Air Serbia is devising a strategy for its narrow-body fleet which has been impacted by growing seasonality as a result of the coronavirus pandemic. The carrier has been forced to wet-lease four aircraft this summer, complementing its fleet of ten Airbus A319 and one A320 aircraft. Air Serbia’s CEO, Jiri Marek, noted that this year’s wet-leases were driven by high demand from tour operators, which surpassed expectations, and were arranged short-notice. "Currently, we are looking into the longer-term strategy because leisure demand is from mid-June until mid-September, and whatever calculation you do, a dry-lease option with the additional crew for three months of operations, that mathematics doesn't work. We are looking either to make some capacity provider agreement on a long-term basis, five-plus years or trying to enter into some Joint Venture agreements with reverse-seasonality operators. But we are also still looking at dry-lease options because currently, the oversupply of A320s on the market means that some of lessors are open to the winter power-by-the-hour model", Mr Marek told “ch-aviation”.
The airline is currently reviewing its strategy for high seasonality, which has further increased as a result of the Covid pandemic, with demand for leisure flights growing significantly. “Over the past year, leisure traffic has become very strong, while VFR traffic [Visiting Friends and Family] remained stable. The one that is still questionable is business traffic. That is why we completely redesigned our network and announced many new destinations this year, which are predominately VFR and leisure-driven”, Mr Marek said. However, this has resulted in increased seasonality, which was reduced in the pre-Covid era through the development of the hub model.
In the short-term, the airline has no plans to renew its fleet of mid-age narrow-body Airbus aircraft, however, more jets of the same type may be added in the future. Mr Marek acknowledged that ultimately, newer aircraft would have to be introduced into the fleet. Since both the A319-100neo and the B737-7 are niche aircraft, the airline could upgauge its narrowbody fleet and then make room for the addition of regional 100-seater jets. However, the carrier’s CEO emphasised this is not a short-term prospect for them for the time being.
So if I understood correctly, they are looking at a long term wet lease partner?
ReplyDeleteYes through multi year contract or an airline whose low season is during European summer.
DeleteSo an airline from the southern henisphere.
DeleteDoes any European airline have something similar?
DeleteNot that I'm aware of.
DeleteSmartwings is currently wet leasing an Ethiopian Airlines A350 😀
DeleteI think transavia has/had similar agreements with GOL and Sunwing.
DeleteInteresting. Thanks
Delete@9.18 that definitely wasn't a result of long term planning.
DeleteLooking to, hoping for, planning to... AV mindset.
DeleteAko nemaš šta pametno da napišeš, a ti ne piši.
DeleteAir Serbia needs Embraer E2-195, at least 5, and at least 3 ATR 72-600 more.
DeleteWith prices they charge to fly around the region it would be great to some E195.
DeleteSome of their decisions now make more sense.
ReplyDeleteMost of the things they do and say makes sense.
DeleteThey are basically trying to survive in pandemic conditions. Lots of travel in summer and almost no business trips for 6+ months. It is challenging.
DeleteSo I'm guessing had they taken those A320neos that Etihad ordered then they would have had to get 100 seaters too?
ReplyDeleteProbably. A320 is too large for most JU routes, especially in winter.
DeleteThey would have gone bankrupt had they not cancelled that order.
DeleteAnd on top of that they got Jat's deposit back from 1998!
DeleteYes, they were very lucky.
DeleteHow come they didn't expect big demand for charters if it was already present last year?
ReplyDeleteWhere did he say that?
DeleteHe said it surpassed expectations. Last year they only had to wet lease one plane. This year 4!
Delete@09,17
Delete2 B737's were wet leased from Smartwings last summer, not 1. Aircraft were OK-SWT and OK-SWW.
The second one was only there temporarily for less than 2 weeks.
DeleteLast year has much less passengers due to corona regulations what allows them to use their capacity for needs…
DeleteSo basically Airbus fleet will stay the same with annual wet leases
ReplyDelete"But we are also still looking at dry-lease options because currently, the oversupply of A320s on the market means that some of lessors are open to the winter power-by-the-hour model"
DeleteSeasonality will probably be reduced in next few years as health situation stabilises. We now have seasonal corona travel where corona disappears so European countries can fill up their budgets during summer and then it magically appears when season is over.
