Look Beyond the Short Term

31 August 2008 (Last Updated August 31st, 2008 18:30)

The airline industry remains keen to expand route networks. We speak to Olivier Jankovec, director general of the European region of Airports Council International (ACI europe), about the prospects for route development in Europe and the role that airports must play.

Look Beyond the Short Term

Future Airport: Are there sufficient opportunities in Europe to meet the industry's present appetite for opening new routes?

Olivier Jankovec: Finding new destinations has been a priority for more than ten years and the pace of expansion has been amazing since 1997. This growth has been driven by low-cost carriers, which now account for nearly 27% of the market. There are still many opportunities in the medium term as we see the impact of the EU's enlargement to include Central and Eastern Europe.

Eastern Europe is a dynamic market in a similar way to some parts of Southern Europe. Also, traffic to destinations including Morocco is booming because of Open Skies. There are also talks happening between the EU and Canada. The EU certainly has an ambitious agenda.

We've seen a lot of growth in point-to-point services because of the liberalisation of air traffic rights, but there is still strong growth at big hub airports too.

FA: What challenges must the industry confront in order to take advantage of these opportunities?

OJ: Given the present crisis in the aviation industry there may be less desire to open new routes in the short term. That said, between April 2007 and April 2008, 518 new routes opened, which at 5.9% is aggressive growth compared to the previous year. That level of growth would be hard to maintain. Now the opportunities are in the medium term, so in the next year we might be lucky to see zero growth.

The economic downturn and rising fuel prices are the key factors. Oil prices ease and then rise again but experts tell me that prices of $125 to $140 a barrel do not reflect market conditions, so there may be a cyclical trend. The days of cheap energy are over but oil prices cannot stay so high forever.

FA: Apart from fuel prices, are there any other constraints on route development?

OJ: While we are optimistic about the future, the big challenge is capacity limitations. By 2025 there will be 60 congested airports in Europe, and the top 20 will be saturated. The process of constructing new capacity has become increasingly expensive and is often complicated by problems getting permission to build. Security costs have also risen dramatically – now accounting for 35% of operating costs, compared with 8% before September 2001.

FA: What can airports do to facilitate future expansion to new destinations?

OJ: Airports and airlines have to work together. One difficulty that many regional airports face is that they can attract airlines but find it hard to make them stay. Often they have a lot of traffic in some months and then the rest of the year is a desert.

"Between April 2007 and April 2008, 518 new routes opened – 5.9% growth."

Increasingly, airports are taking a greater role in route development. They present business cases to airlines showing what they can offer in terms of airport charges, marketing support and services. They must also work with regulatory authorities and local businesses to attract and retain the airlines. Any airport CEO will tell you they don't want to raise charges, so that they can remain competitive and attract airlines. This means that airports must focus on non-aviation revenues to sustain the cost of their infrastructure. They need to find the ideal balance – lower charges mean more passengers and therefore higher ancillary revenues.

FA: Do you see airports making innovative efforts to bring in airlines?

OJ: Brussels Airport was badly hit after the industry recession caused by 9/11 but it has been creative in bringing in new airlines. Jet Airways now uses it as a hub for flights to India and North America. It is a competitive market, so airports have to think of new ideas.