10
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/ Vol. 5 / No. 2 / FEBRUARY 2013
Changing times:
The future of
national carriers
in Eastern
Europe
The EU-accession of Eastern Euro-
pean states in 2004 and later in 2007
has broadened the scope of airline lib-
eralisation in the region. Unfortunate-
ly however, the increased competition
and free market legislation has forced
many of these small-sized carriers
into precarious financial situations.
The looming bankruptcy concerns we
are seeing for both Estonian Air and
airBaltic come only after the collapse
of Air Slovakia, Malév Hungarian
Airlines and more recently, Poland's
OLT Express. Other carriers are not
faring particularly well either, with
Czech Airlines and LOT struggling
to turn around after years of ongo-
ing losses and aggressive competi-
tion from low cost airlines. Staving
off future insolvency could prove a
formidable task, but there are certain
avenues airlines may take to improve
their overall competitiveness.
Prior to EU-accession, most
of the state-owned flag carriers
of Eastern Europe were either
profitable or sustained losses within
relatively narrow margins. While
EU membership afforded greater
network capacity for the airlines,
it also led to heightened volatility
of annual returns, resulting in
record annual losses, including
a 1.5bil loss for Czech Airlines
in 2009, a 78.0 mil loss for the
Romanian carrier, Tarom in 2010
and a 17.3 mil loss for Estonian
Air as of last year. Meanwhile, low
cost competition from the likes of
Ryanair, Wizz Air and EasyJet have
procured substantial market share
by expanding their activities into
the newly opened markets of the
East. Indeed, the past five years have
shown nothing but ongoing annual
losses for the majority of legacy
carriers in the region, with a further
decline projected unless drastic
structural reforms are sought.
`The current Eurozone crisis
has not levelled favourable results
among airlines in Europe. It appears
however, that Western European
airlines have managed to weather the
downturn reasonably better. Looking
into their developments, one may
notice the handful of mergers taking
place over recent years, including
Air France with KLM in 2004 and
British Airways with Iberia in 2011.
This has allowed them to achieve
economies of density and to rid
double marginalisation, generating
both competitive fares and lower
marginal costs. It is through similar
cost synergies as these that airlines in
the Eastern states may seek a future
revival and regain some of their
competitiveness,' comments the CEO
of AviationCV.com, Skaiste Knyzaite.
Currently, most airlines in
Eastern Europe remain under the
ownership and regulation of national
institutions. The failure to separate
these two functions in the open
aviation market of today does not lend
well to balancing the books of many
of these struggling carriers. Clearly,
wide public support still remains in
preserving the national interests of
these legacy airlines.
For the interim however,
airlines in Eastern Europe may seek
alternative ways at stemming their
growing cost profiles. One of these
ways is through outsourcing certain
factors, such as recruitment, IT or
back office operations. S. Knyzaite
asserts that `While outsourcing has
traditionally been seen as merely
a cost cutting exercise, today's
strategic partnerships in the airline
industry also serve to achieve
ongoing efficiencies and operational
improvements. For instance, contract
personnel provided through crew
leasing agencies affords greater
flexibility in line with seasonal
variations, thereby avoiding excess
staffing costs during the low season.
In addition, such partnerships ensure a
steady stream of qualified personnel if
and when they are needed, enhancing
overall competitiveness.' ·
By AviationCV.com
Airline News
Boeing has commended the Senate for
its approval of legislation previously
enacted by the House that establishes
Permanent Normal Trade Relations
(PNTR) with Russia.
Boeing's CEO, Jim McNerney
said that the action by the Senate
sends long-sought legislation to
the president's desk that offers
enormous opportunity for U.S.
exports, economic growth and jobs.
He commended Senators Reid and
McConnell for bringing legislation
already passed by the House to the
Senate floor, as well as Senators
Baucus, Hatch, Kerry, Thune and
McCain for their long standing
support of Russia PNTR.
Russia is a nation rich in natural
resources with a $1.9 trillion economy.
In 2011 it imported more than $400
billion of goods and services. It is a
growing market that offers significant
opportunity for workers in a broad
range of American industries
telecommunications, energy,
agriculture, chemicals, machinery,
medical equipment and aerospace, to
name just a few.
Boeing forecasts that Russian
airlines will purchase some 900
commercial airplanes over the
next 20 years, a market valued at
approximately $100 billion.
McNerney has urged President
Obama to sign this important
legislation without delay. Russia has
made significant concessions to join
the World Trade Organization and
the governments of 155 other nations
have already normalized trade
relations with Russia. McNerney
said that the U.S. should do the same
to ensure that American exporters
and their employees have the
same advantages as their foreign
competitors when doing business
in Russia. ·
Boeing commends senate action supporting U.S. exports to Russia
First flyable A350 XWB "MSN1" structurally complete
Airbus has successfully completed
the main structural assembly and
system connection of A350 XWB
`MSN1' the first flight-test aircraft.
The aircraft is depicted here on its
wheels for the very first time moving
out of the main assembly hall (Station
40) at the recently inaugurated
"Roger Béteille" A350 XWB Final
Assembly Line in Toulouse. It
then entered the adjacent indoor
ground test station (Station 30).
The assembly work performed
in Station 40 included the successful
electrical power-on of the aircraft's
entire fuselage and wings. Soon work
in Station 30 will start by testing the
aircraft's hydraulic system, followed
by the full electric and hydraulic
power-on of the aircraft which will
be completed by around the end of
the year. This will mark the start
of several weeks of comprehensive
functional system testing.
After the A350 XWB MSN1
exits station 30, the aircraft will
go through a series of extensive
production and certification /
development tests, be painted and
have its engines installed. It will
then be delivered to the flight-line
and be readied for its first flight in
mid-2013.
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