View
217
Download
3
Category
Tags:
Preview:
Citation preview
1
Mutual development of Schiphol after the merger KLM - Air France
in view of the
dynamics of airline competition
AMO lecture TU DelftMay 12th, 2005
2
Relevant issues
– Industry developments
– KLM’s key strategic choice
– Merger with Air France and joining the SkyTeam alliance
– Mainport proces at Schiphol
– Impact of KLM’s strategic choice on Mainport Schiphol
3
Relevant passenger market of Schiphol consist of “Netherlands local market” en “SPL transfer potential”
Transfer potential
158 Mln.
Source: ICAO/IATA / AEA Statistics 2003 / Airline Business (Regional) / AAS - Historisch Vlucht Systeem (Incl. LCLF, charters)
Number of passenger movements in 2002
Worldwidepassenger market
1.600 mln
Europe-related market (to/from and within EUR)
550 mln
Relevant SPL markets
185 mln
Rest of the world
1033 Mln.
Europe related market
554 Mln.
Rest of Europe related
373 Mln.
SPLrelevantmarket
181 Mln.
Netherlands local market : 26.6 mln - Regional airports: 1.5 mln- Airports outside NL: 1.5 mln
Local traffic at SPL: 23.6 mln(89% of Netherlands local market)
Transfer potential: 158 mln
Transfer traffic at SPL:17 mln (11 % of transfer potential)
Traffic at SPL
40 mln
2
Local
Transfer
4
Airline industry: old world
• Market access was highly regulated:– System of bilateral traffic rights between countries– National carriers dominated the market– Air transport was a luxury good
• High government influence in the value chain:– National airline– National airport– National air traffic control organization– Permits (airline, maintenance, etc.)
5
Airline industry: structural changes
• Phased deregulation (free market access):– 1978: one step introduction in USA– 90’s : phased introduction in EU – 90’s : phased introduction on North Atlantic route (Open skies)– Coming decades: gradual deregulation world wide
• Airline business becomes a global industry:– Main markets are: North America, Europe and Far East (>90%)
• Airline industry becomes a consumer business (market driven):– In 2004 ca. 2 billion passengers– Cargo network more independent from passenger network
6
Airline industry: new world
• Free market access leads to specialization and consolidation:
– Hub-operation + low cost operation + charter operation
– Hub-operators create world wide alliances
• Specialization and consolidation leads to fierce competition:
– Price wars and shifts in market shares
– Consumers become highly price sensitive
– Supported by technological developments (internet shopping)
• National carriers must choose a new competitive position
7
Growth of the European passenger market
0
10,000
20,000
30,000
40,000
50,000
60,0004/
1/88
4/1/
89
4/1/
90
4/1/
91
4/1/
92
4/1/
93
4/1/
94
4/1/
95
4/1/
96
4/1/
97
4/1/
98
4/1/
99
4/1/
00
4/1/
01
4/1/
02
4/1/
03
4/1/
04
4/1/
05
4/1/
06
AEA Total Scheduled Passenger Traffic (in million RPK)
Source: AEA, incl.domestic, excl. charters
Average annual growth rate 1988-2003: 6.0 %(passenger traffic within and to/from Europe)
Expected growth rate of 4-5 % per year until 2012
3
8
KLM’s key strategic choice
• In a consolidating industry mid-sized companies are most endangered:– Large companies use their market and financial power– Small companies specialize in niche markets
• Key strategic choice for KLM was between:– Continuity of the company as an independent legal entity– Continuity of the economic activity
• KLM decided for continuity of economic activity:– Specialize as a hub-carrier at AMS– Continuity safeguarded as partner in a global alliance
9
Worldwide alliances
SkyTeam12%
Star alliance22% Oneworld
17%
Others40%
KL-NW-CO9%
SkyTeam21%
Star alliance22% Oneworld
17%
Others40%
Before 2004 After 2004
10
Different forms of alliancesLevel of
integration
Coordination
Integrated units
Managerial
Company
Scheduling,pricing, etc.
