routesnews
The world air service development magazine
Cartagena: Open for business Interviewed: TAP Portugal’s Fernando Pinto Airline focus: JetBlue Special report: Airline mergers Issue 1 Volume 9 2013 www.routesonline.com
Airport features: Lyon, Belo Horizonte & Kathmandu Destination report: Cartagena
Foreword C
olombia is quite literally open for business. With an historic open skies agreement with the US having now come into full effect after years of negotiations, there is now unlimited scope for routes and frequencies between the two countries and the chance for new carriers to enter the market. This is good news, given that the US is already Colombia’s top aviation market, and Colombia is the US’s second biggest market in South America after Brazil, and several carriers have already grasped the opportunity to open new routes. One of the beneficiaries has been Cartagena, which welcomed a new jetBlue service from New York JFK in November, and hosting Routes Americas will give delegates a chance to find out more about this UNESCO heritage city whose business and tourism opportunities we explore in detail in this edition of Routes News. But there is good news for non-US airlines too. Colombia is a keen supporter of liberalisation of its aviation market. Today its three biggest carriers – Avianca, Lan Colombia and Copa Colombia – are all either foreign-owned or part of larger merged groupings, giving more scope for Colombia to increase its international connections. Colombia is a signatory of the Latin American Civil Aviation Commission Multilateral Open Skies Agreement, which seeks to open up more routes between Latin American countries and is gaining momentum, with Brazil having signed up late last year.
Editorial
Editor Oliver Clark +44 (0)208 831 7514 oliver.clark@routes-news.com Group Editor Joe Bates +44 (0)208 831 7507 joe@aviationmedia.aero Reporter Steven Thompson +44 (0)208 831 7560 steven.thompson@routes-news.com
Sales
Advertising Manager Rebecca Randall +44 (0)208 831 7513 rebecca.randall@routes-news.com
Brazil also features heavily in this Americas themed edition, with a special report looking at the opportunities offered by its hosting of the 2014 FIFA World Cup and 2016 Olympics, and we speak to TAP Portugal’s Fernando Pinto about why the market is so important to the Portuguese flag carrier. Elsewhere, it seems that the need for airlines to consolidate to ride out difficult times has never been stronger, with Virgin Atlantic’s tie-up with Delta and discussions between American Airlines and US Airways continuing. We take stock of this trend and ask where the next big mergers are likely to happen. The year may be young, but if it continues like this, it will be an exciting 12 months for aviation.
Editor Oliver Clark
R™ is a registered Trade Mark of UBM Aviation Routes and is used under licence. © Copyright 2013. The content of this publication is the copyright of UBM Aviation Routes 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 Aviation Routes shall not be liable for any errors or omissions contained herein.
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Sales Manager David McCauley +44 (0)208 831 7515 david.mccauley@routes-news.com
Production
Design, Layout & Production Andrew Montgomery andy@aviationmedia.aero Mark Draper mark@aviationmedia.aero Erica Cooper erica@aviationmedia.aero Jose Cuenca jose@aviationmedia.aero
Publisher
Jonathan Lee +44 (0)208 831 7563 jonathan@aviationmedia.aero
Published by Aviation Business Media Ltd Sovereign House, 26-30 London Road Twickenham, TW1 3RW, UK T: +44 (0)208 831 7500 F: +44 (0)208 831 7501 The opinions and views expressed in Routes News are those of the authors and do not necessarily reflect any policy or position of UBM Aviation Routes or Aviation Media. Printed in the UK by The Magazine Printing Company using only paper from FSC/PEFC suppliers www.magprint.co.uk
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Contents 24 16
28
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Foreword
8
World news
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Cargo news
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On the move
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Work in progress Oliver Clark talks to TAP Portugal CEO, Fernando Pinto, about his plans for the airline following the rejection of the latest privatisation plan.
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Airline one2one Rocío Blázquez Reyes, Aeromexico, VIP sales Europe and Asia.
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Hidden treasure Gary Noakes reports on the growth potential of one of Colombia’s most prized tourism destinations, Cartagena.
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Isle of plenty ASM’s Ralph Anker explores the network development of the biggest of the Canary Islands, Tenerife.
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Natural selection It may have secured its first Emirates service late last year, but Lyon-Saint Exupéry Airport is not resting on its laurels, writes Steven Thompson.
Airport one2one Michel Tohane, network development manager, Nice Côte d’Azur airport.
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Blue-sky thinking Ronald Kuhlmann reports on jetBlue’s innovative business model and its impressive growth over the last decade.
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Contents
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The sporting life
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Brazil’s hosting of the 2014 FIFA World Cup and Olympic Games in 2016 offers plenty of opportunities and challenges for airlines.
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Being social
Dr John Kasarda reports on the impressive recovery of Belo Horizonte’s Tancredo Neves Airport from a traffic nadir to become a thriving international gateway.
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Routes News takes a look at the latest innovative ways airlines and airports are using social media.
