What happened to all those Spanair and Malev aircraft?

 When it comes to financial stability, the airline industry has a terrible reputation (and track record!). We had a reminder early this year with the disappearance of Spanair and Malev.

But, have you wondered where do all these aircraft go when an airline goes bust?

I did, and The Sun (I know! not my top source of aviation knowledge though..) has provided part of the answer. At least 24 ex-Spanair and ex-Malev planes made their way to Ireland to be stored at Dublin and Sannon airports (while they await their final destination, that in most cases will very likely be the Arizona desert).

In the meantime, Dublin Airport Authority benefits nicely from providin this sort of long-term parking facility (€2,500 per aircraft per day). Other to benefit have been airlines loking to expand their fleet, since this glut in aircraft supply might have lowered leasing costs up to 25%.

The Sun's article was written in March though, it would be interesting to learn where all these planes, except the 9 Spanair A320s that went to Vueling, have finally ended up...any clues?

Starbrook Airlines, the airline that only exists in chocolate, and more...

There are many interesting stories in the aviation industry these days, so interesting that, actually, haven't got the time yet to sit down and write the proper article they deserve. So I thought about sharing a couple of, somewhat lighter, aviation-related stories that might also be of your interest...

For a start the story of this amazing chocolate box I came across the other day....Starbrook Airlines does not exist today...but a Belgian chocolatier has developed a whole range of airline-themed chocolates taking inspiration from the "belle-epoque" of aviation. According to the story in their website, there was actually a "Starbrook Airlines", started by a Belgian in California in the first half of the 20th Century, although I could not find further references to it...

And more vintage (and not so vintage) stuff today, as the great Spanish-language blog "Fronteras" has devoted two very detailed post to those airlines that, for whatever the reason, are no longer flying...you name them: TWA, Varig, Malev, Mexicana, Spanair...even if you do not read Spanish, these two articles (1 & 2) are worth a look, since there are some amazing pictures I am sure any aviation enthusiast will enjoy!

Have a great start of the week!

What is going to happen to BMI Diamond Club miles after BA's acquisition?

As most of you might already be aware of, British airline BMI was sold by Lufthansa to its Oneworld competitor IAG (aka British Airways). Once the news was confirmed, one thought came to my mind: what happens with BMI's Diamond Club frequent flier miles?

As both airlines operated out of the UK, many frequent travelers were members of both British Airways' executive club and BMI's Diamond Club.

The truth is that BMI has moved fast to inform its Diamond Club members and in the last few days has sent a couple of messages providing updates...it looks like BMI Diamond Club cardholders are actually going to get a good deal and, whereas they will have only until the 31st of May to use their miles within  the Star Alliance group, the Diamond Club programme itself will continue to work as usual.

This is possibly the reason that BMI is still accepting applications for its Diamond Club programme while I am writing these lines:

I ignore if this "business as usual" will last for long, as Diamond Club members  are being invited to join British Airways' Executive Club programme. They will also be able to exchange miles into IAG's Avios at a rate of 1:1.

This is literally, an excerpt of BMI's Diamond Club notification email:

"As part of the transition of bmi into British Airways, from 1 May 2012 British Airways is inviting you, as a Diamond Club member, to also join the Executive Club at your equivalent tier status level. Diamond Club Gold customers will be invited to become Gold members of the Executive Club and Silver members to become Silver, which will be in addition to your Diamond Club membership. Further details will follow shortly."

Whereas it's not stated explicitly, I guess IAG's plan is to progressively transition all Diamond Club members to Executive Club. In any case, I think Diamond Club's members are getting quite a good deal and many of those that were on both programmes will be able to consolidate and advance their status within the programme really fast.

Is Vueling getting ready for an African adventure?

 Ready to fly South

One of the consequences of Spanair's demise was that Barcelona airport lost some niche African routes, such as Banjul (The Gambia) and Bamako (Mali) that were only operated by the bankrupt carrier.

While these routes never carried a large number of passengers, they were strategically important for Barcelona airport, that, lacking a traditional flag carrier, has long been struggling to find its place among European hubs. Africa's developing air travel market might provide some opportunities for Barcelona to develop its long-haul network. Over 560,000 passengers flew between Africa and Barcelona last year, around 60% of these on Moroccan routes, however these numbers are only a small fraction of the 30 million passengers that passed through Barcelona-El Prat (BCN).

According to Spanish business daily Expansion, quoting sources of the CDRA, Barcelona's route development organisation, nearly 25,000 passengers flew on the Banjul route last year and almost 15,000 on the Bamako one, with both routes showing robust growth. The CDRA has also identified Dakar as a potential viable route from Barcelona, since 24,000 passengers currently fly between the two cities annually through indirect routes.

If we are to give credit to some reports, Vueling might be seriously considering stepping in. Those are certainly challenging markets, but the absence of competition means that airlines can get higher yields on their African routes. This fact and growing economies all over the continent, despite current political instability in part of the Sahel, means that airlines from all over the World have turned their attention to the once-neglected African market.

