There is light at the end of Austrian Airlines’ long lasting tunnel with losses being reduced from 50.1 million euros in 2005 to 19 million euros last year. By 2009 the group that consists of AUA, Lauda Air and Austrian Arrows shall be profi table, predicted CEO Alfred Oetsch while presenting the latest fi gures for fi scal 2006. If so, it would turn out to be almost a miracle since the Vienna-based carrier – at least up to now – notoriouslyreported severe defi cits year by year.
The main reason for the foreseeable turnaround is the change of philosophy and thus of strategy the new management has decided on. The core message of former Siemens manager Alfred Oetsch, who now is heading the AUA group, had to hammer into the heads of his 8,500 AUA workforce was the bold fact that the airline is no longer a major player that can compete successfully with the big boys on intercontinentaltrunk routes.
“We have to give up this illusion and step a bit back by concentrating on secondary markets, and thereby on those niches with lasting revenue potential and less intensive competition,” emphasized Oetsch in a recent statement.
Consequently, the carrier pulled out of Australia, scrapped unprofi table routes (Shanghai) and diminished the loss-making intercontinental fleet by axing the number of aircraft by one third – from formerly 15 to now 10 (6 B767s, 4 B777s). In addition, the “Focus East” strategy was born, with AUA concentrating on routes to Eastern Europe, Russia, Middle Eastand the CIS countries.
“There, we operate extremely successful due to our dense network and the high number of frequencies both on scheduled fl ights and road feeder services,” says Franz Zoechbauer, head of AUA Cargo.
His air freight division contributes substantially to the recovery of the Austrian fl ag carrier. “We are well in the black with our cargo business”, the manager states. Or putting it this way: If the air freight people hadn’t done a solid job, the losses of parent company Austrian Airlines would have been substantially higher than the reported 19 millioneuros in 2006.
While on intercontinental fl ights AUA Cargo contributes up to 20 percent to the AUA Cargo is focusing on eastern traffi c carrier’s turnover the fi gures are lower on short and medium haul routes to under fi ve percent, due to smaller aircraft andthus very limited belly hold capacity.
However, flights between Odessa, Sibiu or Krasnodar to and from Vienna, which are operated with Canadair Jets, Airbus 319 or other single aisle and therefore comparatively small aircraft, proof to be a door opener not only for passenger traffi c but also for boxes andpackages.
“It’s our ‘first mover strategy’ by gathering local traffi c in Eastern Europe, Russia or the CIS states and feed this traffi c via Vienna into our international network. And vice versa, of course,” says Arnulf Schoeberl, AUA’s general sales manager.
Despite the “successful and promising” (Oetsch) ‘Focus East’ strategy there will be a decline in tonnage during the current year. While the carrier lifted 172.000 tonnes last year, “we expect a decrease of about ten percent for fi scal 2007,” Zoechbauer predicts. An inevitable result of the fl eet reduction and therefore, less capacity AUA can offerits shippers and agents.
But some of the declines are likely be compensated by a number of new destinations that seem to be quite prospective for cargo transports. One of them is Chicago/Illinois, which AUA is serving six times a week since June 1. The ‘Windy City’ is the fourth place in North America the Austrian carrier is fl ying to, after New York, Toronto andWashington (all daily).
“With Chicago added to our network, we now can concentrate our sales activities on the northeastern region of the US and Canada, including Illinois and the surrounding areas,” Schoeberl states. It is a geographical triangle which the AUA freight managers have declared to become one of their international core markets.
By leaving Moscow’s Sheremetievo and moving to modern Domodedovo airport south of the Russian capital, AUA is presently trying to create another local hot spot for the air freight and passenger business. There, AUA intends to collaborate with AiR Union, an alliance consisting of Kras Air, Samara Airlines, Omsk Avia, Domodedovo Airlines andSibaviatrans which fl y heavily into Domodedovo.
“By deciding to leave Sheremetievo and use Domodedovo instead, we have expanded our network to places in Russia and the neighbouring states substantially,” says Zoechbauer. In fact, carriers like Kras Air cover almost all major cities within Siberia plus the vicinity due to their rapidly growing and dense schedules. “This offers us excellent feeding and defeeding possibilities via our hub at Domodedovo,” adds Zoechbauer.
In addition, the Austrian airline offers clients five fl ights per week with an An- 12 freighter between Vienna and the Ukraine capital Kiev. These fl ights are operated in co-operation with Ukraine International in which AUA holds a stake of 22.5 percent. Including this route, Austrian now serves as many as 43 destinations in Central and Eastern Europe.
According to Zoechbauer, the blocked space agreements he has signed with Emirates SkyCargo and Eva Air have also proven to be a “successful venture.” Both cargo carriers serve Vienna twice a week by operating an MD-11F (EVA) respectively an A310F (Emirates). AUA Cargo has purchased a capacity of eight tonnes on these fl ights in and out of the Austrian capital’s airport Schwechat. Finally, Beijing, Tokyo, Bangkok, Mumbai and Delhi are becoming increasingly hot targets for AUA’s cargo business, according to both Zoechbauer and Schoeberl. “Despite our Shanghai withdrawal we continue to generate a lot of revenue on our fl ights to Asia-Pacifi c,” Zoechbauer points out, although he admits that pulling out of Pudong has hurt his cargo ambitions.
