plan so the target is to reach a profit in 2014 and we are in a good way,” he tells Routes News. “If you look at the EBIT change from 2011 to 2012, I think we will be one of the leading airlines in Europe.” It’s all a far cry from the airBaltic of just a few years ago.

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In November 2011, when Gauss was brought in, he found a carrier haemorrhaging money that had been almost torn apart by disagreements between its government and private shareholders over the future of the company. Gauss, who replaced previous CEO Bertoldt Flick to help to put an end to the shareholder dispute, presented a sombre appraisal of the airline’s position and what would need to be done to turn around. “The initial priority was to stabilise as there wasn’t a management at that point, then evaluate the situation and within four weeks to give an overview of the options – that could have been to shut down,” he says. “I said to shut down will need the least money, but there were three other options that I presented; that was the shrinking [of airBaltic] to a very small size, the second was to do what we are doing today, and the third was investing a lot of money and grow the airline even faster than we had been growing before.”

“Our shareholders went for the second option which was also my preference. I said it would only work if we choose an option that provides the funding from the management team and the shareholder, you can not work against the shareholder.” Both the Latvian government and then stakeholder Baltic Aviation Systems (BAS) agreed to a major cash injection to keep the carrier afloat. With the government then effectively renationalising the carrier, it seemed the airline had the backing it needed to continue operating, but it was Gauss’ job to make sure it turned into a going concern.

Reshape and new network Gauss attributes his carrier’s dramatic turnaround to the root and branch changes enacted as part of its ‘reshape’ programme, which saw airBaltic cutting costs by downsizing its fleet and increasing its aircraft utilisation, cutting its workforce and scaling back its operations to focus on profitable routes.

airBaltic

Among the changes introduced was a new network and flight timetable which airBaltic’s route development team believe maximises the utilisation of its aircraft and the attractiveness of the product to passengers. Rather than offering midday flights that proved unattractive to business as well as leisure passengers, airBaltic now seeks to offer early morning services and a same day return flight on both weekdays and weekends. Tested for the first time during this winter schedule, the new structure sees airBaltic reduce its bank structure from four waves a day to three waves, which does away with the very early morning flights that can no longer be operated because of a new night curfew which comes into force at Riga Airport this summer. “If you go for business, you don’t choose a flight in the middle of the day and this was affecting the revenue management and pricing policy as it was difficult to generate the revenue for this unattractive product,” explains Manuel Esu, VP of network planning and development. “At the same time it was not very attractive for leisure passengers because if you wanted to have a weekend in Rome or Paris, same issue: if you are flying at 11 you are losing half a day, arrive in the middle of the day, when you have to come back a day after you lose half a day. “How we dealt with this was to cut the number of waves; before we had four banks in our hub structure, one early morning, late evening and midday banks,” he adds. It has also beefed up frequencies on some of its busiest routes with Paris Charles de Gaulle (+5), London Gatwick

“Southern Europe is very popular; Spanish and Greek islands are very successful. I remember during my time in Italy we were making more money in summer months than any other time of the year.” As airBaltic has downsized, its operations have been reduced and the carrier experienced an 8% decline in flights in 2012 and carried 3.08 million passengers, compared with 3.3 million the year before.

New fleet orders

Martin Gauss.

(+4), Barcelona (+2) and Rome Fiumicino (+1). With its new network in place, airBaltic is aiming for a 9% increase in aircraft utilisation, a 150% improvement in connectivity leading to a 15%–20% improvement in results for the summer.

New summer routes Another important innovation in the airBaltic network was to decrease the frequency of business routes in the peak summer season and replace them with leisure destinations. With this in mind, the Latvian carrier drew up a shortlist of some 30 potential destinations, from which five destinations were chosen after discussions with their airports and tourism authorities: Larnaca, Cyprus; Heviz-Balaton, Hungary; Olbia, Italy; Malta (May 11); and Rijeka, Croatia. “This is something we have never done before at airBaltic; the only summer route we used to operate was with charter flights,” explains Esu.

AirBaltic is set to become the only national airline in the world to operate an allBombardier fleet in the coming years as it phases out its Boeing 737s and Fokker 50s in favour of four additional Q400s NextGen aircraft and 20 new CSeries 300. Offering a significant fuel cost saving and with a 148-seat configuration, the new CSeries, which will begin to enter service in the airBaltic fleet in Q4 2015, is expected to make a significant difference to the carrier’s profitability, as Gauss explains. “If you assume the same fuel prices as we had this year, if we had the 10 CSeries, just 10 of the 20 ordered in the fleet, then we would have finished the year with a profit.” AirBaltic can also expect more fuel savings when it introduces continuous descent approach vectors for its Q400s from this summer, becoming the first carrier in the world to introduce it for a turboprop aircraft.

Alliances and new private partners With airBaltic seemingly back in financial health, the government is keen once again to find a new private backer and Gauss explains that the Latvian Prime Minister had discussions recently with Japan’s two main carriers.

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Picture courtesy of Bombardier.

airBaltic

“We will have to stabilise. Either we will grow again or we will have to find a partner to become bigger, because from our size I do not think we can maintain with just 20–25 aircraft.” While the growing threat of low-cost carriers to its operations means airBaltic cannot stand still, explains Gauss, he is not prepared to compromise on the independence of his carrier and as such airBaltic is not looking to join one of the main airline alliances. Instead, airBaltic is prepared to consider more regional partnerships, such as with neighbouring Estonian Air. “We have a small neighbour airline but of course what I would like to see is one strong Baltic carrier. That doesn’t mean there isn’t the possibility of doing things together [with Estonian Air] rather than competing.” So what are Gauss’s future ambitions? While the short-term priority is to continue to reduce the carrier’s costs and improve yields, long-term he is more confident, expecting the carrier to become the premier airline of the Baltic states and potentially offering long-haul routes to Asia by partnering with an Asian carrier. He is confident about the general outlook in the region and opportunities to grow from its Riga base. “According to IATA and Eurocontrol, our region is growing by some 7% a year, so from that it’s good, but the pressure coming from the low-cost carriers will stay and I personally see a lot of deregulation happening yet so I can see more airlines coming together or disappearing from the pressure coming from short-haul flights being in the hands of low-cost carriers now.”

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CASK increasing at higher rate than RASK LVL cent 6

CASK - based on total cost, excluding extraordinary items. 2

RASK - based on total revenue.

2008

2009

2010

2011

2012

Source: airBaltic financial statements, BCG analysis.

AirBaltic’s net result 2008–2014 in Latvian lats 10,000,000

-10,000,000

-30,000,000

-50,000,000

-70,000,000

-90,000,000

*Estimated

2008

2009

2010

2011

2012

2013*

2014*

Source: airBaltic financial statements, BCG analysis.

f they take the train to the airport, air travellers leaving Switzerland get a clear reminder of what they will shortly miss. Passengers from Bern, Geneva and Zurich airports can check in immediately at the rail terminus to stroll unencumbered through the terminal. For air transport infrastructure, in fact, Switzerland takes the ninth spot in the WEF’s most recent Global Competitiveness Report. The 10 carriers

then operating in the country use infrastructure ranked fifth for quality and operate an international air transport network rated sixth in the world. Switzerland also emerges well for capacity – with 876,200,000 seats a week on international flights, which earns 23rd place in the listing. As a travel destination, in fact, Switzerland has no need to reposition or to broaden its offer, says Sandra Carvao, chief, communications at the

World Tourism Organization (UNWTO). “Switzerland is already very well positioned to benefit from current world travel trends,” she said. “It offers high-quality products, a diversified tourism offer that caters for travel all year around and for different segments, from families to adventure travellers.” While the winter skiing season brings additional fliers, demand from business and finance feed a mid-year bump in air travel.

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Switzerland Change in passenger numbers to Zurich Airport by origin/destination, 2011–2012 20%

11.5% 10%

7.5%

Opportunity rises in the East

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-10%

Europe

North America

Asia

Africa

Latin America

Passenger traffic per month, 2012 2,500,000

2,000,000

Zurich 1,500,000

1,000,000

Geneva 500,000

Basel 0

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Commercial passengers, 1992–2012 25,000,000

Zurich

20,000,000

15,000,000

Geneva

10,000,000

5,000,000

Basel 2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

0 1994

To some extent, though, Switzerland’s air passenger growth could be simplified as anything but Europe. As the Eurozone’s economic turmoil rumbles on, the Swiss franc has soared against the euro, pushing the destination beyond the reach of many on the continent, although Eberhard sees a silver lining. “The high Swiss franc was certainly a factor in the decreasing number of European guests but the excellent image as a premium destination is also a contributing factor for the strong growth from Asia, the GCC and Russia,” said Eberhard.

-1.1%

-2.5%

1993

Europe traffic falters

0.4%

1992

Yet the winning formula needs new markets. The profile of visitors is already shifting, says Urs Eberhard, Switzerland Tourism’s vice president. “The major growth comes from Asia, the Middle East and Russia,” he told Routes News. “Our strongest source markets in 2012 were China, the Gulf countries, Russia, South East Asia – Singapore, Thailand, Indonesia, Malaysia – Japan, India and Australia.” In the midterm, Asia will keep growing, he added. “We think one Asian country with strong potential for us is Indonesia, but we are also looking at Turkey.” Asia’s emergence for inbound tourism can already be seen in new routes from Swiss, which is now focusing on Singapore, said Sonja Ptassek, a spokesperson for the carrier. In its 2013 summer schedule, Swiss adds a daily direct flight between Zurich and Singapore. Meanwhile, Zurich–Beijing and Zurich–Newark services are switching from A340s to A330s to raise capacity.

Source: Zurich Airport, Geneva Airport and EuroAirport.

Switzerland

As the logical corollary of the trend, Swiss’s summer schedule adds outbound tourism destinations such as Lisbon and Barcelona. Olbia and Catania also debut on Zurich’s departure board from July to August. In long-haul, as well as boosting Asia routes, Swiss has bolstered connections with North America, with an A330 now flying to Newark, while Chicago flights ramp up to 11 services a week from June. At Geneva, where Air China will fly direct to Beijing from May, only Europe is bucking the overall growth trend, said Samer Jrab, cargo and business development manager. “Most of the regions are growing in Geneva,” he said. “However, some traditional European big hubs like Frankfurt are losing market share.”

