If growth through the world's airports was relatively modest last year, then the causes are not too difficult to trace. The collapse in traffic over much of Asia-Pacific left the region's bright new airports showing an outright decline. That was enough to bring world growth back below 3% despite some heady expansion elsewhere around the globe.
Asia's fall from grace could hardly have come through more clearly in this year's ranking of the Top 100. The league, based on preliminary results from the Airports Council International (ACI), shows that Asia-Pacific's once glittering stars were by far the worst performers of 1998. Indonesia's main hub at Jakarta saw passenger numbers collapse by nearly 40% as the country struggled with its economic and political traumas. Seoul Kimpo was not far behind with a near 20% fall, as South Korea continued efforts to rebuild.
Overall, the ACIfigures show passenger numbers in Asia-Pacific down by close to 6% last year. Cargo too fell by nearly 4%. Despite some tentative signs of recovery from the region's major carriers, the decline appears to have continued into the start of 1999, with passenger traffic down by another 3% in January according to ACI.
The consequences of Asia's downturn also show up further afield as European airlines switched capacity onto the Atlantic and the USmajors renewed their push south of the border. That helped Latin America's airports towards a boom year with passenger growth in double digits.
Europe's hubs also thrived with passenger numbers rising by an average 8%. A resurgent Sabena helped Brussels airport grow at twice that rate, while big capacity increases by Air France, KLM and others encouraged a rise of 10% or so at their home hubs. The region's boom appears to have continued into 1999. Figures from ACI Europe, based on the first three months performance from the region's major hubs, show growth holding steady at the 8%mark.
On the other side of the Atlantic, growth has been less universal. Perhaps the biggest news was that Atlanta Hartsfield finally knocked Chicago O'Hare off the world number one spot after years of solid growth.Other major hubs saw passenger numbers decline, including San Francisco and Miami. Further down the rankings, secondary airports such as Chicago Midway and Washington Dulles have thrived from a mix of new regional services and transatlantic capacity. So too in Europe where up and coming second tier airports such as London Gatwick and Munich have boomed.
Hub dominance
The story behind this second-city growth is highlighted in a recent study carried out by Craig Jenks of New York-based consultants Airline/Aircraft Projects. Looking at the new transatlantic services opened by the majors last summer, Jenks concludes that airline growth strategies have shifted away from the hub-to-hub emphasis of the early-1990s. His analysis shows that the bulk of capacity growth was rather between hubs and second cities or occasionally straightforward point-to-point. As the market shifted away from inter-hub consolidation, at least four cities saw new non-stop transatlantic flights -Denver and Cleveland linked to London, while Basle and Luxembourg won services to New York.
For the future, Jenks concedes that the growth of global alliances could push the market in either direction. As new members join the alliances, so they will wish to develop links between their own hubs and those of their partners. However, this could be outweighed by the addition of spokes to existing hubs as the rival alliances begin to challenge each other in their respective fortresses.
Either way, their efforts are certain to be watched closely by competition authorities in Washington and Brussels, concerned at the grip that the majors can exert, especially in concert with powerful alliance partners.
Major US hubs may soon find themselves in the position of having to demonstrate how they propose to open up to greater competition if they wish to receive additional funding for upgrades. This is the thrust of new legislation - part of the Aviation and Investment Reform Act (AIR-21)- being considered for entry into the statute books. The US General Accounting Office has recently added credence to the arguments of the anti-trust hawks with a study of fares at 171 US airports which concluded that as a rule "the control of a large percentage of the airports' passengers by a single airline contributed" to an increase in fares.
As a guide to the extent of hub dominance, a listing of the leading three carriers is given for each of the airports in the Top 100 ranking. The analysis is based on frequency data provided for March/April by OAG - a sister company to Airline Business. Typically, a single carrier accounts for around half of the flights for airports in the ranking, with its closest challenger holding a mere 15% share. The US majors lead the pack, with most taking over 60% share of slots at their respective hubs. Atlanta Hartsfield is a case in point. Delta Air Lines flies over 70% of all flights out of the hub, while its its nearest rival takes little over 10%.
Although Europe's flag-carriers appear a little less dominant than their US counterparts, the stakes are arguably higher, based on historically powerful international hubs with sizeable catchment areas. Where the European carriers have opened a second hub they have also aimed to dominate - witness the British Airways ascendancy at London Gatwick, partially thanks to the presence of its franchise partner CityFlyer. It is not surprising that BA has made a bid to buy its regional partner, nor that the acquisition is subject of intense scrutiny. Also worth noting that Gatwick is among Europe's the top five gateways to North America, ahead of Amsterdam.
