Comment: Liliair – The new airline for Carinthia

Klagenfurt Airport (Photo: René Steuer).
Klagenfurt Airport (Photo: René Steuer).

Comment: Liliair – The new airline for Carinthia

Klagenfurt Airport (Photo: René Steuer).
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The Lilihill Group plans to launch its new Liliair on December 13, 2022. The project seems to come out of the blue, but that's not the case at all. This has been pushed forward ambitiously since 2019 - with delays caused by corona. It won't be easy and you need a lot of money and patience, as examples from Bozen, Altenrhein and Mannheim show. But: Lilihill uses private funds and not tax money.

The Lilihill Group, majority owner of Klagenfurt Airport, has been pushing ahead with the development of its own airline since 2019. Even then, the aviation specialists needed to operate an airline were secured. The plans have never been officially commented on, but neither have they been denied.

Actually, Liliair should have been in the air for a long time, but the corona pandemic made sure that it was approached more slowly than originally announced. The constant cross shots from the Carinthian state politics have not exactly had an accelerating effect. In any case, there was a lot of work going on behind the scenes on the project. On December 13, 2022, former AUA boss Peter Malanik and Dieter Kandlhofer, who act as managing directors of Lilihil, want to present the new Liliair. Kay Kratky, who also used to be the head of Austrian Airlines, was also won over to the project.

Ex-Niki competence on board

But an airline cannot be made with just managing directors. Lilihill was able to take advantage of the fact that numerous former Niki key employees have left the company since Laudamotion was taken over by Ryanair. Also, after the waves of layoffs that took place shortly before the flight operations of Laudamotion were discontinued, some hired in Carinthia. With regard to the nominated persons, Liliair has already been able to recruit numerous experts and it is also striking that many Niki can show previous experience in connection with Embraer jets.

Of course, Lilihill wants to “let out” as little as possible before December 13, 2022, which at the same time opens up space for a lot of speculation that can already be found across the media landscape. Due to the fact that the company has already stocked up on the specialist staff required to operate an airline, it can be assumed that in the medium term the company wants to operate with its own AOC and its own operating license. This will also be inevitable, because no "virtual construction" has ever been successful in the long term.

Skyalps and Peoples: Two airport airlines with different start-up concepts

In an initial phase, it is conceivable that, following the example of the South Tyrolean Skyalps, you would initially work together with a partner who would take over operational flight operations and later switch to in-house operations. Skyalps is currently in this phase, and the cooperation with Luxwing is very deep. To be precise: The Maltese operator not only carried out flights for Skyalps, but actually delivered a complete airline, because the Maltese made their know-how available for setting up an airline and provided massive support. With foresight, most of the flying staff was hired in the region, because they will soon be changing employers and will then be employed by the “real airline Skyalps”.

It should be clear that Skyalps is by no means cheap. Behind the airport and thus also behind Skyalps is a financially strong consortium of South Tyrolean entrepreneurs. The entrepreneurs René Benko and Hans Peter Haselsteiner are also involved through their companies. The latter investor is known in particular for the Strabag Group, but he is also an important shareholder in the private railway company Westbahn. In South Tyrol, the owners of Bolzano Airport own hotels, ski lifts and much more. So it is only natural that you want to optimize capacity utilization with your own airport, which the state government was no longer allowed to operate due to a referendum, along with your own airline. You can definitely cope with the start-up losses, because the Skyalps project is designed for the long term and is constantly developing. Since Bolzano Airport was even more derelict than Klagenfurt, one thing is obvious: a lot of private money had to be spent.

A few years ago, Altenrhein Airport took a completely different approach. Key workers, pilots, flight attendants and even managers from InterSky, Austrian Airlines, Niki and Tyrolean were recruited to build the Peoples airline. The latter is also important insofar as Rheintalflug, which was taken over at the beginning of the 2000s, was merged into it and not all of them switched to the then newly founded InterSky. Quietly and secretly, the Peoples team built their own airline and obtained an AOC and operating license. From the first flight on you do everything yourself. This does not apply to wet lease operations by other carriers if the only aircraft in the fleet has to undergo lengthy maintenance.

