Highlights in this Issue

No Frills carriers: Revolution or Evolution? p. 4

A Five Forces Analysis of the Central European Market p. 6
World Travel Market Conference 2006 p. 8
LCCs in Russia p. 11
LCCs in Poland p. 13
The Low Cost Carriers Analysis Newsletter
AIR SCOOP ANNOUNCEMENTS
EDITORIAL Air Blow - News In Brief

L
ast May, Air Scoop made a special issue on Central and Eas-
tern European LCC markets. These markets are more than
ever under heavy competitive pressure (p. 13), especially since
powerful “Islanders” decided to invade them (p. 14). Maciej Kwia-
tkowski, CEO of Centralwings, Polish LCC, has kindly answered
to our questions about his company, his market and his competitors
(p. 2). These C&E markets are also important as they are conside-
red as a step towards far eastern areas, such as Russia (p. 11-12), for
many European LCCs. Indeed, German LCCs prefers to attack these
new markets with currently low LCC penetration rather than wes-
tern European markets (p. 11). Russian airports are also aware of the
opportunities and threats created by the development of low-cost
carriers in these markets (p. 12). The use of SWOT Analysis or Mi-
chael Porter’s Five Forces framework (p. 6-7) applied to these mar-
kets is really relevant to understand factors of influence and to anti-
cipate as best as possible future mutations. For instance, Ryanair is
generally given top billing for generating non-ticket revenue from its
passengers. But another star may steal a portion of the spotlight from
Europe’s top low cost carrier (p. 5). A recent study from the Civil
Aviation Authority (CAA) pointed out benefits of European LCCs,
but also revealed that socio-economic profiles of air passengers have
not changed (p. 4). The release of this study matched with the World
Travel Market 2006 in London (p. 8). This was an opportunity to
meet some delegates and speakers, like Vojin Vlahovic (Director
of Montenegro National Tourism Organisation) and Niko Bulic
(Director of Croatian National Tourist Board) and to know their
points of view on Low-cost carriers in Europe (p. 9). This event was
also a chance to discover smaller carriers, such as Fly Gibraltar (p.
10).
Air France-KLM announced the launch of a
new LCC.
Based in Paris Orly Airport, it would be mo-
deled on its subsidiary: transavia.com, and
jointly owned by Air France (60%) and tran-
savia.com (40%). The French-Dutch legacy
carrier wants to benefit from the important
leisure market with this medium-haul carrier
with “southern” destinations (Morocco, Spain,
Tunisia…).
Ryanair announced a third base in Spain by
the end of 2007.
Ryanair has already two hubs in Spain in Gi-
rona and Madrid, and is still negotiating with
five Spanish airports to decide where to settle
its last base.
Air Scoop - In the Air
Vueling: a base in Paris

As the year 2006 finishes, the whole Air Scoop Team wishes you a
merry Christmas and a great new year 2007! We would like to thank
all our readers who have made this first year of Air Scoop newsletter
such a phenomenal success. See you in 2007 for more LCCs analysis,
exclusive interviews of LCCs leaders, full LCCs events coverage, and
many new projects yet to come. Ryanair and
UAV 737RS

Air Scoop - November 2006 www.air-scoop.com


Exclusive Interview of Maciej Kwiatkowski,
(CEO of Centralwings)
Could you please present Centra-
lwings to our readers? What are your
specificities compared to other Euro-
pean LCCs? What do you do better
than your competitors?
Centralwings has been operating fli-
ghts into the UK since February 2005
and into Ireland since October 2005.
We operate routes into London Ga-
twick from Warsaw and Krakow;
Edinburgh from Warsaw, Gdansk and
Katowice; Shannon from Warsaw;
and Dublin from Wrocław, Gdansk
and Katowice. We have carried over
1.9 million passengers since the begin-
ning of our operations. Centralwings
operates nine Boeing 737 400s and
300s. The fleet is serviced and main-
tained at a certified technical base of
PLL LOT.
We offer our passengers all kinds of
services to make their travel easier,
faster and more low cost. Centra-
lwings gives wide variety of payment
methods, by money transfer, cash or
credit card. Our passengers are able to
choose their seat at the check in and
pay less for any excess luggage then in
any other low cost airline.
Children aged between 2-16 years old
are eligible for a 20 per cent discount
when traveling with Centralwings,
and there is no charge for infants un-
der 2-years old. Passengers needing to
check in excess baggage can pre-book
at a discounted rate via the Centra-
lwings website. We also offer two op-
tions for travel insurance, group rates,
special offers, car rentals, hotels and
much more. Our Call Centre is availa-
ble in five language versions and our
Website – www.centralwings.com - is
one of the three most popular websi-
tes in Poland with more than six mil-
lion page views per month.
We are the only Polish low cost airline
operating from seven regional airports
in Poland, carrying people to and from
2 Air Scoop - November 2006
BIRD’S EYE VIEW
Maciej Kwiatkowski,
CEO of Centralwings
many attractive destinations all over
Europe. We know the market and
we know it well. We want to be as
attentive as possible to our passengers
needs - offering good quality and best
standards.
Ryanair, easyJet and Wizz Air have
number of Polish nationals choosing
announced the launch of new routes to travel for business and occupatio-
to Polish market. How do you plan
nal opportunities; for tourism; and
to manage such competition in this to visit family and friends. We also
market? What are your advantages
provide visitors to Poland with access
on this market? to some of the most beautiful and ex-
citing destinations, such as Krakow,
In addition to the routes mentioned Wroclaw, and Gdansk.
above, Centralwings has added 11
new routes to its schedule for win-
“Islanders” (Ryanair and easyJet)
ter 2006/7. Centralwings operates need to find new attractive destina-
the largest number of the flights on
tions to maintain their growth; The-
the Polish market during this season. refore Central Europe represents an
This includes 6 new flights to the UK
important market for these LCCs.
and Ireland (from Warsaw to London Who are your most dangerous com-
Stansted, Gdansk to Shannon, Wro-
petitors: ‘Centralers’ (SkyEurope,
claw to London Stansted and Cork, Wizz Air, Estonian Airlines…) or
Krakow to Cork and Szczecin to Du-
‘Islanders’: Now? In near future?
blin). This winter we offer a total of
24 connections.
Poland is the second fastest growing
We operate to the UK, Ireland, Ita- air travel market in the world after
ly, France (routes to Lille and Paris
China. Central Europe is very compe-
launched this winter) and other mar- titive, with the presence of all the ma-
kets. We also offer charter flights and
jor European players. Even this year,
charter-mix products (in the win- there have been new entrants. Cen-
ter season this year this will feature
tralwings has just celebrated a second
Grenoble - very popular with Polish year of operations during which time
skiers last year and a successfully
it has become third largest player in
performing route for Centralwings). the Polish LCC market and achieved a
During the summer seasons we also
17 per cent share of the market. Next
operate Mediterranean charters to year, we will build on this strong foo-
holiday destinations in the Greek Is-
ting. Healthy competition is very good
lands and Sicily. These are extremely for passengers in terms of pricing and
popular with Poles. At present we are
the wide variety of schedules and ser-
a major charter operator within the vices available. We are able to offer
Polish market, with a 33% share of the
attractive discounts and promotions
sector. We are able to combine ticket to our customers, offering tickets so-
sales for tour operators with direct
metimes for as little as 1 euro, pound
online sales through charter-mix. or zloty.
Currently the most important stra-
tegic markets for Centralwings are
the UK and Ireland, due to the large
www.air-scoop.com

