Vienna Airport Rebounds, Without Europe’s Travel Chaos

Photo credit:  Austrian Airlines

Europe’s airports are finally enjoying a demand recovery, and Vienna’s airport is no exception.

On Thursday, the airport’s parent Flughafen Wien reported results for the first half of 2022 that showed a return to profitability, boosted by a strong recovery in passenger traffic. In an earnings call with investors, executives said the recovery picked up steam this summer, with the Vienna airport’s passenger volumes during July close to 90 percent of pre-crisis levels. The company also owns the airports serving Malta and the Slovakian city of Kosice, where traffic is likewise bouncing back sharply from pandemic lows.

Vienna, Austria’s capital, is a major hub for the Lufthansa Group, specifically its Austrian Airlines unit. During the first half, 23 percent of the airport’s passengers were connecting between flights. The rest were local Vienna travelers. As airport data show, connecting traffic is closer to full recovery than local.

The revival looks less robust when looking just at flight movements at Vienna this summer. They are still more than 20 percent below 2019 levels. But thanks to a significant increase in the number of seats per aircraft, plus higher load factors, passenger volume trends are healthier. As Wien Flughafen Chief Operating Officer Julian Jager explained, holiday markets like Italy, Spain, Turkey, and Greece are all performing “extremely well.” He mentioned the UAE as another strong market. U.S. traffic to and from Vienna is also busier now than before the crisis. On the other hand, Germany, UK, France, and Switzerland are “performing significantly below the 2019 levels.” Germany happens to be the Vienna airport’s busiest country market, and traffic is still down 35 percent from pre-Covid.

“I would say there are mainly two reasons,” Jager said, citing big declines in capacity and the fact that Germany attracts many business fliers who probably won’t return to the skies until after the summer. “But,” he added, “I think we’ll still see the effect of Zoom and Teams and so on,” referring to the videoconferencing apps that some say will structurally reduce the volume of overall business travel going forward.   

Another weak market is Asia, and Jager advised caution here: “I would not be overly optimistic on China.” On the other hand, he sees encouraging signs from markets like India, Thailand, Taiwan, and Japan. “Airlines want to come back.” As for Russia, Ukraine, and Belarus, all of Vienna’s flights to these markets stopped operating in late February following Russia’s invasion of Ukraine. Last year, these three countries only accounted for about 4 percent of Vienna’s airport traffic. But the company warned in its financial report that, “if the conflict continues until the end of the year, this could result in the loss of up to 1 million passengers.” That includes traffic lost due to airspace closures over Ukraine and Russia, which impact flights between Europe and Asia.

Prior to the pandemic, Vienna was a major battleground among low-cost carriers. EasyJet, Ryanair, and Wizz Air all vied for a larger slice of the market. In late 2017, International Airlines Group struck a deal to buy Vienna-based discounter Niki — once part of Air Berlin — with the intent to merge it with Vueling. Ultimately, however, Niki would fall under Ryanair’s control, propelling the Irish carrier to a number two position in Vienna today, behind only the Lufthansa Group. Wizz Air, based on first-half passenger volumes, was a distant third, followed by Turkish Airlines. Vueling, incidentally, launched its own new Vienna-based operation called Level Europe, which filed for bankruptcy and closed in 2020.  

Separately, airport executives said Vienna’s passengers have largely been spared from the operational mayhem at many other European airports this summer. “Compared to most other airports in Europe,” said Jager, “we are doing really, really well in terms of waiting time, in terms of punctuality, in terms of flight cancellations.” The company does face higher costs for wages, but “we are entitled by law that our tariffs will be adapted with inflation rates.” This implies that airlines will ultimately be the ones that absorb the higher costs.

Many airports in Europe, unlike those in North America, are owned by public corporations from the private sector. The general arrangement is that the fees they charge airlines are subject to government regulation. Flughafen Wien also generates revenue from airport services, like ground handling and security, and monetizing the retail, parking, and office space it owns. As it happens, the company is currently subject to a hostile takeover bid that the company’s board is urging shareholders to reject. The local governments of Vienna and the province of Lower Austria each hold 20 percent ownership stakes in the airport operator. Employees hold another 10 percent, as does the Melbourne, Australia-based pension fund staging the takeover.

Flughafen Wien executives are, of course, watching closely developments at Austrian Airlines, which alone accounts for nearly half of its traffic. The carrier received a €600 million ($602 million) Austrian government rescue package during the pandemic, thus ensuring its near-to-medium-term survival. And while one condition of the bailout was agreeing to preserve Vienna as a hub, it also led to a major fleet reduction to 61 aircraft from 82. A fateful question now is whether and when Lufthansa will decide to renew Austrian’s aging longhaul fleet. According to Cirium’s Fleets Analyzer, the airline operates just nine widebody aircraft: six Boeing 777-200s and three Boing 767-300ERs.