Out of the woods

posted on 5th June 2023
Out of the woods

The bustling Polish city of Lodz hosted the 2023 edition of Routes Europe, with the network development industry in buoyant mood as traffic soars again.
Mark Pilling reports

With its crazily designed socks, fabulous cake-infested coffee shop stand, stunning fashion and dance shows, Lodz – both as a city and as an airport – went all out to put itself firmly on the map. By the way, the word Lodz is pronounced ‘woodge’, which is a constant conversation point with locals.
The city (which is celebrating the 600th anniversary of its foundation) and Routes welcomed 1,200 delegates and 90 airlines during the event, where upwards of 4,000 meetings took place, said Steven Small, Routes Director.
2023 is the year that many participants will see their passenger numbers return and in some cases exceed 2019 levels for the first time since the pandemic. According to keynote speaker, ACI Europe Director General Olivier Jankovec, 27% of Europe’s airports achieved full recovery to pre-pandemic traffic levels in 2022; however, ACI Europe is only forecasting full traffic recovery across the region in 2025.
“We are finally turning the corner from Covid but with renewed challenges both in the medium and short term,” said Jankovec. In addition, the early months of this year have shown some markets bounding ahead, such as most around the Mediterranean benefiting from beach tourism, plus Poland, while others may have reached a “recovery ceiling”, he explained.
“We have markets that have lost their national airline, or where the national airline is a shadow of itself,” said Jankovec. The Czech Republic and Slovenia are clearly underperforming, while Germany is sluggish, with the exit of some low-cost carriers hitting that market.
“Russian airports interestingly are close to where they were in 2019 because traffic is shifting,” noted Jankovec. “They’ve lost traffic to the EU and to North America, but that traffic is going elsewhere – to countries like Uzbekistan and Kazakhstan who are seeing record numbers in terms of volume.”
When it comes to market dynamics, Jankovec said: “We have a recovery which continues to be driven by leisure and VFR demand, boosted by the capacity expansion of low-cost carriers, and very much relying on intra-European, North Africa and the transatlantic market.”
This pattern is becoming structural and it explains the difference in performance in terms of direct connectivity across the airport industry, where “the smaller and regional airports are outperforming [larger ones],” he said.
Another structural trend Jankovec sees is related to business travel. “I think it’s clear that corporate travel will increasingly be decided on sustainability criteria that reflects pressures from shareholders, from consumers, and from society,” he said. “This is one reason why business travel is coming back at a much slower pace compared to leisure travel.”

LCC dominance
It’s not a new trend, but the increasing dominance of low-cost carriers in Europe is “the new aviation paradigm” for airports, said Jankovec. “It is very clear that ultra low-cost carriers have been the winners over the past years,” he said.
Jankovec noted the “exponential growth” of Ryanair and Wizz Air, the lag in capacity restoration from major European network groups, and the weakness of medium-sized network carriers.
Air Baltic Chief Executive Martin Gauss acknowledged the reaction the arrival of the LCC giants can prompt. “Network people always freak out when Ryanair or Wizz Air come [into a market],” he said. “But they come and go. Air Baltic has a long-term strategy on providing connectivity and we don’t deviate from it. We provide reliable, long-term flying to mainly business destinations and see such a strategy can expand well beyond a 30-aircraft model.”
According to the ACI Europe study Fierce Competitors, Fragile Foes, released on the opening day of the Routes event, there is a new aviation market paradigm in the post-Covid world where the increasing buying power of airlines in Europe is squeezing the continent’s airports ever further as they strive for financial stability and resilience.
“The constant level of route openings and closures – the so-called route churn – along with changes in capacity on existing routes, all documented by ACI Europe, provides indisputable evidence of airports being under constant competitive pressure to attract and retain air services,” said Jankovec.
“The Routes events are essentially a beauty contest – with airports vying to attract the footloose airlines, who can and will leverage bargaining power through size and flexibility,” he said.
“Airport competition of course isn’t a bad thing – quite the opposite,” said Jankovec. “But the fact is that the reality of airport competition remains largely ignored by national regulators across Europe. The result is airports being over-regulated with price caps and limited commercial freedom.
“Meanwhile, airlines enjoy unrestrained pricing power vis-à-vis consumers with no checks and balances whatsoever,” said Jankovec. “Let’s be honest here: these regimes are all about protecting airlines and their shareholders, and they do little to protect consumers. This needs to change – and we look forward to further engaging with regulators on this.”

Financial pressure
A look at how little airport charges have increased this year, coupled with inflationary pressures and contrasting with the way air fares have risen, indicates the structural cost and revenue pressure that the region’s airports are feeling, explained Jankovec.
This is a major challenge: “The fact that we’re going to have slower growth with constraint on revenue is really potentially exposing us to an investment crunch,” he believed. “And we’re seeing, very worryingly, that airports are cutting down investment at a record pace.”
“Our second challenge is decarbonisation and societal acceptability,” said Jankovec. “We’re now seeing one government in particular having taken a decision which many of us thought was unthinkable just a few years ago,” he noted. He was referring to the Dutch government’s decision to structurally reduce the capacity of Amsterdam Schiphol Airport.
This was described as an “irrational” move by Rafael Schvartzman, Regional Vice-President, Europe, IATA. “In such a connected country you are basically limiting your future,” he told delegates.
“So, there is a lot of societal, political, and regulatory pressure on the sector,” added Jankovec. “I think it’s no longer about our licence to grow; it has become about our licence to keep operating.”

Prepared for the peak
A market feature nobody hopes will be a regular occurrence is the terrible disruption seen at some European airports in summer 2022 as traffic surged. “We are watching very closely for potential disruptions, because we all know last summer was quite difficult at a number of major airports,” said Jankovec. “I think the operational risks this summer are receding quite noticeably and that’s down to the fact that airports across the continent have stepped up their preparedness.
“They’ve done massive recruitment. They’ve improved wages for airport workers. There has been a lot of outreach to all the operational stakeholders to work together to prepare for the summer,” he added.
“There is risk, and we still have pain points,” Jankovec went on. There are various issues, one of which is the level of staff skillsets and qualifications. “We have airports where up to 40% of the staff are new, which means staff with less experience – and that is less than ideal when we’re faced with disruptions. We have continued issues with ATM capacity. There’s the impact of the war in Ukraine and we have risk of strikes and social unrest still in some countries.”
While there are challenges aplenty for the industry to grapple with, the overall mood in Lodz was upbeat. A strong example of this positivity was the Routes Europe 2023 Awards, with Denmark’s Billund Airport crowned as the overall winner as well as best airport in the under 4 million passenger category.
The airport was one of five winners at the event, which celebrated excellence in airport and destination marketing. The other victors at the ceremony were Budapest Airport, Athens International Airport, Canary Islands Tourist Board – Promotur, and Air Baltic.
And for Lodz the final act was to hand over the baton of hosting the event: from 22-24 April 2024, Routes Europe will head to Denmark, where the airport and city of Aarhus will play host. We will see you there.