Hungary’s Budapest Airport stated (02-Aug-2012) it remains “optimistic” despite reporting an 11% year-on-year decline in passenger numbers for the first six months of 2012 following the collapse of Malev in Feb-2012. Budapest Airport aviation director Kam Jandu stated, “the void left by Malev offered numerous business opportunities for carriers both flying into or establishing bases at Budapest”, with the airport having now recovered 80% of the point-to-point traffic previously handled by Malev. Load factor on services from Budapest also increased 3.8 ppts to 72.1% in 1H2012. The airport welcomed six new airlines in 1H2012, adding 13 new destinations. [more - original PR]
Budapest Airport optimistic despite 11% pax decilne in 1H2012 following Malev collapse
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Nevertheless, the LCC five remain collectively far more profitable than the legacy three. Moreover Europe's two most profitable airlines, Ryanair and Wizz Air, look set to increase their margin lead this year. Even easyJet, which has had a bad year by its standards, achieved a higher margin for calendar 9M2016 than the most profitable of the big three legacy groups, which was IAG.
The divergence of results in the European sector suggest that not all airlines are following the same cycle. However the collective margin decline for the continent's leading LCCs, and its major legacy airline groups, at least gives reason to question whether or not the cyclical upswing may have run its course.
Vueling NEXT Part 2: new CEO to lead IAG's LCC in restructuring bid to achieve IAG targets
Vueling's new CEO, Javier Sanchez-Prieto, is leading a programme ('Vueling NEXT') to improve its profitability, both through revenue enhancement and cost efficiency gains. Among other aims this hopes to reduce Vueling's high levels of seasonality, to raise aircraft utilisation and to improve labour productivity. Given ambitious financial targets by IAG – action is needed.
Part 1 of CAPA's analysis of Vueling examined its capacity growth and profitability trends since its acquisition by IAG in 2013. Vueling's operating margin and return on invested capital are on a downward trend, hence the new initiative to reverse these trends.
This second part of CAPA's analysis considers the profit improvement programme. During this programme Vueling's fleet will remain broadly flat to 2018, before resuming growth thereafter. Focus markets for Vueling are domestic Spain and Spain-Europe. It has strengths in these markets but faces growing competition from its lower-cost rival Ryanair, which has also been raising its service quality – closing the gap to Vueling's more premium positioning on the LCC spectrum.