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 Systems Engineering and of

Civil and Environmental Engineering

Massachusetts Institute of Technology


Theme

No-frills airlines are developing a “parallel network” of travel

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

As low-cost carriers grow (and majors shrink) traffic may shift to second airports (e.g: from Boston to Providence)


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, London/Stansted,

Osaka/Kansai, Montreal/Mirabel, etc.

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 ~ 12 million originations/year

Note: higher as aircraft larger


Metropolitan areas with significant multi-airport systems

Metropolitan Multi-AirportRegion For Region Originating System

London 120 47 YesTokyo 84 36 YesLos Angeles 79 34 YesNew York 87 33 YesParis 72 28 YesChicago 94 26 YesMiami 53 20 YesSan Francisco 54 20 YesHong Kong 47 19 YesWashington 51 18 YesSeoul 37 17 Yes

Traffic in Millions


Metropolitan areas with significant multi-airport systems

Metropolitan Multi-AirportRegion For Region Originating System

Osaka 35 15 YesBoston 32 15 YesAtlanta 79 14Las Vegas 37 14Dallas 59 13 YesShanghai 30 13 YesFrankfurt 51 13 YesSao Paulo 25 12 YesHouston 42 12 YesMilan 27 12 YesTaipei 26 12 Yes

Traffic in Millions


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, Taipei

Political -- 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 agents

Parallel 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 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 AirportMetropolitan

Area Name Traffic

Millions

Name 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 airports

Competition 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 4th largest airline in world (pax) Market Cap ~ 12billion $ > 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 growth shifted from Boston/Loganto Regional Airports along with growth

of Southwest at Providence and Manchester (NH)

P age 3

R eg io n a l A irp o rts

23 %

(+ 0 .7M )

L o g an

77 %

(+ 2 .3 M )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 assen g ers




D is trib u tio n o f N ew E n g lan d P assen g er G row th

R eg iona l a irpo rts inc lude P rov idence , M ancheste r, W orces te r, B an gor, B u rling ton , H a rtfo rd , N ew H aven , and P o rtland .

S ource : A irpo rt R eco rds and U S D O T , F o rm 41 schedu 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 2003 Share is about 63%


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

multi-airport systems in era of low-cost carriers

Documents

airport choice

location airport

traffic concentration

significant airports

hungry airports

airports e

major facilitiesnew

lowcost carriers oftennot