BUSINESS
Wizz Air Expected to Make Georgian Air Market Cheaper
14 June, 2012

Georgian air travelers get a chance to fly cheaper to Europe via Kiev after Wizz Air, Hungarian based low-cost air-company launches flights in Georgia starting September on Kutaisi-Kiev route. Wizz Air is expected to boost competition and cut down the prices at the expensive Georgian air market.

Wizz Air, one of the largest low-fare airlines in Central and Eastern Europe, starts flights from Kutaisi to Kiev from September 2012. It is expected to deliver over 40 thousand passengers in the

first full year of operation and support 40 jobs in Kutaisi. This new route will operate three times per week and is the first low-fares airlink to/from Georgia that offers access to one of Europe’s leading route networks with over 240 routes across 27 countries, the Wizz Air web-site informs. 
“Either Tbilisi will cut down prices or passengers from Tbilisi will move to Kutaisi; and either Batumi cuts down prices or passengers will shift from Batumi to Kutaisi,” the President of Georgia said on June 4, 2012 at  the Kutaisi airport during the ceremony of endorsing  the agreement between Wizz Air and United Airports of Georgia (UAG).
Mikheil Saakashvili touted the sale prices Wizz Air enters the market to celebrate the launching of the new route. He assured people that as of now they’ll have an opportunity to reach any European city from Kiev for about EUR 37: ( EUR 22 charge for the flight of Kutaisi - Kiev direction as a starting prices plus about EUR15-20 fare for the flight from Kiev to European directions). Georgian Journal could not find a flight as cheap as EUR 15 from Kiev to any available European directions; the cheapest available flight seems to be EUR 69 to London at the moment, but fares include 32 kg checked-in baggage and 10 kg handbag that is many-fold cheaper than total average price from Tbilisi to London, which for instance, fluctuates around EUR 389-900. 
Flights to Kiev direction were implemented by Georgian Airway largely known as Airzena and Ukrainian AeroSvit  offering almost similar prices fluctuating around EUR 175 (one way) -EUR 396 (two-way) and EUR 199 (one way) -EUR 420-396 (two-way) fixed by the companies respectively.
Wizz Air enters with the fares starting from EUR 22.99 (one way) and about EUR 141-166 for return tickets  for the same direction that is by almost 80% and 58% cheaper respectively compared to the flights implemented from Tbilisi International Airport  - the only available line to Kiev up to day.
Georgian government expects Wizz Air to create a competitive climate at the market and cut prices down significantly, at the same time increasing the tourist inflow and job creation.
“Wizz Air offers unprecedented prices to our market, that will create competitive situation and significant drop in prices,” Giorgi Molodinashvili, Deputy Head of UAG, said in the interview with GJ.
Georgian tour operators think it is too early to speak of real prices Wizz Air will be fixing until it starts flights and at least two seasons will pass. However they unanimously welcome the low-cost companies to Georgia as high travel prices is one of the biggest obstacles hampering both incoming and outgoing tourism inflows in Georgia.  
Expensive prices on air-tickets have always been a subject of public criticism. Out of twenty air-companies operating in Georgia only two Turkish Pegasus and Dubai-based Fly-Dubai implementing flights to Istanbul and Dubai directions are the low-cost companies, Molodinashvili, said. Giorgi Tsintsadze, financial manager of Carlson Wagonlet Travel’s official representation in Georgia, thinks Air Baltic is also a low-cost but they all fix relatively high prices than Wizz promises but the total travel price will be clear only after the company starts operation.
“The point is low-costs operate at secondary air-ports generally and the final travel price and airline choice depends of the place of destination,” he said.   
Prices of ordinary airlines range between EUR 350-800 at average on international flights. Georgian government been ambitious to make Georgia into regional hub and realizing it was impossible without low-cost carriers  has long been negotiating low-cost companies to come to the country but they shunned Georgia for low passenger turnover as sector pundits explained. Ryan Air, the Irish-based biggest low-cost air-company of the world expected to enter Georgia in 2010 halted the deal allegedly due to low flight frequency and passenger turnover.
Government assured then that low-cost companies would start flights in Georgia as soon as the number of passenger turnover exceeds million. In 2011 the figure crossed the line reaching 1 200 868 official statistics say. However Wizz Air chose to start flights in Kutaisi where passenger turnover faced 39% drop in 2011 from around 7 thousand in 2010 to approximately 4 thousand unlike Tbilisi and Batumi international airports enjoying 28 and 51% of growth in 2011 respectively making more than million in Tbilisi and 133 thousand in Batumi.
According to Daniel de Carvalho, Corporate Communications Manager of Wizz Air Group, Kutaisi is well located for a quick access to varied tourist attractions and is also an alternative low cost entry to the regions of Batumi and Tbilisi. He also stressed on Georgian high prices. 
“Passengers travelling between Ukraine and Georgia have long been subject to high fares and the demand for Wizz Air’s low fares is huge,” Daniel de Carvalho said in the interview with GJ.
Now Georgian officials say the key reason air-companies shun Georgia is not low passenger turnover but the high service tariffs fixed at Tbilisi and Batumi airports managed by Turkish TAV Georgia.
“The key reason air-companies refrain to enter Georgia is high service tariffs at Georgian airports and not low passenger turnover,” Molodinahsvili said. “The major direction of Kutaisi airport is attraction of this kind of companies and offering lower service tariffs a sample of which we have already witnessed in partnership with Wizz Air.”
He assures Ryanair is also expected to appear in Georgia soon as negotiations proceed quite successfully. 
Georgian experts believe nobody but government is responsible for high air-prices in fact. When the state handed Georgian airports to TAV in 2005 under building, operation and management right under quite non-transparent procedures, it very likely did not put limits to profit margin in the contract that is out of public reach since then. If there were any profit limits government could have demanded drop in prices that it is out of control at the moment. Sakashvili intermittently whips TAV Georgia to this end but to no avail.  TAV keeps silence and goes ahead with its pricing schemes.
“The contract between the state and TAV Georgia is non-transparent under excuse that it is commercial secret of private company, but when you hand over the state property the contract should be open,” Davit Narmania, Executive Director of the Caucasian Institute for Economic and Social research, said. “Now we do not know the real contract terms and TAV Georgia takes an advantage out of it.”
Molodinashvili finds it incorrect to disclose details of private company profit margin and tariffs as far as it falls under TAV competence. Besides, tariffs differ very much for each air-company depending which service they have. 
According to Mete Erkal, TAV Georgia’s General Manager, they already have a fee policy depending on flight frequency which helps the airlines to increase the flight numbers and decrease the costs.
“As a result of our marketing efforts, we managed to have a total increase rate of more than 50% in passenger figures in last 2 years and 29% in 2011 only, which put us to the second place in most growing airports classification,” he said.

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