For a short period of time, three airlines even engaged in a price war in the Lake Constance-Vienna business. Austrian Airlines and Peoples flew from Altenrhein and InterSky from Friedrichshafen. All three carriers earned nothing. First InterSky said goodbye to the match and then AUA too. The local crew base continued for a few more years, with the crews being flown to Vienna via Zurich, Munich and Innsbruck. In the meantime, all crew bases outside of Vienna have been dissolved.

Rhein-Neckar Air is still suffering from the corona side effects

The example of Rhein-Neckar Air at Mannheim Airport in Germany shows how difficult it is to operate a “virtual construction”. The company was founded to bring regular scheduled flights to the small airport. Not entirely selfish for the shareholders, because the continued existence was at stake and the SAP group, for example, would have lost the landing pad for private planes. With Gerd Brandeckers MHS Aviation, they quickly found a partner with many years of experience in the regional flight segment. Augsburg Airways briefly belonged to the company and it was present in Mannheim for a long time with Cirrus Airlines. They knew each other and knew how it could work.

For several years, MHS Aviation was quite successful under the Rhein-Neckar Air brand in the direction of Berlin and Hamburg. You could also set up a tourist route with Sylt and occasionally charter at Kassel and other airports. But then Corona came. RNA has not yet been able to fully recover from the pandemic because the city flights to Hamburg and Berlin are no longer available. Repeated attempts were made to resume, but the booking numbers that RNA had before the pandemic failed to materialize. In Berlin, there was another factor that was often underestimated: Tegel Airport made rapid city-to-city travel possible. This is exactly the reason why Cirrus Airlines offered Mannheim flights from this airport until the bitter end of Tempelhof Airport. They even carried out the last scheduled flight at all before the lights went out forever at the THF. Berlin-Brandenburg Airport, which is much further from the city centre, requires more travel time and is therefore not particularly popular with business travellers. The tendency to hold "not so important appointments" on the phone or via Skype and Co is very high. What remains in Mannheim? Currently Sylt flights and whether Hamburg and/or Berlin will ever return to the flight schedule is open. The German federal government is not exactly in an aviation-friendly mood regarding domestic flights.

There is one owner in Altenrhein – in Carinthia politicians think they have to get involved

Incidentally, things don’t always run smoothly in Altenrhein either, because the corona pandemic has caused quite a bit of trouble for both the airport and its own airline, Peoples. Even though the airport is in Switzerland, it is mainly used by Austrians for scheduled flights. The sometimes grotesque entry and quarantine regulations meant that flight operations had to be stopped again and again, and to this day the main route to Vienna is still served to a reduced extent. Demand keeps recovering, but it's not easy for the team at Altenrhein Airport. The fact that the airline and the airport still exist is thanks in particular to sole owner Markus Kopf. He sticks to his plans and his vision and stands behind his companies and his employees. This also includes the fact that a lot of private money has been invested, and Kopf has a decisive advantage over Klagenfurt: it is the sole owner and is not exposed to any political “cross shots”, even though there are always emotional local discussions about aircraft noise.

The situation is a little different in Carinthia, because not all politicians have yet understood that the airport is no longer a "parking lot" for party members, but has a private majority owner. It was the state policy itself that wrecked Klagenfurt Airport and, with a questionable subsidy policy that even concerned the European Court of Justice, turned it into a place where airlines are reminiscent of earlier times and hardly want to do anything without subsidies. The birds were probably shot by Condor flights, which were chartered through a company founded for this purpose. Sales didn't work at all, so that the planes to/from Germany were yawning on their way to and from Germany. Operating a Boeing 757 profitably is not easy, but with charter flights it is not the airline that bears the risk, but the customer. State politics under Jörg Haider even took the risk. They took part in the financially ailing Styrian Spirit and thought they had to play with Bombardier CRJ-200 Lowcoster and that too without any internet ticket sales. The end is well known: Styrian finally went bankrupt and even a lightning loan from Hypo-Alpe-Adria didn't help anymore.

Own airline brings independence

With Liliair, a new carrier for Klagenfurt is to be set up with private funds. You want to become independent of the whims and money demands of airlines. That was also the reason why Markus Kopf founded his Peoples. The interaction between the in-house airline and the airport can be advantageous because many synergies can be used. However, as long as there are cross shots, blockade measures and political influence, things will get complicated. Building and operating a regional airline is damn difficult anyway. First and foremost, it takes a hell of a lot of money, because the expected start-up losses are incredibly high. An example from outside the industry: it took the private Westbahn several years to break even. Different means of transport, but comparable in that everything had to be rebuilt from the drawing board. If you want to get into aviation or rail transport, you need a lot of capital and should have a lot of reserves ready for additional payments, because they will be needed.

