Politically Appointed Disasters

In Serbia politics and aviation are closely interwoven. In a 21st century European business environment that is unacceptable, because modern day Europe is based on the Principles of Enlightenment. In many regards one can assume that this revolutionary process has bypassed Serbia; the civil aviation sector being just one of many examples which could be used to prove the point.

So what new development will the recently held Serbian elections bring to Jat Airways and the civil aviation sector in the country? Will there be any changes?
If the party of the ex-president of Serbia forms the ruling coalition then we can assume that Jat Airways will fall under their jurisdiction. This could be seen as very bad news, simply because over the course of the past 4 years all we have heard are empty promises, both in relation to civil aviation and to the wellbeing of the republic. As always, during the pre-election circus new rumours surfaced that Jat Airways is in the market for a lease of 2 Boeings B737-800s.
We see a clear shift from the traditional rhetoric of Jat Airways looking for the smaller variant, Boeing B737-700.

The real question at this point is not if Jat Airways needs the Boeing B737-800s, but what could they do with the two aircraft once they are delivered.
The vast majority of people tend to forget that Jat Airways’ biggest issue is not its ageing fleet; it is actually their politically appointed management which has no real knowledge of the aviation business. This is best portrayed by their failure to follow the latest trends within this highly competitive industry. Some of these include their utter failure to create and effectively introduce a loyalty programme, provide their customers with a consistent flight schedule across their network, implement effective customer service and most importantly, create a Jat Airways brand.

The last point is the most relevant. Though Belgrade airport reminds me of an abandoned outpost somewhere in Africa, I have to admit that the airport is served by a wide variety of airlines, providing more than affordable fares to pretty much any part of the world. Though this comes as good news for people planning on travelling to/from Serbia, it does not come as good news for Jat Airways.
The airline was forced to battle with increased competition through the liberalization of the market without having been reformed and adapted to the new business trends. This means that Jat Airways found itself in a situation when it had to lower its fares, which resulted in an obvious decrease in revenue, while still maintaining a rather high cost structure. The failure of the Serbian government is best portrayed here when we see what crucial step was neglected in ensuring that the national carrier became competitive. By not doing so, they have only ensured that the carrier accumulates losses which need to be covered by the government at the end of each year. On average Jat loses €20 million per annum. This is one of many examples where Serbia blindly introduced EU legislation without preparing its market for the shock.

Jat Airways faces competition on all of its lucrative routes. Starting with the shortest, Vienna, which sees three carriers and up to 7 daily rotations. Jat Airways operates double daily flights on board their Atr-72 aircraft. Up until the liberalization of the market, both Jat Airways and Austrian Airlines enjoyed a duopoly on the route shamelessly charging people up to €200 for a return flight (the route is about one hour). With Niki entering the market things have dramatically changed. Both Austrian Airlines and Jat Airways have been forced to change their tactics in order to survive. Austrian Airlines have added new flights, with the additional departure at 05:15 offering the possibility of reaching any part of Europe via its hub in Vienna by 09:00. More recently it added a late afternoon flight out of Belgrade allowing for connections to the Middle East and beyond, but more importantly it has become more convenient to organize single day trips between the two cities, in order to attract business passengers. On the other hand, Niki launched their flights to Belgrade with 6 weekly rotations, which in a short period of time was increased to almost double daily. Not only have they increased the number of flights to Belgrade, they have also revised their schedule so as to offer more connections via Vienna. The initial schedule mostly catered for the needs of the so called origin and destination market, while the morning and evening scheduling of flights permit more convenient connections in Vienna.
Jat Airways had done absolutely nothing besides entering a price war with these two airlines, competing for the origin and destination market while relying on a humble number of connecting passengers from its rather limited regional network.

