air transport: quarterly report...

Cranfield University: Quarterly Report Q1 2007 for DG TREN 1

While Bulgaria and Romania joined European Union on the 1st of January 2007 this Antonov An-12, captured

here in former Balkan Airlines colours, has seen a sunset for its freight operations within EU along with a fleet of some 20 An-12s in service by Bulgarian operators.

AIR TRANSPORT: QUARTERLY REPORT NO.14 1st QUARTER 2007 (January to March)

1 OVERVIEW..................................................................................................................................2

2. HIGHLIGHTS AND KEY DEVELOPMENTS ....................................................................3 2.1 REGULATORY.........................................................................................................................3 2.2 AIRLINES................................................................................................................................4 2.3 AIRPORTS...............................................................................................................................9 2.4 SAFETY AND SECURITY ........................................................................................................12 2.5 ATM....................................................................................................................................13 2.6 MANUFACTURERS ................................................................................................................13 2.7 THE ENVIRONMENT ..............................................................................................................14

3. BULGARIA AND ROMANIA, THE LATEST ACCESSION STATES ...............................15 3.1 REGULATORY ISSUES ...........................................................................................................16 3.2 AIR TRANSPORT NETWORKS .................................................................................................17 3.3 AIRLINES..............................................................................................................................18 3.4 AIRPORTS AND AIRSPACE .....................................................................................................21 3.5 DEVELOPMENTS SINCE JANUARY 2007 ................................................................................23


1 Overview

The year began with two important developments: the adoption of the first stage agreement on the EU-US bilateral, and the widening of EU borders to include Bulgaria and Romania.

After four years of negotiations, the first stage of the EU–US bilateral agreement has now been reached, becoming effective in March 2008. The deal permits any EU or US airline holding an appropriate operator’s licence to provide services between any city in the EU and any city in the US. Unlimited third, fourth and fifth freedom rights feature and the US has accepted the Community air carrier concept. There is some expectation that the new bilateral will be the catalyst triggering long awaited consolidation in the airline industry. Any potential disadvantages for EU carriers can be addressed in the second stage of negotiations scheduled for 2008.

The arrival of the two latest accession states increased EU land area by 350,000 square kilometres and added some thirty million to its population. Although Bulgaria has experienced some problems in integrating its air services with the internal aviation market, both new member states have recorded impressive air traffic growth in the first few months of membership. Bulgaria is 83% up on year-to-year traffic figures in the UK market alone, while Romania is slightly ahead in the same market. Low-cost carriers have been at the forefront of network expansion to the new states.

In the wider world, AEA airlines reported passenger traffic up 5% in the three months ending February 2007: intra-European cross-border passenger numbers were up 7%. Air freight was not a buoyant market, with freight tonne-kilometres down slightly.

The European air transport network was reinforced by LCC activities. Led by Ryanair, these airlines started ninety-four new routes in Q1 2007, generating 470 weekly return flights. One LCC failure was recorded, with Sweden’s FlyMe sinking into bankruptcy. There was a measure of consolidation within the market, where Thomas Cook agreed merger terms with MyTravel and Air Berlin took over LTU.

Elsewhere in airline-related news, Iberia was forced onto the market as an investment group prepared to make an offer to buy the company. Flybe became Europe’s largest regional carrier with the acquisition of British Airways subsidiary, BA Connect.

In parallel with traffic growth, safety in air transport continues to improve. IATA reported European airline hull losses in 2006 at 0.32 losses per one million flights, just half the global accident rate, down 14% from 2005 statistics.

Airport traffic reflected increased airline activity. ACI’s European airports posted a 6% increase for passengers in the first two months of 2007, above the worldwide growth at the organization’s airports (held back by relatively low growth at US airports). Traffic growth at major airports may be at the cost of on-time performance: AEA reports member airlines’ departures were delayed more often at Europe’s largest airports. The worst performer was Madrid where the average delay in 2006 was forty-six minutes, and 31% of departures suffered delay of over fifteen minutes.

Among Europe’s largest airports, Dublin, Madrid and Milan Malpensa recorded gains in passenger traffic over 12%, but London Heathrow and Manchester suffered drops of around 2% over the two months. This fall at two of the UK’s airports could reflect the impact of threatened strike action by British Airways cabin-crew in January.


2. Highlights and key developments

2.1 Regulatory

The most significant development in this quarter was the draft aviation agreement on the EU-US bilateral reached on 2nd March following lengthy negotiations over the past four years. The tentative agreement reached in November 2005 was subject to a reform in the US's rules on airline ownership and control. Following the withdrawal of the planned US reform, a number of additional elements have been added to the earlier agreement to provide a better balance of interests. These include: an additional protocol on ownership, investment and control; the unilateral granting to the EU by the US of seventh-freedom passenger traffic rights to a number of non-EU countries; a number of access rights for Community carriers to the US Fly America programme; rights in respect of franchising and branding; and provisions on antitrust immunity. This first stage agreement was approved by the Council of Transport Ministers on 22nd March and will become effective on 30th March 2008. Negotiations on a second stage agreement will focus on: the further liberalisation of traffic rights; additional foreign investment opportunities; the effects of environmental measures and infrastructure constraints; further access to Government-funded air transport; and wet-leasing. If no stage 2 agreement has been reached within twelve months of the start of the review, any Member State may notify the Commission which traffic rights in relation to its own territory it wishes to suspend. In addition on 22nd March, the Council reached political agreement on a proposal for a Decision on the signature and provisional application of an agreement with Russia on Siberian overflights payments.

The EU signed “horizontal” aviation agreements with Paraguay in February and with Malaysia in March removing nationality restrictions in the bilateral air services agreements between Member States and the two countries. Paraguay is the third Latin American country to have signed this type of agreement with the EU.

On 7th March the Commission announced that it had found the restructuring plan for Cyprus Airways proposed by the Republic of Cyprus to be compatible with Community Law.

On 24th January the Commission adopted a package of regulatory measures for airports consisting of three key initiatives: a proposal for a Directive on airport charges; a communication on airport capacity, efficiency and safety in Europe; and a report on the implementation of the ground handling Directive. The proposal on airport charges aims to redefine the relationship between airport operators and airport users by requiring complete transparency, consultation with users, and non-discrimination in the calculation of user charges. Each Member State will be required to establish a national independent regulatory authority to arbitrate and settle disputes in respect of these matters. The aim of the new measures is to create a common set of rules for airports that can be applied and uniformly enforced throughout Europe.

