Банкеръ Weekly

Briefs

BULGARIAN AVIATION MARKET: CHAMPAGNE AND TEARS

Despite the imposed precautionary clause and the rising oil prices on the international markets, aviation services market in Bulgaria keeps growing. Figures provided by the Association of Bulgarian Air Companies show that in 2007 5.985 million passengers passed through the Bulgarian airports which is an 11% increase compared to 2006.
However, local carriers are still falling behind their foreign competitors in terms of market share. Last year they held 36.7% of the market, whereas in 2006 they had 40.6% of it. It is a slightly surprising decline since in early 2007 the state-owned Bulgaria Air was acquired by Balkan Hemus Group which also owns Hemus Air and Viaggio Air. All experts forecast at the time that the deal would result in an increased market share for the local carriers, especially because of the ambitious investment program presented by Balkan Hemus Group.
On the other hand, we should not forget that as Bulgaria joined the European Union three significant low-cost carriers stepped on the local market - easyJet, My Air, and German Wings. They joined Wizz Air and Sky Europe and increased the number of flights mainly from and to Sofia and Varna.
Unfortunately, there is no exact statistics of the number of passengers that low-cost airlines have transported. But together with the clients of traditional carriers, the total number for 2007 reached 3.786 million, compared to 3.198 million in 2006. Bulgarian airlines served 2.199 million passengers which is 0.9% more than they did a year earlier (2.180 million).
There is another curious trend, too. A significant restructuring of the market is monitored mainly due to the increased number of passengers transported with regular flights (mostly by low-cost carriers that opened routes to Bulgaria). In 2007, the number of these passengers grew 33% - from 2.227 to 2.957 million. Bulgarian air carriers served 830,000 of them (compared to 735,000 in 2006), while foreign companies transported 2.128 million (1.492 million a year earlier). The number of passengers who used chartered flights decreased by 4% - from 3.151 to 3.027 million.
And while companies occupied with passenger flights have all reasons to open a bottle of champagne, cargo carriers are in the opposite mood. Last year five of them were deprived of their licence allowing them to flight within the European Union. The precautionary clause that Brussels imposed forced us to take 30 planes out of exploitation and these were machines that performed at least 1,000 hours of flights a year. These are 30,000 hours and the revenues a cargo carrier receives for one-hour flight amount to approximately USD1,000, the Chairman of the Association of Bulgarian Air Companies, Stanislav Stanulov, said. Members of the organisation claim that the efforts the Ministry of Transport put on cancelling the restriction are not sufficient. Assistance is also needed from the Ministry of Foreign Affairs, the Minister of European Affairs, Gergana Gruncharova, and the European Commissioner, Meglena Kouneva, they insist.
There is still hope. Following several inspections by the European aviation authorities, the latest report was extremely positive despite a few omissions that were seen in other countries as well. This makes us think that, first, we have done our work, but we will not relax because there is more to be done. And second, the procedure for removal of the precautionary clause may be set into motion, the head of the Aeronautical Administration Directorate at the Ministry of Transport, Zahari Alexiev, commented.
However, how much time it will take to remove the restriction is difficult to predict. Zahari Alexiev refused to specify deadlines and according to Stanislav Stanulov this may happen no sooner than June. But it sounds much more realistic to expect it happen next autumn or in the end of the year. Until then, Bulgarian cargo carriers will keep accumulating losses. Because there is a rule in the aviation sector that stood the test of time - a plane only makes a profit when it flies.

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