Having commenced operations in March of this year, Rhein-Neckar Air is Germany’s newest scheduled airline. Founded by several companies from the Rhine-Neckar Region, the airline has wet-leased a Dornier 328 to ply its only route – Mannheim to Berlin Tegel – previously operated by the now defunct regional carrier, Cirrus Airlines.
Niels Trubbach had the chance to chat with Dirk Eggert, general manager at Rhein-Neckar Air and also executive manager at City-Airport Mannheim, about the startup which thus far, has been able to sustain operations on a relatively meagre budget.
What were the reasons for setting up Rhein-Neckar Air and how was the airline developed?
After Cirrus Airlines collapsed, we, as Mannheim Airport, had no success in finding a new operator for our Berlin route for two years. All of this was due to the operational restrictions in force at Mannheim which, owing to its relatively short runway (1‘066m), made it very difficult to find a new operator.
You see, the Dornier 328 is actually the only aircraft that is suitable to operate at Mannheim Airport, both in terms of performance and from a passenger’s point of view. While the Dash-8-100 and -200 could be used, there are just two regional carriers left in Europe, namely SATA and Wideroe, that operate them. The ATR 42-600 could also be used albeit with significant restrictions. Alas, the Dornier 328 is the type best suited to our needs.
Anyway, as I just mentioned, there are only a handful of Dornier 328 operators left in Europe and none of them were willing to come. We had held talks with some interested parties but all would only commit to the route on condition it was either subsidized or a Public Service Obligation (PSO).
This struck us as odd as all scheduled flights from Mannheim to Hamburg and Berlin had , been profitable.
So we began to consider our options.
During the Cirrus years, we, as an airport, oversaw customer care for the airline‘s passengers. We therefore knew the customers that flew the route. All in all, about 35 to 40 companies made up 70 percent of the revenue.
It then dawned on us that we as an airport should consider setting up our own airline should we be able to win back Cirrus‘ old clientele. So, we asked them [the old customer base] if they would use the route again and got positive feedback.
Following a meeting with some major local firms, it was decided to found an association which would later become the sole owner of Rhein-Neckar Air. The firms, which themselves have an interest in the flights, are stake holders in the association.
However, the setup doesn’t mean we don’t offer competitive fares as after all, a customer will only fly with you as long as it makes financial sense to them.
Do your current operations have any similarities to those of Cirrus? If not, where do they differ?
The only similarity Rhein-Neckar Air has with Cirrus is that we use a Dornier 328 on our Mannheim to Berlin route.
By the time Cirrus had suspended operations, their reliability and service had become a disaster, in my own personal opinion. So you could say we learned a lot from Cirrus – above all how not to operate.
Do you have any long-term plans to apply for your own Air Operators Certificate (AOC) which would then lead to you terminating your wet-lease contract with MHS Aviation?
There‘s no reason for us to do so at the moment. MHS Aviation is a very reliable partner and offers excellent conditions. MHS Aviation also has enough planes to cover an AOG (Aircraft On Ground ) or provide replacements during repairs and routine checks. Often times, you’ll see a second Dornier 328 here in Mannheim. This second Dornier 328 is used by Sun-Air of Denmark as well as on charter flights.
The route from Mannheim to Berlin was abandoned for more than two years. Was it difficult to get the old clientele back?
We announced our flights just five weeks ahead of the launch date which, in practical terms, is leaving it a bit too late. However, our core group of 35-40 customers knew roughly when the first flight would launch and could therefore prepare themselves accordingly.
Therefor our business plan had estimated around 15 passengers per flight in March but in actuality, we exceeded expectations averaging 19 passengers per flight.
Is it more difficult to attract passengers in Berlin than in Mannheim?
Distribution is definitely more complicated in Berlin. While we are working with a sales agent that is active in Berlin and have also visited some travel retailers there to tell them about our product, we just do not have the funds to advertise as much as we would like to in Berlin.
Case in point, we have just rented one advertising panel at Berlin Tegel Airport, close to the counters where Lufthansa mostly handles their flights to Frankfurt. Though that space is very expensive, I think it makes economic sense.
Also, you have to consider the medium and the clientele being targeted. For example, in Mannheim, we don’t advertise in newspapers or on the street as this would not reach our target niche – business travellers. Instead, we are in contact with major firms and always have to convince them with our fantastic customer care.
In the greater scheme of things, while advertising would bring in more passengers, its costs would not be offset through higher revenue.
So, one impact of this policy is that our morning flight from Berlin to Mannheim is also our flight with the lowest loads.