The European Low cost carriers
market has reached a certain ma-
turity which leads to its consolida-
tion. During this transition, what
are, for you, the greatest threats
to the European Low cost carriers?
Fuel rising? Overcapacity? Evolu-
tion of airports? Regulation?
As a Polish low cost airline operating
from a large number of Polish regional
airports, we see operational efficiency
as paramount. Some airports struggle
to keep pace with the growth of the
market and the increased traffic, and
monopolies exist between handling
companies, fuel providers, agents and
airports. Fuel prices and security at
airports also have an impact on airli-
nes, particularly the low cost sector,
which operates with lower margins.
The key for us is to ensure that we
are able to react quickly to the sligh-
test changes within the market – resi-
gning routes that are not performing
well enough and moving operations
to more profitable locations, whilst
retaining our standards of quality and
service.
Many LCCs look after extra-reve-
nues to offset the low price of their
tickets. What are the projects of
Centralwings in terms of Extra-re-
venues?
Extra revenues are very important
for low cost airlines such as Centra-
lwings. Ancillary profits derive from
BIRD’S EYE VIEW
the different kinds of activities that
the airline undertakes. Our onboard
sales are working well and continuing
to develop. We offer a special menu
during flights as well as duty free
service available during flights out-
side the EU (charter flights). There
is a special offer for children who fly
with Centralwings - the Captain
Bear menu. Toys and gadgets are
available to keep youngsters amused
during the flight. Passengers also have
a unique opportunity to send a post-
card from onboard the plane, with
greeting courtesy of Centralwings.
Advertisers from all over Europe can
use our media products to raise their
profile. Adverts can be placed on
tip-up tables, seats, headrests and a
range of other surfaces. During the
first quarter of 2007, Centralwings
will launch the first issue of its in-fli-
ght magazine.
Do you believe that consolidation
of the market will lead to 2-3 main
LCCs in Europe, or do you think
there will always be many LCCs on
niche markets?
Consolidation is a very probable sce-
nario in the medium term for the
LCC sector. This may mean that in-
vestors choose to collaborate with
other investors to streamline their
efforts and manage financial risk.
Are you worried about the shortage
of pilots and crew hitting LCC mar-
ket?
There are concerns which all airli-
nes will need to address, due to the
dynamics of the growth in the LCC
sector. As the market grows, more
pilots are needed. Centralwings has
a highly qualified group of pilots and
is in a strong position to deal with
this challenge.
What are the options for Centra-
lwings to transform its business
model in order to make more costs
savings?
Since taking up my role as CEO in
June, my goals have been to build the
strategy for the airline and focus on
cost efficiencies. Our primary aim is
to reach profitability and also to be a
low cost, and sustain our market po-
sition through dynamic growth. Ear-
ly on, I identified short, medium and
long term goals for Centralwings.
One of the most important long-term
goals is to find an alternative base as
Warsaw does not currently meet our
needs as a low cost airline. Medium
term goals focused on cost savings in
different areas of our activities and in
some cases to renegotiate contracts.
The first task was to review the per-
formance of routes and make overall
improvements to our flight network.
We are aiming to reach profitability
(break even point) in 2008.

UPS AND DOWNS

Vueling: The Third European LCCs IPO of 2006
Vueling Airlines has received the approval of the stock market regulator CNMV for its forth-
coming initial public offering. The Spanish LCC aims to collect around €100m in fresh equity
to support its rapid expansion from current bases in Barcelona and Madrid. Some 42.62 per
cent of the airline should be floated, and this could rise to 46.88 per cent. In its IPO prospec-
tus, Vueling said it expects revenue in 2007 to nearly double to 427.2 mln from the 237.8 mln
expected this year. Vueling is the third European airline to be floated this year following Air
Berlin and Ireland’s Aer Lingus. Both of these carriers had difficulties with the launch of their
IPO. What about Vueling?

3 Air Scoop - November 2006 www.air-scoop.com

 BIRD’S EYE VIEW
ANALYST PORTHOLE
No-frills carriers: Revolution or Evolution?
The Civil Aviation Authority (CAA) has released a study entitled No-frills carriers: Revolution
or Evolution? This study points out benefits of LCCs, but also reveals that socio-economic pro-
files of air passengers have not changed. Analysts of CAA agree that Ryanair, easyJet and other
LCCs have revolutionized the European short-haul market. They had a deep impact on busi-
ness travelers, especially on lower income business travelers. However, the study also adds that
passengers taking LCCs have mostly the same profile than before. This point is interesting as it
contradicts most of LCCs communication which insists on the fact that many of their passengers
couldn’t afford airlines tickets before them.
LCCs had two simultaneous effects: a push and a pull effect. The “push effect”: the coming of LCCs has increased routes
and choices of destinations for passengers. The “pull effect”: some cities have experienced a decrease in long-term tou-
rism demand because of the decrease in domestic demand as domestic tourists use LCCs to travel abroad.

No-frills carriers: Revolution or Evolution? is available there: http://www.caa.co.uk/docs/33/CAP770.pdf

European LCCs Network in 2000 European LCCs Network in 2006

LCC EVENT

The 4th French Connect takes place on 25-27th April 2007 in La Baule. This unique event offers you the op-
portunity to network with some of the most influential people in European Low Cost aviation.
French airports, the legislators and Europe’s low cost operators all in one place with first-class conference faci-
lities, superb hotels and dining and a relaxed, entertaining business environment : book your place today!
For further information, please check www.frenchconnect.net