Lilihill is willing to take private funds to take the risk herself. The fact that experienced airline managers, who used to be at the top of Austrian Airlines, could be hired and, on top of that, experienced and competent aviation specialists, shows that they don't want to set up just any "joke booth". Many former Laudamotion/Niki/Level Europe employees have not been able to fully develop their potential in recent years, because Niki's bankruptcy, which primarily caused the collapse of the Air Berlin group, and the de facto closure of Laudamotion and the bankruptcy of Level Europe, were also largely due to the market change caused by Corona. In a way, Ryanair has also made its "contribution" that one or the other has looked around for alternatives - sometimes voluntarily, sometimes forced due to job cuts.

With Liliair, Lilihill now has it in its hands to prove that the investment is serious and then the proponents should present and implement their “baby”. The project is financed with private funds and not with tax money, so let them work and you can always form an opinion later.

2 Comments

  • Stefan, 9. December 2022 @ 08: 49

    ...interesting comment, which I can get some things from, but not everything.
    First of all, I am a Carinthian living abroad who is following what is happening at Klagenfurt Airport with great interest.
    From my point of view, the federal state of Carinthia does not need its own airport, since all Carinthian districts are well served by other airports (ref. VK, WO, K, KL SV - Graz Airport // reference VI, VL, FK, HE, SP — Ljubljana Airport).
    Viewed soberly, I have to say that if there was a corresponding demand in Carinthia, even the big airlines would not miss it.
    As a reminder, in the 80s, 90s, 2000s there were connections (several times a day) to various hubs: from Klagenfurt to Zurich (Tyrolean + Swiss), Klagenfurt to Frankfurt (Tyrolean + Lufthansa), Klagenfurt to Munich (Air Dolomiti + Lufthansa) , Klagenfurt via Linz to Amsterdam (KLM Alps + KLM).
    Behind all these connections, operated by small airlines, were large partner network airlines (codeshare) and yet they all had to be discontinued...
    I agree that a lot has been done wrong in the past (especially by the state of Carinthia and the political leaders), but in the hope that Klagenfurt Airport will be given wings.
    In the course of the privatization of the airport, there was not a single interested party from the aviation sector - that alone speaks for itself!
    ... and yes, I too am skeptical about Lilihill, why: because a lot of what happened this year was definitely not (morally) right.
    Nonetheless, I believe - and I'm also very curious - that Lilihill must be given a fair chance to present their ideas and plans for their own airline (without prejudice).

  • Thomas Joseph , 11. December 2022 @ 15: 28

    I agree with Stefan, interesting comment with some clear facts. I should/may have worked in industry myself for a long time and was able to gain insight there and there. I would like to comment as follows:

    So it has to be questioned whether the lack of interest in the context of the tender was due to the location, or perhaps to the tender itself, i.e. the procurement regulations and the specifications anchored therein. At least the suspicion remains that the dog was already buried here. At least I know from a large German operator who studied the tender documents whether the poor quality of these was not willing to take any further steps.
    It is also worth questioning why Strabag (Haselsteiner) had not struck at the time, or probably dropped out of the award process? Whether Strabag's commitment up until then, the airport itself or the location itself hardly seems to reflect the problem here. According to the media, they have reported back.

    From the airline side, I can say that in Carinthia it has certainly not been a question of who managed the airport and when. That has the public sector, resp. their representatives in society are neither better nor worse off than anyone else (on the contrary, from what one heard, one was far more active in airline acquisition in the past, there were also good people). The problem used to be the lack of commitment to the airport as a public infrastructure. Above all from politics and the interest representatives. If any lump sums were unthinkingly promised to someone in heaven, as soon as that was used up, then it was “finito” and the suffering started all over again. Even the attempt to force tourism professionals on board via mandatory quotas was not the smartest approach (because they are now enormously skeptical). Long-term, cooperative market development was never the instrument in KLU/Carinthia. But you should use that ... makes sense, not with castles in the air as announced (repeatedly announced).

