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SEAPLANE Activity 1: Status Analysis and Future Development of the North Sea Air Transport Network
This page summarises the results of the Status Analysis and Future Development of the North Sea Air Transport Network that was executed from May to September 2003. It is based on the summary of the Final Report on this activity.
Activity 1 has included 13 regions of six different North Sea countries, 21 airports and 9 airlines. A wide range of airport sizes to be covered, ranging from 9,000 (Bremerhaven) up to 4.6 million (Hanover) passengers per year. The status analysis acts as a basic reference for the ongoing work under the SEAPLANE project.
Status Analysis of Airports
Technical Restrictions. The data collection on the airports indicates that only minor technical restrictions at some SEAPLANE airports exist which have no limiting effect on tapping their full market potential. One airport (Stavanger) may experience capacity restrictions in the near future if no action will be taken.
Airport Ownership. A wide range of different ownership constellations exists in the group of the 21 SEAPLANE airports. Surprisingly, not only at major airports with millions of passengers but also at smaller airports, such as Ljungbyhed Airport and Braunschweig Airport, the ownership structure shows private shareholders. The integration of private know-how and/or investment is of advantage for the airport's functionality and supports the development of non-aviation business potential.
Only very few participating airports are operated as public private partnership (PPP), such as Inverness Airport and Kortrijk Airport. In both cases PPP ensured a proper construction and operation of the passenger facilities to the benefit of the public. The other side of the coin is that the private "partners" require exclusive access to the commercial development potential of the airports, leaving the 'less-sexier' airport administration and maintenance activities to the public partner.
At military SEAPLANE airports (under conversion), such as Cuxhaven Airport and Jade Airport the airport operator benefits from the existing maintenance facilities and services and the operation of basic airport functions by the air force. However, one characteristic feature of military airports is that the immediate catchment area of the airport is rather small in terms of population and thus the potential passengers. Appropriate efforts are required to make sustainable benefit from above identified cost advantage.
The state-owned airport networks such as HIAL (Highlands and Islands Airports Limited, Scotland) and AVINOR (Norwegian Civil Aviation Administration) are represented by a number of airports in the SEAPLANE project. The national airport management's philosophy is determined by the geographical peripheral situation in both countries and concentrates on an efficient and reliable supply of transport infrastructure, accessibility and social links for all communities. In Norway, only at very few airports operations are commercially viable. Their surplus is used for cross-subsidising of other, mostly smaller and remote airports in the country.
The Public Image of Regional Airports. The public image of regional airports seems to be vulnerable. Although regional airports impact on their neighbourhood to a limited extent only, due to usually low aircraft frequencies, individuals in the airport vicinity still feel negatively affected by emissions and use the media as forum for their protest. Some airports commented that this kind of bad press negatively affects public opinion and limits airport business and development opportunities (Ostend-Bruges Airport, Groningen Airport).
However, bad press and protests against airport operations or development can be mitigated, inter alia, by the organisation of events supporting a positive picture of the airport in the public. One prominent example is the annual "Haake-Beck SkateNight" at the Bremen Airport's apron and runway system. Apart from supporting a positive image and getting access to potential (future) customers, such events also contribute to the airport's non-aviation revenues.
Especially for smaller airports non-aviation activities such as outdoor events, concerts, car and tyre testing as well as farming on the airport's premises could be an interesting source of additional revenue. However, current (political) efforts to increase safety and security standards at airports (motivated by the 9/11 terrorist attack) thwart efforts to utilise airports as location for events such as concerts, motor races, car testing etc. and thus generate non-aeronautical revenues.
Possible synergy effects induced by an increased level of co-operation between the airport's fire-workers and regional civil fire-brigades have been investigated. However, the consultants could not identify significant positive effects.
The economic situation of Regional Airports. The economic situation at many SEAPLANE airports, particular at the smaller ones, have been dramatically affected by the terrorist attack of September 11, the SARS epidemic and by the world-wide recession leading to reduced numbers of passengers and thus revenues. At the same time the implementation of additional safety and security measures has caused airport costs to increase. In a situation of increasing losses and tightening budget constraints most public owners are questioned with the future existence of some of the SEAPLANE airports. Dramatic cost cutting programmes are under way at regional but also national airport owners (Kristianstad Airport, AVINOR airports).
