Christian Mandl: We operate one of Europe’s fastest growing low-cost low-fare passenger airlines, with a focus on services to and from Central and Eastern Europe. From our five bases in Bratislava, Budapest, Krakow, Prague and Warsaw, we offer short-haul ‘‘point-to-point’’ scheduled services to 37 cities in 19 European countries over a network of 73 scheduled routes. The populations of the four countries in which our bases are located, the Slovak Republic, Hungary, Poland and the Czech Republic, collectively comprise more than 85 percent. of the total population of the countries that acceded to the EU in May 2004, which we believe provides significant growth opportunities for us. In addition, our largest base, Bratislava, where we also maintain our operational headquarters, is located approximately 50 kilometres from Vienna, thereby providing us with access to Austria, one of the most mature air travel markets in Central and Eastern Europe. We target both leisure and business travellers, as well as travellers visiting friends and relatives (‘‘VFRs’’). Our network comprises routes that connect cities within Central and Eastern Europe as well as between Central and Eastern Europe and Western Europe. SkyEurope Airlines was established in September 2001, and we began flying passengers on a single domestic route in the Slovak Republic in February 2002, becoming the first LCC to commence operations in Central and Eastern Europe. We currently operate a fleet of 16 Boeing 737 aircraft and have ordered up to 32 brand new Boeing 737-700 Next-Generation aircraft to be delivered by 2010. Our strategy is to fly to convenient airports, so there is no need for extra transfer costs. Our added value is always to come up with innovative new services for our clients that make flying an even more enjoyable experience: reservation confirmation via sms, assigned seating, real Italian illy espresso and cappuccino on board, no weight limit for hand luggage, etc. Moreover, we keep opening new attractive destinations (recently Turin, Grenoble).

 One of your strategic initiatives is “Go East” which consists in developing East-East connections. How do you plan to manage such strategy with inherent difficulties due to this area (countries not yet in the European Union, lack of Internet and credit card penetration…)?

Our „Go East“ strategy is oriented at developing markets in those countries that will soon join the European Union. As the largest low cost airline in Central Europe we have a first mover advantage in this region. Five years ago SkyEurope was founded in Slovakia, we then opened bases in Hungary and Poland and recently expanded with a new base in the Czech Republic. These markets have different characteristics than the Western European ones. For example, the internet penetration is lower, and customers usually do not have credit cards, therefore we cooperate with Travel agencies, offer the option of call centre bookings and also allow cash payments in local banks.  This local know-how and service differenciate us from Western European LCCs.

“Islanders” (Ryanair and easyJet) need to find new attractive destinations to maintain their growth; Therefore Central Europe represents an important market for these LCCs.  Who are your most dangerous competitors: ‘Centralers’ (WizzAir, CentralWings, Estonian Airlines…) or ‘Islanders’: Now? In a near future?

The level of competition among airlines is high. Airlines compete primarily on the basis of routes, fare levels, convenience of airports, timing and frequency of flights, reliability of service, brand recognition, passenger amenities and the availability and convenience of other passenger services. The principal LCCs with which we compete include Centralwings, easyJet, Niki, Ryanair, Smart Wings and Wizz Air. The main LCC competition within the Vienna-Bratislava catchment area comes from Ryanair and Niki, in Hungary we compete with Wizz Air, in Poland we face competition from Centralwings, easyJet, Ryanair and Wizz Air. At our youngest base Prague as the main competitor is Smart Wings.

The European Low cost carriers market has reached a certain maturity which leads to its consolidation.  During this transition, what are, for you, the greatest threats to the European Low cost carriers? Fuel rising? Overcapacity? Evolution of airports? Regulation?...

All airlines are affected by high fuel prices, as it takes some time to adapt fares to reflect higher fuel cost. However, low-cost airlines are less affected than traditional airlines, as thanks to their strong growth, they are able to at least partially offset higher fuel prices by efficiency gains in other cost categories.
Concerning potential overcapacity, this is still not the case in Central & Eastern Europe. On the contrary, many markets are still underserved by low-cost airlines. Usually, the secret of success is to find a strategic positioning with a new model in a new market and achieve from the beginning a significant market share as a result of the first mover advantage.

Many LCCs look after extra-revenues to offset the low price of their tickets. What are the projects of SkyEurope in terms of Extra-revenues?

We provide our customers with a complete offer of additional services that bring ancillary revenues. All of them bring added value at discounted prices to our passengers. SkyEurope.com is a travel portal that offers in a one stop shop a solution to all travel needs: car rental, hotels, hostels, travel insurance, access to airport lounges, downloadable city guides, audio travel guides, in winter ski equipment rentals etc. These services can be booked together with your flight on our website www.skyeurope.com. Also, SkyEurope differentiates itself by offering high quality products onboard: Italian illy cafe, hot soups and pizzas, tasty sandwiches, etc.
It is necessary to constantly develop the product offering to bring more choice and value added services to our customers. We introduced for instance the option to book against a small fee a pre-assigned seat in our booking process, and offer the possibility to get booking confirmation and flight information by sms message on your mobile telephone.

Do you believe that consolidation of the market will lead to 2-3 main LCCs in Europe, or do you think there will always be many LCCs on niche markets?

The consolidation process is a factor in maturing markets. We are well positioned as the leading LCC in Central and Eastern Europe with a pan-European brand recognised fro linking Western European markets with CEE and providing increasingly also East-East low fare connections. The future will see definitely the further development of a few large and globally oriented LCCs and smaller LCCs that serve purely niche markets.

Are you worried about the shortage of pilots and crew hitting LCC market?

We are proud of having an international crew that loves flying for SkyEurope. We pay adequate salaries, provide excellent career possibilities and a truly international, dynamic working environment. Our brand new fleet of Boeing 737-700 NG is an additional very important factor that are a good reason to fly for SkyEurope.

What are the options for SkyEurope to transform its business model in order to make more costs savings?

We are exchanging our fleet to more cost efficient planes 737NG that save on fuel consumption, maintenance costs  etc, we are expanding to reach critical mass which again will reduce costs, and are increasing productivity by further increasing the utilization of our fleet.