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On the right track With a second international airport under development and the modernisation of Tribhuvan Airport ongoing, Nepal hopes to offer a more attractive proposition for airlines, writes Mark Smullian.
Routes News is tweeting @routesnews Follow us at www.twitter.com/ routesnews Find out the latest news and let us know what you want to hear from us.
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A tale of two airports
Mergers and acquisitions Lida Mantzavinou examines the major airline restructures and consolidations of the past year and gives her predictions for the future shape of the market.
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Routes update pages
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View from the top Dr Ghassan Aidi, president of the International Hotel and Restaurant Association (IH&RA), talks to Routes News about the latest trends in the global hospitality sector.
The HUB, your weekly, central source of information for everything related to Routes and Routesonline, is delivered to your inbox every Friday. It includes event updates, airline and airport profiles and news and analysis. Sign up to receive The HUB at www.routesonline.com/register/
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World news CZECH TARGETS LONG-HAUL EXPANSION From June this year, Czech Airlines will launch its first long-haul operation with direct service to Seoul. It also plans to add new destinations to Russia, CIS and Asia starting from 2014, Routes News can reveal. Czech Airlines will add A330s to its fleet to explore potential new routes to Russia and niche markets in Asia, where it is likely to target China and Japan. The carrier takes delivery of its first A330 at the end of May allowing it to begin serving Seoul from the summer with a twice weekly service – raising the number of codeshare services with Korean Air to six weekly – but, this is not the end of Czech’s long-haul expansion plan, according to executive director, Christophe Viatte. “We are already working on a plan with our SkyTeam partner Korean Air. We will fly to Seoul but we are also looking at additional niche markets in Asia, as well as connecting traffic to Japan and Pacific region via Seoul,” he said. “We are also analysing more points in the Far East, Russia and CIS such as Astana, Krasnoyarsk, Irkutsk or Vladivostok. After that, definitely we see a big potential for China, Japan and South East Asia either operating on our own or using codeshare partners. “There could be a plan to add more long haul aircrafts, but it will depend on our future partner ambitions as well as Prague Airport’s development plan. It all depends on the bigger picture, but the plan is for sure to develop more long-haul destinations from Prague in the future.”
AirBaltic is set to launch additional flights to Amsterdam and Chisinau, in Moldova, from its Riga base. CCO Michael Grimme, said: “As part of our new business plan we have been concentrating on highdemand routes and have added frequencies to 12 destinations in Europe and the CIS already for this winter. We are delighted to improve our service to Chisinau and Amsterdam.” 8
MAJOR AFRICAN EXPANSION FOR RYANAIR Ryanair plans to open two new bases in Morocco – its first outside of Europe – and operate news routes from Essaouira and Rabat this year, allowing it to serve 60 routes from eight airports in 2013. The airline will base two aircraft at Marrakech allowing it to operate 22 routes including seven new destinations: Baden (Switzerland), Bergerac, Dole, Tours and Paris Vatry in France, Cuneo (Italy) and Munich. It will station one aircraft at Fez allowing it to operate a total of 15 routes including the new destinations in France of Lille, Nantes, Nimes and St Etienne. Ryanair will also launch new routes to Brussels and Marseille from Essaouira and to Brussels, Paris and Marseille from Rabat. Morocco has seen stiff competition between Ryanair and easyJet with both competing to serve burgeoning tourism demand from Western Europe. EasyJet, which already operates from Agadir, Fez, Marrakech, Casablanca and Fez to the UK, France, Italy and Germany, launched its first services from London Stansted to Marrakech in February.
Finnair will fly to Palma de Mallorca, Antalya and Tel Aviv this summer. Frequencies to Malaga, Barcelona and Madrid are also being increased, the carrier said. Finnair earlier announced two new summer connections to Asia, to Hanoi from June 15, with three weekly flights and Xi’an, from June 14, also with three weekly flights.
Flydubai has introduced a fifth Saudi Arabian destination to its network from Dubai after launching a twice weekly services to Ha’il on February 13. Etihad Airways has expanded its codeshare with KLM and will launch daily flights to Amsterdam from this May. KLM’s current service between Amsterdam and Abu Dhabi will also
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News AIRTRAN PLANS NEW CABO SAN LUCAS SERVICE AirTran Airways has asked US regulators to grant it permission to begin flying between Austin, Texas, and Cabo San Lucas on the southern tip of the Baja California peninsula, Mexico. In its submission to the US Department of Transportation, AirTran said if exemption was granted for the route, it planned to begin operating it on or about June 2. AirTran would serve the route using a Boeing 737-700 configured for 137 seats and plans to offer service three times per week, depending on demand and other market conditions. It said its proposed Austin–Cabo San Lucas service would provide new convenient low-cost travel options to passengers and shippers in both the United States and Mexico, and clearly is in the public interest. The submission, if approved, would represent Cabo San Lucas International Airport’s only international service.
