Incentives for growth

Unveiled by ANA earlier this week, the new incentives system will be introduced at the end of this month – the start of the IATA summer season – and will cover the airports of Oporto, Faro, the Azores (Ponta Delgada, Horta, Santa Maria and Flores) and Madeira (Funchal and Porto Santo), but excludes Lisbon.
“For reasons of business strategy, the incentive system shall not be available, during this phase, in Lisbon, where only a system of marketing support to promote demand shall be applied”, ANA explained in a statement.
In its statement ANA said that the incentives are aimed at airlines that “in a sustainable manner, contribute the most to traffic growth and the development of the network of destinations at national airports.”
“Under current market conditions, we must be prepared to offer airline companies a competitive support package. At ANA we decided to create a new incentive system, clearly aimed at supporting the offering of new routes, frequencies and seats, and, at the same time, a support system promoting demand – marketing support – used in part in collaboration with Turismo de Portugal [the National Tourism Board] through a protocol signed on 23 February 2015.”
Thus, ANA’s statement continued, it should be noted that, “at this time, the situation we are witnessing is structurally different. Besides the climate of economic uncertainty, there are fewer opportunities for opening new routes and for markets that are more challenging from the standpoint of demand, either tourism demand or of other motivations associated with outbound flights.”
Both ANA and Turismo de Portugal have each allocated five million euros of their respective budgets to promote tourism demand over the next five years.

A three-pronged approach

ANA’s new programme offers a three-pronged support system: It supports the increase in operating efficiency, providing an incentive to air companies that, using the same number of movements, increase the number of passengers carried (by increasing the load factor or the capacity of the aircraft). Secondly, it supports the increase in existing routes, thus promoting a diversified offering in terms of companies and schedules, and it supports the opening of new routes, thus allowing ANA to broaden the network of destinations served.
The minimum value per incentive is in the region of €2,000, with ANA being responsible for calculating how much each airline will receive, using traffic statistics.
ANA said “the new regulatory model and the route and traffic growth development plan defined by ANA have brought about the need to review the existing incentives systems and create a new incentives programme.”
According to information from the national airport management company, incentives for existing routes can vary between €1 and €3 per passenger in the event the airline ups its capacity, or between €2 and €11 per passenger on increased frequencies.
For airlines introducing new routes, the inducements can rage between €4 and €16 euros per passenger.
Base incentives for new routes can also vary widely, from a €65,000 inducement for a new route flying once a week in winter between Oporto and Berlin, while the launch of a winter route between Funchal and Stockholm three times a week could see the airline granted up to €1.6 million in incentives.
Launched in the presence of the State Secretary for Transport Dr. Sérgio Monteiro, the new incentives programme will allow the redistribution of part of the revenue generated by a rise in airport taxes that has been greatly contested by airlines.
Jorge Ponce de Leão, president of ANA explained: “It is not only about raising taxes but about putting those taxes to good use. Redistributing with our business partners part of what is generated through that product and also investing in improving conditions to cater for a growth in traffic.”

“Zero euros” for Lisbon

The State Secretary added: “The incentives programme rewards growth, mainly in the parts of the country that most need it. It’s not that Lisbon doesn’t need it, but it has natural attractions that do not need extra stimulation, therefore the programme has zero euros to distribute in Lisbon.”
In a nutshell, he said, the programme pays airlines to bring passengers “to Oporto, Faro, Madeira, the Azores and even Beja, keeping taxes artificially low, benefitting from a crossed-financing system.”
Sérgio Monteiro criticised opposition in Parliament “that only talks of the rise in taxes at Lisbon airport, even when they are elected by constituencies in Porto and Faro, omitting the benefits of infrastructures in those cities.”
The principal of the programme, he explained, is the same as upping airport taxes in step with growing traffic: “We allow a rise in taxes in Lisbon so that the taxes at other airports stay lower to stimulate airports in those regions.”
The State Secretary further pointed a finger at those who believe taxes should be lowered as air traffic rises, saying: “That is like a hotel charging less as the rooms fill up.”

Ryanair reasons it out

Recently, the outspoken CEO of Ryanair, Michael O’Leary, said the taxes charged by Portuguese airports to airlines are “too high”, particularly during low season, and prevent tourism-dependent regions such as the Algarve from extending tourist season.
Speaking at Faro airport last week during a press conference held to introduce the airline’s winter schedule, O’Leary said of that particular airport that he wasn’t surprised by the prices charged in June, July and August, but keeping them high throughout the year, in his opinion, makes no sense and curtails the tourist season.
Saying that the possibility of lowering taxes at Faro had previously been discussed between the airport and the Irish low-cost airline, the head of Ryanair added that the answer has always been that it is not possible.
“It is, and the place is empty”, he said, referring to the Algarve’s main airport during low season.
Michael O’Leary stressed that his airline is interested in promoting the expansion of the Algarve’s busiest season, to increase the number of routes and passengers as well as guarantee job stability for workers on the Faro operations.
For that, he added, hotels, restaurants and places of entertainment need to stay open for longer, as happens in other destinations like Malaga, Spain.
“We would particularly like to have more winter routes from Faro” O’Leary reflected, saying that new routes to Spain, Germany, Scotland and Italy could soon be launched.
This company summer Ryanair will operate 27 routes to and from Faro.
With regards to ANA’s latest announcement a Ryanair spokesperson told The Portugal News: “Ryanair supports any initiatives by Portuguese airports that effectively incentivise traffic growth and route development. However information received to date indicates that no such growth plan or incentives are in place for Lisbon Airport in particular, and that instead airport charges in Lisbon will rise by circa 8% in 2015.
“Ryanair has a consistent record of delivering traffic growth in Portugal, dating back to the start of its operations there in 2003, with 25m customers flown to/from Portuguese airports in the intervening years.”
According to the airline, Ryanair is “the number 2 carrier in Portugal with 17% market share, and recently announced 31% growth in Lisbon as part of its Winter 2015 schedule, where it will carry 2m customers to/from the Portuguese capital in 2015.”
“Ryanair’s Winter 2015 schedule in Faro will see traffic growth of 12%, carrying over 1.6m customers, while our new base in the Azores opens in April with three routes and will deliver 350,000 customers to/from Ponta Delgada in 2015. Ryanair will deliver over 2.8m customers to/from Porto in 2015, with 25 routes in total.”