Klagenfurt Airport looks to tourist traffic as it prepares for hopeful privatisation

Klagenfurt Airport, in southern Austria, has declared that it will focus more on tourism than business traffic as it prepares for privatisation. Tourism is a vital part of Austria’s economy, generating USD60.7 billion in 2016, or 15.6% of GDP (direct and indirect contribution). Tourist numbers have grown consistently in the past five years and notably in 2015-16 (5.6% and 5.2%). The rate of growth in 1H2017 is 4.6%.

CHART – Annual tourism arrivals in Austria have grown at a consistently healthy rate the past three years, albeit the rate of growth in slowly shrinkingSource: CAPA – Centre for Aviation and Statistics Austria

The airport’s new CEO, Michael Kunz, says “the entire air traffic in Europe continues to grow… there are quite interesting areas where you can appeal to tourists who come to Klagenfurt”. Mr Kunz particularly expressed interest in a service to London (there are no UK direct services at all momentarily though Ryanair has operated at Klagenfurt, getting itself involved in an EC investigation into state aid), stating there are “opportunities” for easyJet to launch service. The airline has scheduled a service commencing 17-Dec-2017 from London Gatwick, which is probably aimed predominately at ski-tourists.

CHART – Austrian Airlines has the greatest seat capacity with its service to Vienna as noted by capacity for the week commencing 04-Sep-2017Source: CAPA – Centre for Aviation and OAG

Klagenfurt is the capital of the Federal State of Carinthia in a scenic region of the south of the country, bordering Slovenia. Ljubljana is just 70 km distant. It has a population of 100,000, making it the sixth largest city, but the airport handled 194,000 passengers in 2016 (-14.8%).

Passenger traffic numbers at the airport have been up and down (mainly down) over the last three years and there have been concerns about its future. While Vienna’s Schwechat Airport is by far Austria’s busiest, those serving comparable regional cities such as Linz and Graz are considerably busier than Klagenfurt and 100,000 ppa is well below the accepted norms for profitability.

MAP – Klagenfurt is the capital of the Federal State of Carinthia in a scenic region of the south of the country, bordering SloveniaSource: Google Maps

Moreover, Austrian Airlines has been experimenting with its ‘air-rail’ service in conjunction with the Austrian Federal Railways (ÖBB) connecting the busier Linz Airport (435,000 passengers in 2016) with Vienna, at the expense of flights. With a rail station very close to the airport terminal at Klagenfurt the opportunity there is evident.

Under such circumstances one can hardly blame the new management for seeking an increase in direct international services by foreign airlines bringing in more tourists and apart from easyJet’s London flights there is some good news in the form of a seasonal Rotterdam-Klagenfurt service to be operated by Transavia, to test demand, from 20-Jan-2018 to 03-Feb-2018. Again this is likely to be aimed at the ski market.

MAP – There are several resorts in the immediate vicinity of Klagenfurt, including Simonhöhe, Flattnitz, Frauenalpe and Fanningberg, and for which Klagenfurt is the closest airportSource: Google Maps 

As a bonus, the natural scenery in Carinthia in other seasons coupled with the proximity of the Slovenian cities of Ljubljana and Maribor, which are growing in popularity as short-break tourist destinations, offers an opportunity for Klagenfurt to be a gateway to a wider tourist region for multi-destination visits.

In Apr-2017 the Carinthia municipality, which majority-owns the airport along with the city, issued initiatives for implementation at Klagenfurt Airport including entering into discussions for new destinations to international countries.

But the impetus will henceforth be on tourism. Unlike Linz, which has heavy industries and logistics businesses and Graz, which is a university city, Klagenfurt has only light industries, mainly in electronics, to offer apart from tourism; it is not a business destination.

Two years ago the prospect of ‘part-privatising’ the airport was first mooted and Fraport was mentioned as a potential partner. The original strategy was based on the need to rehabilitate the runway, which has now been completed, but privatisation remains a prospect all the same. ‘Partial privatisation’ often means corporatisation (i.e. bringing in corporate management principles as a first step) but in this case it appears that a strategic partner is still sought; one that would take a minority equity share, perhaps in return for providing management -including route development – expertise, under contract.

Fraport does that and has expertise in abundance. Whether it would be interested in an airport as small as Klagenfurt is a different matter. Mr Kunz is confident there are “serious prospective partners” for the airport.