You’ve now been in business for a couple of months. How have your results been until now?
We have exceeded our own expectations. Though the yield could be a bit better, we are actually very happy about the results. Currently there are around 22 passengers per flight. In comparison, Cirrus, which operated four as opposed to two return flights, achieved 21 passengers per flight on average. And Cirrus was able to make money on top of that!
Do you have any plans to set up or join a Frequent-Flyer (FF) programme?
We‘re looking into this.. In all honesty, our customers are frequent flyers living around Mannheim with many of them having attained some level with some other airline‘s frequent-flyer programme, more often than not, Lufthansa‘s Miles & More. So, taking that into consideration, for someone flying 100‘000 miles a year, the 500 miles earned on our Mannheim-Berlin route is less important compared to the convenience and comfort we offer them.
In any case, I think there is a bit too much hype placed on frequent-flyer programmes.
Would the opening of the new Berlin International Airport (BER) have any impact on your business?
Obviously we would like to see Tegel Airport stay open for longer. Aside from its overall lack of attractiveness, there is also the prospect of BER charging higher taxes for small planes which would present us with big problems. With the way things are, small planes visiting Tegel are already paying more. Landing fees start at 26 tons while our airplane has a weight of just 13.9 tons. Landing fees will triple to €900 for a Dornier 328 which of course is not good for us.
Are you planning to open more routes out of Mannheim?
At this time we have no concrete plans to add any other destinations to our network. Currently, we are focussed on developing our Berlin operations into a solid business. But sooner or later we will evaluate flights to Hamburg which would then mean sourcing a second aircraft. While a second aircraft would of course be necessary, it would also be a big risk.
Another idea we have is to launch a weekly flight to Sylt/Westerland – possibly in 2015 using our existing aircraft during the summer season and operated only on weekends.
While using a cost-intensive 30-seater for leisure flights would generally make no financial sense as it needs average yields of around €300 to €350 per passenger on a short to medium return trip, we could make flights to Sylt work given the presence of wealthy tourists that may be willing to pay such prices for a ticket.
But other than those options, we as Rhein-Neckar have no intention of starting leisure flights to destinations other than Sylt as the distribution would require cost-intensive advertising.
But then again, leisure flights might also come about in the form of charters, so who knows.
The Dornier 328 is renowned for its high operational costs. What makes it the perfect fit for Mannheim?
As I mentioned earlier, only a few comparable aircraft types are able to operate into and out of Mannheim: the Dash-8 -100, -200 and the ATR 42-600 with restrictions. When Cirrus used a Dash 8-100 on flights to Mannheim during [the Dornier’s] maintenance downtime, we received a lot of negative passenger feedback.
In comparison to these aircraft types, the Dornier 328 is very comfortable and convenient for passengers. And even if the type’s production run has finished, it is still up-to-date.
You also have to consider that while a used Dornier 328 costs around €2.5million, a brand new ATR would cost €18million which would, in turn, lead to increased capital costs. And just the fact that we are operating a newer aircraft does not mean an increase in revenue to cover those increased costs.
All in all, despite the fact that even with load restrictions an ATR could still offer more seats than the Dornier 328, in our case, if we want to increase flights, we will simply add more frequencies.
Despite of its high cost per seat, the Dornier 328 is our sole option so we simply cannot complain about it.
Is the Dornier 328 a reliable aircraft?
The Dornier 328 has an excellent record of reliability. In the event of problem, MHS Aviation often has a second aircraft available as back-up based here in Mannheim.
We are very focused on reliability and, of course, also on on-time performance. I can say that flight crews and engineering are collaborating very closely and to a very strong extent.
Is Mannheim Airport serviceable all year-round?
Mannheim City Airport sometimes becomes a problem in winter as we cannot offer CAT 2 or even CAT 3 operation. On average, for eight to twelve days of the year, when there is strong fog, it is impossible to operate flights and we are forced to use Karlsruhe/Baden-Baden as an alternative airport. Cirrus, for its part, used to land in Saarbrücken.
Actually this was one of our reasons for launching the airline in March. In our opinion, there are only two start-up dates that make sense: shortly after winter to avoid additional costs due to de-icing, cancellations etc. or at the end of the summer holidays..
Where do you see yourselves going over the next five years?
Rhein-Neckar Air is not a company that expands for expansion’s sake. We don‘t want to serve a lot of destinations; we just want to focus on a few core markets where we know we can be successful. Maybe in the long-term we’ll serve Hamburg and possibly even a third destination. But, from a realistic point of view, Mannheim is only capable of sustaining flights to two to three destinations at max.