Kociolek: living alongside LOT

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By David Kaminski-Morrow in London

As Poland emerges as the most competitive battleground for low-fare carriers in the newly enlarged European Union, flag-carrier LOT’s budget spin-off Centralwings appears keen to remind its parent airline of a local proverb: Gdzie dwoch sie bije, tam trzeci korzysta – where two fight, a third wins

kociolekCentralwings’ chief executive Piotr Kociolek says that the budget operation has no desire to poach LOT’s passengers. But Polish cities have no secondary airports – both LOT and Centralwings operate from Warsaw Okecie – and the pursuit of strong routes inevitably risks possible cannibalisation.

While LOT operates Warsaw-London Heathrow, Centralwings opted to serve Warsaw-London Gatwick when it began services in February this year. Since launching flights it claims to have snatched 10% of the Poland-London marketshare, with a load factor of 85% on the UK flagship route. Centralwings has avoided Paris, however, because the alternatives to LOT’s Charles de Gaulle service are unattractive.

Kociolek says that initial indications suggest little evidence that Centralwings is sapping business from LOT.

But he highlights the threat from third-party low-fare carriers such as SkyEurope Airlines and Wizz Air, and says: “If we don’t enter [certain LOT routes] then other competing airlines will come. In which case it would be better for LOT to lose passengers to Centralwings.”

Centralwings is nevertheless trying to avoid antagonising LOT. It wants to develop a corporate product, aimed at attracting price-sensitive business passengers, without competing directly with the flag-carrier.

“We’re still looking for the selling point for this kind of customer,” says Kociolek. LOT set up Centralwings, its direct response to the growing low-fare sector in Central Europe, by transferring its charter services to a newly created subsidiary and then adding scheduled budget destinations.

Kociolek claims the charter division is already profitable and that the scheduled services will be so in 2008. It has redefined all its charter routes as scheduled services, retaining tour operators to sell blocks of seats – usually at higher prices – and opening the remainder to budget travellers via the internet and other sales outlets.

Internet and credit-card penetration in Poland is relatively low, so Centralwings offers alternative payment options such as bank transfers and cash ticket sales through supermarkets.

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About 60% of Centralwings’ 720,000 passengers this year will fly on former charter routes. But Kociolek says that the airline plans to develop its scheduled services and that these will account for the majority of its 1.6 million projected passengers next year.

Centralwings says that it uses Slovakian-based budget carrier SkyEurope Airlines as a benchmark and claims that it has bettered its rival in cost-base terms, citing a cost figure of less than $0.05 per available seat-kilometre. Kociolek adds that its fleet utilisation compares with that of UK low-fare operator easyJet.

The Polish carrier has yet to develop strong ancillary revenue streams. Kociolek says that Centralwings’ primary aim has been to concentrate on its flight operations and “not spend attention on too many other aspects”. But he says the airline is “concentrating on barter deals” to aid marketing and gradually taking advantage of internet-based opportunities to push accommodation and car rental, even in cities in which it does not operate.

Centralwings will be adding Shannon, Edinburgh and Milan Malpensa to its Warsaw route network this winter and will be operating from five Polish cities during the season. Next year it intends to expand its fleet from five to 10 Boeing 737-300/400 aircraft while plans are already being drawn up to renew the fleet with either 737-700/800s or Airbus A319/320s and give Centralwings 24 jets by 2010.

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