Although traffic is currently down, the issue of capacity constraints is likely to come back on the agenda in the next few years
In the first few years of this decade, capacity - or rather the lack of it - was a constant topic of conversation in the airline industry. Then the economy turned down in 2001, swiftly followed by 11 September, leaving airport operators to deal with the unanticipated problem of filling spare capacity. Painful as this process has been for the industry, it has provided a bit of breathing space ahead of a looming capacity crisis.
The situation is most acute in Europe, where planning issues have put on hold expansion activity at some key airports. While a spate of shelved projects in the USA has raised fears of future capacity problems, Europe has overtaken Asia as the world's key problem area.
A study by the European Civil Aviation Conference (ECAC) in 2001 predicted that 2006 would be the crunch year for Europe's airport industry. John Hume, director of policy at Airports Council International (ACI) Europe, warns that while this doomsday may have been pushed back a year or two, it is still scheduled to arrive.
Since 2001, the number of airport projects in Europe has shrivelled. The list of those that have been shelved include a new international airport at Lisbon, a third airport at Paris and a second airport at Madrid. Much uncertainty remains over the planned new Brandenburg Airport in Berlin on the site of Schoenefeld Airport. All this means that there is a dearth of new builds in Europe at the moment, with the second terminal at Munich, designed to handle 20 million passengers a year, the only major action this year. Indeed, this is the first major project to come on stream in Europe since Athens in spring 2001.
There is a similar story at Europe's existing gateway airports, although here it is planning issues as much as economic concerns behind the slowdown in activity. That said, Amsterdam Schiphol announced in April that it is postponing some €800 million ($916 million) of its €2.8 billion of investments over the 2003-7 period, with €100 million being held back this year. Construction of a new pier and a people-mover will be put back two years, while an extension to the west wing of the airport will be temporarily limited to one, instead of four, new modules.
Schiphol's management estimates that the downturn has effectively knocked traffic growth back by two years, but adds: "Should volumes grow more quickly than anticipated, or should the expected slowdown be prolonged, the investments now put on hold will either go ahead or be postponed for a longer period of time."
In general, however, Europe's main gateways are still pushing for extra capacity. BAA, operator of the three main London airports, reports: "The Iraq war and SARS are not expected to cause any significant medium- to long-term changes in traffic forecasts."
BAA is calling for three new runways in the London region over the next 30 years. The call comes in the run-up to a UK government announcement, expected towards the end of June, which will set out its future strategy for the UK's airport development.
The group has identified a short-haul runway at Heathrow, a second runway at Gatwick and up to two extra runways at Stansted, London's low-cost hub. BAA is pushing the government for a "prompt" decision on the first runway and for two other sites to be ring-fenced for future development. "We hope that firm decisions will be made before the end of the year," says Mike Clasper, BAA's chief executive-designate. An extra runway at Stansted is tipped as the most likely way forward by most observers.
BAA predicts that demand for air travel in the London region will grow from 117 million passengers in 2000 to around 300 million in 2030. BAA says its approach is based on "responsible" development. Clasper explains: "By this, we mean an approach which balances economic, social and environmental concerns and which represents absolute capacity limits, where these have been clearly established, as is the case with climate change."
Frankfurt International is also having to battle with environmental issues as it seeks to gain permission for a fourth runway and third terminal, and also faces the possibility of night flights being either limited or stopped altogether, leaving Paris CDG as the only major European gateway in expansionist mood.
Against this background, airports are looking at operational methods to increase capacity. Europe's air traffic co-ordinator, Eurocontrol, says that although en route air traffic management delays are falling after the introduction of reduced vertical separation minima (RVSM) last year, airport delays have been on the rise, up by 40% at the start of the year. "The next constraining factor in the medium- to long-term will be airports," the organisation says. Eurocontrol has been working with a number of mainly second-tier airports, including Helsinki, Lisbon and Brussels, looking at ways of squeezing more capacity out of existing infrastructure.
