There is plenty of activity in aviation circles in the Czech Republic at the moment, with the country’s main gateway and flag carrier undergoing privatisation and the airport also pursuing a second parallel runway, which it hopes will cement its position as the leading airport in central Europe.
For Prague Ruzyne Airport, these are major undertakings. Indeed, some major detective work (involving the airport collecting over 4,000 original documents stretching back many decades to 1937) was required in its transformation from a state owned company into a joint-stock company. The gateway is now fully focused on its future privatisation and its bid for a second parallel runway.
Prague Ruzyne’s CEO, Miroslav Dvořák, believes the runway is vital for the gateway’s continued growth and prosperity. “We are currently using 80% of the existing runway system’s capacity and during peak times [about seven hours a day] we are completely full. The new runway will greatly increase the capacity and this, in turn, will allow us to satisfy the demand of airlines.”
There were also important commercial reasons for acquiring the land for the new runway, which is planned to go into operation in 2014. “It was a fundamental factor for potential investors’ decision-making,” Dvořák explains.
“Now they can buy an airport with definite potential for further growth for dozens of years to come and not a company that will stagnate in the mid-term.”
Estimates for the airport’s price tag had last year hovered around the €2.8 billion mark, but the continuing deterioration in the global economy means that the asset could well fetch below that figure.
Still, Dvořák believes that Prague Ruzyne remains an excellent investment opportunity due to its geographic location in the centre of Europe and strong operational offering.
It is this geographical proximity to both East and West that the flag carrier, Czech Airlines, hopes to capitalise on with its planned privatisation. As a SkyTeam member, Czech Airlines had attracted interest from within the alliance, with Aeroflot and Air France-KLM submitting expressions of interest. Now though, Air France-KLM is the only SkyTeam carrier to remain in the bidding. It hopes to boost its reach into central and Eastern Europe.
Czech Airlines’ vice president for marketing and product development, Petr Pistelak, told Routes News that the main aim of pursuing privatisation is to attract more transit passengers by growing the carrier’s reach in Eastern Europe where the market is less competitive and there are more opportunities. “We are trying to increase our presence in Eastern Europe because of the less competitive environment in that region, where there is limited or no penetration by low-cost carriers. There are opportunities in these fast-growing markets and there are other links too, including linguistic, cultural and economic ones,” he says.
Pistelak explains that Czech Airlines has in recent years concentrated on serving fewer destinations but in a more intensive manner. “Each and every route of Czech Airlines now has a clear role to play in increasing network profitability, otherwise we are ready to take the decision to terminate that operation,” he says.
Czech Airlines has recently been aiming to improve its network profitability in recent years, Pistelak points out. “We have succeeded in improving the overall network profitability because of more effective work with data in the sales management, route control, revenue management and pricing. It is important to note that the size of the fleet remains about the same as three years ago, so capacity for new routes is obtained by reallocating equipment from less profitable routes.”
A route that has proved to be highly successful is Almaty in Khazakstan, which Czech Airlines launched in 2008 operating an A319, which Pistelak claims became profitable within the first two months of operation. “Due to this success, we are looking to further develop our network in central Asia by this year adding Tashkent and Novosibirsk and other new destinations that could be started in the next three years.” Due to the success of the Kazakhstan service, Czech Airlines is upping its flights from twice weekly to seven flights a week.
“Prague and Vienna are the only European hubs from which destinations in Central Asia are still accessible with single-aisle medium-range aircraft.
Long-haul widebody aircraft would be necessary to fly there from Frankfurt, Amsterdam and other hubs west of Prague, which come with much higher operating costs than A319s or A320s. In comparison with Vienna, we have a stronger local market, mainly due to the popularity of Prague and the Czech spas among people in CIS countries,” says Pistelak.
In addition to Almaty, Czech Airlines last year launched five other new destinations: Tbilisi; Damascus; Rostov-on-Don; Strasbourg; a seasonal route to Heraklion and increased capacity on routes to Moscow; Oslo; Stockholm; Copenhagen; Stuttgart and Hamburg.
This year, however, Czech Airlines is feeling the effects of the global slowdown, having carried 12% fewer passengers from the beginning of this year to March 15 compared with the same period last year. Pistelak explains that this is due to a reduction in capacity (mostly ad hoc cancellations), which has seen 9% of flights cancelled. Czech Airlines’ biggest decreases have been on domestic routes as well as those to Slovakia, Russia and Ukraine.
“Our traffic decreases are still less than the decrease in traffic at Prague Ruzyne Airport, which is oscillating between 15% and 20% from the beginning of this year,” Pistelak points out. And he adds that the current environment is currently very difficult to respond to or plan for due to the lack of information. “There are very few trends regarding booking forecasts, with behaviour on each route changing on a weekly basis. This is totally different in comparison to last year,” he muses.
One constant is that even after privatisation, Czech Airlines will be retained as the Czech Republic’s national airline and Prague will remain its hub.
Prague Ruzyne is already widely considered a SkyTeam hub, with 51% (over six million passengers a year) coming from alliance members, namely: Czech Airlines; Air France-KLM; Aeroflot; Delta Air Lines and Korean Air.
Czech Airlines has a 43% market share at the airport, but Prague Ruzyne’s Dvořák also points to SkyEurope Airlines’ strong performance in 2008.
“SkyEurope Airlines has climbed to second position with 9% share, followed by another home based carrier, Travel Service (8%), and then easyJet (7%) and Lufhansa (7%). In 2009, the launch of Wizz Air and expansion of Ryanair‘s operations will significantly strengthen both of their positions in the local market,“ he believes.
Despite the new services, Prague Ruzyne has seen declines on services to Western Europe, particularly with Alitalia’s recent dramas and UK carriers reducing capacity. “An extensive reduction of flights resulted in significant decrease in passenger volumes on several routes, such as Copenhagen, Milan/Malpensa, Madrid and Dublin. Also, the most popular charter destination – Hurghada – witnessed lower passenger numbers.”
Dvořák adds: “Despite the current general decline of air traffic, it is gratifying to be able to announce some increased frequencies and new routes.” These included Wizz Air launching new flights from Prague to four European destinations, along with Delta’s new frequencies on the New York route and Korean Air announcing that from the beginning of the 2009 summer season it will operate a B777-200 aircraft four times weekly instead of the current A330-300.”
While there will be fewer passengers through the airport this year, the gateway remains committed to continually improving the passenger experience through its terminals as well as relations with its airline customers and the surrounding communities.
“Last year, we launched regular surveys among departing passengers that help us to analyse detailed passenger profiles, including their travel habits and behaviour,” explains Dvořák.
Prague Ruzyne also introduced a new interactive B2B module for airlines in March, giving them the opportunity to check all airport and airline operational results, passenger surveys results and MIDT statistics online, anywhere in the world. “Knowledge of passengers’ requirements contributes to attracting new customers and efficient use of the airport’s catchment area,” he continues.
It is hoped that these types of initiatives, along with Prague's geographical location, will see the airport retaining existing services and growing new ones well into the future.
This article is featured in Routes News 2009 Issue 3