The Spanish airline industry, in a state of flux

A constant flow of news is coming out of the Spanish airline industry, making it one of the hotspots of the industry in Europe, so I thought about writing this post to summarize what is going on...

One of the most amazing things is that the deep economic crisis that Spain is currently going  thorugh is not enough to deter Spanish airline entrepreneurs...one of the most exciting developments we have seen in last few months is the set-up of "stealthy" Barcelona-based airline startup, Volotea. Little is known about this project so far, except the identity of the founders, the fact that it is going to operate in the short-haul market and that its fleet is going to be composed of Boeing 717s. All these details, that were already advanced in the post I wrote a few weeks ago, have now been confirmed. Some reports in the press pointed also to the fact that it might not restrict its operations to the Spanish market only.

This is certainly an interesting timing to get into Spain's regional market, as the main incumbent in this segment, Air Nostrum is grounding up to 15 aircraft, reducing the number of staff and considering to move its headquarters from crisis-hit Valencia, on the Mediterranean coast, to the Basque city of Bilbao.

Air Nostrum operates many regional routes within Spain on behalf of Iberia

At the same time Vueling has announced an investment of €325 million and a major expansion at its Barcelona base, with 5 new Airbus A320 based there and the launch of 23 new routes. This will bring Vueling's total number of cities served from Barcelona to 70, which makes it one of the largest short-haul networks in Europe.

Vueling's recent network expansion strategy is also worth of note, not only from a quantitative but also from a qualitative point of view...I wrote not long ago about how Barcelona could fulfill its hub ambitions by having an airline develop a network linking it to second and third-tier cities around the Western Mediterranean. The aim would be to become the reference hub for this region, in a way similar to what KLM does with its links between Amsterdam and British and Scandinavian regional airports. When I wrote this what I had in mind was more of a regional type of operation (as KLM does) and I still have serious doubts about whether the Airbus A320 is the right aircraft for this type of operation based on thin routes, but Vueling's route map, particularly in France, with additions such as Bordeaux, Lourdes, Marseille, Nantes and Brest, and Italy, with Genoa, Pisa, Verona,...plus its new "connection flight" service seem to fit well with this strategy. Whether this will ultimately lead to the materialization of the much-awaited long-haul hub at Barcelona remains to be seen...

It is also noteworthy that Vueling is finally launching its first UK routes out of Barcelona (it flies already between the UK and several Spanish regional airports), a territory that, until now seemed reserved to the likes of Easyjet and Ryanair (by the way, the Irish airline has finally closed a deal with the Catalan government that will provide for 19 routes being launched or reinstated at Girona airport (GRO), just one hour drive North of Barcelona, BCN).

In the meantime, Barcelona's other carrier, Spanair, is languishing while awaiting its possible acquisition by Qatar Airways. Senior officials from the Catalan government and Barcelona City Council flew to Doha a few days ago to discuss the sale of Spanair to the Gulf carrier. As pointed out in this post, it will be interesting to see how petro-dollars affect the competitive landscape in the European airline industry. These negotiations, however, have not been obstacle for Qatar Airways to cooperate closely with Spanair's rival Iberia, to the point that it will be the only non-Oneworld airline to use Madrid's gigantic T4 terminal. Qatar Airways' passengers will also be able to use Iberia's domestic network for onward flight connections.

And I finish this post, precisely, with Iberia, as it is preparing the launch of its new low-cost airline Iberia Express. In reality, I think this move will be hardly noticeable to the average passenger: Iberia Express will be using the same aircraft and fly the same routes that Iberia already does, plus it will also offer business class. Iberia's on-board service on short-haul economy is already barely different to that of low cost airlines so not much of a change here either. So Iberia Express is more of a way to end a bitter labour dispute and lower operating costs in its short haul operations, a necessity for Iberia considering how entrenched Ryanair and Easyjet have become in the Spanish market, rather than the launch of a truly "new" airline.

