TAROM is the flag carrier and oldest currently operating airline of Romania and operates a network of domestic and international services to destinations in Europe, Africa and the Middle East. TAROM is majority government-owned and its main base is the Henri Coand? International Airport, Bucharest – the major gateway into Romania. Compared to some other Eastern European countries, airport infrastructure in Romania is well developed, resulting from the country’s long association with aviation – the world’s first jet powered aircraft was built by a Romanian.
The Civil Aviation Authority of Romania is the regulatory authority, while air navigation services are provided by ROMATSA.
Airports in Romania
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The United Arab Emirates’ newest airport, Dubai World Central (DWC), opened its passenger terminal on 27-Oct-2013 and its first commercial passengers. The operator was Wizz Air, the Eastern/Central European LCC, with a flight from Budapest. Wizz Air Group (which includes Wizz Air Ukraine) also launched Bucharest, Sofia and Kiev from DWC as the winter season commenced.
According to Wizz Air CEO József Váradi, Wizz Air expects to handle 250,000 passengers on services to DWC in the first year of operations. Based on the four routes launched this week, this would imply load factors averaging 95%. Although Wizz Air’s 2012 load factor was more than 85%, this seems very ambitious for new routes, even in the hyperbolic world of low-cost airlines. More likely, Wizz Air plans to add frequencies and/or routes through the year.
Either way, it demonstrates the carrier’s confidence in taking the narrowbody LCC model further than most on routes that look to be under-penetrated. Mr Váradi is even talking of adding flights to India from DWC.
The fast-growing Wizz Air Group, privately owned and not subject to the same financial and traffic reporting requirements as publicly listed companies, has remained a mystery when it comes to its cost structure and profitability. CAPA has obtained and analysed detailed financial and operating data and the results are presented in this article. The group’s cost base is certainly low – it has the second lowest unit costs among European carriers, with CASK more than one third lower than easyJet’s, and a track record of cutting ex fuel unit costs. This cost structure, built mainly on Europe's most productive and low-cost labour force, has helped Wizz Air to a strong market position in Central and Eastern Europe, where it was the leading LCC in the 12 months to Mar-2013.
Its last reported financial year (to Mar-2012) saw a healthy EBIT margin of 5.8%, after seeing net losses in six of the previous seven years, suggesting that the business may be maturing. Wizz's closest competitor, with overlap on around one quarter of its routes, is Ryanair, whose unit costs are 14% lower than Wizz Air’s. Ryanair is growing strongly in the region and this could threaten Wizz Air’s goal to become its largest carrier over the next decade unless it can continue to lower unit costs.
TAROM has unveiled plans to develop its network in 4Q2012 and 2013 at Iasi which could potentially see a large scale expansion from the secondary Romanian city. However this comes as central European low-cost carrier Wizz Air continues to expand its Romanian network, both in the capital Bucharest and secondary cities, incuding Cluj, Craiova and Tirgu Mures. Wizz Air’s continuing expansion is likely to see it overtake TAROM as Romania’s largest passenger carrier.
Iasi is Romania’s fourth largest city based on population (263,000 as of the 2011 census) and is located in the northeast of the country close to the border with Moldova. Iasi is located approximately 400km north of Romania’s capital, Bucharest.
Known as the “Cultural Capital of Romania”, Iasi is a leading centre of academic, artistic, cultural and social life. The city is also an important economic centre in Romania, with several international companies with operations there including US-based Amazon.com.
Carpatair has added its first Boeing 737 to its fleet of regional aircraft, allowing the airline to develop longer range routes and to reduce unit costs particularly on routes where it competes head-to-head with Wizz Air. By deploying higher capacity aircraft, Carpatair hopes to boost its competitiveness and adapt to the changing environment with LCCs increasingly expanding their footprint into regional markets.
Carpatair commenced operations in 1999 providing regional connectivity from Timişoara Traian Vuia International Airport to other cities in Romania as well as a number of international airports. The airline built its operations on the traditional hub-and-spoke model using a fleet of Saab 2000 and Fokker 70/Fokker 100 aircraft. Carpatair has developed step by step by remaining truthful to its niche approach and growing its market share versus TAROM, but the mushrooming LCCs are now forcing the carrier to rethink its model and branch out with longer range routes and higher capacity aircraft.
Russia, the CIS nations and Central and Eastern Europe have been receiving a great deal of attention from Middle East-based carriers in recent months. Full service and low-cost carriers have announced or added a flurry of routes into Eastern European destinations over the past few weeks. Airlines in the Middle East are looking to tap into the underserved region, which is still showing strong economic growth despite troubles in several European markets and strong growth in business and tourism traffic.
Homegrown LCCs Air Arabia and flydubai are leading a push into the regions, but so too is Qatar Airways. Additionally, Oman Air plans to launch services to Moscow. While Middle Eastern carriers have long dominated traffic into western Europe, they now comprise the majority of traffic between the Middle East and central Europe, eastern Europe, Russia and CIS.
Airlines on Europe's southern and eastern periphery are becoming more precariously positioned, but are looking for for partners to help overcome the growing financial crisis. Cyprus Airways is the latest such carrier, and reported a widening in first half losses in the six months to 30-Jun-2011, as lower top-line revenue fell and higher fuel costs squeezed the airline in the period. Cyprus Airways is also turning to implementing a raft of measures aimed at stemming operating losses.