A diverse traveller profile In fact, while Switzerland’s core attractions have changed little since the 19th century, they now draw visitors with widely differing characteristics, says Eberhard. In terms of age or socio-economic status, it is hard to generalise, he added. “Some markets are younger, such as Asia. Some are older, such as Germany or the UK. Some stay longer, such as those from Europe and the US. Some shorter, such as Asia. Russians come more in the winter, while tourists from Asia come more in the summer, and visitors from India tend to come in April and May.” What unifies all these travellers is “the desire to see our mountains, our lakes and the beauty of our country”, he added. But even more outstanding than its natural environment – ranked fourth best by WEF – is Switzerland’s customer orientation. In this, the country is second

only to Japan. Across Switzerland, 4,562 hotels offered 246,311 beds at the start of 2013, according to Swiss state statistics.

Rome, CSA, for Prague, and Royal Air Maroc, for Casablanca. If Europe’s economy is an inescapable downdraft, Zurich’s own market is resilient, “not only in the front of the cabin but in economy as well”, he said. “Another opportunity for the size of our market is the B787… Although now grounded, we are convinced that this aircraft will be used by many long-haul airlines to serve our airport.”

Geneva expands capacity

Urs Eberhard, Switzerland Tourism’s vice president.

Zurich stays ahead Zurich stands out as Switzerland’s leading gateway, with 24,802,400 air passengers over 2012, a 1.8% rise on 2011. Peter Grunig, head of aviation marketing operations, stresses the airport’s setting. “The Zurich catchment area is one of the most stable economic spaces in Europe… The propensity to travel is the second highest in Europe.” While business demand is underpinned by international business headquarters, tourism is still growing, especially from Asia and the Middle East, he added. To further develop its network, Zurich is spreading its net broadly, attending Routes Americas as well as Routes Asia and Routes Europe. Having recently landed Iceland Air, serving Reykjavik, and Intersky, flying to Graz and Salzburg, the airport is aiming to win back Alitalia, for

Geneva also gained traffic over 2012, when it served 13,899,422 passengers, an annual increase of 5.9%. In a recent strategy overhaul, Swiss is setting up a new operations base at Geneva and giving greater independence to its management team, with the aim of tailoring services to the Western Switzerland market. Meanwhile, a new terminal will soon extend the airport’s capacity for widebody aircraft. “Geneva is targeting new routes in Asia and in North and South America,” said Jrab. “We are also following closely the situation of LATAM, as we have clearly identified a real potential and growing traffic between Geneva and Säo Paolo.” As a key selling point, Geneva can offer a dynamic local economy, he added. But he admits that a limited availability of slots, especially in the winter season, is a threat to expansion.

LCC opportunity EasyJet, the leading airline in Geneva with a 36% market share, sees the market as ripe for further expansion. While low-cost carriers take 40% of the market across Europe, the figure for Switzerland is only 26%, said spokesperson Celine Prenez.

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Switzerland

Business travellers, who already fill 18% of easyJet’s seats, are a key focus, she added. “We are developing a balanced product combining business and leisure destinations, looking for year-round destinations.” This year, business services are being bolstered between Geneva and Gatwick, Paris Orly and Nice, she said. “We invested for 7.2% capacity growth in 2012 in Switzerland to consolidate our position in Geneva and Basel and we have planned 11% capacity growth in the market in the first half of 2013,” said Prenez. Easyjet, which bases a tenth of its fleet in Switzerland, took delivery of a 13th aircraft in Geneva in December 2012 and an eighth aircraft in Basel in March 2013. In Basel, easyJet is also the leading carrier, with a 48% market share, she added. Zurich, while on the list for potential bases, is one of Europe’s most expensive airports, which prevents the airline from considering it under current conditions, she said.

Basel Basel, Switzerland’s third gateway, drew 5,354,758, a 6% expansion on the previous year. Vivienne Gaskell, a spokesperson at EuroAirport, sees Scandinavia as well as east and south east European destinations, along with New York, as current targets for new routes. Like its larger rivals, Basel can offer a strong local economy, she added. In particular, pharmaceutical headquarters propel business travel, such as for the head offices for Roche and Novartis. But the Alps are also nearby to attract skiers, while Basel hosts trade fairs such as Basel World and Art Basel to safeguard the gateway’s bright outlook,

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Our strongest source markets in 2012 were China, the Gulf countries, Russia, South East Asia – Singapore, Thailand, Indonesia, Malaysia – Japan, India and Australia she added. “We cannot see any significant changes in visitor figures. We have a good mix: business, tourism, family and friends.”

Lugano With an annual total of about 200,000 passengers, Lugano’s goals are necessarily more limited in scope, although a revamp of its facilities is due to raise its capacity for expansion. On the border with Italy, Lugano’s key tourism pull is as the gateway to the three lakes of Como, Lugano and Maggiore, said commercial and marketing director Flavia Ferrandin. In the short-term, the city airport targets seasonal connections with cities in countries such as Germany, which provides most inbound tourism, she said. “Our long-term objective is to develop point-to-point connections with the main European capitals such as London, Paris and Berlin, which would effectively serve the market’s demand,” she added. In her view, the arrival of Minoan Air, now flying from Lugano to Rome and Vienna, should dispel the airport’s ‘elite’ reputation and clear a misconception that the gateway is difficult to work from.

Eurozone headwinds But even if the Swiss aviation sector can show positive trends at all its gateways, networks are likely to realign as well as expand. The impact of Switzerland’s soaring franc can be seen in recent hotel occupancy figures, where the Swiss Federal Statistical Office (FSO) reported a continuing slide in January for the key tourism regions of Bernese Oberland, Graubunden and Wallis. For UNWTO’s Carvao, the currency sets a clear challenge. “In this case, it is one of the reasons for the slow growth in international tourism to the country in the last two years,” she said. “Yet, looking at the different markets, the picture is very different – while the number of tourists visiting Switzerland from countries in the Eurozone wend slightly down, the number of tourists from China or South America grew exponentially in 2012.” As the Swiss tourism sector continues to tick over with the smooth precision of the country’s famous watches, the air sector’s main challenge could be to realise demand in markets that are only just discovering the country’s charms.

Budding market Victoria Moores investigates Budapest Airport’s phoenix-like recovery following the collapse of national airline Malev.

t 4am on Friday, February 3, 2012, Budapest Airport aviation director, Kam Jandu, woke up to a call from the airport’s operations manager. Malev had not opened its check-in desks; this was going to be a very long day. “At that point I knew something was happening, so I told him to mobilise the crisis communications centre,” recalls Jandu. “For three years we had a ‘what if?’ contingency plan on the shelf. We modified it slightly each year. Unfortunately we had to exercise it.” Malev had been on daily prepayments throughout the three-year period, but Budapest still took a €70 million hit from Malev’s historic debts. What’s more, roughly 40% of the airport’s 8.9 million passengers and 50% of its revenue disappeared overnight, leaving its second terminal virtually empty. “After Malev collapsed, we needed to move fast,” he tells Routes News.

Jandu’s team picked up the phone and started contacting some target airlines with potential to move quickly. “During the previous few years we had fostered relationships with a number of airlines, but we had never quite risen to the top of their radar. We recognised it was very difficult to compete with the big hubs, so it made no sense to court every airline when only one or two would be the right fit.” Airberlin, a newcomer to Budapest, rapidly came on board and started operations within a few days. Likewise, Wizz Air’s reaction was “fairly immediate” and Ryanair quickly set up a new base, expanding to five aircraft within two months. Other airlines also stepped up their presence. In fact, the response was so aggressive that there was a huge surge in capacity and within six months, Budapest had restored 80% of its point-to-point traffic and by the close of 2012 the airport had handled 8.5 million

passengers, way ahead of its reduced 7.8 million forecast and around 400,000 shy of the previous year. “It surpassed our wildest dreams,” says Jandu. “We over-performed against our revised plan. It was fantastic. If anything, there was overcapacity, causing a price war.” After 12 months of carriers jostling for position, Budapest has now hit an equilibrium of sorts, where operations are now more sustainable. In 2013, the airport is expecting to keep its passenger numbers stable at 8.5 million. Wizz Air chief commercial officer, Gyorgy Abran, says the market was badly in need of more low-fares capacity, but Wizz Air was already a “home-town carrier”, he says, having operated there since 2004. Wizz was quick to ramp up capacity to seven aircraft and seek Malev’s former designations on routes such as Kiev and Tel Aviv. It has also added some routes which were not on Malev’s network, including Malta and Geneva.

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Budapest

“There have been big changes in the market, but I don’t think it was all negative. What we see a year later is that Malev’s volumes have been in part replaced by point-to-point traffic, which is good for tourism. Although certain destinations are not served any more, others have more choice and lower fares,” says Abran. After posting 28% growth at Budapest between 2011 and 2012, Wizz Air is still seeking further route designations, which will be announced over the coming weeks and months. At the moment, Wizz Air is forecasting 10% growth from Budapest in 2013, taking its local total to just under 2 million passengers, but if it wins the traffic rights, it is likely to post stronger growth. Abran is reluctant to give details of the talks, but one new route will be a four-times weekly Budapest–Dubai service which will go live on October 28. This route has just been announced and will mark a double first, as Wizz will be one of the launch airlines (and first European low-cost carrier) operating into Dubai World Central.

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He also mentions Istanbul and Antalya in Turkey, plus the Russian cities of Moscow and St Petersburg, as firm targets. “We have designation from the Hungarian side, but both CAAs need to grant permits before we can start. It is very difficult to give an exact timeline because the regulatory process can be quite unpredictable, but we are ready and if we had our choice we would already be serving them.” Ryanair was also instrumental in Budapest’s rapid recovery, but in January 2013 the Irish budget carrier slashed its Budapest fleet from five to three aircraft. “Sadly, 800,000 passengers per year and over 800 jobs will be lost by Budapest to other airports elsewhere in Europe, where Ryanair will continue to grow,” said Ryanair CEO Michael O’Leary, who slated airport operator Hochtief for increasing its fees and for rejecting Ryanair’s growth plans. Jandu said the airport received numerous letters from Ryanair seeking fee reductions. “Much to both parties’ frustration, we have not been able to

agree on traffic growth beyond the three aircraft,” he says. In total, 10 of Ryanair’s 30 routes were lost and a further nine were cut back, culminating in the loss of 110 weekly flights. However, even after the cuts, Ryanair still remains Budapest’s second largest operator, with 1.2 million annual passengers and 20 routes. “Ryanair based five aircraft in Budapest shortly after the Malev exit,” says Wizz Air’s Abran. “That clearly overheated the market with overcapacity. Some of their routes have since proved financially unsuccessful and that is why we have seen Ryanair reduce its presence from five to three aircraft, cutting routes and frequencies.”