By contrast to their western counterparts, Asia-Pacific carriers appear relatively weak at their home bases. At airports such as Tokyo Haneda and Seoul Kimpo, the second carrier has considerable weight at the hub. China's growing importance as a major air transport hub is also apparent. It now hosts four out of the top 10 Asia-Pacific airports to North America and is second only to Japan in the region in terms of frequencies to Europe.
New capacity
With some irony the Asian downturn has coincided with a major airport building programme in the region. While Hong Kong's Chek Lap Kok and Malaysia's Kuala Lumpur have yet to really benefit from their expanded facilities, elsewhere expansions are continuing apace in the belief that long-term, growth will necessitate the new infrastructure.
In Japan a third airport serving the capital may be on the cards, following the government's failure to reach agreement with the owners of the land needed to construct a third runway at Narita, and construction on reclaimed land on Tokyo bay could begin as early as 2002. Osaka Kansai airport meanwhile, has finally settled a long-running compensation claim by local fisherman in February, thus clearing the way for the construction of a second runway, which when completed by 2008 will allow for a 50% increase in aircraft movements. In addition, the Kobe Municipal government has applied for permission to build a domestic airport for completion in 2005. In Thailand the government is calling for the construction of a new airport, Second Bangkok International Airport, to be accelerated and its projected capacity to be expanded from 30 to 40 million passengers. This followed studies predicting stronger than expected growth when the $7 billion airport is completed in 2004.
China is said to be on track by October to complete Pudong International as a second hub to serve the massive new city constructed at Shanghai. Meanwhile, expansion at the city's existing Hongquiao airport should allow it to handle a further 20 million passengers annually. A second airport at Sydney also appears likely, with the Australian government giving its clearest indication yet in April that approval is imminent.
In North America airport expansion continues to tick over with a series of plans to increase throughput capacity at the major hubs. American Airlines has signalled its intention to maintain, if not boost, its presence at New York Kennedy, with the announcement of plans for a new $1 billion terminal project for completion in 2006. At the United Airlines home base in Chicago O'Hare, $1 billion is also being invested in two new terminals and more than 20 additional gates.
With a perverse logic, Europe has both the direst need for capacity expansion and also the greatest difficulty in delivering new projects. Swissair has joined with the complaints of many flagcarriers, issuing dire threats over the future position of Zurich as a major international hub if environmentalists continue to challenge the planned expansion of the hub which would take passenger capacity from 18 to 30 million a year. Although London Heathrow may have finally reached the end of the public hearings into its much-needed fifth terminal, the airport will have to wait another two years while the UK Government considers the inquiry's findings.
In Italy, a country where second tier hubs are flourishing on mainly low-cost point-to-point traffic, yet another former air force base has been converted into a civil aviation airport - this time in Brescia, northern Italy. Lufthansa, meanwhile, is co-funding a second terminal at its growing secondary hub, Munich. Construction is to start this year and the airport's capacity will rise by 15 million passengers a year when it is completed in 2003.
Fortunately, Europe still has shown some limited capacity for new airport schemes, as last year's openings of Milan Malpensa and Oslo's Gardermoen proved. Germany's new capital Berlin is set to benefit from improved air transport links with a consortium led by Frankfurt Airport finally winning government approval to build and operate a new airport alongside Schonefeld Airport in east Berlin, to be named the Berlin Brandenburg International Airport. Berlin is just one airport looking to expand with the help of private finance.
Aer Rianta is pressurising the Irish Government to launch an initial public offering (IPO)within three years so it can finance a I£500 million ($672 million) expansion programme at Dublin, Shannon and Cork.
Aeroporti de Roma, has ambitious expansion plans despite a shifting of priorities of flag carrier Alitalia north to Malpensa, and intends to carry them out under private ownership. The Italian Government sold a majority stake in the first quarter of this year and intends to sell the remaining shares by year end. Turin Airport is also slated for sale by the end of this year.
India is making fresh efforts to upgrade its aviation infrastructure, and is set to receive private and possibly foreign help. The Indian state of Karnataka is to reopen a tender for the construction of an international airport at Bangalore while these plans, as well as those for Chennai and Hyderabad, may receive support from Malaysia, which opened its new Kuala Lumpur airport in mid-1998.
Despite a faltering economic outlook, Latin American governments are pushing ahead with privatisation. Following last year's sales of Argentina's Buenos Aires, Peru's Lima and Mexico's Cancun, a consortium led by Ogden of the USA has been awarded a 20-year contract to run a key airports in the Dominican Republic in return for a $400 million commitment to upgrade them.
Even if the present economic uncertainty in Latin America and beyond does turn into full blown recession, such investments are hardly irrelevant. The long-term forecasts are still for bullish growth, and if they materialise, the world will need all the capacity it can get.
Source: Airline Business
