04-Nov-2020 3:50 PM

Khrabrovo Airport revives little Kaliningrad’s big hub aspirations

Analysis

Every so often an unlikely small air transport hub appears somewhere. That happened in the Russian oblast of Kaliningrad 15 years ago, courtesy of the innovative airline KD-Avia, which sought to connect large swathes of Russia with Europe through Khrabrovo Airport. It did not last for long, as the airline succumbed to financial pressures.

Two years ago the Khrabrovo management examined recreating that hub with LCCs like Pobeda, but it didn't work.

Now, mindful of St Petersburg Pulkovo Airport's success at securing a seventh freedom operating environment there, Khrabrovo seeks to have one of its own, which could lead to self-connecting hub passengers growing by default.

Summary

Last year in 2019 St Petersburg Pulkovo Airport was authorised to permit seventh freedom airline operations.
It has not so far been successful, but now another Russian airport, as anticipated, wants to try.
In this case there is a history, because Khrabrovo Airport was at the centre of an innovative hub and spoke network in the noughties.
Two years ago in 2018 the airport's management considered trying to replicate it.
By now focusing on developing low cost hub and spoke services flown by foreign airlines the same end result might be achieved anyway.

An oblast which punches above its weight

According to Kaliningrad Khrabrovo Airport Director-General Aleksandr Korytniy, the airport is working on obtaining seventh freedom rights, with assistance from Kaliningrad Oblast's Governor Anton Alikhanov.

Kaliningrad is an odd case, an Oblast (region) - technically a federal subject and semi-enclave of the Russian Federation - which occupies a strategic position (because its main port is the only Baltic one in the Federation to remain ice-free in the winter) away from the mainland. Kaliningrad is on the Baltic Sea, wedged between Lithuania and Poland, and has a population of approximately one million.

Location of Kaliningrad

Early in the 21st century, the economy of Kaliningrad Oblast became one of the best performing economies in Russia. This was helped by a low manufacturing tax rate related to the Yantar Special Economic Zone, which is located inside the oblast.

Little pandemic-related impact on traffic

Between 2016 and 2019 there was solid passenger traffic growth at Khrabrovo Airport, and although it has fallen back this year, as with many other Russian airports a decline of the sort experienced by most airports elsewhere has not occurred.

Kaliningrad Khrabrovo Airport: passenger numbers, 2010-2020

Indeed, Khrabrovo has been barely impacted by the pandemic at all.

Seat capacity fell steeply from the end of Mar-2020 (53,000) to mid Apr-2020 (30,000) but has since revived, at first in stages, then since May-2020 consistently, until it hit a peak of 91,300 seats in the week commencing 24-Aug-2020.

It has fallen back since, but as of the week commencing 05-Oct-2020 it is still 10,000 seats above where it was earlier in the year. It looks as if it will end 2020 with 2,900,000 seats having been offered, which is marginally ahead of 2019.

In Jul-2016 the large Russian airport operator Novaport partially acquired Khrabrovo Airport from Aeroinvest, and as part of Russia's preparations to host the 2018 FIFA World Cup, a new terminal was put into operation. In addition, the airport infrastructure was modernised.

Analysis of current schedules data reveals that there are five main airlines, of which the largest two are Aeroflot and its LCC subsidiary Pobeda.

Kaliningrad Khrabrovo Airport: seat capacity by airline, week commencing 05-Oct-2020

No foreign airlines; management talking to European LCCs

There are no foreign airlines at all. All but 2% of seat capacity is domestic. Full service carriers operate 64% of capacity and despite a presence from SkyTeam (Aeroflot), 64% of capacity is also on unaligned airlines.

The Director-General, Mr Korytniy, said the airport is actively working on further development plans and is in discussions with many airlines, including the three main European LCCs: easyJet, Ryanair and the fast-expanding Wizz Air.