Incentives While Ryanair is perhaps the most aggressive bargain-hunting airline, all airlines are putting pressure on airports to offer a good deal. Jandu says Budapest offers a “fairly significant discount” for new routes and additional frequencies, plus a route recovery

Budapest

incentive for links which have been dormant for at least 12 months. “We are also evaluating a new thin route incentive to target routes like Minsk, Valencia, Belgrade, Palma, Turin and Verona where daily frequencies outweigh the demand but two to three weekly flights work well,” says Jandu. “In addition to it potentially being combinable with the landing fee discounts we offer for new routes, the savings add up tremendously. We think this is innovative and will make a big difference to existing and new airlines.” Since Malev’s demise, Budapest’s traffic mix has changed dramatically, with low-cost traffic spiking from 26% in 2011 to 51% in 2012. Previously, Budapest differentiated between its low-cost and traditional offerings by using two separate terminals. However, with the sudden change in circumstances, the airport decided to close Terminal 1 – which housed its budget airlines – at the end of May 2012 and co-locate all its operators in the newer Terminal 2. The decision on whether to re-open Terminal 1 or expand Terminal 2 is unlikely to be revisited until Terminal 2 hits its 11 million-passenger

ceiling, which will be after 2016. “We developed something called basic boarding gates (BBGs),” explains Jandu. The airport removed two air bridges, one of which was inactive, to create the new facilities in Terminal 2, which includes simple reception areas and covered walkways to the aircraft. The eight BBGs have now been completed and are about to go live after their October 2012 launch was delayed by construction permit issues, forcing the airport to introduce interim measures. These gates are €2.92 cheaper per passenger than a standard boarding gate and can be used by any airline meeting the criteria within the airport’s published tariff manual. While Jandu does not think the stronger low-cost presence represents a huge paradigm shift, Lufthansa’s Budapest-based regional director for Central Europe, Ofer Kisch, is concerned about the new traffic mix. “They have come up with some very strange incentive schemes which none of the legacy carriers flying to Budapest will be able to reach,” claims Kisch. However, Jandu insists that the tariffs are available to all airlines that meet

the criteria, noting that Lufthansa subsidiary Germanwings may well benefit from the discounts. Despite its gripes, Lufthansa was one of the early responders to Malev’s collapse, launching new Berlin and Hamburg routes within 24-48 hours of the news breaking. “They went bankrupt on Friday and by the end of the day we were ready with two new routes,” says Kisch, applauding Lufthansa’s network planning team for their quick response. “Our people in network planning stretched other routes and optimised the network to get these two additional routes. The rumours of Malev’s bankruptcy had been there for years, so we could not be prepared for that.” Lufthansa already linked Budapest with Frankfurt, Munich and Düsseldorf, plus Geneva and Zurich through Swiss International and a Vienna service operated by Austrian. While only two new routes were launched in the wake of Malev’s collapse, capacity and frequencies were also boosted on the existing routes. This meant that in 2012 Lufthansa Group carried 1.3 million passengers on its Hungarian operations,

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Budapest

Left: Celebrating 5 million Wizz Air passengers at Budapest. Right: Qatar launches flights to Budapest. Middle: Budapest welcomes new Aegean service to Athens.

up 11% on the previous year. “There is no doubt Lufthansa has benefited from the demise of Malev,” Kisch observes. Jandu says that, despite the change in traffic mix at the airport, Lufthansa remains an important business partner. “We are pleased that they performed well and we will continue to find more ways of improving cooperation going forward.” Lufthansa plans to keep its 2013 capacity stable against 2012, although its new Budapest–Berlin service has since been suspended and the Düsseldorf and Hamburg links from Budapest are due to be transferred to budget arm Germanwings under the recently announced revamp of Lufthansa’s short-haul operations.

Missing routes Lufthansa does not operate any direct transatlantic flights from Budapest, but Kisch says suddenly the group became Hungary’s number one North Atlantic carrier, albeit via Frankfurt, Düsseldorf, Vienna and Zurich, after American Airlines and Delta withdrew their direct Budapest services. This highlights

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the missing link in Budapest’s phoenixlike recovery. “Despite not having a direct connection to New York anymore, last year we had more passengers flying there than ever [via other hubs],” says Jandu. “It is not the end of world just because we don’t have a long-haul airline [apart from Qatar]. It is nice to have that kudos and prestige, but it is not a commercial disaster because three [short-haul] frequencies a day generate more revenue than one [long-haul] frequency.” Unserved long-haul destinations with the highest potential volume from Budapest include New York, Toronto, Bangkok, Tokyo and Beijing, so Jandu is reaching out to United, Continental, American Airlines, Air Canada, Air Transat, JAL, ANA and Hainan Airlines to fill these white spots. He is also speaking with Emirates and Etihad, but closer to home he is hoping to attract Vueling and reports “good discussions” with easyJet and Tarom. Looking further into the future, in 10 years’ time Budapest is aiming to grow from

90 to 130 destinations, of which 15% will be long-haul compared with 2% today. It is also aiming to increase its connecting traffic which plummeted from 1.5 million a year to “several thousand at most” since Malev disappeared. But while Jandu plans to evaluate ways of introducing selfconnecting opportunities in the second or third quarter of this year, he believes the former levels will never be restored. He also rules out the prospect of a Malev revival: “That is not on the horizon, the market has gone now. There is nothing really left.”

Conclusion As that long day in February 2012 finally drew to a close, Jandu took some of his team to the Skycourt restaurant overlooking the apron at Budapest. “One of the lessors had asked for the Malev aircraft to be flown out to Shannon. There was a synchronised parade of 18 or 19 aircraft, just leaving one by one. The tears streamed from all the Hungarians. Anyone who’s worked in aviation in Hungary has at some stage worked for Malev. It was a sad, poignant moment.”

No brainer? The term ‘nerd bird’ has been around since the 1990s, but is it just a clever catchphrase or a compelling niche market? Adam Coulter finds out.

he term ‘nerd bird’ originated at the height of the dot-com boom in the late 1990s and early 2000s for flights between two high-tech cities. The first such nerd bird route was operated by American Airlines (AA) and linked San Jose, the centre of Silicon Valley, with Austin, Texas, a major centre for technology and defence industries. Because the connection between the two technology hubs carried so many employees of Sun Microsystems, Dell, Hewlett-Packard and other high-tech companies, it was nicknamed “the nerd bird”. AA has since dropped this route as it downsized its operation at San Jose International Airport (SJC), and Southwest Airlines is now the only carrier operating a San Jose–Austin service today. However, Virgin America appears to have stepped into the breach, launching two flights this May connecting silicon hubs: San Francisco (SFO) to Austin (AUS) (Silicon Valley to Silicon Hills) and San Jose–LAX (Silicon Valley to Silicon Beach). As if to cement its tech-serving credentials, in 2011 the airline even named one of its aircraft #nerdbird. Jennifer Thomas, a spokesperson for Virgin America, said: “I can say that both SFO–AUS and SJC–LAX are very much nerd bird routes, as we expect them to quickly gain a following among techindustry business travellers who choose Virgin America for their business travel in no small part because our fleetwide WiFi allows them to be productive even at 35,000 feet.”

As the only San Francisco Bay Areabased airline, Virgin America actively seeks out these types of routes, says Thomas. “Many of our most frequent guests work in tech-related industries. For that reason, our planning team does look to add other tech-focused business markets in order to build a network that is attractive to this important segment of guests.”

Silicon ‘hubs’ Recently a number of other ‘silicon hubs’ have sprung up across the US, which are gradually being connected by airlines. The term ‘nerd bird’ isn’t in widespread usage, however, possibly because nerd has fallen out of common usage, and is more of an airline industry term, rather than a popular phrase. SFO spokesman Doug Yakel said: “Although the San Francisco Airport does not use the term, I would define ‘nerd birds’ as a slang term for flights to/from cities which are known tech centres.” When asked how many routes from SFO could be labelled as such, he replied: “As an airport, we don’t use this label to describe flights; it’s a bit of a subjective assessment.” Despite this, such routes are coveted by both airlines and airports as they tend to be high yield business routes. There is no one type of aircraft used on these routes, although inevitably the short-haul workhorses are the B737 and A320, often configured with a top-heavy business class. In the case of Virgin America, as noted above, the entire fleet of new Airbus A320s is fitted with WiFi, designed to be attractive to tech industry business travellers.

The aircraft have mood-lit cabins and the most advanced personal entertainment platform in the skies, according to Virgin America. A seatback touch-screen TV, with 25 films, live TV, Google Maps and video games, allows seat-to-seat chat, plays music videos, and has a 4,000 song library (including the ability to create and save your own playlist in-flight). The are a number of regions in the US now labelled ‘silicon’ something, either well-established or up-and-coming, which Virgin America has flights to and from, including Silicon Beach to Silicon Alley (LAX–JFK); Silicon Valley to Silicon Alley (SFO–JFK); and Silicon Beach to Silicon Canal (LAX–SEA).

A senator weighs in Albany International Airport, the gateway to the capital of New York state and

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Nerd birds

recognised as a hi-tech hub, recently came under the spotlight after local Senator Chuck Schumer started lobbying on its behalf for nerd bird routes. He is calling on United Airlines and Southwest to introduce flights connecting Albany to their respective hubs in Houston and Denver, arguing that the flights, which would be eligible for more than $1.5 million in cash incentives, would be popular with Albany’s technology sector. “A direct route that connects Albany and the hubs in Houston and Denver would be a win-win-win for the airlines, Albany’s booming high-tech industry and Capital Region travellers,” Schumer told the Times Union newspaper. “Daily direct routes to these hubs would set Southwest or United miles ahead of the competition in upstate New York as they provide low-cost flights that

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will connect growing high-tech companies in the Capital Region with their established counterparts in Texas and the West Coast.” He said both carriers “have a unique and recent history of identifying and connecting booming business hubs across the United States,” citing Southwest’s service between San Jose and Austin and United’s between Washington, DC, and Long Island. Meanwhile, Denver International Airport has a number of routes which could be labelled ‘nerd bird’, for example United’s service from Denver to cities such as Seattle, Austin and San Jose/Silicon Valley, as well as to their Chicago and San Francisco hubs, which also have components of technology-related traffic. Arguably, though, these aren’t ‘nerd bird’ routes in the purest sense.

Despite the number of routes, a spokesperson for the airport said such routes are not actively sought out at the airport: “This isn’t on our radar as an area of focus for route development.”

