In its quarterly report published last week, the European Travel Commission outlined how tourism in Europe is holding up “well”, despite “faltering global economic prospects”. The report flagged up the Southern/Mediterranean countries as a region of “some staggering growth”. But while some star performers like Greece and Turkey strongly rely on their national airlines to generate growth, in other countries like Montenegro and Croatia the flag carriers have a laughable presence. We take a look at a few examples.
Greece and Turkey succeed where others do not
Turkey’s growth so far this year has been 12%, as outlined by the European Travel Commission’s report. This percentage increase is the second-highest in Europe. But the increase is particularly impressive considering Turkey is already the sixth most visited country in the world, as announced by WTO last month.
The report credits the weak lira as a pull factor for tourist arrivals this year. But to link Turkey’s tourism success solely to falling domestic currency as a result of recent political instability would paint an incomplete picture. It is also Turkish Airlines, and its strategy since 2004, that is generating the tourism boom in Turkey. Such is the success of this airline that it became a case study of Harvard Business School back in 2015.
In conversation with The Daily Sabah, the CEO of Turkey’s flag carrier outlined that Turkish Airlines did not shed its status as a regional player until it adopted a clear strategy of attracting transfer passengers. The airline embarked on bursts of route launches between 2004 and 2006, and is still continuing to push itself towards connecting as many countries as possible to Turkey.
Similarly, Aegean Airlines, which is frequently named Europe’s best regional airline, continues to defend its market share in Greece. It does so on both domestic and international routes, despite fierce competition from low-cost carriers. Aegean’s CEO told Airline Geeks that his company achieves this through investment in human resources, which improves the quality of service provided, and in technology, which boosts productivity.
Turkish Airlines and Aegean also benefit from having large domestic markets, in large economies with large populations. Elsewhere, in smaller markets, the relationship between national airlines and their countries’ flag carriers is far less stellar.
Montenegro is a star performer but Montenegro Airlines is not
The small country of Montenegro, located across the sea from Italy, was said by Lonely Planet to have “some of the best scenery the Mediterranean has to offer”. The country is slowly following the footsteps of neighbouring Croatia in positioning itself as a beach destination. Montenegro has only two airports; Podgorica (the capital) and Tivat (coastal), just over 40 kilometres away from one another. For most Europeans, the country is best accessed by air.
The European Travel Commission notes that Montenegro is by far the best performing market so far this year. Tourist arrivals are up an incredible 50% and the Commission credits “connectivity” for this boom. This year, Lufthansa launched scheduled services from both Frankfurt and Munich to Tivat. Also to Tivat, Norwegian has launched flights from Helsinki and Air Serbia will be launching flights from Niš. In Podgorica, Ryanair launched flights from Stuttgart, Bologna and Barcelona.
With such rapid growth coming from relatively few new routes, one would expect that aviation in Montenegro had been dormant until recently. But it hasn’t. In fact, the country has had a national carrier since 1994. So what has it been up to?
Montenegro’s national carrier is Montenegro Airlines, a state-owned airline with limited ambitions that has not turned a profit in years. According to Alen Ščurić, Montenegro had 539,014 passengers from these two airports, which according to Airports of Montenegro constitutes a share of under 25%.
Montenegro Airlines launched just one new route this summer, from Tivat to Hannover. But it also cut one route, from Copenhagen to Tivat, and it launched no new routes from its base, Podgorica.
This means that the flag carrier of a tourist destination that is experiencing 50% growth this year played a minimal contribution to what it claims on its website to be its purpose: establishing an “air-bridge between Montenegro and Europe”.
Croatia Airlines in stagnation mode
Another booming market in Southern Europe is Croatia, which we already described as a success story thanks to its European Union membership. But, just like in Montenegro, the national carrier Croatia Airlines is not the one driving Croatia’s growth. Instead, it is the likes of Iberia and American Airlines that are making bold moves.
The same European Travel Commission report points out how it is air connectivity that is driving Croatia’s growth. Between 2017 and 2018, the latest available year, the Croatian government reports a 12% increase in tourist arrivals. In particular, there has been a 44% increase in arrivals from China. This follows what we reported in May: that Chinese airlines are increasingly looking to Croatia to launch new routes.
Meanwhile, Jutarnji List reports that Croatia Airlines is operating at a heavy loss this year. And Croatia Airlines itself reports that it saw a 2% increase in passengers in 2018, while Croatia as a whole has been recording double-digit passenger growth for several years. The government reports that last year Croatia’s nine airports saw 10.5 million passengers, which is 10.5% more than in 2017.
Is there a future for small flag carriers?
A lack of strategic planning, insufficient investment over the years, and fierce competition in their home markets make for tough conditions for the likes of Montenegro Airlines and Croatia Airlines to survive.
Alen Ščurić, who acts as a consultant to Croatia Airlines staff, claimed this year that the Croatian flag carrier is in an irreparable state. Montenegro Airlines is in the superior position of having access to state finance, with Montenegro not being in the EU. But this does not guarantee that it will still be flying in a few years’ time. Especially as its market share in its home country continues to dwindle.