Budapest’s new owners lose SkyEurope but welcome Ryanair

Image: Budapest Ferihegy change ownership

These are interesting times for Hungarian aviation. The country’s main airport Budapest Ferihegy (BUD) changed its ownership (again) in June when Hochtief of Germany took over management control of the airport from the UK’s BAA, whose new Spanish owners decided to terminate their 18-month involvement in the airport.

As if that was not exciting enough Malev, the consistently unprofitable national airline was sold in February 2007 to AirBridge, a Russian airline consortium (also known as AiRUnion) which operates five other airlines (KrasAir, Domodedovo Airlines, Omskavia, Samara Airlines and Sibaviatrans). On 1 April the newly-privatised airline became a member of the oneworld alliance.

Traffic surge on joining EU

Hungary joined the EU in May 2004 and as a consequence the aviation market was liberalised allowing a range of new (mostly low-cost) airlines to break into the Hungarian market.

Chart: Budapest airport traffic 1997-2006
Source: Budapest Airport, ICAO

As a result passenger numbers grew by 29% in 2004 and 25% in 2005 before stabilising in 2006 with more modest 3% growth. Since Hochtief took over management duties from BAA the airport appears to have stopped publishing monthly traffic statistics. However, in the first six months of 2007 growth averaged a modest 2.5%.

Budapest demand is seasonal

Malev’s share of Budapest’s traffic fell from around 50% in 2002 to just 35% in 2005 despite its own traffic growing by 25% during that time. However, its market share has now stabilised and analysis of its monthly traffic figures reveals the consistently seasonal nature of demand to/from Budapest. The peak to off-peak ratio (August to February) has been around 2.2 for each of the last three years.

Chart: Malev traffic seasonality
Source: AEA

While Malev remains the leading carrier in Budapest it is facing intense competition from some of Europe’s most dynamic LCCs. This winter’s schedule data reveals that LCCs have around a 31% share of capacity which probably equates to a 35% share of passengers due to higher load factors. The leading airlines in Budapest this winter are:

Airline Frequency Share Capacity Share Number of Routes
Malev 48.3% 41.1% 48
Lufthansa 10.2% 8.6% 4
Wizz Air 4.6% 7.7% 10
easyJet 4.1% 5.9% 5
Ryanair 3.1% 5.4% 7
Source: OAG Max Online for w/c 10 December 2007

Other LCCs operating at the airport include Germanwings, Aer Lingus, Air Berlin, jet2.com, Norwegian, Click Air and Sterling. At the end of the summer season SkyEurope withdrew all services from the airport having set up its first foreign base at Budapest in November 2003. During its four years at the airport the Bratislava-based LCC had operated to 24 destinations but complained that demand was too seasonal to make operations profitable.

Ryanair only started serving Budapest at the start of the current winter season but already operates to seven of its bases across Europe – Bremen, Bristol, Dublin, East Midlands, Frankfurt Hahn, Glasgow Prestwick and Liverpool. The Bristol route was previously operated by easyJet.

Logo: Wizzair.comDespite having its HQ close to Budapest airport Wizz Air operates just 10 routes from the airport this winter with only one route (London Luton) served more than five times per week. During the summer the number of destinations doubles as a range of low-frequency summer sun routes such as Heraklion, Palma, Rhodes and Varna are added. With Ryanair adding services to Frankfurt Hahn Wizz Air has pulled off that route but has reinstated services to Milan Bergamo (another Ryanair base) which had been served by SkyEurope before they exited the market.

Malev planning SSJ100 acquisition?

Logo: Malev Hungarian AirlinesMalev’s existing fleet of 30 aircraft consists of 18 737s, three 767s, five Fokker 70s and four CRJ200s. A recently signed co-operation agreement between Malev, AiRUnion, Sukhoi and a major Russian bank suggests that the airline may replace its smaller jets with the new Sukhoi SSJ100. Malev’s network has seen little development this year though it did start a new route to Ekaterinburg in Russia.To help improve its financial position the airline is axing its transatlantic services to New York and Toronto from mid-November to the end of March and leasing out the B767s that operate these routes. The new Russian owners are determined to ensure that the airline returns to consistent profitability and has installed a number of new senior managers within the airline.

Logo: Budapest Winter InvasionTo help try and reduce the impact of low demand in winter the airline is co-operating with various partners to promote the “Budapest Winter Invasion” where visitors can spend four nights in the city but pay for just three.

Banner: Malev

Germany & UK top destinations

Image: Malev has seen plenty of management changes in recent months but Father Christmas has yet to be appointed as Cargo Manager.
Malev has seen plenty of management changes in recent months but Father Christmas has yet to be appointed as Cargo Manager.

This winter Germany and the UK are the leading country markets to/from Budapest. Germany with around 20% of all flights is served by Lufthansa, Malev, easyJet, Ryanair and Air Berlin. A total of 12 German airports are connected to Budapest with direct services this winter.

The UK market accounts for around 10% of flights, 13% of capacity and an estimated 15% of passengers. Flights to eight different UK airports are provided by a mix of British Airways, Malev, easyJet, jet2.com, Ryanair and Wizz Air. easyJet faces direct competition on both its routes to London Gatwick (from Malev) and London Luton (from Wizz Air). Surprisingly, Europe’s busiest LCC airport at London Stansted is not currently served.

The UK market trebled in size from 375,000 in 2003 to 1.12 million in just two years but since December 2005 a year-on-year comparison of monthly traffic has shown a steady decline. In 2006 traffic was down 12% to 982,000 and this year passenger numbers are down a further 14%. However, the new Ryanair routes to Bristol, East Midlands, Glasgow and Liverpool should see that trend reversed.

While Malev may have withdrawn transatlantic services for this winter Delta still operates four times weekly to New York JFK. Malev is still flying thrice-weekly to Bangkok and Hainan Airlines provides twice-weekly services to Beijing.

New Skycourt coming soon

The airport’s new operator announced this autumn plans to invest €261 million in providing more capacity and upgrading facilities at the airport. The nine-month refurbishment of the 1950 built Terminal 1 was completed in January 2005 and is now used mostly by low-cost carriers.

A new ‘SkyCourt’ terminal building is planned to connect terminals 2A and 2B. This will double the existing retail space at the airport and improve passenger flows through a centralised security area. A further two new piers with 16 airbridges are also planned for Terminal 2.


Comments

Comments are closed