Fraport Chief Stefan Schulte has come under heavy fire for welcoming the highly contentious LCC carrier Ryanair to his airport, guaranteeing the Irish airline generous discounts. Consequently, other airlines are fiercely demanding equal financial conditions as offered to Ryanair. Meanwhile, critics warn of a price war and wage dumping at FRA, resulting in a downward spiral of income.
Beginning end of next March, Ryanair will base two of their Boeing 737-800s at big Rhine-Main airport, for commencing services to Spain, the Canary Islands and Portugal. It’s the first appearance
of a budget carrier at FRA, with more presumably following soon.
Under normal circumstances, nobody would make big fuss about Ryanair’s move, not even the media.
But things are not normal in Frankfurt. Since years, local initiatives, environmentalists and neighbors demand further night flight restrictions or at least an effective noise cap, supported by many politicians including the ruling coalition of Christian Democrats and the Greens. If shutting off the airport’s lights at night were not enough to make the place less attractive for a number of carriers that rely on 24/7 traffic options, the Berlin government has imposed special passenger taxes on carriers operating in Germany. These millstones around FRA’s neck together with high landing and handling fees demanded by operator Fraport, has turned the place into one of the costliest airports in Europe, but dormant from 11 p.m. to 5 a.m. due to the harsh night flight ban.
The result of this erroneous policy: passenger numbers stagnate or even contract since years, so do cargo volumes.
So far, so good – or bad.
Controversial landing fees
Now, however, Ryanair approaches, announcing the upping of travelers, highly welcomed by Mr Schulte and his Board members. Their bait offered to the newcomer: a landing fee reduction of up to 40 percent compared to prices demanded from other airline clients. This issue is still subject to approval, but the ruling coalition in Hesse state seems to support Schulte’s advance, hoping to attract more low cost carriers, thus driving passenger numbers at FRA up again. The politicians have the final word on fees since Rhine-Main is state owned.
Meanwhile, this hotly discussed issue has triggered vociferous protests exclaimed by almost the entire incumbent aviation community utilizing Frankfurt, above all the Board of Airlines Representatives in Germany (BARIG). They complain of unequal treatment, demanding being granted the same (low) landing fees Fraport has offered to Ryanair. Fraport’s reaction: A fee rebate is only applicable to new market entrants, not to existing clients that are already operating there.
Having announced this, Lufthansa’s Chief Carsten Spohr lit a big firecracker by letting Fraport known that his company will exit the existing fee scheme, be it for passenger or cargo aircraft, by paying only the same price demanded from Ryanair.
It is useful to known that LH is a 9 percent stakeholder in Fraport and the operator’s most loyal and longest-time customer, accounting for about 60 percent of all FRA conducted movements. Should LH get through with this, it would reduce the carrier’s expenditures severely in view of their monthly quota of roughly 93,000 flights operated at Rhine-Main. Conversely, Fraport’s revenues would go south dramatically.
More cost-cutting programs on the horizon
In the meantime, the unions have tuned into the choir of protest. They fear that more low cost carriers will follow the Ryanair example, offering flights to and from FRA. This includes LH daughter Eurowings that is expected to start operations from 2018 onwards, to take on rival Ryanair directly at the Lufthansa Group’s central hub.
Spohr and his management will be left little alternative to bringing in Eurowings if they don’t want to risk losing market shares to their fiercest European competitor Ryanair at their home base Rhine-Main. Wizz Air, Norwegian, Easyjet might follow, opening up a Pandora's box, jeopardizing the current level of wages and income at airport and airline staff in view of questionable working conditions and the poor salaries they are willing to pay.
Noise will increase, contrasting the Green’s political promises
Already today, all ground handling services operating at FRA are suffering under extreme price pressure, with low cost airlines driving the price spiral further down,” argues Ralf Mueller, Chairman of the Lufthansa Works Council. In an open letter to Fraport chief Schulte he reminds that at Lufthansa a series of cost cutting programs including job axing decisions have been taken to keep the carrier in the black. Additional pressure on ticket prices will inevitably lead to more savings measures, pressure on wages and jobs. Mueller concludes that from the employees’ standpoint Fraport’s strategy of attracting budget carriers doesn’t pay off for anybody, except for passengers preferring to pay as little for air transportation as possible. But this price conscious segment doesn’t shop at the airport’s boutiques and stores, leaving little or no money there. Movements will go up, leading to increased noise protests by people living in neighboring communities.
Mueller’s résumé: Low cost traffic at FRA will kick off a downward spiral producing plenty of losers but only two winners: the budget carriers and their passengers.