4 Air Scoop - November 2006 www.air-scoop.com

 DOWN TO EARTH
Allegiant Air Declares its Ancillary Revenue Manifesto
Ryanair is generally given top billing for generating non-
ticket revenue from its passengers. But another star may
steal a portion of the spotlight from Europe’s top low cost
carrier.
Allegiant Air generated ancillary revenues of €10.79
(US$13.58) per passenger during the first 6 months of
2006, which bests the €7.84 (US$9.87) posted by Rya-
nair for the same period. This activity translated into
total ancillary revenues in excess of €10 million (US$12.6
million), which admittedly were dwarfed, by revenues
of €147 million (US$185 million) reported by the far lar-
ger Ryanair for the same period. But Allegiant’s results
are remarkable due to the competitive environment that
exists in the U.S. air travel market.
Las Vegas based Allegiant Air has strayed from the mo-
del currently favored in the United States which bundles
amenities in the price of a ticket. Many US-based LCCs
don’t charge extra for advance seat assignments, checked
baggage, onboard beverages, video entertainment, and
payments made by credit card. The phrase “ancillary re-
venue” has not yet captured widespread use. In contrast,
Allegiant Air described its ancillary revenue manifesto in
its recent common stock prospectus filed with the U.S.
Securities and Exchange Commission (SEC):
“We believe most leisure travelers are concerned prima-
rily with purchasing air travel for the least expensive price
and do not value many of the amenities provided by most
other airlines for free. As such, we have created new sour-
ces of revenue by charging fees for services most U.S. airli-
nes currently bundle in their product offering. We believe
by offering a simple base product at an attractive low fare
we can drive demand and generate incremental revenue
as customers pay additional amounts for conveniences
they value. We aim to continue to create new revenue
sources by further unbundling our product.”
While this strategy may be little used in the U.S. market,
it’s difficult to argue with the success enjoyed by Alle-
giant Air. According to the same SEC filing, Allegiant
Air achieved revenue growth of 46.6% for fiscal year 2005
over prior year results. Its cost structure may be the envy
of the U.S. airline industry with an 18.3% advantage over
the average costs of its LCC peers. Allegiant’s profita-
ble record, emphasis on low costs, and drive for ancillary
revenues places it closer to Ryanair and the European
model of offering consumers low fares and an unbundled
product.
5 Air Scoop - November 2006
‘‘IDEAWORKS AISLE’’
by Jay Sorensen
(President of IdeaWorks)
www.IdeaWorksCompany.com
In a manner similar to LCCs in Europe, Allegiant Air de-
rives its ancillary revenues from a variety of sources:
• Commissions and mark-up on vacation packages inclu-
ding hotels, rental cars, show tickets, night club packages
and other attractions.
• Fees charged for advance seat assignments.
• Sales of beverages and snacks onboard its aircraft.
• Onboard retail sales of items such as discount coupon
books and destination souvenirs.
• Fees charged for reservations made via the call center
and online booking site (airport ticketing does not incur
fees).
• Charges for excess baggage (checked baggage does not
incur fees).
The largest percentage of ancillary revenue is generated
by the sale of hotel rooms packaged with air travel.
All of these distinctions make Allegiant Air a rare bird
in American skies. Its record of consistent profits since
2003 suggest the airline has found an attractive niche with
U.S. consumers. Allegiant’s ability to achieve continued
growth and success may eventually force a redefinition of
the model used by LCCs in the United States.
As Southwest Airlines once influenced a revolution in
Europe, Ryanair may return the favor by providing the
model that is fueling success at Allegiant Air.
Sources of Information used in this article:
• Allegiant Travel Company SEC Form S-1, Preliminary Prospectus da-
ted August 23, 2006.
• Financial reports filed by Ryanair for quarters ended June 30, 2006
and March 31, 2006.
• Exchange rate assumptions: 1US$ = €0.794 Euro, and 1€ =
US$1.259
IdeaWorks cannot guarantee, and assumes no legal liability or respon-
sibility for the accuracy, currency or completeness of the information.
www.air-scoop.com
 BIRD’S EYE VIEW
A Five Forces Analysis of the market demand lags behind the capacity increase of
the carriers, internal rivalry is likely to reach a high level,
the Central European LCC Market resulting in diminishing profit margins.
Michael Porter’s five forces framework is a simple mo-
del which helps identifying the strength of those market
factors that affect the profitability of an industry. When
applied to a well-defined market, the following factors
have to be assessed: internal rivalry, entry/exit barriers,
substitutes and complements, supplier power and buyer
power. The regulatory effects are not included as the fra-
mework is concerned only with forces arising from mar-
ket competition.
The Central European (CE) geographical market is con-
ceptualized here as including the territory of the eight
new EU member states plus Croatia, Bulgaria and Roma-
nia. In the airline industry, each route represents a distinct
product; this definition of the market includes all interna-
tional routes (products) that touch at least one destination
within the territory of these countries. For instance, both
the London-Warsaw and Warsaw-Budapest routes are
part of the market, if served by a low-cost carrier.

Internal rivalry
Entry barriers
Market share can be gained either by opening up a non ser-
The capital intensity of the industry and the limited pos-
ved route or entering into one which is already served by
sibilities of alternative use of the equipments mean that
another carrier. Direct competition therefore occurs if at
sunk costs are generally high constituting a high entry/
least two airlines serve the same route and in this respect
exit barrier to players. However, the new, flexible forms
an entrant can cause the exit of the incumbent player. So
of financing and the tendency to lease aircrafts have signi-
far, the Central European carriers have been able to expand
ficantly lowered those barriers. Furthermore, due to libe-
relatively freely without facing major threats from other
ralisation, administrative obstacles have been eliminated
players. However, as the ‘Islanders’ started their expansion
to a large extent, thus entry to the market became much
to the CE market, intense rivalry arose exactly on those
easier. Expectations about post entry competition, howe-
routes which represent the biggest passenger flows: des-
ver, play a substantial role, especially because the Western
tination pairs from CE capitals to Western and Southern
market is about to reach saturation point and expansion
European metropolises (especially London, Paris, Rome
is primarily taking place in Central Europe. As the num-
and Barcelona) are affected the most, although the high
ber of non served routes decreases, entry will be possible
and relatively less volatile market demand on these routes
only into routes where at least one low-cost player is there
lowers the intensity of rivalry. This is one reason why local
already. Consequently, even if entry/exit barriers current-
carriers keep opening up non served routes and why some
ly are relatively low in Central Europe, they are expected
exits from certain routes have already taken place (for
to rise to a medium level in the future.
example SkyEurope withdrew from Budapest-London
and Warsaw-London, WizzAir from Budapest-Milan and
Substitutes and complements
Budapest-Amsterdam, serving instead Budapest-Eindho-
Traditional air carriers, charter airlines and other means
ven). On the one hand, the total number of those routes,
of transport may appear as substitutes to low-cost flights.
where competition is stiff, is still not significant enough
Even though the fares of traditional air carriers have fallen
compared to the overall size and number of routes served
on routes where they face competition from LCCs, in ge-
in the CE market. On the other hand, the limitations to
neral, their service still cannot be considered competitive if
product diversification (price is the most decisive element
price is taken as the defining element of consumer choice.
of competition) together with the high price transparency
While low-cost carriers mostly target new demand, at the
that makes switching from one carrier to another rather
same time price sensitive passengers tend to switch from
easy for a customer, internal rivalry tends to range from
traditional carriers to LCCs. In the CE market the Euro-
low to medium levels. In the long run, if the growth of

