Contents INTRODUCTION 10 A step back in time
ROUTES – Twenty years of progress have given the company the perfect platform to promote air service development. 18
From little acorns...
20 The heart of the matter 25 A sense of community 27
The World Routes team
28 An enlightened strategy TIMELINE – A pictorial history of World Routes, from Cannes in 1995 to Chicago in 2014. 32
World Routes timeline
HOSTING – All World Routes hosts have benefitted from the enormous impact of the event, from new air services to enhanced economic activity. 46 Host cities 1995-2016 48 Broad horizons 51 The benefits of hosting 52
South Africa’s golden mile
54
China’s panda city
AIRLINES – Airline networks have evolved over the past 20 years thanks to the efficiencies brought about by new aircraft designs and engines. 59
The value of connectivity
60
Evolution in the sky
65
Freedoms of the air
routesonline.com
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AIRPORTS – From terminal operators to airport cities, the gateways to the world have developed into proactive members of the aviation value chain. 69
The power of competition
70
Paving the way for success
72
Giving travellers the freedom to choose
75
A compelling story
77
A changing business
78
Sowing the seeds
TOURISM – A crucial sector, especially for many emerging economies, tourism has introduced a new dynamic to route development. 82
Embracing tourism
84
Playing with numbers
86
A winning formula
88
A platform for collaboration
FUTURE – Air transport has an exciting future thanks to new technology. 92
A step forward in time
DATA – Facts and figures from 20 years of route development. 96
Facts and figures
ACKNOWLEDGEMENTS
Routes 113-115 Portland Street Manchester, M1 6DW, UK +44 (0) 161 234 2730 routesonline.com R™ is a Registered Trade Mark of UBM Information Ltd and is used under licence. © Copyright 2014. The content of this publication is the copyright of UBM Information Ltd and shall not be copied or stored in digital format without the written permission of the Copyright holder. Content is correct at time of printing. UBM Information Ltd shall not be liable for any errors or omissions contained herein.
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routesonline.com
PUBLISHER Jonathan Lee jonathan@aviationmedia.aero Aviation Business Media Ltd Sovereign House, 26-30 London Road, Twickenham, TW1 3RW, UK aviationmedia.aero The opinions and views expressed in this publication are those of the authors and do not necessarily reflect any policy or position of UBM Information Ltd or Aviation Business Media.
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INTRODUCTION
INTRODUCTION
A step back in time Aviation has changed beyond recognition in the 20 years since World Routes began. On 14 September 1995, the first World Routes opened in Cannes. It was an eventful year for aviation. Boeing introduced the 777, Denver and Macau opened shiny new airports and a Concorde set a new speed record for a round-the-world flight, returning to New York’s JFK 31 hours 27 minutes after take-off. Also this year, the development of Netscape Navigator, a web browser that had a dominant share of the market in the pioneering days of the Internet, marked the beginning of the dotcom bubble. Communication technology has come a long way since then. Think of the social media platform that is such a crucial part of the routesonline hub, its 24/7 conversation deepening established relationships and creating new partnerships. But such advances were most likely beyond the imagination of those brave few that first used Netscape to book their airline tickets online. Soon enough, however, there was no other way to book tickets on another phenomenon – and one that was destined to take the aviation world by storm.
