Ryanair pulling out of the Valencia route in the short-term has created some commotion in the local tourism community. However, one should not panic. The core issue should now be to change the Madrid route, which is seasonal, into a year-round service. How can this be done? We are going to look at three options, while also drawing up other routes that could be expanded with Ryanair without damaging Air Malta. But first the Madrid case.
Iberia
One possibility could be an operation by Iberia feeder company Air Nostrum using Canadair CRJ900 jets, which are very cost-effective and at the same time do not have such a high marketing risk (half the seats of an A320, not that worse unit cost). This could mean a higher frequency in summer and a lower one in winter, but still a permanent frequency rather than no link at all when the marketing risk for a larger jet is too high.
While any addition was also welcome in summer, it is particularly during the winter months that one might get more tourists with the use of smaller, but at the same time very efficient (no way comparable to the Avro RJ70) jet. For example, with a load of 70 passengers, it makes no sense to fly with a 190-seater. So there are no flights and zero tourists. If one has an aircraft with 90 seats, 70 is still a good load; the flight might make sense and one gains these tourists. It is better to have a connection with the smaller jet rather than nothing. Malta has no night-flying problem so one could keep an aircraft occupied rather than parked thus increasing productivity, which is what Vueling did on the route.
What might make the route not so attractive for a year-round service operated by Air Nostrum/Iberia is the high orientation on tourism, which means one sells primarily lower fare tickets quite a time beforehand, rather than the higher fare short-term bought tickets. Also, during the more attractive summer season but outside the school holidays period one would possibly have to fight tons of overcapacity.
Also, Air Nostrum in general flies routes to all sorts of places across Spain as domestic links, or links major cities in Europe to Spain. A small holiday island link outside Spain would be a complete novelty and the odd one out in its route network. The only hope could be that Air Nostrum would indeed take up the route during the night instead of leaving an aircraft parked. Besides, one must not forget that all Air Nostrum flights are after all Iberia flights and hence have strong distribution channels. Two weekly CRJ900 flights in the winter schedule and three in summer would be equivalent to just one and one and a half A320s/B737-800s respectively.
Generally, the scenario shows the great potential a CRJ900 would have for Malta if Air Malta had some available: maintaining more routes which are unviable with the higher capacity (and trip cost) Airbus fleet while concurrently having a good unit cost performance, or adjusting route/volume ratios to cut costs, even though commonality of fleet is a strong counterargument in the overhead cost field.
In a previous article I also dealt with the potential of a CRJ900 and A320 combination for a link from Milan-Bergamo with Italian low-cost airline Myair, which could represent a way more balanced addition for that market than other potential year-round operators. Replacing the Volare seasonal link by having three weekly CRJ900 runs in winter and either three A320 runs or six CRJ runs in summer, is a solution that would put less pressure on the Air Malta-Malpensa link than other options while providing high frequency (see TMIS, 17 August for details).
Vueling
Vueling has achieved nice results thanks to the merger between Vueling and Clickair. Some consolidation finances improved significantly in the last quarter, which means one has a more solid base. It would be nice to see them back next summer. One could try to have them operate this for a longer period of time at least. An operation with Vueling/Clickair would have the advantage of keeping the low-cost carrier portfolio more diversified, lessening dependence on certain carriers.
Ryanair
Given that Ryanair pulled out after what is usually the highest subsidy period on the Valencia sector, maybe one could have Ryanair re-allocating capacity to a Madrid-Malta route. This would certainly damage traffic with other carriers during the summer months. Vueling might decide not to return. But one would gain the crucial so far non-existent winter service. And with Ryanair and its enormous overweight luggage (starting from 15 kilos) charges, plus the necessity to do transits in DIY style, less people would use it for transatlantic connection links. If Iberia/Air Nostrum would compete with check-through transits to Iberia’s low-fare transatlantic services, this would mean less competition for the current network carriers and therefore more solidity on the hub routes.
Maybe one could agree upon two flights in winter and four in the summer. I am not very confident that the Valencia route would return anywhere soon. As I argued in an article (StoM, 4 March 2007), the route development for Spain must look at places that are really different from Malta: “Selling ‘sunny Malta’. in Almeria hardly works.” “Spanish tourists need something not found at home.”
The Barcelona/Gerona/Reus area is way more populous and is not competing directly with Malta like the more southern Spanish places. Furthermore, Gerona is a major DIYtransit airport, so one could have arrivals from Spain that are actually British, Irish travelling through there between Malta and. the British Isles. This means the potential for that route is much higher. However, when looking at the capacity of this summer one wonders if it was partly overcapacity as regards profitability, and whether next summer will see the same seat capacity again. Madrid is very far away from the sea, and it is one of Europe’s big metropolises.
