Vueling Quick to Expand After Spanair Collapse

Spanish carrier Spanair may have suspended operations abruptly at the end of last week but many of its rivals already had contingency plans in place for its collapse, in fact some of its rivals had been planning for the closure of the airline for the past year. Initially established in Palma de Mallorca but more recently based in Barcelona, Spanair, part of the Star Alliance, has been facing stronger competition from its rivals during the past couple of years as local operators like Iberia, Air Europa and Vueling and international rivals such as easyJet, Ryanair and airberlin have strengthened their activities in Spain.

Its future has been in doubt after it posted a €115 million loss in 2010 but its shareholder, the Catalonian Government, approved a €10.5 million loan in January 2011 and working capital to keep the airline afloat. A restructuring of the carrier enabled costs to be reduced and revenues to grow, however, the regional government pulled the plug on funding after discussions to sell the airline to Middle East operator Qatar Airways failed.

Spanair’s main focus was on the Spanish domestic market where this month, ahead of its closure, it held a 15.3 per cent share of the total weekly seat capacity, positioning it as the second largest operator in this market behind the country’s flag carrier Iberia. It was scheduled to operate 651 weekly domestic flights this month, providing over 117,000 seats. In the international market its focus was on niche destinations, particularly some of the smaller markets in Africa. According to schedule data it was due to operate just 117 international flights every week during January, making it the eighth largest international carrier in Spain by seat availability behind its Spanish and international low-cost rivals (see ‘STATS: Air Capacity Data – Spain’ for details on the available seats on domestic and international routes).

The collapse of Spanair has left tens of thousands of passengers stranded across the carrier’s network and its rivals have moved quickly to repatriate customers and to take advantage of this week’s events to enhance their own positions in the market. Vueling, which had been the carrier’s main competitor at Barcelona El Prat, has immediately initiated a revised business strategy: a plan that it has had in place in case of Spanair’s closure.

Vueling will add a total of 33 new frequencies to its existing domestic and European routes including bringing forward the launch of its new routes between Barcelona and Copenhagen and Stockholm from March 25, 2012 and increasing its planned operation to eleven flights per week to each of the Scandinavian capitals. From Barcelona, the carrier will also introduce daily flights to Berlin and Hamburg from March 25, 2012 as well as increasing frequencies to Munich to four times daily. Elsewhere, Vueling will add new links from its Bilbao base to the Canary Islands with routes to Tenerife (three times weekly), Las Palmas (twice weekly) and Lanzarote (twice weekly). Vueling is not alone in modifying its network following Spanair’s closure and easyJet also brought forward the launch of its flights on the Madrid – Bilbao route by two weeks from February 19 to January 30.

Spanair’s largest markets were from Barcelona and Madrid and the imminent arrival of new competition is sure to have been behind the decision to close the business. At Barcelona’s main gateway, El Prat, Vueling Airlines have recently announced a major expansion including entry into many of Spanair’s existing markets, while easyJet and Ryanair have both expanded their own offerings; the latter establishing its own base there. At Madrid, Spanair was soon to face direct competition from Iberia Express, the new low-cost venture from the country’s national carrier, which with its reduced cost structure would have been able to compete strongly against the airline.

The table below highlights Spanair’s schedule in the week before its collapse and the competition it faced on each route. It is never pleasant to see an airline collapse but Spanair’s failure will provide a massive fillip to its Spanish rivals at a time that the economic conditions are hitting their own bottom line hard. It is certainly right to say that the strong competition in both the domestic and international markets had resulted in an overcapacity on some routes. It will now be interesting to see if airlines look to back-fill the capacity or simply look forward to the reduced competition to boost yields.

Across Spanair’s entire network only nine routes have no direct competition. These are its links from Barcelona to Bamako, Banjul, Belgrade and Istanbul; from Alicante to Algiers; from Malaga to Tenerife Sur; from Palma to Nador and between Valencia and Algiers. Many of these were flown on just a single or twice weekly basis and it is unclear if any other operator will look to serve these markets.