The Bangalore Express In India, the booming tech centre of Bangalore is spurring its own nerd bird routes transporting the city’s techies domestically and to other IT clusters around the world. The most famous route is the so-called ‘Bangalore Express’, operated daily by Lufthansa on a Boeing B747, and connecting San Francisco to Bangalore. A natural successor to the original nerd bird routes, it’s said that more deals are done on this 22-hour journey, which has a stopover in Frankfurt, than in the boardroom, particularly for entrepreneurs.

Nerd birds

Image courtesy of Cathay Pacific.

“This route for us is a pure, almost all-business-passenger route,” Axel Hilgers, the South Asia director for Lufthansa, has said. The airline counts SAP, Cisco Systems, Honeywell International and the Indian companies Wipro and Infosys as clients; and it’s quite common – in fact, expected – for passengers at the front of the plane to network, job hunt and seal deals. Girish Nair, AVP and head of airline marketing at Bangalore International Airport, said: “We see tremendous potential in this route.” “Our constant endeavour has been to establish a direct connectivity to the US market, particularly San Francisco, which is a key destination. In fact, many Indian and US-based carriers are evaluating the BLR–SFO route through a mid point over the Pacific.” And it’s not just the BLR–SFO route that could be labelled ‘nerd bird’ – there is a burgeoning tech centre located in South East Asia, which the airline also wants to connect to. “We are the first airport in India to connect Bangalore to Chengdu; this route operated by Air China connects China with the city. Additionally, the growing west coast traffic that started moving over Hong Kong is operated by Dragon Air. Singapore Airlines and Thai Airways also carry the west coast traffic

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through their hubs in Singapore and Bangkok,” he said. Bangalore is also pitching for a non-stop route to Australia: “Australia is emerging as a growing IT market and we see a huge potential for direct connectivity. Currently, Bangalore is connected to Australia through the hubs of Singapore, Bangkok and Kuala Lumpur. We are actively pitching for a non-stop Australian connectivity as we believe we have a strong geographical positioning to be the ‘Gateway to India’ for the Oceania region.” The recent San Jose to Japan’s Narita Airport service on All Nippon Airways, could also arguably be described as such a route: “While we have never characterised the SJC–NRT service as a nerd bird flight, you are welcome to draw your own conclusions as this flight certainly connects two technology powerhouses,” explained Rosemary Barnes at San Jose’s Mineta Airport. What is interesting is how the route launch came about: “We certainly make a business case to existing and potentially new airlines on any new or expanded service that data shows can be supported by Silicon Valley’s business travel needs,” she explains. In this case, for two main reasons: 1. A Silicon Valley Leadership Group survey revealed that Tokyo is the third

highest in demand international destination from San Jose. 2. US Census 2010 data shows that San Jose has the third largest Asian population in the US, after New York and Los Angeles. Incidentally, the leadership group represents more than 375 of Silicon Valley’s employers, including Cisco, eBay, Adobe, Brocade and Novellus, which collectively provide nearly one of every three private sector jobs in Silicon Valley and are enthusiastically committed to supporting the new flight.

Benefits So how valuable are these routes to airlines and airports? Well, if Senator Schumer is correct in his assessment, about $1.5 million. But, as Doug Yakel at SFO says more generally: “The primary benefits to airports are increases in passenger traffic and ancillary revenues, such as concessions.” Bangalore’s Nair added that such routes were hugely beneficial, not only to the airport but the wider region: “When business passengers seek to fly to Bangalore, it has a cascading effect in other sectors, leading to job creation to cater to the escalating demand, thereby playing a vital role in facilitating wider economic growth for the region.”

Free movement Oliver Clark and Mark Smulian analyse the potential impact of the lifting of restrictions on Romanian and Bulgarian citizens within the European Union.

right to work in the UK and Ireland and later the EU, Poland proved a magnet for low-cost carriers. Ryanair first began operating in 2005, from Wrocław to London Stansted, a year after its accession to the EU. Today the airline carries some 6 million people per year in this market. The same thing happened, to a lesser extent, with the Czech Republic, the Balkans and the Baltic states, where liberalisation of their aviation markets brought a wave of new air services led by low-cost carriers. Now, Romania and Bulgaria might be about to provide airlines with some tempting new markets as the restrictions on their citizens working across the EU are removed at the end of this year. Meanwhile, waiting in the wings is Albania, which is not an EU member but for historical reasons has many

n December 31, 2013 regulations restricting the right of Romanians and Bulgarians to travel freely to Austria, Belgium, France, Germany, Luxembourg, Malta, the Netherlands, the UK and Spain will be removed. While the full impact of lifting these restrictions, which formed part of Romania’s and Bulgaria’s accession agreements to join the European Union, is unclear, for airlines at least, relaxing the rules offer obvious opportunities. With potentially millions of people now free to move to and from Western Europe to work, go on holiday or immigrate, there is a real possibility of boosting intra-European passenger traffic flows and opening up new routes. If the Polish experience is anything to go by, we can expect to see a significant impact. When its citizens gained the

Top 10 airlines operating between Romania and Western Europe, February 6, 2013 8

1 Wizz Air

9 10

2 Tarom 3 Blue Air

6 1 5

4 Lufthansa 5 Austrian 6 Carpatair 7 Turkish Airlines

8 Air France 9 British Airways 3

10 KLM 2

Source: OAG Analyser.

expatriates in Western Europe who lack convenient air routes home, and which has an entire airport that the country’s government wants to put at the disposal of budget carriers. Despite alarmist headlines in some newspapers about an influx of Romanians and Bulgarians heading for Western Europe, the truth is that no one has the remotest idea how many will in fact arrive. Even the EU has not published detailed estimates. One report that might help airlines to plan for this potential market came from the UK’s National Institute for Economic and Social Research (NIESR) in April, which stated: “It is not possible to predict the scale of future migration from Bulgaria and Romania to the UK numerically.” Based on historical trends, it said the main destinations for Romanian and Bulgarian citizens would likely be Spain, Italy and, to a lesser extent, Germany, reflecting employment opportunities and, for Romanians, the similarity of Spanish and Italian to their language. The NIESR says surveys in Bulgaria and Romania show some interest in migration to the UK, but it was “not a favoured destination and there are indications that much of the interest that exists is in temporary stays rather than long-term moves”. However, UK think tank Migration Watch predicts around 50,000 Bulgarian and Romanian immigrants a year. As Romania and Bulgaria complete their integration into the EU, it also seems likely they will become more popular tourist destinations for visitors from Western Europe.

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Romania’s and Bulgaria’s Schengen hopes fade A joint bid by Romania and Bulgaria to join the Schengen programme is in limbo after the European Union decided to postpone a decision until the end of the year. Earlier, Hans-Peter Friedrich, Germany’s minister of the interior, had said Germany would block any attempt to include the two countries in the scheme because they failed to meet the necessary criteria. “There are some areas of weakness, such as in the functionality of the judicial system, that prevents us from saying: abolish the borders,” he told reporters last month. All 27 members of the Schengen scheme need to vote yes for new members to join.

Wizz Air At present, Romania and Bulgaria’s international markets are dominated by Wizz Air, which controls some 30% of the Romanian market and 25% of the Bulgarian routes going to Western Europe. Recent new routes include services from Bucharest and Sofia to Dubai, and new connections from Romania and Bulgaria to Bologna. A Wizz Air spokesman points out that it has recently launched routes to Kiev and Georgia, “and will continue its ‘Go East’ expansion” plan. “Our low-cost route network from Romania and Bulgaria already serves the traffic flow of migrant workers and facilitates western companies’ access to more skilled labour, while our

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Romania and Bulgaria passengers can fly home more often, thanks to our low fares. “Wizz Air will continue monitoring the demand for more low fare seat capacity on its west-east routes and react according to market demand,” he adds. Ryanair on the other hand has a relatively modest network in both countries. In Romania, it operates between the Romanian coastal city of Constanta and Pisa and Milan and recently launched operations from Targu Mures ‘Transylvania’ Airport to Brussels and Pisa. In Bulgaria, Ryanair only operates to Plovdiv Airport, with services to Frankfurt Hahn, and from the end of March this year began operating three frequencies a day to London Stansted. Spokesman Robin Kiely says: “Ryanair currently operates at Constanta and Targu Mures in Romania, and Plovdiv in Bulgaria, and will always meet with airports that are interested in bringing Ryanair’s low fares to their market.” Kiely says the carrier would not comment on “rumour or speculation, but will always keep the door open to new routes and new airports”.

It is in talks with more than 75 airports, Kiely says, including those in Montenegro, Macedonia and Serbia. EasyJet is also a minor player in the market. It currently operates no routes to Romania and to just one destination in Bulgaria, Sofia; however, it is a market where it is expanding. It launched its first Sofia–Stansted route in February and Berlin service on April 2. Neil Slaven, network development manager for easyJet, says: “There’s certainly no restrictions in place. It’s in the EU so there’s an open skies agreement. There’s no reason why we couldn’t fly there if there was a business case. “We continually review destinations across Europe, and Romania is one of those. If we see an opportunity, then we’ll act on it.” Monika Pelinkova, head of communications for Bulgaria’s principal gateway Sofia Airport, says the lifting of restrictions on Bulgarians working across the EU would “influence beneficially the number of the passengers processed through Sofia, and we can expect a rise in the migrations to Western European countries.

Romania and Bulgaria Neighbouring Albania seeks to court low-cost carriers

here is a modern but empty airport in the heart of the Balkans waiting for low-cost carriers to fill it. This strange situation has come about because Albania wants to attract new carriers but has an airport which, at present, no one can use. Albania was for decades isolated, even by the standards of communist Europe, and since democracy arrived in 1990 it has struggled to get itself noticed by carriers and tour operators. It isn’t in the EU, but large numbers of Albanians, and their kin from Kosovo, work elsewhere in Europe and would use flights home. The country has a similar coastline, scenery and history to those of Greece and Croatia, but is peripheral to the tourism industry, in part because of a lack of cheap flights. During the Kosovo war in the late 1990s large numbers of ethnic Albanians from that country, as well as citizens of Albania, moved to western Europe. To cope with the war’s demands, Albania built an airport at Kukës, near the Kosovo border. This could in theory serve expatriate workers from both Albania and most of Kosovo as well as tourists wishing to reach the capital Tirana or the coast. But as Albania’s ambassador to the UK Mal Berisha tells Routes News: “An error in the contract by the previous government means that Hochtief manages Tirana airport and that is the only airport that can be used for international flights.