Generally, one should check if Ryanair would now have to fulfil obligations after prematurely pulling out from an eventual subsidy contract, because, in general, for any such route (e.g. Bremen), if they can move out without incurring a penalty, other carriers might have also liked to participate in any ‘calls’ had it been known. If it has no consequences, then one could make it known that it is no problem to swap or even drop routes from subsidy contracts without incurring penalties. Therefore, more carriers might be interested in seeing if they can start the route, capitalize on the initial fat subsidy and if one drops it then, never mind.
But one also has to see that the Madrid sector is a bit longer than the Valencia run, hence more cost-intensive.
Therefore one could try and work towards the following: if Ryanair took up Madrid instead of Valencia maybe before the end of 2008, it would continue running it year-round. The market on the Madrid route is incomparably bigger than the Valencia one, and one could agree to a compromise – continuing to give them the subsidy as normal, but not with any bonus for a “new” route, just as continuation. I reckon this would be a compromise that would:
• Provide Ryanair with a route with more realistic potential than Valencia from one of their key airports in Spain; one could agree on no penalty in case this would have to be paid for pulling out prematurely on the Valencia route
• Provide destination Malta with a winter route so far never operated, which would at least be a seasonal genuine addition
• Generate higher incoming tourist arrivals than on the Valencia sector
• No unfairly subsidized competition for Air Malta as it had to give up the route earlier and this is no parallel flight
•Appease angry local Ryanair fans that want subsidized flights to another destination
Concurrently, one should not forget that quite a part of true incoming traffic has so far been carried by Spanair, an SAS subsidiary, which saw some financial problems and which the troubled SAS has found no buyer for. While the fall of oil prices might thankfully have come just in time (while for Futura and LTE it came too late), if Ryanair would take up the Madrid route, maybe one could manage to get Spanair and the relevant tour operators to lose interest in the Malta route operated by Spanair (A320/A321/MD-80). If one could get Spanair to give up Malta, but a tour operator market remains, charter contracts could then go to Air Malta, with planes of slightly smaller capacity (A319) than those of Spanair.
Whatever the case, the development of the Madrid link into a year-round service should have (had) priority over (re-)developing Valencia. Malta’s tourism sourcing problem is a seasonal one, and it is way more likely that one can fill a plane from Madrid than from Valencia in winter. To generate growth to counter eventual losses next summer from the Barcelona market, the Spanish north should be evaluated.
The North
The distance from the Ryanair airport of Santander to Bilbao is 100 kms of motorway. Bilbao is the most central place in the industrialised half of the northern coastline, seeing sporadic Air Malta charters, as does Zaragoza. As regards “sunny” places, Zaragoza only has the domestic run to Alicante, while Santander only has Barcelona-Reus. So one would have an innovation here. But one cannot expect miracles. A possibility might be the Pisa plane running once or in summer maybe twice weekly each to Santander and Zaragoza, all with roughly same block time, with a scheme Pisa-Malta-Santander/ Zaragoza and back.
But, again, Madrid is the priority.
One should appreciate the Valencia route for what it brought. It deserves great respect for having the courage to run it. However, one also would have to see how high the percentage of incoming tourists was compared to other (potential) routes, and if the money for eventual subsidies could not have been spent more wisely on other routes; although one also has to see that appeasing local Ryanair fans with interesting routes was an important target when it was taken up.
Valencia airport has various carriers around. For routes with a natural market, the void created will surely be filled. If not, then it was a due piece of consolidation. For Ryanair, making a media spectacle out of the Valencia pullout is very important because one again sets an example as a warning to other potentially disobedient airports or governments. It also shows however that when dealing with Ryanair, it is very important to have other strong carriers on whom one can really count, particularly if one depends on air connections, e.g. if one is an island. It would be unwise to wreck one’s own enterprise and jobs by subsidizing parallel flights. Yet one has to acknowledge the improvements Ryanair brought to regions, which were not linked by any (international) air service at all. For Malta, some routes were pure parallel flights (London, Bremen), others were true additions (Venice, winter links from Gerona or Stockholm-Skavsta). Only genuine additions should be financially encouraged.
