Hole in the sky: after the collapse of no-frills airline SkyEurope, its competitors prepare to fill the void on the market.
Thousands of travellers were stuck in airports after their air carrier declared bankruptcy. It is one thing to read such a line in the comfort of your home in a corporate news story describing what went wrong. Finding out on your mobile internet while abroad and with no idea how you will get home, the feeling is quite different.
For many Bulgarians, this story affects them directly, because the bankrupt airline is not one of the giants across the Atlantic, such as United Airlines, Delta or Northwest, but SkyEurope. The Slovak-based carrier serviced regular flights to Sofia and Bourgas, and it was no surprise that as soon as SkyEurope suspended all flights on September 1, its competitors were quick to offer travel packages for SkyEurope's distressed customers.
One man's plight is another man's golden opportunity and, despite the crisis in the industry and their own financial difficulties, a number of airlines have seized the opportunity to grab some market share and strengthen their positions on certain flight routes. Within hours, a price war was already raging, with both traditional and low-cost airlines joining the fray.
Czech Airlines were among the first to react, offering customers that had bought SkyEurope tickets prior to August 31 the chance to use the same tickets by paying an extra 50 euro for a one-way ticket. The offer is valid for 20 European destinations. Czech low-cost airline Smart Wings offered an even lower price for some destinations--49 euro, saying that the offer already included all airport fees. Its offer is valid until September 15.
Austrian Airlines, recently taken over by German giant Lufthansa, offered SkyEurope customers return tickets to Vienna for 150 euro, provided that they presented their SkyEurope tickets. Dimitar Dimitrov, regional manager for Austrian Airlines for Bulgaria, Macedona, Kosovo and Montenegro, said that the offered price included all fees. Another Austrian company, FlyNiki, owned by former Formula 1 champion Niki Lauda, priced its "rescue package" at 99 euro.
According to reports in Bulgarian media, Bulgaria Air offered to change its schedule and offer additional flights for SkyEurope customers with tickets to Vienna, pricing its offer at just more than 100 euro.
Europe's leading low-cost airline Ryanair also joined the fight for new customers, offering an extra cost of only 25 euro (all fees included) to service SkyEurope tickets, valid until September 20 and covering flights until December 17, but the Irish airline does not fly to Bulgaria.
Britain's easyJet offered to service SkyEurope tickets on the London-Prague, London-Vienna and Milan-Prague routes, for an extra cost of 40 euro, provided that ticket-holders give their SkyEurope reservation numbers. However, given that the routes serviced by the two companies did not overlap much, easyJet said it did not expect to see a drastic increase in the number of customers in the wake of SkyEurope's collapse.
The alternative for SkyEurope's customers is to demand their money back. Customers that paid using credit cards could contact their card issuer, and travellers who booked a flight through a travel agent stood a good chance as well. But those customers that paid in any other way were unlikely to receive a refund, SkyEurope said.
... and opportunities
Hungarian low-cost airline Wizz Air saw not only an opportunity for a short-term gain in passenger numbers, but for its long-term business development. The company is already the leading no-frills operator using Sofia Airport and, with seven million passengers annually, is the biggest low-cost airline in Central and Eastern Europe. The Hungarian airline offered all customers with SkyEurope tickets for flights to Prague and Budapest for the period September 1 2009-March 26 2010 the chance to book one-way ticket on a Wizz Air flight, for an extra cost of 30 euro, with all fees included. The deadline for bookings is September 15.
Furthermore, Wizz Air showed good reflexes in saying that it would increase the frequency of flights to some of its existing destinations as early as September and October, as well as launching new flight routes in 2010.
Fighting for Bulgarian customers
Wizz Air's efforts to expand its range of destinations are already yielding results, with its business in Bulgaria on the increase. In the first six months of the year, the company has nearly doubled the number of customers served--266 000--compared to the same period of 2008. The growth on the Bulgarian market has exceeded the company's total growth of 30 per cent in passenger traffic for the first half of 2009. While Wizz Air was not immune to the crisis, it was ready for the challenge with low prices, an extensive network of destinations and its new jets, company spokesperson Natasa Kazmer said.
Easyiet's business in Bulgaria has also been growing strongly, increasing by 144 per cent to 130 000 in the first half of the year. Overall, the British airline posted a 0.24 per cent decrease in passenger numbers, but its business in Bulgaria thrived with the opening of new destinations, the company said.
Low-cost airlines have become increasingly popular in Bulgaria, as shown by Sofia Airport statistics for the first half of 2009. Their market share was 27 per cent of the passenger traffic at Bulgaria's biggest airport, compared to 12 per cent in the first half of 2008 and 20 per cent for the entire last year, according to data quoted by Dnevnik daily.
Thank you for flying with us
Evidence shows that low-cost airlines have been dealing with the recession better than their classic counterparts, because they are offering what customers want in a time of crisis--low prices. While the number of passengers carried by big airlines is declining, especially in the lucrative segment of business travelling, the decline experienced by the low-cost arilines has been smaller, while some have even managed to keep growing--Ryanair, Wizz Air and Norwegian Air Shuttle, to name a few.
Customers have turned their backs on traditional and more expensive airlines, according to easyJet, which is counting on more business travellers in the future as companies cut down on expenses.
The same trend is bad news for Austrian Airlines, according to Dimitrov. The economic slowdown in Eastern Europe came with a sizeable lag, but the expectations were that the decline would be felt during the summer, a forecast that came true, he said.
"Within the airline industry, the times of greatest threat also provide the moments of greatest opportunity," Dow Jones Newswires quoted Nick Kirrage, co-manager of investment fund Schroder Recovery Fund, which holds airline stocks.
Clearly, SkyEurope, founded in 2001, did not find a way to survive. Since launching commercial operations in February 2002, it did not post a profit and the recession dealt a deadly blow with rising fuel prices and falling demand. In June, the company sought and received creditor protection. In July, its passenger traffic declined by 37 per cent as customers fled. Unpaid airport fees prompted Vienna Airport to stop servicing SkyEurope in mid-August. On September 1, Bratislava Airport suspended flights and Prague Airport did the same a day later.
Slovak civil air administration rescinded SkyEurope's licence and issued a temporary one for the duration of its restructuring, which also allows the company to carry out airline operations. This means that travellers have certain rights, such as the airline refunding tickets in the event of a flight cancellation, as well as requiring the airline to offer alternative flights, cover hotel stay costs and telephone charges. In case the company has not notified its customers on time about flight cancellation, the travellers have the right to seek damages.
SkyEurope's bankruptcy came at a time when the decline in the number of airline passengers has been showing signs of slowing down. It could be the long-awaited light at the end of the tunnel that will fill the hole in the sky over Europe. Until then, analysts will continue to wonder who will be the next victim.
Most of the 114 passengers of the SkyEurope flight due to depart from Sofia on September 1 had been notified in advance about their flight cancellation, because they never showed up at the airport, Sofia Airport said. Some irate customers took out their frustrations on employees of Sofia Airport, in the absence of an airline representative, airport officials said. After SkyEurope had to return four jets for failing to keep up with its leasing payments, the frequency of flights to Sofia deteriorated and arrival delays of more than one hour became routine. On August 22, SkyEurope customers had to wait eight hours at Sofia airport, with no reaction from the airline. Until August 14, the Slovak airline carried out daily flights from Sofia to Vienna, but when Vienna Airport barred its jets from landing there, the flights arrived at Bratislava Airport and were ferried by shuttle to Vienna.