A brand new airport opens in Spain, no flights expected in the near future...

I had no plans to continue writing about Spanish airports and overcapacity this week, when I learned about the opening of the latest Spanish airport: Castelló-Costa de Azahar (CDT), on Spain's Eastern coast, filling the gap between Valencia (VAL) and Reus (REU) airports. Well, I said "open" because it has been actually been "inaugurated", but it will take some time until an airplane is seen taking off or landing at this facility. In reality the timing of the official inauguration has more to do with the Spanish political calendar than with the readiness of the facility (the run-up towards the upcoming local and regional elections).

This is the third airport in Spain to be built and managed outside Aena's network. It is going to be managed by a private consortium, although much of the investment so far has come from the regional and provincial governments, and presumably public money will also be needed to fund the facilities for quite a while, since the airport management company will get €6 per passenger unless the 600,000 passenger/year threshold is reached during the. This figure looks like a distant goal at a time when only Air Nostrum, Iberia's regional franchise has shown some interest in operating from the new airport.

Unlike other Spanish ghost airports, Castelló is located in an area with considerable economic potential, including many export industries (for example, ceramics) and a tourism industry that, until the crisis arrived, had put its sights on massive development schemes to rival those of neighbouring Costa Blanca and Costa Daurada...and here lies the problem: it seems to be that the airport's business plan, its capacity and its management contracts were elaborated under the assumption all these massive development plans were going to be a reality by the time the airport was ready. They aren't. In fact, construction activity in the area has all but collapsed..and it looks like there is going to be another empty airport in Spain, at least for some time...



In the meantime, the Castelló airport has become a sponsor of Villarreal Football Club, that is conducting an excellent campaign. It might not have scheduled flights, but Castelló Airport might well be at the Champions League next year!

Spain's empty airports (IV): Logroño

The Spanish region of La Rioja is famous worldwide for its great wines and its cellars attract numerous visitors every year, but few get there by plane if we are to judge by the traffic figures at the regional airport Logroño-Agoncillo. The airport was inaugurated in 2003, after an investment of €40 million, and after a few years of growth, peaked in 2007 at 56,000. It has been in falling since then and it currently stands at around 20,000 passengers per year.

There is hardly any regular traffic at the airport, only Air Nostrum operating a regional jet to Madrid-Barajas (MAD), but it is possible that there is not really a critical mass of passengers to sustain more flights, particularly when considering that land transport in the area is quite good (Logroño is in the middle of the Ebro Valley, a major communication line) and Bilbao airport and its much broader choice of flights and frequencies, is 1,5 hours away by car.

In the meantime the airport keeps losing €4,42 million a year, or €220 per passenger, and its debt stands at €52 million.

Spain's empty airports (III): León

In North-West Spain the city of León got a brand-new airport in 1999. There had been an airfield at León for decades, but the inauguration of the new facility and the opening of commercial services at León airport was a significant improvement on the accessibility of this historical city, that tracks its origins back to an old Roman fort, that had traditionally suffered from its remoteness and its distance to the country's main urban centers.

However, I got quite surprised to learn, this autumn, that the airport had just been enlarged. I had a look at the numbers and found out that the Spanish government had invested over €80 million at the airport during the last 6 years. This seems quite a large number taking into account the current amount of passengers the airport is handling, more so when some of the recent investments have been directed at increasing the airport's capacity. For example, LEN is now able to process 580 passengers per hour...but the total number of passengers last year was 94,282, that is around 250 passengers per day! And looking at the route network available from the airport it looks as if this traffic is well distributed along the year, in other words, it does not seem there are extreme demand peaks that require all this extra capacity (most routes are done by Air Nostrum using regional jets).

The expansion programme was implemented with an expectation of 500,000 passengers per year in 2012...but since reaching a peak of 160,000 passengers in 2007, traffic has only decreased since then. The fact that León is going to be connected to the Spanish high speed rail network in 2012, and it will then be within 2 hours travel time of Madrid by train will not help raise the airport's traffic figures...