LOW-COST CARRIERS The low-cost carrier (LCC) concept actually had a notable history by 1995. Laker Airways was one of a number of airlines founded on a business model that was determined to undercut the flag carriers. Southwest Airlines is most often cited as the LCC ‘granddaddy’, however. Southwest started service in 1971 and has performed admirably in the United States, initially under the colourful leadership of Herb Kelleher. Kelleher noted in 1994 that “if the Wright brothers were alive today, Wilbur would have to fire Orville to reduce costs”. LCCs live true to this sentiment in many ways. They serve secondary airports to keep charges down, 10
WORLD ROUTES
use online sales almost exclusively and employ a standardised fleet. Alongside cutting costs to the bone, LCCs innovated in ancillary services, charging for bags or food and beverages on board. These new revenue streams have been every bit as important as saving the pennies. But it was the advent of the Internet that really allowed the LCC ethos to hit home. A name synonymous with low-cost, easyJet, started flights just a couple of months after the first Routes event, serving Edinburgh and Glasgow from London Luton (Ryanair had been re-launched as a LCC in 1990). Today, easyJet flies some 630 routes from 22 bases, carrying more than 60 million passengers using 217 aircraft. Its achievement typifies the LCC movement. Being an LCC is no guarantee of success though. Hundreds of start-up LCCs have come and gone in the past 20 years. The major carriers tried – and usually failed – to establish their own subsidiaries in an effort to beat back the competition. The likes of Go by British Airways, Song by Delta, and United’s Ted are no longer part of the scene. Gradually, however, lessons were learned or defeat accepted. LCCs now control around 30% of available seats. But the wheel of fortune may be coming full circle as LCCs begin to gain a whiff of corporate respectability. Upstarts no longer, LCCs have become part of the establishment even though the core of the business model remains. As Routes marks its 20th anniversary, Ryanair’s uncompromising business model looks to have run its course while easyJet now offers allocated seating and many of the other sprinklings of a mature airline.
THE GULF CARRIERS If the LCCs can be beaten in their claim as the greatest transformational force in aviation in the past 20 years,
DID YOU KNOW?
6,500
more aircraft were in service in 2013 compared with 1995
it is perhaps the “Big Three” from the Gulf that would pip them to the post. World Routes had moved on to Oslo in 1997 when Akbar Al Baker re-launched Qatar Airways with just four aircraft. The airline now has around 130 planes serving 140 destinations. Some 300 aircraft are on order, worth around US$50 billion. A new airport, Hamad International, will facilitate this extraordinary development.
infrastructure development. When World Routes rolled up in Dubai in September 2006, the airport was enjoying a successful year that would see it handle more than 28 million passengers. Less than 10 years later, the city luxuriates in two major airports and handled almost 66 million passengers in 2013. Emirates is the driving force behind the incredible growth with 370 aircraft on order worth US$162 billion. It hasn’t been plain sailing and the Gulf carriers have had to fight hard for the rights to certain routes. Many countries are resisting the pressure to accommodate them, fearing for the survival of their own airlines. But with Qatar now a member of oneworld, Etihad having an equity share in several airlines and Emirates co-operating with Qantas on the lucrative Kangaroo routes between Europe and Australia, the rise of the Gulf Carriers looks set to continue.
ALLIANCES
Meanwhile, Etihad was set up in 2003, first flying a couple of months after the Edinburgh World Routes event. It has become one of the fastest growing airlines in the world, its near 90-strong fleet operating 1,500 flights per week across the globe. Like Qatar, it is developing its home base to accommodate the growth strategy.
Of course, no airline can cover all corners of the globe. The solution is the global alliances, Star Alliance, oneworld, and SkyTeam. KLM and Northwest set the ball rolling in 1993 but it was Star Alliance, started in 1997, that really cemented the trend. Oneworld followed two years later while SkyTeam was set up in 2000. Combined, the three alliances account for some 1.8 billion passengers (more than 60% of all passengers on an annual basis) and around 3,000 destinations.
Arguably, Emirates has created the biggest storm, riding on the back of the success of Dubai as a destination and Dubai Airports as a trailblazer in
Alliances have made a tremendous difference to the way a member airline develops its own network. No longer is there a need to cover all bases if a partner 20TH ANNIVERSARY
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can do it for you far more cost effectively. It gives an airline and its customer instant reach and adds an extra dimension to route development.
