Ryanair and Wizz Air Lead the Race to Fill Malev's Budapest Void

For the second consecutive week the European market has been hit by a high profile closure as Malév Hungarian Airlines followed Spanair into the aviation history books. The economic crisis prevalent in Europe, combined with the volatility in the price of fuel, has made the current environment one of the toughest in history and other casualties are certain to follow. However, we have seen how quickly the industry can adapt to change. After the collapse of Spanair, airlines moved quickly to fill the capacity void and the same has been the case with the closure of Malév, with both Ryanair and Wizz Air announcing major expansion at Budapest Airport just hours after the Hungarian flag carrier and oneworld alliance member closed.

As was the case with Spanair last month, the collapse of Malév was no real surprise. The airline had been suffering financial problems for a number of years and a ruling at the start of January 2012 that the carrier had to repay the nearly Ft100 billion ($406 million) it received from Hungarian Government in loans during a three year period between 2007 and 2010 represented the final nail in its coffin. Therefore after 66 years of operations the decision was taken to suspend all commercial operations from 06:00 on February 3, 2012.

“Unfortunately, the event occurred which we had a greatest fear of and we wanted to avoid with might and main. Although, until the latter days there were prospects to continue operation and the trust of our passengers is unbroken, our partners lost their trust due to the information published in the last days and they started to ask for payment of their services in advance. This speeded up the cash outflow and the situation of the airline became untenable. It is also known that the owner, despite the best intentions, is unable to provide additional financial resources to operate after the EU decision. Considering all these the Board decided to order the cease of operation of the Hungary’s National Airline. We apologise to all of our passengers,” confirmed the airline’s Chief Executive Officer, Loránt Limburger, in a formal statement.

The collapse of a flag carrier can have a significant expansion on a country given the high level of traffic that they fly in and out. According to its planned February 2012 schedule, Malév was due to operate 329 weekly flights from Budapest to 42 destinations, offering more than 35,000 weekly seats. This represented a 39.1 per cent share of the total international market from the Hungarian capital. As the table at the bottom of the page shows, Malév was the sole operator on 21 of the routes that it operated from Budapest, with competition on 21 others.

Historically, when a national carrier has failed in Europe it tends to be replaced by a more streamlined successor – for Swissair read Swiss International Air Lines and for Sabena read Brussels Airlines. However, other airlines have moved fast to fill the void in Hungary. airberlin has already launched a daily flights between Berlin and Budapest and Tarom has increased flights on the Bucharest - Budapest route from five to 12 a week. Elsewhere Aegean Airlines is to introduce a four times weekly link between Athens and Budapest from March 9, 2012 and Blue 1 is to offer up to two flights per week on the Helsinki - Budapest route on a seasonal basis from June 2, 2012.

It is the development plans of low-cost carriers Ryanair and Wizz Air that are likely to limit the opportunities for a new start-up though. Ryanair announced last month that it was to return to Budapest in March 2012 around a year and a half after it pulled out of the Hungarian capital at the end of the Northern Summer 2010 timetable after failing to reach agreement with the airport’s management on revised operating terms. It announced plans to introduce flights to Birmingham, Bologna, Bristol, Dublin and London Stansted but will instead now open a base at Budapest Liszt Ferenc International from where it will serve 31 routes.

The Irish carrier initially revealed it would base four Boeing 737-800s at the airport from February 17, 2012 and plans to serve around two million passengers across its proposed network. After grounding around 80 aircraft this winter and with new aircraft deliveries due, Ryanair has been able to move quickly to establish itself as one of the largest operators at Budapest. It will launch the new routes on a phased basis between February and April and is now finalising discussions with the airport management over costs, facilities and handling arrangements.

According to its draft schedule it will introduce flights in February to Baden Baden, Barcelona, Bergamo, Brussels Charleroi, Dublin, Gothenburg, Hamburg Lubeck, Krakow, London Stansted, Madrid, Manchester, Munich West, Oslo, Paris Beauvais, Rome Ciampino, Stockholm Skavsta and Thessaloniki; from March it will add Birmingham, Bologna and Bristol to its network; in April it will introduce connections to Alicante, Chania, Eindhoven, Malaga, Palma. Paphos, Pisa, Rhodes, Trapani and Venice Treviso; while from July it will fly to Warsaw Modlin - its first confirmed link to the new airport.