6 Air Scoop - November 2006 www.air-scoop.com

 BIRD’S EYE VIEW
pean flights of LOT, Czech Airlines, Malév and Tarom
are the most exposed to competition posed by LCCs. In
this respect, traditional airlines do not appear as potential
substitutes to LCCs, it is rather true the other way around:
LCCs compete traditionals’ passengers away.
The main substitute of low-cost carriers thus is rail, bus or
car travel but compared to these vehicles, air transport is
the fastest and most time-efficient of all within distances
that LCCs fly. Transport on the ground in Central Europe
is much more time consuming than in Western Europe
because of the lack of proper infrastructure, thus it is via-
ble for LCCs to strengthen their position in this market by
opening up more intra-CE routes. Consequently, although
price elasticity within a specific route is high because cus-
tomers are by definition very price sensitive and can easily
switch from one low-cost provider to another, price elas-
ticity at the industry level is inelastic which shows that
the power of substitutes is low in Central Europe.
Supplier power
Supplier power consists of airports on the one hand and
jet fuel suppliers on the other. Generally, the bigger the
LCC is, the more bargaining power it can exercise over
suppliers and the more able it is to beat down airport pri-
ces and squeeze profits away from them. In the CE mar-
ket there is not an LCC yet with such a high bargaining
power like Ryanair and easyJet have, but if we take into
account that secondary airports tend to establish themsel-
ves as low-cost airports, these efforts can be considered as
relationship-specific investments which manifest a strong
commitment to the low-cost sector. These airports there-
fore will offer very competitive prices to LCCs in order
to attract them.
a competitive advantage over small ones but this can be
balanced to a certain extent if young and more fuel-effi-
cient fleet is used. All in all, supplier power seems to range
from low to medium level in Central Europe.
Buyer power
This is one of the most significant forces that can squeeze
away profits from the low-cost carriers. Differentiation
between customers is very limited: they are price sensitive
and prices are, to a large extent, transparent. Furthermore,
LCCs products have very few features that can differenti-
ate it from others. Moreover, switching costs of customers
are low. Where a carrier does not face competition, it may
ask for a higher price but only within certain limits. Whe-
re LCCs directly compete, buyer power tends to be high.
This is partly the reason why LCCs are eager to extend
their revenue base and rely more on ancillary revenues.
Based on the analysis of the Central European market, it
can be concluded that the low-cost carrier business is ra-
ther unattractive because of the relatively strong presence
of forces that squeeze profits away. Only those players
can have bright prospects in the long run that achieve the
lowest cost base and critical size in order to have bargai-
ning power over suppliers and take advantage of econo-
mies of scale. However, being a first-mover seems to be
important – if a carrier is the first to serve certain routes,
it is likely that it can capture the whole of the market
demand and if it manages to keep fares low, even a small
player can thrive in the market.

Concerning airports, the real bottleneck is the availability

of slots – if an airport is about to reach saturation, the
bid for the empty slots becomes more and more inten-
sive which decreases the margins of the bidders. In the
CE market even the major airports are not as contested as
in Western Europe, thus bidding is not likely to become
heated. The exceptions are those “hub” airports for certain
low-cost carriers (Budapest, Bratislava, Warsaw, Katowice
and Prague). In these cases, those players will find it more
difficult to obtain slots that have their hubs elsewhere,
thus “outsiders” will be in a disadvantageous position.

In case of fuel, the larger the purchasing volume is, the

bigger the probability that a lower price per barrel will be
bargained. However, fuel suppliers cannot reduce prices
infinitely and if fuel expenses of LCCs rise, sooner or later
it will impact on ticket prices. This primarily affects small Michael Porter’s Five Forces Framework
players in the CE market as their product portfolio and
revenue base is limited. In this respect, the big LCCs have

7 Air Scoop - November 2006 www.air-scoop.com

 DOWN TO EARTH
World Travel Market Conference
2006
For the 27th time, the World Travel Market
in London has provided for the whole global
travel and tourism industry the opportunity
to meet, negotiate, network and conduct their
business in one of the best growing sector.
Conferences, seminars, debates and presenta-
tions took places on the latest industry trends
and developments. Many areas of the exciting
sector like airlines, hotels, and health and wel-
lness were focused on the event. More than
5.500 companies from more than 200 coun-
tries exhibited on this event on 41,500 square
metres. Government Ministers, Ambassadors
and High Commissioners participate in the
WTM programme.
“It is very important that the industry remains a major
contributor to today’s global economy. If you continue to
make life difficult for us then you must reap the whir-
lwind. That will happen, if we cannot manage the job as
people like us to do“, said Tim Clark, President of Emira-
tes Airlines at the World Stage in his interview by John
Strickland, airline analyst. “Airlines should stop meekly
surrendering and accepting their image as the world’s en-
vironmental “whipping boys” it was his message. “Airlines
are responsible for 2 or 3 % global emissions. That compa-
res with 75 % from automotives and I know the UK has
some interesting proposals about that sector”.
Dr. Martin Cetron, the world´s leading futurist said:
“Airport check-in queues could soon be a thing of the past
for travelers because of radio-frequency identification…
airport misery for millions of holidaymakers is set to end
by 2010“.
Recent developments of the new low cost airport at Co-
miso by the Province of Racusa in Sicily in Italy were pre-
sented at the Italian Press Conference. A new airport that
is still waiting for some final decision is open to welcome
any European LCCs on its 2,500 meters runway soon.
South part of Italy will offer to their new tourists a beau-
tiful area and atmosphere to enjoy their holiday or even
facilitate the purchase of a second home.
In the panel “Does size matter”, Noel Josephides, Mana-
ging Director of Sunvil Holidays believes that there is
no doubt that liberalization and growth of the market are
excellent for consumers. Air travel is very cheap, however
he is worried about the fact, that Brits are colonizing Eu-
rope by buying properties. This can have negative impacts
8 Air Scoop - November 2006
on destinations on a long term scale. The properties are
left empty, local people cannot afford the increasing pri-
ces. He also declared to be worried about environmental
impact on middle and long term. The low-cost airlines
moved now in the same way to Morocco, they receive
enormous help from the local government. He believes
that we all have benefited from what LCCs have initially
done, but warns not to be blind to LCCs impact in middle
and long term.
On the Tourism Business Frontiers Forum: Looking into
the Future of Tourism leading academic and professionals
tourism experts agreed on the statement that the LCCs
have revolutionized the European travel market and gave
a new opportunity to people that had not flight before
(Read CAA Study in this issue). One of the panelist said
that passengers probably do not care about the food on
the plane, do not care about seats allocation and some
other frills because they get what they pay for, and they
are happy with it. But on the other hand, what he does
believe is, that consumers will start to care in the future
about the attention service and any help or support in case
of any inconvenience at the airport.
WTM Forecast Forum presented Global Trends Report
in partnership with EuroMonitor International. Growth
and impact of LCCs in Europe have been pointed out
many times. Mr. Clement Wong spoke about the first
long-haul low-cost connection between Hong Kong and
London in Europe. According to him, it will be now a new
trend in the travel industry. The rise number of tourists
traveling from Asia, particularly from China and India, to
Europe will be an issue that will drive this sector over the
next five years.
www.air-scoop.com
 DOWN TO EARTH
Exclusive Interview with Mr. Vojin Vlahovic
Director of Montenegro National Tourism Organisation

