Low Cost & Regional

Vienna Airport: How the European airport is dealing with a surge in capacity

Vienna Airport

Vienna International Airport is like a dancefloor for Europe’s budget carriers. We look closer at the recent surge in capacity.

Currently, it seems all roads lead to Vienna, the Austrian capital. This is certainly the case with many European low fare operators, as well as other airlines from further afield.

Following the demise of NIKI and airberlin, which both had considerable capacity out of Vienna, there has been strong growth by LCCs and the Lufthansa Group.

Benefitting from its historically significant geographic location, Vienna has for some time been a market of mystery for many.

Regarded for many years as a gateway to small niche markets in Central and Eastern Europe, the airport had a perception of above average yields, regional jet services, and an almost secret collection of airlines operating there.

However, things are changing very quickly. In 2017 Vienna Airport handled 24.4 million passengers – up by 4.5 million on the previous year, as data from the airport shows.

Also, data from air travel specialists OAG highlights a significant growth trend.

“Consistently within the top twenty European airports based on scheduled capacity, Vienna is the adolescent that never grows up, having ranked between thirteenth and nineteenth over the last ten years,” observes John Grant, senior analyst at OAG.

Grant says 2018, however, looks like a year of significant change, with year-on-year capacity growth of over 9per cent making the airport the second fastest growing amongst the top 20 airports in Europe, with Lisbon in first place.

At the Vienna location, the number of passengers increased by 5.5per cent from January to June 2018 to 11,840,245 passengers.

For the full year 2018, the company continues to expect passenger growth of at least 8per cent in the Flughafen Wien Group [operators of Vienna Airport], and at least 6per cent in Vienna Airport, according to the airport’s figures.

Vienna’s Central European location is reflected in the share of capacity offered to points within Europe compared to its peers.

Grant notes that with some 85per cent of seats destined to other points in Europe, Vienna’s location would appear to be a key strength, although perhaps some strategist would argue equally a bit of a weakness. “Either way, its reliance on a market with few travel and visa restrictions would be a desirable position for many competitors,” he reckons.

Vienna Airport
Vienna Airport handled 24.4m passengers in 2017

Throughout the last decade the strength of the base carrier, Austrian Airlines, has provided a solid foundation for the airport’s capacity development, regularly producing around 48per cent (OAG) share of all capacity; a balanced perspective that any airport would like to see from its largest carrier, Grant notes – “Enough to be strategically important, but not enough to scare away others!”

Austrian Airlines increased its traffic volume in the first nine months of 2018, transporting 10.6 million passengers according to the airline.

From winter 2018, the flag carrier has announced a string of new long haul destinations and frequency increases, including a new route to Cape Town and additional capacity to regional services in Eastern Europe.

Indeed, OAG figures show that in the last year just over 900,000 new seats have been added by new airlines operating to Vienna, including services from Laudamotion (formerly Niki and now partly owned by Ryanair), Wizzair and LEVEL, whilst easyJet increased their capacity by some 387,000 seats year-on-year.

“Collectively, those three new entrants account for only 5per cent of all scheduled capacity, but accounted for the vast majority of capacity growth at the airport in the last year, leading to a modest change in the mix of operators at the airport. In 2018, some 3.4 million seats will have been supplied by low cost airlines, an increase of nearly 35per cent compared to 2017,” Grant indicates.

Laudamotion, the new LCC that ‘resurfaced’ in the wake of NIKI’s demise, is growing aggressively. The airline is adding 20 routes from winter 2018, with the carrier has reporting more than three million bookings since the start of its operations
in March 2018.

“With the new track recordings from Laudamotion, passengers receive an even wider selection of destinations, making the winter timetable at Vienna International Airport more diverse than ever,” stated Mag.

Julian Jäger, CEO of Flughafen Wien AG at the launch of the winter schedule in late October. He added that Laudamotion was on course for growth and would thus contribute significantly to the upcoming passenger record at Vienna International Airport.

In 2019, the airline expects to capture five million passengers. “Laudamotion is setting strong growth impulses at the site,” Jäger continued.

Clearly the airline is committed to growth, but as experience shows, growing too quickly can have pitfalls. However, with significant backing from Ryanair, it looks likely that the growth curve will continue.