In March the Commission produced its third update of the Community list of airlines banned from operating in the EU. Two carriers (Phuket Air and DAS Air Cargo) have been removed from the revised list after having rectified their previous serious safety deficiencies. A total of 49 airlines previously included in the list have been removed as a result of their ceasing to operate. New safety measures have been


imposed on two carriers, Pakistan International Airlines (PIA) and Air West of Sudan. PIA is subject to an operational restriction that only permits the carrier to operate its Boeing 777 aircraft within the EU.

In January the Commission approved Italian state funding for infrastructure developments at Tortolì-Arbatax airport and in March German aid in respect of Augsberg and Memmingen airports.

2.2 Airlines

2.2.1 Network carrier news British Airways averted a strike and settled with its cabin crew in two year deal at the end of January 2007.

World average jet kerosene prices fell by 9% in January 2007, followed by an upturn in February 2007 of 4% (Airline Business, April 2007). The average jet kerosene spot price was 194.8 US cents per US gallon over 2006, up by 16%. Some fuel surcharges were reduced in January/February, followed by increases in March.

2.2.2 Charter carrier news Consolidation is very much the order of the day. In February Germany’s Thomas Cook agreed merger terms with the UK’s MyTravel Group. Also merging are UK tour operator First Choice Holidays and the tourism division of Germany’s TUI Group, creating a new entity called TUI Travel. First Choice operates in-house carrier First Choice Airways, while the TUI Group operates several in-house airlines in the process of integrating under a single brand, TUIfly. In March Air Berlin announced its takeover of German charter carrier LTU, creating Europe’s fourth-largest airline group in terms of traffic, with a combined fleet approaching 120 aircraft.

New charter carriers FlyExcellent is a newly formed Swedish charter carrier based at Stockholm with a fleet of one MD-83.

Orizonia Group, the parent of Spanish charter carrier Iberworld Airlines, is setting up a Portuguese charter carrier, Orbest, to serve holiday destinations from Lisbon.

Ex-charter carriers In January Spanish charter carrier Air Plus Comet amended its name to Air Comet to reflect the fact that it is now focusing on scheduled full service operations.

The Croatian government grounded Air Adriatic in March after an inspection of the carrier’s operations.

2.2.3 Routes Comparing the scheduled routes offered in January 2007 with January 2006, the table below demonstrates the level of volatility present in the structure of Europe’s air


transport network. Although the network expanded in terms of the number of airport-pairs operated, the make-up of the network changed considerably. January 2006 v 2007, scheduled airport-pairs and weekly frequencies

gains losses result

airport pairs 3,675 3,426 249

flights per week 4,684 2,836 1,848

Source: OAG

The apparent volatility owes much to the relative ease with which airlines can enter, and leave, routes. LCC, in particular, exploit this facility as they test new markets. The table below provides a measure of this activity, listing the new routes announce for stat-up in the first quarter of 2007. New LCC routes started in Q1 2007