Mr. Vlahovic, this is the first year at the WTM as an independent nation for Montenegro.
What do you believe will be the development of Low-Cost Airlines in your country?

We already have some conversations with two low cost airlines, Ryanair and easyJet. Howe-
ver, Ryanair did show higher interest than easyJet. Ryanair spoke to our Minister of Tourism
about their launch, which is supposed to be any time during the year 2007. These are the only
talks with LCCs till now. Ryanair will probably fly to our two airports, one in the capital Pod-
gorica and other in Tivat. Both airports are completely reconstructed and renovated. We did Vojin Vlahovic
invest more than 20 million Euros improving the infrastructure to attract investors. The funds
came as a loan from the European Bank of Reconstruction and Development.
Will be given any incentives for Ryanair for operating Some new members of Open Sky Agreement after joining
these two airports? the European Union are afraid of negative consequences
in their countries because of the influence of LCCs, I am
It is too early to speak about incentives given to Ryanair. speaking for example about the “cheap tourism effect”.
Some negotiations are not finished yet, and we are waiting Are you not afraid of it?
for the final decision in this issue.
We are not afraid of Low-Cost cheap tourism. We are
Are you open for negotiations with other LCCs? very committed to high quality of Montenegro tourism.
We know our capacity and we look for sustainable econo-
We are open to welcome any Low-Cost Carrier on our mic, ecological and social development. And the LCCs are
airports after joining the Open Sky Agreement. There are very well informed about our wishes and plans. We do not
already some proposals and negotiations between the Na- want to exaggerate and receive massive of people, and we
tional Montenegro Carrier, Ministry of Transportation will be very careful in this issue
and the Ministry of Tourism regarding the development
of LCCs in our country.

Questions to Mr. Niko Bulic

Director of Croatian National Tourist Board

You did speak about LCCs connections and routes in
your country, growing numbers of independent trave-
lers and subsidies programs in the tourism sector. What
do you believe will be the further development of LCCs
in your country and the consolidation in that sector?
Are there any figures related to the investment in your
airports, any subsidies for this sector?
At last but not least, what about the “Cheap Tourism
Effect” in Croatia, are you not worried about it?
Sky operations and rules are completely opened in Croatia,
so it is now to the commercial and risk estimation of the
Low-Cost Carriers to entry to Croatia. The only problem
that we see for ourselves comes from the structure of the
accommodating units. There are two things we should be
going for all together by using already our
Niko Bulic
units sides, turning some premises that we are not in tou-
rism active like further arms areas into tourism. Croatia
needs additional 50.000 hotel rooms for 3 class and 4 and 5
stars. And then it will be for anyone who wants to feature
Croatia to see how to better connect Croatia with the rest
of Europe.
You do not have to be now a British Tour Operator or
British Air Carrier to fly from Britain to Croatia. You can
do it with British, Irish or other Carrier from Britain from
Spain, France or other parts of Europe and fly to Croatia.
We do not see any obstruction. It is not threatening our
National Carrier Croatia Airline but competition adds to
the market excitement.

9 Air Scoop - November 2006 www.air-scoop.com

 DOWN TO EARTH
AIRWAY MARKERS
Exclusive Interview with Mr. Joe Gomez
Commercial Manager of Fly Gibraltar

http://www.flygib.com
Could you please present Fly Gibraltar to our readers?
What are your specificities compared to other European
LCCs?
We should see shortly the first low-cost long-haul flight
to Europe. Do you think it can be the new trend in the
Fly Gibraltar is totally private and independent airline.
Low Cost Carrier Industry? Do you believe that consoli-
The funding comes from a Property Development Com-
dation of the market will lead just to very small number
pany, the owner is Mr. Robert Noonen from Ireland. Fly
of LCCs in Europe.
Gibraltar is based on LCC model but we start to intro-
duce some differences, an extensive selection of services,
The future of LCC is on short-haul flights. The traditio-
a choice of hot meals, light snacks, newspapers, magazines
nal airlines will operate long-haul flights and will have
and seat allocation. We do not want to compromise us
fewer opportunities on short-haul. People want to travel
just to the LCC No Frills model. Fly Gibraltar will con-
as cheap as possible. There is no danger; there is enough
nect Gibraltar with London Stansted, Birmingham, Bris-
space for all of them. And the final decision about the
tol, Manchester and Dublin from April 2007. We will start
future of LCC will make the passengers.
to operate with 2 aircrafts, then we intent to increase one
aircraft and the fourth in the third year.
What is your opinion on Low-Cost Carriers quality? Do
you believe passengers will see any changes in the fu-
What about your routes strategy for the future?
ture?
We plan to expand our routes to Russia and Spain, with
Low Cost Model means flexibility in Cost Management,
direct flights to Barcelona and Galicia. The connection
but meanwhile a certain minimum level of service must
to Galicia is for example at the moment quite complica-
be maintained. Flying is a commodity and passengers want
ted; indeed for passengers that fly to Málaga, they have to
to travel comfortable, but above all cheap. Many people
change the plane in Madrid to finally arrive in Galicia.
are flying now because it is cheap, many of them could not
have afforded it in the past. Obviously you cannot expect
What kind of passenger are you looking for and which
a special service quality flying for 20 Euros. If we start to
area are you focused on?
offer more than the minimum level of service, it would
not be a low cost model any more.
Our passengers will be 50% holiday makers and 50% bu-
siness travelers and British expatriates. Our area of ope-
ration is focused in Gibraltar as a destination. But we are
also focused on Andalusia (south part of Spain) as a cat-
chments area. We are promoting both areas and making
Marketing Mix for those two regions.

How do you analyze the competition with other LCCs?

Are you not afraid about it?