At Brussels International, Eurocontrol has carried out a study with the airport operator BEAC and air traffic control provider BelgoControl that has resulted in the declared capacity of the airport being increased from 66 to 70 movements per hour with the use of mixed- mode operations - dual use of the two runways for both landings and take-offs.
In fact, Brussels has seen its traffic levels plunge since the collapse of Sabena at the end of 2001. However, George Paulson, director at Eurocontrol, points out that even so, the airport can face congestion during peak times.
Mixed-mode operations are seen as one way of easing the pressures on Heathrow, increasing movements on the two runways from 80 to 90 an hour. However, there is stiff opposition at local level, where many see this option as a fall-back plan should the third runway fail to get the go-ahead. At present, each runway is dedicated to either departures or take-offs, with a switch-around at 15.00h every day. Local pressure groups and government argue that this provides some respite for residents, and are opposing the plan.
Indeed, one of the defining characteristics of airport policy in Europe is that it is very much a local issue. The European Commission is publishing a communication on airport capacity later this year, but as it does not have competence in this field, the report will not carry that much weight. There have been suggestions by some airlines that the major gateway hubs should be seen as European airports and thus fall under the remit of Brussels. "This is not going to happen in my lifetime," jokes John Hume, director of policy at ACI Europe.
While Europe's hub airports struggle for space, there is evidence that smaller airports are taking up some of the slack. Europe's regional airports have increasingly been attracting low-cost carriers, particularly Ryanair, which flew 12 million passengers to secondary airports last year. However, much of this is newly generated traffic.
While the 2006 crunch date for airport gridlock may now be a couple of years further out, airports insists that the fundamental message of looming capacity problems remains. Using 1999 as a base year, ECAC predicts that the percentage of "unaccommodated" flights, (those delays where the system cannot cope), will account for 7% of delays in 2005. By 2015, this will be 26%.
Japan's capacity crisis
Europe is by far the worse region for airport capacity issues, although the IATA-backed Air Transport Action Group (ATAG) notes that Japan, and particularly Narita, faces similar problems. The airport was forced to scale back its second runway, which opened last year, from 2,500m (8,200ft) to 2,180m to accommodate local farmers. The number of passengers using Narita is expected to grow by up to 77%, bringing it to 46 million passengers by 2030. This compares with a projected 65% gain in capacity. Not surprisingly, Airbus is pushing the case for Narita to become a prime candidate for its A380 super jumbo.
Elsewhere in Asia, the capacity crisis of the early 1990s has been eased by several projects that have come on stream in the last five years or so, including Hong Kong, Kuala Lumpur and Incheon.
In the USA, meanwhile, awareness that an airport capacity crunch will return is nearly universal, even if debate centres on the changing federal authority-airport relationship and on the impact of teetering airline finances.
United Airlines, under bankruptcy protection since December, has had the widest effect on its hubs: San Francisco International has delayed plans to build two terminals while at Washington Dulles, a $1.5 billion project last year to replace the United concourse is on hold. Fitch Ratings has downgraded key Denver International airport bonds because of the United situation. Denver's deputy manager, Amy Bourgeron, says that even though a $165-million sixth runway should open in September, the airport had to postpone a 16-gate expansion, a $30 million parking addition and a new 500-room hotel. At Indianapolis, the airport fears United's recent closure of a maintenance facility there could threaten $220 million in revenue bonds.
At Pittsburgh, US Airways has given the county that operates the airport until January 2004 to renegotiate lease terms even though the carrier is on the mend, having come out of Chapter 11 bankruptcy protection. The Airports Council International-North America surveyed airports about their capital needs and estimates that capital development costs will total more than $61 billion between 2003 and 2006 at an average rate of about $15 billion per year. However, airports fear that a new US funding bill will bar them from increasing user fees, crimping their ability to finance growth.
Airports have business cycles of around 20-30 years, much longer than those of airlines. So while the current crisis in the airline industry may have provided some breathing space, the fundamental problems will not go away.
REPORT BY COLIN BAKER IN LONDON
Source: Airline Business