Start Weekly Start Weeklydate flights date flights

Centralwings Lodz Paris BVA 19-Feb 2 Ryanair Barcelona GRO Altenburg 01-Mar 3

Lodz Rome CIA 20-Feb 2 Barcelona GRO Bologna FRL 09-Mar 4

Szczezin Dublin 19-Feb 2 Barcelona GRO Faro 02-Mar 4

Click Air Barcelona Amsterdam 01-Mar 14 Barcelona GRO Fuerteventura 08-Mar 3

Barcelona Basel 01-Mar 7 Barcelona GRO Oporto 02-Mar 7

Barcelona Berlin TXL 01-Feb 7 Barcelona GRO Teesside 12-Feb 3

Barcelona Dublin 01-Mar 7 Barcelona GRO Tenerife North 09-Mar 4

Barcelona Frankfurt 01-Mar 14 Barcelona GRO Verona VBS 09-Mar 3

Barcelona Malaga 01-Jan 35 Dublin Alghero 09-Feb 2

Barcelona Munich 01-Jan 7 Dublin Almeria 23-Jan 2

Barcelona Oporto 01-Jan 7 Dublin Billund 24-Jan 4

Barcelona Prague 01-Feb 7 Dublin Bologna FRL 09-Feb 4

Seville London LHR 01-Feb 7 Dublin Malta 08-Feb 3

Valencia London LHR 01-Feb 7 Dublin Pula 08-Feb 3

Valencia Milan MXP 01-Feb 7 Dublin Rzeszow 24-Jan 2

easyJet Lyon Rome CIA 16-Feb 7 Dublin Seville 23-Feb 3

Madrid Asturias 15-Feb 14 Dublin Stockholm VST 12-Feb 6

Madrid Casablanca 22-Feb 7 Dublin Trapani 11-Feb 2

Madrid Edinburgh 25-Feb 7 Dublin Vitoria 24-Jan 4

Madrid La Coruna 15-Feb 14 Dublin Warsaw 12-Feb 7

Madrid Lyon 16-Feb 7 East Midlands Alghero 19-Feb 4

Madrid Marrakech 22-Feb 7 East Midlands Bratislava 26-Feb 4

Madrid Rome CIA 23-Feb 7 East Midlands Granada 20-Feb 3

Madrid Toulouse 25-Feb 7 East Midlands Inverness 26-Feb 3

Flybe Birmingham Aberdeen 08-Mar 12 East Midlands Knock 27-Feb 4

Birmingham Galway 08-Mar 3 East Midlands Krakow 20-Feb 3

FlyMe Malmo Alicante 17-Feb 1 East Midlands Santiago de Comp. 27-Feb 3

Malmo Nice 17-Feb 3 East Midlands Valencia 19-Feb 4

Stockholm Malaga 24-Feb 1 Frankfurt HHN Malaga 19-Jan 4

Jet2.com Blackpool Malaga 19-Mar 5 Marseille Gothenburg GSE 17-Jan 4

Edinburgh Prague 09-Feb 3 Marseille Hamburg LBC 17-Jan 4

Manchester Prague 01-Mar 7 Marseille Malmo 17-Jan 3

MyAir Bari Bucharest BBU 15-Mar 3 Milan BGY East Midlands 12-Feb 4

Bari Milan MXP 15-Mar 3 Milan BGY Valladolid 02-Mar 4

Bari Paris CDG 15-Mar 4 Pisa Cagliari 16-Jan 3

Bologna Bordeaux 28-Feb 3 Pisa East Midlands 13-Feb 3

Milan BGY Bordeaux 15-Feb 4 Rome CIA Madrid 01-Mar 7

Milan BGY Casablanca 15-Feb 3 SkyEurope Bucharest BBU Rome FCO 12-Jan 4

Milan BGY Lille 15-Feb 5 Budapest Bucharest BBU 01-Feb 6

Milan BGY Marseille 15-Feb 4 Sterling Stockholm ARN London LGW 19-Mar 6

Milan BGY Metz-Nancy 15-Feb 3 Wizz Air Bucharest BBU Barcelona 15-Jan 3

Rome CIA Sofia 15-Feb 7 Bucharest BBU Dortmund 15-Jan 3

Venice Bordeaux 28-Feb 3 Bucharest BBU London LTN 15-Jan 3

Venice Lille 28-Feb 3 Bucharest BBU Rome CIA 15-Jan 4

Venice Marseille 28-Feb 3 Budapest Bucharest BBU 15-Jan 3

Venice Metz-Nancy 28-Feb 2 Targu Mures Barcelona 15-Jan 3

Norwegian Oslo Zurich 06-Jan 1 Targu Mures Rome CIA 15-Jan 3

RouteAirline Route Airline

In the first quarter of 2007, Europe’s LCCs launched 94 new routes generating 470 weekly return flights. This compares with 57 new routes and 298 weekly return flights in the first quarter of 2006. Ryanair and easyJet continue to generate around half of all new routes.


In Spain, Click Air took over more Iberia routes and expanded rapidly in Barcelona. Ryanair responded by adding new routes from nearby Girona and easyJet’s new Madrid base got underway with eight new routes including two domestic routes. Ryanair added routes from its East Midlands and Dublin bases. In Italy new services were offered by MyAir and Ryanair but things were unusually quiet in Germany, perhaps because several of the leading players busy consolidating their businesses.

In Central Europe the arrival of Romania and Bulgaria into the EU triggered the creation of a mini-base at Bucharest Baneasa for Wizz Air who began services to five cities in five countries. SkyEurope also added two new routes to Bucharest and Wizz Air also started flights from Tirgu Mures in Romania to Barcelona and Rome.

2.2.4 Capacity and traffic Approaching seventy-five million passengers were carried by AEA airlines during the three-month period ending in February 2007. This was up by 4.7% on the same period 2005/06. Just over three-quarters of passenger traffic was carried on intra-European sectors, which accounted for 28% of total RPK. Routes between Europe and north America, and between Europe and Far East/Australia-Pacific countries each came close to matching intra-Europe traffic measured in RPK, accounting for 22% and 23%, respectively, of AEA airlines’ output. Scheduled services of AEA members, December 2006 – February 2007

Passengers ASK RPK Load Factor

thousands millions millions %

Domestic 24,028 20,859 13,070 62.7%

Cross-border Europe 33,156 55,642 34,006 61.1%

Europe / N Africa Mid East 2,628 11,293 7,852 69.5%

North Atlantic 5,538 50,534 37,926 75.1%

South/Mid Atlantic 3,053 28,980 24,964 86.1%

Europe/rest Africa 2,048 17,678 13,942 78.9%

Europe /Far East, Australasia 4,406 45,011 36,169 80.4%

Other 108 43 73

TOTAL 74,965 230,040 168,003 73.0% Source: AEA

The European carriers increased intra-European capacity (ASK) by less than one percent, but benefited from an increase in RPK of 2.4%, producing an average passenger load-factor on these services of 62.7%, up over one percentage point on the 2005/06 quarter.

There were higher load-factor increases in other markets, with the South and Mid Atlantic routes improving by 1.6 percentage points. On the highly competitive North Atlantic market traffic increases did not keep pace with the growth in capacity, leading to a quarterly load-factor of 75.1%, down by just under half a point.

Of AEA’s members, British Airways was the airline with most passengers, very slightly ahead of Lufthansa. Air France, however, achieved the lead position in passenger traffic measured in RTK. Growth over the 2005/06 period was very varied. Turkish airlines improved its traffic (RTK) by 31.7% while increasing capacity (ASK)


by just 22.9%: s a result the carrier’s load factor was up by 4.5 points. SAS, however shrank capacity by 3.2%, while RTK fell even faster at 3.7%, leaving the airline with a passenger load factor down one-third of a percentage point. AEA members, December 2006 – February 2007, growth over same period 2005/06

Passengers ASK RPK Load Factor

thousands millions millions change (points)

Domestic 1.5% 0.7% 2.4% 1.1

Cross-border Europe 6.8% 6.6% 8.0% 0.8

Europe / N Africa Mid East 7.9% 9.1% 9.6% 0.3

North Atlantic 1.7% 3.1% 2.1% -0.7

South/Mid Atlantic 8.9% 7.2% 9.3% 1.6

Europe/rest Africa 4.4% 4.9% 4.4% -0.4

Europe /Far East, Australasia 6.1% 3.0% 4.7% 1.3

TOTAL 4.7% 4.6% 5.4% 0.6 Source: AEA

In terms of air freight, traffic carried in the three months showed no growth over the same period one year earlier. Domestic and cross-border European markets (only 2% of total freight traffic carried by AEA airlines) were both down by around 15%. The much more important routes to North America (28% of total FTK) and the Far East/Australia (45%) were also down. Growth in the markets between Europe - South America improved substantially. Air freight traffic AEA members, Dec 2006 – Feb 2007 vs same period 2005/06

Freight (TFTK)millions change

Domestic 27 -15.0%

Cross-border Europe 158 -15.4%

Europe / N Africa Mid East 286 -2.8%

North Atlantic 2,408 -0.6%

South/Mid Atlantic 990 10.3%

Europe/rest Africa 778 6.0%

Europe /Far East, Australasia 3,865 -3.5%

Other 47

TOTAL 8,559 -0.1% Source: AEA

2.2.5 Financial

European network carriers Financial performance of major EU carriers for January to December 2006


Revenues ($m)

Operating result ($m)

Net result ($m)

Op.margin %

Net margin %

Air France-KLM 28,929 1,570 1,093 5.4 3.8

Alitalia 5,928 -333 -508 -5.6 -8.6

Austrian Airlines 3,341 -112 -163 -3.3 -4.9

British Airways 16,331 1,252 730 7.7 4.5

Finnair 2,533 -4 -17 -0.2 -0.7

Iberia 6,823 162 152 2.4 2.2

Lufthansa Group 24,905 1,060 1,008 4.3 4.0

Ryanair 2,695 619 515 23.0 19.1

SAS Group 8,970 223 679 2.5 7.6

Swiss Group 2,874 -59 -222 -2.0 -7.7

Total above 103,328 4,378 3,267 4.2 3.2

Source: Airline Business, April 2007 and airline annual reports; exchange rates averaged for calendar year from OANDA.com

Net income for 2006 for SAS included SEK4,576m (US$647m) attributed to income from discontinued operations (its hotel group that was listed on the Stock Exchange at the end of November).

