Eastern/Central Europe

Belarus aims to privatise Belavia in 2013, with Russian carriers the most likely suitors

Belarus and its aviation industry have come under the spotlight in recent months, not least for its air services dispute with Russia which led to the temporary suspension of all Minsk-Moscow services in late Mar-2012. Discussions regarding the privatisation of national carrier Belavia have also been occurring, with the privatisation likely in 2013 according to Belarus’ Transport Minister. Aeroflot is rumoured to be interested in purchasing the carrier, although other Russian companies are also reported to be interested.

In Apr-2012 the subject of Belavia’s potential privatisation emerged after the Belarusian Government revealed plans to convert state-owned transportation enterprises into open joint stock companies by 2015. Belarusian Transportation Minister Ivan Shcherbo confirmed Belavia was included in these plans with privatisation most likely to occur in 2013.

Poland’s OLT Express plans international expansion

Poland’s OLT Express is gearing up for international expansion with a range of new destinations to be launched from winter 2012/13, tripling its network. The airline will also be almost doubling its fleet in order to serve its new Western European network. The international expansion will be aimed at taking market share from LOT Polish Airlines from secondary cities in Poland which have traditionally been served through LOT’s Warsaw hub.

OLT Express has been in operation since 2001, originally under the name of Jet Air. From winter 2005/06 until mid-2007 the airline operated domestic services for LOT Polish Airlines on low density routes. JetAir’s regional feeder partnership with LOT ended in 2007 and the carrier began to operate services under its own name. OLT Express’ sister carrier, OLT Express Poland, was formerly a Polish charter operator which commenced operations in Apr-2011, serving regional Polish destinations on behalf of tour operators.

Flag carriers of the former Yugoslavia urged to unite

National carriers in countries of the former Yugoslavia are struggling to survive in the current economic environment as operating costs rise and they face competition from large network carriers and expanding low-cost carriers. The former Yugoslavian nations of Bosnia and Herzegovina, Croatia, Montenegro, Serbia and Slovenia all have national airlines but are struggling to become profitable, while the national carriers of Kosovo and Macedonia have already failed and have not been revived. 

Association of European Airlines (AEA) secretary general Ulrich Schulte Strathaus recently told Slovenian newspaper Dnevnik that national carriers in the former Yugoslavia need to unite into a single carrier in order to survive. Mr Strathaus stated, “the once single Yugoslav market is now fragmented and a regional solution is necessary. The region needs an airline that would cover local needs and connect with global hubs.”

The main airlines in the region are Bosnia and Herzegovina’s B&H Airlines, Croatia’s Croatia Airlines, Montenegro’s Montenegro Airlines, Serbia’s Jat Airways and Slovenia’s Adria Airways.

After Malev's grounding, Hungary could become large LCC market with Wizz Air and Ryanair moving in

Low-cost carriers, in particular Wizz Air and Ryanair, stand to benefit the most from the 03-Feb-2012 suspension of services at Hungarian flag carrier Malev. Budapest-based Wizz Air was already the second largest carrier in the Hungarian market and has now become the country’s largest carrier. Ryanair, which only late last month unveiled plans to resume service to Budapest, will become within a few months the second largest carrier in Hungary in the post-Malev era.

Lufthansa, as the largest remaining legacy carrier in the Hungarian market, is also poised to benefit from Malev’s grounding. Malev had accounted for a 47% share of capacity (seats) in its home market. Most of this share will be absorbed by LCCs although total traffic at Budapest Liszt Ferenc International Airport, which is owned by a private consortium led by Germany’s Hochtief, will likely decrease as its status as a transit hub is lost. Malev had been pushing to raise Budapest’s profile as an international hub, focusing on east-west connections. Malev's collapse saw oneworld overnight drop from the leading alliance in Hungary to the third largest after Star Alliance and SkyTeam.

Slovenia’s Adria Airways seeks strategic investor following restructuring

Slovenia’s Adria Airways this year plans to search for a strategic investor, hopeful it can attract interest from other airlines after completing a restructuring and recapitalisation in 2011. But the flag carrier, which has emerged as a significantly smaller and less ambitious entity, still faces significant challenges as it joins several Eastern European carriers in trying to sell stakes in adverse market conditions.

The Slovenian Government sold just under 30% of Adria Airways in Sep-2011 to a group of four banks as part of a debt for equity swap. The agreement also included a EUR50 million cash infusion from the Government, which has had to pump capital into the Ljubljana-based carrier multiple times over the last several years to cover continued losses. But the banks, which include two Slovenian and two international banks, are considered short-term investors and only agreed to the deal as it was seen as the only alternative to avoiding bankruptcy. The four banks are expected to sell their stakes at the first opportunity while the Government is also eager to further reduce its share, which now stands at just over 70%.