AIR FRANCE HAS LAUNCHED A NEW LOW-COST FARE PRODUCT FROM FOUR FRENCH BASES The airline will offer a two-tier price structure - Classic and MiNi - to passengers flying from Paris-Orly, Nice, Marseille, and Toulouse. The new MiNi fare will be sold alongside the classic fare from today. The budget option, which is priced from €49, includes on board refreshments but customers must pay an additional €15 for checked baggage. Air France said today in Paris that the new fare was aimed at customers who had been tempted away from the French flag carrier by low-cost airlines and other modes of transport. Passengers choosing the MiNi fare will not benefit from Air France’s loyalty programme - Flying Blue miles. The first customers paying the new fare, which is available to 58 destinations, will fly on February 6 this year. Air France said the new fare structure was profitable and would bring no further job losses to those announced last year.
UNWTO SAYS – 1 billion tourists travelled internationally in 2012 IATA’S – Tony Tyler predicts airlines will handle over 3 billion passengers in 2013 SYPHAX AIRLINES – The new Tunisian start-up orders 10 A320s
AIRBUS is targeting 700 new orders in 2013
TAKE OFF, NOT AIRLINES GROUND – their B787 Dreamliner fleets over safety fears
EU AIRPORT TRAFFIC – reported to be in ‘recession’ for the second month running, says ACI Europe
AEROSVIT AIRCRAFT – seized as it faces bankruptcy
HAMBURG AIRPORT – increase to daily from this summer, meaning the two airlines will offer a combined double daily service. Korean Air will bring nine new aircraft – including two A380s – to its fleet in 2013. The arrival of the two Airbus superjumbos will bring Korean’s total to seven. The carrier will also add one A330-200, two B777-300ERs,
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two B737-900ERs, and one B777F.
one
B747-8F
is hit by strike action
US Airways is to launch a new direct route between Philadelphia and Salt Lake City, from this June. The new daily service will give customers in Salt Lake City one-stop access to destinations throughout the East Coast, Europe and the Caribbean. 9
News MAASTRICHT AIRLINES TO TARGET LONDON, PARIS AND COPENHAGEN Start-up carrier Maastricht Airlines, which aims to fly four times daily to Amsterdam from March, is already targeting new business routes to London, Paris and Copenhagen. The carrier, which will be based at Maastricht Aachen Airport, will also fly twice daily to Munich and daily to Berlin on weekdays. The airline will initially fly two Fokker 50s and aims to have a fleet of six aircraft by the end of next year. Marjolein Peerboom, responsible for sales and marketing, said: “The main focus is business travel, as well as tourists looking to travel to other destinations from the Maastricht region.” Sander Heijmans, CEO of Maastricht Aachen Airport, added: “The concept of the airline is focused on business travellers, which is a nice addition to our increasing leisure and low fare network. “With three new destinations and 35 weekly flights, Maastricht Airlines will be the second largest passenger operator at our airport and is an important contributor to the expected increase in passenger numbers in 2013.”
Air Asia Indonesia has announced new domestic and international routes connecting Semarang, Central Java, and Makassar, South Sulawesi, with numerous cities both in and outside Indonesia. Air China will launch a new Beijing–Houston service on July 11, subject to regulatory 10
NEW BEGINNINGS American Airlines unveiled a new logo and livery in January. “Our core colours – red, white and blue – have been updated to reflect a more vibrant and welcoming spirit,” enthuses American’s CCO Virasb Vahidi. “The new tail, with stripes flying proudly, is a bold reflection of American’s origin and name.”
QANTAS-EMIRATES ALLIANCE MOVES CLOSER Australian regulators have granted interim authorisation, subject to conditions, for a strategic alliance between Qantas and Emirates which will see the re-routing of Qantas’ Kangaroo routes via Dubai. The Australian Competition and Consumer Commission (ACCC) said permission had been granted for the alliance to begin operating from April 2013 onwards, but the airlines will still need to work out joint sales and pricing strategy, joint marketing, system integration and testing, customer handling, scheduling and capacity coordination to satisfy the regulator’s conditions. “The ACCC is allowing Qantas and Emirates to start implementing their alliance because of the long lead time required to market and sell tickets before the commencement of long-haul services,” said ACCC chairman, Rod Sims. “The interim approval clears the way for Emirates and Qantas to be geared up to provide customers with a unified experience from day one,” said Tim Clark, president Emirates.
approval. The airline will operate a Boeing 777-300ER on the route.
already Australia’s leading domestic aviation network.
Qantas will lease an additional five Boeing 717s and purchase three Bombardier Q400s, due to start arriving from the second half of 2013. CEO, Alan Joyce, said the new aircraft would strengthen what was
Starting from April 25, Spirit Airlines will a daily seasonal service from Baltimore/Washington International Thurgood Marshall Airport and Philadelphia International Airport to Myrtle Beach International Airport.
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Cargo news
UPS/TNT MERGER HITS THE ROCKS
UPS has abandoned its planned €5.2 billion takeover of TNT Express after European regulators blocked the deal on competition grounds. Both companies said UPS had agreed to pay a cancellation fee to TNT of €200 million after the European Commission said the merger would lead to a highly concentrated market for domestic and international express delivery services in Europe. TNT Express said in a statement: “UPS informed TNT Express that UPS sees no realistic prospect that the European Commission clearance can be obtained and that UPS will not pursue the transaction on any other basis.”