It would be logical that Barcelona's home airline had a go at it. The Catalan airport, in turn, would also benefit from leveraging its advantageous geographical position to become a connection point between Europe and Africa.

A tribute to Spanair, in pictures...

I travel often through Spanish airports, where Spanair aircraft were a common sight. They came in different sizes and colours, the result of a convulse corporate history. Spanair, we will miss you! 

Here is my photo-tribute:

The old livery, here a Spanair Airbus at Madrid-Barajas

And the new livery...this one spotted at BCN

 Spanair was a proud Star Alliance partner

A Boeing 717, we'll see some more of these in the European skies soon!

 Spanair was positioning itself as "the Barcelona airline": here a map of its network in a commercial advert

A Spanair MD-83 with the city of Barcelona in the background

Spanair EC-GVO taxiing at BCN

Spanair's fleet was initially made of MD-83s, some of these have remained with the carrier until the end

The old and new liveries side by side at BCN

Despite management efforts, the outlook had always been really foggy for Spanair...

Spanair's collapse: a few notes

When I wrote my latest post a few days ago, I was not expecting to write again so soon about the Spanish aviation industry, but the events of last Friday, despite not being entirely unexpected, have shaken to the core the Spanish airline industry, nothing less than the collapse of Spanair.

I have been following the Spanair saga almost since the day I started this blog and a lot has been said already about Spanair's demise (the Spanish and, particularly, the Catalan press are packed with news, reports and comments about the Spanair case), so this won't be a long post...

The fact is that Spanair was fighting an uphill battle from the very start (by "start" I refer to the date when Spanair was acquired and re-founded by a consortium of government-back Catalan institutions after its near bankruptcy in 2008):

1) When it was acquired by its current owners, Spanair was already in a difficult financial situation and under-capitalized

2) The financial crisis has hit very hard its main markets

3) It was a not-particularly-efficient airline that had to face formidable competitors such as Vueling and Ryanair at its own home base

4) It lacked any significant source of differentiation, it was neither strong enough to develop a viable network or superior service, nor efficient enough to deliver value, plus it lacked a strong brand.

5) It was acquired with government-backed funds because it was expected to help in the development of a long-haul hub at Barcelona airport, a mission that it was totally uncapable to fulfil since it lacked the fleet or the feeder routes to do it. Governments and business do not usually mix very well, but it becomes even more difficult to justify such support when there aren't any tangible results in the form of a greater return to the overall economy and the government itself is going through a round of public spending cuts.

Then there is Spanair's membership of Star Alliance: there was the expectation, that, if not alone, at least with the support of its partners, Spanair would be able to consolidate some sort of hub at BCN, while giving Star Alliance a solid foothold in South-Western Europe.

None of this is going to happen, no Qatar Airways last minute rescue either, although judging by Vueling's quick reaction, I think this supply shock will be quickly absorbed by other carriers (I have written already about the adaptability and resilience of air travel markets).

Vueling is, indeed, the airline that benefits the most from Spanair's demise and emerges from this situation undisputedly as Barcelona's home airline, with an expanding network and a product that has been evolving from the pure low-cost model to that of an hybrid carrier, able to appeal to both business and leisure passengers.

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.

Are European airlines becoming like football clubs?

This week we have got confirmation of the acquisition of a significant equity stake in Air Berlin by Eithad. The Abu Dhabi carrier will increase its stake to over 29% from the 2.99% it already owned, this will make it the first shareholder in Germany's second largest carrier.

What's interesting in this deal, though, it's not only that this is the first major foray by one of the emerging Gulf carriers in the European airline industry, although maybe not the last if we listen to the rumors coming out of Ireland, but the fact that this investment will have consequences that go beyond the financial sphere. And this raises important questions regarding the industry's competitive landscape.

As this CAPA thorough analysis underlines, Air Berlin and Etihad are going to be, from now on, close  partners: financially, as Etihad is injecting €255M in Air Berlin to help finance its fleet renewal and expansion, and also operationally, as Etihad and the airlines in Air Berlin group (including Austria's Niki and Switzerlands Belair) are going to codeshare routes across their networks. Air Berlin has already announced that is moving its Dubai service to Abu Dhabi to take advantage of the enhanced connectivity that its new partner provides. We can expect Etihad to benefit as well from Air Berlin's European network at the other end of the route.

Austria's Niki and Switzerland's Belair are also going to join forces with Eithad,a s they are part of the Air Berlin group

What this means, in effect, is that Lufthansa's long haul operation is going to be facing a larger passenger drain towards the emerging Gulf hub. Plus Air Berlin-Etihad have also the opportunity to develop an alternative German hub at Berlin's new airport, possibly not a coincidence that, in what looks like a preventive move, Lufthansa has recently announced plans to create a base in the German capital, an airport where it had had a very limited presence so far. It remains unclear whether this situation is going to affect Air Berlin's recent membership of Oneworld.

