Regional airports hope to take off in Poland

7 May 2012, Business New Europe

Smaller cities across Poland are busy pumping millions into new airports, claiming that if they build it, passengers and investors will come. However, others worry these air hubs are no more than white elephants that will struggle to get off the ground.

Whilst airport infrastructure development in major cities such as Warsaw or Krakow are being built on solid passenger streams – mostly serviced by the cheap air carriers running between Poland and the UK or other popular job markets in the EU – projects in smaller cities look more challenging.

In the first three quarters of 2011, nearly 17m passengers passed through Polish airports, a growth of 5.9% over the same period a year earlier and 14.4% up on 2009. However, the gravitational pull of the big six – Warsaw, Krakow, Poznan, Wroclaw, Katowice and Gdansk – saw them suck up over 90% of that traffic.

However, several local authorities seem convinced that having airports will cause passengers to use them, even if examples of operating airports outside of the big six – Lodz is a prime example – are rather discouraging.

Reflecting those hopes, new airport projects are underway in locations such as Swidnik, which will serve Lublin, eastern Poland’s biggest city with a population of 400,000, and Kielce, a town of just 200,000 located 176km south of Warsaw. Other projects include an airport to service Olsztyn in the northeast of the country, and one for Bialystok, also in the east.

According to Adrian Furgalski at tranport market analysts Tor, there is room in the market for new regional airports, but they need to plan their strategy extremely carefully. In fact, he says that the dominance of the big six is largely down to there being few alternatives, particularly in the east of the country. However, it takes more than rolling out a carpet of black tarmac. “These new airports must plan their destinations very carefully. An airport itself guarantees you nothing, it’s the connections that make it work or fail. So, don’t think about flying to other continents; think about flying people out to jobs in the EU or in to see your local tourist attractions,” he suggests.

Katarzyna Mieczkowska-Czernik, spokeswoman for Lublin city hall, is convinced the eastern hub will rise to the challenge. “Everything speaks for us: we are the biggest city in eastern Poland, we are an important regional business center and a gateway to Ukraine. The airport is one missing element that, if supplied, will scoop the traffic from Warsaw, there’s no doubt about it,” she says.

A mark on the investment map

The local authorities and airport operating companies talk of prestige and opening gateways to their locales, so that they can improve their visibility on investor maps.

They complain that investors who do call never make the trip after hearing there is no local airport. “When beginning the construction of the airport in Swidnik, we purchased plane tickets for the entire population of the region. Perhaps even today, some will say sceptically that these are one-way tickets,” Lublin Region Governor Genowefa Tokarska said in a speech at the ceremony that broke ground on the construction. “[However], we wish to build the wealth and well-being of the region so as to show others that we can; and no one will ever say where our place is in the hierarchy of regions.”

The focus on attracting investment has given the likes of the Lublin project a lot of momentum, and construction on the PLN410m (€97m) replacement for Swidnik Airport (a grass airstrip) is well underway, with the airport scheduled to start servicing the region in 2012. The terminal building will be topped out in weeks, while preparatory work for the runways are 80% complete, according to Piotr Jankowski, spokesman for investor Port Lotniczy Lublin.

However, the directions from which those investors will be able to approach Lublin are less certain. “We are now talking to airlines to secure best the possible connections, primarily to the UK, Germany and Italy, as well as eastward to Ukraine. Such connections should get us to the break-even level of 300,000 passengers after the first year of operations,” says Jankowski. “No fewer than 300,000 people from the Lublin region regularly travel to Warsaw to board planes. With a local airport, there is no reason that they would continue doing so.”

However, even the airport serving Poland’s third largest city has struggled to get to that level. Since an expensive upgrade in 2005, Lodz Airport, which draws from a population nearly double that of Lublin, only managed to attract more than 300,000 passengers for the first time in 2011. That said, the city suffers from the proximity of Warsaw, which sucks up labour and investment in central Poland.

Elsewhere, some appear to be throwing good money after bad. The airport at Zielona Gora – which has a population of just 117,000 – attracted a mere 4,000 passengers during the first nine months of 2011. The local authorities have now announced plans to spend several million zloty to develop the facility further, apparently hoping that this will help push it closer to the 30,000 passengers forecast in 2010. Just over 3,500 showed up that year.

Cheap means business

Back at Lublin, analysts also worry that the new airport has been too fussy over the livery that will adorn the planes taxiing the tarmac. Port Lotniczy Lublin’s CEO Grzegorz Muszynski told Gazeta Wyborcza in 2011: “We are working so that it’s regular airlines that will be our main partners… cheap carriers would come and go, and with them their connections. It’s hard to base the airport’s development on that so they will be last to talk to.”

Pawel Cybulak, editor of aviation website Pasazer.com, says a regional airport has little choice, however. “Attracting a large carrier like Lufthansa would take years, if it could happen at all,” he writes in his analysis of the project. “Lufthansa has been eyeing Lodz for several years, but has made no decision to fly there yet. Lublin’s chances are close to zero. They simply must bet on cheap airlines.”

The airport spokesman Jankowski claims today that the CEO was “misunderstood,” and that no frills carriers are welcome. However, some believe there’s little chance the airport will be able to stand alone no matter which colour the planes are painted.

Przemyslaw Kalinka of Bankwatch – which monitors public funds – says that all of Poland’s new and existing regional airports are likely to need to be subsidized in the long run by local authorities blind to their lack of economic sense. “There is a widespread practice of indirect subsidizing of airline companies in order to sustain connections in regional airports,” she says, “mostly as payments for promotion of the region.”