Vienna Airport
Grant says for many airports the case for low-cost airlines has centred on market stimulation

Another significant move was that made by easyJet, with the establishment of a subsidiary based in Vienna, simply titled easyJet Europe.

The airline was established in July 2017, and started operations the same year, with the first flight being an Airbus A320 (re-registered as OE-IVA, previously G-EZPA) flying from London Luton Airport to its new home base at Vienna Airport.

The airline was established following the UK referendum vote to leave the European Union, and the airline’s decision to obtain an Air Operator’s Certificate (AOC) in another EU member state was made in order to continue operating flights across and within European countries after the UK leaves the EU.

From July 2018 International Airlines Group (IAG) followed with the launch of its own new Vienna- based low cost Austrian subsidiary, branded as LEVEL. Armed with its own Austrian AOC, the airline based four Airbus A321s in Vienna, from where it started flying to 14 European destinations.

During the launch, Willie Walsh, IAG’s Chief Executive said the new short haul subsidiary was established to provide Austrian consumers with more flight choices across Europe.

“These flights are branded as LEVEL to build upon the huge success of our new long haul low cost operation.  “We serve the Austrian market with low cost, reliable flights, and will initially create around 200 new jobs at our Vienna base,” Walsh stated.

Each of the A321s operated by LEVEL in Austria have 210 economy seats and flights operate from Terminal 1 in Vienna Airport.

The airport has also seen capacity increases from inward looking carriers. In October, Adria Airways began connections from Vienna directly to Paderborn in eastern North Rhine-Westphalia. This is the second destination by the Slovenian airline from Vienna.

Travel destinations in North Africa are also becoming increasingly popular, and passenger volumes have increased significantly since the beginning of the year, the airport reports. Moroccan LCC Air Arabia Maroc recently added new services from Vienna to Marrakech twice weekly.

“With the new flight connection, there are now up to five weekly direct connections from Vienna to Marrakech. Travel from Vienna Airport to Africa increased by 37per cent in 2017, and by more than 30per cent since the beginning of 2018. Morocco is an attractive holiday destination right now in the cold season and we expect further growth here”, said Jäger.

Perhaps more alarmingly, when looking to the first half of 2019 and drawing comparison against 2017, low cost airline capacity will have increased by over 55 per cent in two years, a rapid rate of growth by any measurement standards, OAG’s Grant analyses. “However, in absolute terms low cost capacity will only just have reached 20per cent of the airports total capacity by June of 2019, by many measurement criteria below industry averages in Europe suggesting that there is perhaps space for such growth to be absorbed.”

Vienna Airport
easyJet established a base in Vienna in July 2017

Grant further states that for many airports the case for low cost airlines has centred on market stimulation, the creation of new city pairs, and of course greater activity and asset utilisation.

In the context of airport pairs, Vienna seems to have a large degree of overlap between those points served by legacy and low cost airlines.

“Over one quarter of all airport pairs operated are served by both carrier segments; which of course suggests some opportunity for competitive fares being offered across carriers in both segments [low cost and legacy], especially as we head for the notorious months of January and February.”

For Vienna perhaps, the market gap lies in the development of long haul low cost services, and that is perhaps where the dilemma of being such a Eurocentric network challenges further development. “With the increasing emergence of the self-connecting passenger and the development of products such as Worldwide by easyJet, as well as competing airports creating their own branded connecting services long haul low cost may just be out of reach. All of which will be comforting to Austrian Airlines and their own long haul services.”

Grant feels that ultimately for Vienna, there appears to be more opportunities for the development of both sectors.

“Geographic positions never alter, and that places Vienna in an ideal location for network development from legacy carriers in growth markets such as China, Southeast Asia and the Middle East. Whilst at the same time the relatively small share of capacity from low cost airlines would suggest that there is further opportunity for growth,” he says.

In fact, long haul connectivity is taking off. Recently announced connections include new services to Montreal from next year and Hainan Airlines now connects Vienna with the Chinese high-tech metropolis of Shenzhen. The connection is served twice a week with a 787.

However, on a cautionary ending, any significant low cost carrier capacity growth in a short period of time may be too much for the market to absorb, leading to a potential reset at some point in the future.

“But, should that happen, then the Viennese market will show its usual resilience and continue to dance as the market grows,” Grant concludes.

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