Ryanair holds the upper hand at Catalonia’s airports
Girona Aiport, photo credit Allplane (creative commons license)
It’s a pleasure today to welcome a very ineteresting guest post from Miquel of Allplane!You also can find him on Twitter
i’d like to thank him again to share his insights!
If there is a part of Europe where the low cost revolution has had a massive impact on the economy, this is Catalonia and its most famous destination: Barcelona.
Last decade’s growth has gone hand in hand with the consolidation of Barcelona as one of Europe’s top tourist destinations. To be fair, the city’s popularity is the result of a long-term, well executed strategy, jump-started by the success of the Olympic Games of 1992, that started well before the deregulation of the European air sector. The development of low cost carriers in Europe happened to be perfectly timed to accelerate and reinforce this process.
In a sort of virtuous circle, the more popular Barcelona became among European holidaymakers, the more capacity was added by low cost (and legacy) carriers and the more competitive Barcelona became as a tourist destination.
The most tangible result of this growth is the expansion of Barcelona-El Prat airport (BCN), that in 2009 got a brand-new spectacular terminal that virtually doubled its capacity overnight to 70 million passengers per year. This new terminal was planned at a time when the airport was getting near its theoretical capacity of 35M pax/year (it grew from 19.5M in 2000 to a peak of 32.8 in 2007 (just before the crisis started to hit hard and passenger numbers suffered a decline).
However, by focusing on BCN only we would missing half of the picture, since the most spectacular growth has not taken place at BCN but one hour drive north of the city, at the small airport of Girona-Costa Brava (GRO). Well located next to the main communication axis that connects Barcelona (and the whole of Eastern Spain) to France, GRO went from 500,000 pax/year (mostly seasonal charter flights) in 2002 to the current 5M pax/year. The reason for this growth? Ryanair of course!
A similar although much smaller phenomenon took place at Catalonia’s third largest (by traffic) commercial airport, Reus (REU) located one hour drive South of Barcelona, close to the historical city of Tarragona, where traffic went from roughly 500,00 pax/year to 1.7M. over the same period.
All this growth has been fantastic for the local tourism sector, but Ryanair is so powerful at GRO and REU that it has also created a massive hold-up problem for Catalan authorities. In short: what happens if Ryanair decamps? We are not talking about a small matter, a whole ecosystem of businesses have been built on the back of Ryanair’s traffic, even new infrastructure has been built based on the assumption that passenger numbers will continue growing or, at least, remain the same. For example, GRO has now massive car-park facilities and there was even some talk of creating new train connections, even a station for the new Barcelona-France high-speed train whose tracks are expected to run near to the airport.
The danger of relying on one single airline, and one that is particularly skilled at getting the most out of its negotiation partners, became evident when Ryanair decided to start operating from Barcelona-El Prat this autumn. Although Ryanair still keeps a considerable presence at GRO (none of its London flights to STN, LTN or LGW has moved to BCN yet), the drop in activity at Barcelona’s secondary airports has been significant: year-on-year traffic data for September (the first month of Ryanair operations at BCN) reflect a 10% drop in the number of passengers at Girona and a 19% drop at Reus! (in fact this is just the start, because sources of the Catalan goverment were pointing out that a drop of between 30-40% in traffic is expected).
Ryanair’s welcome at Barcelona has been far from enthusiastic, as it constitutes a powerful threat to local airlines Spanair and Vueling and fuels the fear that BCN might be unable to escape its “low-cost airport” tag. But it was difficult to deny entry to Ryanair when BCN’s old terminal (with a capacity of over 30M pax/year) is virtually empty. The Irish airline is getting access to a major market but besides that, it is also getting strength to negotiate better deals elsewhere in Catalonia.
However, the possibility of Ryanair leaving Girona and Reus has put in the spotlight the subsidies that the Irish company has been receiving from the Catalan authorities and institutions in order to develop its routes at these two airports. If the Catalan government admitted last summer that they might have to consider an increase in subsidies to keep Ryanair where it is, recent statements seem to indicate that no additional public funds are to become available.
So I imagine there is going to be strong pressure on AENA, the Spanish airport administrator, to adjust its rates in order to keep Ryanair…In fact, Michael O’Leary said openly when inaugurating the Barcelona flights, that they would stay in Girona and Reus if airport fees went down. He might have a point here, I do not have enough inormation to assess O’Leary’s claim that fees should be 45% lower at GRO and 65% lower at REU, but as rates at Spanish airports are set centrally, individual airports have little autonomy to set their commercial policy. If the secondary airports could pursue a more aggresive pricing policy they might be able not only to comply with Ryanair’s demands but to attract other low-cost carriers serving the Barcelona market.