Future Development at Airports
At some Scandinavian SEAPLANE airports a new trend can be seen: Airlines tend to increasingly concentrate on their core business activity, leaving passenger/baggage handling as well as aircraft ramp handling to the airport.
Closely following the low cost carrier debate, also charter and "traditional" airlines have approached many of the SEAPLANE airports and demanded more favourable aircraft landing and handling fees. Many airport managers believe that the Low Cost Carrier model will gain higher market shares.
Passenger Numbers. Due to the attacks of 9/11, the SARS epidemic, and the general economic downturn, passenger data have shown a sharp decline in passenger volumes in 2001 and 2002, followed by a relatively quick recovery to previous levels. Surprisingly, the regional airlines have been less affected by the effects of 9/11 as they operate in specific regional markets with relatively high shares of (business) passengers, who "have to fly" (see Fig. 1).
Fig. 1: Airline passengers by major(AEA) and regional(ERA) carriers 1992-2002. Source: AEA and ERA web sites. (www.aea.be and www.eraa.org)
The stated average growth in passenger figures 2004 to 2010 among smaller SEAPLANE airports range between 1,4 % p.a. (Molde) and 9,0 % (Groningen), while larger SEAPLANE airports expect growth in the range of 1,9 % p.a. (Stavanger) up to 6,5 % p.a. (Kristiansand). High growth rates are substantiated by the inauguration of new Low Cost Carrier services ("Norwegian" airline at Kristiansand) respectively the development of a new market segment like the charter market at Groningen Airport.
The Role of Low Cost Carriers. As already discussed in many publications Low Cost Carriers can make a positive contribution to the regional development by bringing in several 10,000 passenger per year and route to the benefit of regional tourism and to support small and medium enterprises in having access to new international markets. These effects can be expected at the new Ryanair destinations Groningen (NL) and Ostend (B), as well as at Kristiansand (N) and Aalesund (N), which are linked with the airport Oslo-Gardermoen by the Low Cost Carrier "Norwegian". The future will show to what extend the Ryanair business model will sustain as it also relies on major financial support from the regions, which is against the EU subsidisation regulations. However, other Low Cost Carriers exist, which are slightly different in product quality and price. They rather concentrate on larger European airports with good accessibility, similar to the larger SEAPLANE airports, and make less use of airports, similar in size to the small SEAPLANE airports.
Accessibility. Some SEAPLANE airports are located in geographical peripheral or less accessible regions such as Western Norway and Northern Scotland. They play an important role in securing accessibility of the regions. On some routes air services originating from these airports are confronted with strong competition from high speed (catamaran) ferries/ boats as well as new rail and road infrastructure.
Economic impact of regional airports
Airports and the Regional Economy. Demand for air transport, similar to other means of transport, is derived from activities, both private and professional, of individuals. It is therefore easy to assume that the social and economic characteristics of the area surrounding an airport may have a decisive impact on the kind and level of the airport's activities. However, there is reason to assume that the "causality" between environment and airport is not a one-way street. Taking Inverness and Växjo Airports as examples the study seeks to identify also in how far regional airports positively interact with their regional environment. The data base and information generated under this task also serves as an input for the calculation of existing and future passenger potentials.
Employment Effects. Inverness Airport directly employs 159 persons, which gives a (theoretical) employment density of 454 employees per one million passengers per year. Given a regional employment multiplier of 2.5 derived from Scottish Input-Output tables (and in line with previous studies for other airports), total regional employment directly and indirectly related to the airport as well as induced by airport employment amounts to 434 persons. With the help of a regional income multiplier of 2.0, also derived from input-output tables and average salaries of direct airport employees, total airport related payments to regional employees can be extrapolated in the range of £ 7.2 mn per year.
