Published in Nacional number 615, 2007-08-28

Autor: Eduard Šoštarić

BUSINESS BY THE SNATCH PRINCIPLE

Ryanair deceived Croatian airports

THE MOST RECOGNIZED LOW-COST airline cancelled its contracts with Pula and Zadar and will no longer fly towards Croatia as of October, despite signed five-year contracts and annual subsidies of €500,000

Michael O'LearyMichael O'LearyThe world famous air carrier Ryanair from Ireland, a synonym for a low-cost model of air transportation with low operative business costs which result in lower passenger ticket prices, recently cancelled its contracts with the Pula and Zadar airports and in that sense cancelled all flights from these two Croatian airports to London, and flights from Pula to Dublin from 28 October this year. With winter approaching, Ryanair has announced its decision to withdraw as do most other low-cost carriers on routes towards the Adriatic coast because the tourist season in Croatia dies down at the beginning of October. These other carriers include German Hapag Lloyd, Sky Europe and Norwegian Air Shuttle because it will not be profitable for them to fly in the period from October-February, the winter period which is most problematic for all airline.

However, as opposed to the aforementioned air carriers who appear only during the tourist season when large profits can be made, the situation with Ryanair is more serious. Ryanair is a world famous airline with the cheapest passenger tickets in Europe, which obliged itself to fly three times a week throughout the year in its five-year contracts with Pula and Zadar. To make the situation more absurd, the company received more than €500,000 per year to do the same. Despite the fact that Zadar and Pula signed five-year contracts with the Irish airline, Ryanair has cancelled the contracts after just over one year of flying. The announcements made by tourism employees from Zadar and Istria on the very important role that the largest low-cost company in the world, Ireland’s Ryanair, will have in extending the tourist season proved to be amiss and unrealistic because those who participated in the signing of the contracts in front of the Zadar and Pula airports did not have an idea on how Ryanair’s business model functions.

The real reason for Ryanair’s withdrawal from Croatia is the fact that the tariff nearly doubled from ₤6 to ₤11 at the London Stansted airport, which was used for connections to Pula and Zadar. Ryanair management immediately reacted and decided that a part of the Ryanair fleet would be transferred to the profitable Spanish market where the Irish will wage a battle for passengers against the English low-cost airline Easy Jet.

Even though there were speculations that the real reason why the flights to Pula and Zadar were cancelled was due to poor flight occupancy, less than the expected 75%, this is not completely correct when you take into account the aforementioned information; this is only an excuse. Anyone who follows aviation was aware that flight occupancy from Zadar and Pula would not be able to exceed 75% during the entire year, so Ryanair protected itself in the contract so that it would be able to pull out at any given moment without explanation.

In the period when there will be no flights from Pula and Zadar, specifically from the end of October this year, Ireland’s Ryanair will begin flights from Madrid with seven aircrafts which were located on London Stansted, some of which flew to Pula and Zadar, towards six new destinations: in the north of Spain towards Santander and Girona, towards the Italian towns of Alguero and Cagliari, and towards Frankfurt and Liverpool.

The business philosophy of the low-cost carrier is that if there is no profit, there will be no flights. With that, these companies seek specific subsidies in the regions where they arrive. If profit is present but is lower than what can be created on other routes, the air carrier will withdraw because the demand for cheap flights in Europe is extremely large, and new markets have just been opened or need to be opened in the east. These eastern markets are Poland, the Ukraine, Turkey, Bulgaria, Romania, Albania and even Russia. The low-cost carriers are paying close attention to the price of real estate in specific countries, the demand for real estate, investment paths, and the labour force, which is how they adapt to new destinations.


The Republic of Croatia is a small market and is a choke point for such companies who want to create profit flying only from spring to the beginning of fall. It is completely normal for Ryanair to abolish 10-15 routes each month, at the same time introducing the same number of flights to new destinations. Officials from the Pula and Zadar airports and employees from the tourism boards in those areas spent a lot of money on subsidizing the Irish low-cost carrier which actually did not bring any good apart from a larger number of tourists at the airports, which really means nothing if we look at profits in tourism.

They did nothing to protect themselves from the cancellation of flights by the Irish air carrier in the contracts, and in the end, both counties will have losses because it will show that the subsidies for the arrival of passengers did not amount to €6/per person but double or triple that amount.

Zadar especially does not have any reason to discuss positive operations because it does not even have the hotel capacity for more serious tourism, and most passengers who arrived via Ryanair proceeded to the more attractive neighbouring Split-Dalmatia County. Management at the Pula and Zadar airports believed that any flights are better than no flights, and in the end they will have to calculate their losses together with the tourist boards. Despite Ryanair flights to Istria, for example, there was a clear decrease in the number of British tourists. Passengers in Ryanair airplanes mainly have lower purchasing power, and actually a larger share of passengers are Croatian citizens who wanted to visit London at lower costs.

Low-cost carriers have been flying to Croatia for several years. Their average occupancy is 80-90% during the period from April-October, while this occupancy is approximately 70% in the winter months if they fly to larger towns or centres such as Zagreb, as is the case with Hungarian Wizz Air and Germanwings. No other place in Croatia can fill more than 75% of the aircraft during the winter months, especially not in Pula or Zadar.

