Taking the leisure route
The unprofitable LOT low-cost subsidiary is revising its business to focus more on charters as it struggles to compete against larger low-cost carriers.
Centralwings chief executive Waldemar Krolikowski says every carrier has been losing money over the last year in the Polish market and that Centralwings is struggling to compete against Ryanair, easyJet, bmibaby and Eastern Europe's largest budget carrier, Wizz Air, in the key Poland-UK/Ireland market. Krolikowski says 75-80% of Centralwings' flights are to the UK and Ireland, but these are to be reduced in favour of more charter flights to the Mediterranean. Charter flights already account for about 30% of Centralwing's traffic but this will be increased to 45-50% as the carrier expands its fleet this year from eight to 10 Boeing 737s.
"At this time we're trying to change our orientation," Krolikowski says. "I'm trying to find a more profitable market. The charter market will be stable for the next couple of years in my opinion. Therefore we will look to take a place in the charter market. It's not as competitive as the low cost market."
Centralwings is not the only low-cost carrier which has struggled in the Polish market. Bratislava-based SkyEurope had a base in Krakow but dropped it late last year. "It was a complete blood bath for everyone. UK-Poland is getting overdone," says SkyEurope chief executive Jason Bitter.
CentralWings, which has two aircraft based at Krakow, picked up some of the routes SkyEurope dropped but quickly discovered there were unviable and dropped them. "At the time being it's very difficult and very competitive because a lot of big players are in this market," Krolikowski says. "They offer very cheap tickets and I can't give such cheap tickets to the people. You can see how hard it's to fight in the Polish market."
SkyEurope, meanwhile, has restructured its network to focus on its three remaining bases at Bratislava, Prague and Vienna. It has dropped 55 of its 93 city pairs, slashed headcount from 933 to 679 and cut its fleet expansion plan. "We had committed to a growth path that was ridiculous, especially in today's cost environment," Bitter says.
Source: Airline Business