The analysis of interactions between Inverness Airport and the regional economy indicates that currently the airport as a gateway to fast interregional transportation does play an important role for the economic success of a variety of the existing regional enterprises as well as a entry gate for incoming tourism. Moreover, experience shows that adequate additional air services to national business centres or other European regions can quickly affect branches such as those important for Inverness region in a positive way. Demand for additional services to e.g. London or other centres in Scotland or UK surely exist.
Växjö Airport directly gives employment to 78 staff, leading to a (theoretical) employment density of 323 employees per one million passengers per year. If a.m. regional employment multiplier is applied, total airport-related and induced employment in the Växjö region increases to 195 persons. These persons earn salaries in the range of 5.6 million p.a., of which about 1.7 million are income taxes paid to the regional government.
The analysis of interactions between Växjö Airport and the regional economy indicates that also Växjö Airport seemingly plays a significant role for the economic success of a variety of existing enterprises. Regional demand for additional national and international services is expected to further grow.
The investigation of Inverness and Växjö Airports indicates that regional airports are an important factor in regional economic development. The provision of new air services will lead to a further deepening of interaction between the airport and the regional economy, to the benefit of both sides.
Status Analysis of Airlines
The Growth of Regional Airlines. Regional airlines have experienced a strong growth (9% annually) during the last decade, a growth rate that by far exceeds the growth rates of European majors. Further, regional air traffic have only to a small extent been affected by congestion and the effects of 9/11. Regional carriers operate smaller aircraft and have shorter flight distances. Jets are more widely used in the central parts of Europe, while turboprops are dominating in southern Europe, and particularly in the Nordic countries. This pattern reflects the size of the regional markets served.
Competition. In peripheral regions there is usually no competition on the routes served. In some countries, especially France and Norway but also Sweden and Scotland, Public Service Obligation (PSO) is applied to secure satisfactory level of air service provision. Thin regional markets often experience unstable operating environments, with airlines coming and going.
Slot allocation. The European Regions Airline Association (ERA) that lobbies the interests of regional carriers points at two policy challenges in the years to come: First, slot allocation revision threatens the access of regional carriers to hub airports. Second, the directive of passenger's rights applies too high levels of compensation compared to average ticket price in regional aviation.
Entry Barriers. The regional airlines in the North Sea Region perceive small market size as the main barrier against opening new routes. Their main strategy seems to be linking regional routes to hubs. There are still some niches to develop but there also is an increasing pressure from low-cost airlines. Major policy complaints are related to airport charges, hub access and security fees. Low start up fees, marketing support, risk sharing and PSO routes are considered to be among the most import measures facilitating new routes.
Safeguarding Accessibility. Regional airports play a significant role for accessibility - this has been in particular identified for peripheral and rural regions in Scotland and Norway. On the other hand the development of the surface infrastructure including high-speed water transport spurs competition in passenger transport on single air routes but will not lead to a replacement of air transport on thinner routes. Air transport on some routes in the North Sea region is ensured by Public Service Obligation (PSO) to support cost coverage respectively a commercial viable operation for regional carriers. Regional carriers but also regional authorities claim this instrument as indispensable to ensure a sustainable air service operation to densely populated areas. Regional airlines normally connect regional airports with network airports. The availability of slots at those airports at attractive times during the day is another constraint hindering the provision of high quality transport for peripheral regions.
The Impact of 9/11. The regional airlines have been less affected by the effects of 9/11 as they operate in specific regional markets with relatively high shares of (business) passengers, who "have to fly". The airlines' service providers on the ground, the regional airports have been more heavily affected as they generate income also from the charter traffic market, which has significantly declined due to the 9/11 terrorist attack. At some locations significant cost cutting programs shall ensure a future of the regional airports.
The Importance of Regional Airports for Economic Development and Social Cohesion. As indicated by the regions Växjö and Inverness the existence of regional airports is essential as a local direct and indirect job provider, which generates consumer market demand and, finally, tax income for the regional authorities. Further, airports are important to provide high quality transport infrastructure for those companies and decision makers who are looking for future investments and settlement spots.
Low cost carriers are of particular importance regarding the social cohesion in the North Sea Region as they offer low transport prices enabling private people to commute and to visit relatives and friends more often in contrast to a regular schedules services with a different business model and fares.
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