We are not afraid of competition, competition is good for

us. We are also not worried about the increase of capacities
at the airport in Málaga. Our Gibraltar Airport is smaller
than the Málaga Airport. The passenger can be within 20
minutes outside of our airport.
Joe Gomez, Commercial Manager of Fly Gibraltar

10 Air Scoop - November 2006 www.air-scoop.com

 BIRD’S EYE VIEW
German LCCs Going (Far) East
By buying his challenger DBA in August 2006, Air Berlin
has not only reinforced its national network and its num-
ber of business customers, the leading German LCC also
won new international routes.
Indeed, since 2005, DBA was flying from Munich, Berlin
and Düsseldorf to Moscow, and since June 2006, it was
also connecting Stuttgart to the capital of Russia. In addi-
tion, on December 21st, Air Berlin will open for the first
time its own route to Russia (Nurnberg-Moscow), three
times a week, with connections to several national and
international Air Berlin destinations, such as Milan, Pa-
ris, Rome... The airline will also inaugurate on December
18th a route between Berlin-Tegel and Saint Petersburg,
on Mondays and Fridays.
Now the battle for Russia really begins in the German sky.
Germanwings, Air Berlin’s challenger, opened its first rou-
tes to Russia, Köln-Moscow and Berlin-Moscow, during
the 2005 summer season. Since summer 2006, it operates
flights from Köln/Bonn to Saint Petersburg. And since the
end of October 2006, Germanwings also connects Ham-
burg to Moscow and Berlin to Saint Petersburg. The ex-
pansion to East is not over: next year, Germanwings will
operate one flight per day from Köln/Bonn to Moscow. In
LCCs’ Subsistence in Russia
December 2006 has been preliminarily declared to be the
birth month of the first Russian low-cost carrier ever, Sky
Express. The project is being co-ordinated by the AirU-
nion alliance that consists of such carriers as KrasAir,
«Domodedovskie Airlines», «Omskavia», «Samara»
and «Sibaviatrans». According to the business plan pre-
sented by parties concerned, Sky Express will operate
flights from Moscow “Vnukovo” Airport to more than
20 destinations within Russia. However it is plausible to
assume that Sky Express being AirUnion’s youngest and
promising daughter can later on operate flights to such
ever trendy destinations as Turkey and Greece.
As previous experience of working with foreign low-cost
airlines has shown, the perspectives of Sky Express are
not something predetermined. On the one hand, such a
budget transportation is a real steal for those who have
to deny themselves travelling through vast territories of
Russia and go for example to Baikal Lake that is basically
cut off from the European part of the country because of
11 Air Scoop - November 2006
LCCS AND RUSSIA
the Russian capital city, Air Berlin/DBA is landing at Do-
modedovo airport (South of the city), and Germanwings
at Vnukovo (West).
Eastern Europe is still one big battlefield for European
LCCs. Poland and Hungary represent already quite busy
markets, and in Romania and Bulgaria, new routes open
every season. SkyEurope even called its global develop-
ment strategy « Go East ». But until now, neither the two
big « Islanders » (Ryanair and easyJet), nor the « Cen-
tralers » (SkyEurope, Wizz Air, Centralwings...) operate
flights to Russia. Apart from German ones, only WindJet,
Air Baltic or eVolaVia are landing in Moscow. By ope-
ning its Nurnberg-Moscow route, Air Berlin becomes the
first huge LCC connecting Western Europe to the Russian
city. For the German carrier, it may be an important com-
petitive advantage for the future, as the edges of Europe
- Russia, Scandinavia, Northern Africa... - are becoming
new stakes of the competition on the low-cost market.
Russia may also soon have its own low-cost company as
the first Russian budget airline is expected to be put in
service at the beginning of 2007. SkyExpress, a common
investment of the Russian airline KrasAir and the EBRD
(European bank for reconstruction and development), may
serve 20 destinations in the western part of the country.
the high cost of tickets. On the other hand, railway is still
a competitive and is seen more preferable and secure for a
certain segment of tourists. Apparently some destinations
will be in greater demand than others, with Southern des-
tinations being the most popular.
Undoubtedly, it is still foreign discount airlines which run
the show in Russia. Most of them are successful though
there are several exceptions. In 2005, German Aero Flight
and Air Arabia based in the United Arab Emirates had
to leave the Russian market because of unprofitability.
Norwegian Air Shuttle and WindJet were the last carriers
to enter the market. Overall there are 7 LCCs operating
flights from Moscow and Saint Petersburg.
Meanwhile the really interesting aspect of LCCs’ being in
Russia is their atypical “behaviour.” In the first place, pri-
ces are not the same than those implemented in Europe.
In general, they are lower than those of non-low cost car-
riers but this difference is not significant. In some cases
tariffs offered by national airlines, particularly Aeroflot
and Russia (former Pulkovo), are more economical than
www.air-scoop.com
 BIRD’S EYE VIEW
those offered by low-cost carriers. Several reasons can be
named that provoke the current situation.
Firstly, there is a lack of “cheap” airports in Russia. Opera-
ting flights from Moscow and Saint Petersburg, LCCs have
to sign the same kind of agreement that other airlines do.
That simply means they get ground handling and mainte-
nance for normal prices that are high for them.
Furthermore, these Russian airports still don’t have all ne-
cessary equipments and trained personnel for dealing with
LCCs. Especially when it comes to e-ticketing both check-
in agents and passengers got lost. Indeed, there are far less
people with internet access in Russia than in Europe, thus
not everybody can purchase a ticket.
Thirdly, LCCs cannot simply afford budget prices since
it is not profitable taking into consideration low flow of
passengers which can be explained by rather slack adver-
tising policy.
Exclusive Interview with Sergey A. Ryzhov
Deputy Sales Director -
Vnukovo International Airport in Moscow
Could you please present the Vnukovo Airport to our
readers. What are your goals for the future related to the
LCCs development?
Vnukovo Airport is the oldest airport in Moscow; we ce-
lebrated the 65th anniversary this summer. The Vnukovo
airport is the closest to the Moscow City, only 11 kilome-
ters to the Moscow Ring Road. Now we are on a big de-
velopment program, we are constructing a new terminal
for international and domestic flights. The new interna-
tional terminal B is already constructed and was put into
operation two years ago. Our main shareholder the Mos-
cow City Government plans this development till 2015, so
there is so much to do.
Which LCCs are you going to welcome on your airport?
Now we have two terminals, one for domestic flights and
one for international flights, the third is under construc-
tion now. When the new terminal will be launched, Ter-
minal A, in this Terminal we will serve only regular flights,
scheduled flights international and domestic. Other parts,
now existing parts of our terminal complex, will be used
for charter flights and low-cost carriers. So any types of
LCCs are welcome in our airport.
12 Air Scoop - November 2006
LCCS AND RUSSIA
Fourthly, distance does matter. No doubt that it takes lon-
ger to get from Moscow to Berlin that from any German
city which is why a flight operating from Moscow is less
apt to pay off.
And at last, aviation authorities in Russia in many cases do
not simply allow LCCs to have low prices. For instance,
Germanwings could only start operating flights from Rus-
sia providing that an average price would not be less than
$100.
It is clear that LCCs play now a very considerable role in
air transportation and it is also clear that Russia needs to
take its place in the market. In case Russia does not enter
into it, Russian airlines may soon become non competi-
tive, especially on international flight routes.
Are you giving any incentives for operating your airport?
And how high are the fees?
We give to our partners Air Carriers marketing support,
especially as advertising programs, because we want to de-
velop our airport as fast as possible. Unfortunately main
fees, in Russia and especially in Moscow, are under Go-
vernment regulation, so these three airports should have
the same rates.
Do you see any difficulties for European LCCs to join
the Russian Market?
We have some legal and technical problems. For instance,
not so many people in Russia use internet payments and
credits cards, this is the first problem. Then, we are still
waiting for a new Tax Law that would permit using of
electronic tickets, the newest tickets technology. Current-
ly, the sale of any type of tickets, except paper tickets,
is simply illegal. However, I think that these problems
about this law should be solved in beginning of coming
year. Many airlines are looking to increase their frequen-
cies to Moscow. For example, SkyEurope is looking to
connect Bratislava with Moscow, therefore the Slovakian
President is now negotiating with Russia about the route.
Many bilateral agreements between Russia and European
Union should be solved, but we do not know when.
www.air-scoop.com

