Less than a year after swooping in to ‘save the day’, Ryanair has announced it is cutting its route network at Budapest Airport. Caroline Cook gets the facts.
When Malév Hungarian Airlines (MHA) collapsed on February 3, 2012, many felt that Budapest Ferenc Liszt International Airport would struggle to deal with the hefty blow. After all, the flag carrier accounted for 40% of the airport’s revenue and the majority of its transfer passengers.
A process of mass redundancy began and 250 employees lost their jobs, cutting the airport’s staff by up to 25%. All planned investments and developments for the year – worth up to €60 million (US$78m) – were halted.
Perhaps more disheartening, the news was announced less than a month after the airport had declared 2011 its most successful year yet, after handling 8.9 million passengers, an 8.9% increase year-on-year. Budapest had seen many improvements in 2011, including the opening of Terminal 2 and the new SkyCourt (see Airports International, June 2011).
Filling in the gaps left by Malév’s collapse, airlines including British Airways, Air France and KLM increased their frequencies on existing Budapest flights while Lufthansa, Wizz Air and airberlin announced new routes, but the biggest news came when European airline Ryanair stepped in with an ambitious “rescue plan”.
Within hours of MHA’s demise, Ryanair had issued a statement proclaiming that it would “replace most of the traffic and routes lost by Budapest”, following the grounding. Basing five new Boeing 737-800 aircraft at the airport and opening 30 new services, the low-cost carrier responded quickly and had its new operations up and running by February 17, a mere two weeks after the loss of Malév.
Ryanair had previously stated on January 24 that it would return to Hungary, after an absence of almost two years, with flights between Bristol, Dublin, Birmingham, London Stansted and Bologna. According to the airport the airline was offered support by the Aviation Marketing Fund (AMF), restarted by the Hungarian National Tourism Organization (HNTO), uniting the tourism board, airport and carrier together in a joint marketing effort to promote Hungary.
Budapest Airport was, unsurprisingly, delighted by the airline’s post-MHA announcement, with CEO Jost Lammers commenting: “We look forward to Ryanair’s long and continuous operations from our airport.”
However, the new services were not to last long. On November 22, Ryanair announced the closure of ten of its 30 routes and the loss of more than 170 of its 280 weekly flights from January 10, 2013. The airline is removing Baden, Birmingham, Bologna, Dusseldorf, Krakow, Lubeck, Malaga, Munich, Oslo and Thessaloniki from its Budapest portfolio.
The carrier blamed German operator Hochtief, which owns 49% of Budapest Airport’s shares, claiming that it “increased charges, refused to provide efficient facilities and failed to offer a competitive cost base for future growth offered by Ryanair.”
Because of its cuts, a statement from the carrier said that its traffic at Budapest would fall by 800,000 passengers per annum to 1.2 million, “leading to the loss of up to 800 on-site jobs”.
It suggested: “Hochtief’s failure to agree a long-term growth deal with Europe’s largest airline is further proof that Budapest Airport has no interest in growing Hungarian tourism, traffic and jobs as it repeatedly increased charges – even as its traffic declines.”
Ryanair will remove two of its based aircraft from the site and will drop the frequency on nine of its remaining 20 services.
The statement added: “Ryanair regrets these cuts and confirms that they can be reversed if a competitive cost offer and efficient facilities become available.”
Given this state of affairs, it is perhaps surprising to report that Budapest Airport remains positive about its ongoing relationship with the carrier. Kam Jandu, Director of Aviation, told Airports International that he was sorry to hear Ryanair’s statement but was not surprised, as route cuts from all airlines were expected for the winter season.
Admitting that the situation was precarious, Mr Jandu revealed that, before its statement, the carrier had been speculating about adding some more based aircraft and wanted discounts and incentives from the airport. While the airline will not give specifics, a spokesperson told Airports International that Ryanair did have a growth proposal for the airport’s consideration.
However, Mr Jandu went on to claim that Budapest Airport’s charges are “transparent and non-discriminatory”, so Ryanair could not attain the rates it sought. He also argued that charges had not been increased to the extent that the airline was claiming but mainly remodelled from the former conventional pricing structure.
Questioned on Ryanair’s accusation of disinterest in tourism, Mr Jandu fervently disagreed: “We are in partnership with the HNTO,” he said. “And new routes are always welcome. Ryanair wanted to increase some existing routes that we already have with other airlines, which is their prerogative, but it makes no sense for us to subsidise Ryanair or any other airline in forcing further competition – the market dynamics normally take care of that aspect.
“If we had agreed, it could have killed or inhibited other carriers. Ryanair is always very welcome at Budapest but the gap in the market [for unique routes] exists and that is where we would like to incentivise them.”
The carrier’s announcement stated that 40% of its route network from Budapest would be cut. According to Mr Jandu, experts believe the figure is nearer 35%, and he reiterated that it was more likely to be due to seasonal reductions driven by passenger demand rather than issues between the two parties in isolation.
He added: “We hope that Ryanair will automatically increase their routes in the spring but we will still be affected.” He claimed that the airline and the airport were still in talks to find a middle ground, but that any solution would need to be within the parameters achievable for other airlines.