Ryanair has now subsequently confirmed the addition of a fifth based aircraft from March 26, 2012 due to strong advanced ticket sales. The additional 737-800 will be used to launch a further route to Tampere in Finland and to add more frequencies on the flights from Budapest to Brussels, Eindhoven, Gothenburg, Madrid, Milan, Rome, Stockholm and Thessaloniki.

Wizz Air will also have a more notable presence in the post-Malév Hungarian market. It already has a three aircraft base at Budapest Liszt Ferenc International and had accounted for around 11.8 per cent of the available seat capacity prior to Malev’s closure, ranking it as the number two airline at the facility. It initially confirmed it will introduce an additional two aircraft and increase weekly flights from 67 to 129 through frequency growth, the introduction of a new route to Bucharest and seasonal flights to Antalya, Bourgas, Catania, Corfu and Palma de Mallorca.

The airline will offer an additional three weekly rotations to London Luton, increasing the route to a three times daily schedule, will double services to Brussels Charleroi and Eindhoven while additional flights to Barcelona, Madrid, Malmo, Milan and Rome will mean all these destinations are be served at least daily. It has also further expanded its base plan with an additional A320 set to arrive in Budapest in April and will grow its network to 33 destinations. This will be used for new routes to Malaga (Spain), Bucharest and Cluj (Romania), Warsaw (Poland), Sofia (Bulgaria), Larnaca (Cyprus), and Heraklion, Zakynthos, Rhodes, Thessaloniki (Greece).

Despite the loss of over a third of its capacity, Budapest Airport says it is business as usual. Having established a Crisis Control Centre to manage the immediate effects of the national airline’s collapse and ensuring that stranded passengers were attended to in the best possible way, it is now turning its attention to generating additional traffic.

“We are, of course, saddened by the collapse of Malév,” said Jost Lammers, Chief Executive Officer, Budapest Airport. “But we now move into the post-Malév era with a degree of optimism. We are open for business as usual and would like to thank the airlines who have already stepped in to operate some of the routes previously flown by Malév – we will continue to work with these airlines and others, with a view to offering sensible long-term solutions.”

Alongside the previously mentioned carriers, the airport confirms that Air France, British Airways, Brussels Airlines and Germanwings have all added more frequencies on their existing routes , while Lufthansa has also expanded its network with additional services.

Budapest Airport’s 2012 plans are currently being re-evaluated as part of an expected business review, which will result in some long and short term changes. In the coming days, the airport’s airline development team says it will work with airlines wishing to add Budapest to their network plans, indicating that employment impacts can also be mitigated if the right solutions for market recovery are found as soon as possible. “We are particularly interested in airlines wishing to use Budapest as a base and have launched a special route recovery incentive programme to attract the most appropriate operators,” added Jost Lammers.

Just a day after this announcement it emerged that Czech Republic operator Smartwings has already taken advantage of this programme and will base a single Boeing 737-800 at the airport this summer to inaugurate twice daily services to Paris CDG from March 29, 2012 and introduce three times weekly links to Barcelona and Athens from the end of April. The arrival of a second aircraft at the end of May will support a four times weekly route to Larnaca and possible additional destinations.

The airport operator, Budapest Airport Zrt, is keen to see passenger recovery buoyed by the Hungarian authorities removing obstacles currently preventing airlines from picking up the lost Malév capacity. There are four regulated agreements which allow only one Hungarian airline to fly routes to Turkey, Israel, Russia and the Ukraine and currently Malév has these traffic rights. “It is imperative that the Hungarian authorities move quickly to close these gaps; otherwise the road to recovery will be much slower,” it said in a statement, adding that it will fully support the government in moving quickly if necessary. Wizz Air has already confirmed that it is interested in starting services to some of these non-European Union markets, subject to designation and regulatory approval. It highlights Istanbul, Kiev, Moscow and Tel Aviv of particular interest.

“The announcements made in the last few days confirm our long held view that Budapest is indeed a primary destination for many airlines as they bid to grow their presence here in the absence of Malév. In spite of this early success, a gap remains in our business plan and we welcome discussions with airlines interested in services to Budapest Airport. Our published charges and incentive scheme are available to all airlines expressing an interest,” said Kam Jandu, Aviation Director, Budapest Airport.

The new arrivals at Budapest Airport and the frequency increases mean that in less than a week around 60 per cent of Malév's point-to-point traffic has already been recovered. However, the majority of the new arrivals will be solely focussing on origin and destination traffic and will still leave Budapest Airport with an approximate 1.5 million passenger shortfall from the travellers that had used Malév's network to transfer via the airport.