And it is precisely Oneworld who could be facing a similar situation in one of its home markets if Qatar Airways acquisition of Spanair is finally confirmed. As I write these lines the outcome of this negotiation is uncertain, although a deal must be closed soon as Spanair seems to be running out of cash. As I mentioned a few days ago, Qatar Airways would have its European beachhead, and, as in Berlin's case, it would be able to use a large brand-new airport with plenty of spare capacity to expand its European feeder operation.

Most important, and hence the title of this post, getting new entrants with access to a seemingly unlimited amounts of capital could significantly alter the competitive landscape (or distort it, depending on how you look at it)...which makes me think doesn't all this seem resemble what has happened with that other glamorous but chronically loss-making European industry:...football?

Qatar Airways about to invest in Spanair and why this is good news for Barcelona airport (and II)

As a continuation of my previous post on Qatar Airways possible acquisition of a stake in Spanair, here are some interesting questions that come to my mind when thinking about the possible consequences of this deal:

1) What is going to happen with Spanair's current Star Alliance membership and how is this going to affect the agreements Spanair had with Star partners on several routes, some of were of strategic importance to the carrier, such as Singapore-Barcelona-Sao Paulo.

2) What designs has Qatar Airways for the new Spanair and what degree of control would be able to exert? Is this a purely financial operation, with Qatar Airways limiting itself to turn the company around and making it a stronger stand-alone carrier?  Or are we witnessing the first act of a much more ambitious project aimed at building a presence in Europe (possibly by acquiring other troubled European airlines). If the latter turns out to be the case, it would be interesting to know what is Qatar Airways plan: a feeder operation involving a transit through Barcelona from Southern Europe regional airports and onto the Gulf does not seem to fit into the global-connector strategy Qatar Airways is developing through its Doha hub. Or maybe using Spanair to code-share on flights beyond Europe, as Singapore Airlines is already doing with Spanair? or build a base in Barcelona to fly from there to destinations in America, along the lines of what Indian carrier Jet Airways tried to do in Brussels?

In any case, Qatar Airways is gaining access to a large and recently renovated airport, with plenty of spare capacity and a geographical position that makes it a suitable gateway to Europe and beyond when flying from the Gulf.

3) Another interesting question that comes up these days is: will Spanair keep its name? rumours are its name is going to be changed to Air Barcelona or Barcelona Airlines. I am, personally, not a big fan of airlines named after cities, but this change would possibly make sense, since the Spanair brand does not enjoy a particularly strong recognition, whereas "Barcelona" is certainly a powerful brand (coincidentally or not, the Emirate of Qatar is also sponsoring FC Barcelona and another of the World's emerging airlines kicked off its European brand building campaign by associating itself with Barcelona's name)

In any case, I will be posting more analysis as soon as more news will come out soon, as Spanair's current situation is hardly sustainable...watch this space!

Qatar Airways about to invest in Spanair and why this is good news for Barcelona airport (I)

I just learned that Qatar Airways might be about to acquire a 49% stake in Barcelona-based troubled airline Spanair. While I do not know the details of the deal, I can think of a few reasons why this could be a good move for all parties involved, as well as for Barcelona's airport.

First of all, is a matter of financial necessity and of urgency. Spanair is in a critical financial situation and, despite strong backing from the Catalan government, is quickly running out of cash. Since I wrote this note a few months back it seems Spanair's cash-flow position has only got worse.

An investor with deep pockets is needed in order to keep the airline flying and allow the Catalan government to save face and disentagle itself from an operation that is difficult to justify at a time of tough budget cuts, while claiming a partial success at keeping Barcelona's long-haul hub aspirations alive.

And this takes us to the next factor that I think it makes a tie-up with Qatar Airways a potentially interesting proposition and this is none other than opening a window to the East and to the globe's currently most dynamic economies. On June 2010 I commented on this blog how commercial aviation's center of gravity is moving East and any carrier and airport with aspirations should try to ride this trend. A link with Qatar would certainly help Spanair and Barcelona airport gain this intercontinental dimension they have been so much longing for.

A side effect of a re-capitalized Spanair is that it will put pressure on Vueling, Barcelona's other airline, that is already being squeezed by Ryanair's increasing presence at BCN. Having to face renewed competition from a stronger Spanair will certainly not help recover its margins. It will also prevent Vueling from becoming the only carrier able to build some sort of air hub at Barcelona. Although Vueling has been developing some flight connectivity at BCN there are serious doubts about Vueling's capacity to build a fully fledged hub at the shadow of Iberia, that remains its main shareholder, since any such move would risk cannibalizing Iberia's operations in its main Madrid hub.

In my next post I am going to present some interesting strategic questions that arise from the possible imminent completion of this deal...

Vueling and Spanair: two different strategies to develop Barcelona into an airline hub

A few weeks ago I presented my vision of Barcelona airport as at potential Mediterranean hub. But are there any airlines able to turn this idea into a reality?