Mr Korytniy noted: "We see their interest in Khrabrovo. But they will come only once the airport receives Open Skies status with seventh freedom rights". Mr Korytniy said the airport could develop as a base for Russian and foreign airlines, while its technical capabilities allow the airport to offer LCC services.

The Seventh Freedom of the Air is one of the more recent ones arising out of the original handful agreed at the Chicago Convention in 1944, and in Europe has done so since European open skies were introduced in the early 1990s.

It is the right or privilege, in respect of scheduled international air services, granted by one state to another state, of transporting traffic between the territory of the granting state and any third state with no requirement to include on such operation any point in the territory of the recipient state, i.e. the service need not connect to, or be an extension of, any service to/from the home state of the airline.

To put it more simply: the seventh freedom permits an airline to operate 'stand-alone' services outside the territory of its own state, to carry passengers and freight between two foreign states.

To put that into perspective it could mean, for example, the UK-registered easyJet operating between Khrabrovo Airport and Riga in Latvia; the Irish-registered Ryanair operating between Khrabrovo and Paris, France; and Wizz Air operating between Khrabrovo and Vienna, Austria.

Services would depend on the existence of a bilateral air services agreement between the relevant states, rather than on the nationality of the airline. All the above assuming that such routes were authorised by the authorities; there are always caveats with these sort of arrangements.

Khrabrovo mimics Saint Petersburg

This concept is not new in Russia. In 2019 Pulkovo Airport, serving Russia's second city, St Petersburg, applied for an airport-specific open skies agreement to be put in place, whereby fifth and sixth freedom rights would be observed.

That would mean, for example, if it applied globally, that an Asian airline such as ANA could operate from Tokyo to London via St Petersburg with traffic rights on all three sectors, or a Middle Eastern one such as Emirates (which is already a selective fifth freedom operator) could do the same between, say, Dubai and Chicago.

In the sixth freedom domain it would mean an airline(s) could base itself at St Petersburg and operate a hub and spoke system there between countries, again as Emirates does at Dubai, or, more appropriately, as nearby Helsinki Airport in Finland does.

However, what St Petersburg was ultimately offered, in Dec-2019, was seventh freedom status restricted to European airlines only, and this 'halfway house' was agreed by which foreign airlines would be allowed to introduce point-to-point services from 30 countries, in some cases from any city, and in others from selected ones only.

In detail, the Ministry of Transport - which is keen for there to be more foreign LCCs operating, particularly, as there is only one Russian one - approved 21 countries to operate seventh freedom rights services to Pulkovo Airport without any restrictions on airport point of origin, including Belgium, Denmark, Ireland, Switzerland and Portugal.

The nine remaining countries were approved to operate seventh freedom rights services to Pulkovo, with the following restrictions on points of departure or arrival:

• Austria: all cities except Vienna;

• Bulgaria: services from/to Sofia only;

• UK: all cities except London;

• Germany: all cities except Berlin, Munich, Düsseldorf and Hamburg;

• Spain: all cities except Barcelona and Málaga;

• Italy: all cities except Rome and Milan;

• Cyprus: all cities except Larnaca and Paphos;

• France: all cities except Paris and Nice;

• Czech Republic: all cities except Prague.

Little take-up at Saint Petersburg so far, but can it be expected right now?

It is not easy to gauge the airline response in view of the pandemic, which set in soon afterwards. The route map below, as of the week commencing 05-Oct-2020, reveals only one service operating on any of those routes (Sofia), and no service at all from many countries.

In Sep-2020 Wizz Air postponed to Dec-2020 the launch of additional St Petersburg services that do include one of the designated cities, namely Sofia, also Bratislava and Bucharest. Previously it had announced the postponement of the opening of a new base there, also to Dec-2020,

So there is latent interest in the arrangement and the authorities will be hoping for a change in fortune next year, having fought hard for this exception to the regulations.