European LCC Air Berlin which recently acquired DBA has achieved a €50 million net profit for 2006 on combined passenger numbers of 19.7 million passengers last year. The load factor for the combined group was unchanged at 75.3%. Operating income stood at €64.1 million, reversing the previous year’s €5.5 million loss. EasyJet revenues grew nearly 15% to £366.2 million during the three months ended 31 December 2006. EasyJet is aiming for a 40% to 50% improvement on last year’s pre-tax profit of £129 million for its 2006/07 financial year, citing its continued focus on cost control and increased ancillary revenues. Total revenue per seat was up 4% in the first quarter, while ancillary revenues grew 22%.

Flybe has returned a £9.3 million pre-tax loss for the full year ended 31 March 2006 on a turnover of £303.5 million. While its turnover increased by 26%, its performance was dampened by its postponed IPO and exceptional aircraft costs. Flyglobespan has posted a 27% full-year revenue increase to £208 million in revenues, increasing its passenger numbers by 34% to reach 1.8 million. The airline achieved pre-tax profits for the year of £4.7 million. Swedish carrier FlyMe filed for bankruptcy. At the end of March an investor was involved in talks about the possibility of buying the carrier

Ryanair has raised its full-year net profit expectations by more than 10% to €390 million. Ryanair’s revenue figure was lifted by a 7% increase in average fares, a 19% rise in passenger numbers to 10.3 million, and strong growth in ancillary sales which helped to offset a 52% rise in fuel costs to €175 million. The carrier has secured around €60 million in savings by hedging much fuel for the 2007/08 financial year. Vueling’s full-year 2006 net losses remained just over €10 million. Revenue more than doubled to €235.5 million, helped by a near-trebling of ancillary revenues to €68.6 million.

USA and Asia network carriers


The US majors moved into profit for the full calendar year 2006, with operating margins at 3.9% compared to a negative 1.6% in 2005. The airlines produced at net result of US$1.6 billion in 2006 compared to a net loss of $4.6 billion in 2005. Only United and Delta were still in a loss position in 2006. Southwest’s 10.3% operating margin was well ahead of its nearest rival Northwest with 6.1%.

Cathay Pacific reported a strong increase in revenues for calendar year 2006 (up 19%), with operating profit up 26% on slightly improved margins. Its net profit was up 18% to US$526m. Both Air New Zealand and Qantas also returned higher operating profits for the six months to end December 2006, both increasing revenues by 13%. Both achieved good operating margins in the six months, Qantas at 8.4% and Air New Zealand at a very high 19.4%. The other major Asian airlines improved their operating margins from 1.4% to 3.0% in the last three months of 2006, with net profits up from US$140m to $399m.

Acquisitions and disposals Iberia reported at the end of March 2007 that it has received a request from TPG Capital on behalf of TPG Partners V for access to specific corporate, accounting, fiscal and legal information, with a view to the possible formulation of a public offer to buy all shares in the company at the price of €3.60 cash per share. British Airways subsequently retained Investment Bank UBS to evaluate its options.

Approval was given for AirBridge to take a controlling stake in Hungarian carrier, Malev, in February 2007. The state holding company APV had invited AirBridge into final negotiations after excluding the other remaining interested bidder, Lithuanian investor LAL. The AirBridge consortium, including Russian airline group Air Union, had agreed to pay Ft200 million for its 99.95% stake and committed to invest $66 million in the airline.

In March 2007, Flybe completed the acquisition of British Airways subsidiary, BA Connect, making it the largest regional airline in Europe with forecast annual passengers of around 10 million.

2.3 Airports

Traffic Europe’s ACI member airports increased passenger throughput by 6.1% in the first two months of 2007, compared with the same period in 2006. This was above the worldwide ACI growth of 5.9%, held back by relatively lacklustre performance of North American airports.

Cargo traffic growth worldwide was less strong, with the ACI airports worldwide recording 3.5% annual growth for the two months to end February. Europe was behind the world average, which was boosted by strong performance from Asian airports (the largest market in absolute terms). Year to February growth (2007/2006) at ACI airports worldwide


8.7%

4.0%

6.1%

2.6%2.2% 2.1%

5.9%

3.5%

Passengers Freight

Asia Pacific Europe North America Total ACI

Source: ACI International

The top twenty European airports increased passenger traffic in the first two months of 2007 by an average of 5.9%, compared to the same period in 2006. Passenger traffic and growth, January-February 2007 at the top European airports

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At the two UK airports in this group, London LHR and Manchester, traffic fell, but increased at all others. The downturn at some UK airports could reflect passenger


reaction to the threat of strikes in January by British Airways cabin crews. Many of the others recorded growth in double-digit percentages, with Milan MXP and Madrid achieving over 13% year-on-year growth.

Delays AEA released statistics covering airport delays in 2006 reported by the organisation’s member airlines. The table below summarises departure delays (>15 minutes) at the fifteen worst performing airports. Of these airports, only one improved its record on departure delays compared to 2005. European airports with the worst record for departure delays (AEA airlines) 2006

London Heathrow 31.8 ▲ 34.9

Madrid 31.3 ▲ 45.7

London Gatwick 30.7 ▲ 32.5

Paris CDG 28.6 ▲ 38.1

Barcelona 27.2 ▲ 43.4

Rome 26.3 = 41.8

Athens 25.2 ▼ 40.2

Frankfurt 25.0 ▲ 36.9

Dublin 24.4 = 44.6

Larnaca 24.3 ▲ 50.9

Milan Malpensa 24.2 ▲ 44.3

Lisbon 24.1 ▲ 42.6

Copenhagen 24.0 ▲ 39.2

Manchester 22.2 = 44.0

Paris Orly 22.2 ▲ 51.0

compared to 2005average delay

(minutes)Airport departures %

Source: AEA

Airport news The UK Office of Fair Trading decided to refer BAA to the UK Competition Commission. The referral is based on concerns relating to BAA dominance of the airport markets in the London and Central Scotland regions.

The EC Directorate for Competition approved the sale of Exeter airport in the UK to a consortium that includes Balfour Beatty and London City Airport Ltd.

The operator of the Berlin airport system was granted permission by a Berlin court to close Tempelhof airport in October 2008 as part of its long-term plans to transfer traffic to Berlin Brandenburg International Airport, due to open in 2011.