Actually, the chances of this happening, although small, have never been better, as there are currently two airlines aiming to develop a hub-style operation at BCN: Vueling and Spanair, however each of them has its particularities.


Spanair MD-83 EC-GVO with the city of Barcelona in the background

On one hand, Vueling started as a pure low cost play, although its model has been going through an hybridisation process that has seen it progressively adding more of the features of a network airline. On the other hand, Spanair's troubled existence as a conventional full-service airline, took a radical turn when a group of investors supported by the Catalan government purchased it with the mandate to develop an international hub out of Barcelona.

Spanair is actively marketing itself as "Barcelona's carrier", the only one able to take Barcelona to the first division of European airports. Spanair's latest marketing campaign, Jo Crec en Barcelona (which means "I believe in Barcelona" in Catalan language) goes in this direction. But how does this translate in terms of network development?

Until now most of Spanair's growth, which has been constrained by the carrier's delicate financial situation, has been aimed at leveraging its Star Alliance links, new routes and frequencies between Barcelona and Germany and code-sharing with Singapore Airlines, as well as developing some niche markets out of Barcelona with routes to North Africa and the Sahel (Algiers, Nador, Banjul, Bamako and the, now abandoned, Tripoli). This niche market strategy would fit well with the concept of a Star Alliance South-Western European hub, by offering a diversified and unique route network and channeling traffic through Barcelona, however, given Spanair's weak European network outside Germany, it remains unclear to me what traffic is going to feed these specialty routes other than a limited domestic Spanish demand and some spillovers from Star Alliance's main hubs in Central Europe.

In my post about the Mediterranean strategy I pointed at the need to achieve some critical mass by linking those cities that are within easy reach from Barcelona and are somehow underserved buy their own flag carriers. And this is what Vueling seems to be doing. This airline, partly owned by Iberia, is strengthening its network by opening routes from Barcelona to a number of airports in Southern France (Bordeaux, Toulouse) and Italy (Genoa, Pisa) in addition to a very strong Spanish and European network, at the same time it is enabling connections between different flights and feeding Iberia's new transatlantic services at Barcelona (to Miami and Sao Paulo). Does this mean the hub status for Barcelona is getting closer? yes and no, in a way the seeds of a potential Mediterranean hub are being planted, but at the same time, Barcelona is still far from enjoying the sort of coordinated waves of arrivals and departures, network reach and feeder frequencies that even secondary hubs have.


Vueling A320-200, EC-ICS, landing at BCN

Another question is whether is there enough space at BCN for two airlines aiming to make it its hub, particularly when factoring in the increasing competition from Ryanair...maybe developing a hub would require combining Vueling's European reach with Spanair's niche network...but this is another story!

Allplane quoted at AirObserver blog: commenting the new scenario at Girona airport after Ryanair's massive route cancellation

In this blog I speak often about the constantly evolving situation at Barcelona and Girona airports. It is a very interesting case of interaction, in one single metropolitan market (Barcelona-Girona-Reus) of pure low cost players (Ryanair), airlines developing an hybrid model (Vueling), an airline trying to develop a hub-and-spoke operation (Spanair), a retreating flag-carrier (Iberia) and all of this while it is becoming an emerging destination for major global carriers (Singapore Airlines, Qatar Airways, Delta Airlines).

This environment has not gone unnoticed to other European bloggers and AirObserver has just written a piece where it quotes me and presents my point of view about an hypothetic post-Ryanair Girona airport. This is a topic on which I am going to write a piece soon...In the meantime, great thanks to AirObserver for presenting my thoughts on the issue to its readers!

A hub in the Med? What strategy should Barcelona airport follow

Barcelona airport is a sort of unusual case in Europe, it is one of the continent's top ten airports by number of passengers, however it managed to get this spot without having a flag-carrier based there and with a minimal offering of long-haul flights.

So Barcelona has been mainly a feeder market for Europe's main airlines and an important short haul destination on its own right. I have already expressed my point of view of what routes would enhance considerably the reach of Barcelona's airport but this was based on the idea of BCN becoming a spoke of other hubs. But what could be the strategy to make of BCN a hub on its own? is it feasible?

It is too late for Barcelona to become a generalist hub, it does not have the sort of legacy carrier that would make this possible. In think that any small chance of Barcelona achieving hub status depends on its ability to find a market niche and becoming incredibly good at serving it (think Finnair and its Asian strategy!).

In my opinion Barcelona should focus on becoming the gateway of the Western Mediterranean.



If you take a close look at the map you can see how Barcelona is at the centre of a Mediterranean arch that goes from North-Western Italy to South-Western Spain, the contour of its coast clearly lit, a densely populated area. Destinations such as Marseille, Nice, Turin, Genoa, Cagliari, Algiers or Alicante can all be reached within 1-1.5h from Barcelona, that itself has a large airport with plenty of capacity and considerable Origin-Destination traffic.

