It has been a busy week for Star Alliance member Aegean Airlines. Whilst implementing a codeshare with Continental Airlines on selected routes, the carrier also cut a number of routes in its network. The Hub investigates why Aegean has taken the decision to discontinue a number of routes.
Aegean announced that from September 13th it will discontinue scheduled routes to Ioannia, in Greece, and Tirana, the Albanian capital. The start of the Winter 2010 season will see the axe fall on scheduled routes to Belgrade, Venice, Vienna and domestically Kavala, all from its Athens hub.
Of the six routes that have been cancelled, Ioannona, Kavala, Tirana and Vienna are currently still served by Olympic Airlines , whilst Venice and Belgrade will no longer be served by a Greek carrier from Athens. Belgrade, however will continue to be operated by the Serbian national carrier, JAT Airways whilst Venice will have no scheduled service according to flightbase.
THE GREEK MARKET
The Greek market is dominated by its two flag carriers, Aegean Airlines and Olympic Airlines, who earlier this year agreed to merge and form a single, more robust, carrier.
Aegean is the largest operator in the Greek market with 38% of the domestic and international seat capacity, with Olympic Airlines having a smaller 30% . With neither airline having long-haul aircraft, Olympic operates A319/A320 and Avrojet equipment, whilst Aegean operates A319/A320/A321 plus ATR aircraft.
The lack of long-haul aircraft available to the Greek carriers has led to the two carriers battling for domestic and short-haul traffic predominately from Athens. In terms of weekly flights operated, Aegean and Olympic Airlines both operating 56% of weekly scheduled seats from Athens and they compete on 24 destinations according to Flightbase schedules for November 14th - 20th, 2010. This lack of long-haul flying has intensified competition on short-haul routes, a situation that has been intensified by the economic crisis that has swept Greece this year.
ECONOMIC CRISIS
With the economic crisis that has engulfed Greece particularly this year, Aegean posted a loss of over 32 million Euros for the first half of 2010. With its impending merger with fellow flag carrier Olympic Airlines still subject to European approval, Aegean has taken the decision to discontinue these loss-making routes.
Outbound traffic has been affected and inbound traffic slowed, due in part to press articles deterring passengers from choosing Greece as a holiday destination this year. The combination of economic factors and competition from low-cost airlines in the UK and Germany, which are two big markets for leisure and VFR traffic, has led to an inevitable adjustment to capacity.
IATA BSP data shows that easyJet is now the third largest carrier in Greece, in terms of passenger share, with a 6% share, followed by fellow low-cost operator, Air Berlin, who has a 4% share. EasyJet only competes on two routes from Athens with Aegean, Rome Fiumcino and Milan Malpensa, but operates six destinations in total. Aegean will find it difficult to compete on a cost basis with the likes of easyJet and Air Berlin. Under different conditions, the Greek currency could have been devalued to encourage more exports and a rise in tourism to Greece; this has not happened so other markets such as Egypt, Turkey and Morocco appear even better value, although these markets are also experiencing financial difficulties.
THE FUTURE FOR AEGEAN
There will be the need for further rationalisation of the Aegean and Olympic markets as the carriers have been entirely dependent on their local market. Aegean's move into Star Alliance will add connectivity and take away some of the dependence of the local market, however, its lack of long-haul aircraft will mean there is no China or India effect, which flag carriers have used to penetrate emerging markets and take the pressure of some of its short-haul routes. Once the Aegean and Olympic merger has been ratified, the combined entity will be able to implement more network rationalisations.
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