Saturday, 27 November 2010

A tour of Spain's empty airports: Ciudad Real (I)

Life's hard for Spanish regional subsidy, no Ryanair...

Spain has been hard-hit by the current economic crisis. One of the ills of Spain is its oversized construction sector, that flourished at a time when Spain was building more houses in a year than the rest of Western Europe put together, or more kilometers of high speed rail than Japan. And the airport sector was not immune to this fever. A number of airports were built under the assumption that the good years would never end and that ever-growing low-cost airlines would fill their facilities and bring prosperity to their hinterlands.

In a number of posts I will examine the legacy of that the boom years have left at Spain’s airports network, how airports that to this date remain devoid of flights are coping with the effects of the economic crisis, what is their current situation and what are the perspectives for the future.

It must be said that part of the growth was for real. A number of factors explain why it was necessary to invest in better infrastructure: first of all an upgrade was necessary after decades of backwardness compared to the rest of Europe, add to that a booming and increasingly internationalized economy, a growing and more diverse population and a continuing flow of tourists taking advantage of the low cost airline revolution.

But in the midst of this growth some companies and local authorities started devising ambitious plans, some have proven to be too of them is Ciudad Real airport, also called Don Quijote airport(CQM), named after the legendary 17th Century Cervantes' masterpiece,that is set in the region.

The scheme was simple and executed on a grand-scale (investment is thought to have been around €1.1B): to build a brand-new airport next to the high-speed railway line Madrid-Seville and market it as "Madrid-South".

This was the first dubious assumption. Ciudad Real airport is 250km. from Madrid, the main market it was intending to serve. This is a bit far, even for Ryanair standards!

No problem, the airport developers argued, we are next to the high speed train so why not just build a station and get people to complete their journey by train? Ok, some problems with this: are you expecting low cost passengers, that are supposed to account for the major share of traffic, to step off their cheap flights and then pay the not particularly cheap high-speed rail tickets for the hour-long trip to Madrid? (another key factor in such a set-up is train frequencies, that at the time of writing this post remained an enigma, but my guess is that they would be unlikely to reach the sort of frequency that air travellers would expect of a commuter service). It might work for some passengers but I think this would not be very sustainable solution to support the levels of traffic that would make CQM economically viable (the airport has the capacity to handle 10M. passengers a year). If you opt for road transport, the ride can take you nearly two hours, which is more that the flying time to Ciudad Real airport from most European destinations. Take away the Madrid link and there is little economic or tourist activity in this sparsely populated area to support an airport of its own.

You might say that, luckily for Spain’s wretched public coffers, this was a private initiative (the first private airport to open in Spain). But this is just part of the story: one of the airport's main shareholders was the semi-public local savings bank, Caja Castilla-la-Mancha (CCM), that owned 30% of the venture, and that subsequently had to file for bankruptcy and be rescued by the Spanish government. Plus do not expect the local authorities to allow the airport to close down without first trying to keep it alive with generous public subsidies.

Four different airlines have opened routes from Ciudad Real. The first two to try it, Air Berlin and Air Nostrum, have already left. Ryanair departed shortly after, since it could not reach a satisfactory agreement (aka generous enough subsidies) to continue operating. Only Vueling is left, operating a heavily subsidised operation(something AirObserver noted a few weeks ago). I prefer not to think what the cost/passenger is (at some point this year there were 91 full-times employees taking care of the passengers of a single Ryanair thrice-weekly flight, which forced the airport company to dismiss part of the workforce). Prospects to get more traffic look grim.

Is there a future?

It will be very difficult for Ciudad Real airport to achieve, in the foreseeable future, the levels of activity it has been designed for, even if the economy rebounds and the Madrid metro area goes back to previous growth levels. Even more when there is still plenty of capacity left at MAD and plans for a new airport to the South of Madrid are already under way.

Another option that might have more chances of becoming economically viable is to become a cargo airport. Ciudad Real has a central location in the Iberian peninsula, an extra-long runway and plenty of land around it, the sort of space that could facilitate the development of a large scale intermodal logisitcs operation.

But the idea of developing a large logistics hub from scratch remains no less of challenge...! .

Thursday, 25 November 2010

From today I am guest writing at AirObserver

It is an honour for me to have the opportunity to be guest writer at such a high quality blog as AirObserver.

My first post on this site, that focuses on the European low-cost airline industry, is titled "Ryanair holds the upper hand at Catalonia's airports" and on it I explain how the Irish airline has gone on to become an extremely powerful player in the Catalan air market, an issue that has deep consequences in an area where the tourism sector is one of the main drivers of the economy.

You can find a link to the article here.

And my suggestion is that you do not forget to have a look at the rest of AirObserver's articles... it's worth the time!

