Multi-Airport Systems in Era of Low-Cost Carriers

Airport Systems Planning RdN

Multi-Airport Systems in Era of Low-Cost Carriers

Dr. Richard de Neufville

Professor of Engineering Systems and of Civil and Environmental Engineering

Massachusetts Institute of Technology


Theme

“Low cost” airlines are developing a “parallel network” of travel

“network choice” (rather than “airport choice”) may determine traffic in multi-airport systems

Competition between “low cost” and “legacy” airlines leading to struggle between “low cost” and “legacy” hubs Boston/Logan vs. Boston/Providence, etc., etc.


What is a Multi-Airport System?

the significant airports serving transport in a metropolitan region, without regard to ownership or political control Ex: Boston, Providence, Manchester

Discussion This is reality for travellers Contrasts with ACI focus on ownership


Planning Issue

Many ‘mistakes’ in planning multi-airport systems Washington/Dulles – planned as major DC

airport, but had only ~ 3 MAP for 20 years London/Stansted – similar story – only

developed with Ryanair hub around 2002 Osaka/Kansai – Osaka/Itami did not close Montreal/Mirabel – huge airfield, now

“closed” to passenger traffic Et cetera…


Why mistakes happened

Failure to appreciate traffic concentration at primary airports

… Because planners/forecasters using wrong mental model


What drives traffic allocation in Multi-Airport System?

Airline competition has been primaryS-shaped market share/frequency share

Drives airlines to Match flights => Allocate flights to major markets Concentrate Traffic at primary airports

Frequency Share

MarketShare


Right model: “Concentration” not “Catchment Areas”

Concentration is standard urban phenomenon e.g.: financial, jewelry, etc. districts

Driven by what suppliers offerCustomers choose which location

(airport) depending on where they find what they need -- not just most convenient facility


“Concentration” persists --until high level of local traffic

When local originating traffic high…More flights add little at major airportsAirlines place flights at second airportsThere appears to be a ‘threshold”…

Currently ~ 13 million originations/year

Note: higher as “average” aircraft larger


Metropolitan areas with significant multi-airport systems

Metropolitan Traffic in Millions Multi-Airport Region For Region Originating System

London 130 51 Yes Tokyo 93 40 Yes New York 97 29 Yes Los Angeles 86 37 Yes Chicago 100 30 Yes Paris 76 29 Yes San Francisco 58 24 Yes Miami 57 24 Yes Hong Kong 55 22 Yes Washington/Baltim. 57 20 Yes Seoul 41 18 Yes Boston 35 16 Yes

de Neufville data base for 2004


Metropolitan areas with significant multi-airport systems

de Neufville data base for 2004

Metropolitan Traffic in Millions Multi-Airport Region For Region Originating System

Shanghai 36 16 Yes Osaka 35 16 Yes Atlanta 84 15 Las Vegas 42 15 Bangkok 28 14 U.C. Frankfurt 54 14 Yes Milan 31 14 Yes Dallas/Fort Worth 65 13 Yes Orlando 33 13 Yes Sao Paulo 27 13 Yes Phoenix 40 13 Moscow 27 13 Yes


Major exceptions to rule: technical or political

Until recently, major exceptions to concentration rule were:

Technical -- runways too short Belfast, Belo Horizonte, Buenos Aires,

Rio de Janeiro, TaipeiPolitical -- or military...

Berlin, Dusseldorf/Bonn, Glasgow, Moscow


New Reality: No-frill airlinessetting up “parallel network”Low-cost carriers “parallel” majorsMajor fare distinctionsTicket distribution separate

Internet direct to users, ‘no’ travel agentsParallel service between cities

Providence/Baltimore not Boston/Washington‘No’ interlining of bags, tickets‘Not’ in Reservation systems


New Reality: No-frills choose different airports

Southwest, Westjet (Canada), Ryanair and Easyjet (UK) require: Cheap properties, no Taj Mahals (compare

San Francisco/International and Oakland; London/Gatwick and Luton)

Low congestion and delays Flexible work force

They find this at aggressive, ‘hungry’ airports -- not in major facilities


New Reality: US/Canada Network of Low-Cost Carrier Airports

Metropolitan Secondary Low-CostRegion Airport Carrier

Boston Manchester SouthwestBoston Providence SouthwestDallas/Ft Worth Love SouthwestHouston Hobby SouthwestLos Angeles Long Beach Jet BlueMiami Ft Lauderdale SouthwestNew York Islip SouthwestSan Francisco Oakland SouthwestToronto Hamilton WestjetVancover Abbotsford Westjet


New Reality: Europe Network of Low-Cost Carrier Airports

Metropolitan Secondary Low-CostRegion Airport Carrier

Brussels Charleroi RyanairCopenhagen Malmo RyanairDusseldorf Koln/Bonn EasyjetFrankfurt Hahn RyanairGlasgow Prestwick RyanairHamburg Lubeck RyanairLondon Luton EasyjetLondon Stansted RyanairManchester Liverpool EasyjetMilan Linate EasyjetMilan Orio al Serio RyanairOslo Torp RyanairParis Beauvais RyanairRome Ciampino Easyjet + RyanStockholm Skvasta Ryanair