“The prime minister is very keen to see Kukës used and is interested in handing it over to low-cost carriers.” Albania’s government is open to negotiations over Kukës, but has not made any specific offers until it can sort out its problem with Hochtief’s 20-year contract. Budget airlines are meanwhile welcome to use Tirana. Berisha points out that about half the Albanians now working in western Europe are from either near to Kukës or from just over the border in Kosovo, “so there would be a demand for flights home”. Some 150,000 Albanians are in the UK, with similar numbers in France and Germany, but many more Kosovars historically went to Switzerland. The Albanians hope that were Kukës in use it could offer substantially lower landing charges than Pristina, which is used almost entirely by scheduled carriers, while being conveniently sited for most Kosovo citizens. Kukës has a runway of 1,900m and could handle 1 million passengers a year, the country’s transport ministry says. A new highway links Kukës to Tirana within about two hours, and coastal resorts are three hours away, while Kosovo’s capital Pristina is only a 120 km distance. Albania remains somewhat low profile as a tourist destination, but the ambassador says it welcomed 4.5 million visitors in 2012, a substantial increase on the 400,000 recorded in 2005.

“Yet, all these assumptions are only based on the current economic situation, and the actual demand is hard to predict at this early stage.” She says the airport “intends to introduce a programme with stimulating discounts on landing fees for new routes and for increased capacity on the existing ones”. This incentive discount scheme will be available to airlines of all kinds. Already, this year will see 11 flights to Berlin added to schedules, four to London, and three each to Barcelona, Istanbul and the Netherlands. In Romania, the old Bucharest Baneasa Airport now caters only to private flights with commercial airlines having had to relocate to Otopeni Airport and meet its higher costs, a move that has annoyed LCCs.

New ‘Bucharest South International Airport’ But this could all change if Romanian carrier Blue Air gets its way. The LCC is working with Romania-based airport owner and operator, Infra Group, to build a €200 million airport south of Bucharest, at Adunatii Copaceni: ‘Bucharest South International Airport’. Under plans developed by a consortium airport developer, Infra Group says this facility will be large enough to take the A320 and B737, making it ideal for LCCs. In Bulgaria, Sofia Airport is planning to expand its Terminal 2 while Fraportmanaged Burgas Airport is also planning expansion. It seems certain that more people will fly to and from Romania and Bulgaria once the work restrictions end and as tourism grows, and there may be rewards for any airline that takes a chance on this market.

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Firm footing On the back of its success in attracting an Emirates service last year, Richard Maslen reports on Newcastle Airport’s future route development plans.

fter completing a refinancing and with the arrival of AMP Capital as its new 49% shareholder following Copenhagen Airports’ sale of its own stake, Newcastle International Airport is looking to the future on a solid platform. The global investment manager has relevant expertise in the industry through its involvement in Melbourne and Launceston Airports in Australia and it is currently working with local government majority shareholder LA7 on a development vision for the airport. In the next month this will include a review of the airport’s route development strategy and the formulation of a five-year network growth plan. The airport is a major asset to the north east of England, generating millions for the local economy every year and supporting thousands of jobs. It would be wrong to say that the region is remote – the Tyneside urban area is the sixth largest living area across the UK – but the north east of England is the only major UK region not connected

to the rest of the country by a motorway. With long journey times to other larger UK airports, the importance of direct domestic and international connectivity is high, an issue that has been highlighted in a report released in April 2013. The ‘More and Better Jobs: North East International’ study has highlighted the important role of air connectivity to the region. It was commissioned by the north east local enterprise partnership which comprises representatives from councils in Northumberland and Durham, themselves shareholders in the airport. The report said “ever stronger links from Newcastle Airport to the major global air hubs are required, plus continuing direct flights to the more distant British cities”. The report highlighted a goal of maximising the number of global destinations that can be reached from the region with just a single change of aircraft, and following the success of the Dubai connection said the “top priority” for the future has to be a new direct flight to a major North American hub.

For the airport management team, this is nothing new. They have been working hard to bring a direct US connection and came close to establishing a scheduled link to New York in the last decade, but have instead had to make do with Christmas holiday charter flights. But aviation development director, Chris Sanders, acknowledges this would be a challenge in the current environment. “All the factors are pushing against us at the moment with the state of the economy, Air Passenger Duty (APD), the pound-dollar exchange rate, fuel prices, restructuring in the US airline business… the list goes on. However, the business case for a non-stop link to a US hub is actually much stronger than the business case when Emirates launched Dubai,” he said. The arrival of Emirates was a major coup for Newcastle. The carrier already had a strong presence in the UK, and although the route filled a market gap between its existing destinations of Manchester and Glasgow, Newcastle had little pedigree as a long-haul destination. When you consider that at the time Emirates hadn’t set course for destinations such as Amsterdam, now an A380 service, you can understand why there was this level of surprise. But what benefits does such a service bring alongside the obvious enhanced connectivity? A UK Trade & Industry report suggests that since Emirates’ Newcastle debut there has been a notable boost to exports and trade. The analysis shows a rise in trade from €175.5 million to €321.7 million between the north east and Australasia over the period. There are suggestions that the route could be expanded to a double daily operation within the next few years, such has been its success. Statistics shows that just 25.2% of passengers travelling on the airline’s service end their journey

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Newcastle in Dubai, the rest connect on to at least one other flight via the global gateway. In fact, the Emirates service enabled passengers from Newcastle to fly to 152 different destinations via Dubai in 2011. Away from these long-haul markets, the airport has plans to further expand its domestic and European offering as well as strengthen operations to existing markets. The return of an important link to Brussels is a priority after Brussels Airlines pulled the route earlier this year, while the European network wish list includes a range of other destinations, such as Berlin, Madrid and Milan, markets Sanders believes can be sustainable served on a twice or three times weekly basis. In the UK, the return of a London Stansted link is one option, although the airport would like to see the introduction of a jet aircraft on Flybe’s Gatwick flight, replacing the existing Bombardier Q400 with an Embraer 175. With financial stability, the airport’s management plans to use its twin pillars of excellent customer service and reliability to provide an efficient and sustainable environment for its existing airline partners, potential new operators and its passengers. “Our aim is to be the most welcoming airport in the UK and, this year, we’re going above and beyond once again for our customers,” says Sanders. “Last year was a great year for the airport as well as the north east travelling public.

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We secured a number of new routes to sought-after destinations, were honoured with the AOA Award for best UK airport under 6 million passengers for the fourth year in the row and welcomed a 50% increase in seats on our Emirates service to Dubai with the debut of the 428-seat Boeing 777-300ER. We also officially opened our £3.2 million terminal development.” A small growth in passenger numbers in 2012 ended five consecutive years of declines and, following only a modest decline in 2011, shows stability in the local market. The latest UK CAA data shows positive growth for the rolling 12-month period until February 2013, with traffic up 0.6% to 4.34 million passengers. Much of this growth relates to the success of the Emirates route to Dubai, but also an increase in flying from easyJet. The airport is now looking to the future and is in the process of redeveloping its masterplan, which will show its aspirations up to 2030. It is a key business in the north east of England, providing both employment opportunities and driving the development of the local economy. According to latest company data, the airport employs 3,200 people and contributes more than €754 million to the region every year. It supports €213 million in Gross Value Added (GVA) through on-site activity, €32 million through directly related off-site

activity and €158.5 million in GVA through indirect and induced effects in the north east. While, on the basis of 2012 traffic levels, analysis by York Aviation suggests the services provided by the airport will bring economic benefits of €284 million to the region. A key part of Newcastle’s network development strategy involves attendance at the Routes Europe regional event and World Routes. For Sanders this is an important part of his annual diary and he has attended every Routes Europe since 2009 and almost every World Routes. “The events on one hand enable us to maintain relationships with existing customers, where it would be difficult and expensive to see them all. On the other hand, it allows us to speak to potential new partners while also catching up with industry colleagues to better understand developments across the sector all across a three-day period,” he says. He also had a message for the UK Government. “It amazes me when you look at events like these and the number of lives that will be changed for the better, the growth in business and the economic development the decisions that are taken will bring to any country. I really wish the UK Prime Minister and other senior Government officials could take time and visit a Routes event, see what goes on and how important this industry is.”

Teamwork Valencia Airport says the doubling of its passenger traffic over the last 10 years is down to successful partnerships with the tourism authority and airlines, writes Steven Thompson.

ike many European airports, Valencia in eastern Spain suffered a fall in traffic in 2009 following the global economic crisis. Numbers dipped again last year following two years of modest rises – but passenger numbers have nevertheless doubled in a decade, and the Spanish airport is predicting yet more increases towards the end of 2013. So what makes Valencia so resilient? Well, in 2005 work began on a new terminal for domestic traffic as well as a new air cargo centre with an annual

capacity of 72,000 tonnes. This work was completed in 2007, while the second phase was launched two years later, which saw the expansion of Terminal 2 (T2) and public parking at the airport. Over the seven-year revamp, T2 increased in size from 25,000sqm to 64,000sqm, while the number of gates was more than doubled, from 10 to 22. But it does not necessarily follow that the construction of new facilities automatically boosts passenger numbers, a perennial problem for many Spanish airports. Instead Valencia

executives point to a successful partnership with the tourist board and in turn with carriers such as Wizz Air and Turkish Airlines. “The relationship with the city’s tourism authority is vital for the airport, as most of the city’s international tourists arrive by plane,” explains Julián Cámara, managing director of Valencia Airport. “Valencia Tourism is doing a great job promoting the city, and what’s more important, they do it together with all the key players in the local tourism industry.”

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Valencia

Valencia is one of Spain’s biggest tourism markets and is popular with European and international visitors.

The airport will launch a new route to Rotterdam with Transavia in April and will also increase frequencies on a raft of current services within Europe this summer, such as Brussels, Frankfurt, Berlin and Moscow, to name a few. This, Cámara notes, reflects an increasing demand on European routes which the airline industry is “most willing to satisfy”. “When an airline approaches the airport, we put it in contact with the tourist board and they do the same t he other way round, so we are all aware of the needs of the airline and can help them with anything they need,” he adds. Valencia Tourism was established in 1991 and, since then, it has contributed

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to the growth of tourism in the city as well as increased its economic impact. “A key factor to achieve these goals is to increase connectivity to the city through airlines, so they are a strategic partner,” says José Salinas, CEO of Valencia Tourism. “To achieve new connections, we work with airline route managers, but also keep close contact with sales or country managers and airport route managers. Within companies, many decisions are made in teams so it is positive to be known by all members of that team.” The support airlines receive is confirmed by Wizz Air Ukraine, which operates from Kiev and will double its services to two flights a week from this summer. The airline began its relationship with Valencia Tourism “even before the first flight took off,” according to Akos Bus, general manager for Wizz Air Ukraine. In September 2011, Wizz Air Ukraine and Valencia Tourism hosted a press trip for five Ukrainian journalists to promote the new service. Later that year, a presentation on Valencia was held in Kiev for Ukrainian media and tour operators. Valencia Tourism has also recently organised a Spanish Food Festival in Ukraine, further raising interest among the local press and travel trade.