The hub of the Western Mediterranean?

If you have visited the city of Barcelona and strolled down the Ramblas towards the sea, you might have noticed a large medieval building at the end of this promenade. It now hosts the maritime museum, but in its time this was one of the largest civilian buildings in the World, the Royal Drassanes (Shipyards) are a vivid reminder of an age when Barcelona managed to become the main trading port of the Western half of the Mediterranean...the example might be a bit anachronistic, but that shipyard seating at the edge of the town was the medieval equivalent of today's largest air facilities... and not too far from there, some 12km. further South, now sits the largest air terminal on the Mediterranean rim. Can we reinvent Barcelona as the hub of the Mediterranean?

Let's do some SWOT analysis!

BCN has some strengths to show for:

It has some critical mass of its own (it is capable of generating a traffic of 30 million passengers a year with virtually no transit passengers) and, despite the surge of tourist numbers in the last two decades it keeps a fair number of business traffic too (just look at the visitor figures of the Mobile World Congress that is taking place in the city as I write these lines)

It has a magnificent new terminal that has added plenty of spare capacity

It has quite a good geographical position to fulfill the role of West-Med hub, with the whole Iberian Peninsula, the Southern half of France and the coastal towns of Italy and North Africa all within 1,5h. flight time.

Plus it has reasonably good (although they need to improve in some areas to reach full potential) overland connections with its hinterland, the Mediterranean coastal corridor (the big arch going from Marseille to Alicante) and the Ebro valley (that links with the interior of Spain and the Atlantic), including high-speed railways (although at the moment these do not pass through the airport). The main passenger port in the Mediterranean (with both cruise and regular shipping lines) is also next door.

Now the weaknesses:

And the first and most obvious one is...there is no local airline currently able to run the mix of long-haul, short-haul services that would make it possible to develop BCN as a hub. True, Vueling is coordinating with its part-owner Iberia in order to provide connection flights and to start feeding some long-haul flights, but there are reasons to doubt the scale of Iberia's commitment to operating long-haul flights at BCN, not least because its main hub is so close!

And Spanair has also expressed interest in the hub option (this is actually its "raison-d'etre" and the only reason the airline has managed to survive through public support) but it needs to sort out its finances first.


The outlook remains a bit foggy for Spanair

We will get back to the airlines later, because there are other weaknesses that I must mention and these are more structural.

One of them is the peripheral nature of the Mediterranean market and the fact that a large share of the traffic this area generates is related to tourism, and this is a segment where any hub-and-spoke airline would have a hard time competing with low cost carriers and charters focusing on origin/destination traffic.


But some uncertainties surround Vueling's competitive position too...

And let's not forget that all European hubs, including the most consolidated ones are currently under pressure, as the center of gravity of aviation is moving East (to the Gulf, to Turkey) and this will certainly have an effect on traffic patterns.

Moreover, whereas emerging markets in Eastern Europe are making steady economic progress, the Med remains plagued with political unstability and sluggish economic performance...

Are there opportunities? Of course!

First of all, there is currently no strong hub on the Mediterranean rim, Madrid is not far, but it has a rather transatlantic orientation, Alitalia's chronic problems and underinvestment at Italian airports have prevented Rome and Milan from taking this role and Paris is a long way up North.

I said previously that the lack of long-haul airlines is a weakness, but the fact that there are not one, but two airlines, is, actually, a great opportunity. And both have links to strong alliances, in the case of Spanair, it looks as if a Mediterranean hub would fit really well in its current network, that is strongest in Northern, Central and Eastern Europe.


The gap in Star-Alliance's network

And then we have the aircraft industry producing models that seem well suited for the sort of niche positioning that Barcelona should pursue. The Boeing 787 will improve the economics of long-haul thin routes and the next generation of regional jets, such as the Bombardier CSeries or Embraer E-Series could do the same for the short haul sectors.

There would be threats of course, as competitors would not seat idle. Iberia, Alitalia and Air France would not be happy with an hypothetic Star Alliance hub in their backyard and Vueling is already facing a tough fight with Easyjet and Ryanair in its own main base.

The high degree of political control over the Spanish air travel and airport industry (even after an eventual partial privatization), including commercial and pricing policy, slot allocation and bilateral agreements with non-EU countries, is something to be accounted for. Infrastructure management and politics often mix in Spain...

Finally, the increasing share of low cost carrier traffic, although not necessarily bad news, might have some long-term implications for BCN's aspiration to become a hub. The perception that BCN is becoming a mostly tourism-oriented low cost airport could become a reality if low cost carriers take enough market share to make routes operated by full-service network airlines unprofitable, this could result in a self-reinforcing process, whereas BCN ends up being a limited choice of carriers, limited connectivity to other major airports and an almost exclusively low cost traffic.

In any case, I admit there was a lot of wishful thinking involved in this exercise...as the goal here was just to summarize the multiple factors that can play a role in the development of a hub at Barcelona airport. But most of these are secondary factors, and whether Barcelona will become a hub or not is something that ultimately depends on the airlines that choose to operate there. And this is something I am going to write about soon...