Vienna is just one of the few examples where Jat Airways’ failure to react has cost them dearly. Turkish Airlines is increasing their flights to Istanbul, Wizz Air has added additional flights to Malmo while Norwegian has launched their own flights from Copenhagen, and routes such as Amsterdam and London see competition from Wizz Air’s flights to Eindhoven and Luton.
It is also worth mentioning that Jat’s lack of adequate equipment has only speeded up the process of another airline launching flights from Dubai. This was done by flydubai which uses its own 189 seat B738 between the two cities. When the route was operated by Jat, it used a 125 seat B737-300 with a stop in Larnaca. The route saw roughly 70% load factor and was not a great money maker for the airline as it had to compete with other carriers from the region such as Turkish Airlines. The route to Belgrade is considered a success for flydubai with the airline currently operating 5 weekly rotations between the two cities.
This can only mean that Jat’s outdated management is not only driving the airline to its eventual demise, but at the same time it is restricting the normal development of the market. Had the airline leased its B737-700, as it stated some time ago, they could have used it to operate the route to Dubai directly, thus reducing the chances of flydubai launching their own flights. However, their rather archaic product and the stop in Cyprus have made this route unattractive for passengers.
The same applies for Jat’s triangular routes such as those that are operated to Scandinavia or the one to Cyprus and Israel. Naturally, Jat can afford to operate its triangular route in the middle of the night to Cyprus and Israel because it sees no competition in that region. At the same time, they are charging exuberant fares with the cheapest flight to Larnaca starting at €270 (2h: 40 mins.). Attitudes such as these have driven customers away and created a negative perception of Jat among the flying public.
It was exactly because of such policies and such perception that the arrival of competition from Scandinavia was more than welcome.

The management of Jat Airways needs to understand that they are not running JAT Yugoslav Airlines any longer. Operating frequencies are no longer arranged through bilateral agreements and in the contemporary aviation business, profit is everything. On top of it all, the fact that they have been recording passenger growth is only because they introduced numerous ticket sales.
The greatest challenge for any new management would be to restore trust in Jat among the flying public. This can only be done through a strong brand which would make people want to fly with them, even when they are not the cheapest option. Today, the vast majority of passengers would only opt to use Jat if it is cheaper than its competition. Through these numerous sales, that goal was achieved. Unfortunately the management of the company does not see why the airline is failing to make money, though its passenger numbers are up. Probably the term ‘cost structure’ is foreign to them and they have no clue what its relation is to Jat. Future management will keep on failing as long as they are appointed by the government, as is the case with the present CEO.

The current fleet structure is good, in other words a regional turboprop and a medium sized jet aircraft. Unfortunately the airline has never managed to replace its DC-9 aircraft which had the capacity of roughly 100 passengers. This is something that is killing the airline as the Atrs are too small and too slow to operate some of the routes, while the B737s are too big and too inefficient. Some of the best examples of routes which require a regional medium-size aircraft (100 to 110 seats) are destinations such as Berlin, Brussels, Copenhagen, Stockholm, Larnaca and Athens. By introducing these aircraft the airline will be able to reduce capacity and increase frequency. Through such a move it will be able to build departure waves out of Belgrade and thus facilitate the introduction of regional flights to feed its network out of Belgrade.
By using its Atr fleet, which is very fuel efficient, it will be able to reduce the damage of constant fluctuations of fuel prices. These fluctuations are one of the biggest problems for the aviation sector today. With these aircraft this problem can be overcome and so transform Jat Airways into a much more competitive player in the region.
Though Jat currently operates 4 of these aircraft, their scheduling is abysmal with connecting passengers having to spend hours waiting in Belgrade. This only goes to prove that running an airline requires more than good political connections; it requires in-depth knowledge of all aspects of the business.

Both Jat Airways and Belgrade international airport are run by politically appointed people. Naturally, Belgrade airport is in a better position as it is currently the only real international airport in the country. Other airports in Serbia cannot compare in terms of destinations offered, frequencies or infrastructure.
Their current CEO was appointed thanks to his wife’s friendship with the wife of the ex-health minister who offered him a choice between a position at the university or the position of deputy-CEO of Belgrade airport. After the ‘Kristo scandal’, current CEO Velimir Radosavljevic was offered the position during a lunch meeting with Mr Dinkic and Mr Mrkonjic.
A similar story occurred with the appointment of the current CEO of Jat Airways, Mr Ognjenovic. His aunt was one of the founding members of the party of the previous president of Serbia.