“I would say that Valencia Tourism office is one of the most innovative and creative in what they are doing,” adds Bus. Turkish Airlines are also growing their business in Valencia, thanks to their close relationship with the airport and the tourist board, as well as fostering trade links with the Spanish city. The carrier, which counts Valencia as one of its most important destinations in Spain, will soon be flying there five times a week, linking the Spanish gateway with its Turkish global hub, in turn connecting the city with more than 200 destinations worldwide. “Turkish Airlines has very close relations with airport and other regional institutions,” explains Serkan Kuzlu, Turkish Airlines representative in Valencia. “We collaborate with them to promote the city and the region as a tourist destination and help businesses in Valencia ‘go international’. Recently, for example, we signed an agreement with Castellón Chamber of Commerce that seeks to foster and facilitate exportation of products made in Valencia. “Besides being a destination for tourists, Valencia is also a very industrial area, with sectors such as pottery, textiles, shoemakers and toys, and their sales abroad are doing very well.

Valencia

Valencia traffic 2005–2012 19%

6,000,000

-3%

5,000,000

-18%

50%

2010

2011

-5%

4,000,000

28%

3,000,000

14% 2,000,000

-7%

1,000,000

2002

2003

2004

2005

2006

2007

2008

2009

2012

Source: Aena Aeropuertos.

“From a tourism standpoint, together with Valencia Tourism, we have also done presentations in different parts of the world to present Valencia as a destination for tourists. One of the latest trips took place in Moscow, as incoming passengers from Russia are forever growing,” he adds.

Despite the dip in airport traffic, Valencia Tourism’s own figures show a 10% increase in international bednights. Plus, tourism from less traditional markets is growing, from Russia (58%), Switzerland (60%), the Netherlands (38%), Turkey (72%), China (56%) and from Japan (98%).

“We work together with Valencia Airport and AENA to attract new airlines,” adds Salinas. “To reinforce airline relationships, three years ago we created a new position, airline manager [Miguel Ángel Pérez] who has a very active approach to airlines and airports to work on new possible routes or to recover old ones. “It is also vital to be able to provide valuable data for airlines to evaluate the convenience of the destination. To do that we work hard to have the latest city statistics and keep in touch with all the organisations that can provide additional information. “Another important thing is to be prepared to put the airline in touch with any local contact they need to meet. Finally, in addition to all these initiatives, it is critical to generate a positive perception about the city and about the key local decision makers, so we always follow up closely with new airline representatives to make sure they receive the best from us and the best from our locals.”

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Dealmaker Piers Evans reports on how the EU is pressing ahead with open skies agreements with Israel, Ukraine and Azerbaijan and eyeing other emerging markets.

n September 2012, the European Commission reviewed its progress in liberalising aviation markets since 2005 and called for “a major and rapid transformation”. One way it is seeking to do this is by adding countries on the edges of Europe to its Common Aviation Area, with the eventual aim of achieving unrestricted open skies between them and Europe. This year, such ‘neighbourhood’ deals are poised to be concluded with Israel,

Azerbaijan, and Ukraine, while bilateral negotiations are due to resume with key emerging players such as Brazil.

Open skies versus fair competition The rethink has been forced on the EU by the rise of the Middle Eastern carriers, leading to the realisation that European carriers need to gain access to emerging markets. “We analysed some of the new challenges that EU carriers are facing internationally – including, for example, in relation to the Gulf carriers,” a European Commission official told Routes News. But the threat from Middle Eastern carriers has also led to “a certain hesitance among EU carriers for very liberal agreements”, he added, and has led to much debate as to how far liberalisation should be pursued. Attitudes on EU aviation policy also vary between industry associations. ACI Europe, for instance, welcomes liberalisation on the grounds of economic benefits to regions and airports. “Ensuring a fair, level playing field is paramount to protecting the hub positioning of Europe,” it said in a statement. “But we also need to be realistic and strike the right balance between fair competition and market access. In other words, this cannot be an excuse for systematically blocking negotiations and

holding back the ripple effect of wider liberalisation benefits.” But the Association of European Airlines (AEA) general manager communications Geert Sciot is more cautious. “Our position is that we welcome bilateral agreements that expand air markets in so far that there is a clear business case that guarantees that this opening of the market is in the best interest of European carriers as well,” he told Routes News. “We are worried about serious level playing field issues. Let’s give you just one example. While EU airlines are obliged to comply with EU competition law on state aids, a large number of nonEU carriers have benefited from massive subsidies over the past 10 years, including airlines that fly to Europe from China, India, Malaysia and Bahrain.”

Emerging markets The EU Council of Transport Ministers, which has the final say on aviation policy, has endorsed the Commission’s plans to liberalise bilateral restrictions with key trading partners such as Turkey, India, Russia, certain Gulf countries, ASEAN and – “at the earliest opportunity” – China. But slow progress in negotiations with Australia and New Zealand – not to mention complications with an agreement signed with Brazil – suggest

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Bilaterals expanding the Common Aviation Area – the contenders Ukraine (under discussion) Next to the Russian Federation, Ukraine is the EU’s largest neighbour. Growth in its aviation market averaged 8.8% between 2007 and 2011, when 3.7 million passengers travelled between the EU and Ukraine. Ukraine attracts more than 6 million foreign tourists each year.

Azerbaijan (under discussion) The first round of CAA negotiations started on January 24. A study for the Commission found that an additional 860,000 passengers would fly between the EU and Azerbaijan over a period of five years if an agreement came into force, with journey times shrinking, fares dropping and the number of destinations available to consumers increasing. The study puts the economic benefit of a deal at about €46 million during the first five years after liberalisation.

immediate gains will be through expanding the Common Aviation Area. Israel is currently top of the ‘neighbourhood’ list, but the Commission also sees deals with Ukraine and Azerbaijan as imminent. “With Ukraine, I think our hope is that we could finalise that this year,” said the Commission official. “The same for Azerbaijan. We hope to finalise it by the end of this year.” Tunisia then heads the schedule. “We have a mandate to negotiate with Tunisia and we hope in the coming months to start those negotiations and bring Tunisia into the European regulatory family,” said the Commission official. ACI Europe director general Olivier Jankovec generally shares the EU’s optimism. “EU-Israel negotiations are in the final stage. There is agreement on all issues and, despite fierce

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Israel (concluded) A comprehensive aviation agreement was initialled on July 30, 2012, to gradually open up and integrate markets. All EU airlines will be able to operate direct flights to Israel from anywhere in the EU and Israeli carriers will be able to operate flights to airports throughout the EU. By 2018, the market is due to be fully open, with no restrictions on the number of weekly flights between Israel and the EU.

Tunisia (talks planned) With 8.2 million passengers to/from Europe in 2010, Tunisia is the 10th world partner of the EU in terms of traffic. Based on the precedents of Morocco, a CAA deal would be expected to increase traffic by about 15%–20% per year for the first few years following the implementation – an increase of about 1.5 million passengers.

opposition from the Israeli national airline, we do expect signature in June,” he said. He also expects talks with Azerbaijan to complete “within a year”. But with Ukraine, “less progress has been made and we understand that the situation there is rather confused”, he said. “So I would not expect anything from that in the near term.”

New routes But will the CAA’s expansion deliver the desired benefits? Wizz Air, which has recently announced new routes to all three of the CAA’s top candidates – Azerbaijan, Israel and Ukraine – sees clear gains from rolling out EU regulation, said corporate communications manager Daniel de Carvalho. “Liberalisation has been an important driver of LCC growth,” he said.

In Israel, determined opposition to liberalisation from El Al, Arkia and Israir also attests to the genuine impact of a EU common aviation area deal. While Israel’s exceptional security costs and risks might be expected to be a deterrence for low-cost carriers, this hasn’t been the case for easyJet, which now operates there from the UK and Switzerland. The EU can also point to gains from earlier deals. An agreement with Morocco in 2006 is credited with bringing an economic benefit of €3.5 billion in 2006–2011. In 2007, traffic rose by about 22% to 8 million, more than 50 routes opened and 12 new carriers entered the market. A Western Balkans agreement covering Albania, Bosnia and Herzegovina, Croatia, Montenegro, Serbia and Kosovo is estimated to have brought economic benefits to the region of €2.4 billion.

Bilaterals three pillars of eu policy Since 1992, when the European Union (EU) opened its own internal aviation market, the bloc has pushed steadily to assert itself in external bilateral discussions. The switch in focus to external routes followed the pivotal Open Skies judgment in 2002, when the European Court of Justice ruled that bilateral agreements between the US and eight member states infringed the core EU principle of freedom of establishment, meaning any agreement between one EU state and a third party must apply across the EU. In 2003, the European Commission was granted three separate mandates to liberalise relations with external aviation markets. Through ‘horizontal agreements’, the Commission has set out to restore legal certainty to existing bilateral deals between external markets and individual

The Middle East But for many European carriers, the key external markets could be Qatar and the UAE. But both lie outside the CAA’s neighbourhood, which includes other Arab states such as Egypt, Lebanon, Tunisia and Morocco. In the face of the fierce competitive challenge from Etihad, Emirates and Qatar, can Europe open up the European market to them? For Jankovec, liberalising connections with Qatar and the UAE is an “evolving issue”, but he thinks there needs to remain a balance. One answer is partnerships, and several Gulf-based airlines are already

EU countries. So far, it has amended nearly 1,000 bilateral air service agreements with 117 non-EU countries, covering 75% of all extra-EU passenger traffic. Secondly, the Commission was tasked with rolling out the EU’s Common Aviation Area (CAA) through comprehensive agreements with the bloc’s neighbours to its south and east. Under an established template, the Commission aims to harmonise legislation before rolling out ‘fifth freedom’ rights. So far, the western Balkans, Morocco, Georgia, Jordan and Moldova have signed up. The Commission’s third ‘pillar’ is to negotiate individual tailored agreements with key partners. The EU’s team has a mandate to negotiate with Australia and New Zealand and has already set up deals with the US, Canada and Brazil.

opening up to collaboration, such as in the tie-up between Qantas and Emirates or Etihad’s equity partnerships in Aer Lingus and airberlin, he added. “There must be a way to ensure balance and therefore also benefits for European airlines through establishing new aviation agreements with those countries,” he says. “EU-level negotiations would be preferable – that would be the best way to increase leverage in negotiations with those countries.” For its part, the European Commission supports negotiation with Qatar and the UAE. A recent report it commissioned picked out these nations

among a list of key emerging markets where comprehensive air transport agreements could deliver €12 billion of economic gains. For now, the Commission describes the relationship between Gulf States and the EU as a “one-way process”, opening EU markets without any gains in fair competition. But the Commission must continue to make its case to the European Transport Council. While the Council welcomed most of the Commission’s recent requests, it merely “acknowledges” its intention to engage in a dialogue with pivotal Gulf nations.