Future prospects for LCCs on the Polish market
Because of its projected growth and
its 40 million inhabitants, the Polish
market has become a main target for
European LCCs. Many Polish workers
travel in order to get new incomes
abroad in Germany, England, Ireland
and other Scandinavian countries.
And on the other hand, more foreign
tourists come each year to visit new
Eastern countries of European Union.
According to IATA , the Polish aviati-
on market is supposed to grow 11.2%
yearly till 2009.
The sappers on the Polish low-cost
carriers market WizzAir and SkyEu-
rope become each new day financially
stronger and hard competitors, but
many other carriers are already on this
market: Air Polonia, Centralwings (a
baby of LOT), Germanwings a subsi-
diary of Lufthansa, and also Sterling
which started to connect Krakow
with Copenhagen, Jet 2 with New-
castle and Leed Bradford. Norwegian
is the “connections leader” of this year
on the Polish market. Last year it star-
ted with two flights from Krakow
and Warsaw, where this spring ope-
ned its first base outside of Norway.
Now, Norwegian connects Warsaw
with Alicante, Malaga, Stockholm,
Oslo, Rom, Dublin, Athens and fly
from Krakow to Stockholm and Oslo.
Blue 1 connects Warsaw, Lodz, Wro-
claw and Krakow with Helsinki. ea-
syJet supports Polish laborers with
its publicity campaign, offers special
programs and collaborates with re-
cruiting agencies. Many others new
comers will join in a short and me-
dium term the Polish market. Finally,
Ryanair joined the Polish market two
years ago. Its local growth and futu-
re plans to capture the whole Polish
market worries its rivals. Ryanair has
a very important advantage with its
financial situation which goes pretty
well compared to some of its compe-
titors. With its well-known aggressive
marketing campaign, “Centralers”
(local LCCs) definitely need to adjust
their development strategy. However,
13 Air Scoop - November 2006
BIRD’S EYE VIEW
“Centralers” still have some assets.
For instance, Centralwings benefits
from its origin as a Polish carrier: the
airline speaks the same language than
passengers; it is well informed from
the local government, it has good re-
lationship with its own cities and citi-
zens, it knows local rules…
Ryanair transported 30 million pas-
sengers in 2005 with 2.700 employees
and should transport 42 million pas-
sengers this year. To compare with
“Centralers”, Centralwings transpor-
ted 1.8 million with 335 employees
since its launch in February 2005.
Even though these low-cost airlines
compete on the same market, they
pay different salaries. Maciej Kwia-
tkowski recently declared that the
lack of good staff is partly caused and
created by emigration of Polish em-
ployees to England and Ireland. What
a paradox! Indeed, passengers flying
with Ryanair will find many Polish
employees working for them as the
carrier recruits some of its crew in
Poland. The CEO of Centralwings
has realized this weakness and has
undertaken some measures. In fact, a
scenario with four options as a future
strategy for Centralwings has been
recently presented to LOT:
1. Further development of Centra-
lwings within LOT (offering a share
to a new investors)
2. Merger with another European
LCC
3. Integration of Centralwings into
LOT
4. The sale of the two years old Polish
LCC.
The last option is preferred by some
experts on the aviation market be-
cause Centralwings plans to start its
benefits by the year 2008.
Focus on Carriers
The Polish national airline LOT still
has the highest market share, but it
has decreased from 47% last year to
33% this year. The biggest challengers
on the market are the low cost car-
LCCS AND POLAND
riers. LOT realized it and wants to
adapt itself to a new proactive posi-
tion. The carrier decided to readjust
its price offers to the new market
conditions and to operate more fli-
ghts from the regional Polish airports,
which are incredibly booming. The
leader, between these Polish “low-cost
airports”, is Krakow (1.75 million pas-
sengers), Katowice (1.1 million) and
Gdansk (930.000).
SkyEurope has transported 780.000
passengers from the Krakow airport
during the last two years; it is approx.
20% of the total airport traffic. SkyEu-
rope has based there three aircrafts
and employs 100 peoples. In the next
summer, the Slovakian LCC wants
to open six new connections from
Krakow airport. New destinations in
Russia and Ukraine (first attempts in
the past did fail because of some le-
gislation problems) come back into
consideration. New European Union
countries, such as Bulgaria and Roma-
nia, would be very welcomed on the
SkyEurope schedule too. SkyEurope
tries to connect destinations where
other LCCs, and especially Ryanair,
are not flying. SkyEurope realized the
low penetration of Internet and Cre-
dit Card payment in these countries,
and looked after solutions to it in sales
through Global Reservation Systems.
A new agreement with Hahn Air will
reduce the transaction costs. The loss
of SkyEurope has risen from 28.6 mil-
lion last year to 57.3 million this year.
The new investor, York Global Fi-
nance II, is still supporting the Cen-
tral European LCC.
WizzAir, the LCC leader on the Po-
lish market, announced it will open in
May 2007 daily connections from Ka-
towice and Warsaw to Belfast - ano-
ther job location for Polish citizens.
WizzAir´s shareholder is Indigo, an
American company from the aviation
sector.
www.air-scoop.com

