Swissport and Goldair at Sofia airport Price competition in Bulgaria
With a manageable volume of traffic, the airport in the Bulgarian capital Sofia is one of the smaller airports in Europe. Yet there is fierce competition over its ground handling services market. Five companies are fighting it out in the this sector.
Just 3.5 million passengers and less than 20,000 t of airfreight are handled annually at Sofia airport. In addition to the ground handling service department of the airport authority itself, Swissport from Switzerland and Goldair Handling from Greece vie for the attention of the airlines that manage this traffic. The national carrier Bulgaria Air recently started carrying out its own handling activities, but another company, Jet 1, which has had a licence since the end of 2011, has not so far begun operations.
According to Swissport Bulgaria CEO Fernand Stauffer three ground handling service providers are too much of a good thing at this small hub. «The infrastructure is limited, there is just not enough space for more than two handlers to work efficiently and in accordance with safety requirements,» he told the ITJ. Due to the international economic uncertainty many airlines have reduced their services or even eliminated them altogether to Sofia, and so the business volume for those offering ground handling services has also reduced, he added.
Swissport threatening to leave
Last autumn Swissport Bulgaria filed two complaints with the Bulgarian competition commission (KSK). In one complaint the company stated that the airport authority’s own ground handling department has an unfair advantage, which has a distorting effect on competition.
The company also accused Goldair Handling Bulgaria of engaging in unfair competition and in price dumping. According to the complaint the two companies together created an unhealthy, unsustainable competitive environment. Swissport Europe manager Mark Skinner outlined the possible consequences. «If our complaints are not acted upon and the unfair competition continues, we might be forced to withdraw from operations in the Bulgarian market.»
Swissport has been active in Sofia since 2007 and has also handled freight here since summer 2011. The proceeds in this segment are negligible, Stauffer explained, explaining that passenger and aircraft handling are his core business activities in Sofia. In recent years EUR 5 million has been invested in the operations.
Swissport’s market share is around 30%, behind the airport authority’s own share of 40%. Since the beginning of its operations in 2010 Goldair Handling captured around one quarter of the total market through an aggressive pricing policy. Swissport Bulgaria’s customers include Lufthansa. Goldair Handling services airlines such as Qatar Airways and Aeroflot. «For every euro it earns, Goldair spends two, as is evident from the figures in the company trade registry.» Stauffer is on the offensive, and demands that his competitor abide by Bulgaria’s laws governing ground handling service providers, which require absolute financial stability. «These accusations come as a surprise ti us,» said Goldair CEO Dimitris Papamichail, countering the attacks of the competition in the Bulgarian business newspaper Kapital.
He denied offering services at less than the cost of operation, and accused Swissport of having «begun a defamation war against us.» Papamichail’s position is that «our prices are low, but economically attractive – this is what competition is all about.»
The airport authorities are obliged to comply with EU regulations regarding liberalisation, and it is true that prices have fallen by 20–25% since Goldair Handling began its operations in Sofia. «We’ve handed over all the required documents to the KSK and have no reason for concern,» Goldair Bulgaria’s head said.
Meanwhile the airport authority, which is part of the transport ministry, has asked the ministry to limit the number of suppliers to two. This would make it necessary to invite tenders. If it comes to that both Swissport and Goldair have declared that they will submit offers.