The legendary air shuttle Barcelona-Madrid: the "Puente Aéreo"

Early morning at Madrid airport, a familiar view for many Barcelona-based passengers

If in my previous post I explained how the Spanish airport authority is using replicas of some venerable aircraft to advertise her state-of-the-art facilities and, for this post, we are not leaving Spain yet, because during my recent trip to Madrid I had the chance to experience another of Spanish aviation's legendary institutions: Iberia's "Puente Aéreo" (the Air Shuttle Barcelona-Madrid).

For those who are not aware, Barcelona-Madrid happens to be the air route with most traffic in the Europe, with nearly 3 million passengers per year and around 70 daily frequencies in each direction.

A large share of this traffic went through Iberia's "Puente Aéreo", an air-shuttle that was conceived as a commuter service, where you do not need a previous booking, you just show up at the airport and get on the next available flight. If a plane is full another one departs shortly after, with frequencies at peak hours could rival those of overground public transportation, every 15 minutes or so. The idea is to provide plenty of flexibility and short waiting times at airport.

The "Puente Aéreo" has its own brand identity and fare structure, separate from Iberia's other flights, even when they are doing the same route (around half of Iberia's frequencies on the Barcelona-Madrid route correspond to the "Puente Aéreo" service, with the rest being regular flights that require reservation.

The "Puente Aéreo" has been a sort of second home to generations of businessmen and politicians, ready to pay for all this flexibility and convenience and it is no wonder that, for years, it has been Iberia's most profitable route (in a way, the "Puente Aéreo" is to Iberia what LHR-New York is to British Airways)

However, a number of changes that have affected the competitive environment in which the "Puente Aéreo" was born and developed.

The first one was the liberalization of European skies. As soon as European skies opened up, new entrants Spanair and Air Europa decided to give it a try. The route quickly became a mainstay of Spanair, that now boasts 8 daily frequencies on the route and has branded the service with a similar name, making use of the concept of "air bridge", although for legal reasons it can not call it "Puente Aéreo", so it has "Puente a Barcelona/Pont a Madrid" instead. Next came low cost airlines, with Vueling entering the fray, it has now 11 daily frequencies. Surprisingly Easyjet chose not to compete on the route in spite of having a base in Madrid. Despite all this new competition, Iberia's market share on the Barcelona-Madrid air market remains at around 45%

The completion of the high-speed railway between Barcelona and Madrid has had a stronger effect on the route as it has emerged as a real alternative in terms of frequency and comfort for business travellers, taking half of the market on the Barcelona-Madrid corridor. It has forced Iberia to reduce capacity, maintaining frequencies but deploying smaller aircraft. However, the 600 kilometers between Barcelona and Madrid are really at the edge of what is considered to be a competitive distance range for high-speed railways and the airplane remains competitive, even for origin-destination traffic. Competitive pricing and the high volume of Catalan transit passengers at MAD have helped the airplane hold its ground on this route.

I am wondering what will happen the moment Ryanair starts flying between the two cities, it now has a base in both so it sounds like a logical next step...but I think the other airlines operating the route will feel the pinch, as they rely on a more price-conscious type of travele. My guess is that the "Puente Aereo" itself will be relatively inmune.

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.

By invitation: Roman from AirObserver on Airport privatization in Spain. What impact for Ryanair?

From today Roman from AirObserver is going to be guestblogging in this blog.
Roman runs AirObserver, a blog which covers airline news and especially European low cost market. He cooperate in Airpanorama project, a barometer which aims to offer the easiest way to compare most European low cost airline traffic figures.
He is also the author of an e-note about Ryanair business model.

Here is his first post in this space. Enjoy!

Airport privatization in Spain: What impact for Ryanair?


Picture: Barcelona airport new terminal

Spain's Prime Minister José Luis Rodríguez Zapatero has recently declared that his government plans to privatize 49% of AENA, the public authority in charge of Spanish airports. This privatization will start with two major airports in Spain: El Prat and Bajajas (other airports will come). Thus, probably in the hope to reduce public expenditure and to a certain extent, to improve airports management. Indeed, Zapatero’s government, who leads a struggling Spanish economy, hopes that the privatization would generate €9 billion.

A private management could impact Ryanair’s revenues:

In Spain, as all over Europe, Ryanair is massively subsidised. What I noticed in France is that each airport which gives money to Ryanair is actually managed by regional public bodies. Most of regional airports that are giving money to Ryanair are loss-making airports. Indeed, Ryanair always deals in the same way no matter the country: it brings in passengers, in return of important subsidies and free or lower airport fees. Consequently, small airport have more costs than revenues. Moreover, most of the time, the airport also has to hire, train, and pay all the required ground personnel. If you take this into account, you’ll understand why it might not be that profitable. However, when they realise that they are no longer able to deal with these high costs, it is too late, as the Irish airline doesn’t allow for contract changes.

