Airlines soon to become more like media companies?

We all know what the internet has done to print magazines...is it now the turn of the in-flight magazine?

As in-flight wi-fi becomes commonplace and airlines start to facilitate the use of hardware platforms on-board too, I imagine the days of the paper in-flight magazine are counted...

Airlines can find new ways to monetize the information gateways they open for their passengers, in an extreme case, they would become more like media companies, for example, Finnair is now lending iPads, but I can see Ryanair charging for such a service. Similarly, airlines can develop their own media products tailored to the specific interest of their travelers, for example Lufthansa's CloudStream...after all, they know quite a lot about their frequent fliers, and it opens the door to new monetization opportunities that have more in common with the online media rather than with traditional airlines.

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...

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.

The demise of Hamburg International Airlines

Another airline that has recently stopped operating: Hamburg International Airlines, from Germany, has joined the list of the recession's victims.

Hamburg International was no conventional airline, it was considered a "hybrid airline", operating a mix of scheduled and charter flights and, as this article explains, some of its routes were certainly off-the-beaten track (if such thing exists in aviation!), such as Germany to Iraq. It also operated a small mixed fleet of just 9 aircraft that included both Boeing 737s and Airbus A319s (that have now been returned to the lessors). Amazingly, a year before its bankruptcy the airline was contemplating ambitious expansion plans...

The demise of Hamburg International Airlines illustrates the difficulties small airlines face when they can not find the right positioning in the market.

Which airport does Santa Claus take off from?

Possibly Rovaniemi, Finland (RVN), at least this is the airport commonly assumed to be the closest to his home in the Finnish woods...or was it the North Pole? in that case, Ivalo, Finland (IVL) could be a better alternative, as it is farther North, although if he really lives in the North Pole maybe he should be taking off from Svalbard airport-Longyear (LYR), in the Svalbard islands, Norway, which happens to be the World's northermost airport with regular air services.

In any case, it seems that most European airlines have made their choice on where Santa's real home is, otherwise you wouldn't have over a dozen airlines from all over Europe flying every winter to the small town of Rovaniemi (pop.60,000) from tens of destinations such as Milan, Amsterdam or Budapest...However, looks like Easyjet and Transavia beg to differ...or at least they are hedging their bets, as they fly to Ivalo instead.

Wherever Santa's home is, though, one thing is sure, these two airports are the gateway to an amazing winter wonderland...!

Air Malta's struggle and the dependent island

Malta's lifeline (Photo: Wikipedia)

Government subsidies to airlines are a regular topic on this blog, however, up until now we had focus mostly on the funds governments pay out in order to develop air routes or airports, and devoted relatively little space to that government aid whose objective is to guarantee the survival of an airline.

We have, admittedly, seen less and less of these since the wave of market liberalization of the 90s and the stronger stance of the European Commission on these matters, however, a new, and I hope exceptional, case is back on the table. This time it affects one of the small players of European aviation, but one that can have a massive impact on the economy of one of the European Union members states: Air Malta.

I guess the capital importance of tourism and air travel in this island nation, that happens to be also the Europe Union's smallest member, has been the decisive argument in convincing the European Commission to give the green light to a €52 million aid package to Malta's ailing flag carrier. We saw in a previous post how the market is often able to adapt quite quickly to the demise of a relatively large carrier, however, the fact that tourism accounts for around a quarter of the country's GDP and Air Malta is carrying nearly half of this traffic, could make any less-than-immediate transition extremely painful for the island's economy.

When I was reading about the case I could see how many commentators had serious doubts about Air Malta's capacity to reverse its situation, an opinion that seems to be shared in Brussels too...in any case, the aid package is supposed to guarantee operations for the next 6 months, a time the Maltese authorities should use to prepare for the worst-case scenario and to make sure that a possible Air Malta's bankruptcy does not bring about the bankruptcy of the country too!

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)