Cablegate: Low-Cost Carriers Give Stuttgart Unexpected Boom

This record is a partial extract of the original cable. The full text of the original cable is not available.



E.O. 12958: N/A

1. SUMMARY: In September 2004, the Stuttgart Airport
experienced the largest year-on-year growth in its history
(over 900,000 passengers). In 2004, airport management
expects a total of 8.6 million passengers (up 12%). The
airport's recent boom is largely due to low-cost carriers
Germanwings and Hapag-Lloyd Express (HLX), both of which
started local operations in September 2003 and have since
doubled their destinations. Stuttgart Airport sources
expect eventual consolidation in the low-cost carrier (LCC)
market but remain optimistic concerning the airport future's
growth. Two important regional airports in Baden-
Wuerttemberg, the Karlsruhe/Baden Airport and the Bodensee-
Airport in Friedrichshafen, are also profiting from the LCC

2. In September 2003, Hapag-Lloyd Express (HLX) and
Germanwings began operations from Stuttgart Airport to 21
destinations in Europe. Stuttgart Airport spokesperson
Volkmar Kraemer told us that airport management was
initially reluctant to host low-cost carriers (fearing the
airport would have to cut prices for its services) but
eventually realized the potential of LCC's to expand the
airport's overall business. Unlike many airports, Stuttgart
did not/not offer special rates to HLX or Germanwings (both
carriers accepted the airport's standard fees and

3. Within a year of beginning operations, HLX and
Germanwings have doubled the number of destinations served
from Stuttgart and now account for a fifth of the airport's
traffic. In that period, passenger traffic through
Stuttgart increased by over one million persons, one of the
highest growth rates of any major airport in Germany.
Kraemer expects Stuttgart's 2004 passenger traffic to top
8.6 million, a new record for the airport. In September,
Germanwings expanded its destinations in eastern Europe and
stationed a second plane and crew in Stuttgart, while HLX
now offers eight new destinations. At a recent press
conference, Germanwings Vice President Andreas Bierwirth
said that the company's Stuttgart operations were profitable
in their first year (NOTE: a rarity in the airline business
-- END NOTE) and that the carrier, already the largest LCC
at Stuttgart, intends to become the low-cost market leader
in Germany. The stationing of HLX and Germanwings has also
had a positive effect on the larger Stuttgart region:
Bierwirth pointed out that the Germanwings presence created
over 100 new jobs at the airport and supports about 2500
jobs in the region.

4. With no catering on board, no travel-agent commissions
(booking via internet), no overnights for crews and one
additional round-trip per day (LCC's generally do not fly on
routes longer than two hours), the average break-even point
for LCC's is 80 euros per one-way ticket according to
Kraemer. He noted that high fuel prices have had limited
negative impact on LCC growth since most carriers secured
fuel contracts through the end of 2004 (before the recent
spike in fuel prices). Kraemer expects that LCC's will
remain a force in Germany (as in Great Britain) and will
expand their domestic flights but that the overall LCC
market will shrink due to competition leaving only a handful
of low-cost survivors (including RyanAir, Germanwings, and

5. Low-cost carriers are expanding in other parts of Baden-
Wuerttemberg, with RyanAir service from regional airports in
Karlsruhe/Baden and Friedrichshafen (Bodensee Airport).
RyanAir started operations at the Karlsruhe/Baden Airport in
September 2003 with two daily flights to London-Stansted and
has since added destinations in Italy and Spain. RyanAir
now accounts for half of passenger traffic at the
Karlsruhe/Baden Airport, where annual volume has doubled
from 300,000 to over 600,000 passengers.

6. COMMENT: The LCC market continues to boom in affluent
Baden-Wuerttemberg, helping Stuttgart and other airports to
break new ground after the industry-wide setbacks related to
September 2001 and the Iraq conflict. Although airport
sources see the LCC boom tapering off in the medium term,
they remain optimistic about overall growth at the Stuttgart
Airport, located in a wealthy region with regional
unemployment of about four percent (well below the
nationwide average of 10.3%) and a large pool of potential
travelers. END COMMENT.


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