The Spanish economy
One should not forget Spain’s economy in general. Quite a good share of the summer loads were generated by the Zapatero government subsidizing the “language learning” trips of Spanish youth; as regards learning activity outside the classroom refer to Sliema residents. With due budgetary pressure, how long will the Spanish State continue to fund this programme? Primarily, the Spanish economy has been quite dependent on real estate development and a good share was sold or was intended for sale to UK buyers at high prices – no further comment. The issues faced by UK consumers should reflect on the demand for UK-Spain flights, and consequently on carriers on these routes.
Hence Ryanair’s Valencia shutdown must also be seen in this perspective. As for demand for the intra-Spanish sectors just see job development in retail in Spain in recent months reflecting the consumer market - even though all was blamed on the local government/airport not “cooperating”.
The Malta Independent on Sunday carried a news item on 22 June about Granada airport as to what “cooperation” seems to mean. One might also recall cases like Klagenfurt, Newquay and so on.
Also, at other airports like Vittoria and Erfurt Ryanair completely disappeared.
Notably Ryanair seems to be the carrier number one needing “attention”, needs to “negotiate with the government” to be “allowed” to fly when it is legally perfectly free to do so, maybe playing with the word allowance rather than permission.
But, as said, the Spanish consumer market might be seriously affected.
While some have been very quick in the past to attribute any success exclusively to the flights by their favourite airline, when it comes to problems I am very sure there will be a broad consensus not to blame anything on Ryanair but just the Spanish economy or Valencia airport.
Still, the idea propagated by some that just by bringing in Ryanair and paying them enough, sorry, “allowing” them to fly, all problems are solved and nothing else has to be done, with the economic state of the consumer market of the source countries not relevant, proves to have been a bit too easy.
Ryanair route development potential – beyond Spain
But apart from Spain, there are also other options for a genuine (rather than parallel flight, as was the case with London and also Bremen) Ryanair expansion:
For Ireland, Shannon near Limerick covers the whole west and south. A twice-weekly summer and once-weekly winter run could work, though a lot depends on Eire’s economy.
For France, an option could be creating a year-round Marseille link, as the route currently is seasonal. But be careful not to kick Air Malta out as it is crucial for the tour operator business. A better alternative from the Air Malta perspective would surely be if Easyjet were to run Nice-Malta.
For Sicily, there is the possibility of an “airbridge” service to Vittoria-Comiso, though one should not to underestimate the impact on the ferry service and the very important Catania flights. The Virtu fares, if not bought through tour operators from their large contingents, are not exactly low compared to fares in other parts of the Med or around the British Isles. One must point out that the high costs are a result of low utilisation of the catamaran on account of the limited market.
If one takes more passengers away, the ferry fares might go up even further for those with no choice, like shop owners with a van.
Due to the long-established flights to Catania (and Palermo), and the very high content of outgoing traffic to be expected, no subsidies for Sicily flights should be paid to Ryanair by Malta, particularly taking into account the very low trip cost (just over 100 kms) anyway.
For mainland Italy, Pescara has only 1.3 million inhabitants in its direct catchment area. Yet it is only 190 kms of motorway (though toll road) away from Rome. So, while for most of the year it would have to rely on itself, when capacity peaks (and thus fare peaks) are reached on the Rome runs, this could provide extra capacity. But Pescara will not be easy during the off-peak period.
The Air Malta and also Alitalia Rome flights should clearly not be damaged with subsidised parallel flights directly from Rome. This route is a key hub route and crucial for Air Malta.
As regards Finland, a once or maybe twice weekly flight to/from Tampere could be an option, while for Denmark one might look at Billund with one or two flights, as Billund so far only has a seasonal service (JetTime charter).
For the UK, Edinburgh could be an option, though I would prefer a package solution for many airports in the north with FlyGlobespan as described in the article of 3 August, while welcoming Air Malta’s decision not to give up Glasgow (now charter route).
A second airport could be Bournemouth, but beware of effects on Gatwick. For Britain, in the short-term perspective, one should be happy if the status quo is maintained.
Unfortunately, so far Ryanair only looks at east-west services for the Polish south and west.
As explained in earlier articles, for results in support schemes one should not attempt to get carriers into unrealistic frequencies or too long contract running times. It is better to have just a smaller addition, which might be less worth subsidy-wise, than offering really tons of money and expecting too much. Source market diversification offsets risks of regional slowdowns and cyclical destination demand. Creating seemingly cosy dependencies on a certain carrier well known for threatening airports and governments for more and more money and pulling out at such short notice, and what else is risky.
At the same time, I hope the above article has helped to show that with Ryanair giving up the Valencia route one should not panic. Because for Malta there are better route options already from Spain itself, even with Ryanair. Not only to offset the loss but even to improve results.