What next for Girona airport?

Transavia is currently the only airline other than Ryanair operating at GRO

Girona has been possibly the fastest growing in Spain during the last decade. From a sleepy charter-only airport, GRO has gone on to become one of Ryanair's major bases in the continent...or was it?

In fact, GRO is now going through a delicate moment, and the responsible is none other than the same airline that helped it get out of obscurity: Ryanair. The Irish airline started operating from Barcelona last September and it has been opening new routes since then, most of Ryanair's traffic at GRO are actually originating or have as final destination the city of Barcelona, an airport that has now plenty of spare capacity for the Irish airline to grow.


Ryanair's base at Girona will go from 11 to 6 aircraft permanently-based aircraft

In a recent post at AirObserver's blog I already mentioned how its arrival to Barcelona has strengthen considerably Ryanair's bargaining power at Girona. And the Irish airline has put all this market power to work: a new agreement has supposedly been reached with the Catalan authorities, providing €7.5M to keep Ryanair at Girona until. But the recent government change in Catalonia has changed spending priorities and now is uncertain whether the agreement is going to be implemented or not.

According to some reports, Spanair is being asked by the Catalan government (that has been supporting it through direct capital injections) to take over some of the routes previously operated by Ryanair, namely the Girona-Madrid one. This move would not make any sense to me.

For a start, I doubt it would work without heavy public subsidies. Spanair already tried operating this route a few years ago and it did not work. Why should it be different this time? and if subsidies are to be paid, why then all the fuss about paying them to Ryanair? the Irish airline was at least capable of bringing to Girona a volume of traffic that no one else in the industry can match.

But if we then look at the relationship between Spanair and Catalan public institutions we have that public money has been used to support this ailing airline on the grounds that it intends to develop a hub-and-spoke operation at Barcelona El Prat (BCN) that might, in the long run, make of BCN a major European airport. Making Spanair fill the gap at Girona while Ryanair is itself increasing its presence at BCN would be a total departure from this strategy!

This situation might be mitigated if Girona airport had the autonomy to set its own fees and pursue a more aggresive commercial policy (Mr.O'Leary himself said recently that Girona's fees were too high to compete effectively with Barcelona El Prat. If we are to judge from the fact that Ryanair is currently expanding at BCN despite not getting any subsidy) that includes actively looking for new routes and airlines.

At this point in time the only non-Ryanair regular route at GRO is Transavia's to Rotterdam. Have the airport managers any other option on the table? It would be a good idea to start looking for some...

Spanair's difficult year

A Spanair A320 on the tarmac at Barcelona airport

From this blog I follow very closely the evolution of Spanair, as Barcelona (BCN) is one of my favourite airports and its future is inextricably linked to the future of Spanair.

Why? because Spanair is at the center of an experiment: the attempt to establish from scratch a hub-and-spoke operation in a mature market with strong presence of low-cost carriers. The reasons for this are both political and economic. Barcelona is one of Europe's main airports (one of the top ten, in close competition with Rome-Fiumicino) however, it has never been a hub, neither has it had its own flag carrier.

Although Barcelona and Catalonia have traditionally been the main tourist destination and the more export oriented economic center in Spain, during the period when most European countries developed their own flag carriers, Spain was a heavily centralised country and Iberia always focused on Madrid-Barajas, with Barcelona acting as a sort of secondary mini-hub for European flights. The result has been that today Barcelona is possibly the European airport with the lowest proportion of intercontinental traffic with regards to total traffic in Europe. This situation is, obviously, a source of concern in Barcelona, as the lack of long-haul connections can become a major weakness in the era of global business.

Iberia's decision to hand over its European flights at BCN to its low-cost subsidiary Clickair, that subsequently merged with Vueling, and the increasing share that low-cost airlines have been acquiring at BCN, added salt to the injury.

No wonder then that, as soon Spanair, an airline with a history of losses but with the second largest network in Spain, was put on sale, a consortium led by the Catalan governement took over. The aim was to make of BCN a hub and consolidate a full-service hub-and-spoke operation out of Barcelona, in coordination with Spanair's Star Alliance partners. SAS would remain as a strategic partner with 20% of the capital.

Easier said than done. If consolidated flag carriers are having a hard time in their established markets, Spanair's challenges looked daunting...and, indeed, the numbers the company has just presented are deep in the red. It lost €186 million, of which €120 million are an oeprational loss. This is 55% above what was expected by the airline. However, it is true that this is an improvement over the €218.3M. loss of the previous year, and last quarter it managed to book a modest profit of €5 million.

The company is keeping the goal of becoming profitable in 2012, despite the short term reality that it has needed a fresh injection of capital from a company owned by the Catalan government in order to keep it afloat.

This money should keep Spanair flying for a period of time, but is unlikely to facilitate the development of the sort of intercontinental hub that remains the raison-d'être of Spanair and the ultimate justification of all this public support.

Ryanair stops taking reservations from end of March for its Girona (Barcelona) routes

Passengers looking to book a flight out of Girona-Barcelona (GRO) with Ryanair for travel dates beyond 30th March are coming across this:



As Catalan daily Avui has pointed out, there are two possible reason why this is happening while bookings from the other Barcelona-area airports where Ryanair operates, Reus (REU) and Barcelona-El Prat (BCN), are working fine
Either it has something to do with ongoing negotiations to keep Ryanair at GRO or, the official version, the Irish company is still defining its summer flight schedule.

On one hand and as my article of a few days ago at AirObserver pointed out, Ryanair's recent arrival at BCN strengthens its negotiating power bis a bis the Catalan authorities. The current agreement between Ryanair and the local authorities expires at the end of the year 2011 and it seems that Ryanair has been asking for 12 million euros to renew it.

This happens at a time when these same authorities seem less keen on more money handouts and risk getting caught in a "subsidies war" with other local airlines (see AirObserver's post on this too). Blocking flight reservations could be a way to send a strong signal and an important power gesture...

On the other hand, Ryanair has just opened routes to destinations from GRO, such as Larnaca (Cyprus).

So possibly there was a combination of the two factors at play, negotiation strategy and route planning. In any case, while I finish to write this post I read that sources of the Catalan government have confirmed that an agreement has been reached to keep Ryanair operating at Girona airport (although has not yet been ratified due to last week's parliamentary election in Catalonia). I am waiting for more details...

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!