UPS CEO, Scott Davis, said the US company was “extremely disappointed” with the EC’s position, adding: “The combined company would have been transformative for the logistics industry.” Joel Ray, head of consultancy at analysts, Transport Intelligence, said: “It is hard to see what the EC sought to achieve through the negative stance they took to this deal. “European shippers would have gained from the acquisition through a strong new road and air based player. This decision has set the market back many years, and risks reducing competition, not increasing it.”
CARGOLUX NAMES NEW CHAIRMAN
Cargolux Airlines International has appointed Paul Helminger as its new chairman. The move follows the Luxembourg government’s acquisition of 35% of the airline from Qatar Airways on December 31, 2012. Alphonse Berns, Paul Mousel and Patrick Nickels were also appointed to the Board. Qatar bought the stake in Cargolux from a unit of the now defunct Swissair just over a year ago. The Gulf carrier, which announced its intention to sell the stake in November 2012, is understood to have received
Yangtze River Express is now operating technical stops at Tolmachevo Novosibirsk International Airport on routes between China and Europe. The Chinese carrier will initially operate a Boeing 747-400F three times a week, but the airport reports that Yangtze is also considering launching passenger flights in the future.
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$117.5 million from the Luxembourg government, the same price it paid for the shares in 2011. The Luxembourg government has now pledged to find a new buyer for the stake. Cargolux is Europe’s largest all-cargo airline and launch customer for the new generation Boeing 747-8 freighter. The company currently operates a fleet of six B747-8 freighters and 11 B747-400 freighters. The carrier’s network covers 90 destinations worldwide, 60 of which are served on scheduled all-cargo flights.
Finnair Cargo has successfully used Route Exchange, the online platform for air service development, to open a new Brussels base. In March 2013, Finnair Cargo will initiate weekly flights via its new Brussels hub, connecting the Belgian capital with Finnair’s Helsinki base as well as with New York JFK and new destination Chicago O’Hare.
Liege Airport has blamed poor global economic growth, the loss of charter operators and the euro crisis for a 14.5% fall in cargo tonnage handled at the gateway in 2012. The airport handled close to 580,000 tonnes of cargo in 2012 as opposed to 674,469 tonnes handled in 2011. 13
ON THE MOVE
Virgin Atlantic has appointed former American Airlines executive Craig Kreeger [pictured] as its new CEO. Kreeger, 53, spent 27 years at the US airline working his way up to senior vice president – customer, in 2012. He replaced Steve Ridgway who had headed Virgin Atlantic since 2001. Jonathan Snook, currently vice president for operations, planning and performance at American Airlines, will assume Kreeger’s role as senior vice president for customer service, managing all aspects of the customer experience.
Simon Moore [pictured] has joined flydubai as manager of network planning. Moore was previously with bmibaby where he began his career as a network planning executive in 2008 before becoming network development manager for the airline in March 2009.
Dallas/Fort Worth International Airport CEO, Jeff Fegan, is to retire after 28 years with the airport. Fegan, who made the announcement to the DFW Airport Board of Directors on Thursday, has been CEO for 19 years. He will continue his responsibilities until September 1, 2013, or until a successor is in place.
Michael Huerta has been confirmed as permanent FAA Administrator by the US Senate. Huerta had been acting FAA Administrator since December 2011 following the departure of Randy Babbit.
London Stansted Airport’s commercial director Jonathan Crick has moved to Network Rail. His previous roles include 15 years at Monarch Airlines where he served as commercial director and sales and marketing director. The airport will not be replacing Crick until its sale by Heathrow Ltd is completed. Jet2.com has announced the appointment of managing director and chief commercial officer Steve Heapy as its new CEO as part of a management reshuffle, which will see current boss Philip Meeson become executive chairman. Heapy, who was made a company director in July 2011, will also take over the running of Jet2holidays, the company’s package holiday operation.
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Gulf Air has appointed Maher Salman Jabor Al Musallam as acting CEO following the departure of Samer Majali. Al Musallam, who was previously deputy CEO of the airline, was officially promoted by the airline’s board of directors in December.
AirAsia has announced the promotion of Siegtraund Teh to group chief commercial officer. Teh will take on the responsibility of Kathleen Tan, the current group head of commercial, who is to become the CEO of AirAsia Expedia. Her main responsibility will be to manage the commercial team and deliver commercial performance improvements across the AirAsia group. Former deputy director general of the European Regions Airline Association Simon McNamara was promoted to director general on January 1 following the retirement of Mike Ambrose. Brisbane Airport Corporation has appointed Michael Bradburn as its new chief financial officer. Bradburn took over on February 4, 2013, replacing current CFO Tim Rothwell, who spent 19 years at Brisbane Airport.