Multi-Airport Systemsin Brazil

Internat'l Distant Airport Domestic Close-in AirportMetropolitanArea Name Traffic

MillionsName Traffic

Millions

Sao Paulo Garulhos 13.0 Congonhas 11.7

Rio de Janeiro Galeao 6.0 Santos Dumont 4.9

Belo Horizonte Confins 0.8 Pampulha 2.5

Source: INFRAERO, 2002; Rabbani, 2002


Importance of Parallel Networkof close-in Brazilian airports

Airport Pair Passengers,1000s

Rank

Congonhas Santos Dumont 1461 1

Congonhas Brasilia 596 2

Congonhas Pampulha 565 3

Congonhas Curitiba 551 4

Congonhas Porto Allegre 365 5

Garulhos Salvador 364 6

Santos Dumont Brasilia 325 7

Santos Dumont Pampulha 312 8

Source: INFRAERO, 2002, Rabbani, 2002


Implications for modelling future of second airports

A new driver for second airports... Low-cost carriers often ‘not’ competing at big

airports Frequency competition does not drive growth

pattern of secondary airportsCompetition between networks may

be primary… … followed by catchment area

model of airport choice


Implications for future of second airports

No-frills airlines are becoming ‘major’ Southwest 2nd largest airline in world (pax) Market Cap ~ 12 billion $ > any other pax airline Ryanair Market Cap greater than British Airways

Majors are shrinking (UAL, USAir, etc.)Implies that Primary airports will lose

significant traffic to second airportsThis is already happening!!!


Southwest entry in Boston market grew second airports

Figure 1: New England traffic grow th shifted from Boston/Loganto Regional Airports along with growth

of Southwest at Providence and Manchester (NH)

P a ge 3

R eg io n a l A irp o rts23%

(+ 0.7M )

L o g an77%

(+ 2 .3M )R eg io n a l A irp o rts

76 %(+7.2M )

L o g an24%

(+ 2.3M )

1990–1996 1996–2000

+2 .9 M illio nA ir P as sen g ers



+9 .5 M illio nA ir P as sen gers

D is tribu tio n o f N ew E n g land P a ssen g er G row th

R eg iona l a irpo rts in c lu de P rov idenc e , M an che ste r, W o rceste r, B an gor, B u rling ton , H artfo rd , N e w H av en , and P ortla nd .S o urce : A irp o rt R ec ords an d U S D O T , F o rm 4 1 sch edu les .

Since 1996, the Regional Airports Have Captured More than 75% of the Region’s Air Passenger Growth

Figure 4

Source: Louis Berger, New England Regional Aviation System Plan materials


Market Share of Boston/Logan is in decline

F i g u r e 2 : T h e B o s t o n / L o g a n t r a f f i c s h a r e d r o p p e d b y a q u a r t e r o v e r t h e p a s t 2 0y e a r s ; h a l f o f t h i s o c c u r r e d w i t h t h e S o u t h w e s t g r o w t h i n t h e l a t e 1 9 9 0 s a tP r o v i d e n c e a n d M a n c h e s t e r ( N H )

P a g e 4

5 0 %

6 0 %

7 0 %

8 0 %

'8 0 ' 8 1 '8 2 '8 3 ' 8 4 '8 5 ' 8 6 '8 7 '8 8 ' 8 9 '9 0 '9 1 ' 9 2 '9 3 '9 4 ' 9 5 '9 6 ' 9 7 '9 8 '9 9 ' 0 0

L o g a n ' s S h a r e o f N e w E n g l a n d A i r P a s s e n g e r s

N o t e : I n c l u d e s e n p l a n e d p a s s e n g e r s a t L o g a n , H a r t f o r d / B r a d l e y , T . F . G r e e n / P r o v i d e n c e , M a n c h e s t e r , P o r t l a n d , B u r l i n g t o n , B a n g o r , T w e e d N e w H a v e n , a n d W o r c e s t e r .

S o u r c e : U S D O T , F o r m 4 1 a n d P a r t 2 9 8 / C . A i r p o r t r e c o r d s f o r L o g a n a n d v a r i o u s r e g io n a l a i r p o r t s .

7 8 %

5 9 %

T h e R egio n is Less R elian t o n Lo gan A irp o rtFigu re 5

Source: Louis Berger New England Regional Aviation System Plan

The 2004 Share is about 57% (SH&E, ’05)


Summary

A new, parallel air transport network is emerging to compete with majors

This low-cost carrier network may become a major feature of industry

It implies growth and importance of low-cost second airports throughout North America, Europe -- and perhaps elsewhere


Supplemental Comment

Meanwhile, a similar development is taking place in air cargo

Fedex and UPS are developing their own networks of cargo airports

Fedex: Memphis, Manila/Subic Bay, San Francisco/Oakland, etc.

UPS: Louisville, Los Angeles/Ontario. Chicago/Rockford, etc.

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Multi-Airport Systems in Era of Low-Cost Carriers

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