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Flying the Styrian Spirit
Our flight has some similarities to the history of the young airline. After all the planning and the preparations, the young airline started operations out of Austria. But the start was tough. The main competitor Austrian Airlines was not too happy to welcome the new competition, and accordingly the new entrant was battled. These were the turbulent times for Styrian Spirit but despite the uncertain outlook, Styrian Spirit flew through this phase and escaped into the clear sky. A rather short history with dramatic elements - that's the story of Styrian Spirit.
Plans for a scheduled airline based in the region of Styria have been around for a long time, but due to the massive power of the national airline, the Austrian Airlines Group, it was an impossible project. That changed in the last years, after AUA tied up with Lufthansa and entered the Star Alliance in March 2000. The routes between Austria and Germany became a monopolised market. In order to allow competition on these routes, AUA had to agree to certain terms in order to get the approval for the integration into the alliance. These terms were installed to make sure that new carriers have a chance on the then monopolised routes. Within the last year, the plans for a regional carrier based in Styria became concrete and the airline was finally founded as "Styrian Airways GmbH & Co. KG" in late 2002. The airline is backed by the local industry, which is looking for attractive connections out of Graz. Funds are mainly provided by numerous private investors and entrepreneurs, which are based in the region. The staff of the airline is mostly local, coming from companies associated with the Austrian Airlines Group. There are many people which started their career at Lauda Air prior to the integration into the AUA group. The Chief Executive, Mr. Otmar Lenz was a previous CEO of Lauda Air.
Despite the fact that the company is officially called "Styrian Airways", Styrian Spirit was chosen as the airline's name for marketing purposes. The logo is made up from the traditional Styrian emblem, which shows a cougar with a doubled tail. The cougar is also present on the plane's livery, just beyond the cockpit and on the winglets. Styrian Spirit is the name, "Best Fare Business Air" the slogan. And that says a lot about the approach of the airline. A product for the business traveller at good fares. That's why the airline is so different from all the other start-ups we see these days. They are offering a real menu during their flights, including wine and a selection of other beverages. It is not a no-frills concept, but a full service airline. However, the fare structure is easy and tickets are affordable. Beside the business traveller, the airline is also working in the charter business. In cooperation with various tour operators in Austria, charter flights to some Mediterranean destinations out of Graz, Linz and Innsbruck are operated. Beside that, some ethnic flights to Balkan are also part of the charter program. Styrian Spirit has a fleet of three Canadair CL-600-200LR (CL-600-2B19) Regional Jets (registered as OE-LSC, OE-LSD and OE-LSS). The aircraft were previously operated by the Danish company Maersk Air. Before they were leased to Styrian Spirit, the planes were flown to Canada to have their avionics upgraded. For example, a head-up guidance system (HGS) was installed to enable CAT3 arrivals with no visibility.
A Dramatic History Despite the young age, the airline does already have a dramatic history. As a new entrant into an existing market, it is not easy to establish itself. Especially as the existing airlines will try to dismantle such a new carrier in their monopolised home market. Styrian Spirit has expected to be battled by the Austrian Airlines Group, but they were well surprised how hard and long the initial fight would take. Before the start of Styrian Spirit, Austrian Airlines and Lufthansa, its counterpart in the Star Alliance were the sole operators on routes between Austria and Germany. Accordingly, the ticket prices were very high as passengers didn't have the choice to take another carrier. The routes were working fine until the day when Styrian Spirit started up with lower fares and improved service. Austrian Airlines was afraid that it could loose too much market share on the high-priced routes. To stop the new competitor from taking away the customers, AUA launched a new promotion with prices starting as low as 110 Euros. An immense cutback in comparison the old fares which often were above 1000 Euros. The new fares were introduced on all routes between Germany and Austria. But the tickets were restricted, and as analysis later showed, they were almost only sold on routes which Styrian was serving too. It was a campaign to push them out of the market. We could say that this is just normal business practice, it is normal to respond to new competition. But in fact, this reaction was against the antitrust rules which AUA has agreed in order to gain membership in the Star Alliance. These rules were established to make sure that AUA and Lufthansa leave room to new entrants in the Germany-Austria market. As an example, they were requested not to launch fare wars or take other actions with the goal to destruct start-ups. But that's exactly what they did in this situation. They were trying to kill competition with crazy low fares. That looks like a good deal for the customers, but only as long as it takes to bring the new rival out of business. After that, they could go back to "business as usual", without any competition there is no need for low fares anymore.
The whole concept of the Styrian carrier was in question, it wasn't possible to match the lower AUA fares for a long time. Such a massive reaction by AUA wasn't expected. And it clearly was violation of their own agreement with the European Antitrust Agency. And that was the point when the lawyers became active. Styrian Spirit was taking AUA to the court, to stop the fare war. The management and the lawyers were optimistic that the case would be solved soon and they will get an interim injunction which would stop AUA's destruction course. "We expected that we will get the interim injunction within three weeks or a month." says Mr. Lesjak, Manager Marketing and Distribution at Styrian Spirit. "But it took us two and a half month to get it". During that time, the airline wasted a lot of money in an unnecessary fight. The rescue came at July 1st, 2003, when the Trade Court of Vienna took a decision and urged Austrian to stop the unfair practices which were in fact a breach of the European antitrust rules. At the end, Styrian Spirit emerged from the battle during the last minute. Just a few days prior to the court's announcement, the management decided that without any fair conditions, it was impossible to run the airline into successful times. They were ready to pull the plug - if necessary. But thankfully, that wasn't needed.