    However, the historical figures show that there is a market. Even if many PAXe took a seat on subsidized seats, you have to leave the church in the village here (you put in relation what a KLU-STN circulation causes in terms of costs and consider the amount of the subsidy ... this raises the question of whether you can take the risk differently could minimize...).
    Most LCC routes in Europe are still supported with certain marketing contributions, even some network carriers can cushion the risk, especially in the less dense areas. Be that as it may, traffic development must and may cost something, especially if it is done sustainably, in a cooperative and coordinated manner, with realistically calculated staying power. It was always too little in KLU (now it's actually too little). There were a few years when the HUB connections (see Stefan above) constantly exceeded 200. PAX at KLU generated, even then there was whining. If the numbers were only approximately in the room, then everything would be fine. However, there are apparently legal principles that must be observed and before that the current constellation is as far away as KLU is from an LH-FRA connection.

    But what is happening right now, if you can believe the media? We are mainly talking about real estate developments, even if Liliair is suddenly an issue again, it seems to be a diversionary maneuver mmn. But let us surprise ourselves.
    To: In Altenrhein there is an owner - in Carinthia the politicians think they have to get involved -> ??? ... Uh yes, that's good! The state of Carinthia and the city of Klagenfurt are also co-owners. Why shouldn't they be allowed to have a say? Especially when, it seems, the airport's assets are at stake, such as the properties. They belong to the airport company and are therefore part of the public sector.

    It will also be interesting to see who will be the ACMI lessor (will probably be FLITE, the upcoming MESA Europe offshoot), they still need their AOC, but that should be ready in March/April when you Maltese media can believe.
    It should also be questioned why, for example, you haven't come to terms with Sky Alps long ago? In Bolzano they certainly wouldn't have had anything against risk-sharing, on the market side they hardly stand in each other's way, on the contrary, they could complement each other wonderfully and use synergies. But there are many more possibilities, I'm convinced. I'm also curious to see whether the said airline manpower is actually at work.

    Btw, Peoples was also mentioned: The source market and its position in relation to Vienna is exactly the point why ACH-VIE works, KLU-VIE or -MUC would certainly not work without codeshare: the geographic location alone makes it all the difference! Peoples mainly serves P2P, KLU-MUC or -VIE are certainly 80% (minimum) potential switchers. There is little point in comparing the Peoples concept without codeshare.

    To get to the heart of the matter: Apparently, the expected revenue potential of the non-operational real estate (and the entire property if nothing more should happen with flight operations) seems to be so pronounced that even a million-euro investment in an airline start that is not very promising then seems to be written off -Up does not represent a problem in the overall calculation. Here it seems to be mainly a question of gaining time until less correct politicians fulfill their supervisory duties and/or the management of the responsible national company, which apparently simply acts correctly, is replaced. If you look closely at what has or has not happened since 2018, this seems to be the logical conclusion ...

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2 Comments

  • Stefan, 9. December 2022 @ 08: 49

    ...interesting comment, which I can get some things from, but not everything.
    First of all, I am a Carinthian living abroad who is following what is happening at Klagenfurt Airport with great interest.
    From my point of view, the federal state of Carinthia does not need its own airport, since all Carinthian districts are well served by other airports (ref. VK, WO, K, KL SV - Graz Airport // reference VI, VL, FK, HE, SP — Ljubljana Airport).
    Viewed soberly, I have to say that if there was a corresponding demand in Carinthia, even the big airlines would not miss it.
    As a reminder, in the 80s, 90s, 2000s there were connections (several times a day) to various hubs: from Klagenfurt to Zurich (Tyrolean + Swiss), Klagenfurt to Frankfurt (Tyrolean + Lufthansa), Klagenfurt to Munich (Air Dolomiti + Lufthansa) , Klagenfurt via Linz to Amsterdam (KLM Alps + KLM).
    Behind all these connections, operated by small airlines, were large partner network airlines (codeshare) and yet they all had to be discontinued...
    I agree that a lot has been done wrong in the past (especially by the state of Carinthia and the political leaders), but in the hope that Klagenfurt Airport will be given wings.
    In the course of the privatization of the airport, there was not a single interested party from the aviation sector - that alone speaks for itself!
    ... and yes, I too am skeptical about Lilihill, why: because a lot of what happened this year was definitely not (morally) right.
    Nonetheless, I believe - and I'm also very curious - that Lilihill must be given a fair chance to present their ideas and plans for their own airline (without prejudice).

