The Slovenia Times

Small Means Flexible



The Phoenix Rises Prior to 1991, Adria Airways was primarily a charter airline. However, most of its charter flights were abandoned after Slovenia gained independence, as the coast with most desirable destinations remained in another country and we were forced to reorient towards scheduled routes. It demanded a totally different business approach, which we took very successfully. The key moment of Adria's reform was the revamping of the business plan. One of our most innovative steps was to move away from being solely oriented towards point-to-point traffic. Instead we built a junction, a hub in Ljubljana to connect the airports of the "western Balkans" to the airports of "western Europe" - a step that helped us become profitable. At the time, the Slovenian market alone was too small to support an airline company. Another important move we made was to attach ourselves to a major airline. In our case it was Lufthansa. Because of Slovenia's traditional business links to Germany, most of the traffic was directed there. We signed an agreement with Lufthansa seven years ago and now direct all passengers who wish to reach destinations we don't cover ourselves, through to two of Lufthansa's major hubs - Frankfurt and Munich. In November this year, we will also become a member of the Star Alliance. Destinations Frankfurt has always been our busiest route. The Ljubljana-Split route is the complete opposite and will be discontinued next year because of the lack of interest. But we keep looking for new destinations. A connection to Milan will probably start next year. About 40 % of Adria's passengers use its services to connect to other flights, but this side of the business is in decline. Until recently, many of the countries we covered from Ljubljana were caught up in war. Airlines from Western Europe didn't want to fly there and these countries had no local airlines of their own or they were in great trouble. We were the first into the Balkans and started to fly there relatively early compared to the other airlines who didn't want or dare to fly there at the time. Now this situation is changing and direct flights are being established. A passenger, who can now choose to fly from Zurich directly to Pristina, of course won't take Adria's flight from Ljubljana anymore. We still have a nice number of these "via" passengers, but as they are slowly disappearing we have to redirect these flights to western European destinations. We have lost the charter routes that connected Western Europe to the Adriatic coast but there is still a consistent demand for charters from Slovenia to the Adriatic and the Mediterranean and from Great Britain to Slovenia. The European charter market is mercilessly competitive; since 2000, it has lost tens of millions of passengers to the low-fare airlines. Being small and flexible can be an advantage in these circumstances. The European Union The EU enables us to provide charter flights to and from any destination inside the union without the special agreements that we previously needed when we flew from say Graz or Trieste. This was a matter of special traffic rights, which countries were not obliged to give. We usually won these rights, sometimes with difficulties. Now this area is open to us and we will take advantage of it. In a way, we effectively entered the EU two years ago, when we were given special permission to fly between Frankfurt and Vienna as a company from a non-member country. It remains one of our most profitable routes. We are now looking for a second hub besides Ljubljana. Ljubljana has potential to expand in line with the growth in GDP and Slovenia's trade with the other EU countries. However, as the market is opening, competition is getting tougher. Being limited to Slovenian space can not ensure our long-term survival. Therefore, another hub inside the EU is essential - an airport where we can establish an operation and house our planes, pilots and maintenance crew. There are a couple of possibilities we are looking into - it's too early to be specific yet - but we are planning to start in late 2005. We are also expanding our facilities at Ljubljana's Brink airport and we project that another Regional Jet will be added to the fleet every two years. But this alone would not be enough to keep an airline company growing healthily. We used to say small is beautiful, but in this case being small also means being vulnerable. The Fleet In 1991, we practically woke up with 13 aeroplanes (MD80's, DC9's, A320's, Dash 7's); a fleet completely unsuitable for the demands of the new market. It was during a period of general aviation and economic turmoil caused by the Gulf War, so we couldn't dispose of these aircraft overnight for a fair price. We now have a "young fleet" with six 48-seat Canadair Regional Jets 200's, and three Airbus 320's. The Regional Jet is the optimal aeroplane to fly regular routes from Brnik. Unfortunately, this craft is much more expensive per seat than the Airbus A320, but we have to offer capacity that meets the demands of the market. It would make no sense flying a 160-seat plane to carry just 30 or 40 passengers. The Airbus is terrific for charter flights. easyJet vs. Adria A direct consequence of easyJet's appearance at Brnik was the drop in fares as we were forced to respond to their pricing policy. However, there have been positive effects as well. Namely, that as a Slovenian company, we could never put Ljubljana on "the radar screens" of potential travellers in the UK. As soon as easyJet appeared with the Ljubljana-Stansted flight, Slovenia immediately became popular with a great number of people. It made us recognizable, which has been a great benefit for us as well. Essentially, we are filling more seats on our London route, in spite of the entry of easyJet. Trends Adria now promotes sales through the internet. From today's point of view, it is just another sales channel, but in the future it might bring change to not only the sale of tickets but to the whole structure of marketing airline services. Passengers can now do many things for themselves. We live in a time of swift technological advancement and we are also facing keen competition, which is becoming increasingly globalized. The effects of technological innovations don't only pour into the pockets of companies anymore, but to an ever-increasing extent back into the pockets of the customers. In a world of many "players", if something can be done at a lower cost then someone will do it immediately and lower their prices. The world has changed dramatically for airline companies and hoping that the seventies and eighties, the airline industry's golden age, will come back is fanciful.


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