Ownership and airport developments

• Spanish construction company ACS purchased Custodia Holding’s 25.1% stake in German airport operator Hochtief AirPort.

• Ferrovial sold its 21% stake in Sydney Airport to Macquarie Airports for €607 million. Since its acquisition of BAA in late 2005, the Spanish infrastructure company has been gradually divesting itself of various airport assets.


• Aéroports de Paris sold its stake in Beijing Capital International Airport (BCIA). The French airports operator had originally a 10% share of the Chinese airport company – purchased in 2000 and further reduced to 6.6% in February 2005.

• The Netherlands government will not proceed with plans to part-privatise the Schiphol Group (operator of Amsterdam Airport).

• Flughafen Wien, the operator of Vienna airport, announced its intention to purchase 25% of shares in the company that manages Friedrichshafen Airport in Germany.

• Aena announced plans to build a new €3.8 million terminal at Reus Airport.

• BAA announced that the cost of its proposed second runway and associated terminal expansion at London Stansted will be approximately €3 billion, substantially below earlier UK Government estimates set out in its 2003 white paper.

• The Hungarian Government agreed that Hochtief takes over Budapest Airport privatised previously to BAA

2.4 Safety and security

A report issued recently by the IATA indicates that 2006 was the safest year on record. The report describes seventy-seven recorded accidents during 2006, with jet transport operations accounting for three-fifths of these losses. The remaining accidents involved turboprop aircraft. This figure compares to 111 recorded accidents in 2005, an overall reduction of nearly 31%.

However, this reduction must be weighed against an increase in the amount of global air travel. The global accident rate for 2006 was 0.65 hull losses per 1 million flights, a reduction of 14% from the rate observed in 2005.

It is worth noting that European airlines achieved an accident rate of 0.32 hull losses per one million flights, while North American airlines were also lower than average with a rate of 0.49. These figures contrast with the accident rate of 8.6 within the Commonwealth of Independent States, and 4.3 across African airlines.

Despite achieving an accident rate of 0.48 hull losses per one million flights amongst its member airlines, IATA is not complacent. According to the association’s CEO “Air transport remains the safest form of travel, but we must do even better. With demand for air travel increasing at 5-6% per year, the accident rate must decrease just to keep the actual number of accidents in check.”

The report also contains an analysis of contributing factors, citing adverse weather in 43% of accidents, communication problems in 38% of accidents, and poor flight crew training in 33% of accidents.

In spite of these results, IATA believes that the greatest improvements in airline safety are to be had by focussing on three key areas:

• Runway safety: Despite causing relatively few accidents, runway safety-related issues resulted in numerous serious incidents in 2006. IATA hopes to target pre-emptive action to prevent future accidents.


• Ground damage: Last year, ground damage cost the industry around US$4 billion. By increasing ramp safety, IATA hope to make more money available for re-investment into other safety related areas

• Cargo operations: Whilst cargo operations account for only 4% of global travel, they are involved in 24% of all accidents. To address this inconsistency, IATA intends to focus effort on recommending new safety standards for cargo airlines.

The goal IATA has set itself is to reduce the global accident rate to 0.49 hull losses per one million flights by 2008. If this can be achieved, it would represent a 25% improvement in overall safety within the airline industry.

2.5 ATM

Germany, France, Switzerland, Belgium, the Netherlands and Luxembourg are examining the potential for creating a single block of airspace covering the core area of Europe through what is termed the FAB [Functional Airspace Block] Europe Central Programme. Sweden and Denmark, Spain and Portugal, Ireland and the UK, and a number of central European countries have also embarked on projects to develop functional blocks of airspace. On this subject the Commission has adopted a mid-term report on the implementation of the FABs by Member States1.

European transport ministers have approved creation of a €2.1 billion organisation to oversee ATM technology research for the Single European Sky. The first calls for research proposals will be at the beginning of 2008. Research areas could include high-capacity data and voice ground-to-air communications, automated decision tools for air traffic controllers, aircraft-based ATM, wake turbulence detection systems and satellite navigation using Galileo for all phases of flight. The new organisation will be called Single European Sky ATM Research (SESAR) Joint Undertaking and will operate to 20132. The EC will provide €700 million of funding; Eurocontrol is expected to provide another €700 million of funding, and industry and third-party country organisations the remaining €700 million.

European transport ministers imposed a deadline on the consortium bidding to operate the Galileo navigation satellite system, ordering it to resolve serious internal management problems holding up the entire programme. Galileo will be a constellation of 30 satellites providing navigation information for air traffic. Eight companies make up the consortium bidding to operate Galileo: EADS, Alcatel-Lucent, Thales, Finmeccanica, Inmarsat, Hispasat, AENA and TeleOp.

2.6 Manufacturers

2.6.1 Aircraft manufacturers Boeing overtook Airbus in terms of net orders for 2006 – their total being 1,044 against 790 for the European manufacturer.

Airbus suffered in 2006 as a result of problems with the A380, poor sales of the A340 and uncertainty over the A350. Orders for the A320 were strong and in some way 1 COM(2007) 101 final of 15.3.2007 2 Council Regulation (EC) N° 219/2007 on the establishment of the SESAR Joint Undertaking, OJ L 64, 2.3.2007, p.1.


compensated for the poor widebody sales performance. A total of 434 aircraft were delivered in 2006. Airbus announced its Power8 plans in the first quarter of 2007 comprising the reduction of around 10,000 staff, divided between its main production centres in France, Germany and the UK and a reorganisation of its internal structures.

Boeing Commercial Aircraft increased its full-year operating revenues by about one third in 2006 compared with 2005. It delivered 398 aircraft during the year.

Bombardier announced the launch of a further stretch of its CRJ family to produce the CRJ1000 which will seat around 100 passengers.

Embraer announced in January that production problems had led to a reduction in full-year deliveries from 141 in 2005 to 130 in 2006, of which some 72 were for its E-jet family. By the end of the quarter, Embraer was announcing that its financial performance had deteriorated with a drop in earnings and profit due to increased expenses and reduction in earnings due to reduced deliveries.

ATR received a total of 63 orders for its turboprop aircraft, claiming 60% market share in orders, the increase in deliveries in 2006 led to a 30% increase.

2.6.2 Engine manufacturers GE, with its joint venture, CFMI produced the engines which powered 70% of all Airbus and Boeing deliveries in 2006, for Boeing aircraft alone the total was 93%. In terms of long-range mid-size widebodies (A330/A340 and 777), where the three main engine manufacturers compete, GE with 46% of aircraft deliveries just bettered Rolls-Royce with 40%. On the narrow body market CFM bettered IAE with 57% market share on the A320 family. CFM’s sole supplier status on the 737 family and A340 meant that it was the market leader in the civil aeroengines sector.

