Introduction
Company overview
Operations
SkyEurope is one of Europe’s fastest growing low-cost low-fare passenger airlines (“LCCs”), with a focus on services to and from Central and Eastern Europe. From our bases in Bratislava, Prague and Vienna, we offer convenient, short-haul “point-to-point” scheduled services to 38 cities in 18 European countries.
Strategy
We target both leisure and business travellers, as well as travellers visiting friends and relatives (“VFRs”). Our network comprises routes that connect cities within Central Europe as well as between Central Europe and Western Europe. The network has been developed using a business model that first seeks to stimulate “point-to-point” local market demand for flights to other destinations already served by existing bases in our network. We refer to this as “joining-the-dots” in our network. As this local market demand increases, we introduce additional destinations from a base to satisfy the increased demand. The implementation of this business model has allowed us to become the largest LCC(1) based in Central Europe, based on our current fleet size, with a total apron capacity of 2,288.
SkyEurope focus on its growth strategy continuously by expanding in terms of destinations and frequencies. In early December 2005, SkyEurope started to offer flights to Bulgaria and Romania as part of its “Go East” strategy. Even seasonal changes in customer demands are reflected in the flight schedule, so in winter 2005 a campaign was launched with direct flight connections to attractive European ski resorts whereas in summer destinations in South Europe will be increasingly offered e.g. France, Italy, Spain and Croatia.
History
SkyEurope Airlines was established in September 2001, and we began flying passengers on a single domestic route in the Slovak Republic in February 2002 using a 30-seat Embraer 120ER aircraft, becoming the first LCC to commence operations in Central Europe. Our business development strategy initially sought to serve unsatisfied demand and stimulate additional demand in the Slovak Republic for air travel services in what had previously been an underserved air transport market that lacked an LCC alternative for flights to destinations within Central and Eastern Europe, and that also lacked any regular scheduled direct service to destinations in Western Europe. As we continued to meet this demand, we began to stimulate demand for additional routes and we used capital raised on a number of subsequent occasions to expand the reach of our network beyond the Slovak Republic. To do so, we established additional bases in other countries with the potential for additional demand stimulation and shifted the focus of our fleet composition away from our regional 30-seat Embraer aircraft through longer-range 133-seat Boeing 737-500 (Classic) aircraft towards 149-seat Boeing 737-700 (Next Generation) aircraft.
SkyEurope Holding AG completed its initial public offering in September 2005. We raised €60 million (gross) of new equity capital and our Shares were simultaneously listed on the Vienna and Warsaw Stock Exchanges, reflecting the Central European focus of our operations. As a result, we became, and remain, the only airline to be listed in Central Europe.
Fleet
Today, we operate a leased fleet of 14 aircraft, comprising:
- fourteen 149-seat Boeing 737-700 (Next Generation) aircraft
The twelve Boeing 737-700 (Next Generation) aircraft operated by us were delivered between March 2006 and May 2007 and represent the first twelve deliveries of an order for 16 aircraft made by us in April 2005. These twelve aircraft have been acquired by GECAS and leased to us under operating leases, each with a term of eight years. The remaining four aircraft have been ordered by us directly from Boeing and are expected to be delivered between July 2007 and November 2007. In addition, we have acquired purchase rights for a further 16 Boeing 737-700 (Next Generation) aircraft from Boeing for delivery prior to the end of 2010, together with the right to upgrade some or all of those aircraft to larger 189-seat Boeing 737-800 (Next Generation) aircraft. In July 2007, we exercised the first ten of these purchase rights for deliveries of Boeing 737-700 (Next Generation) aircraft between April and November 2008.
Passenger volumes
The expansion of our fleet and network has been, and continues to be, driven by the demand for low-cost low-fare airline services in Central and Eastern Europe, which is reflected in the significant growth in our volume of passengers. Our passenger volumes have increased substantially, from 167,535 in the year ended 31 December 2003 to 3,206,088 in the 12 months ended 31 July 2007, the latter representing a load factor of 81.8 per cent for the period. SkyEurope transported 5th million passenger and reported +49.7% passenger growth in September 2006.
(1) Based on number of routes operated and passengers carried. Information based on most recent published information by SkyEurope Airlines and its competitors.
