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...