The airport also challenged Ryanair’s estimate that 800 jobs would be lost. Despite Ryanair citing Airports Council International (ACI) statistics, Mr Jandu said it was more likely to be much less but would be interested to see how the 800 is calculated. “Nobody has 100% clarity. We don’t anticipate having to cut any of our own staff at this time.”
Ryanair told Airports International the ACI report states that one on-site job is created per 1,000 passengers. (Ed – The report was released in January 2004)
Speaking on behalf of Budapest Airport, Mr Jandu commented: “Ryanair is still one of our biggest customers and we would like to have all-new routes, without going head-on with other airlines. That is the reason why most airport incentive systems reflect this approach, so they increase their overall network reach.” He referred to the carrier’s close competition with Wizz Air, a low-cost carrier that remains the airport’s largest customer with six based aircraft and 35 destinations.
However, Mr Jandu is adamant that the airport’s relationship with Ryanair has not been damaged by the airline’s statement. He jokingly added: “I always say we are like two kids at a prom. We both want to dance but it’s just a question of who makes the first move.”
He insists that the airport attempted to accommodate Ryanair’s needs during the summer season, and Mr Jandu explained that this had included walk-on, walk-off boarding, and keeping the carrier’s extremely high punctuality record.
Budapest’s refusal to cut down its charges comes after another year of costly developments. In March 2012, the airport declared that its survival was at stake, following the collapse of Malév, amid the addition of a HUF4.2 billion (US$19.4m) unpaid claim from the flag carrier. Worse still, a new land tax modification draft was brought in by the Hungarian Government, “increasing the fee by 330%” to HUF2.25 billion ($10.4m). After reviewing its business plan for the year, construction of the planned Cargo City was postponed by two years.
Additionally, Budapest Airport opted to transfer its traffic temporarily from Terminal 1 to Terminal 2. Terminal 1 was running close to full capacity but the loss of the national carrier meant significant reserve capacity had become available at the recently opened Terminal 2. Terminal 1 was closed to passengers on May 29, 2012.
Since the relocation, Budapest has strived to get itself back on track. Road access to the terminal has been improved, a new, user-friendly car parking system was introduced during the summer, and new shops opened in September. A smartphone application was also launched to passengers in mid-November. Less than two weeks later, Budapest announced construction would soon begin for a new Business Park on the southern side of the airport.
Mr Jandu told Airports International about the airport’s new basic boarding gates (BBG) facility, which was introduced for carriers primarily looking for lower costs and faster aircraft turnarounds. After consulting its airlines, including Ryanair, Wizz Air and easyJet, the airport designed a concept of covered walkways from the terminal to the basic gates and onwards to the stands. Although building permits are required to make the gates permanent – expected by February, 2013 – temporary structures were opened in late October and more than 120,000 passengers have used them so far.
However, Mr Jandu said that Ryanair is not happy, despite its input throughout the consultations. “It doesn’t make sense that the airline is saying it’s not the right facility anymore. It was designed with the airlines in mind and helps to achieve Ryanair’s 25-minute turnaround,” he claimed, although he admitted that some of the airline’s requests could not be delivered.
According to Mr Jandu – the carrier was seeking to attain non-Schengen operations in the Schengen part of the basic boarding gates for operational synergies. He said: “It is out of the airport’s hands, but we’re not against it. We can’t decide the regulations. However, we are in talks with Ryanair and the border control police to come up with a solution.”
There appears to be some confusion though, as the airline’s spokesperson commented: “The new boarding areas, which we are told are a temporary measure, are not to the level we expected.”
It would appear that Ryanair is not the only dissatisfied airline. In November, it was reported that Wizz Air had begun using buses again to transport its passengers to remote stands, suspending the use of the BBGs. At the time, the airport emphasised that the gates did not hinder security or safety standards for travellers, but revealed that it was holding “senior level meetings in good faith” to improve the system. Mr Jandu has since said that any new product can experience teething problems and the airport expects to eradicate most of them in the coming weeks.
Budapest Airport has undoubtedly had a tough 2012. Mid-year traffic reports indicated that the airport had experienced a 10 to 13% decrease in passenger numbers, and the loss of almost 100% of its transfer traffic following Malév’s closure.
Low-cost carriers are becoming a more important part of operations at the airport, with figures showing that market share for that sector had risen to more than 50%.
However, the airport remains optimistic and, it appears, with good reason. Wizz Air alone is planning to launch flights in the next six months, including new services to Tel Aviv, Geneva, and Kiev. Even after Ryanair’s announced cuts, SAS Scandinavian Airlines declared it intends to expand its portfolio, with flights to Copenhagen and Oslo planned to be introduced for summer 2013.
In the meantime, Mr Jandu remains hopeful that reconciliation is on the horizon. “Ryanair is an important part of Budapest’s network map and we are looking to increase that. It is not too late to grow capacity for the summer – as no new national airline has materialised, a huge market opportunity still exists in Budapest.
“However, we cannot help the carrier to lower its costs to meet its network average. We are the only airport for the city of Budapest so we don’t operate in the same way, or for the same prices, as other Ryanair bases. It is an inherent challenge that we always come across, but we have not walked away from the dance floor just yet. In our financial position, we need to grow our business in a measured, rational and transparent way.”