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Being social

Routes News takes a look at the latest innovative ways airlines and airports are using social media.

Airport_FRA Nonstop to China? #AirChina to start nonstop #Frankfurt/Chengdu service on May 19, 3x weekly. http://bit.ly/YDwAU8

Philippine Airlines@flyPAL 8 Mar PAL launches new routes to Australia, China, Middle East http://j.mp/ZhTKjy #PALnews #AtHomeWithPAL

@BostonLogan Have you heard the news? JetBlue Airways will begin nonstop service from HOU to BOS this July. Plus, Alaska... http://fb.me/2AzzTvJEV

News Abu Dhabi boosts social media presence Abu Dhabi Airports Company (ADAC) has established a profile on LinkedIn and launched a Twitter account. The company says its Twitter feed – @AUH – will primarily be consumer focused, offering passengers updates on competitions and tips on what to visit in Abu Dhabi. Its LinkedIn profile aims to provide the public

with detailed information about ADAC and its subsidiaries, communicate with employees and engage in discussions about the aviation industry. ADAC already runs a blog targeting airlines which provides an update on the latest passenger and market trends at its hub.

@AmericanAir 1 Apr Today, we begin flying from @dfwairport to #Lima, complementing existing service from Miami. http://bit.ly/DFWLIM pic.twitter.com/n5u4HAfvgC

Airports to be offered social media masterclass Airports Council International (ACI) is proud to announce its collaboration with SimpliFlying to provide social marketing training to ACI’s airport members worldwide. Aviation consultancy SimpliFlying is to provide masterclasses for ACI members to help them to use social media. The three- and five-day courses titled Airport Marketing 2.0 will offer over 50 real-world digital marketing case studies, provide advice on using more than 10 social media tools and will give attendees “training in the development of strategic roadmaps

and key performance indicators for the aeronautical and non-aeronautical sides of the airport business,” according to SimpliFlying. “Digital marketing and engagement is critical to the success of any airport in the 21st century. SimpliFlying is an internationally acclaimed leader in this field and ACI is pleased to collaborate with them to further promote excellence in this area among ACI airport members worldwide,” said ACI’s assistant director of global training, Kevin Caron.

@mandalaair 12h Jakarta-Bali (starts on April 8th) dan....... JakartaSingapore (operated by us, from CGK T3)! WOHOO!! #MandalaAnniversaryMonth

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Social media media, especially internet based media, which trawl through Twitter and Facebook in search of interesting stories. How often do you tweet and how often do you post on Facebook? We generally add new content every day, both on Facebook and Twitter. We try to keep it to three posts a day on Facebook so as not to be seen as spammers. Of course, we are in constant dialogue with the online community and try to answer any questions on an ongoing basis, even the hard ones.

ONLINE WITH:

Warsaw Chopin’s social media specialist, Sylwester Puczen, speaks to Routes News about the airport’s approach to Facebook and Twitter. When did Warsaw Chopin first embrace social media? Our relationship with social media began in June 2010, when we launched our Facebook and YouTube pages. What is Chopin Airport’s social media strategy? At first, our strategy was to use social media to communicate directly with passengers. Now that has changed and we recognise the importance of other groups, such as the local community, aviation enthusiasts and journalists. How did you use social media as part of your communications during the UEFA European Football Championships? Social media proved an important communication tool during Euro 2012. We used it to inform fans and passengers about what was going on at the airport and present the most interesting moments during the tournament. Our posts on Facebook and Twitter were also popular with the journalists who covered the event.

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Do you think social media can foster brand loyalty? Open, frank dialogue with passengers can boost their positive attitude and loyalty towards the brand. In our case, it’s hard to talk about the latter, since passengers take into account not only the quality of services offered by the airport, but also the availability of a particular destination. We’ve noticed, however, that the image of the airport, as well as the city and the entire region it is located in, can affect an airline’s decision on whether or not to operate to such airport. So, in this sense, social media can play an important, imageboosting role. What are the pitfalls of using social media? Having a page on a social media site is not without its risks. A social media presence which hasn’t been thought through properly, or failure to respond to problems reported by passengers, can trigger crisis situations. What are the advantages to an airport of having an active social media presence? We are in direct touch with our stakeholders: passengers, aviation enthusiasts and the local residents. We can communicate better. It also improves our communication with the

Can social media play a role in route development? Are people polled as to which destinations they would like to fly to? People post about their dream destinations all the time. We find it hard to tell, however, if airlines take these into consideration when deciding if they should launch a new service to Warsaw. Does Warsaw Chopin blog? Yes, we have a dedicated blog run by airport spokesman Przemysław Przybylski. In a casual manner, he writes about what’s going on at the airport and various aspects of its day-to-day operation. What advice would you give to an airport that was thinking of launching a social media presence? First of all, it needs to ask itself if it wants to use social media as an important communication tool or just a gadget. If the latter is true – and we are seeing more and more of this recently – I would recommend against it. If, however, the airport decides to have a social media presence, it should define a strategy and patiently build its relations with the online community.

GET INVOLVED! Do you want the global route development community to hear what you have to say? Let us know at: oliver.clark@routes-news.com

routes ASIA report back

! i d a a m l l Chi

Routes Asia in Mumbai proved a major success with record attendance and more than 3,000 meetings taking place over three days.

there were plenty of chances for airports to meet their target airlines and have in-depth conversations about new route development opportunities. Event host Chhatrapati Shivaji International Airport CEO Rajeev Jain was joined by Dr GVK Reddy and GV Sanjay Reddy to put on what many agreed was an impressive show which proved an excellent chance to showcase the Mumbai airport’s upcoming T2 Terminal. Delegates were treated to a spectacular dinner hosted by GV Sanjay Reddy and Rajeev Jain. Delegates enjoyed a night of Indian folk dancing, food and a display of sand painting.

ore than 700 delegates gathered in Mumbai, India, in late March for the 11th and biggest Routes Asia event to date. Almost 90 airlines and 257 airports and numerous tourism boards from across the Asia-Pacific region and beyond attended the event, with big names such as Air India, Jet Airways, GoAir and IndiGo lining up senior delegations. With 3,000 pre-arranged and same-day meetings during the event

Record attendance.

Bollywood International singer and ge. sta on ry oud star Sophie Ch

w w w. ro ut es -n ew s. co

But the big highlight was international singer and Bollywood star Sophie Choudry, who wowed delegates with her brand of Indian pop music. A lucky few joined her on stage to show off their dance moves before the rest of the crowd were drawn onto the dance floor by some thumping dance beats. At the earlier Sunday reception hosted by GVK Bengaluru International Airport, the theme of the party was the Bangalore dialect phrase “Chill Maadi” roughly translates as “chill out”. With so many meetings packed into three days it is hard to imagine when delegates had a chance to do so!

routes ASIA strategy summit

Land of dreams The huge potential of India’s aviation market for growth was just one of the themes explored at this year’s Routes Asia Strategy Summit.

ditya Ghosh revealed his dreams for the future of aviation in India at this year’s Routes Asia event in Mumbai. “My dream is that, over the next decade, we will see over a thousand planes, from more than just one profitable airline, carrying hundreds of millions of passengers across scores of cities and towns in India through modern, efficient and cost-effective airports at fares that are affordable to one and all,” he told delegates at the Routes Strategy Summit. But, to achieve that dream, India needs to overcome serious challenges, admitted Ghosh, including reducing aviation taxes and costs, reforming its air traffic management and regulatory frameworks and building dedicated low-cost airport facilities. “The key growth driver for the Indian aviation has been – and will be in future – the need for high quality low fare travel. The economy and the Indian aviation industry both have a symbiotic relationship. Therefore, if India has to grow by 8%-10%, then the aviation market has to grow at just double that rate. There is a long runway ahead of all of us!” It was a theme echoed by Mumbai Airport CEO Rajeev Jain, who said Mumbai itself offered huge opportunities, and was a “city of hope and despair, of money and of power and above all it’s a city of dreams”.

Mumbai is on a strong growth trajectory and could be expected to surpass North America and Europe for GDP growth by 2030, he said. He said the entry of new low-cost carrier AirAsia India into the market would spur competition in a historically underserved market. Deepak Brara, commercial director of Air India, revealed that the carrier, which is still in the throws of a restructuring programme, was planning to grow this year with new routes to Melbourne, Washington, Milan and Birmingham. “We have 20 Boeing 787s on order and we expect to fly them in the next couple of months; we are looking at expanding our network and looking at flights to Australia, Italy, a secondary market in the UK and the US,” he said. “We are not focusing on sixth freedoms in the next few years but on regaining market share,” he added. SpiceJet might be known as a low-cost carrier, but with the high costs of operating in India it is anything but, the airline’s CEO, Neil Mills, told delegates. Mills also revealed that an interesting trend he is seeing in India which could benefit LCCs is increasing numbers of passengers self-connecting on to domestic and international flights. As airline consolidation continues apace, how do airlines work as a group to maximise their revenues and streamline their operations?

One airline that has had to deal with these challenges is Etihad, which has stakes in airberlin, Aer Lingus and Virgin Australia, among others, and John Shepley, SVP network management, explained how the partnership with its sister airlines works. “What’s happened just recently is airberlin have announced the strengthening of their Berlin and Düsseldorf hubs whilst also slightly strengthening hub operations at Abu Dhabi,” he said.

A who’s who of Indian aviation The strategy summit followed an official inauguration ceremony which proved to be a who’s who of Indian aviation, featuring India’s Civil Aviation Minister Ajit Singh, V P Agrawal, chairman of the Aviation Authority of India, and Anil Srivastava, Joint Secretary of the Ministry of Civil Aviation. Speaking to journalists at a press conference, Ajit Singh said that various policy measures initiated by the government in the civil aviation sector have begun to yield results, with the change in the law allowing up to 49% investment of Indian airlines to be owned by foreign companies as being “the single most important policy decision” in enhancing the troubled local industry.