My point here is that this kind of deal is only possible thanks to public support. Without public support, the airport won’t be able to survive, and would not agree to such deal. A private airport will only focus on revenues. In the light of this, we can conclude that, if the Spanish government decides to extend the privatisation movement to other small regional airports, the type of deals that Ryanair was able to conclude until now won’t be possible any more. Newly privatized airports will look at revenues first and not hypothetical future tourism revenues.

Airlines such as Vueling and Spanair have already given their support to this privatization, however full details have not been disclosed yet. Cataluña government for instance is waiting more detailed precisions from the Spanish government and Zapatero's still has to find potential investors.

Why is Turkish Airlines sponsoring F.C. Barcelona?

Turkey's flag carrier made the headlines of the Spanish sports press by announcing an sponsorship deal with F.C. Barcelona. As detailed in this press release, and without having more details about it, it seems that the Turkish carrier will not only airlift the team to all its away international games but will also pay 7.7 million euros as part of the sponsorship agreement, the airline's logo will, inn turn, feature prominently in the club's website and marketing material, joining the likes of Nike and Audi to become one of the club's international sponsors.

The airline has struck a similar deal with another of Europe's most prominent football teams, Manchester United.

Why would Turkish Airlines pay so much to sponsor two football teams so far from home?

This strategy makes sense if we look at the extensive intercontinental network that Turkish Airlines (THY) has been building and its future expansion plans. As Hmadi Topçu, the company chairman explains in the airline's own in-flight magazine, the company has grown from 10 million to 26 million passengers since the year 2003 , the fleet has expanded from 65 to 135 and the number of destinations from 104 to 156 (the route map looks certainly impressive at includes destinations where not many international airlines go, such as the Central Asian capitals).

Turkish Airlines must attract lots of transfer passengers to its Istanbul hub in order to sustain this expansion strategy and fill all this capacity. Istanbul's location might make sense for passengers connecting from Western Europe to Asia and the middle East, after all, Istanbul has been since its foundation an important trading entrêpot. This strategy would mimic that implemented by the Gulf airlines, such as Emirates and Etihad, that are challenging long-established Western hubs such as Paris and Frankfurt in providing West to East connections.

One of the obstacles to succeed in such an strategy is that Turkish Airlines is not a name that comes naturally to the mind of many European travelers when researching travel options. Gaining visibility and reputation by associating itself with well known and successful sports brands, together with competitive pricing, might help overcome this situation.

In the case of the Barcelona deal, it also does help that Turkish Airlines is seeking to get a more important presence at the Barcelona-El Prat (BCN), where it now flies twice daily. Turkish Airlines originally planned to increase to three its daily frequencies between Barcelona and Istanbul and even base one of its aircraft at BCN. There was the obstacle that, as an airline from a non-EU country, Turkish Airlines was already covering the number of frequencies allowed by bilateral agreements, but we believe this obstacle has been removed with the liberalization of air traffic between the EU and Turkey.

Additionally, fellow Star Alliance partner, Barcelona-based Spanair has also started flights to Istanbul in code share with Turkish Airlines. One more F.C.Barcelona connection here: Spanair's executive chairman, Ferran Soriano, used to be a member of F.C.Barcelona's board and is now on one of the electoral tickets contesting the upcoming F.C. Barcelona election.

Airline commercials: route networks and tube maps

Maybe because I pay more attention now that I am busy with my new map-based venture, GourmetOrigins.com, but I have been coming across many airline commercials in the tube that use cool ways to display route networks and use them as a marketing tool.

Here is the first one from Easyjet, found in the London tube, displaying the main ski resorts that can be reached from different Easyjet destinations. I found this to be an elegant way to show useful information and a good way to suggest winter travel ideas.



Here another one, by Spanair, at the Barcelona Metro. Here the focus and the message is different, although the visual concept is similar. Spanair wants to highlight the scope of its network (including some destinations that are actually served by its Star Alliance partners, like Singapore), at a time when it is trying to position itself as Barcelona's main network airline, after it recent takeover by Catalan institutions.

What happens when a major airport loses all of its traffic overnight?

Foto by Flickr user Berto Garcia under a Creative Commons Attribution Generic 2.0 License.

Last week I landed at the old terminal (T2) of Barcelona airport for the first time since the new terminal (T1) became operational at the end of last summer. Both terminals are actually part of the same airport (BCN), but they are physically separated, and they actually look like two separate airports, with the new terminal duplicating the capacity of the old one (see this story I wrote a few months ago)...and this is the problem! All three major airline alliances have moved to the new terminal, and the old one, that used to handle over 30 million passengers a year, is now virtually empty...well, not totally, a handful of airlines, with Easyjet and Air Berlin the largest of them, and some charter flights still use it, but the drop has been dramatic (the night that I landed, my Easyjet flight was the only one on sight). This is not totally bad for the passenger, that can enjoy plenty of space and no hassle, but it must have required a strong readjustment to the many shops and businesses that used to operate (or that still are) in the old terminal, and, most important of all, it sets a challenge upon the airport managers to find new traffic to fill the void.

