"Low-costs don't have to run late," says the company's CEO, Piotr Kociołek. His business plan predicts 800,000 clients in 2005, with the majority transported on scheduled routes, and the remainder on chartered flights transferred to the company from LOT Charters. All this, however, differs little from the assertions of the airline's competition. But the carrier stands apart from the pack when it comes to one important detail: Centralwings is owned 100 percent by LOT Polish Airlines and is therefore state-owned.
Powerful friends
That translates, within reasonable boundaries, to a virtually unlimited source of financing and removes the threat of losing financial fluidity.
"If some outside party fails to provide technical service, LOT will do it. If an airplane is stuck at some airport, LOT will provide one of its own," claims the editor of aviation title Lotnictwo, Bartosz Głowacki. The state will be determined to keep the company afloat, even at a significant cost. Głowacki gives the example of Volareweb, a bankrupt Italian airline, which the Italian parliament is considering rescuing with state aid.
"If [Italian Prime Minister] Berlusconi wants Volareweb to be saved, it will happen," Głowacki says. Airlines are companies of high public interest, as was proven when the Swiss and Belgian authorities reached into their pockets to support their national carriers.
Centralwing's Piotr Kociołek includes a catchy slogan in his speech: "Poles are waiting for a Polish low-cost carrier." In fact, they already had one-AirPolonia, which, heavily indebted, failed to attract strategic investors and cancelled its flights overnight. The aviation industry, however, along with the current low-cost leader in Poland, Wizz Air, say that AirPolonia's bankruptcy was a result of poor management and fatal planning, and mustn't be seen as a sign of things to come. The Warsaw School of Economics aviation expert Professor Elżbieta Marciszewska says the mix-up in internal affairs and relations of the company would have scared away anyone bold enough to consider investing in the carrier.
Big players, big moves
On the other hand, this new market has such a dynamic and ever-changing landscape, that it is bound to take casualties. The Polish market is one of the best prospects in Europe, a country of 40 million, only three percent of whom fly. In Europe, it is usually 20 percent. Thus, along with the growing economy, the number of passengers should grow tenfold, with some estimates predicting passenger numbers of five million in 2010 for low-cost carriers alone. If this is the case, then why is Austrian operator Niki withdrawing out of Poland, and why is AirBerlin also rumored to be canceling its flights east of the Oder? By the time this article goes to print, low-cost airline schedules will have changed many times, as carriers try to find the routes with the maximum profitability. A new timetable presented by Hungarian Wizz Air, for example, introduces Poland's first internal low-cost route from Katowice to Gdańsk, offering a solution for business clients.
"We have to be patient and try out new routes. That's a part of it," says Wizz Air president, József Váradi.
Because, in the end, thinks Bartosz Głowacki, comfortable stability in this industry is not a realistic option.
"There were several alliances but they didn't last. It will be a fight, not a peaceful coexistence," he says. Right now everyone is awaiting the entrance of Ryanair- which is said to be preparing a strong move on the Polish airline market-with bated breath.
According to Głowacki, Ryanair, with annual revenues of more than ?800 million (zł.3.343 billion), plans to buy some 100 new planes over the next few years. These numbers are simply incomparable to the competition-Centralwings operates on three machines and hopes to have five by the end of 2005. However, the U.S. scenario, with just a few dominant domestic low-cost carriers, would be difficult to repeat, because of the state protection of airlines in Europe.
"Every country wants to have its own," claims Głowacki.
Airlines, unite
Although the management will not confirm it, it seems Centralwing's name's similarity to Germanwings is not by accident. The Poles share the same IT solutions as their German partners. Kociołek says: "The model of operation presented by Germanwings is very close to our idea. This would be the natural partner should we consider any sort of consolidation."
Váradi says Wizz Air isn't planning a similar move, and claims his airline currently has no strategic partner. However, he admits: "I believe there will be only one carrier in the CEE region and I think it will be Wizz Air."
Indeed, what Wizz Air and a dozen other small airlines, like the niche Iceland Express, must understand is that consolidation in such a dynamic business could be the only solution to avoid AirPolonia's fate. N
Prof. Elżbieta Marciszewska, an expert on the aviation market from the Department of Transport at the Warsaw School of Economics, shares her views on:
The industry...
Predicting that only four or two companies will remain is very newsworthy, but unfounded. Market analysis shows that the aviation industry must expand. In Poland, this growth should be catalyzed by regional airports. If they are able to attract operators, their final costs will fall. It can be seen in Katowice [airport], which is aiming to create a welcoming environment for them.
The business model of the low-cost carriers must guarantee reaching profitability and not only by cutting costs. Revenues can be increased by planning a rational connection scheme and ensuring that the number of seats taken exceeds critical mass. There is room for several, maybe more than 10 operators, unless Ryanair enters and overshadows the smaller operations.
Centralwings...
There are some bad as well as good experiences [in establishing a low-cost airline by traditional national carriers]. The low-cost operator of Irish firm Aer Lingus fleeced its mother-company and started to seize the market. In other cases, the project failed entirely. I have some reservations about the fact that LOT so quickly and without consideration gave away its charters to Centralwings. Those flights were always among the most profitable. But this can be regarded as a bonus for the new company that ensures it has some constant and secure revenue.
AirPolonia's bankruptcy...
Several factors joined together there: a lack of good relations between the owners and the managing board and unfair practices by some of them. If in a group of initial investors there is no agreement on basics, new investors back away. The CEO [Jan Litwiński] claims he had no idea about the owners' actions. He was brought to this company because of his contacts with airports and with the IATA [International Air Transport Association] but you need to be aware that capital is needed. You have to fight for investors from the very beginning and not when things start to go wrong. Plus, I don't know if the expenses in this company were well considered.
Błażej Karwowski
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