Ryanair, easyJet and Germanwings, which carried 128 million passengers throughout the world last year, have barely reached 340,000 passengers on the local market, less than 0.3% of the total traffic. On the other hand, Romanian airline Blue Air and Hungarian-owned Wizz Air each carried 1.7 million passengers, and both companies operate from several airports throughout the country.
“Airlines are a business like any other, they react to market conditions and decide to allocate operating capacity to areas (regions or countries) with potential. Under the circumstances, the opening of new destinations or temporarily dropping others is a normal and necessary move,” explained Alexandru Dobrescu, country manager of Air France KLM in Romania.
easyJet announced it would leave Romania next January after operating flights to Milan and Madrid from the Otopeni Airport in Bucharest for over four years.
Peter Voets, easyJet’s marketing manager for Switzerland, Austria and Eastern Europe, says profitability of the routes operated from Romania was not as high as expected because of the high operational costs. He added that profitability would have been better had operational costs been lower. “Fees on the Otopeni Airport are very high.”
Passenger tax on the Otopeni Airport is EUR22, and landing tax is EUR8 per ton, while on Baneasa charges EUR17 and EUR6, according to the latest data available. In comparison, the passenger tax on the Bajas low-cost airport in Madrid is EUR8.
Peter Voets says his company discussed with the Baneasa Airport when preparing for its entrance in Romania back in 2007, but the airport did not meet its security requirements and there was not enough transparency from its management.
easyJet operated seven flights to Madrid and five to Milan a week and carried 200,000 passengers in 2009. It never revealed any figures about its business, but according to ZF estimates, easyJet’s revenues amounted to EUR30 million, at an average revenue per passenger of EUR150.
The presence and extent of competition are something any airline looks at when having to decide whether to start operating a certain destination, experts in the industry say.
The largest airlines on the low-cost market are Hungarian Wizz Air and Blue Air, controlled by Nelu Iordache, each with 1.7 million passengers. These companies have pursued aggressive development since entering the market in 2005 or 2006, betting on destinations like Italy and Spain, where most Romanians work. However, there has been some controversy about the fact that two of the airports where Wizz Air operates, Timisoara and Cluj, were favoring the Hungarian operator by charging it preferential fees.
It is not only the extent of competition that is taken into account but also the volume and quality of demand on the target market, as well as the market share potential, Dobrescu says. A little more than 9 million passengers were carried from all airports throughout the country, most by Wizz Air, Blue Air and state-owned Tarom.
“Last but not least, the operating expenses are considered in comparison with the revenue derived,” Dobrescu said.
This is what Ryanair, the largest low-cost airline in Europe, did, when it decided to operate only from the Constanta airport on the Romanian market. The company carried only 58,165 passengers on the local market last year. Ryanair’s traffic on this market was merely 3% of Wizz Air’s last year.
However, Ryanair carried almost 70 million passengers on 960 routes last year on the other markets it operates on.
The largest low-cost airline in Europe continues to have a marginal presence in Romania, operating only flights to Pisa and Bologna from Constanta. The company started offering flights to Milan in March, but from the Constanta airport again.
“Before it entered the local market via the Constanta airport, Ryanair requested information about the fees charged by Baneasa and Otopeni, but chose not to operate on these airports,” said Valentin Iordache, quality manager of the two airports in Bucharest. He said that the two airports could not negotiate before; they had no margin to negotiate with but could now do so.
When entering Romania in 2008, Ryanair also introduced a flight to Bergamo from Arad, besides the flights to Pisa from Constanta. A few days later, the company stopped offering that flight because of a failure to reach an agreement on the fees. At the same time, Ryanair was expanding its operations to Poland and Ukraine.
Low-cost airline Germanwings, too, operates only from one airport and only a few routes. The company has four weekly flights from Cologne to Bucharest and three to Stuttgart and Berlin. Germanwings carries 50,000 to 80,000 passengers on the Romanian market. Its financial results were not revealed. Germanwings carried 8 million passengers on all its routes and posted EUR630 million revenue last year. The low-cost unit of Lufthansa entered Romania in 2007.
(English version by Loredana Fratila-Cristescu)