New low-cost airlines swoop into Romania

Countries like Germany already have more than 50 low-cost airlines operating on the market, while there are only five such companies established on the Romanian market. At least another three airlines have announced their intention to enter the market by year-end while the low-cost division of Lufthansa, Germanwings, made its first flight on a Romanian route last week, becoming the sixth company operating out of Romania.
The reason for the arrival of so many airlines is the increase of air traffic created by EU accession and the potential increase in standards of living. Romanian workers from countries like Spain, Italy, Germany and many others are faithful flyers with the low-cost carriers. The increased traffic seen by airports like Baneasa and Otopeni for Bucharest is an assurance for the companies just entering the market.
Although in Romania low-cost airlines are just rushing to enter, on the international market the situation is different, with players expecting the market to consolidate with mergers and acquisitions foreseen for the years to come.
“From about 75 low-cost airlines operating on the international market, only around 10 will survive plus, some niche companies,” said Heinz Joachim Schottes, senior vice president of corporate communications for Germanwings, referring to the consolidation process of the airline industry. “The process has already started and we expected it to be faster than this – only last year three strong companies disappeared from the German market through mergers and acquisitions,” he added.
Analysts predict that in 2010 the low-cost operators' share of the European aviation market will reach 30 percent. It started from only seven percent in 2002 and had more than 16 percent in 2006. The estimates do not take into account the new markets from Eastern Europe, but refer mainly to mature markets from the low-cost operators' perspective. On the Romanian market, estimates are that low-cost flights have about a 10 percent share of the market, with the local operator Blue Air flying the biggest number of clients.
The experience of neighborhood countries, like Hungary, which entered the EU in 2004, shows that after EU accession when the open-sky agreement became valid for their markets, the entrance of new low-cost companies and the development of this segment accelerated.
On the local market, Bogdan Tanase, deputy general manager of Baneasa airport, believes that low-cost flights are supported mainly by so-called ‘ethnic tourists' and the demand for such flights is going to increase in the next period. In order to cope with this increase, the airport is waiting for the completion of a feasibility study which should lead to the doubling of its capacity.
“We decided to enter the Romanian market, too, as there is great potential here – especially now that the country joined the EU. The local economy is in full expansion and more and more foreign investors are attracted by the business environment here, so the passenger traffic between Romania and other European countries has considerably increased in the recent period and the trend will continue in the future,” Schottes added.
Germanwings started its operations on the local market on Sunday with a flight on the Bucharest-Cologne/Bonn route. The majority of the operator's clients – up to 42 percent – are flying for business purposes and company representatives are expecting the same proportion on the Romanian routes.
The Baneasa representative expects at least two more low-cost companies to enter the local market this year through his airport. “We are currently in talks with two companies. One is EasyJet, which is from the UK and should enter the market by summer, while the other one should start its operations here by the year-end,” Tanase said, declining to disclose the name.
Baneasa airport is the choice for the majority of the low-cost companies present on the local market.
But passengers who enjoy the airport's convenient location may find that their journeys from landing until destination get significantly longer, following a proposal signed by the Transportation Ministry which calls for the removal of the low-cost operations to another airport about 70 km away from Bucharest, as Baneasa is closer to the capital center which, the ministry argues, means that it should have higher taxes.
The Henri Coanda Airport in Otopeni, which is the biggest airport in the county, where traditional international carriers as well as local companies seem to be attracted, draws the low-cost airlines as well. Barcelona-based Clickair will launch its first Romanian route from Otopeni at the beginning of May. The low-cost airline is new on the international market, as it started in October 2006 in Spain. Company estimates foresee 4.5 million passengers carried in 2007, while in 2008 officials expect the number to increase to 10 million as they plan to branch out with 70 more flights.
The experience of neighboring countries shows that following the open-sky agreement the traditional airlines lost significant market share. Representatives of the national carrier Tarom seem to have woken up to this fact, as the company recently posted on its website offers for European destinations costing even less than some of the low-cost operators from the market. The offers are valid for the period between March and May, when the low cost companies do not usually have special offers in place.
The airlines currently operating on the low-cost market are the local Blue Air and CarpatAir, Italian Myair, Hungarian Wizz Air and Sky Europe.
Transport, Construction, and Tourism Minister Radu Berceanu supports the project of the merger of the two Bucharest airports, Aurel Vlaicu International Airport (Baneasa) and Henri Coanda International Airport (Otopeni). The merger into a single company called Aeroporturi Bucuresti, (Bucharest Airports) was made public in a government project. The authorities say that the merger is necessary because of the increase in the number of passengers and traffic restrictions imposed to protect the environment at Baneasa with its close proximity to residential areas. The merger, says the ministry, would create a recognizable company, able to secure important financial resources and make a flexible assessment of passenger traffic.
Transportation Minister Radu Berceanu announced the intention to move the low-cost operators from the Baneasa airport to Alexeni, about 70 km away from Bucharest. World wide, the low-cost operators use a secondary airport which is usually located outside cities, not closer to the center of the city, as is the case of the Baneasa airport.
The Airport in Alexeni is going to be developed in the next seven to 10 years, Berceanu said, adding that the services of the Baneasa airport will increase and the low-cast companies will be unable to afford operating there, effectively forcing them to move.

Roxana Mihul