AIRPORTS AND THE PASSENGER If the world has changed for the airlines, the same must be said of airports and the passenger experience. In general, the passenger process in 1995 was much the same as it had been 20 years earlier. Bookings were usually made via a travel agent, a paper ticket was issued and check-in was completed at an airport desk with the paper ticket swapped for a paper boarding pass with a 1D magnetic stripe. But 1995 was a pivotal year with the first tickets sold via the Internet. Two decades later, a complete transformation has put the journey experience into the hands of the traveller. Bookings are made via the Internet (although travel agents remain popular in some regions), there is no ticket, check-in is online or at an airport self-service kiosk and the boarding pass could be a bar code on a smartphone. The enabler for much of this transformation was the e-ticket. It had first made an appearance the year before the inauguration of World Routes but it was applicable only to a single segment on a single carrier. The industry needed a complete system overhaul if interline and more complicated itineraries were to be accommodated. This was finally achieved in mid-2008.
The events Severe Acute Respiratory Syndrome (SARS) was one of a number of external events that have shaped aviation since World Routes began. SARS hit in early 2003 and caused a 3% drop in seats worldwide, according to OAG. Flights to China dropped 45% in June 2003 compared with the year before while flights within Asia Pacific dropped 10%. But the most significant event in aviation was undoubtedly the 9/11 tragedy. Its most obvious effect was on the security checkpoint, which became far more robust. Without losing any of the efficacy gained, the challenge ahead is to ensure efficiency and a throughput capability that matches passenger numbers. But 9/11 did more than up the security stakes. It forced a complete re-think about the value of aviation, a conversation that is still ongoing today. There have also been various bird flu scares, a volcanic eruption that shut down European airspace for the best part of a week and a global economic meltdown that actually had a far greater financial impact than even 9/11. All have influenced aviation’s direction, the strategies employed and the processes required.
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THE MARKETS As technology has changed, so have the aviation markets. No longer do North America and Europe dominate. Aviation’s centre of gravity has shifted east in the past two decades and Asia Pacific is now the largest air travel market in the world. Sheer size gives it weight, notably the thriving middle class in China. In 1995, Chinese carriers were not the global giants of today and the potential of air travel in the country was recognised but not realised. Airlines were merged under the umbrella of Air China, China Southern and China Eastern. This brought greater efficiency to the sector, while airports improved in both size and standards. China is now in its 11th five-year plan (2011-2015) in which the government indicated it would spend US$237 billion to improve the aviation sector further. New aircraft are coming in their thousands and some 150 airports are under development. With per capita income set to reach US$15,000 in the next decade, an extra one billion Chinese are expected to travel and so the upgrades will be sorely needed. Asia Pacific is not just about China. It is a diverse region and not all countries have enjoyed unbroken success. The Tiger Economies blossomed in the mid-90s but by 1997 had fallen prey to the Asian Financial Crisis. Some 50% of stock market value was wiped out in Hong Kong and Singapore while currencies in the region declined to a similar extent. Air travel inevitably suffered as a result. But the Asia-Pacific is nothing if not resilient and a willingness to trade and a culture of saving soon had
these economies back on their feet. Further shocks, such as Severe Acute Respiratory Syndrome, kept a check on the region but its emergence as a global driving force has never been questioned. Meanwhile, in Africa, strong moves towards greater safety and enhanced infrastructure are finally helping the continent to realise its potential while Latin America seems to have largely overcome its financial difficulties to host strong airlines satisfying strong demand.
CONCLUSION Much else has happened in the past 20 years, of course. Environmental issues loomed large, for example, but these seem to have been headed off at the pass by a coherent and comprehensive industry strategy. And safety, the top priority and the backbone of a successful industry, has seen exceptional improvements. In 2013, there was just one accident for every 2.4 million flights in western-built jets. Many airlines have come and gone and airports and destinations have risen to meet the new paradigm of connectivity. At its heart, though, aviation remains customer-centric. Serving the customer in the most efficient way possible while ensuring an excellent bespoke travel experience is the ideal that aligns all stakeholders. For all of aviation’s trials and tribulations, getting partners around the table to discuss ways to improve customer service is as important now as it ever was. World Routes has remained fundamental to this goal since the very first show. 20TH ANNIVERSARY
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ROUTES Twenty years of progress have given the company the perfect platform to promote air service development.
