Budapest Airport well positioned for growth in 2011 and beyond
Budapest Airport is close to recovering all the traffic lost in the global economic downturn thanks to its strong positioning in full service and low-cost markets. Hungarian national carrier Malév has been through a challenging period but some positive developments are now flowing from the airline’s restructure, according to Budapest Airport CEO Jost Lammers who spoke exclusively with CAPA.
Mr Lammers stated that LCCs have also dramatically reshaped the airport’s passenger mix, with the sector now accounting for more than one quarter of passengers. Full service traffic is also growing again, with most airline ”looking very buoyant” into 2011.
The airport is pushing for a daily service to connect the Middle East region and enhance connectivity to Asia. In a positive development, Qatar Airways will be launching a four times weekly service from Doha to Budapest in Jan-2011.
Overall, the outlook is bright with the LCC share continuing to grow strongly, reflecting in part the airport’s differentiated service and charges structure. The upcoming completion of the Sky Court, which connects Terminal 2A and Terminal 2B, will, among other things, offer another opportunity for the airport to grow its non-aeronautical revenue streams.
Q: European aviation has had a turbulent two years. What have been the particular challenges and bright spots for Budapest Airport?
The single largest aspect of the BUD Future programme which altogether incorporates an investment of more than EUR260 million is the construction of Sky Court which connects Terminal 2A and Terminal 2B. Once complete, we will provide better passenger experience for all of our passengers in addition to being able to offer a wider choice of retail and food and beverage facilities.
Whilst it will be the best facility in the region by far, it also qualifies as a big challenge, given that placing a new building between two existing ones is full of engineering complexity. Furthermore, we had to complete this task whilst still offering the same seamless travel experience to our passengers.
On the airline side, Malév, the Hungarian national carrier has been a challenge and a bright spot at the same time. As they continue to go through a major restructuring plan which includes capacity reduction, amongst other things, they remain a key part of Hungarian aviation and to the fortunes of Budapest Airport.
For example, Malév strongly promoted its network with some aggressive pricing and marketing actions which had a positive affect on the passenger traffic in 2009.
Q: Do you expect to surpass the 8.4 million passengers handled in 2008 this year?
Our projection is very close to the 2008 passenger figures, however we might not reach it in 2010 due to the volcano effect in April which wiped over one hundred thousand passengers from our anticipated performance.
Q: Qatar Airways recently announced plans to launch service to Budapest next year and the airport has stated it is interested in attracting more Middle Eastern carriers to the airport. Can you update us on progress in this area?
The market is large enough to sustain a daily service to the region. Qatar [Airways] are the first to connect Budapest to the Asia Pacific region with the operation of a four times per week service introduced from January 2011. This service will provide passengers with a choice to avoid back-tracking in Europe which many of them do and will continue to consider until there is a daily direct service.
Therefore our task is to increase the choices offered which means that increased capacity of direct services remains a priority for Budapest Airport.
Q: Budapest is a growing transit hub in Eastern Europe. What strategies do you have in place for growing the transit business?
Transfer passenger traffic in 2009 alone amounted to approximately 20% of the total passenger numbers at Budapest Airport. The hub capability has been successful and remains core to the future development. Transfer and transit passengers are a pivotal part of our growth plans underpinned with the new Sky Court facility which will offer faster connection capabilities than today.
Q: How has the opening of a dedicated low-cost terminal changed the passenger mix at the airport? How have you handled the differentiated pricing model with airlines?
There was a major change in our passenger mix since the low cost carriers (LCC) arrived in Terminal 1. More than 25% of our passengers use LCCs today to reach their destination and the trend continues to grow.
Budapest Airport offers a differentiated service and charges structure to low-cost carriers which makes it, as a primary capital city airport, an attractive choice for airlines and passengers alike.
When the charge was established, all airlines could apply in an open tender for operating to T1. If we had more airlines apply than the capacity available, we would have held an auction which would have invariably changed the cost structure. As this did not materialise, the low-cost model took-off because Budapest Airport could accomodate all applicants at the time.
Q: Do you see other major European airports joining Budapest in offering dedicated low-cost facilities and differentiated pricing?
Until today we have not seen any other European airport offering such a unique low-cost product as our Terminal 1. The value proposition for our low-cost facility is simply that it is at a primary airport in an EU member state capital city, which thanks to Budapest’s natural cultural beauty is always in demand as a short-break destination.
Q: How far off reaching capacity is the low cost carrier terminal? How does traffic growth at this terminal compare with Terminal 2 growth rates?
The traffic at Terminal 1 is below capacity overall at the present time. During peak times, and especially with the success of the home low-cost carrier Wizz Air, pressure points build up in the listed building we use as Terminal 1.
Once again, on an overall basis, our own analysis shows that the current configuration of the terminal is able to manage all traffic forecasts for the next five years at least. To make the peaks wider and better spread, Budapest Airport offers off peak incentives for interested carriers. The growth rate at Terminal 1 is presently stronger than Terminal 2 but the full-service traffic with most airlines is looking very buoyant in the last part of this year and into 2011 according to our forecasts.
Q: How is the Duty Free and retailing business performing this year? What initiatives to you have planned to continue building your non-aeronautical revenues?
Apart from April, hindered by the ash cloud crisis, we have experienced a healthy growth of passenger spends and revenues so far. The increase has especially been encouraging at the low-cost Terminal 1, where we can capitalise on a small but efficient walk-through duty free concept complemented by several special retail and food and beverage outlets.
The main focus area of our retail business is preparations for the opening of the spectacular SkyCourt that will add close to 4,000sqm of new retail space to the existing areas, including an all-new walk-through duty free shop, offering an environment to our passengers unprecedented at Budapest Airport to date.
A natural outcome of the new facility in addition to providing more variety and choice is that non-aeronautical revenues will increase as we have such a significant dependency today on aeronautical revenues which needs to be better balanced.
Q: Are there any notable differences in the duty free/retailing spend profiles between the LCC and main terminals?
As expected, passengers of low-cost airlines spend less, and are attracted by different products than passengers flying through our main terminal. One difference worth mentioning is that the tobacco purchases represent a much higher portion at the low-cost terminal than at the one serving the flag carriers. However, commercial income is a major source of revenues at our LCC terminal as well.