Budget Airlines

Economic News

22 Jul 2010
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The recent influx of low-cost airline operators into the Bulgarian market is good news for passengers, who benefit from cheaper fares and a wider range of destinations.



However, the increased competition is creating new challenges for existing operators. Unless tourist numbers continue to rapidly grow, there is a possibility of an excess in supply in the next three years.



Even if the rate of foreign visitors to Bulgaria does not meet expectations, the new fares will encourage more Bulgarians to travel abroad.



The German budget carrier Germanwings, which is 49% owned by Lufthansa, announced last month that it would introduce connecting services from its main hub in Cologne to allow passengers to fly from Sofia to Paris, London and Berlin at a price of _60 ($88) each way.



This development followed an announcement from the Hungarian airline Wizz Air that it will start domestic flights in July 2008. The airline said it would run four flights per week between Sofia and Varna. Company officials said they would add another A320 passenger jet to its fleet specifically for these flights.



The company expects to fly 156,000 passengers in 2007. A company spokesman predicted that Wizz Air would be flying 1m passengers to and from Bulgaria by 2010.



Natasa Kazmer of Wizz Air told OBG, "By using modern, efficient A320 planes we are able to keep fuel and maintenance costs low. We are also more efficient with our bookings system and personnel. Eighty per cent of our bookings are made online, which is the cheapest method and Wizz flew 4.9m passengers with a staff of just 1200."



In early November the first easyJet flights touched down at Sofia airport. The British airline runs three flights per week between London's Gatwick Airport and the Bulgarian capital. An easyJet representative told local press he expected the route to carry more than 50,000 passengers during the first year the route is open.



The projected passenger numbers are impressive and the fares highlighted by company officials are not always what they seem. As is the case with many low-cost operators, getting the best fares requires booking seats well in advance of travel. A comparison of prices listed on the companies' websites shows that travellers wishing to fly from London to Sofia for a two-week winter holiday would pay around _274 ($402) each with British Airways (BA) while similar flights with easyJet would cost over _452 ($663) per person.



Emil Delibashev, commercial manager of BA for Romania, Bulgaria and Moldova told OBG that because of the distance between Sofia and London, "the cost of fuel means that the areas where 'no-frills' airlines have a competitive edge - such as faster turnaround times and limited personnel costs - have less of an effect of determining the price of the ticket."



It is unclear if the bold claims regarding passenger numbers made by operators, both low-cost and traditional carriers, can be achieved. Delibashev notes that 80% of BA's growth in the number of passengers comes from leisure travellers. According to data from the National Statistical Institute, over 6.5m tourists visited the country between January and September 2007, with Romania, Germany and the UK supplying most of the visitors. However, some analysts have said they believe that future growth in tourist numbers may slow as the main tourist hotspots on the Black Sea and in the Pirin mountains are beginning to earn a reputation for being overdeveloped. A recent international tourism forum in London forecast that bookings for Bulgarian ski resorts would not exceed last year's figure.



Kamen Kitchev, regional manager for Austrian Airlines, told OBG the 27% growth in passenger numbers to Bulgaria over the last year was the largest of all the southeastern European countries. He was cautious about the long-term future and said, "Growth in passenger numbers will increase over the next three years but with so many operators moving in and expanding services, there is a real risk of overcapacity after this time. Balancing the number of seats to the number of passengers is a constant challenge for airlines."



Wizz Air's Kazmer said that while traditional carriers still have an important role to play in offering business class services and connecting flights, they would have to compete on a more competitive cost basis in the future.



While the opening of the market and the entrance of new players create new challenges for operators, the real winners are the passengers and the Bulgarian tourist industry, with cheaper tickets and more destinations becoming available. Kazmer said, "Prior to the entrance of low-cost carriers, air travel was prohibitively expensive for the majority of Bulgarians. Operators such as Wizz Air are making foreign travel accessible to a much larger portion of society."



Sofia's airport saw an extensive $40m expansion and modernisation project in 2002 that increased capacity to 2.5m passengers per year.



Regional airports could also see more flights and investment especially as infrastructure improvements are sorely needed. Passenger numbers of 1.9m and 1.5m passed through the Black Sea airports of Burgas and Varna respectively in 2007 and the figure looks set to grow significantly in the coming years. In preparation Fraport Twin Star Management, which operates the two airports, announced last month it would invest $29m over the course of 2008 to improving facilities and staff training in the Varna and Burgas airports.

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