  • Thomas Joseph , 11. December 2022 @ 15: 28

    I agree with Stefan, interesting comment with some clear facts. I should/may have worked in industry myself for a long time and was able to gain insight there and there. I would like to comment as follows:

    So it has to be questioned whether the lack of interest in the context of the tender was due to the location, or perhaps to the tender itself, i.e. the procurement regulations and the specifications anchored therein. At least the suspicion remains that the dog was already buried here. At least I know from a large German operator who studied the tender documents whether the poor quality of these was not willing to take any further steps.
    It is also worth questioning why Strabag (Haselsteiner) had not struck at the time, or probably dropped out of the award process? Whether Strabag's commitment up until then, the airport itself or the location itself hardly seems to reflect the problem here. According to the media, they have reported back.

    From the airline side, I can say that in Carinthia it has certainly not been a question of who managed the airport and when. That has the public sector, resp. their representatives in society are neither better nor worse off than anyone else (on the contrary, from what one heard, one was far more active in airline acquisition in the past, there were also good people). The problem used to be the lack of commitment to the airport as a public infrastructure. Above all from politics and the interest representatives. If any lump sums were unthinkingly promised to someone in heaven, as soon as that was used up, then it was “finito” and the suffering started all over again. Even the attempt to force tourism professionals on board via mandatory quotas was not the smartest approach (because they are now enormously skeptical). Long-term, cooperative market development was never the instrument in KLU/Carinthia. But you should use that ... makes sense, not with castles in the air as announced (repeatedly announced).

    However, the historical figures show that there is a market. Even if many PAXe took a seat on subsidized seats, you have to leave the church in the village here (you put in relation what a KLU-STN circulation causes in terms of costs and consider the amount of the subsidy ... this raises the question of whether you can take the risk differently could minimize...).
    Most LCC routes in Europe are still supported with certain marketing contributions, even some network carriers can cushion the risk, especially in the less dense areas. Be that as it may, traffic development must and may cost something, especially if it is done sustainably, in a cooperative and coordinated manner, with realistically calculated staying power. It was always too little in KLU (now it's actually too little). There were a few years when the HUB connections (see Stefan above) constantly exceeded 200. PAX at KLU generated, even then there was whining. If the numbers were only approximately in the room, then everything would be fine. However, there are apparently legal principles that must be observed and before that the current constellation is as far away as KLU is from an LH-FRA connection.

    But what is happening right now, if you can believe the media? We are mainly talking about real estate developments, even if Liliair is suddenly an issue again, it seems to be a diversionary maneuver mmn. But let us surprise ourselves.
    To: In Altenrhein there is an owner - in Carinthia the politicians think they have to get involved -> ??? ... Uh yes, that's good! The state of Carinthia and the city of Klagenfurt are also co-owners. Why shouldn't they be allowed to have a say? Especially when, it seems, the airport's assets are at stake, such as the properties. They belong to the airport company and are therefore part of the public sector.

    It will also be interesting to see who will be the ACMI lessor (will probably be FLITE, the upcoming MESA Europe offshoot), they still need their AOC, but that should be ready in March/April when you Maltese media can believe.
    It should also be questioned why, for example, you haven't come to terms with Sky Alps long ago? In Bolzano they certainly wouldn't have had anything against risk-sharing, on the market side they hardly stand in each other's way, on the contrary, they could complement each other wonderfully and use synergies. But there are many more possibilities, I'm convinced. I'm also curious to see whether the said airline manpower is actually at work.

    Btw, Peoples was also mentioned: The source market and its position in relation to Vienna is exactly the point why ACH-VIE works, KLU-VIE or -MUC would certainly not work without codeshare: the geographic location alone makes it all the difference! Peoples mainly serves P2P, KLU-MUC or -VIE are certainly 80% (minimum) potential switchers. There is little point in comparing the Peoples concept without codeshare.

    To get to the heart of the matter: Apparently, the expected revenue potential of the non-operational real estate (and the entire property if nothing more should happen with flight operations) seems to be so pronounced that even a million-euro investment in an airline start that is not very promising then seems to be written off -Up does not represent a problem in the overall calculation. Here it seems to be mainly a question of gaining time until less correct politicians fulfill their supervisory duties and/or the management of the responsible national company, which apparently simply acts correctly, is replaced. If you look closely at what has or has not happened since 2018, this seems to be the logical conclusion ...

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