After these issues with Austrian Airlines were solved, the management crew of Styrian Spirit could finally go back to business. But the airline suffered during the "times of war", and the business model had to be reviewed. It became clear that it was almost impossible to compete with Austrian Airlines and Lufthansa on the high-capacity routes between Vienna and Germany. It was time to do something. After a capital injection by the investors, it was decided to concentrate itself to the home market. All scheduled operations out of Vienna and Linz were halted and the three aircraft were all relocated to Graz, to be used for further expansion there.
A destination which became very interesting was Zurich. After Swiss International Air Lines Ltd. (SWISS) has announced that it would leave the Graz market, Styrian Spirit started to think about a possibility to continue the route. The negotiations between the two airlines were successful and since August 1st, Styrian Spirit is offering two flights between Graz and Zurich. The flights are operated in a code share with SWISS. The route, which is served in the morning and in the afternoon, is doing exceptionally well, with average load factors of up to 67%. It is possible that the partnership with SWISS will be expanded in the future. Styrian Spirit wants to offer an alternative against the Star Alliance. SWISS will soon be a full member of the Oneworld Alliance, so a closer tie-up would certainly be interesting. For Styrian Spirit - and for the Austrian customer. While Swiss currently is the most important partner, they are not the only one. Beside the code shares to Zurich, the airline does have agreements with Finnair and Air France to Helsinki and Paris. And more is in the pipeline. "We are in the process of developing interline agreements." says Mr. Christian Lesjak. "We're currently working with Delta Air to close a deal." The codeshare agreement is planned to be installed on the Stuttgart-Graz route, where Styrian's flight schedule is very well fitting the intercontinental departures of Delta. The Styrian flight would then feature Delta's flight number. These partnerships with foreign airlines are also important from a financial standpoint. With attractive code share agreements, Styrian Spirit will gain a lot more passengers, which otherwise would have been lost to the local competition. The revised concept shines to work well and the airline is getting back to the right track. October should be the first month where Styrian Spirit makes a profit, not that bad after half a year of service. By the end of the fiscal year, total revenues should be around 30 Million Euros. It will be interesting to see whether the airline will already be able to make a profit after the first year of operations.
With the changed strategy, new problems had to be addressed. One is the fleet utilisation. With the withdrawal of Vienna, new solutions for a part the three CRJs had to be found. "The problem is that out of our market we could use many more planes in the morning and in the evening, and none at midday." says Lesjak. "One plane is very well utilised, the second too. the third one is standing idle during the day." This third machine is currently operating flights to Zurich in the morning and in the evening. To get it into the air in the time between, Styrian Spirit has now started scheduled flights to Rome. Since October 23, two flights per week are departing to Italy, with a short stop in Salzburg. "We will look how Rome works and we hope we will be able to add frequencies and other destinations, Nice or Paris for example." states Lesjak The airline is investigating more destinations, especially for the business traveller, but to offer more flights in the lucrative peak times, more planes are a need. "There are various options. We're looking at the CRJ200, but at the same time, we're also thinking about other ideas like a 70- or 80-seater." says Lesjak. It has always been the plan to operate a fleet of six planes after a first period. The whole operations are built to handle that number of aircraft. It is likely that new planes are added to the fleet by the next year, but has not been decided yet. The airline's growth plans have been disordered anyway, after the long and expensive dispute with Austrian Airline and the concentration to the home market in Graz. But a fleet expansion is definitely planed - sooner or later.
It is nice to see that the airline managed to keep its track during the turbulent start-up time. They're still in the climb-phase of their flight and there is much more to do. But they have a good base to become a successful carrier.. The key problems have been addressed and solutions are being implemented. Anyway, this is the airline business, new challenges will certainly arrive. Just these days, Austrian Airlines has announced that it will bring back the low fares to Germany and now even to other destinations in Europe. The name of the promotion has changed, the prices not. It will be interesting to see what is going to happen this time. There's certainly a special spirit in this airline. The people are really motivated and they're offering an outstanding and nice product. Let's hope that they can continue their flight in a clear sky, without too much fog patches and clouds. And if they will be hit by turbulence again one day, they are already trained to fight back. Michael Meier
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It
is one of those foggy days in October, while we are getting ready
for departure as Styrian 002. The boarding of our Canadair Regional
Jet has just been completed and the engines are started up. We are
leaving our parking position at Zurich Airport and heading to the
runway. After a short moment, we are cleared for take off and roaring
down the runway. The rotation is smooth and we fly through the thick
fog with a bit of turbulence for some minutes until we enter the
bright sky. A sunny morning in the air has just begun. 
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