Friday, 10 February 2012

Flagging carriers out east


Full article on economist.com

The grounding of Malev, Hungary’s national carrier, shows once again how Eastern European countries are struggling to fly their flags around the world. According to a report from CAPA, Hungary is now expected to follow Slovakia in switching to a predominantly low-cost carrier (LCC) market. The report notes that, prior to Malev's bankruptcy, LCCs accounted for just 24% of capacity in Hungary, compared with more than 70% for its neighbour to the north. That figure shot up to 40% overnight, and with Ryanair circling covetously above will only rise further.

But there are few positive signs for Eastern Europe's older airlines. Slovakia has a high LCC penetration because it abandoned its flag carrier in 2007. Lithuania did the same thing two years later, while Latvia clung onto its national airline, but only by marketing it as a pseudo-LCC with pan-Baltic aspirations—baffling analysts, and perhaps government financiers, in the process. Poland and Romania seem no more confident in their flag carriers, beating paths to Turkey, Qatar and the United Arab Emirates for financial backing and feed-in traffic. While none would admit it, they are all perilously close to their own Malev moment...