ReplyDeleteAccording to what Marek says in the article, seasonality will be present for 5+ years.
DeleteWe are in the middle of corona wave in Europe now.
DeleteNot if you follow continent wide entry restrictions and rules.
DeletePandemic and travel restrictions aside, JU should push with the Serbian Government and respective tourism organisations in attracting winter tourism to Serbia.
DeleteI believe there isn't much investment needed for getting UZC up and running for commercial flights, which works well for Zlatibor and Divčibare. INI for Kopaonik and Stara Planina.
Initially, I don't think there would be massive demand, but it's a start and would help give some extra flights to their fleet. Thompsonfly used to operate flights to INI with the B767 so a few flights on an A319 shouldn't be too much trouble to fill.
Plus, there is also the possibility for extra flights to SJJ and SOF for those heading out to mountain resorts in those areas.
Sooner or later people will get fed-up with these "corona waves" and a constant need for crisis. If this hasn't happened already?
DeleteNumber of people choosing air transport for winter holidays in both Bosnia and Bulgaria would be insignificant. Those people are heavily oriented towards car/bus transportation.
Delete@12,37
DeletePeople are oriented towards cars and busses because of the significant differences in price. JU has a terrible pricing policy to destinations in the region which is why they don't adequately attract the local O&D demand, not because demand isn't there.
For example, BEG-SJJ-BEG.
JU's return fares start at 18.472 din (157€) return without luggage.
Combi transportation, door to door, 60€ return.
Bus prices for a return ticket starts around 35€.
Petrol at current prices should set you back 70-80€ for the trip there and back, depending on what you drive.
Those traveling to Jahorina for winter vacations are probably also traveling on summer vacations. Flying doesn't become an option if a family of 4 has to fork out over 600€ just to sit on the plane, let alone take luggage with them. A weeks accommodation for a family of 4 on Jahorina is half the price of JU's lowest returm fare to SJJ!
+1
DeleteThere are more factors influencing such tourist behavior when talking about Jahorina, not just the price. And talking about price for fares, it will never match bus/car price, it is not realistic.
Delete"or trying to enter into some Joint Venture agreements with reverse-seasonality operators"
ReplyDeleteWow this is very interesting.
+1
DeleteThis thinking isn't new .... it was previously looked at within JU but EASA has regulations around the duration that non-EASA registered aircraft can fly within the ECAA. Also, different countries within the EU have different restrictions around the very same thing. Not as easy or straight forward as the CEO thinks. Best bet is to make a long term contract with an existing EASA registered carrier ....
DeleteCan't the operating airline just swap aircraft from time to time or the time limitation is applied for the entire fleet from the moment the first aircraft is leased?
DeleteYou have to keep such aircraft deployed to non-ECAA jurisdictions - Turkey, Russia, Montenegro, Egypt , Middle East etc etc. It could work to the charter/leisure destinations that JU fly to, but would be problematic if deployed into schedule operations. This was the issue JU faced when it had 2 x EY wet leased aircraft when Air Serbia first took to the skies on 2013
DeleteThanks for the clarification. Requires lots of thinking and careful planning on their part.
Delete^ none of which are their strengths.
DeleteLately they seem to be focusing and thinking about the future. I think we will be pleasently surprised in next few months.
ReplyDeleteFingers crossed
DeleteIt won't be easy to find a single long term wet lease provider, especially one that can provode several aircraft.
ReplyDeleteIf they actually let some competition operate charters they wouldn't need to wet lease planes.
ReplyDeleteThis is why TK wants to make a deal with JU so that they can access this lucrative segment. Remember prior to the Serbian CAA implementing the current strict regime, Turkish carriers such as Turkish, Freebird and Corenden, 'owned' the charter capacity space
DeleteWhy? Most country's tourists are transported by local charter airline, not foreign one.
DeleteNot really
DeleteI was a bit surprised the other day when their results were published that their revenue from charters isn't that huge.
DeleteIt was over 37.000 EUR. Not bad.
DeleteEUR, I think it was pax?
DeleteAnyway that was 2021, we had restrictions and hesitation from the people about going anywhere. This year should be drastically better.
