Multi-Airport Systems in Era of Low-Cost Carriers

1. 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 Airport Systems Planning RdN

2. 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) Airport Systems Planning RdN

3. 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 Airport Systems Planning RdN

4. 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 Airport Systems Planning RdN

5. MarketShare Frequency Share What drives traffic allocation in Multi-Airport System? • Airline competition has been primary • S-shaped market share/frequency share • Drives airlines to • Match flights => Allocate flights to major markets • Concentrate Traffic at primary airports Airport Systems Planning RdN

6. Right model: “Concentration” not “Catchment Areas” • Concentration is standard urban phenomenon • e.g.: financial, jewelry, etc. districts • Driven by what suppliers offer • Customers choose which location (airport) depending on where they find what they need -- not just most convenient facility Airport Systems Planning RdN

7. “Concentration” persists --until high level of local traffic • When local originating traffic high… • More flights add little at major airports • Airlines place flights at second airports • There appears to be a ‘threshold”… • Currently ~ 12 million originations/year • Note: higher as aircraft larger Airport Systems Planning RdN

8. Metropolitan areas with significant multi-airport systems Airport Systems Planning RdN

9. Metropolitan areas with significant multi-airport systems Airport Systems Planning RdN

10. 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 Airport Systems Planning RdN

11. New Reality: No-frill airlinessetting up “parallel network” • Low-cost carriers “parallel” majors • Major fare distinctions • Ticket 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 Airport Systems Planning RdN

12. 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 Airport Systems Planning RdN

13. New Reality: US Network of Low-Cost Carrier Airports Airport Systems Planning RdN

14. New Reality: Europe Network of Low-Cost Carrier Airports Airport Systems Planning RdN

15. Multi-Airport Systemsin Brazil Airport Systems Planning RdN

16. Importance of Parallel Networkof close-in Brazilian airports Airport Systems Planning RdN

17. 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 Airport Systems Planning RdN

18. 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 airports • This is already happening!!! Airport Systems Planning RdN

19. Southwest entry in Boston market grew second airports Source: Louis Berger, New England Regional Aviation System Plan materials Airport Systems Planning RdN

20. Market Share of Boston/Logan is in decline The 2003 Share is about 63% Source: Louis Berger New England Regional Aviation System Plan Airport Systems Planning RdN

21. 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 Airport Systems Planning RdN