Talk, Talk: Airlines

There has been talk, you may be aware, of the Balearics forming its own airline. Talk is likely to be all it ever is, whether such a venture might be viable or not, whatever routes such an airline might serve or not. One established airline that would probably be against the idea is Ryanair, whose commercial director David O'Brien, you will recall, was doing the rounds last week in the Balearics and the Canaries, celebrating thirty years of the airline. The Balearic Islands are not unique in there being talk of an airline. They're talking in much the same manner in the Canaries, and Mr O'Brien has added to the talk. It would not be a good idea, he said the other day. Not a good idea to open the market, which in a sense is a rather odd thing for a representative of an airline that has long trumpeted the need for open markets to say. He was, after all and on a different subject, raising an objection last week to the monopoly that AENA has on Spanish airports. But when it comes to the Canaries having their own airline, he is against the idea. He went on to say that Ryanair do what others claim they will do, inferring that such an airline wouldn't work, and then to highlight ways in which Ryanair has been successful: "the key to success is in treating the passenger well, and this is what we have been doing for thirty years".

Mr O'Brien's comments haven't been greeted with universal support. A contributor to "Preferente" magazine, for example, referred to the "hypocrisy" of the "Anglo-Saxons" when talking about customer service (the Irish, it might be said, are more Anglo-Celtic, but be this as it may) and to the Spanish air industry being "in the hands of villains". So, not a lot of sympathy for the Ryanair position there, but the same contributor went on to imply that he didn't have a great deal of sympathy for Spanish airlines either: "Im not going to defend the Spanish air industry". And this industry has seen its position whittled away to the point that it has lost any previous domination of the market and is mostly owned by foreign companies (those villainous Anglo-Saxons, or Anglo-Celts in the case of Willie Walsh).

Because it remains a significant, Spanish-owned player, Air Europa does stand out, and it has reinforced its position in the Balearics by announcing that it will start operating inter-island flights from May, so creating competition to Air Nostrum. Fares should therefore come down, though they are already subject to a form of capping because they are considered to be flights that are a "public service obligation". There had been a great deal of huffing and puffing by Air Europa, which at one point appeared to be going to pull out of any future inter-island service, but presumably the arguments it had with the national ministry for development regarding scheduling have been resolved.

Over on the mainland, Air Nostrum was helping to make history by providing the first flight to take off from the white elephant airport of Castellón in the Valencia region. It was a flight with 88 passengers, all of them supporters of Villarreal football club who were off to the match against Real Sociedad. The club expects to use the airport, as it will save time and money to do so. Whether Castellón does now become a fully operational airport, we will have to wait and see. Ryanair might take note. The airport fees will probably be very favourable.

Fifty Up: Castellón and Spain's airports

An inaugural flight was made last week. A helicopter landed at a new airport. Its occupants spent a few minutes looking around before the helicopter took off. The airport in question was that of Castellón in the Valencia region. It isn't totally accurate to say that the airport is new because it was itself inaugurated in March 2011, but forty-five months after that inauguration, the first flight - the helicopter - landed.

Of the many excesses perpetrated across Spain that only truly came to light when economic crisis engulfed the country, Castellón airport is one of the worst. It shouldn't have required public money, as the private sector was supposedly going to fund its building (a similar story to that of the disaster of Ciudad Real's airport). It has thus far cost the government in Valencia around 170 million euros, a figure that will rise to almost 200 million when a fee to be paid to the operator is factored in. This operator, the Canadian firm SNC-Lavalin, has the concession to run the airport for twenty years. It is a company which has been undergoing urgent management restructuring and establishment of corporate governance and ethics procedures. Its CEO was arrested two years ago on fraud charges.

The helicopter was able to land at the airport because the national agency for air safety, AESA, had finally granted it a licence to operate. But when the first airplanes start landing is still open to some question. Flights should start in March next year, but then flights were supposed to have started last year. They didn't, and one reason why they didn't was because the runway had to be re-built; it was too narrow. This was just one additional cost that the airport has attracted. There have been others, such as 30 million euros spent on its promotion, a sum that was revealed over two years ago. Then there is the sculpture. It cost 300,000 euros, chicken feed by comparison with some other costs, but a cost that might be added to. Will the sculpture remain? If it does, passengers, as and when they start arriving, will find a face staring out at them from the sculpture. It is the face of Carlos Fabra, ex-president of the Castellón province, who was the driving force behind the airport. Fabra started a four-year prison sentence for tax fraud on 1 December.

The airport should never have been built. A justification for it was as an alternative to Valencia's airport, which is less than an hour away to its south. But the 35,000 passengers that SNC-Lavalin believe will pass through it next year is a miniscule number when compared with over four and a half million passengers at Valencia airport in 2013. It will undoubtedly offer greater convenience for some tourists, but if, as has been said, it is expected to take fifty years to realise a return on investment, where was the wisdom? If there are indeed 35,000 passengers next year, this would place the airport in 34th place in the list of Spanish airports by passenger number (on 2013 figures). There is a vast leap in passenger numbers to the airport in 33rd position, that of El Hierro, the small island in the Canaries, which attracted almost 140,000 passengers in 2013.  

Castellón would have to be added to the network of airports operated by AENA. It would bring the total to fifty. A few of these, like Son Bonet in Palma, have limited functions or are heliports rather than airports, but mostly they are airports with genuine commercial operations and Castellón would represent an additional burden for an airport network that the national minister of development, Ana Pastor, once described as "stupid and crazy". And this stupidity and craziness is something which the partially privatised AENA is going to have to get its head around. A rationalisation of the airport network has been pretty much ruled out, and Pastor admitted almost three years ago that such a rationalisation would be complicated, but what do shareholders make of an investment represented by, according to 2012 figures, an accumulated debt of over 12,600 million euros and an accumulated loss of over 70 million, a figure that would be significantly higher were it not for the profits that Palma and Barcelona turn in?

The long-term shareholders who are to acquire a 21% stake are presumably satisfied enough with their investment, but with the government retaining a 51% stake after the 28% of shares go public - delayed until at least February next year because there was no auditor in place (there now is) - room for manoeuvre in terms of network rationalisation will be limited if non-existent because the government appears not to have the political stomach for this. Small, loss-making regional airports will remain, and Castellón will be one more to add to the list.