2.7 The environment

In February the ICAO Committee on Aviation Environmental Protection (CAEP) recommended to the ICAO Council guidance for States on the best way to incorporate international aviation in their emissions trading schemes. The ICAO Council subsequently decided to published the guidance as a draft and indicate the preference of a majority of ICAO states for the including third country airlines in such schemes only on the basis of the explicit agreement of the third counties concerned. It is intended to post information on missions trading schemes and measures on the ICAO website.

The Committee for Environmentally Friendly Aviation (CEFA), a group of European airline trade associations, has secured cross-member funding to commission the Paris office of Ernst & Young to scrutinise the accuracy of the report on which the European Commission based much of its proposed legislation. This is the CE Delft impact assessment of the proposed EU aviation ETS published late in 2006. The Ernst & Young study is expected to be completed at the end of March 2007.

At around the same time, one EU LCC, easyJet, published its strategy for limiting its impact on the environment. Its three promises: increasing its efficiency in the air and on the ground and help shape a greener future for the industry. The latter includes engaging with airframe and engine manufacturers on the application of new technologies to short-haul aircraft.


3. Bulgaria and Romania, the latest accession states

Bulgaria and Romania became Member States of the European Union on 1 January 2007. This section of the report offers an overview of the two countries’ air transport industry, highlighting any changes that have occurred in the first months of EU membership.

The table below compares the two states in terms of some measures of the socio-economic environment influencing air transport, and sets their environment in context of neighbouring Greece, and Poland, a recent accession state.

Some socio-economic measures: Bulgaria, Greece, Poland and Romania, 2005

Bulgaria Romania Greece Poland

Area thousand sq km 111.0 238.4 132.0 312.7

Population million 7.7 21.6 11.1 38.2

GNI per capita 3,450.0 3,830.0 19,670.0 7,111.0

Internet access

per 1000 population 283.5 207.5 176.8 235.7

Source: World Bank

The evolution of passenger and cargo traffic over the last twelve years has been similar in both countries.

The chart show that passenger traffic between EU countries and each of the union’s two new members increased from the one million passengers per year level in 1993 to four million in 2005.

The overall healthy average rates mask a slow-down in passenger traffic growth before 1996, followed by a build-up to increases of between twenty and thirty percent each year over the last four or five years.

Cargo traffic growth has been much more erratic, although here as well there was average growth in the twelve years to 2005 of 11% per annum for Bulgaria, and 14% for Romania. Both have seen the freight tonnes rising from around 3.000 to close to (Bulgaria) or well above (Romania) 12.000 tonnes.


Passenger traffic between EU and Bulgaria/Romania, 1993-2005 (Note: EU15 1993-2004, EU25 2004- )

0

1.000

2.000

3.000

4.000

5.000

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005Source: Eurostat

Pass

enge

rs (t

hous

ands

)

BulgariaRomania

3.1 Regulatory issues

Despite becoming a Member State of the European Union in January 2007, Bulgaria has been excluded from the internal aviation market after failing to overcome shortcomings in the oversight capabilities of its civil aviation administration. “The deficiencies that have been identified by the European Aviation Safety Agency (EASA) concern important shortcomings in the administrative capacity of the Bulgarian CAA in the field of safety oversight in general, and for the certification of airworthiness and maintenance of aircraft. The number of CAA staff is insufficient and their level of training is generally inadequate to perform their duties at the required level,” according to the European Commission. Bulgaria will remain excluded until a further EASA inspection judges the safety situation in the country to be satisfactory. To date, no Bulgarian carriers have been put onto the EU’s aviation ‘blacklist’, but airworthiness and maintenance certificates issued by the Bulgarian CAA will not be automatically recognised by other EU member states, and Bulgarian carriers will not be granted unrestricted access to EU routes. Any Bulgarian carrier will still though be able to serve other EU countries as a third-country operator in accordance with the bilateral air service agreements between Bulgaria and other EU member states. In February, Bulgaria withdrew permission for five freight carriers based in the country to fly to other EU countries. As a result of the decision taken by the Bulgarian authorities against Air Sofia, Bright Aviation Services, Heli Air, Scorpion Air and Vega Airlines, the Commission decided not to include any Bulgarian carrier on the EU blacklist.


3.2 Air transport networks

Bulgaria In January 2007, scheduled services were offered from just three airports in Bulgaria. The chart below lists the airports and the number of domestic and international cities served from them with non-stop flights. Sofia dominates the network, with flights to twenty-nine international destinations. Bulgaria: airport network and number of connections from each airport, January 2007

BULGARIA Cities servedcode city domestic international

BOJ BOURGAS 2SOF SOFIA 2 29VAR VARNA 2 5

Source: OAG

The table below gives a measure of the competitive environment in January 2007 on both domestic and international routes. The Sofia London market offered the most competition, with four carriers operating. Bulgaria: competitive environment on domestic and international routes, January 2007

1 2 3 4 5

international 21 10 2 1

domestic 3BULGARIA

Number of carriers:

Source: OAG

Romania In January 2007, scheduled services were offered from thirteen airports in Romania. International services operated from eight of these. The chart below lists the airports and the number of domestic and international cities served from them with non-stop flights. As might be expected, Bucharest dominates the network, with flights to nine domestic destinations, and thirty-three in other countries. The second most well-connected city is Timisoara, which has flights to fifteen destinations outside Romania.

Competition on domestic routes within Romania is not high. Of the fifteen routes, only the one between Timisoara and Bucharest had more than one airline operating in January 2007.