Airberlin has appointed Wolfgang Prock-Schauer [pictured] as its new CEO. The 56-year-old takes over from Hartmut Mehdorn, who had been in the position since September 2011. Mehdorn was responsible for establishing and successfully implementing the partnership between airberlin and Etihad Airways, and for leading the airline into the oneworld alliance. Liverpool John Lennon Airport CEO, Craig Richmond, is to leave his post on March 1. Richmond will be replaced by Matthew Thomas, currently commercial director at the airport. Richmond is to take up a new position in Cyprus where the Vantage Airport Group manages both Larnaca and Paphos airports. Slovenia’s Adria Airways has placed former commercial director Mark Anžur in temporary charge of the company, replacing outgoing CEO, Klemen Boštjan i . Anžur will remain in the position for a maximum of six months and the management board will invite applications for the role in the next month. Birmingham Airport has appointed Tom Screen as its new aviation strategy and development manager to help to grow the airport’s airline and route network. He joins from from Thomson Airways, where he has held the position of aviation planning manager since August 2008. He will manage a team of two, reporting to the aviation development director, William Pearson.
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Work in progress Oliver Clark talks to TAP Portugal CEO, Fernando Pinto, about his plans for the airline following the rejection of the latest privatisation plan.
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hen Synergy Aerospace’s privatisation bid for TAP Portugal was rejected by Portugal’s government last December, the decision may have come as a shock, given the country’s desperate finances, but one man it is unlikely to have surprised is the airline’s CEO, Fernando Pinto. Pinto has developed something of a stoical attitude when it comes to the airline’s future ownership since his appointment in 2000 with the brief to steer the carrier through its first partial privatisation bid from Swissair. When that deal fell through following Swissair’s bankruptcy, Pinto had to pick up the pieces, aware that the carrier risked drifting along with an uncertain future. “I came to TAP in 2000 for the privatisation, and that was supposed to happen with Swissair at that time. I was hired jointly by them and the government to prepare for this, but a few months after I arrived I was told Swissair were not proceeding with it,” Pinto tells Routes News. Having expected his tenure to be temporary, Pinto agreed to remain at TAP on the condition that he be given the freedom to work out a long-term strategy that would turn the loss-making airline around. “I stayed with the airline, but my conditions to the government was that we would have to manage TAP like a TAP Portugal’s Fernando Pinto.
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TAP Portugal Brazil–Western Europe airline capacity share: December 2012 Others – 10.89 British Airways – 5.35
TAP Portugal – 25.58
KLM – 5.47 Alitalia – 5.67 Iberia – 7.53 Lufthansa – 7.83
TAM Airlines – 18.94 Air France – 12.83 Source: OAG Analyser.
private airline, so no government influence, and over the last 13 years I have been able to manage it professionally as an airline that has to compete, and we really do compete strongly,” he adds. Aware that the government remained committed to honouring its pledge to privatise the airline and with TAP having posted losses of €122 million in 2000, Pinto launched a three-year turnaround plan, based on generating efficiencies, cutting costs and focusing on profitable routes.
Key markets – Africa and Brazil TAP Portugal’s strong network connections between Europe and Lisbon on the one hand and its access to Brazil
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and key markets in Africa on the other provided a core around which to build this profitable business. Today, TAP operates to 76 destinations in 34 countries, with some 70 frequencies to Africa every week and an unparalleled 77 frequencies to Brazil. TAP is the dominant carrier serving Brazil, via Europe, with data from OAG Analyser revealing that the carrier has a capacity share of 25.58% (see chart). South America’s biggest country by population, geography and economic might, Brazil is also in the top 10 world economies and will play host to the FIFA 2014 World Cup and the 2016 Olympics, giving TAP a lucrative market for decades to come.
If Synergy’s bid for TAP Portugal had been successful it would, Pinto admits, have offered a good fit with Avianca Taca’s network across Colombia, Peru and El Salvador, but the airline still benefits from a codeshare with LATAM on services to South America via Madrid. The airline offers the only direct European link to the Portuguese territory Mozambique, with a service to Maputo International Airport, and is the second biggest carrier operating between Europe and Angola, with 15.5% capacity share after TAAG Angola Airlines. Other markets with a strong TAP presence are Cape Verde and São Tomé and Príncipe. “Africa is also a very good location. We can do night flights which makes for very good utilisations. There is no night curfew so it is much easier to use. We believe we can do a little more and increase seat load factors,” says Pinto. The airline also offers services from Lisbon into the US to Miami, Houston and New York. TAP feeds its profitable long-haul network through more than 50 European short-haul destinations, including a strong presence in France, according to Pinto, with traffic hubbed through its base at Lisbon Portela Airport. This is further enhanced through its membership of Star Alliance and 28 specific codeshares with Etihad, Emirates, Turkish and Brussels Airlines. According to Pinto, ticket sales are fairly well spread across its markets, giving the carrier resilience when one particular market, such as Europe, is struggling. “When you see this balance of sales between Brazil and Africa, it’s very close, sometimes it’s Brazil, sometimes it’s Africa. Whenever we have a crisis as now in Europe, we see Brazil growing faster than Portugal, but if we have a balance between these four markets – Brazil, Europe,
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TAP Portugal
Portugal and Africa – when one fails the others are there to supply it,” says Pinto. Closer to home, the airline is an important part of the Portuguese economy, exporting €2 billion worth of goods every year and providing a source of direct and indirect employment. While many other European legacy carriers have struggled financially in recent years, TAP Portugal has generally bucked the trend, achieving record-breaking profits in 2010, and has been “profitable for the last seven years apart from 2008; that was a bad year for everybody” says the airline boss. TAP transported a record 10 million passengers in 2012, a 4.4% increase on the year before, with European, US and African routes the top performers. According to Pinto, during his first 10 years at the airline – 2000 to 2010 – TAP was averaging 10% traffic growth a year, now it is more like 6% to 7%, and the slowdown, combined with high fuel prices, has convinced Pinto that a period of consolidation is called for in 2013. “I wouldn’t say we will have new markets right now,” he adds.