No, it is EUR but 37 MILLION EUR - "Revenue generated from scheduled flights amounted to 145.9 million euros, while charter services generated a further 37.7 million euros."
DeleteThousands and millions. Just a little difference haha
DeleteLot's of interesting stuff from them lately. ATR72 freighter conversion, second A330 lease. JV with Turkish, wet lease planning...
ReplyDeleteLet's see if any of these will become reality.
Deletesecond A330 looking most likely at the moment.
DeleteI'm low key hopping for freight, we need them. When I order something and see it going to Germany I wanna cry. I have started ordering more from US do to direct flights picking up mail.
DeleteTurkish also works reasonably fast, any else if it's not a mail service with its own planes is a disaster.
Would their ATR freighter conversion really improve package delivery speeds?
DeleteIt seems that Mr Marek did not hear possibility to wet lease it's own fleet to South hemisphere during winter months.
ReplyDeleteThis isn't that easy and there are so many specialised European wet lease operators.
DeleteAir Serbia tried this in winter 2017. They put 2 A319s on the market. There was no interest whatsoever. The planes ended up sitting in BEG all winter.
DeleteAnd how did JAT was successful in that. JAT particulary survived sanctions leasing out fleet. Even tried to create it's own subsidiary in Africa.
DeleteThat was a different era that can't be compared to today. Most companies that today specialise in aircraft wet leasing didn't even exist in the 90s.
DeleteIdeally Airserbia may dry-lease 2 aircraft. Than with "reverse-seasonality operators" wet-lease them out during winter and wet-lease in another 2 from them during summer. This can be Canadian (lots of Caribbean charters in winter, but legally challenging or Southern hemispfere operator). I don't think it is smart counting on wet-lease providers for several seasons in advance. Some of them are money laundering and might not be present long enough.
ReplyDelete+1
DeleteIt is strange, borderline incredible, Air Serbia still doesn't have A321's in its fleet.
ReplyDeleteThey don't need it at the moment. Let them start with a couple of A320's and then let's talk about A321's.
DeleteCharters, Moscow, Zurich, Paris, Barcelona, London could all stomach the A321 year-round.
DeleteStop talking nonsense.
Well if they schedule A321 on the certain routes in the winter season, that means even lower frequencies. Loads are not always that good even on their best-performing routes.
DeleteThere is absolutely no way for the A321 to be properly utilized throughout the year.
Delete@19,44
DeleteOn all those routes you mentioned, JU is looking to boost frequencies not seat capacity. They need the frequencies to help better the connections via BEG and to better fight competition. Logic step up would be to send an A320 not an A321.
Just as an example, LX is competing with JU on frequencies by sending their A220's 3 times a day. Prior to the pandemic, the moment JU increased frequencies so did they. Currently, JU has 13% larger capacity per LX flight, sending an A320 would make that an increase of slightly more than 40%, now imagine an A321.
JU in 2020 was intending to have a third daily to CDG. In BCN they compete with 2 LCC's, so frequencies is a way to keep above them. Full LHR slots they have are not used in the winter, so an A321 would make the situation worse.
Lack of business passengers depends largely on the regions investment opportunities. Asides of that, theres little an airline can do to increase the number of business travellers and offseason ticket sales.
ReplyDeleteIf theres little investments and business activities an airline cant to much to make these figures better.
Actually, there`s quite a lot of foreign investment in Serbia, but there are yet not enough congresses, exhibitions, occasional business travel, etc.
DeleteThey first need to think about finalyzing the mid-term fleet structure with at least 6 x ATR72-600, and adding one of each A320/A321/A330 over the next 6 months to start additinal LH service and get some capacity flexibility on busy routes. Then all effort should be directed towards creating a more viable network year-around, and finally preparing well for the 2023 summer peak with charter demand.
ReplyDeleteThey already said they are looking at adding more ATRs and that ideally they should have 10 in the fleet.
DeleteI think the A321 would be ideal for charters, especially to Antalya and Hurghada.
DeleteYes, they could easily fill A321s for charters.
DeleteSeveral scheduled routes would work well on the A321 too.
DeleteYes but what do you do with an A321 in winter. It has over 200 seats!
DeleteThey can use A321 to Moscow without a problem every day and it will be full. In winter included.