As long as the societal riff raff gets promoted to key positions in the country, young and competent Serbs will have no chance of finding adequate employment opportunities in their own country. This is only encouraging the already serious problem of ‘brain drain’.

Could the saying, birds of a feather flock together, indicate that people such as the CEOs of Belgrade airport and Jat Airways are actually no different than those who have appointed them?
It all goes to show that ‘It’s who you know, not what you know’!

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A Quiet Cold Winter

 

For the past couple of seasons Belgrade airport has been boasting about numerous new airlines opening up routes to cities that have not been linked to Belgrade previously.

 

Every fan of Serbian aviation will have to deal with the anti-climactic situation at Belgrade airport this coming winter. A total of 6 airlines will not be returning to Serbia. Some, such as Cimber-Sterling or Lot, had announced that they will be reinstating flights to Serbia with the 2012 summer season. On the other hand the potential return of some other carriers is uncertain, at least for the time being.

The struggling national carrier of Latvia, airBaltic, will not be returning to Belgrade, thus cutting the only direct airlink the two countries have ever had. airBaltic entered the Serbian market in April 2010 and was forced to axe the route within a few months as the lease on its Fokker 100 aircraft was expiring. They had remained optimistic about their future in Serbia and even announced their return for the following summer.

A year later, in May 2011, Riga and Belgrade were re-connected. Flights operate four times weekly with airBaltic’s brand new 74 seater Dash-8.

Loadfactor increased from 46% last year to 74% this year. The sharp rise in loadfactor was probably due to a smaller aircraft used between the two cities, but nevertheless passenger numbers have grown by 23% year on year.

Due to a deteriorating situation within the company, the airline was forced to axe Belgrade,  although tickets for the winter season were already on sale. The airline had even kept Belgrade as a 4 times weekly service instead of the originally planned two.

CSA Czech Airlines will not be returning to Belgrade after operating the route for more than 65 years. In 2007 and 2008 the airline saw its passenger numbers fall by 6% and 11% respectively! 2009 saw passenger numbers rise by 40% as the airline revised its schedule by increasing Belgrade to daily services while at the same time reducing the route to an Atr.This enabled more connecting possibilities via its hub in Prague.  Its impressive upward passenger trend continued in 2010 when the airline added an additional 6 frequencies, thus serving Belgrade with an almost twice daily service. With the increased competition in Belgrade CSA faced a sharp drop in bookings and completely revised its schedule for 2011 which sees the airline operate 4 weekly services to the Serbian capital, on board their old B737-500.

 

 

As a result of this reduction in capacity and frequency, year on year numbers fell by 34%.

 

 

 

Belgrade will eagerly await the return of both Lot and Cimber which had announced that their suspension will only be seasonal. Links to Copenhagen and Warsaw on these airlines is expected to resume with the 2012 summer season.

Airlines which operated flights last winter but will not do so this year are Aerosvit from Kiev and British Airways from London Heathrow.

Lufthansa will be introducing small changes to its current flight schedule. Double daily flights to Frankfurt are to see a drop in capacity as the airline plans on replacing the B737-300 with its smaller variant, B737-500. Munich will see two frequencies cut from 21 weekly to 19. Flight LH 1724 will be operated 5 times per week using the Crj-900.

Lufthansa could be considered as the most successful airline in Belgrade, with an average yearly growth of 20%. Last year the airline carried a total of 295,287 passengers achieving yearly growth of 9%. In the first 8 months of 2011 the airline did not record any considerable growth as it carried only 461 more passengers than the same period last year.

 

What is wrong with the airport?

In the statement published on the website of Belgrade international airport on the 15th of September, we were informed that as of December 2011 the Hungarian lowcost airline Wizz Air will be increasing its frequencies to Malmo. The airline currently operates the route three times per week; however from December they will switch their twice weekly rotation to Eindhoven in favour of Malmo. Eindhoven will be operated by an aircraft originating in the Netherlands.

Since the PR team of Belgrade airport is so eager to announce that Wizz Air will be adding more flights, how come they have not informed the public of several other airlines increasing, or even launching, their own flights to Belgrade?

Since the above mentioned team has not done so, below you can find information about the additional flights added this winter to Belgrade.