Fleet TAP Portugal will receive an expected 12 A350-900s from 2015, but until then it is concentrating on revamping its existing fleet. In 2011, UK-based Marshall Aerospace won a contract to upgrade the interiors of TAP Portugal’s four A340-312s to include
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new seating with enhanced in-flight entertainment systems to give the airline a superior long-haul product. The first A340 returned to service in November 2012, with the rest expected to follow early this year. “What we’re doing with the long-haul fleet is completely updating the entertainment system. We have good seats in the business class but not a good entertainment system that was acceptable in the tourist class and so we are bringing in a brand new system to business class. “That will standardise our whole fleet. We will have all the fleet updated to a system that is up to date that will give the fleet some life,” enthuses Pinto.
Low-cost challenge Like all European legacy carriers, TAP Portugal has had to contend with strong competition from low-cost carriers (LCCs) in its backyard. The carrier has held on doggedly in its base at Lisbon Airport, despite easyJet opening a base there, with a 62.63% capacity share to easyJet’s 10.86%. In January 2013, TAP still held a leading 35.21% at Porto’s Francisco Sá Carneiro Airport, compared with Ryanair’s 26.89%. “It is a challenge. When I came to Portugal there were no LCCs; we had charter flights mainly into the south of Portugal. Faro was a popular destination, but all of a sudden it started to change and
I would say one of the reasons for that change was TAP Portugal,” he explains. “We showed that there was a viable market; we started to grow so much that other airlines said ‘there is a market there, we didn’t know’ and so I would say there was a strong attack by the LCCs. Now we have Ryanair and several others in the north and easyJet’s strong Lisbon operation. In the south that’s all you see. “But we keep on growing more than the LCCs together in our main area; it’s funny to see we increased more in the last four years at Lisbon than all the LCCs together.” But TAP does compete strongly and has a few advantages over the likes of Ryanair. One of these was TAP Portugal’s acquisition of regional carrier Portugália and its subsidiary PGA Express in 2006. This gave the national carrier access to Portugália’s network of thin routes to destinations such as Porto–Madrid, Lisbon–Porto Santo and Funchal–Lisbon and with the Embraer ERJ145s and Fokker 100s, the regional aircraft to serve them; LCCs operating the A320s and B737-800 simply cannot compete. While Portugal is determined to restart the privatisation process in early 2013 as part of its EU/IMF bailout agreement, the future of TAP Portugal remains uncertain. However, Pinto can be confident that the business model he has put in place will give the carrier a strong base from which to proceed, whichever path it finds itself on. RN
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one2one How is 2013 shaping up for route development?
represents, today, our first strategic traffic flow on the long-haul sectors.
It seems very promising with new destinations like Bremen with Germania and some other projects that remain confidential at this stage on the short and medium-haul sectors but also on the long-haul front.
What sets you apart from your competitors in the region? Our geographical position is an asset, if we consider that we are the gateway to the French Riviera and Monaco and we are only 20 minutes drive from the Italian border. The offer in terms of destinations and carriers is also very different from our competitors, with a large choice within Europe, but also with some year-round daily long-haul flights, for example New York JFK and Dubai.
Which of your airlines are growing? In terms of capacity, our major clients – the major flag carriers and low-cost airlines – invested a lot in 2012. Air France and easyJet started to operate their brand new bases at Nice with flights that boosted both our domestic and international networks. British Airways, Emirates, Swiss, Norwegian and some other major carriers also increased their operations tremendously at Nice; however, this is not an exhaustive list!
How many airlines do you currently have? Who are your main airlines and what are your top-performing routes?
Who most inspires you? Name: Michel Tohane
I am inspired by my family, friends and my passion for aviation.
Company: Nice Côte d’Azur Airport
What do you like doing when you are not at work?
Designation/job title: Network development manager
Again, I like to spend good time with friends and family. And I have to admit, I like to spend as much time as possible “above ground level” – flying private planes, freefall, radio controlled aircraft.
