Alliance terminals at Europe's major hubs are showing few signs of moving beyond the concept stage. In practice, most airports are simply not run or built with alliances in mind. In the words of David Feldman at Mercer Management Consultants: "It will require a fundamental change in the way airports do business." Airlines too may have to re-examine the way they operate. Global alliances have so far focused more on looser marketing links than hard operational ties and although this may change over time, a familiar problem still needs to be confronted, especially in a congested Europe - lack of space. As much as airlines would like "alliance terminals", they are reduced to a game of shuffling around airports trying to mend and make do.
Such constraints mean that the future level and timing of alliance terminals will largely hinge on the opportunities thrown up by airport expansion programmes. Unfortunately, as no-one knows when this will happen, planning is made more difficult. Airports in turn, see the lack of stability in the airline alliances as a problem, given the long lead times and huge investment needed for these projects.
While they wait for extra space to materialise, alliances do what they can in Europe's crowded hubs. Frankfurt and London Heathrow may be home to the world's leading alliances - British Airways' oneworld and Lufthansa's Star Alliance - but both are also famously congested and waiting for approval for fresh expansion.
A useful alternative has been to look instead for growth at secondary hubs, as Lufthansa is doing at Munich with the new Terminal 2 project for a dedicated Star hub (see page 70). Star sources say that the UK's Manchester Airport will be developed as a secondary hub to Heathrow next year, while AirFrance has recently hopped terminals to be next to SkyTeam partner Delta Air Lines in Manchester's Terminal 2.
Air France has been developing its Paris Charles de Gaulle (CDG) base as a SkyTeam hub. Although it may have less constraints than many rivals when it comes to expansion, this space is being filled as soon as it is available. In 1997, the French Government set a limit for CDGof 55 million passengers, a level which will be reached in 2002 at current growth levels. With a cap on slots at Paris Orly and no third airport in prospect there is no shortage of demand for CDG's extra space.
Lack of connectivity
CDG's Terminal 2 is home to both Delta and Air France, with Delta and Aeromexico both located in 2C, with Air France spread across 2A-D and 2F. New partner Korean Air is located in the old Terminal 1 building, however. CDG has been criticised in the past for the lack of connectivity between the terminals.
Chris Smith of consultants SH&E, says that in effect Terminal 2 is "several different terminals" and is not ideal as a transfer hub. "The layout isn't along lines of the classic transfer hub at Atlanta," he says. Air France has been making a big play for transatlantic traffic since it signed Delta as a partner, but Smith believes that the US carrier still has some more work to do back home in building its presence on the US East Coast. Delta is indeed investing heavily in the region, particularly in Boston and New York, and that is going to be crucial to build a bridge to CDG, says Smith.
Star bases
Star is keen not to let SkyTeam have things all it own way at CDG. Most Star airlines are based in the older Terminal 1, although Austrian Airlines are in Terminal 2. When the extension to Terminal 2 was built, Star asked operator Aeroport de Paris to group the Star airlines together in the new terminal. Unfortunately for Star, CDGdid not have the space to do this. Instead, ADP offered a revamp of Terminal 1, a process which will take three years. This terminal is home to around 60 airlines, so it is unclear to what extent Star will be able to emerge as an identifiable group.
Star is the most proactive of the major alliances when it comes to making its presence felt in rival European hubs. In addition to its consolidation in Paris, it is becoming more aggressive at London Heathrow, where newest member, British Midland is in a strong second position behind BA.
At present, the various oneworld partners are scattered over all four terminals, with BA itself spread across all but one. For its part BA points to the fact that it is "very well integrated" with Qantas in Terminal 4 and is also looking improve connectivity with Iberia. However, its long-term Heathrow plans remain tied to the proposed Terminal 5, which is not expected to come on stream till 2008 at the earliest.
Star is no less keen for BA to move into Terminal 5, if and when it is built, is taking some alliance partners with it and freeing up space for everyone else. Like oneworld, it is spread out at Heathrow, with British Midland at Terminal 1, Lufthansa and Austrian Airlines at Terminal 2, with the other non-European partners, and SAS, at Terminal 3. Even if Terminal 5 gets the go ahead and frees up more space, getting everyone under one roof and evaluating the best fit will not be easy, as those close to the project admit.
A key issue is the fact that Terminals 1 and 2 principally cater for short-haul traffic, while Terminals 3 and 4 are geared towards long-haul. As one Star insider asks: "How do we cater for both a Lufthansa frequent flyer and an Air Canada transit passenger at the same terminal?" An issue lurking in the background for all alliances is the fact that connecting traffic is by its nature lower yielding. This presents alliances with the dilemma of trying to develop transfer traffic while also pleasing their high yield business passengers.
British Midland has some hard choices. It is clearly reluctant to move out of its long-term home in Terminal 1 or to have to duplicate its services across other terminals. However, some concessions may be essential if it is to see through the goal of creating a "Star hub" at Heathrow. Star is evaluating all its options, a complicated process that involves considering all four Heathrow terminals.
Expanding options
At Frankfurt, meanwhile, Star has gone some way to consolidating its position in Terminal 1, the older of the airport's two terminals. Given Frankfurt's space constraints, much depends on whether the airport gets the go ahead for a fourth runway.
If the airport does get the go ahead, there are still problems for Star. Smith at SH&E notes that there is a tight landside area between the apron and the adjacent autobahn, which would limit room for development and may well mean that Star will have to split its operation on both sides of the airport, which would be far from ideal.
A fair description of most alliance operations at Europe's major hubs is "far from ideal". Given the long lead times that airport projects require, and the tempestuous nature of alliance relationships, improvement in the near future seems unlikely.
Source: Airline Business