WORLD ROUTES ROUTES
From little acorns… The World Routes event has grown from humble beginnings to transform and influence the aviation world. When ASM was set up in 1993, aviation was a very different industry. This was pre-alliance, pre-9/11 and, from an airport point of view at least, pre-marketing. The notion of airports actively seeking airline business was very much in its infancy and it was this gap in the market that ASM was created to fill. The founders were drawn from Manchester Airport in the UK and had been working hard to improve the airport’s connectivity. Interline workshops were the order of the day, bringing together a range of diverse airlines in the hope of forging interline agreements that would connect at Manchester. So a small, regional carrier would be encouraged to adjust its schedule to serve Manchester an hour or two before one of the majors was due to take off on a big international flight. The team that would lead ASM in its formative years were essentially acting as matchmaker. And the kernel of an idea about an air services event was beginning to germinate. ASM was started on a shoestring budget. There was no capitalisation. And contracts – awarded to help airport clients further airline relationships – were sporadic,
necessitating a hand-to-mouth existence. The route development agency understood it needed a platform to promote its services. This is where the team’s original interline workshop idea, employed at Manchester, took shape and began to flourish. ASM didn’t want a “normal” conference, with delegates and speakers. Right from the start, it was clear that allowing the stakeholders to meet and conduct meetings was paramount. “But it was hard work,” says David Stroud, managing director ASM, and one of the original Manchester team. “ASM was a young agency trying to persuade airports and airlines to come to a third party destination to negotiate. And while it seems an obvious idea now, it wasn’t the way business was done back then. We had to persuade everybody that it was a win for them all – for airport, airline and the cities, regions and countries involved.” The first World Routes event took place in Cannes, France. It was a small, Euro-centric affair and was seen very much as a driver of business for ASM. For most of the year, the
ASM continues to shine ASM may have been the parent that World Routes quickly outgrew but the consulting service is still alive and well as a recent contract win in Taiwan illustrates. ASM, too, is owned by UBM and so feeds into the same corporate structure as Routes even though it is a separate limited company. DAVID STROUD
18
WORLD ROUTES
“We still help airports attain airline service,” says Stroud. “We work exclusively for airports as we want to be able to look at and assess airlines in an open and transparent
manner. We go to World Routes now as customer.” While many of ASM’s clients are second-tier airports, the need for their expertise – and the service provided by World Routes – is illustrated by the number of big hitters that have retained ASM. These include Munich, Singapore Changi and Copenhagen. ASM helps them not only develop airline relationships but also trains and develops staff. This side of the business is growing too with Shanghai Airports the latest beneficiary of an intensive course.
airport consulting business held sway, to be replaced by a scramble to put together something the industry would deem worthy of attendance. And while the team were new to the events industry, they used all their marketing experience to create a launch forum that delegates would demand was repeated. But lessons were learned and the second year at Abu Dhabi enticed a bigger turnout. By the time the fourth World Routes was held in London, attendance had doubled over the previous year. No longer was the event simply a vehicle for ASM. It had taken on a life of its own.
COMPETITORS ENTER THE FRAY It wasn’t long before competitors realised the value of the event and the potential for growth in the route development sector. “But we had all the ingredients for success and from the start we knew we had a good brand,” notes Stroud. “Routes was a great name, it perfectly captured the essence of the business and had marketing appeal. It was still a battle to establish ourselves, of course, but we knew we couldn’t be derailed.” Determined to succeed, staff size grew over the years, as did the office space, and slowly but surely World Routes moved from new kid on the block to establishment. Scale-wise, there is no comparison between today’s World Routes and those early days. There wasn’t an exhibition originally, for example, just desks around the outside of a hall. And the event hadn’t really gone global even though by 2003 a Routes Asia event was established to highlight the growing role of Asia-Pacific. What hasn’t changed, however, is the core idea of connectivity. It has become a buzz-word in the industry when talk turns to aviation’s many benefits, but World Routes was the first event to promote connectivity and remains a primary driver. “It is a challenge to stay relevant,” says Stroud, “but underpinning the business through meeting facilitation and encouraging connectivity is never going to go away. Meetings will always be the cornerstone of the business even though the types of meetings will evolve, as will overall content. Routes has never been a brand that’s afraid to innovate and so we’ll see constant enhancements.” The acquisition by UBM in 2010 provides the financial muscle and robust framework of expertise to pursue any opportunities for development. And forthcoming events in Durban and Chengdu showcase the global intent.