As of the winter timetable Austrian Airlines will be increasing their frequencies to Belgrade with an additional 6 frequencies.

Flight OS 735 will leave Vienna at 16:45 with the scheduled arrival time in Belgrade at 17:55. The return OS 736 is scheduled to leave Belgrade at 18:30 with its arrival time in Vienna as 19:50. Austrian Airlines will operate up to 4 daily rotations from Vienna, so through their codeshare with Jat Airways that number goes up to 6 daily flights.

Belgrade-Vienna will see tough competition as the Austrian no-frills airline Niki has announced it will double its presence in Belgrade by adding an additional 6 frequencies!

Its schedule has been revised in order to facilitate one-day trips to both cities in addition to increasing transit possibilities in Vienna.

Below is the new flight schedule of Niki for the upcoming winter season:

123456-

Vienna-Belgrade  08:40-09:55

Belgrade-Vienna  11:30-12:45

12345-7

Vienna-Belgrade  16:55-18:10

Belgrade-Vienna  19:15-20:35

In total there will be 49 weekly frequencies between Belgrade and Vienna, on average 7 every day.

Another airline that was not mentioned, nor have its flights been loaded on the airport website is the Bern based SkyWork airline. They are scheduled to inaugurate two weekly frequencies this coming winter season, on Tuesdays and Saturdays. Flights depart Bern at 11:30, arriving  Belgrade at 14:05. Return flight is scheduled to leave Belgrade at 14:05 with the arrival time in Bern expected at 16:10.

The changes introduced by these three airlines are going to have a far greater impact on the situation at Belgrade airport than the additional two frequencies of Wizz Air.

Belgrade airport management is known for their ‘proud moments’. Some of the best ones had to be when they clearly showed us that they do not know the difference between ‘sit’ and ‘seat’; or how they informed us ‘To Copenhagen by plane’, for those who do not remember this was the title used when they announced the launch of flights by Cimber last year. After reading that post it made me wonder, what did Jat use to transport their own passengers to Copenhagen before the arrival of Cimber? Carriages? Buses?

There is no point in mentioning the professionalism of the Belgrade airport management. If there were any traces of it our airport would not look like a glorified bus station in a third world country!

 

 

 

 

 

 

 

 

Why is oneworld unsuccessful in Belgrade?

 

 

The presence of oneworld in Belgrade is pathetic! Not only is their passenger share below 1% but they are present in the Serbian market simply through Malév’s 5 weekly frequencies from Budapest.

 

 

It is a very well known fact that one of the most lucrative markets from Belgrade is the North American one.

However, in that particular region oneworld’s presence is impressive. This is mostly achieved through American Airlines’ extensive  network in the US, and British Airways’ far-reaching network from London Heathrow.

 

American Airlines has numerous bases around the United States, two of them being very important for the Balkan passengers: New York and Chicago.

Star Alliance has mounted a very aggressive ongoing campaign in order to establish itself as the dominant carrier in the ex-Yugoslav/Balkan market.

In Belgrade alone they hold an impressive 22% of the market. In June Lufthansa recorded an average loadfactor to Belgrade of 89%. The airline operates the route twice daily with their Boeing B737-300.

 

For years now Lufthansa has targeted passengers flying from Belgrade to North America. Its subsidiaries, Swiss and Austrian, both offer convenient connections via their hubs. Swiss even introduced a second daily flight in order to offer faster connections. As a result its passenger numbers between Belgrade and Zurich have doubled.

 

British Airways, as the biggest oneworld member airline in Europe, was at a serious disadvantage due to British visa requirements for Serbian citizens.

This meant that Serbs travelling to North America needed a British transit visa even when connecting through Heathrow.

As British Airways’ O&D market was taken over by Jat Airways (higher frequencies than BA) and Wizz Air (cheap!) they had no option but to direct the aircraft to more profitable routes.

Until the British government decides to remove the visa requirement for Serbian citizens it is doubtful whether British Airways will consider returning to Belgrade.

However, the British government has stated its possible intention to remove the visa restriction in the foreseeable future. This liberalization would likely encourage British Airways’ return to Belgrade, thus posing a serious threat to the current airlines dominating this market.