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Sarawak

– an upcoming on ti a n ti s e d m s ri u to

Routes Asia will return to Malaysia next year when it moves to Kuching, the capital of Sarawak, a destination which the province’s tourism minister believes is on the cusp of growth.

peaking on the sidelines of the official handover from Mumbai to Sarawak, Datuk Amar Abdul Rahman Zohari, said the province’s abundant natural wildlife and cultural diversity, combined with its closeness to China and India, made it an attractive emerging tourism market for airlines. “This is going to be a new emerging market within ASEAN as well as being driven by major economies of India and China and we are located in-between them and therefore this strategic partnership between Routes Asia and MAB and other players will enhance the tourism and aviation industry,” he said at Routes Asia. Building on the success of this year’s Asian Routes, which achieved record attendance, the largest route development forum for the entire Asia region will take place on March 9–11, 2014 in Kuching, Sarawak, Malaysia, hosted by the ministry of tourism Sarawak and co-hosted by Malaysia Airports Holdings Berhad.

Sarawak already has a developed aviation market, with two of its airports Kuching and Miri ranked Malaysia’s fourth and fifth busiest gateways, respectively. The province contains large tracts of rainforest and endangered species and is a favoured destination for backpackers and ecotourism.

“this strategic partnership between Routes Asia and MAB and other players will enhance the tourism and aviation industry”

The province has been stepping up its marketing acitivies in recent months, including hiring explorer and TV star Ben Fogle to star in a number of promotional videos. Sarawak has been experiencing a growing influx of tourists in recent years,

with 3.8 million visitors in 2011 and more than 4 million tourists in 2012 visiting the country’s 1.5 million hectares of national parks. Sarawak is also a popular destination for growing numbers of cruise liners. Routes Asia is expected to spark interest in the destination from international carriers, said Mohammed Sallauddin Mat Sah, general manager marketing for Malaysia Holdings Berhad. “It [Routes Asia 2014] will encourage more airlines to seriously assess the market and the city and when we had some discussions with the Sarawak government on how we could jointly develop the city to bring in more tourists and arrivals and more airline arrivals we saw the strategy fit of getting Routes Asia back to Malaysia after slightly more than 10 years away from Malaysia to Kuching,” he said.

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routes airport marketing awards

Changi

wows judges

Changi Airport Group celebrated winning the overall Routes Airport Marketing Award for the Asia-Pacific region during Routes Asia in Mumbai.

he fast-growing hub also won the over 20 million category and will now be automatically entered into this year’s World Routes Airport Marketing Awards taking place in Las Vegas later this year. Judges decided Changi had demonstrated a detailed approach to its route development activities and were impressed by the hub’s efforts to introduce new initiatives into the market. “It has been a great year for Changi Airport Group. To be recognised by our airline partners [with this award] for the hard work our teams have put in to secure new air services is a great endorsement of our achievements,” said Toh Ern Chong, manager airline development for Changi Airport Group, after collecting the award during the networking evening. Innovations in this year’s marketing awards included the introduction of two categories according to airports’ passenger traffic and a new tourism category, which was won by Tourism Australia. This was also the first time that airlines could cast their vote online.

w w w. ro ut es -n ew s. co

Over 20 million passengers Winner: Changi Airport Group Highly commended: Delhi International Airport Ltd Chengdu Shuangliu International Airport Shortlisted: Beijing International Airport Soekarno-Hatta International Airport

Under 20 million passengers Winner: Clark International Airport Highly commended: Auckland Airport Shortlisted: Bengaluru International Airport Hyderabad Rajiv Gandhi International Airport Juanda International Airport Kansai International Airport Siem Reap International Airport

Destination marketing award Winner: Tourism Australia Highly commended: Philippine Department of Tourism Shortlisted: Okinawa Convention and Visitors Bureau Singapore Tourism Board Tourism New Zealand

eventsupdate

Routes CIS to take place in Donetsk, Ukraine

t was recently announced that the 3rd Routes CIS will take place on July 21-23 of this year in Donetsk, Ukraine, and will be hosted by Donetsk Sergey Prokofiev International Airport. The event is the only route development forum for the entire CIS region and the 2013 event is expected to attract around 250 delegates. Kirill Osypov, CEO of Donetsk Sergey Prokofiev International Airport, emphasises that his team is ready to do their best to organise the event to the highest level: “We appreciate that the organisers of Routes CIS have expressed confidence in our team and to become the host of such a high-level aviation event is a big honour for us. “Widening the reach of our air transportation is one of the main priorities not only for our airport development strategy, but also for regional and government politics for the modernisation of the aviation industry. Thus, on behalf of International Airport Donetsk, I guarantee that forum participants will have the most comfortable conditions for productive professional discussions. Besides which, we will prepare an amazing sightseeing tour for the Routes CIS 2013 guests that allows them in a short time to see all of the tourist attractions in the Donbas region.”

With a population of over one million inhabitants, Donetsk is one of the largest cities in Ukraine and is the administrative centre for the Donbas region, which has a population of over 4 million people which makes up 10% of the overall population of the country. The Donetsk region is also the country’s largest industrial centre, incorporating metal, coal and chemical industries as well as heavy machinery. Donetsk was also one of the host cities for the European Football Championship 2012. In accordance with the plan for Euro 2012 a new airport terminal and runway was constructed in 2011. This new runway is able to land all kinds of aircraft without exception and the terminal has a capacity of 3,100 passengers per hour. The airport is now able to serve up to 5 million passengers per year, making it the second busiest airport in Ukraine. Located 7km away from the city centre, Donetsk Airport has a catchment area of 6.5 million potential passengers and flies to 29 international and domestic destinations. Routes CIS will offer the region’s airlines and airports, as well as those from outside the region with an interest in increasing air connections to the CIS countries, the perfect platform to do business and improve air transport networks.

www.routes-news.com

Events update

Interline and codeshare meetings upcoming events at World Routes 2013 World Routes, is the largest and most important event for the commercial aviation industry where the future of the sector is shaped, the event revolves around targeted, pre-scheduled, Face-to-Face Meetings. Now in its 19th year, it is where decision makers from the world’s airlines, airports and tourism authorities gather annually to plan air services and discuss strategies for the global aviation industry. World Routes 2013 also brings together airline planners in order to discuss interline, alliance and partnership opportunities with airlines from across the globe. With over 300 airlines and 650 planners, World Routes offers the only platform for airline

planners to meet other airline planners on a global basis. Following on from its debut at World Routes in Abu Dhabi, the pre-arranged Face-to-Face meetings between carriers will take place on Sunday, 6 October, 2013 and include: airline to airline meetings; the opportunity for carriers to meet and discuss current and prospective SPA, interline and codeshare opportunities. Additional to this, the world’s three major global alliances, oneworld, SkyTeam and Star Alliance will be present at World Routes offering aligned and non-aligned airlines the opportunity for meetings with Senior Management from the respective alliances.

Routes Europe returns to France in 2014 Routes Europe is the region’s largest route development forum and the only event which allows delegates access to the most senior airline and airport decision-makers from all across Europe and in 2014 the event will be hosted by Marseille Provence Airport. The event will take place on April 6-8, 2014 in the beautiful city of Marseille which has also been appointed European Capital of Culture 2013. Marseille Provence was founded over 2,600 years ago and, with a population of over 1 million inhabitants, is the regional capital of southern France. Combining Mediterranean mildness with Provence’s quality of life, the area attracts some 9 million tourists every year.

www.routesonline.com

World Routes October 5–8, 2013 Las Vegas, USA The global meeting place for every airline and airport

Routes Africa July 7–9, 2013 Kampala, Uganda Routes CIS July 21–23, 2013 Donetsk, Ukraine

Routes Americas February 23–25, 2014 El Salvador

Routes Asia March 9–11, 2014 Kuching, Sarawak, Malaysia Routes Europe April 6-8, 2014 Marseille, France

nes European Regional Airli Routes News speaks to a. neral, Simon McNamar Association director ge

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Biography rsity, A graduate of City Unive ra also London, Simon McNama field holds an MSc from Cran University. 99, Prior to joining ERA in 19 at the s McNamara held position d the Flight Data Company an of Air International Federation . Deputy Line Pilots’ Associations m fro director general of ERA me 1999 to 2013, he beca ry director general in Janua this year. the The association promotes n interests of intra-Europea ropean Eu the airlines by lobbying ropean Commission and other Eu licy regulatory bodies on po social matters, promoting the e of and economic importanc air transport and its ents. environmental commitm

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development. We, as an industry, need to be equally proactive at promoting our business to governments and the wider community. Aviation still has a problem of how it is perceived and that needs to be overcome.

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Which European regions still have poor air connectivity and what can be done? Europe’s regions are very well connected. However, if some of the challenges that the aviation sector faces are not addressed, such as the lack of hub airport capacity or ways of supporting Europe’s peripheral regions, there is a real risk that routes will be lost and connectivity will reduce. Airlines cannot continue to run loss-making routes in the current climate and there is a risk of loss of services if regional links are not supported or promoted. Has demand for regional air travel returned in Europe? The outlook in Europe is very uncertain at the moment. A return to growth would be very welcome, but a lot of the stimulus for growth will come from national economic policy. It is hard to predict

developments over the coming year and many operators are working and adapting their businesses to meet the on-going economic climate. What will the impact be of the arrival of next generation aircraft, such as the C Series, on European regional airlines? All new aircraft types bring benefits, both to operators, consumers and the environment. The development of new types also shows that our business is still investing in the future and looking at how it can move forward. Whichever way you look at it, it’s a good news story. Do you think enough is being done by governments and airports to support their national regional airlines? No, governments can do much more by recognising what aviation contributes to Europe in terms of connectivity and economic

ERA has previously published evidence that regional carriers are being squeezed out of congested European hub airports as slots become more expensive. How can this trend be reversed? The simple answer is to deliver more hub capacity, but that is also the most difficult solution in the short-term. Nonetheless, there is no doubt that Europe needs additional hub capacity in the future. In the short-term, the best solution is to ensure that the EU slot allocation system remains non-discriminatory and allows all operators, regardless of size, to retain and operate the existing slots they operate. Where in Europe are most new regional airlines being launched and why? There are no specific markets or regions where there is particularly strong growth or where new start-ups are being formed. But there are some new operators in the market, which shows that, despite the economic challenges, there are still innovators and entrepreneurs who are willing to invest and take the business forward. Is fuel price as big a challenge for regional carriers as it is for the big commercial airlines? The fluctuating cost of fuel remains a major challenge. In recent months, the cost has risen to record levels – a big problem for all operators.