Poland authorities make life worse for budget airlines

By bne IntelliNews October 14, 2008

Matthew Day in Warsaw -

With fuel prices soaring, times are undoubtedly tough for Europe's low-cost airlines. But those serving Poland warn they could get even worse, as the run-away growth they've experienced comes to a juddering halt.

The no-frills operators are spitting feathers over plans by the Polish Air Navigation Services Agency (Pansa), the body that governs the traffic in Poland's skies, to increase charges for airlines operating out of the country's expanding number of regional airports.

In fact to say "spitting feathers" over the increases to the Terminal Navigation Charges is an understatement; incensed is more fitting. Ryanair, never a company to pull its punches, was the first airline to weigh in, calling on the Polish government to "reverse this idiotic decision by Pansa, which is set to stifle economic development and reverse the growth of passenger traffic through the country's airports."

Natasa Kazmer, a spokeswoman for the Budapest-based low-cost Wizz Air, also expressed disapproval with Pansa's decision. "It is very important to note that we keep our costs as low as possible so the increase in charges in Poland is very unfavourable to us and our passengers," she says. "As a low-cost company we are strongly opposing any increase in costs, especially those that have a growing impact on us as we increase routes to and from Poland."

The European Low-Fares Airline Association (ELFAA), an umbrella group representing a number of low-cost airlines, continued the verbal pummelling of Pansa. In a September press statement, it described Pansa's pricing policy as "abusive", and claiming charges have soared at some regional airports by an eye-watering 960%. This, ELFAA says, could have serious consequences implications.

With Poles becoming increasingly affluent and eager to travel, the number of passengers flying to and from Poland has rocketed from 7m in 2004 to close to 20m in 2007, with the vast majority of new growth carried by low-cost airlines operating from small, regional airports. Poznan, for example, has seen the number of destinations served from its airport jump from nine to 25 in little over a year. But Pansa's actions, says ELFAA's secretary general John Hanlon, have darkened the future. "It's a very serious situation," he says. "There is still a lot of growing that needs to be done, but the rate of growth is not going to be sustained. You have young routes and they need to be nurtured so if you significantly alter the cost-base over night, you then throw the economics of that route into disarray.

"It's a strange policy for a Polish agency to adopt: to punish the investor, the people who put money into Poland," he adds, claiming that some low-cost airlines have already started to pull services from the country.

Budget blues

The higher costs could also hit the low-fare airlines harder than the long-established legacy carriers. With little or no fat to trim from their operations, they have the choice of either sacrificing their cost advantage by making people may more, or cut routes. Along with this, Hanlon argues that Pansa's policy may well have a bad effect on regional towns, who could see their dreams of low-costs boosting their neglected local economies wither as the airlines up sticks and move out.

Despite the flack it has received from the low-cost sector, Pansa remains unmoved, and has even launched something of a counterattack, accusing at least one unnamed airline of hypocrisy. "One of ELFAA's carriers has often imposed the condition – before starting their operations to a given regional airport – that the airport has the most modern and most expensive navigation [systems]. Now, the same carrier demands that we 'lower air navigation services'. These two demands are contradictory," exclaimed Pansa's spokesman Gregorz Hlebowicz. "We cannot stop modernising just to appease the demand [from low costs] for lower navigation charges." He adds that Pansa comes under EU regulations and that their fares cover the costs, "no more, no less."

Pansa also dismisses the claim that costs will rise by 960%, claiming that the real figure is nothing more than a mere 8.3%. Exaggerating potential costs is something Ryanair, for one, has form in. In 2004, Ryanair was successfully sued by a passenger it had charged £18 to use a wheelchair. The firm's belligerent CEO Michael O'Leary immediately imposed a 50p surcharge to the cost of every ticket to cover the price of any needed wheelchairs - a sum, pointed out analysts, that was far in excess of any money that would needed to provide such a service.

Much to the fury of low-costs Pansa has not ruled out further increases next year. Although this prospect has already drawn withering fire from Ryanair, which has described it as a "dose of fantasy." Hlebowicz stresses, in a move that may provide the airlines with a grain of comfort, that any increases should be mitigated by EU funding.

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Poland authorities make life worse for budget airlines

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