April 21, 2019 - Infrastructure is a key issue to the expansion of Montenegro's luxury tourism drive. An interview about Tivat Airport with aviation expert Thomas Jaeger, CEO of ch-aviation, a Swiss company leading the way in global airline intelligence since 1998.
1. Tivat Airport is crucial to the development of luxury tourism in Croatia, with Lustica Bay, Porto Montenegro and Portonovi about 2.5 billion euro in investments alone. What is happening with the running of the airport? There are rumours of Turkish company TAV taking over?
I have heard about the TAV rumours, but do not have any more information about it, but it is a move that would make sense and be in line with TAV's strategy in the region. They already run Zagreb airport in a joint venture, for example, as well as concessions in Georgia, Macedonia and Tunisia, so this would be a logical extension.
2. Tivat has grown exponentially in recent years, as tourism has increased. What plans are to upgrade the airport to meet the needs of the destination? What are the biggest challenges?
It is an interesting time for Tivat, but infrastructure continues to be an issue. This summer will see 10 new routes, which is great, but mostly 1-2 times a week, unlike Dubrovnik. The Russian growth will continue, and there will be new connections from Azerbaijan with the opening of Portonovi in Herceg Novi.
The arrival of Lufthansa is significant in that is it the first international hub carrier to come to Tivat. This will directly lead to more Western tourists. But the main challenge for Tivat continues to be its seasonality and seasonal employment needs from April to October, with little in the other months.
If you look at the capacity of Tivat, there is plenty of room to accommodate more flights. Looking at a regular Sunday in August, for example, there are about 25-30 flights a day, with 4-5 aircraft on the ground at any one time a rarity.
By spreading its schedule more throughout the week rather than a concentration on weekends, Tivat can handle 50-60% more traffic than at present, a model that has worked on some Greek islands. More than that, and an alternative new airport is probably the solution.
Currently, flights are concentrated during daylight hours, and I would need to check on the reasons for that (Editor's note – Montenegro Airports has also agreed to an interview, and this is a question TMN will be asking). But night flights only work with certain markets of origin.
This is not a problem for Russian markets, but there are Western European airport curfews to consider. Night flights also invariably mean lower average fares, which is a factor to be taken into consideration.
3. What in your opinion is the maximum capacity of Tivat?
As I said above, there is still plenty of capacity, which is not utilised in Tivat, and there are lots of holes in the schedule. Take a look at some of the Greek islands, which have managed to successfully increase capacity by moving to weekday arrivals.
4. Will FlyDubai return? There are rumours they may not.
The current situation is that the flights are scheduled up to three times weekly, but they are not really selling tickets on all flights. I suspect the aircraft availability due to the Boeing 737 Max crisis is a factor, if you look at the schedule, the first flight is scheduled for June 3. However, if you try and book, the first availability is June 21. I suspect they will continue flights where sales are good, but they will cut frequencies due to lack of aircraft availability.
5. As the luxury resorts get built, the Tivat region will become increasingly attractive for 12-month tourism, but year-round flights will be essential for this to work. How do you envisage major airlines entering year-round relationships with Tivat?
Each airline has its own strategy. Lufthansa has been very active in the last couple of years, and they are trying to move capacity to leisure markets on weekends when business demand is lower. If Tivat works for Lufthansa, expect Austrian, Brussels Airlines or Swiss to follow suit. But Tivat is also a classic Eurowings destination.
Air France-KLM usually look at routes where they fly several times a week, but KLM is now servicing more offbeat destinations such as Sardinia, so they could also be an option. Air France also has a codeshare agreement with Montenegro Airlines, so would not need to come in themselves. BA are engaged in the region, but not anywhere close to as much as Lufthansa – they are more growing leisure capacity to more established markets. Lufthansa is the key airline in this, even more so with its regional partnership with Croatia Airlines.
It would be hard to see a Western European airline servicing Tivat all year. Connections to Moscow are much stronger, and the lack of year-round flights to Dubrovnik is a key indicator. And one to watch, in terms of trends.
6. Dubrovnik Airport has been a major gateway to the Montenegrin coast for tourists. How much has the rise of Tivat affected that, and how do you see the future?
It would be great to have data on how many tourists for Montenegro are using Dubrovnik as a gateway, but such statistics would only possible if they were systematically collected, which they are not at present. Dubrovnik obviously has a much higher capacity, and therefore much better connectivity, so it will continue to be an important gateway to Montenegro.
If you look at a random week in August, you will see 70,000 seats scheduled in Dubrovnik versus 25,000 in Tivat. The Russian market is a major factor in the Tivat numbers, much less so in Dubrovnik. So, while Tivat will continue to grow, the capacity and connectivity will be focused on Dubrovnik. If you want to check the possibility of year-round connections to Tivat, follow what is happening in Dubrovnik, and the same will come in time.
7. Do you expect short-haul budget airline routes in the region to increase, given the poor state of road connections?
Well, we have Air Serbia in Tivat all year at the moment. Both Adria Airways and Croatia Airlines have potential, but they have their own problems. But in theory, yes, and there is certainly a case for using the hubs of Ljubljana or Zagreb, although those hubs are small. But one issue is the timing of the flights, which would probably necessitate night flights to Tivat. I am not sure that the infrastructure is geared for that (EDITOR NOTE – Montenegro Airports has agreed to an interview with TMN, and this is an issue we will be exploring). The other sensible option is Wizz Air from Belgrade, but traffic rights could be an issue, as they would be flying from one non-EU country to another.
8. How will Tivat Airport look in 10 years in terms of capacity and seasonality in your opinion?
Tourism will continue to boom, and Tivat has no serious airport competition, so it will continue to grow at about the rate of 10% as at present. That growth will continue until capacity is full.
As with the Croatian coast, I expect a few weeks of growth to be added to either side of the tourist season. Dubrovnik is a great benchmark to follow for trends. In a perfect world, there would be 3-5 flights a week from Western European capitals in December.
9. Your thoughts on the current situation at Montenegro Airlines?
Montenegro Airlines suffers from the same problems as other regional airlines. It has a small and limited fleet and has to deal with the issue of seasonality. They have to be there in winter, but in summer, everyone is competing with them. Seasonality is a major problem.
They also have small aircraft. Aircraft which are too small in summer, and too big in winter. As such, they can't send them to other locations. Other airlines lease their aircraft to Asia and Canada, where there is more winter demand, but this doesn't apply to the regional jets Montenegro Airlines operates.
They are doing the right things in terms of maximising maintenance in winter and being flexible in terms of human resources, but the market is small and there is limited potential to make Podgorica a hub.
Tourism obviously helps in summer, but in the long term, I do not see it working, and in terms of its cost structure, it is a very difficult business case. Its finances improved last year, but they still rely on the government one way or the other. But such reliance now comes under greater scrutiny with EU rules applying to a member candidate country, so the government will not be able to continue bailing it out.
Thomas Jaeger is CEO of ch-aviation.For over 20 years ch-aviation has been providing decision-makers around the globe with relevant and up to date airline intelligence and insightful news on the industry.
Founded in 1998 in Chur in Switzerland, ch-aviation has become an influential airline intelligence provider and one of the very few Swiss aviation success stories. Today ch-aviation welcomes more than 1.8 million users each year and is proud to count hundreds of companies in the airline industry as its customers. Yet, we are still small enough to care about the details that have always made the difference between good and outstanding data.
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