The location of the new airport was tossed around parliament and planning inquiries for years. In the end, contrary to the wishes of its two leading carriers, SAS and Braathens Safe, the $1.7 billion new airport is being built at Gardermoen, 47km north of the city. The government rejected a preferred southern alternative, saying it was prone to fog and poor visibility, but Braathens is sceptical. The prospect of generating a new business sector in the underdeveloped northern region may have exacted political pressure in favour of the Gardermoen site, according to the Norwegian carrier.
Despite the promise of a 19 minute express rail link to the city of Oslo, carriers are nervous given that 45 per cent of the customer base is south of the city. For Braathens Safe, which has a thriving domestic network, the location is critical: 'Although it has capacity problems, Fornebu works extremely well for us,' says director of strategic planning Kjell Wilsberg. 'Our main routes are in the south. We're much more vulnerable to changes in this local market than the intercontinental or longer European services.'
SAS vice president and chief financial officer Gunnar Reitan comments: 'Of course we understand there is no room for expansion in peak hours at Fornebu. But from an ideal point of view we would prefer another location.' But Reitan is not too concerned. 'We know a lot of customers are not delighted with the location but they will get used to it.'
The need for a new airport was never in dispute. Fornebu, which will be closed down overnight on 8 October, 1998 when Gardermoen takes over, is located in the urban core of the city, and has reached saturation point in terms of runway slots and passenger capacity. Noise is affecting 60,000 local residents, while traffic is growing at 10 per cent a year.
But with strong demand south of Oslo, some experts suggest that carriers may switch to a small local airport south of the city at Torp. 'There might be a negative reaction by the public not to use the airport [Gardermoen] because of its location - there is some talk of that,' says Reitan, but he does not believe this will have a large impact.'Torp is likely to have greater traffic but it will be very limited.'
With such negative perceptions around right from the start, the airport operator, a private company 100 per cent owned by the Norwegian Civil Aviation Administration, is faced with the ultimate marketing challenge.
Oslo/Gardermoen managing director Bjorn Sund admits the location is a 'disappointment' to airlines. 'They had argued for their solution south of Oslo. That was proposed but it went away with the fog!' he jokes. 'The southern location was more convenient for passengers, 45 per cent of whom live in the south. But they have had a few years to get ready for Gardermoen in the north, and they are preparing positively now.'
Still, Gardermoen brings significant extra capacity for the airlines. While demand rockets at Fornebu, carriers are unable to consider new routes or higher frequencies. 'We are currently up to 600 movements a day at Fornebu,' says Sund, 'and we have requests for an additional 350 new movements a week. We can't meet that request.'
Up to 40 million passengers
Enter Gardermoen, which will be able to handle up to 15 million passengers a year immediately - compared with 11 million shoe-horned through Fornebu last year - with potential subsequent expansion up to 40 million.
Given that Scandinavia's premier hubs remain Copenhagen (with 16 million passengers a year) and Stockholm (14.5 million), it seems remarkable that Norway, with a national population of only 4.3 million, should drive such growth. But Reitan points out that Norway is an unusually large air traffic generator. 'Compared to other countries in Europe, the rate of travelling per capita is huge in Scandinavia, especially Norway. Each Norwegian makes four trips a year by air. That is double or triple the rate of other European countries. The topography of the country, with its fjords, mountains and forests, creates quite a lot of capacity which we have estimated to be worth around NKr12 billion ($1.6 billion) in domestic traffic each year.'
With high demand for origin and destination traffic, Gardermoen's natural role is as a pure point-to-point facility rather than as a hub - especially as it is arriving late in terms of hub development. 'I don't believe we will take over Copenhagen/Kastrup's dominating position in Scandinavia,' says Sund. 'And that's not our aim. But we have some aims - to create new direct flights between Oslo and international cities, and to be more independent of Kastrup. We will have more direct flights to new destinations in both Europe and overseas, but that depends on how clever we are in developing traffic. The airlines are not committing themselves right now, but we have started that process,' he adds.
Gardermoen's manager traffic development, Knut Stabaek, says his objective is 'providing the information to make the airlines and tour operators aware of the big change coming up next year. This means telling them how capacity is improved with no restrictions in peak hours. We have put special emphasis on the leisure and freight market. For existing customers, we have frequent meetings with the airlines through the Board of Airline Representatives in Norway.'
