Flight sector surges ahead of May 1

From Warsaw Business Journal

by Kamil Tchorek

Ahead of a boom in demand for travel caused by the proliferation of low-fare
airlines and greater economic integration across the continent after EU
expansion in five weeks' time, airlines are snapping up new routes at an
ever more frenetic pace.

But in desperation to claim new territory as fast as possible, companies
risk overstretching themselves in a year when the sector is only just
beginning to move back into growth. In a strategic move to protect its
pan-European future, tiny low-fare start up Air Polonia (AP) has agreed to
code share with Italian carrier Volareweb, ensuring that there will be no
competition on routes between Italy and Poland. Volareweb is expected to
operate Venice-Warsaw, while AP is expected to operate Warsaw- Rome. "The
cooperation is intended to avoid competition between low-fare airlines on
these routes," says AP's Eryk K³opotowski. "You can see the same thing
happening in Germany, where German Wings and Air Berlin tend not to compete
on the same routes." AP's international offer began with a Warsaw-London
Stansted route, and already extends to Paris, Brussels, Madrid, Athens,
Cologne, Frankfurt and soon Rome. The company expects to carry around ten
times more passengers this year than it has done since the start of
scheduled flights in December. Ryanair, the European low-fare sub-sector
leader, long kept out of the Polish market for want of purpose-built
low-cost airports in this country, may at last be in a position to apply its
strategy to the Polish market. Morrison and Infratil, an airport developer
partnership associated with Ryanair bases, have come to Poland for talks
about an investment in Kraków, inviting speculation that this will be
Ryanair's first Polish destination. Air industry analysts predict that world
air travel will grow by around seven percent this year, much of the amount
being produced by a recovery from worries about SARS and the possibility of
terrorism. Airline strategists anticipate the same and are ensuring that
they are able to head off demand by massively enlarging their offers. While
EU enlargement is expected to create interest from Western European tourists
and businessmen alike, an interest that will turn into flight passenger
numbers, non-essential trips will still be driven down by Europe's slow
economic recovery compared to the rest of the world. However, Lufthansa's
European sales and marketing vice-president, Ulrich Wachter, was in Warsaw
last week to tell the press that the German flag carrier expects 10 percent
growth in passenger numbers this year and, in order to profit from it, will
open new routes between Munich and Kraków, Poznań and Gdańsk. "Poland is
becoming a significant playing field for low-cost carriers," said Wachter,
"but it shouldn't put all traditional airlines out of business." Wachter
sites a 2003 McKinsey report on the airline business indicating that while
traditional carriers will lose market share to newcomers, overall passenger
volume is set to grow this decade to the relief of all. At the other end of
the scale, GetJet is trying to start its operations after several delays by
securing a part buy-up of its parent company Silesian Air by TSB Holdings.
Furthermore, another crucial development for the firm has been indications
from the Civil Aviation Authority (ULC) that it is willing to grant it a
carrier license in due course. "German Wings was granted a license. Wizz Air
and SkyEurope have applied for licenses, but these have not yet been
issued," ULC press spokesperson Adam Borowski said last week. German Wings
is set to start a Cologne-Warsaw route within weeks, while SkyEurope
announced its intention to enter the Polish market one month ago, hoping to
link Warsaw with low fares to Vienna, Bratislava and Budapest. In keeping
with the consensus that a rush to the Polish market makes sense, SkyEurope
Airlines CEO Christian Mandl states, "Poles still suffer from a poor choice
of airline services. SkyEurope will offer Poles a choice of popular
destinations at z³.99 (€20) for a one-way fare." By year-end, Poland
will be served by up to seven new airlines and many times the number of
routes. Analysts' predictions that the market may become oversupplied will
already be tested by that time. In this era of uncertainty for air travel,
the survivors may be the airlines who are able to identify a loss-making
route fast and adapt quickly. A small example of bigger things to come is a
recent move by AP, which has already discontinued its Warsaw-Gdańsk route,
which was deemed unprofitable after just a few weeks of operation.