SkyEurope: A Slovak Air Attack

Bratislava seems like an odd place for one of Europe's newest airline startups. Until, that is, you hear the reasoning behind Christian Mandl's scheme. Mandl, a Belgian, was working as an investment consultant in the Slovak capital when he started to notice the huge impact discount carriers such as Ryanair and easyJet were having on the industry in Western Europe. Then he figured out how to take the discount concept a step further. "We are the first low-cost airline located in a low-cost country," Mandl quips.

"We" is SkyEurope Airlines, launched in February in Bratislava by Mandl, 28, and Alain Skowronek, a fellow Belgian. Skowronek, 30, earlier worked for Euro Belgian Airlines, a startup carrier that eventually was sold to Richard Branson and became Virgin Express Holdings PLC. In addition to scooping up a small but underserved Slovak market, the two young Belgians have their sights set on Vienna International Airport, with its 12 million yearly passengers, sky-high costs, and slim competition.

Here's SkyEurope's selling point: Although Bratislava's M.R. Stefanik International Airport lies in a different country, it's just 50 kilometers from downtown Vienna. That's about as far as from central London to Stansted Airport. Bratislava is another world, though, when it comes to costs: Airport fees and taxes, at $12 per passenger, are about half Vienna's, and wages for everyone from pilots to sales agents are a third to half Austrian rates.

Just check out the prices. Flying direct from Vienna to Zurich means choosing between two state-supported carriers, Austria Air and Swiss International Air Lines. Both charge $1,008, including taxes and landing fees, for a midweek, round-trip economy-class ticket. SkyEurope's top rate, by comparison, is $350. Book a nonchangeable ticket a couple weeks in advance, though, and it's as low as $165. True, customs and passport checkpoints at the border can slow the one-hour trek from Vienna to Bratislava airport by 10 or 20 minutes, but in two or three years that border will disappear if Slovakia, as expected, joins the European Union.

To get started, the partners sold a 49% stake to SwiftAir, a small Spanish airline. SkyEurope now operates three year-round routes--to Zurich, Prague, and Kosice, a city in eastern Slovakia--and three summer routes to the Aegean coast. In August, the Zurich route was 75% full and the summer runs 85% full. This month, SkyEurope adds Berlin, Milan, and Munich. Mandl projects 2002 revenues at a modest $4.7 million, but he hopes to break even by next fall. That may be tough. "They'll have to sell every seat," says Justin Urquhart Stewart, an airline analyst at 7 Investment Management in London.

Mandl and Skowronek think they have an ace up their sleeve: SkyEurope can take advantage of the booming-but-ignored Bratislava area. According to a survey commissioned by Stefanik Airport, 600,000 of Vienna's annual passengers come from Slovakia, with 88% traveling to Western European destinations. If Mandl and Skowronek get their wish, those Slovaks will join the Austrians in the hunt for those dirt-cheap SkyEurope tickets.

By Christopher Condon in Bratislava

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