Romania: airport network and number of connections from each airport, January 2007

ROMANIA Cities served

code city domestic international

ARW ARAD 1

BAY BAIA MARE 2

BCM BACAU 2 2

BUH BUCHAREST 9 33

CLJ CLUJ 1 4

CND CONSTANTA 1

IAS IASI 1 1

OMR ORADEA 3

SBZ SIBIU 2 2

SCV SUCEAVA 2

SUJ SATU MARE 1

TGM TIRGU MURES 1 2

TSR TIMISOARA 3 15 Source: OAG

The table below gives a measure of the competitive environment at that time on both domestic and international routes. Bucharest-Rome offered the most competition, with five carriers offering air services. Romania: competitive environment on domestic and international routes, January 2007

1 2 3 4 5

international 40 15 4 1

domestic 14 1ROMANIA

Number of carriers:

Source OAG

3.3 Airlines

Bulgaria

Balkan Bulgarian Airlines ran into serious financial problems in 2001, temporarily suspending flights, and was later declared insolvent by a Sofia court. It subsequently gradually resumed services and in July 2002 supplemented its fleet with the arrival of a pair of leased Boeing 737s from Lufthansa. The airline was eventually restructured and re-launched as Bulgarian Air. Bulgaria Air was privatised in 2006; although it was thought that the government wanted to sell the carrier to a major foreign investor, a union of locally-owned companies, led by Hemus Air, emerged as the buyer with Italian Air One being the only other contender. Hemus Air reportedly paid €6.6m and promised to invest a further €86m over the next five years. It is seeking to acquire up to 15 new aircraft to expand activities in Bulgaria as a result. In 2007, it operated 3 B737-500s and 7 B737-300s, and had codeshare alliances with Aeroflot, Austrian Airlines, Air France, LOT and Brussels Airlines. Hemus Air operates a mixed fleet of former soviet built aircraft and western aircraft, notably six BAe 146s

http://en.wikipedia.org/wiki/2006

http://en.wikipedia.org/wiki/Hemus_Air

http://en.wikipedia.org/wiki/Air_One


The major operators flying to and from Bulgaria in 2004 were as follows: Operator share (%) of local flights in Bulgarian airspace

Airline 2004

Hemus Air 9

Balkan Air Tour 8

Air Via 7

Bulgarian Air Charter 5

Lufthansa 5

BH Air 4

Others 61

Total 100

Source: Eurocontrol, STATFOR, Doc101, 24 October 2004

Romania Tarom and Carpatair were the two Romanian carriers offering domestic and international services.

Carpatair is a regional airline based at Timisoara airport, operating a network covering twenty destinations in five countries, linking niche Eastern European destinations with cities in Italy, Germany and France. It is a Swiss-Romanian joint stock company operating a fleet of two Saab 340, eleven Saab 2000 and two Fokker 100 jets.

Tarom is the Romanian national carrier, and operates a fleet of nineteen aircraft. The airline abandoned its long-haul network in 2003, and is currently modernising its fleet with the acquisition of Airbus A318 aircraft to serve its 35 destinations in Europe and the Middle East.

Tarom has been a member of AEA and has been operating western built aircraft for many years. Its operating ratio in 2000 was only 76%.In early 2001, the airline put in place a number of austerity measures designed to bring the airline to profitability by 2005. As can be seen from the table below, this actually occurred in financial year 2004.

Its operating ratio climbed to 106.7% in 2005, a relatively good performance by international airline standards.

Also in 2001, the state-owned carrier converted its debt into shares through a new issue, and moved its domestic base from Baneasa Airport to Otopeni International Airport. Long-term debt was reduced from US$303m in 2001 to $46m in 2002 according to their balance sheets reported to ICAO. At the same time the new issue of shares boosted shareholders’ funds by over $200m which resulted in the removal of the negative equity position.


TAROM financial and operating results, 2001 to 2005

2001 2002 2003 2004 2005 Av.% pa 01-05

Passenger revenues US$m 174.4 184.1 198.5 225.4 255.8 10.0 Passenger-kms (m) 1,963.8 1,773.9 1,680.4 1,427.8 1,448.2 -7.3 Passenger load factor (%) 59.9 61.7 64.3 63.6 61.0 0.5 Total operating revenue US$m 192.3 202.6 226.6 259.2 280.8 9.9 Total operating costs US$m 218.8 223.8 230.6 256.3 263.2 4.7 Operating result US$m -26.5 -21.2 -4.0 2.9 17.6 Net result US$m -38.3 -20.5 -14.6 2.2 5.4 Passenger revenue/RPK US cents 8.9 10.4 11.8 15.8 17.7 18.7 Operating cost/available seat-km US cents 6.7 7.8 8.8 11.4 11.1 13.5 Operating ratio (%) 87.9 90.5 98.3 101.1 106.7

The major factors that helped the airline turn round were an increase in passenger load factor, although this dipped in 2005, and yields which rose by just under 20% a year in US dollar terms. Cost reduction was not so successful, faced with very high increases in fuel cost in this period.

In 2001, Tarom had a number of codesharing agreements with other international airlines, notably Air France, Alitalia, Austrian and Iberia. It joined SkyTeam as an associate member in 2005.

The airline operates a mixed fleet of both turbo-props and jet aircraft. Its long-haul A310 fleet was grounded and put up for sale without success. In 2007, it was decided to reinstate them in the fleet.

The airline was due to be part-privatised in 2000, but lack of interest and poor market conditions led to the plan being shelved.

The major operators flying to and from Romania in 2004 were as follows: Operator share (%) of local flights in Romanian airspace

2004

Tarom 32

Carpatair 14

Sixcargo 5

Lufthansa 3

Alitalia 3

Romanian Air Force 3

Others 40

Total 100

Source: Eurocontrol, STATFOR, Doc101, 24 October 2004


3.4 Airports and airspace

Bulgaria: The principal airports are Sofia, which is the main international gateway, Bourgas and Varna. These airports account for the vast majority of passenger traffic in Bulgaria. Sofia is operated by Sofia Airport EAD, which is owned by the Ministry of Transport. The Bulgarian government in recent years has encouraged the participation of the private sector in both its port and airport infrastructure through concession-type contracts. While Sofia remains under direct public sector management, the airports of Bourgas and Varna have been operated since 2006 by a privately-owned company under a 35-year concession agreement with the state. Fraport Twin Star Airport Management AD which is a joint venture between Fraport and BM Star of Bulgaria manages both Bourgas and Varna airports.

Sofia is the busiest airport, handling 2.2 million passengers in 2006. The airport’s traffic has grown on average by 20% per year since 2002. Most of the traffic handled is to and from international destinations. Traffic growth has been even more robust at Bourgas which grew from 0.8 million passengers in 2002 to 1.8 million in 2006, an annual average rate of 34%. Bourgas handles a significant volume of inbound charter services. Traffic growth has however been more modest at Varna. Indeed, Varna used to be the second business airport before it was overtaken by Bourgas in 2004. Varna, also located on the Black Sea, handles similar types of traffic as Bourgas with the only difference being that it also hosts domestic flights. Passenger traffic 2002-2006: Sofia, Bourgas and Varna

2006 2005 2004 2003 2002

Sofia 2,209,000 1,874,000 1,614,000 1,357,000 1,214,000

Bourgas 1,816,000 1,574,000 1,361,000 1,027,000 769,000

Varna 1,533,000 1,559,000 1,339,000 1,191,000 1,094,000

Source: ATI

Sofia International Airport only reported just under 13,000 tonnes of freight in 2005, increasing by 18% to 15,200t in 2006, all on international flights. Its average passenger load per flight was 74 in 2005, up from 65 passengers in 2002.