Home town: Nice
We have 59 scheduled airlines during summer. Our top five airlines are Air France, easyJet, British Airways, Lufthansa and Norwegian. Our top five destinations are Paris, London, Geneva, Brussels and Amsterdam.
How big a percentage of your traffic is low-cost?
If you were not working in aviation, what would you do?
Low-cost carriers make up 34.7% of our traffic.
Before starting in aviation, I worked in the medical field as an ENT assistant. But, honestly, I didn’t feel at ease working ouside of the aviation industry.
How did you start your career in aviation?
For short and medium-haul, we would like routes to Hanover, Billund, Sofia, Budapest, Florence and Bologna. In the case of long-haul, Shanghai, Hong Kong and Beijing; Miami and Toronto; and São Paulo.
I started my carrier at Sabena, the former Belgian flag carrier, as loadmaster; operations then quickly moved to commercial activities and network management. I spent 11 years working for airlines, including Swissair, and then moved to the airport in Nice as network development manager in 2001.
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What new markets or airlines are on your wish list?
What are your fastest-growing markets? Based on figures from 2011, the Asian market is the fastest-growing market with nearly 400,000 passengers yearly, which
If you won €1 million, what would you do with it? I have never dreamed about that. But I think that I would first help my best friends, my kids and my family to live easier and to achieve their dreams. And, personally, I would simply invest to be sure that my future is secure and comfortable! Sorry to disappoint, but I really believe that health, happiness and love is more than enough on earth. RN
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one2one How significant to Aeromexico is the launch of services between Mexico City and London Heathrow? We had been fighting to obtain this slot for seven to eight years. The airline was formed in 1934 and we have been flying to Madrid for the last 54 years. We have also served Paris for many years, so in Europe, London was the city we were looking at, and it had to be at Heathrow. We are very excited, about the new service because obtaining slots at London Heathrow is a very complicated process. The market between Mexico and London is very big – 620,000 passengers a year – 70% of which is charter and 30% scheduled flights. We want to compete with BA on the route, and are targeting business traffic. We have connectivity in Mexico. We have more than 45 destinations and 11 in Central and South America. This route is not only a direct flight to Mexico but connects the rest of the world to the Americas. Why should people choose Aeromexico over British Airways on the London– Mexico City route? I think mainly because we are the Mexican company flying to Mexico. The first time you step onto one of our planes it is as if you are already in Mexico – the food and the culture especially. We will be very competitive in terms of price and we are the best option in terms of connectivity in Mexico. We also offer the SkyTeam loyalty scheme. What passenger mix do you enjoy on average? Our mix of passengers is 30% corporate and 70% leisure, but this 30% corporate traffic generates 70% of our revenues. That’s why we take a lot of care of
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In 2013, we really want to consolidate this big expansion plan and shore up our brand recognition. We will also focus on our customer service. This year we announced the purchase of 100 new aircraft for $11 billion – 90 B737-800s and 10 B787s. It is the biggest investment ever by a Mexican company so we are very proud. This will give us the room to expand.
Name: Rocío Blázquez Reyes Company: Aeromexico Designation: VIP sales Europe and Asia Home town: Madrid these passengers. On the London Heathrow route we think it will be the same mix of leisure and business passengers. What are Aeromexico’s route development plans looking like in 2013? In the last three years, we have been supporting a very important expansion plan. We have added 22 new destinations in the last three years and nine in the past 12 months. This has been very important for the company. Aeromexico took the opportunity to expand our route network when our main competitor Mexicana went bankrupt. This sort of opportunity does not arise very often. We’re operating now in South America to Brazil, Colombia, Chile and Peru; in Central America to Honduras, Venezuela, Guatemala and Costa Rica; and we have a lot of frequencies to the US, too. We have 17 destinations in the US and one in Canada.
Why should people fly to Mexico? Mexico has a lot to offer. We have beautiful beaches but they do not have to be the focus of a trip. They can be a part of the trip. We also have culture, history and gastronomy. What is your background in aviation? I have been at Aeromexico for two and a half years. I am from Spain, but I visited the country a few years ago and the experience was fantastic. I previously worked for Portugália, Kuoni and Spanair. What is the biggest challenge currently facing airlines? I think the biggest challenge is to make routes profitable and to compete with low-cost carriers. We have to emphasise the uniqueness of our product. Sometimes the passenger is looking only for price and in those cases you have to get the product right for the passenger who is only looking at the price, whilst also getting the product right for the other products. Will the London Heathrow route be profitable? We hope so! This is the main challenge here. It’s a really difficult market because the London market is dynamic and fast. There are a lot of alternatives available for customers. This is a very interesting time for us. RN
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Hidden treasure Gary Noakes reports on the growth potential of one of Colombia’s most prized destinations, Cartagena.