Not only is a London transit the most direct way for Serbs to travel to the US but it is also the city that serves the greatest variety of US destinations, and with high frequencies.

 

Currently the only oneworld airline from the alliance in Belgrade is Malév which is struggling to survive.

To make things even worse, both Malév and American Airlines have neglected the Serbian market and the New York flight is not coordinated with the arrivals from Belgrade. This is a major mistake as the combination of Malév and American Airlines could have been the cheapest and most convenient of all thanks to the proximity of Belgrade and Budapest.

 

If these two airlines had serious intentions about serving Serbia then they should have known that by poaching some passengers from the competition and developing Budapest as a transit hub for Serbs they could have planned Chicago-Budapest in the future.

Without suitable timings between Belgrade and North American flights out of Budapest, Malév will keep on struggling in Serbia.

Serbs are no strangers to Budapest. During the 1990s when air travel was severely restricted out of Belgrade the vast majority of Serbs used Budapest as their departure point.

To make things even more convenient for them, Lot has announced that they will be discontinuing Belgrade services during the winter.

With Lot gone for the winter season Malév should have jumped in with a revised schedule in order to offer Belgrade-New York at affordable prices and with fast transit times.

One major mistake Malév is currently making is that they are trying to attract passengers to connect through Budapest en route  to other parts of Europe. The problem with this strategy is that the market they are trying to get into is highly competitive and far from profitable.

One of their major threats is from airBaltic which has a massive network within Scandinavia with multiple daily departures and cheap fares: both of which Malév lacks.

To make things even worse  airBaltic’s average load factor for June jumped from just over 50% to 74% year on year.

With these catastrophic results Malév should really reconsider their operations in Belgrade. Will they keep on struggling to attract passengers to connect via Budapest to the rest of Europe or will they change their strategy and coordinate their flights with American Airlines in order to fill their flight to JFK?

 

oneworld’s situation will remain as is and will not improve until Niki joins the alliance.

With Niki in the alliance oneworld passengers will have much greater flexibility when travelling. Currently the airline uses their E-190 aircraft between Vienna and Belgrade. From the winter season the airline will be adding 5 additional frequencies in order to offer better connections at its hub, Vienna.

 

Besides Malév and Niki the only possible airline we might see in Belgrade is British Airways. The rest have too little demand to succeed in Serbia.

 

 

oneworld’s true glory in Serbia cannot be achieved without the return of British Airways!

 

 

One hot summer

 

Belgrade airport is still reporting phenomenal results, a trend started with the lifting of Schengen visas for Serbian citizens in December 2009.

Last year the airport handled a total of 2,698,730 passengers which represents an increase of 13% when compared to the 2009 results.

 

As we approached 2011, many wondered if the airport would be able to maintain this amazing trend.

Since January the airport has been recording an average monthly growth of 20%! If this trend continues the airport will come extremely close to replacing Sofia as the third busiest airport in the region, behind Budapest and Bucharest.

With the summer season officially in place, the airport should be more than satisfied with the new frequencies announced by various airlines.

Additional frequencies will be available on routes to Istanbul’s main gateway, Ataturk airport. Turkish Airlines has requested an additional two frequencies which should complement their current daily flights. Once the flights receive government approval there will a total of 14 weekly frequencies between the two cities.

TK 1083 arr. BEG

1-3—- 18:20

TK 1084 dep. BEG

1-3—- 19:15

It will be interesting to follow the developments in the Serbian-Turkish market. In addition to Turkish Airlines, the Serbian national carrier operates this route 5 times per week.

Shortly before the crisis and the liberalization of the Serbian market, Turkish lowcost airline Pegasus was planning on opening up the Sabiha Gokcen-Belgrade route. The original plan was to operate the route twice per week using their B737-800 aircraft.

Currently Pegasus is expanding in the region with Bucharest being their newest destination. It remains to be seen what happens. There is always a possibility of higher frequencies from Turkish Airlines or Jat, or we could see Wizz Air inaugurating flights to Istanbul (probably Sabiha Gokcen airport) once they base their second aircraft in Belgrade. Who knows? Maybe we’ll see Pegasus back in Belgrade as they currently operate summer charter flights from Antalya.

