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COMPETITION BETWEEN AIRPORTS FOR LONG-HAUL TRAFFIC FROM EUROPE

COMPETITION BETWEEN AIRPORTS FOR LONG-HAUL TRAFFIC FROM EUROPE. Dr Nigel Dennis Senior Research Fellow Transport Studies Group University of Westminster dennisn@westminster.ac.uk. DEFINITIONS AND SCOPE. Europe = EU 25 plus Canary Islands, Madeira, Azores, Switzerland, Norway, Iceland

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COMPETITION BETWEEN AIRPORTS FOR LONG-HAUL TRAFFIC FROM EUROPE

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  1. COMPETITION BETWEEN AIRPORTS FOR LONG-HAUL TRAFFICFROM EUROPE Dr Nigel Dennis Senior Research Fellow Transport Studies Group University of Westminster dennisn@westminster.ac.uk

  2. DEFINITIONS AND SCOPE • Europe = EU 25 plus Canary Islands, Madeira, Azores, • Switzerland, Norway, Iceland • Long-haul (AEA) = Atlantic, sub-Saharan Africa, Asia, • Australasia – excludes North Africa and Middle East • Around 5000 long-haul flights per week from Europe • (750 per day) • Carrying 1 million passengers per week • Focus on non-stop scheduled services • (charter flights not significant in most markets) • Code-shared services only counted once

  3. LONG-HAUL SERVICES BY EUROPEAN AIRPORT All airlines – July 2004 Airport Non-stop Weekly % hub airline destinations frequencies or code-share London Heathrow 71 1125 40 Paris CDG 78 806 62 Frankfurt 81 671 69 Amsterdam 60 480 67 Madrid 30 276 54 London Gatwick 32 244 21 Rome Fiumicino 34 165 44 Zurich 25 164 70 Milan Malpensa 35 153 75 Munich 33 136 76 Manchester 18 108 19 Paris Orly 11 107 41 39 others 790 (less than 100 freq each) TOTAL 5225 Source: Compiled from OAG data

  4. TREND TO CONCENTRATION • Overseas airlines focus on large origin/destination markets • e.g. London, Paris, Rome, Manchester • Medium sized markets are hubs dominated by local airline • e.g. Zurich, Milan, Munich, Vienna • Cut-backs in long-haul service: • e.g. London Gatwick, Zurich, Paris Orly, • Brussels, Copenhagen • Elimination of long-haul service: • e.g. Lyon, Basel/Mulhouse, Hamburg, • Berlin, Barcelona

  5. LONG-HAUL SERVICES BY EUROPEAN HUB Hub airline and code-share partners – July 2004 European airline Non-stop Weekly % non-operated and hub airport destinations frequencies code-share Air France (CDG) 65 503 18 Lufthansa (FRA) 43 462 31 British Airways (LHR) 46 445 5 KLM (AMS) 42 321 25 Iberia (MAD) 20 150 14 Alitalia (MXP) 17 115 20 Swiss (ZRH) 18 115 24 Lufthansa (MUC) 18 103 35 TAP (LIS) 14 75 8 Alitalia (FCO) 13 72 42 Austrian (VIE) 14 71 28 SAS (CPH) 8 55 0 British Airways (LGW) 8 51 0 Source: Compiled from OAG data

  6. EUROPEAN AIRLINES’ LONG-HAUL TRAFFIC 2002 (1) Airline Revenue Passenger % change from 2001 Km (billion) British Airways 76 - 4 Air France 73 + 4 Lufthansa 66 + 3 KLM 45 - 2 Virgin Atlantic 27 - 3 Iberia 22 0 Alitalia 14 - 27 Swiss 13 - 39 SAS 10 +22 Austrian 9 - 5 TAP 6 +13 Finnair 3 +25 LOT 3 + 1 Olympic 3 - 18 Source: AEA

  7. EUROPEAN AIRLINES’ LONG-HAUL TRAFFIC 2002 (2) Airline Passenger % of passengers load factor (%) in premium cabins British Airways 75 15 Air France 81 14 Lufthansa 83 20 KLM 82 10 Virgin Atlantic 81 7 Iberia 77 11 Alitalia 78 9 Swiss 80 16 SAS 86 13 Austrian 78 7 TAP 75 9 Finnair 81 7 LOT 86 3 Olympic 76 9 Source: AEA

  8. MAJOR LONG-HAUL DESTINATIONS FROM EUROPE by number of flights – July 2004 Destination Flights in first week of July 2004 New York JFK 463 New York Newark 277 Chicago O’Hare 262 Toronto 207 Atlanta 168 Washington Dulles 168 Bangkok 161 Tokyo Narita 160 Boston 138 Singapore 136 Los Angeles 125 Philadelphia 112 Montreal Dorval 104 Sao Paulo 104 Hong Kong 100 Source: Compiled from OAG data