Saint Petersburg Pulkovo Airport: network map for the week commencing 05-Oct-2020

A broader view of what has happened at St Petersburg can be found in this CAPA report (09-Jan-2020):

https://centreforaviation.com/analysis/reports/st-petersburg-pulkovo-airport-mot-approves-7th-freedom-ops-507713

St Petersburg was the first mover in Russia for such open skies rights, but as that earlier report made clear, other airports could follow suit if this scheme is a success. And Khrabrovo is doing so, even though it has not been a success so far.

Khrabrovo's original out-of-the-box experiment was an innovative one

Then again, it was a logical possibility because Khrabrovo has a history with this sort of thing.

Back in Jul-2018 the management of the airport began to talk in terms of it again becoming a hub for travel between Western Europe and Russia and the Commonwealth of Independent States (CIS).

Again? Yes. Using its Baltic location, the now defunct KD-Avia had tried, but failed, to make such a model work previously.

Kaliningrad Khrabrovo was the former home of KD-Avia, which operated an innovative east-west Russia/CIS/Europe hub there from 2005 to 2009 before it became insolvent. In the west its route network included London, Paris, Berlin, Hamburg, Hannover, Düsseldorf, Munich, Barcelona, Prague, Rome, and Milan.

Crucially, these were linked to a network within the Russian Federation that included Moscow, St. Petersburg, Chelyabinsk, Ufa, Nizhny Novgorod, Omsk, Samara, Perm, Kazan, Yekaterinburg, Volgograd and Rostov-on-Don - cities which mainly (except Moscow and St Petersburg) did not offer direct air services to and from Europe (and in most cases do not do so now, either). In addition, Kiev (Ukraine) and Astana (Kazakhstan) were on the network, along with Athens and Tel Aviv to the south.

Essentially the airline replicated for a Russian market what western airlines such as Swissair and Austrian Airlines had been doing successfully for a more general east-west market for several decades.

Its network was configured in favour of westerners, especially business people. Flights from Europe arrived in Kaliningrad between 18:35 and 20:00 and onward connections to Russia departed between 21:30 and 22:20. Allowing for the zero or one hour time difference between Kaliningrad and Western Europe, that meant that most business travellers could get in a full day's work before leaving the office (although arrival at their destination could be very late).

Travelling the other way, Russian flights arrived at Kaliningrad between 10:10 and 11:05 (again, meaning an early start in some cases) and departed for Europe between 12:25 and 13:30.

Management keen to try the KD-Avia approach again; perhaps the seventh freedom one will generate a similar result, eventually

Kaliningrad, by way of the same Director-General, Aleksandr Korytniy, said it intended to begin the development of hub operations again from Jul-2018, targeting transit passengers and adding services to Geneva, London, Paris and Rome, the latter three all being cities that were in KD-Avia's network. The Kaliningrad Oblast Governor expected the airport "again to become a hub" and to handle services operated by international LCCs.

To start off, Pobeda, the LCC that is part of the Aeroflot Group, would operate direct services from Moscow's Vnukovo airport to Europe via Kaliningrad, though that was not strictly a hub operation, unless more than one Russian mainland airport was to be involved as well, with perhaps a simple star-shaped network at Khrabrovo.

But times have moved on; the low cost segment is more dominant than it ever has been. This means that far more passengers are used to the self-connecting principle of buying tickets on separate airlines and transferring themselves and their baggage at airports, which in some cases help them to do that. London Gatwick and Cologne-Bonn airports are good examples, and self-connection is often used now at London Stansted and other large airports.

It really was no more than wishful thinking. This was not an example of another network airline filling a void. If that were to have happened it should have been in 2009, when KD-Avia ceased trading, as there would have been a hard core of travellers who were familiar with this particular nexus.

The airport hoped instead to replicate the idea but with a modern twist, using self-connecting to drive transfers. Unfortunately, it never got going, but the management's ambition cannot be doubted for a moment.

Now it tries its hand at stimulating individual seventh freedom operations instead. If successful (although they wouldn't be until well into 2021) they could act as a catalyst for self-connection anyway, thereby achieving the original goal by quite different means and putting Khrabrovo back on the map again.