Coach tours
While tourism is an important industry in Norway, the leisure market only accounts for one-third of Fornebu's traffic. 'Today hardly any tourists come into Norway by plane,' says Stabaek. 'Partly it's a capacity problem. The traditional coach market is big but stagnating, because the new tourists want to be more independent and they want to get there quicker. Today they use the ferries, but having done that once you don't want to do it again. So what we want to do is persuade the tour operators and airlines that they can put their coaches here and fly people in. Gardermoen can be their starting point for a coach trip around Norway.' To boost business traffic, the airport company is working with conference organisers and the business community to market conference opportunities.
Both of Gardermoen's leading carriers dismiss any notion of the new airport usurping the positions of Copenhagen and Stockholm. 'Well, you can build another airport - you can build three - but the catchment area's the same! There may be some nonstop European flights, but to see Gardermoen as a big intercontinental hub? I cannot see that,' says Braathens' Wilsberg. The only long-haul route at the moment is SAS's daily New York flight. 'Many years ago people here were talking about a transfer airport, but that is history,' says SAS's Reitan. 'It's irrelevant in 1998. The demand is for more direct routes to both domestic and European destinations. We will be among the airlines expanding in that area.'
Transfer traffic accounts for only 8 per cent of Fornebu's current passenger throughput, and the lack of hubbing potential is reflected in the new airport's design. Departing passengers will walk a maximum of only 400m to reach their gates, while transfer passengers will have to pass through a central security checkpoint, preventing simple US style gate-to-gate transfers.
The only new routes planned so far for Gardermoen are new domestic services to Kristiansund and Alesund on the Norwegian west coast. This is an early sign of the competitive battle looming on the domestic and Scandinavian front as Braathens quietly prepares itself to be more aggressive. The carrier currently accounts for 35 per cent of Fornebu's traffic, largely from domestic routes. Vice-president strategy Anders Fougli says: 'Firstly we're building up our basic network in and out of Gardermoen for our own planes and our own market. We have to take care of the Norwegian market first because that's our bread and butter. That's how we make our money.'
But longer term, Fougli sees potential for growth as a counter-point to SAS's growing dominance of the Scandinavian market. While SAS believes its membership of the Star Alliance will boost traffic throughout its network, Fougli is dismissive.'On the one hand, SAS our biggest competitor has the strength of this huge alliance and is forcing a lot of the intercontinental and international traffic via its own and the Lufthansa system. But there are two kinds of traffic here - the southern one and the western one.'
Fougli thinks that SAS will find the western routes to the UK difficult, unless it uses its 40 per cent ownership of British Midland as leverage. 'The western one will be more difficult for SAS and Lufthansa to get hold of if they don't strengthen their alliance with other useful operators. Competitors to the Star Alliance - BA, KLM and Air France - will try to link up with us so that we can serve as a feeder to their services in and out of Gardermoen.'Last year's purchase of Transwede, together with growing relationships with Finnair and Maersk, fit in well with Braathens' ambitions of putting more pressure on SAS while cornering the Norwegian domestic feeder network.
Breaking into the triangle
Braathens wants to break the SAS monopoly on Oslo-Copenhagen, the third leg of the so-called Scandinavian triangle linking Copenhagen-Stockholm-Oslo. 'These are the three air routes between the three capitals where SAS has been a monopolist for 50 years or more,' says Fougli. 'We started Oslo-Stockholm last November, and Finnair-Maersk on a codeshare system started Copenhagen-Stockholm.' He says lack of capacity at Fornebu has stopped competition on the Oslo-Copenhagen route. 'Fornebu is the only reason for Oslo-Copenhagen not having been taken up by somebody. We don't say we will start it, but we say someone will obviously do it. It could be ourselves and Maersk.'
The airport company nurses dreams of longer haul point-to-point destinations, citing its polar route location as a transatlantic asset. But Delta Airlines withdrew its daily Oslo-New York service in 1995 because it was not profitable, and SAS plans no long-haul routes to coincide with the opening of the new facility. 'Our policy is very clear: new routes have to be driven by demand,' says Reitan.