Ryanair:
Polish Market Ogre!
The Polish aviation market has the hi-
ghest growth since joining the Open
Sky Agreement and is predicted to
have the highest potential increase
in a near future, according to IATA
projections. By the end of this year
IATA expects 14.4 million passen-
gers (25% more than last year), and
in the first half of the year, the ove-
rall increase was even 33%, expressed
in number of passengers (a total of
6.7 million). An important influence
on that result has been the low cost
carriers, whose participation share is
higher than 44%, significantly above
the European average (according to
the Mercer Consulting, this average
is around 20% and expected 33% for
the year 2010).
But from airports’ point of view, the
aviation industry offers a less specta-
cular picture. There are 49 internatio-
nal airlines flying within Poland, and
they mainly operate out of only 12
airports. The Warsaw airports mar-
ket share on the whole number of
passengers is approximately 54% for
first six months this year, decreasing
from 61% in the whole year 2005,
68% for 2004 and 72% in 2003. A
second terminal was supposed to be
delivered by the end of 2005, but af-
ter negotiations and obviously some
difficulties, the new deadline for the
Arrival Terminal should finally be the
30th of November 2006, and for the
Departure Terminal the 30th April
2007. The whole investment should
be finalized by the 30th of Novem-
ber, and the airport capacity will be
then of 12.5 million passengers.
This is an excellent solution for le-
gacy airlines which will operate out
of the extended airport Okecie. But
what about the low cost carriers
which are still on the other side of
14 Air Scoop - November 2006
BIRD’S EYE VIEW
Etiuda (Warsaw airport, former na-
tional airport)? Is there any solution
in sight?
Building a new airport in Warsaw
may be too long and too expensive.
The low cost airlines need urgently
a secondary airport near Warsaw.
Three military airports within a
short distance from Warsaw have
been competing to be converted into
civil airports: Minsk Mazowiecki,
Sochaczew and Modlin. For the last
two years no agreement has been
reached yet between executives, but
taking in consideration the pressure
of LCCs lobbies this problem should
be solved any time soon.
Ryanair which is currently operating
out of 8 Polish airports did start re-
cently its first connection from War-
saw to Dublin. Ryanair’s long term
strategy is to reach 10 million passen-
gers in the Polish market. The Irish
carrier is desperately looking to start
the operation to any of the three air-
ports within a short time. According
to competitions rules, higher num-
ber of airports would produce lower
airports fees, and this would conse-
quently mean lower ticket prices. On
the 26th of October, the Civil Avia-
tion Office did promise to convert
the military airport of Modlin into
a civil airport, if all conditions were
complied. A new agreement is hoped
between three estate shareholders:
Military Property Agency (Owner
of 99% of the plot), Polish Airports
State Enterprise (Management ex-
pert owning 1% of the plot) and voi-
vodship administration (with access
to the EU subsidiaries). Because of
the impressive growth in the Polish
aviation sector, development of a
new airport in Modlin would find
many supporters. The region would
get new investors, many new compa-
nies, hotels and other services would
be established in that area. A new
base for Ryanair and other LCCs
would support the area even more.
LCCS AND POLAND
Many Polish airports are offering their
services for the future Ryanair base
while waiting for its final decision,
and the owner of Jasionka´s airport,
Polish Airports State Enterprise,
also owner of Warsaw airport, will
definitely influence future Modlin
airport. A new airport in Modlin (or
near area), used as a base for Ryanair
would probably open more access
doors to future “new” East European
countries, that have huge expansion
potential not yet exploited.
Negotiations are also in progress for
Ryanair’s technical base. Riga (ca-
pital of Latvia) and Jasionka (near
Rzeszow in Poland) are two potential
candidates. The European Union will
support 8 Polish airports (Gdansk,
Warsaw, Poznan, Rzeszow, Wroclaw,
Katowice, Szczecin, Krakow) with
approximately 350 million Euros wi-
thin the next six years. The airports
will belong to the European Union
Airport Network which will main-
tain a high dynamic of development
and meet the conditions of Schengen
agreement.
The area of voivodship podkarpackie
with its airport Jasionka (Rzeszow)
that can be operated by all types of
aircrafts has a long history of develo-
pment of the aviation industry from
the 1930´s.
This region delivers 75% of the total
domestic production of the aviation
sector. The labor cost is 11% lower
than the country´s average and is
highly qualified. Some special eco-
nomic zones that offer exemptions
in income tax are present in the
voivodship. Furthermore, in April
2003, Aviation Valley Association
(a group of aviation industry busi-
nessmen) has been established with
the majority of members located in
the area podkarpacie. The goal of this
association is to transform south-east
Poland into one of Europe´s leading
www.air-scoop.com

aerospace regions, which would be
able to provide a diverse cross section
of products and services for the most
demanding clients. Favorably located,
this region opens the doors of Eastern
markets and looks forward to develop
further great opportunities.
Ryanair, which is already the third
airline after LOT and WizzAir, is rea-
dy to invest in its new technical base
in Rzeszow, but would also need one
BIRD’S EYE VIEW
or more operational bases to connect
this fast growing Polish market, espe-
cially focused on the high demanding
area for air travel near Warsaw.
With its expansions strategy, Ryanair
plans to achieve a better result than its
competitor WizzAir. Ryanair would
like to aim 10 million passengers, but
without a second airport near War-
saw, this goal would be difficult to
reach. Despite a great growth, Central
LCCS AND POLAND
European market is still smaller than
West European market, and routes
are longer and therefore less rentable.
This means that the LCCs market still
needs further investments to obtain
result and start to operate with pro-
fit on Central East European routes.
Some LCCs which concentrate their
business on the CE Europe (WizzAir,
SkyEurope and CentralWings) may
soon encounter problems without any
strong capital support.

UPS AND DOWNS

Aer Lingus: A Cold Shower for Ryanair…
The Aer Lingus Employee Share Ownership Trust’s decision to reject the offer ended Rya-
nair’s takeover bid. Some 97 per cent of ESOT which owns 12.6% of the company voted
against the bid. An Impact statement was headlined: «Staff don’t want Michael O’Leary as
boss at any price.» The Irish government which has a 28% stake in Aer Lingus also refused
to sell it.
However, Ryanair (19.2% of the airline) declared its intention to remain a long-term share-
holder in Aer Lingus. It is prevented from bidding for its rival for 12 months. But Ryanair
recently brought its total stake to more than 26% in Aer Lingus when buying €88m worth
of shares.

BLOGS TREND
Blogospehere:
A Close Buzz Coverage

Ryanair is the European LCCs leader in

real life, but also in virtual. Ryanair ex-
perienced a high peak at the beginning
of the month as the hostile takeover bid
for Aer Lingus was still ongoing.

However, closest competitor, easyJet,

has been well covered by blogs media,
especially because of the positions ta-
ken against environmental taxes over
LCCs. Both Islanders are getting closer
in terms of weblog and buzz coverage.

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