  9. ALLIANCES: WHO'S WHO Star Oneworld SkyTeam ‘Wings’ UNITED AMERICAN DELTA NORTHWEST US Airways Continental Air Canada LUFTHANSA BRITISH AIRW AIR FRANCE KLM SAS Iberia Alitalia Malev TAP+ Aer Lingus- Aeroflot+ Austrian Finnair CSA Czech bmi LOT Polish SINGAPORE QANTAS KOREAN MALAYSIAN All Nippon Cathay Pacific China Southern+ Thai Air New Zealand SAA KENYA AIRW VARIG LAN CHILE AEROMEXICO Share of global RPK 26% 18% 13%} 25% {12% + joining - leaving Southwest and JAL are only non-aligned carriers in World Top 20Source: IATA, AEA, OAG and press reports (subject to continual change!)

  10. SUMMER 04 PRE-ALLIANCE daily freq daily freq Amsterdam-Detroit (KL/NW) 0 4 Frankfurt-Chicago (LH/UA) 2 4 Frankfurt-Denver (LH/UA) 0 1 Zurich-Dallas (LX/AA) 0 1 Vienna-Osaka (OS/NH) 0 1 INCREASED INTER-HUB LINKS

  11. MISFIT SERVICES ARE WITHDRAWN • LOST ROUTESCopenhagen-Hong KongFrankfurt-NairobiFrankfurt-Minneapolis • LOST CARRIERSZurich-Washington (United)Frankfurt-Washington (Delta)Amsterdam-Bangkok (Thai)

  12. BOEING TRAFFIC FORECASTS 2003-2023 Thousand billion RPK

  13. LONG-HAUL PRODUCT VARIATIONS • Use of smaller aircraft (Boeing 757) on thin routes • Continental • American (all economy class on Manchester-Boston) • ‘Executive’ jets (A319LR/737-700X) – all premium class • Lufthansa/Privatair • Air France ‘Dedicate’ • bmi British Midland investigating A319s with • conventional two-class cabin from Manchester • On conventional aircraft • 2, 3 or 4 cabins? • Insufficient demand for separate First Class • Virgin Premium Economy • BA World Traveller Plus • New Large Aircraft (A380) • Ultra long-range mid sized aircraft (A340-500, 7E7)

  14. AIRBUS A380 ORDERS Virgin Atlantic 6 Air France 10 Lufthansa 15 Emirates 43 Etihad 4 Qatar 2 Thai 6 Singapore 10 Malaysia 6 Korean 5 Qantas 12 Source: Compiled from Flight International data

  15. USE OF NEW LARGE AIRCRAFT (A380) Airbus forecast of top 10 A380 airports globally in 2019 with number of aircraft operating Tokyo Narita 116 London Heathrow 96 Hong Kong 83 Los Angeles 74 Singapore 56 New York JFK 50 Bangkok 47 Dubai 43 Taipei 38 Sydney 35 Source: Airbus

  16. LONG-HAUL LOW-COST AIRLINES (1) • Less scope to increase utilisation • Difficult to match the marginal cost of economy class seats in a mixed configuration aircraft of major carriers • Some ‘frills’ must be retained • Hub feed is crucial for long-haul operations; there are few dense routes • Secondary airport strategy more difficult

  17. LONG-HAUL LOW-COST AIRLINES (2) • Cargo cannot be ignored • Less scope for labour savings • Bilateral agreements present barrier • to entry • Some former charter airlines operate • low frequency services e.g. LTU (Dusseldorf-Orlando) Martinair (Amsterdam-Barbados)

  18. CONCLUSIONS • Long-haul travel is becoming more concentrated; SN Brussels, SAS • and Olympic have largely withdrawn; Swiss and Alitalia may follow • Collapse in service from base airports such as Brussels and • secondary centres such as Gatwick and Geneva • Only London can support many services without feeder traffic; • Frankfurt and Paris (and Amsterdam?) will prosper as hubs • Elsewhere: niche ethnic markets plus links to key overseas hubs • If profitability of low-cost short-haul services diminishes then • may entice e.g. easyJet to start long-haul from Stansted and • become more of a network carrier (c.f. Peoplexpress) • If no new runways at Heathrow and Frankfurt then overflow will • trickle down elsewhere

  19. COMPETITION BETWEEN AIRPORTS FOR LONG-HAUL TRAFFICFROM EUROPE Dr Nigel Dennis Senior Research Fellow Transport Studies Group University of Westminster dennisn@westminster.ac.uk

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