Huge potential for growth in ‘New Europe’ as LCCs take on national carriers

Image: Lead Graphic

The expansion of the EU in 2004 and then again in 2007 has resulted in the admission of nine new member states from what used to be considered Eastern Europe. One of the conditions of membership is the deregulation of the air transport markets and this has resulted in significant growth for many airports in the last few years.

Traffic at the region’s three biggest airports (Budapest, Prague and Warsaw) has virtually doubled between 2000 and 2006 with Prague maintaining a healthy lead over its nearest rivals.

Chart: New EU Member States Airport Growth
Source: ICAO

Passenger numbers at the capital city airports of the remaining six new members has typically more than doubled. Bratislava’s rapid growth from a low-base is explained by the fact that after Czechoslovakia split into two separate states the national flag carrier, CSA, remained at Prague in the Czech Republic. The vacuum in Slovakia was filled by the emergence of SkyEurope, an LCC which in effect became the new flag-carrier for the country.

Chart: New EU Member States
Source: ICAO

Riga has also performed above average with traffic trebling between 2003 and 2006.

Poland’s traffic could increase fivefold

An analysis of the total traffic passing through the airports of each country in 2006 and the population provides a measure of propensity to travel in each country. This reveals that six of the nine countries have yet to generate the equivalent of one air passenger journey per head of population and none have achieved a ratio of more than 1.2.

This is, of course, not a true measure of propensity to travel by people in each country as it includes passengers originating in other countries. Hence a high value can reflect an ability to generate significant amounts of inbound tourism.

Country Name Capital City Country Population Traffic at all airports 2006 Passengers per head
Poland Warsaw 38.2 m 14.72 m 0.39
Romania Bucharest 21.6 m 5.43 m 0.25
Czech Republic Prague 10.3 m 11.58 m 1.12
Hungary Budapest 10.1 m 8.25 m 0.82
Bulgaria Sofia 7.7 m 5.51 m 0.72
Slovakia Bratislava 5.4 m 1.94 m 0.36
Lithuania Vilnius 3.4 m 1.81 m 0.53
Latvia Riga 2.3 m 2.49 m 1.08
Estonia Tallinn 1.3 m 1.53 m 1.18
Germany Berlin 82.4 m 177 m 2.15
France Paris 62.9 m 138 m 2.19
UK London 60.4 m 237 m 3.92
Italy Rome 58.8 m 123 m 2.09
Spain Madrid 43.8 m 193 m 4.41
Source: Economist, ICAO, Airport websites

This can be seen when we calculate similar figures for the biggest five EU countries. While Germany, France and Italy all have ratios of around 2.1 to 2.2 the UK manages an impressive 3.92. This is probably less to do with tourism and more to do with being an island on the periphery of mainland Europe and also that London Heathrow is a successful transfer hub. The most revealing figure is that for Spain which scores 4.41. This reflects the country’s appeal as a major tourist destination especially from the UK and Germany where visitors typically arrive by air. France is also a popular tourist destination but many more people get there by car.

If Poland were to get anywhere near a ratio of two it would mean that traffic at Poland’s airports would need to increase fivefold from around 15 million passengers to 75 million passengers.

National carriers under growing pressure from LCCs

An analysis of scheduled capacity at each of the nine capital city airports reveals the extent to which flag carriers are still the leading airlines and the impact of low-cost carriers.

Main Airport #1 Airline #2 Airline #3 Airline % LCC share
Bucharest Otopeni Tarom 38.6% Lufthansa 10.5% Alitalia 7.8% 0.9%
Budapest Malev 43.5% Lufthansa 8.4% Wizz Air 6.8% 24.7%
Bratislava SkyEurope 44.5% Ryanair 35.1% Air Slovakia 9.5% 79.6%
Prague CSA 48.0% easyJet 7.2% Lufthansa 5.8% 24.0%
Riga Air Baltic 52.3% Ryanair 22.9% KLM 3.2% 29.1%
Sofia Bulgaria Air 33.7% Lufthansa 10.2% Austrian 7.2% 10.5%
Tallinn Estonia Air 46.5% Finnair 10.8% easyJet 8.5% 10.8%
Vilnius Air Baltic 45.3% FlyLal 26.0% CSA 6.4% 5.0%
Warsaw LOT 48.7% Wizz Air 9.4% Norwegian 5.0% 26.0%
Source: OAG Max Online for w/c 22 October 2007

Most national flag carriers are still holding around 40% to 50% of the market at their home airport though curiously it is the two newest EU members, Romania and Bulgaria, where the national airline has fallen below 40%. In Romania this is even more concerning as the secondary airport at Baneasa has become a base for various LCCs such as Blue Air and MyAir. Air Baltic is a Latvian carrier (with SAS holding a near 50% share) but also manages to be the biggest carrier in neighbouring Lithuania.

Among non-LCCs Lufthansa is the second largest carrier in Bulgaria, Romania and Hungary.

Penetration by LCCs is still less than 30% at all capital airports except Slovakia where the defacto flag carrier is SkyEurope, an LCC. At non capital city airports in these countries such as Krakow, Katowice, Kaunas and Bucharest Baneasa LCCs have already become the dominant force.


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