Is Ryanair the solution?


Foto by Flickr user Andy_Mitchell_UK under a Creative Commons Attribution Generic 2.0 License.

The Irish airline has been quick to grab some of the extra available capacity and it has already announced its landing at BCN. Ryanair has already proven it can do well in the Catalan market, that already hosts two of its bases (Girona and Reus), both within one hour drive of Barcelona and I have no doubts that it will also do well in BCN. The airport authorities deny that Ryanair will enjoy any discount on its operating fees (a previous request that the Irish airline seems to have finally dropped), but one of the concerns remain: will Ryanair grab market-share up to the point where BCN becomes, over the long term, a Ryanair-dominated airport? this thought surely worries all those local stakeholders that over recent years have been working to make Barcelona a real contender in the European aviation scene (the lack of intercontinental routes is still BCN's main weakness). A precedent exists and it is positive, Ryanair also moved to take spare capacity after the T-4 terminal at Madrid-Barajas was inaugurated and its presence in that airport has contributed to a more competitive scenario that has benefited travelers. However, it must be said that whereas Madrid could count with the solid presence of Iberia as the dominant carrier, the situation at BCN is a bit more volatile, and the situation of the two main carriers currently operating out of BCN, Spanair in the full-service segment and Vueling as low-cost, looks (at least on paper) a bit more fragile...They have reasons to worry when seeing Ryanair at the gates...

Barcelona airport (BCN) or how to cope with simultaneous demand and offer shocks

foto: Terminal 1 by Ricardo Bofill (from Creative Commons)

Barcelona airport got its new terminal last month, almost doubling its capacity overnight, this would be alright was it not for the simultaneous demand and offer shocks the airport is facing.

Although designed in times of double digit growth the new terminal opens when the airport is experiencing its first decrease in passenger numbers in a very long time (-15% in the first quarter of 2009 compared with the same period last year). Europe is in the midst of one of the worst economic crisis in living memory and this would be worrying enough for an airport that relies almost exclusively on short and medium haul traffic, but is even worse when considering that the Spanish economy is among the hardest hit by the crisis. Tourist numbers are plummeting and some airlines have been cutting services (Easyjet has reduced capacity, British Airways is axing its Gatwick services). Other factors are contributing to the fall in numbers, the new high speed train link between Barcelona and Madrid has taken half of the market of the densest and most profitable route from BCN.

The recent merger between Clickair and Vueling, with the resulting company controlled by Iberia, is expect to bring some rationalization on some routes where the two companies had overlapping services. In the long term this might result in a stronger company able to maintain its base at Barcelona (Mr.O'Leary would probably disagree...).

And talking about Ryanair, the offer glut has not prevented Ryanair from opening a new base at Reus (REU), about one hour drive south of the center of Barcelona, to add to its current base at Girona (GRO), about one hour north. It seems that Ryanair is doing well in Barcelona (surely helped by the popularity of the city among the European city-breakers and young travelers). there was even talk of Ryanair eyeing slots at BCN...we do not know whether has there been a firm offer but it seems that the company expected some concessions that Aena was not ready to grant.

There is certainly the concern in certain sectors of Barcelona business and political spheres about BCN becoming an almost exclusively low cost airport. Hence, the takeover of the the troubled airline Spanair, engineered by a Barcelona-based consortium with the support of Catalan institutions, with the objective of making it the "Barcelona airline" (Vueling might also have some claim to the title). The hope is that its membership of Star Alliance will help Barcelona to become an alternative Iberian hub (although smaller than Iberia and Oneworld's at MAD). A challenging task indeed!
The reality in the short term is that Spanair does not have any long range plane in its fleet, so the long haul hub might have to wait, however the recent success of some Star Alliance partners at BCN (like the Singapore Airlines connection) allow for some optimism. Maybe Spanair could be a regional distributor, in the South-West of Europe for its long-haul Star Alliance partners? or will it continue to be a feeder for Lufthansa (a sort of Air Dolomiti)? time will say...the truth is that if it is currently difficult for BCN to become a hub, it has never had it better, since it is the first time that BCN is the base of two airlines of a respectable size.

Therefore, and despite the crisis, I am bullish on the long run prospects of BCN. It is the gateway to a densely populated and relatively rich area, with a diversified economy and some of the top tourist destinations in Europe. The airport itself is very close to the urban center (although could be better connected by public transportation with its hinterland)and there might well be a latent under served demand for direct long haul travel that is currently flowing through other airports (mainly MAD).

The 747s of the image might never materialize (smaller planes like the 787 might stand a better chance at BCN) but as Ryanair has proven at Girona (from nearly 0 regular traffic to 5,5M passengers in just over 5 years) sometimes offer can create its own demand...