The changing nature of route development ASM and World Routes grew out of a need for airports to market themselves to airlines. Over time, tourist boards joined the party as the benefits of aviation connectivity became clear. Airports and tourist boards have, of course, become extremely sophisticated in their marketing over the past 20 years but the need to connect them with airlines is still as true today as it was then. Part of the reason for this is the vibrant backdrop of the industry. Wafer-thin margins and the economic meltdown of 2008/2009 has prompted a need for air services to be successful from day one, for example. No longer can a route mature and the stakeholders reap their rewards years after the initial investment. There is no such luxury of time today and that means even greater due diligence and expertise in putting an air service together. It also used to be the case that airports looked to legacy carriers for major international routes and regional airlines for domestic or regional feeder services. But the advent of low-cost carriers has destroyed this paradigm. And as LCCs mature, they may begin to compete against legacy carriers on the main international city-pairs with a hub-and-spoke strategy. Legacy carriers are used to buying other airlines but perhaps they are now the prey and LCCs the predators. And with new fleets, new business models and new financial imperatives, simple talk of an airport’s catchment area is no longer as relevant. What matters now is how an airport can truly deliver business for its airline customers – and not just how many people it potentially serves. The future of route development will be even more competitive. Those that deliver will be the most successful.
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ROUTES
The heart of the matter Katie Bland, director of Routes, says the core of the World Routes event will remain focused on air service development and the delivery of an exceptional customer experience for delegates. World Routes has an unparalleled position in the industry. How will you ensure it remains relevant? World Routes is a market leader. We continuously strive to make improvements to our events and digital platform and the opportunities that they provide for our air service development community to interact and do business. Customer insight and customer experience underpins our business strategy. We have rolled out an in-depth customer insight project this year through a variety of qualitative and quantitative research methods – including advisory panels, focus groups, surveys, and one-to-one interviews – to gain insight into our customers’ challenges and how Routes can deliver a better experience each year. At the moment, the Extra Meeting System (the on-site meetings scheduling system at Routes events) is one of our key focuses. We are looking at how we can make it more efficient and less reliant on the paper-based system that we’ve been using up to now. Face-to-face meetings are at the heart of Routes and one of the pieces of feedback we have received is how we can better assist attendees in preparing for their meetings that take place at Routes so that they are more effective. So we have devised a number of innovations around this, including a pre-event “How Routes Works” webinar, training modules through our sister company ASM and infographics on how to optimise meeting scheduling opportunities pre-event. 20
WORLD ROUTES
Content, both digital and at our live events, is also important in delivering high level thought leadership and market intelligence to our community. We have a highly experienced content team, including talented journalists and conference producers. We also use digital specialists and aviation experts whose great work ensures that Routes delivers the best and most relevant content in the industry. The Routes Strategy Summits nowadays attract some of the industry’s most highly respected leaders and we have pioneered Route Exchange Airline Briefings online and at our events – where carriers deliver briefings face to face to a targeted airport market which can then submit proposals for air service.
The event continues to grow. Do you have targets in terms of delegate numbers? We have experienced 70% growth in delegate numbers at World Routes since 2006 (1,576 delegates) and we expect 3,000-plus delegates at World Routes 2014 in Chicago, which means that delegate numbers will have doubled in eight years. This has been through organic growth – penetrating more and more airlines, airports and stakeholders each year and welcoming them to the events to use as a platform to discuss air service. The seniority of attending delegates has developed hugely over the last few years. For example, over 50 CEOs and 15 Ministers attended World Routes 2013 in Las Vegas.
