This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS FRANKFURT 009039 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EAIR ECON SENV GM
SUBJECT: LOW-COST CARRIERS GIVE STUTTGART UNEXPECTED BOOM 
 
 
¶1.  SUMMARY:  In September 2004, the Stuttgart Airport 
experienced the largest year-on-year growth in its history 
(over 900,000 passengers).  In 2004, airport management 
expects a total of 8.6 million passengers (up 12%).  The 
airport's recent boom is largely due to low-cost carriers 
Germanwings and Hapag-Lloyd Express (HLX), both of which 
started local operations in September 2003 and have since 
doubled their destinations.  Stuttgart Airport sources 
expect eventual consolidation in the low-cost carrier (LCC) 
market but remain optimistic concerning the airport future's 
growth.  Two important regional airports in Baden- 
Wuerttemberg, the Karlsruhe/Baden Airport and the Bodensee- 
Airport in Friedrichshafen, are also profiting from the LCC 
boom.  END SUMMARY. 
 
¶2.  In September 2003, Hapag-Lloyd Express (HLX) and 
Germanwings began operations from Stuttgart Airport to 21 
destinations in Europe.  Stuttgart Airport spokesperson 
Volkmar Kraemer told us that airport management was 
initially reluctant to host low-cost carriers (fearing the 
airport would have to cut prices for its services) but 
eventually realized the potential of LCC's to expand the 
airport's overall business.  Unlike many airports, Stuttgart 
did not/not offer special rates to HLX or Germanwings (both 
carriers accepted the airport's standard fees and 
conditions). 
 
¶3.  Within a year of beginning operations, HLX and 
Germanwings have doubled the number of destinations served 
from Stuttgart and now account for a fifth of the airport's 
traffic.  In that period, passenger traffic through 
Stuttgart increased by over one million persons, one of the 
highest growth rates of any major airport in Germany. 
Kraemer expects Stuttgart's 2004 passenger traffic to top 
8.6 million, a new record for the airport.  In September, 
Germanwings expanded its destinations in eastern Europe and 
stationed a second plane and crew in Stuttgart, while HLX 
now offers eight new destinations.  At a recent press 
conference, Germanwings Vice President Andreas Bierwirth 
said that the company's Stuttgart operations were profitable 
in their first year (NOTE: a rarity in the airline business 
-- END NOTE) and that the carrier, already the largest LCC 
at Stuttgart, intends to become the low-cost market leader 
in Germany.  The stationing of HLX and Germanwings has also 
had a positive effect on the larger Stuttgart region: 
Bierwirth pointed out that the Germanwings presence created 
over 100 new jobs at the airport and supports about 2500 
jobs in the region. 
 
¶4. With no catering on board, no travel-agent commissions 
(booking via internet), no overnights for crews and one 
additional round-trip per day (LCC's generally do not fly on 
routes longer than two hours), the average break-even point 
for LCC's is 80 euros per one-way ticket according to 
Kraemer.  He noted that high fuel prices have had limited 
negative impact on LCC growth since most carriers secured 
fuel contracts through the end of 2004 (before the recent 
spike in fuel prices).  Kraemer expects that LCC's will 
remain a force in Germany (as in Great Britain) and will 
expand their domestic flights but that the overall LCC 
market will shrink due to competition leaving only a handful 
of low-cost survivors (including RyanAir, Germanwings, and 
EasyJet). 
 
¶5.  Low-cost carriers are expanding in other parts of Baden- 
Wuerttemberg, with RyanAir service from regional airports in 
Karlsruhe/Baden and Friedrichshafen (Bodensee Airport). 
RyanAir started operations at the Karlsruhe/Baden Airport in 
September 2003 with two daily flights to London-Stansted and 
has since added destinations in Italy and Spain.  RyanAir 
now accounts for half of passenger traffic at the 
Karlsruhe/Baden Airport, where annual volume has doubled 
from 300,000 to over 600,000 passengers. 
 
¶6.  COMMENT:  The LCC market continues to boom in affluent 
Baden-Wuerttemberg, helping Stuttgart and other airports to 
break new ground after the industry-wide setbacks related to 
September 2001 and the Iraq conflict.  Although airport 
sources see the LCC boom tapering off in the medium term, 
they remain optimistic about overall growth at the Stuttgart 
Airport, located in a wealthy region with regional 
unemployment of about four percent (well below the 
nationwide average of 10.3%) and a large pool of potential 
travelers.  END COMMENT. 
 
BODDE