MARK PILLING LONDON
Germany's fledgling low-cost sector is set for further expansion later this year with two more carriers joining Virgin Express in establishing a base at Cologne-Bonn Airport.
German regional Eurowings, in which Lufthansa has a 24.9% stake, and the giant TUI leisure business are planning budget carrier start-ups at Cologne. Virgin Express announced its intention in July to establish a low-cost base at the airport.
The Eurowings supervisory board revealed plans for its low-cost operation - called Germanwings - in mid-August. This name was last used in the late 1980s for an operator that tried a business class service from Munich, but failed.
Germanwings will take over the five 142-seat Airbus A319s currently employed by Eurowings mainly on charter services. However, this business sector, while growing in size to annual revenues of €127 million ($125 million) in 2001, has not been profitable. Eurowings will downsize its charter operation.
Germanwings will initially operate to 15 destinations, including London, Paris, Rome and Madrid, from 27 October. It expects to carry 500,000 passengers during its first six months of operation.
Although it unveiled its plans for Cologne before Germanwings, Virgin Express aims to start up in December, around a month after its rival. The three routes Virgin Express will operate - Rome, Madrid and Barcelona - have also been identified by Germanwings in its start-up phase.
The Eurowings move in effect will give Lufthansa an arms length feel for the low-cost market in German. Previously, although it has examined the sector, Lufthansa has questioned whether there is the same open space for low-cost competitors in Germany as they found in the UK or USA and has ruled out a direct entry to the market.
Meanwhile, TUI hopes to announce its well flagged entrance into the low-cost fray in late September. The company, which has charter carriers Hapag-Lloyd and Britannia under its wing, is also leaning towards Cologne as its low-cost base, despite the interest of other carriers in the airport.
TUI is in talks with various operators in Germany for an "operational platform" for its low-cost carrier. Even though Hapag-Lloyd has a reasonably low-cost base, TUI wants to establish a separate entity with even lower costs. It has been linked with another German carrier, Berlin-based Germania, over its plans for the low-cost market, but no decisions have yet been made.
Cologne's strong catchment area (there are 20 million people living within an hour's drive of the airport) is proving a magnet for the new low-cost operators. Germanwings did look at its home base of Dortmund, but decided on the stronger Cologne market.
While this airport cannot offer any special landing fee deals to airlines under German rules, it can offer plenty of terminal and runway capacity. Its second terminal, opened in mid-2000, gave it an annual capacity of 12 million passengers. With three runways it is also not slot-constrained.
"This is a milestone for Cologne because passenger traffic was going down," said the airport's Walter Roemer, with carriers such as Air France and Alitalia leaving Cologne and consolidating their services at nearby Düsseldorf. It expects to handle 5.2 million passengers this year, down from 5.8 million in 2001 and 6.4 million in 2000.
The arrival of the low-cost carriers should boost traffic to over 6.5 million passengers next year. Another boost for Cologne will be the opening of its railway station in early 2004, linking it to the country's high speed network and offering a 20-minute link to the city centre.
Source: Airline Business