KATIE BLAND
How will you continue to provide a service to your customers outside of the World Routes event? Routesonline provides community engagement 365 days a year and in between the events that take place in the annual calendar. It attracts over 75,000 unique visitors each month. It’s a digital platform working hand-in-hand with the live events. We provide our audience with relevant breaking news and key data. Content and community informs our customers ahead of attending live events on the latest industry news and debate. Routesonline then aggregates this content, delivering it to our customers at the time when they are scheduling and preparing for their meetings at Routes. The Route Exchange online directory provides our airport customers with unique insight into the strategy and decision-making process of airlines. We use a variety of analytics and engagement metrics to monitor the success of all of our content, ensuring that we are producing valuable, original content that is of the highest quality.
Where will new growth come from geographically? We believe that growth will come from Asia as Asian aviation markets open up further. The region represents more than a quarter of the world economy today and will represent more than a third by 2032. More than 50% of the new long-haul routes created between 2013 and 2032 will be connected to Asia-Pacific. In 2012, Asia-Pacific’s domestic traffic represented 36% of global domestic traffic in terms of RPKs. In 2032, this number will reach 52%. Traffic to, from and within Latin America is expected to grow 5.2% annually over the coming 20 years.
The two largest traffic markets for Latin America are Europe and North America. These are expected to grow 4.8% and 5.3% respectively and therefore it’s no surprise that we are seeing growth at our events in the Latin American region. Some forecasts suggest seven of the world’s top 10 fastest growing countries in 2015 will be in Africa. China in particular continues to build strong economic ties with the African continent, driving growth. Over 50% of tourists worldwide arrive by air, with international tourist arrivals in Africa growing almost fivefold since 1990. Domestic traffic has grown 86% while international traffic has grown 90% since 2000. We felt that it was the right time to take World Routes to Africa and that’s why the 2015 event will be hosted next year in Durban, KwaZulu-Natal, South Africa. Today, the domestic US market is the largest single aviation market in the world. Over 100 airlines and 4,100-plus aircraft are in service there. A focus on increasing aircraft utilisation and increasing load factors has meant that airlines in North America have been able to absorb growth while their fleet size has remained relatively stable. Some 680 million passengers originate and/or end their trips in North America every year. Therefore, there’s substantial growth to be had at Routes from the US domestic market.
How will you cater to the tourism sector? The presence of tourist authorities at Routes to support their airports in air service development has been there right from the start, although initially in very small numbers. Nowadays, over 121 destinations are represented by their tourist authorities at World Routes. 20TH ANNIVERSARY
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ROUTES
How important is sustainability to the future of World Routes?
creating jobs. Routes has a role to play in this through providing the platform for the world’s airlines and destinations to discuss and negotiate air service.
UBM and Routes aim to be sustainable businesses in many ways: Charitable giving We are currently supporting a local, Manchester-based charity called Francis House, which supports families with children with life-threatening or life-limiting illnesses. Stakeholder engagement and awareness Sustainability is now one of the key criteria when selecting future host cities for our events. We also encourage our exhibitors to exhibit in a less impactful way.
I joined Routes in 2005, heading up the Sales Team until 2010 when I took up the position of Future Hosts Director, responsible for securing host partners for six Routes events and three Airport cities events annually. I moved into the leadership role here at Routes in November 2013.
Materials waste The focus is on using digital products to reduce the environmental impact from paper use.
Under my leadership, there is a culture of empowerment and accountability, which has created clearer development paths for the team. We have been working to integrate even further with the rest of UBM around the world and have embarked on a number of collaborative initiatives on our events with our colleagues in the United States and Asia. We even have a member of the Routes team heading out to our Shanghai office to take part in an International Exchange Programme where he will be able to experience working in business in China.
General Air service development in itself helps to build sustainable communities by connecting people and places, facilitating foreign direct investment and thus
And our Customer Insight (CI) skills are being developed through the various CI initiatives we’ve been working on this year, some of the results of which we hope to roll out at World Routes in Chicago.
We have consciously increased the internal communications of sustainability within Routes and UBM too so that it is a part of the ethos of the business and incorporated into daily working life, through meetings, planning and delivery of our events, presentations and in general day to day routines.
22
Internally, what changes do you want to achieve under your leadership?
WORLD ROUTES
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