Losing all what has already been achieved at Girona and Reus would be a hard to swallow alternative. In any case, I expect Ryanair to hold the upper hand for years to come…
Short bio of Miquel Ros
Miquel Ros is a London-based aviation enthusiast and entrepreneur. He is the editor of the Allplane Blog, a site where you will find analysis and news on the airline and air travel industry (as well as the occasional planespotting pics!) Allplane is global in scope, although due to Miquel’s Barcelona roots, the situation of the aviation sector in Southern Europe is given special attention.
Nice article man. It’s very interesting!
I think the travel industry is ready for a new business model. The numbers are easy: 5 million travelers bring in at least 500 million euros to the region, give Ryan air 4 euro per traveller and catalunia tourism makes 480 million which will be taxed between 5 and 18% which will come back into the the accounts of the Catalan government.
Given these numbers the Catalan government should even consider “sponsoring” traveling to the region. I wonder what the calculations would look like for the Catalan economy if flying to Catalunia would become free of charge. Lets assume this would significantly increase travel to the region and 50 million extra tourists would bring in at least 5.000.000.000. With a minimum stay required of 4 days to be applied i think the average spending would be much higher then 100 euros per person. I don´t have the exact numbers available right now but if i had them my spreadsheet for sure would show that the Catalan government will only gain by at least a light sponsoring each passenger flying into the region. Obviously the deal should be offered to all airlines wanting to bring passengers and not only to Ryan Air. Budget airlines function on really low profits per passenger, sponsoring them with between 5 or 10 euros per passenger might even stimulate them to improve their services….
Well, you have a valid point. But the thing is, most of what you’re saying is already happening. Ryanair already receives between 9-10€ per passengers landing and departing from each airport. Sure, tourists will bring in money and more money equals more tourists.
The only problem I have with calculations on how much money each tourist will spend is that they’re widely speculative and generally end up overlooking a lot of factors. For instance:
1° I’m fairly sure there’s quite a difference in average amount spent between tourists flying with legacy carriers and those coming with low-cost airlines. A sizable part of the tourists flying with low-cost carriers such as Ryanair would have never flown otherwise and might spend less money overall.
2° Geographical factors have to be taken into account. To stick with the Ryanair example, passengers flying to Girona and Reus generally don’t hang around the city they land in but go straight to Barcelona. Thus, the money they spend benefits Barcelona, not Girona or Reus.
3° Budget airlines, as normal airlines, are private companies. They do provide a service to people but, ultimately, the most important thing for them is their financial profitability. I seriously doubt increasing subsidies would translate into improved services. On the contrary, giving more money to airlines will just increase their profitability, artificially sustaining those with the least attractive offer.
Lastly, low-cost carriers have been increasingly taking advantage of the willingness of small regional airports to hand subsidies and have slowly become dependent on those to survive. Airports should take advantage of that and play carriers against each others to drive down subsidization while maintaining (or even increasing) passenger numbers.
I took a Ryanair flight to Girona with my wife about 6 years ago. We had never been to Girona before and decided to stay in the city on that occassion. We fell in love with the place. We have been back at least 4 or 5 times each year since. We stay in local hotels. We eat in local restaurants. It is a lovely city. However we can now no longer get a convenient flight from our local Scottish airport and, unfortunately, we will not return to Girona until we can. We will find some other place in Europe that has the convenience that we are used to. It has been fascinating to see the Ryanair effect on Girona airport, the roads into Girona, the shops, restaurants and hotels in the city but, for us at least, it is unfortunately over. It has been lovely getting to know you, Girona. I had been considering retiring to the area but this is no longer a viable plan. What a great shame.
I am sorry for you (and the town of Girona by the same token). Sadly, the fact is that Ryanair is hardly reliable when it comes to route plans. The company goes where the money is (granted, as do most others…). Wouldn’t it be possible for you to fly to Barcelona and then drive there?
It is possible, and indeed it was what I did on my last two visits this year, but the convenience of getting off the plane in Girona and stepping onto a bus (for a couple of Euros) for the twenty minute journey into the centre of town is the attraction. Flying to El Prat involves the inconvenience and expense of picking up a hire car and driving to Girona and the same on the way back. We were used to having a nice lunch and a bottle of wine on our final day then stepping on the bus to the airport. On about half of our thirty or so visits to Girona we hired a car for the duration of our stay, but this was so that we could explore the wider area around Girona, which was a pleasure. Driving to and from El Prat is a chore, and starts and ends the visit on a sour note. I know that things cannot stay the same ad infinitum and accept that our relationship with the lovely city of Girona is now at an end.