Financial data relating to Bulgarian airports could only be found for Sofia. As shown in the table below, as traffic has grown, so have revenues. The net margin has grown steadily since 2003 to a level of 38% which is very high by European standards.

The airport has relied primarily on funds from various development banks to finance capital investment. The new Terminal 2, opened in December 2006, was funded primarily funded by the European Investment Fund and the Kuwait Fund for Arab Development.


Total Revenue and Net Margin, 2002-2006: Sofia Airport

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

2006 2005 2004 2003 2002

Net

Mar

gin

10

15

20

25

30

35

40

45

50

Tota

l Rev

enue

US

D

Net marginTotal revenue

Source: ATI

ATSA provides air traffic services covering around 145,000 square kilometres. There are two en-route control centres, at Sofia and Varna.

Eurocontrol reported that the number of annual IFR movements in Bulgarian airspace totalled 402,000 in 2006, up 1.8% from the previous year. The majority of these were overflights (84%), with originating and destination flights numbering only 61,000 in 2006, up 15%. For the second half of 2006, 13.7% of movements were accounted for by LCCs, up from 9.2% for the second six months of 2005. Total movements are forecast by Eurocontrol to increase by 5.8% in 2007 and 3.6% in 2008. This compares growth for the Eurocontrol’s statistical reference area (ESRA) as a whole of 3.9% and 4.3% for the same years.

Romania Romania has seventeen commercial airports. The busiest is Bucharest Henri Coanda (formerly Otopeni), which handled 3.5 million passengers in 2006. This is considerably ahead of the second business airport of Timisoara which handed 608,000 in the same period. The third busiest is Bucharest’s second airport, Aurel Vlaicu (formerly Baneassa) which processed 386,000 in 2006.

Henri Coanda is owned and operated by National Company Bucharest Henri Coanda International Airport S.A, itself owned by the Romanian government. The airport is Romania’s main international gateway and home of the national airline Tarom. The airport’s passenger traffic has increased at an average annual rate of 16% since 2002. Bucharest Baneassa was the original airport serving Bucharest before Opoteni was built in 1968. Once traffic had migrated to the new airport Baneassa remained operational but seldom used until the arrival of several low cost airlines in recent years such as Germanwings, Blue Air, My Air and SkyEurope. Operating under its new name of Aurel Vlaicu (BBU), the airport has now positioned itself as the low cost alternative to Henri Coanda (OTP).

Bucharest Henri Coanda airport only reported 14,400 tonnes of freight in 2005, increasing by 26% to 18,100 tonnes in 2006, almost all on international flights. Its


average passenger load per flight was 63 in 2005, marginally down from 65 passengers in 2002. Passenger traffic 2002-2006: Bucharest airports and Timisoara

2006 2005 2004 2003 2002

Bucharest (OTP) 3,514,000 3,036,000 2,644,000 2,347,000 2,119,000

Timisoara 712,000 371,000 304,000 263,000 269,000

Bucharest (BBU 700,000 * n/a 125,000 52,000 31,000

(* Estimate) Source: ATI

Timisoara which serves the western region of Romania has also experienced rapid growth since 2002, mainly hosting full service carrier international and domestic services.

RATCA, The Romania ATC service provider employs around 530 air traffic controllers, 300 of these involved in en-route control.

Eurocontrol reported that the number of annual IFR movements in Romanian airspace totalled 416,000 in 2006, up 1.2% from the previous year. The majority of these were overflights (75%), with originating and destination flights numbering only 84,000 in 2006, up 15%. For the second half of 2006, 8.5% of movements were accounted for by LCCs, compared to 7.8% for the second six months of 2005. Total movements are forecast by Eurocontrol to increase by 4.8% in 2007 and 4.5% in 2008. This compares growth for the Eurocontrol’s statistical reference area (ESRA) as a whole of 3.9% and 4.3% for the same years.

3.5 Developments since January 2007

Bulgaria This summer scheduled capacity (April 2007 v 2006) in and out of Bulgaria will rise by around 5% though movements will increase by around 15%. Average aircraft size has been reduced from 115 seats per aircraft to 105. While Bulgaria does not yet have its own low-cost airline, other LCCs such as Germanwings, MyAir and Wizz Air all operate to Sofia and Scandinavian carriers Sterling and Norwegian will operate to the summer resort areas around the Black Sea.

In the first two months of 2007 traffic between the UK and Bulgaria is up 83% on the previous year.

Romania Blue Air is Romania’s first home grown low-cost carrier. Created in 2004 and based in Bucharest it currently operates a fleet of four Boeing 737s. Last year the airline carried 443,000 passengers on a mix of charter and scheduled operations at a load factor of 77% and generated revenues of around €47 million. In 2007 it hopes to double passengers and revenues. Its route network is based at Bucharest Baneasa airport and features popular Western European destinations such as Barcelona,


Madrid, Rome and Paris. The airline also flies to Istanbul. Destinations in Italy and Spain are also served from Arad, Bacau and Cluj Napoca.

The growth of low-cost service from Romania’s second Bucharest airport at Baneasa has been impressive, increasing from just five routes in April 2006 to 22 in April 2007. Apart from Blue Air which operates scheduled flights to 13 destinations, Italian LCC currently operates to six Italian destinations with new routes to Barcelona, Bologna, Ibiza and Paris planned for later this summer. Other new operators at Baneasa include Germanwings (to Cologne/Bonn), SkyEurope (three routes) and Wizz Air (five routes). Passengers wanting to travel between Rome and Bucharest this summer will have a surprising amount of choice as Blue Air, MyAir and Wizz Air will fly between Rome Ciampino and Bucharest Baneasa, SkyEurope will fly between Rome Fiumicino and Bucharest Baneasa and Alitalia and Tarom will operate between Rome Fiumicino and Bucharest Otopeni.

The sudden surge in operations at Baneasa will result in the closure of the airport for several months this summer while maintenance work is undertaken on the runway. Flights will be diverted to Otopeni during this time.

Across all airports in Romania scheduled capacity is increasing by around 25% this summer (OAG data for April 2007 v 2006) with movements increasing rather more slowly at 16%. This reflects the increase in average aircraft size from 80 seats per flight in 2006 to 87 seats in 2007, which the use of typically 150-seat aircraft by LCCs contributes to.

In the first two months of 2007 traffic between the UK and Romania is up 87% on the previous year.

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