Sunday, 21 November 2010

My insights from the recent Social Media for Airlines Conference

I recently had the chance to attend some of the sessions of the Social Media for Airlines Conference that took place in London, organised by Simpliflying in association with Airline Business and Flight Global and chaired by Shashank Nigam and Mary Kirby (aka RunwayGirl). I would like to share some of the insights I got from this interesting conference (I know, it was nearly two months ago, but this site's redesign plus some other projects that came up left me little time to write a few lines about it!) where I had the chance to meet other bloggers and social media experts that focus on airlines and air travel, such as Paula Berg, Sven Solterbeck, Sergio Mello and Karlis Smiltens.

The sessions I attended were very illustrative of how social media has made a quick foray in the airline scene (and it is here to stay!) sometimes driven by external events beyond the control of airlines. A case in point was the Icelandic volcanic ash-cloud, that grounded almost all European airlines for a number of days last spring.

This event was a watershed in the social media strategy and use for many airlines and aviation related institutions. It was the dramatic disruption caused by the Icelandic volcano what forced these companies to start using social media channels to engage with their stranded clients.

At the start of the crisis some institutions did not have any proper structure to deal with social media (or to interact with their own clients in such a massive scale) and it was mainly thanks to the effort (and sleepless nights) of a bunch of dedicated professionals, such as Aurelie Valtat at Eurocontrol or Christian Kamhaug, of SAS were not only able to improvise and sustain an active presence in the main online social networks, but to set up the basis of what has become a successful long-term social media strategy...So, at least something positive came out of that episode!

I am really looking forward to the next conference where I am sure that, given the unstoppable growth of online social networks and the increasing number of ways in which airlines are tapping them to engage with their potential customers, lots of interesting new case studies will be presented!

Tuesday, 16 November 2010

Ryanair's cheapest fare? what about being paid to fly?

It is just coincidental, I was not intending to write again about Ryanair's website, but the Irish airline keeps giving me reasons to talk about them...

I just came across what is possible Ryanair's cheapest fare from London to Barcelona (Girona)

In this case looks like a technical issue...but will the day arrive when Ryanair is going to pay us to fly with them? the idea might not be that out of place as it seems, since it was Michael O'Leary himself that more than once has hinted that future business models for airlines might involve giving more seats for freee and destinations paying to get traffic. Although this is not that far off what some local authorities are doing, recent statements from Ryanair's chief point towards the opposite direction. But...never say never, specially when you are talking about Ryanair's pricing policy!

Friday, 12 November 2010

How to monetize an airline website: Advertise your competitors!

You need to have strong confidence in your own product to carry advertisements for the competition in key parts of your own website, but this is exactly what Ryanair is doing! After all it makes sense, if you have the cheapest air fares in the market to let the other airlines display your prices next to yours, this is what we can see in the example below, plus they can make some money when someone clicks on one of the adsense ads.

Spot the ads for competing airlines and travel sites on the right

It would be interesting to know what percentage of Ryanair's website visitors end up going to the competition (something that the Flightblogging blog already noted some time ago), but if the ads care still there, and given Ryanair's legendary ability to extract to the latest penny of value from its operations we can be certain that the overall effect has a positive effect on the Ryanair's bottom-line!

Adsense ads are actually placed automatically based on a number of criteria, but you can choose where you place them on your site, and Ryanair has gone us far a placing them in the centre of their main site. That at the time when I checked it while I was writing this post, it was carrying ads for: Eurotunnel!

Spot the Eurotunnel commercial in the central part of the site

Wednesday, 3 November 2010

Finnair rethinking quality

A few days ago I was checking options for my upcoming trip to Russia and I ended up at Finnair’s website. The first thing that caught my attention is the Twitterish interface that Finnair has come up with.

The central part of the screen has actually been taken over by the "Quality Hunters". This is an initiative Finnair has come up with to highlight its commitment to quality. The “quality hunters” are actually independent professionals from all over the World that have been tasked with traveling the globe during a whole month reporting on their experiences on quality wherever they go, be it the flights, airports or destinations.

The innovation is not that these "quality hunters" will be blogging and communicating their experiences along the way, engaging in open dialog with the public and making extensive use of twitter, but that Finair is giving them the main section of their corporate website. Some of the posts have little to do with the airline itself, but when they do write about Finnair I like the fact that they are sharp and straight to the point, like for example this post by "quality hunter" Christina Lund Sørensen about her less-than-satisfactory eating experience on-board several of Finnair's aircraft. It is a much welcome exercise of transparency on Finnair's side that the bloggers are allowed and even encouraged to post even when they do not have positive things to say.

The quality hunting experience has even its own site, that adds to Finnair's well designed main corporate website and where you can find all sorts of background information about the quality-hunting bloggers and their findings. I would say that overall it is a very good idea, with an even better execution!