Delete@12,35
DeleteBEG-SVO rotation is around 6 hours 30 mins. What does the aircraft do for the next 17 and a half hours?
JU needs frequencies, not capacity. Alot of their destinations are not daily, which isn't good for attracting transfer pax and business traffic. A320 is barely needed, which is why only 1 is in the fleet.
Why are you bending over so much over Air Serbia leasing 1 or 2 A321s?? So what if they do? I think it would be a great addition to the fleet, especislly on some heavy traffic routes. And especially when *hit hits the fan, and one of thsir A319s goes technical.
DeleteBesides... Is the few extra percents of fuel burn really going to hurt t their bottom line? A320 vs A319 fuel burn is negligent
I meant 321 vs 320...its like 300kg/hr...I think JU can handle it:)
DeleteSo looks like they might add an A320 dry lease
ReplyDeleteThat seems to be their only real narrow body fleet strategy.
DeleteSo no A321? :(
ReplyDeleteAir Serbia needs aircraft in between the ATRs and A319s.
ReplyDeleteDefinitely. But obviously not in their short term plans.
DeleteI wish they hadn't cancelled the A320neo order. They could have just downsized the number of aircraft.
ReplyDeleteIt was way to expensive for Air Serbia at the time, especially with two massive loans they had (which they have thankfully paid off).
DeleteI really don't understand this wet leasing strategy. Last year it was understandable, regarding the circumstances, but now to wet lease 4 aircraft isn't cheap. Can't a better solution be found?
ReplyDeleteIf they have their own aircraft, those would stay at the tarmac during the winter and that is very expensive. Also, additional crews for those aircraft during summer would be a clear surplus during winter months - with a pilot’s sallaries in a rank with higher management of some middle sized firm, they would just make massive losses during winter. Look at Croatia Airlines’ financial performance and you will see how it could look if Air Serbia is to plan fleet and staff based on 2-3 top summer months.
DeleteA220 is the perfect choice
ReplyDeleteAnd most expensive.
DeleteIt would be a worthy long term investment.
DeleteMaybe its time to find a partner with similar strength from south hemisphere for joint venture?
ReplyDeleteFleet renewal/expansion efforts were presented over the past couple of days and weeks as separate, independent streams. Air Serbia contemplating wide body expansion, then ATR cargo conversion, expanding ATR fleet to ten frames and now narrobody fleet leasing and long term replacement options.
ReplyDeleteFleet planning decisions should be considered at the airline level with one, holistic view of both short and mid to long term fleet needs.
I just can't believe that they're still not considering an Embraer 195, a win-win combination for JU.
ReplyDeleteThey can schedule it on almost any single route during winter season (instead of A319/A320) or also due to high demand in the summer season (instead of ATR).
Because of the seasonality and the market-recovering this is kind of more urgent than leasing another A330 !!!
Fully agree
DeleteI completely disagree they should stick with Airbus and maintain great business relationship with the order of A-220-100.It si better fit for Air SerbiaTo me it fits nicely between ATR-72 and A319.Quantity is open for discussion!
DeleteIt is interesting reading all those comments and the armchair experts suggesting what would be the right aircraft for JU - the size, the OEM etc etc etc. Other comments that seasonality requires smaller aircraft is also interesting. That being the case, why is it then that LCCs - such as Wizz - who fly 320s and 321s, have no issues filling these aircraft YEAR ROUND ??
ReplyDeleteThe issue comes down to pricing and revenue management. It is very easy to fill aircraft and to attack seasonality through the right pricing, promotion and distribution strategies - which is a helluva cheaper and easier way to manage the issue of seasonality and filling bigger aircraft, than it is to go out an lease multiple A220s, embraers and God knows what else has been suggested above.
People respond positively to cheap fares. What JU needs is not new smaller a/c, but bigger and more open minds to doing things very differently in the winter to how they do things in the summer.
The ULCC pricing model comes down to COST first and foremost. Only once you cut down on price of the aircraft by ordering a gazillion of them, by cutting down on maintenance by flying newer planes, by using optimal model without connecting flights, by squeezing every penny out of employees, airports and suppliers, by charging passengers extra for everything, you can have some room room to invest in a limited number of seats offered at very low price. Air Serbia is not based on that ULCC model.
Delete