Spain's empty airports (II): competing to become the gateway to the Pyrenees

With this post I intend to continue the series I opened a few weeks ago about the many underused airports spread across the Spanish geography, a reminder of the construction bonanza of the last few years...

Today I am going to focus on two recently inaugurated airports, Huesca (HSK) and Lleida (ILD) that are vying to become the main gateway to the Pyrenees and to the multiple ski resorts that dot this imponent mountain range that separates Spain from France.

Huesca airport is located near the city of the same name, that is the capital of a province that includes most of the highest peaks in the Pyrenees and ski resorts such as Candanchu, Formigal and Panticosa. This airport is part of Aena's network (the Spanish public airport operator). This investment has been strongly questioned, given the small number of passengers that use the facility and the limited impact it has on the local tourism industry in an area where the vast majority of skiers arrive by car. Traffic numbers certainly abysmal, around 6,000 passengers a year (and a record low of 8 passengers in October 2010), this means there is a annual operating deficit of €700 per passenger (and this does not even take into account the initial investment)! There is currently no regular traffic at the airport and only Monarch airlines and Pyrenair (using Air Nostrum aircraft) operates some seasonal flights during two winter months from UK airports and from Madrid, Valencia and La Coruna.

Prospects do not look very good, particuarly when you take into consideration that Huesca is, given its size and geographical position, quite well connected to the rest of Spain, it has high speed rail services to Madrid and a free motorway links it to the regional capital, Zaragoza, a much larger city (with a population of over 700,000), that, curiously enough has, possibly, the opposite problem, an underused airport, that is shared with a military base, with considerable potential, given the city's growing role as a logistics center (I'll write about this case in a future post...) .

And let's not forget the newest airport that has been built with the Pyrenean gateway in mind: Lleida. I already wrote a post about it last year, where you can find some details about it. This airport, managed by the Catalan government, has a slightly larger local market than Huesca, but faces pretty much the same challenge: to find enough demand to consolidate regular routes. There are a number of routes currently being operated from the airport, Ryanair and Vueling fly to several European and Spanish destinations, but they are heavily subsidised and doubts remain on their long-term survival. Pyrenair has also started some winter flights to Spanish and Portuguese destinations, targeting the ski market.

Lleida has the advantage of having relatively easy access to the most international ski area of the Pyrenees, the Andorran ski resorts, that attract a number of British and Russian skiers that, although not as huge as in the Alps, can guarantee a considerable amount of traffic to a small airport like Lleida. Most of this traffic was currently being channeled through Toulouse airport (TLS), in France, but they might be ready to switch their operations to the South side of the Pyrenees if they eye an attractive enough deal, this is the case of Neilson, that recently announced that, after striking a very favourable deal that includes tax reductions, is going to fly over 20,000 British skiers per year to Lleida for the next five ski seasons.

Despite these efforts, there is another airport that has strong chances of becoming the "real" gateway to the Pyrenees: Barcelona (BCN).

Although we tend to think about Barcelona as a sunny Mediterranean city, the fact is that the Catalan captial is just over an hour and a half by car from teh closest ski slopes, a time that has been reduced considerably through improvements in land transport links, the (unlikely-to-succeed) bid for the 2022 Winter Olympics might speed up some public works already in progress, such as the completion of the Barcelona-Toulouse motorway that will bring the Pyrenees and Andorra much closer to the metropolis and its airport.


Approximate catchment areas of the airports of Huesca (HSK), Lleida (ILD), Toulouse-Blagnac (TLS), Zaragoza (ZAZ) and Barcelona-el Prat (BCN), and their respective positions relative to the Pyrenees. For the sake of simplicity I have not included other airports in the vicinity such as Girona (GRO), Pau-Tarbes (PUF) or Perpignan (PGF)

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

Life's hard for Spanish regional airports...no 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 ambitious...one 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...! .