Polonia suspends all flights due to lease payment difficulties.

Air Polonia Plane.

Less than three weeks after Volare stopped operations in Italy Air Polonia has ceased flying operations this week in Poland.

As ever, debate rages about the precise reason for stopping operations but most analysts believe that it was due to the exit of Irish based Crescent Capital, the major investor in Air Polonia. The airline was therefore left unable to pay USD 800,000 in outstanding lease payments on various aircraft. The news that Air Polonia has become the next victim comes as a surprise given that Air Polonia announced a major expansion of routes on 18th September 2004. The new routes have been running for just over two months before the shut down happened. Other industry insiders appeared to be expecting it. "All of the [low-cost] carriers in the region are running on losses," Jozsef Varadi, president of Hungarian rival Wizz Air, told reporters on Monday. "Air Polonia was first to go down, but it will not be the last this winter. Only the companies that are the strongest financially and have the best cost structure will survive, the rest will die." Wizz Air itself recently moved to reiterate it has a stable cash basis by stating that it had received a EUR 25m cash injection.

The winter promises to be a brutal affair for airlines in the central european area. Most of them are adopting a rapid expansion high risk strategy in an attempt to gain a sizeable foothold in the regional markets before the inevitable entry of giants Ryanair and Easyjet. This would assist them in trying to survive the inevitable onslaught from the two major European budget carriers. Poland would certainly be a good start for both Easyjet and Ryanair - the existing budget carriers seized 20% of the Polish market within six months and as both Easyjet and Ryanair carriers are due to receive a considerable amount of plane deliveries over the next twelve months it's likely that some will be based in central Europe.

Ryanair and Easyjet already rapidly moving into central Europe.

Already some explorations are being made by both airlines into options in central Europe. In Poland alone Ryanair has recently launched Stansted (UK) to Wroclaw whilst Easyjet already has a minor hub connecting Krakow with Luton (UK), Berlin (Germany) and Dortmund (Germany) as well as running planes on the Warsaw to Luton (UK) route. Riga in Latvia looks likely to become a future hub for Ryanair as it already connects with three existing hubs - Stockholm Skavsta (Sweden), London Stansted (UK) and Frankfurt Hahn (Germany) as well as serving Tampere (Finland).

Where next?

As one airline dies, so another materialises out of the blue. The website needs a sizeable bit of polishing as I couldn't make bookins online with them but Romanian based Blue Air has already started operations out of Bucharest. Putting my neck on the line though, I'd be amazed if someone wasn't flying to St Petersburg in Russia within 12 months time. Russia beckons for those that are strong enough to take it on.