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Analysts: Sólyom heading for “huge crash” in 2017

Transport

New Budapest-based airline Sólyom Hungarian Airways has made another step toward beginning flights on the targeted date of August 18, but analysts are reckoning that the company’s original estimates with regard to the amount of business they’ll be doing are exaggerated at best and untenable at worst.

Under the damning headline, “‘We give Sólyom one year,’HVG online cites analysis done by Hungary-based Capitol Consulting Group (CCG) which would appear to make estimates of Sólyom director József Vágó nearly impossible to meet. CCG analysts predicted that the enterprise would rapidly accumulate “massive losses” and will be facing a “huge crash” in 2017.

One primary problem in determining Sólyom’s chances for success is the fact that few details have been released regarding finances at all. After its offices at Liszt Ferenc International Airport opened in the middle of this month, Vágó outlined plans which would see Sólyom beginning with 350 to 400 employees and raising that number to 700 in August; the company further expects to be transporting 3 million passengers next year, and by 2017, the airline’s 50 aircraft will be carrying 8 million – but no budgeting details were made public.

Even figuring in an 80% capacity rate on all planned flights, Sólyom’s calculations appear to fall apart when calculating the industry-standard measure of “block hours,” defined as “The time from the moment the aircraft door closes at departure of a revenue flight until the moment the aircraft door opens at the arrival gate following its landing.”

Assuming Sólyom operates at the no-frills airline average of eight block hours per day per aircraft (the low-budget leader worldwide is US-based Southwest Airlines at an average of 13 block hours), this would mean four flights per day for each Solyóm aircraft, with Western European cities an average of two hours’ flight distance from Budapest. Therefore, calculated the CCG analysts, Sólyom could manage transport of just 2.2 million passengers in 2014, based on the airline’s own estimation of its fleet size.

As HVG points out, Sólyom is at present not planning to form a partnership with another international airline, a move that can bring up to 20% growth in passenger base.

Further estimates say that at average prices of €200 to €400 per round-trip ticket and figuring in the makeup of Sólyom’s fleet to account for standard passenger and business-class passengers, revenue of €26.2 billion could be earned. Unfortunately for the airline, cost of operations are expected at present to top €30 billion per year.

Finally, CCG managing partner Ferenc Turi pointed out that the Airbus 330 and 340 aircraft to be employed by Sólyom at startup have not been manufactured since 1999 and will be subject to greater depreciation and higher upkeep costs than most aircraft used in Europe.

On the plus side, Sólyom has received an official radio call sign from aviation authorities, an “extremely important milestone in an airline’s startup process” according to informational site AIRportal.hu. That three-character code will be “Hotel Uniform November,” i.e. HUN. 

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