Low Cost Flights to the Sky
The fact that the air ticket prices reach the sky often is the thing for discussions in Georgia.
Representatives of travel companies whose business directly is connected to air ticket prices mention that person who buys air ticket for the route of Tbilisi-Istanbul has to pay the same price what would European citizen pay for air ticket for the route of Paris-USA. The comparison of prices of these two routes proves the catastrophically big difference between air ticket prices of Georgia and abroad. However, the situation can be changed in a good way for Georgian customer. Low-cost airlines are entering Georgia”s market and offer much more cheaper prices for air tickets than companies acting in the field of Georgian airspace.
In the beginning of September 2010 Polish airline company “LOT” entered the Georgian market. “LOT” is the member of the biggest alliance of air companies “Star Alliance”. Now it performs routes to Warsaw. One way air ticket to Warsaw costs 185 EUR and roundtrip flight ticket price begins from 275 EUR, the cheapest flight ticket to USA costs 685 EUR. These are revolutionary prices in comparison to prices existing in Georgia up to now. Ministry of Economy and Sustainable Development of Georgia was one of the first that commented on the fact. Officials said entry of “LOT” will support raising competition and stable prices. “LOT” has already estimated the entry as successful its representatives in Georgia said that the company strategy has justified by 100%.
One more low-cost airline company Turkish “Pegasus Airlines” has entered Georgia air space. “Pegasus Airlines” performed the first route on 10-th of October as company officials said their prices will be three times cheaper than existing ones. Representatives of Turkish company consider other low-cost airlines will be pushed to leave Georgia”s market if they will not response with making air tickets cheaper.
Difficult to say if these two facts are linked to each other but one of the biggest players in the market “Austrian Airlines” has left Georgia. Its representatives said the commercial results were not satisfying the demand.
From 1998 Austrian Airlines were performing flight to Vienna four times a week. Air flight tickets to Europe of Austrian Airlines were cost 350-850 EUR. The airline company “Sky Georgia” has changed its profile. It abandoned passenger flights and has begun cargo transportation. Its officials say they will serve NATO air cargo transportation to Afghanistan. They have invested 15 million dollars for purchasing new airplane for cargo transportation. The investment volume will increase by 5 million dollars during next months and the number of airplanes will reach seven. “Sky Georgia” performed air flights to Ukraine.
It is interesting what kind of other changes are coming in Georgia”s air space and what will be fate of the most vulnerable issue of Georgia”s customers – air ticket prices?
Officials from Transport Department of Georgia say there are 17 foreign and 1 local airlines (Airzena) performing regular passenger routes from Tbilisi airport. The most flight routes are performed by “Turkish Airlines” and “British Midland”. Other airline companies have irregular routes and perform charter routes in the air space of Georgia.
Prices of airlines do not differ from each other too much; however, it is possible to divide them into companies for middle and high-class segment. German Lufthansa works for high-class segment and its air ticket prices to Europe begins from 340 EUR and reaches 1165 EUR. Czech Airlines air flight ticket prices to Europe begin from 350 Gel. British Midland airways works for high-class segment too its prices are between 520-1700 EUR. Airzena”s minimal prices for Europe flight routes (Vienna, Amsterdam, Frankfurt, and Paris) begin from 229 EUR and reaches to 430 EUR. Turkish Airlines” prices for Tbilisi-Istanbul flight routes cost from 195 EUR to 550 EUR. However Pegasus Airlines has three times less prices – Tbilisi-Istanbul flight routes cost 80 EUR and Tbilisi-Antalya will cost 99 EUR.
The director of the representative office of Pegasus Airlines in Georgia Levan Elizbarashvili: ” Pegasus has decided to be successful in the air space of Georgia and because of it our first step in the market was cheapest prices in comparison of other players in the air space of Georgia. For example, one-way ticket to Istanbul costs 80 EUR, to Europe prices begin from 130 EUR and it is not a temporal action. We will begin flights to Asia, Africa and USA soon.”
The representatives of Pegasus mention that there is higher competition on the market of Georgian air space in comparison with the Turkish one however prices for air flight tickets are much higher than in Turkey.
Why is air flight ticket too expensive in Georgia? What is the explanation given by the companies to justify themselves? Representatives from the companies say the customer must not be mistaken by cheap prices on air flight tickets – the real price of 80 EUR air flight ticket maybe not be the same. The opponents of low-cost airline companies name the expenditures that may not be included in price of air flight ticket. Such expenditures can be costs for food and luggage and it is possible passengers to be forced to pay extra costs for these services.
The representative of Pegasus refuses the idea. Levan Elizbarashvili: “This is nothing except of lie and disinformation. Even the buyer of the cheapest air flight ticket has right of free of charge transportation of 28 kg luggage where 20 kg is luggage and 8 is hand luggage. As for food at a deck, it is not included in air flight ticket but maximum price for food at deck costs 10 EUR. We let customers not to pay fixed price for food; they can choose how much to spend for food as they can choose desired dishes from menu and pay for it 7, 6 or even 6 EUR. So the highest price for air flight ticket to Istanbul can be cost 90 EUR”.
Pegasus officials say that their rivals have reserves to make prices lower but it is impossible for them to decrease prices so much to be close to prices of Pegasus airlines. The Company Lufthansa is not going to decrease prices yet as its officials say, they do not consider themselves rival of airlines with low-cost airline, and their segment is high-class. The airline companies’ view is to increase service in the same price while crises instead of making prices cheaper. In sales of the big European airlines the share of first class and business class air flight tickets is 20% but revenue is 40%. Tickets cost expensive and its sale volume is low but it makes big profit. That is why Lufthansa is not going to make changes in its strategy.
The Transport Department officials avoid commenting air flights ticket prices and they consider the prices are determined by free market economy principles. The press secretary of the Transport Department of Georgia Ketevan Kochorashvili: “We do not have right to interfere to set prices, it is free market economy and prices depend on the level of competition of companies. Prices are determined by the market. Increasing competition in the market of Georgia”s air space will be supported by the contract according to which air space of Georgia will join unified European airspace. The process must be over at the end of the year.” The Transport Department officials said they support new airline companies to enter market of airspace of Georgia in order to increase competition. Ketevan Kochorashvili stated that above mentioned contract will help to raise competition but it does not mean that signing the contract will be followed by cheap prices automatically. She said after the contract is signed our airspace becomes more competitive and cheap prices are connected with this fact on theoretical basis.
We were interested in airplanes used by airline companies in Georgia they are “boeing” airplanes, “airbuses” and “enbraers”. It must be mentioned that if airplanes do not meet with international standards they will not get licenses for flights. Georgian passengers are served by double-deck “Airbus A380” too that is airplane of Lufthansa.
The government wanted one more Irish airline”s entry in Georgia but negotiations were not successful. As it was told, Irish airline company requested high frequency of flights and Passenger flow.
Low cost airlines have already appeared on the airspace market of Georgia. It is hard to say if the fact will cause sharp changes on the market and if other airlines responses will be cheap air flight tickets. But the progress is existing alternative beside of expensive air flight tickets and customer has choice.