The remainder which do not fly to Zagreb must significantly decrease their routes to the Adriatic coast or completely pull out of the Croatian market during this period. According to the official list of low-cost carriers which are allowed to fly in Croatia, Germanwings has the most routes connecting Stuttgart with Zagreb, Split and Zadar; Cologne with Zagreb, Split, Dubrovnik and Zadar as well as Berlin, Hamburg and Dortmund with Zagreb and Split. They are followed by German Hapag Lloyd Express, as well as Slovakian Sky Europe, in the number of routes to Croatian coastal cities. Hapag flies from Rijeka to Cologne, Hanover, Stuttgart, Munich and Leipzig as well as from Dubrovnik to Hanover, Stuttgart and Munich.

Slovakian Sky Europe connects Bratislava and Prague with Split, Dubrovnik and Zadar, while it flies from Budapest and Krakow to Split and Dubrovnik. Hungarian Wizz Air has routes from London, specifically from Luton to Zagreb and Split, as well as from Budapest to Split. Norwegian Air Shuttle flies from Oslo to Rijeka, Split, Pula and Dubrovnik and from Bergen, Trondheim and Stavanger to Dubrovnik. England’s Easy Jet has routes from Rijeka to London and Bristol. All these companies attempt to attract a large number of passengers with marketing tricks so they quote ticket prices of €19 or even ₤10, but they actually hide other expenses which are included in ticket prices and do not mention that these advertised prices only relate to a specific number of seats in the aircraft and that the passenger must pay for everything else at an extra charge, from meals in the aircraft, luggage expenses, additional expenses for transport to the desired destination from the airport which the company flies from, internet reservation expenses, etc.

It was interesting to look at the advertised prices of the low-cost airlines which fly from Zagreb to other destinations and compare them to Croatia Airlines prices. We reached an incredible discovery which showed that Croatia Airlines is actually cheaper in most randomly selected routes if you take into account that low-cost carriers charge extra for any service in the aircraft, and that tickets purchased from some low-cost carriers add €10 or more for the expense of online reservation, and approximately €6 for luggage if you want to place it in the storage compartment in the aircraft, as is the case with Wizz Air. A very important issue is that the scheduled departure and arrival times, flight order and such are not guaranteed by low-cost carriers, and they maintain the right to changes so it may occur that the low-cost carrier cancels their flight for any given reason and is not obliged to secure another aircraft; the passenger will have to sleep in a hotel, but only if the price is under €70 because the low-cost carrier does not reimburse expenses which exceed that amount.
Truthfully, if the passenger wants to reserve a ticket three or four months in advance, there is a great chance that they will find a cheaper ticket, but there exists a greater risk that they will not be able to fly that day because a relative becomes ill, a business trip emerges, a natural disaster occurs in the meantime or similar. It is difficult to plan so far in advance, and more difficult for the passenger to be certain that they will fly as planned.

It is still unclear to the public why the low-cost carriers have significantly cheaper tickets, if you reserve months ahead, than the network operators such as Lufthansa, Air France, Croatia Airlines, and Austrian Airways. They use the same aircrafts, have the same gasoline prices, as well as the same service and maintenance requirements as the network operators, but the low-cost carriers offer significantly lower market prices. The reason is a completely different operational model. Economic analysts believe that low-cost carriers can save over 50% on expenses compared to companies such as Lufthansa and Croatia Airlines. First of all, low-cost carriers do not offer business class on their flights so it is possible for them to save on service and increase the number of seats in the same type of aircrafts used by traditional airlines, resulting in total savings of 16%. By using airports with less traffic and circulation, low-cost carriers have an advantage for quick takeoffs because the most expensive time is when the aircraft is on land, which adds an additional decrease of 3% in total expenses.

Furthermore, approximately 6% can be saved due to lower airport tariff expenses for airports which are actually auxiliary airports. The company has lower expenses for their own workers which totals 3%. Also, low-cost carriers with an entire fleet of the same aircrafts can save 2% on their maintenance. The minimum number of employees on flight departures and arrivals in smaller airports, the non-existence of catering services, charges for food and drinks as well as luggage, leads to savings of 16% in relation to traditional air carriers. An additional 8% of savings are added to the non-existence of a travel agency which should reserve and issue tickets because passengers do this via the Internet and similar.

The demand for cheaper air travel will remain great because the opening of individual markets is expected, especially in Eastern and South-Eastern Europe. After the initial marketing hit which follows low-cost carriers in new markets, a period of sobriety will follow because the prices are not what they appear to be, and travel conditions and service are not even similar to those offered by network operators. The Association of European Airlines made a projection that by 2008, 25% of all flights in Europe would be covered by seats on such flights. Individuals who do not have a lot of money but have time can use services provided by the low-cost operators, while travellers who seek quality and a timely arrival to specific destinations will definitely use the network operators.

All low-cost flights in Croatia

Among the low-cost carriers, Germanwings provides the most routes to Croatia connecting Stuttgart to Zagreb, Split and Zadar; Cologne to Zagreb, Split, Dubrovnik and Zadar; as well as Berlin, Hamburg and Dortmund to Zagreb and Split. The second highest number of routes to Croatia is made by German Hapag Lloyd Express, as well as Slovakian Sky Europe. Wizz Air provides routes from London to Zagreb and Split, as well as from Budapest to Split. Norwegian Air flies from Oslo to Rijeka, Split, Pula and Dubrovnik, while England’s Easy Jet has routes from Rijeka to London and Bristol.

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