Routesin ‘JV’
Merger of shares(one bottom-line)
Full merger
Air France-KLM
Economicbenefits
KLM-Northwest
Star alliance,KLM-Delta
11
Merger Air France - KLM
Merger between Air France and KLM leads to:
One group: Air France - KLM
Two companies: Air France and KLM
Three businesses: Passenger, Cargo and Maintenance
12
AF/KL largest airline company
Passenger traffic (RPK)in 2002-03
AA UAAF + KL
DL NW AF JALS BA LH
Nr. 3 in pax traffic
Source: IATA - AEA
European
Non-European
KL
Nr. 1 in turnoverTurnover in 2002-03
AF + KLJALSAA LH UA DL AF BA ANANW COUSAirKL
European
Non-European
Annual sales: 21 bln EUR in 2003/04
Source: IATA
14
Connectivity hub-operations at EUR Mainportstotal connectivity 1994 - 2004
Total number of connections per hub per week
126,345
145,991
167,144
68,641
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Amsterdam / Skyteam Charles de Gaulle / Skyteam Frankfurt / Star Alliance Heathrow / One World
FRA
CDG
AMS
LHR
15
Effect SkyTeam on connectivity at AMSbased on mid-term planning scenario’s 2005 - 2012
Number of one way connections on total network per week
230,348
210,905
169,765
150,937
100,000
120,000
140,000
160,000
180,000
200,000
220,000
240,000
2003 2004 2005 2008 2010 2012
Skyteam (high growth scenario) "Wings" (high growth scenario)
Skyteam (low growth scenario) "Wings" (low growth scenario)
Effect SkyTeam: +10%
16
EUR Mainports dominate intercontinental trafficon routes to/from Europe
4 mainports=
54% of all flights
Other airports9%
LHR
6 medium size hubs 21%LGW, ZRH, MAD,MXP, ROM, MOW
AMS
Capital cities16%
CDG
FRA
17
Competing European multi-hub systems
London-Heathrow (LHR)
Paris-Charles de Gaule (CDG)
Frankfurt (FRA)
Schiphol (SPL)
Madrid (MAD)
Munchen (MUC)
= SkyTeam alliantie
= Star alliantie
= Oneworld alliantie
18
Mainport process at AMS
Dutcheconomy
Air transportnetwork at AMS
Environmentof AMS
Capacityairport AMS
19
Air transport network at SPL
MAINPORT SPL
Total network at SPL
Hub-Operation SkyTeam (ca. 65% share)
ICA networkEUR network } Core of the network
of the Mainport SPL
Continuity of the Mainport SPL requires a “sustainable competitive position” of the SkyTeam network in comparison to the network of the alliances at the other European Mainports.
20
SkyTeam intercontinental network at SPL highly dependant on transfer traffic
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Local Transfer
21
Growth strategy network AF/KL
• Increase profitability:
– Continue structural measures
– Implement e-services
• Realize growth:
– Develop network and fleet: 4 - 5% growth per year at CDG and SPL
– Secure sufficient internal and external capacity
• Further develop the alliance:
– Capitalize on AF/KL opportunities
– Extend SkyTeam with new partners
22
Network AF/KL at AMS: Mainport requirements
• Growth by stronger competitive position requires annual capacity:
– in 2004: 403.000 movements
– in 2012: 600.000 movements
• Increased connectivity requires peak hour capacity:
– in 2004: 105 movements per hour with availability of 85%
– in 2012: 120 movements per hour with availability of 95%
• Competitive costs require low visit costs per unit:
– Direct plus indirect costs must be lower than those at other Mainports
23
Government remains part of mainport process
Regulations by Dutch authorities determine to a certain extent the
in-efficiencies of the Mainport process:
• Spatial planning around the airport determines the extension possibilities of runways, air space and terminals
• Environmental standards, operational regulations and charges are limiting the annual capacity and quality of the airport and lead to higher visit cost
• Extra charges and longer process times by security and customs result in increased unit costs, in particular for KLM
24
Key success factors Mainport Schiphol
• Further improve the competitiveness of the network of AF/KL and SkyTeam at AMS
• In time development of cost efficient capacity by AAS, LVNL and Dutch government
• Level playing field between AMS and other Mainports on charges and environmental regulations
• Integral approach for the development of the Mainport Schiphol:– More consistent long term planning– More open approach towards the neighborhood
Recommended