Another recent announcement came from Belgrade’s northern neighbour. Malev has announced that from July 1st it will be adding an additional two frequencies to Belgrade.

In the first couple of months of operations in Belgrade, Malev recorded impressive results. Part of this success was due to the promotional campaign where passengers could purchase tickets for as little as €1! Very soon their Dash-8 aircraft became too small for their daily operations to Belgrade and their Boeing aircraft became a common sight at the airport.

This trend did not continue once the promotional campaign was over. There was a very sharp drop in passenger numbers and the airline was forced to reduce capacity from 68 seats to just over 30 per day. In time frequencies were reduced from daily to 4 times per week.

However, summer 2011 will see Malev operate daily flights until July 1st when the two additional flights will be added. These flights will spend the night in Belgrade with a very early departure in order to provide passengers with decent connections through Budapest.

MA 478 arr. BEG

-2–5– 00:40

MA 479 dep. BEG

-2–5– 04:55

With CSA’s possible withdrawal, Malev should be more than satisfied as passengers who previously used Prague as their transit airport can now connect via Budapest. It would be a great shame to see CSA leave the Serbian market since it has been present there since 1946.

One airline which has announced drastic changes to its Belgrade flights is the Austrian lowcost carrier Niki.

Until the start of the winter season (31.10) the airline will keep its current 6 flights per week. Since the inauguration of its flights Niki has aimed at the large Serbian diaspora living in Vienna. With its upcoming membership of the oneworld alliance the airline has revised its schedule in order to cater for the needs of business and connecting passengers.

VIE-BEG

arr. as HG 8026 at 07:15   12345–

arr. as HG 8028 at 20:00   12345-7

BEG-VIE

dep. as HG 8027 at 08:00  12345–

dep. as HG 8029 at 20:35  12345-7

Both Malev and Niki have remained as the only carriers from the oneworld alliance to offer direct flights to Belgrade from their hubs.

Several months ago British Airways axed Belgrade due to tough competition from Jat Airways and Wizz Air.

With the above mentioned changes Vienna will see up to 7 daily flights operated by three airlines. As of 31.10 departure times to Vienna from Belgrade will be as follows:

    05:15, 07:55, 08:00, 08:10, 15:15, 16:50, 20:35

This particular route is important for both Austrian Airlines and Niki. Vienna is one of the few destinations out of Belgrade where airlines have the opportunity to offer convenient connecting possibilities while relying on the considerable origin and destination market (Serbian diaspora).

While these two carriers fight it out with each other, Jat Airways maintains its double daily flight on the route. Jat mostly aims at the origin and destination market between the two countries. Even if their flights are perfectly timed to offer connections to several ex-Yugoslav cities my personal belief is that they will lose in the long run. Both Austrian Airlines and Niki have expressed strong interest in expanding in the ex-Yugoslav/Balkan market. Austrian Airlines is a very well established carrier in this region, whereas Niki has just begun its own expansion in the region. After launching Belgrade, Sofia and Bucharest the airline has recently announced plans to open direct links between Vienna and Skopje.

Jat’s failure to modernize will result in its demise. The more we see these Austrian carriers expand in the region the less passengers will opt to fly with Jat. Demand between Belgrade and other ex-Yugoslav cities (with the exception of Montenegro) is far from enough to sustain profitable flights. Jat’s daily frequency to the regional cities cannot compare with those offered by its neighbours such as Adria, Malev or even Croatia Airlines. If Jat is unable to compete with these airlines then how can they even think of fighting off airlines which are backed by Lufthansa and Air Berlin?

It’s a race against time for Jat and for it to preserve what is left of its past glory. It seems to me that recently they have adopted a different strategy, one that will see the airline concentrate on fighting off competition at its home base in Belgrade and therefore regain some of the lost O&D market. Some of the recent changes to their timetable include daily flights to Dusseldorf and Athens, a sixthweekly frequency to Istanbul (pending government approval) and an additional 4 frequencies will be added to Paris CDG.

Only time will tell if these changes will prove to be successful. We will have to wait until the end of summer season to know who is the real winner and who is the real loser in Belgrade.