May 7, 2020 – How will the future of flights to Croatia look like in the post-corona world? TCN catches up with Max Oldorf, COO of the aviation data company, ch-aviation.
One of the great uncertainties in a world of great uncertainty at the moment is how the future of travel will look, especially regarding air travel. Will airlines survive, will budget travel still be a big thing, and what about inter-continental travel? And how will flights to Croatia look like from key markets later this year, and next?
One man with better insight than most, both in terms of the aviation industry, as well as flights to Croatia, is Max Oldolf, one of the Swiss founders of ch-aviation, which provides industry data to airports, airlines and other clients all over the world. Oldorf is a regular visitor to Zagreb, as the company’s largest subsidiary office is in the Croatian capital – you can learn more about it this TCN feature story.
The aviation industry has gone through massive change in the last few months, and the effects will be felt for years. Let’s look at how this will affect some of the major players in the Croatian market. Firstly, let’s look at the inter-continental market, which Croatia has been developing in recent years. American, Qatar (to Dubrovnik), Emirates, Air Canada – they have all postponed plans for 2020 until next year. Will they be back?
In general we need to accept that the world will look different from now on so I think we just have to live with a new normal. Some of these flights might come back in the next 2 years, some of them we will never see again. I think it is safe to say that we will see close to zero Intercontinental flights this year. If there will be no further waves, we might see some of them back next year already. But my suggestion is that there really needs to be a focus now on first getting domestic flights back, then Europe, and if that works fine the Intercontinental flights will follow at some point.
The UK and Scandinavian markets are important for Croatia. With Norwegian in trouble, Gatwick emptying, easyJet CEO saying they will come back ‘like a startup’ and Ryanair CEO saying if the government don’t pay for the middle seat, Ryanair will not fly, things look pretty bleak. How will budget travel to Croatia form the UK and Scandinavia change? And what about price and frequency?
The only thing we really need to look at right now is if there will be a summer season in Croatia or not. I would say with the current developments the season should not be written off yet. A lot of people have had enough of the lockdown and are eager to travel the moment they are allowed to again. Volumes might be lower due to precautionary measurements or fear by some citizens, but in general all airlines will lift off again the moment they are allowed to and have passengers to transport.
On the prices, short-term we will see very good deals for travellers. Airlines will face significant overcapacity and Ryanair and Wizzair already announced that they will fight for each customer with low prices, so the next 1-2 years we will see a new price war on European skies until market shares are settled.
Give us a sentence on each of the following airlines, and what their post-corona relationship will be with Croatia in terms of flights and traffic.
Ryanair: Not worried about them at all. They will be back in full force shortly after stable flight operations are possible again. To my knowledge, Ryanair is keeping its fleet in full operational mode right now so they can start any time again.
easyJet: Even before the crisis, easyJet had a dispute within their shareholders if they might have grown too much in the last couple of years. Especially its founder Stelios is not happy with the growth and said a smaller easyJet might be more profitable. So the crisis now might put them back a bit but in general I am also not really worried about them, they will be back.
Norwegian: Norwegian is like the walking dead, only still alive because of their shareholders, leasing companies etc. gave them time for restructuring. Don’t count on them coming back to Croatia soon or at all.
Eurowings: I think they will be back similar to Ryanair and easyJet. Flying to Croatia is a part of their bread and butter leisure business so the moment demand picks up again they will fly.
Jet2: Same as with Eurowings.
Lufthansa: A different situation because they are focused on Hub connectivity to Frankfurt and Munich so they have more business passengers than holidaymakers. They might send smaller planes but they will send them for sure.
BA: Probably similar to Lufthansa, they might send smaller planes.
SAS: The airline used Corona now to do some much-needed restructuring, laying off staff etc. I think they will be back as well. But in which form remains to be seen.
Croatia Airlines post-corona. Discuss.
Croatia Airlines really showed during this crisis why it is important for a country to have a flag carrier. They provided the lifeline route to Frankfurt, flew to China to pick up PPE material, performed repatriation flights etc. Croatians can be really proud of its well-functioning airline in this crisis because it is something Croatia would have really struggled with if there would not have been a flag carrier.
They will also play a very crucial role now for the recovery of the Croatian economy given the fact that Croatia will have much better connectivity than other countries in the Region once border limits are lifted. But this is something the Adria Airways collapse already showed quite drastically. Adria collapsed and the pick up of their deserted routes from Ljubljana did not really happen. There were volume increases to the larger hubs but many direct connections were lost.
That’s why Croatia Airlines is so important for the development of Croatia, they provide direct connections no one else otherwise would provide. And also important they pay their taxes in Croatia, so while the government might need to support them from time to time, this money always comes back in form of taxes, added value within the country etc. The only thing Croatia Airlines really should do is to find a bigger partner so they can use synergies, drive costs down etc. A good partner who challenges them to become better every day.
Similar to Swiss in Switzerland who is now owned by Lufthansa and who was too small to be profitable on its own but with a larger buying force in the back became unstoppable. I was actually super excited when it was announced that Aegean is interested in them. Aegean is a fantastic airline as well with a smart, lean business model that is capable of dealing with seasonality and even the fleets of these two airlines would be a 100% fit. So I really hope once all is over these talks resume. It would be a very good marriage.
Do you expect any airlines to enter or increase their presence in the Croatian market? Wizzair, for example, seems to be pretty active in the region.
As with any crisis there are companies that will go out of business because they were sick before, and there are others that see huge opportunities now. Wizzair definitely is in the second group and they are now really pushing to win market shares. A Wizzair entry into Croatia would make absolute sense and they will probably do that if the airport fees come down to a competitive level.
A severe reduction in traffic has affected airports around the world. How much are Croatia’s airports hurting? The concession for Zagreb has already been controversial. How do you think the situation will affect things?
Well, the situation for all airports is really bad, that’s why they will all fight like crazy to win traffic back. That’s what the Croatian airports need to prepare for now. They need to create competitive incentives and support programs for the airlines to continue serving Croatia making sure the traffic does not flow to other countries in the region.
How much traffic (%) less do you expect in 2021 compared to 2019 at Croatian airports?
I would say anything between -50% and similar is possible. Right now I would probably be happy if we see 20% less traffic in 2021 compared to 2019.
Looking forward and planning for the future, Split would be more effective if it connected directly with a major European hub such as Munich or Frankfurt, rather than most traffic via Zagreb. What do you think about the possibility of a deal to connect Munich or Frankfurt as a proper hub for Split?
I think this will be very challenging as Split still deals with a lot of seasonality. Last year they had 720.000 passengers in July and 35.000 in February. So any airline looking into this will have to deal with the seasonality. It goes a bit into your question on Croatia airlines and underlines why Croatia Airlines is so important for the connectivity of the Country. In summer when the flights are full everyone can and will fly, but once you get to October everyone will stop operations because it becomes unprofitable and you are cut off for another half year until it picks up again. If Split wants to have this connectivity to Munich and Frankfurt it will come at a cost and they will have to create a program that will cover the airlines losses from October till March. If they are able to do that than we will see something happen. If not then the status quo will prevail.
You can follow the latest global aviation news on the ch-aviation website.
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