Unlike many other new airports, Gardermoen is not looking to recover its development cost through large increases in landing fees. The Civil Aviation Administration has pledged not to raise landing fees at Gardermoen, and instead has placed special discounts on the agenda. 'We are going to decrease landing fees for new routes to attract new traffic,' says Sund. 'This will be for a given period of three years.' Each application will be reviewed on an individual basis, he says. The aim is to 'speed up international connections.'
Still, Braathens is sceptical about the landing fees - 'They are too high already, of course!' comments Fougli - and airport rentals will exact a cost. SAS is investing NKr1.4 billion ($186 million) in new facilities and Braathens Safe is investing NKr200 million.
With a large domestic network, the Norwegian carrier is also concerned about taxation. 'We have higher labour costs, higher taxes and higher aviation taxes,' says Wilsberg. 'If the government levies environmental taxes and VAT, then we will have the situation where air travel could shoot up. That could happen in the next couple of years. We are a very high cost country.'
As a leading international hub, Oslo looks likely to remain out in the cold for the time being. SAS has no intention of relocating any long-haul services from its main hub in Copenhagen, and alliances like the Star Alliance should consolidate the dominance of existing hubs even further. Instead, when Norway's new airport opens next October, the scheduled carriers will be concentrating on O&D markets, focusing on using the new capacity to boost frequencies, increase competition and develop their regional networks. Braathens' competitive ambitions bode well for the new airport, which should also be able to develop more charter traffic.
Sally Gethin
Airports take controlThe image of an airport as a sleepy monopoly is fading fast. Many airports are being freed from public control and all have to meet the challenge posed by the new breed of dynamic airlines. Airports now have to act like competitive businesses.
In a fast-moving, liberalised market, an airport which embraces change and turns it to its advantage can reap rich rewards in terms of growth, profits and regional development - a successful airport is the most powerful job creation machine known.
Most airports now use marketing techniques to influence airlines' route developments, and even alliances. Inevitably, most large and medium sized airports tend to place their main strategic emphasis on hub development.
There are three categories of hub. Established hubs dominated the old order of air transport, but in many cases did not really function as true hubs with large volumes of connecting traffic. Slowly, even the most complacent is awakening, usually in conjunction with the network planners of the incumbent carrier. Triggered by the aggressive moves of KLM and Amsterdam, vastly more efficient hubs have been created at Copenhagen, Brussels, Zurich, Paris/CDG, Frankfurt, and London/Heathrow.
The second group is aspiring world hubs. In the 1980s, many US airports emerged from relative obscurity to assume the status of mega-hub. Several of these, including Atlanta, Detroit, Minneapolis and Cincinnati, are adding long-haul international spokes. In Europe, liberalisation and congestion are creating opportunities for well located 'secondary' airports like London/Gatwick, Munich and Lyon. The Middle East is a new hub battleground, with Dubai in pole position, and in the Far East strong growth and the vast programme of airport building could be the catalysts for new world hubs to emerge, although construction alone is no guarantor of hub status.
Regional niche hubs are usually smaller airports in regions of high congestion, such as Europe. Helsinki, with its specialisation in Far East traffic, is an example, as are the mini-hubs being built in cooperation with carriers such as Eurowings and Régional Airlines.
Despite the love affair with the hub, most airports cannot aspire to hub status. These smaller airports have to be clever. Many regional airports have overlapping catchment areas, and they must compete aggressively to provide the most effective feed to the largest number of hubs. Other airports specialise in leisure traffic, cargo or low-cost airlines. Often, such airports provide carriers with highly competitive financial deals and hope to make money through volume or retail sales. Some may be content with achieving other goals such as boosting regional economic development.
In the next five years, a new generation of airports will be jostling for position on the world stage. Several European airports, including London/Stansted, Oslo/Gardermoen, Barcelona and Milan/Malpensa, offer significant growth potential. The US hubs are well established, but many airports, such as Baltimore-Washington, Las Vegas, Phoenix, Denver, Orlando and Tampa, are becoming more aggressive. In Asia, the problems of congestion will soon be replaced by the opportunities of new capacity, as new airports like Hong Kong, Kuala Lumpur and Seoul come on stream.
As competition develops, airport strategies will become far more sophisticated. Many airports will make new 'horizontal' initiatives, including alliances with other airports, as well as 'vertical' initiatives, as they develop their role as the interface between their economic hinterlands and the global economy.
Mike Howarth
Source: Airline Business