I
t has been a long time coming, but Colombia’s improving international image as a safe tourism destination means that its flagship attraction, the UNESCO-protected colonial city of Cartagena, can now expect to reap some real dividends. Colombia has yet to fully realise the tourism possibilities of developing its Caribbean coast, but passenger figures from Cartagena’s Rafael Núñez International Airport, are already promising. The airport almost breached the 3 million passenger mark in 2012 after growing by at least 20% annually in the past four years. “Last year we almost reached 30% growth,” says Ramon Pereira, the airport’s chief executive. Credit for the recent jump in Cartagena’s arrivals numbers cannot go to one source, as it has been a joint effort involving the airport, the city, hoteliers and the tourist board. “No one goes to any city for the airport, luckily for us there is a lot to see here,” adds Pereira, whose ambition is to grow the number of direct services.
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The majority of passengers, some 70%, are tourists, with the city and surrounding coastline providing the key attractions, which means that Rafael Núñez, with little local outbound market and only a few industries, such as the port and petrochemicals sector, relies heavily on the leisure sector. Airport operator Sociedad Aeroportuaria de la Costa (SACSA), which is part-owned by Aena, has negotiated an extension to its management of the airport until 2020 and has put in place a $60 million expansion plan. This includes a terminal upgrade, which will increase surface area by 35% to accommodate 4 million passengers, and a new private aviation terminal in the hope that the airport, already located near the city centre, will be put on the conference and summit map. SACSA hopes to complete work within five years, but meanwhile the airport will concentrate on attracting tourists to the historic city.
Boasting a population of one million, Cartagena was declared a UNESCO World Heritage Centre in 1985 owing to its Spanish-built old walled town, which is still overlooked by the San Felipe Fortress, built to protect gold shipments from pirates. Architecture is one attraction, but Cartagena is almost surrounded by the warm waters of the Caribbean. The city’s two wide urban beaches, Bocagrande and Laguito, are lined with high-rise hotels, while the exposed beach at Marbella, 6km from Cartagena, is a favourite with surfers. Cartagena has seen an explosion of hotel building in the last eight years, during which the number of properties in the historic quarter jumped from five to more than 70. Nearby Playa Blanca, a popular day trip destination on the Islas del Rosario 20km south-west of Cartagena, is zoned for development. Within the Old Town, there have been many conversions of historic buildings into hotels such as the Sofitel Santa Clara, a 17th century former monastery, and the
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Cartagena
Charleston Santa Teresa, a convent from the same period. Brands such as Hilton and Holiday Inn are also present and there is a thriving market in restored casas, which range from basic bed and breakfasts to luxurious boutique properties. Further proof that Cartagena is on the up is that the city that inspired Colombia’s most famous novelist, Gabriel Garcia Marquez, now hosts the Hay Literary Festival, most recently in January 2013. Meanwhile, with peace talks taking place with FARC insurgents and the restoration of normal relations with Venezuela, Bolivar province is now considered safe to travel to. It contains the gold mines that brought the Spanish here and houses around 1 million people. Attractions include the town of Mompós, another UNESCO heritage site, where palatial mansions on the banks of the Magdalena River provide evidence of its former role as a trading post. There are also some protected areas such as the Parque Corales del Rosario y
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San Bernardo, 45km from Cartagena, a marine park with white sand beaches and a coral reef set around an archipelago of 30 islands, other protected areas inland feature mangrove swamps and tropical forests. Diana Henderson, head of product at UK-based tour operator Journey Latin America, accepts that the country’s image remains tarnished and that some of the remote archaeological sites remain out of bounds to tourists, but adds that safety in the Cartagena area is improved. “There are still a few areas where it’s not advisable to go because of the drug activity, but it’s much better now; the road from Cartagena to Mompós is okay to travel on.” The company believes international tourism to Colombia generally has been slow to take off because of the stigma attached to the country, and points to the well-developed domestic tourism sector, which means hoteliers often do not need to look beyond their borders to find business.
OPEN SKIES USHERS IN NEW ROUTES
A new Colombia–US Open Skies agreement, which came into force in January, is likely to lead to a flurry of new routes between the two countries. The agreement provides unlimited scope for airlines to launch new routes, with any number of frequencies to any points within the US and Colombia, with only cabotage restricted. Several carriers have already taken advantage of the relaxation, including jetBlue, which launches a service to Medellin from June 13, 2013, and American Airlines is planning a new Dallas–Bogotá route. However, Henderson does not anticipate a tourism boom similar to that experienced by Mexico, which has benefited from new air routes prompted by currency movements favourable to airlines and tour operators.
LATIN & NORTH AMERICA RANKINGS: NUMBER OF MEETINGS PER CITY IN 2011 Rank City 1 2 3 4 5 6 7 8 9 10 11 12 13
# Meetings
Buenos Aires Rio de Janeiro Sao Paulo Vancouver, BC Mexico City Washington, DC Montreal, QC Santiago de Chile Bogotá Boston, MA Lima Toronto, ON Cartagena
94 69 60 55 51 51 50 49 44 44 44 44 36
Source: The International Congress and Convention Association.
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Cartagena
THE ECONOMIC CONTRIBUTION OF TRAVEL & TOURISM: REAL 2011 PRICES “Colombia’s exchange rate has not changed hugely over the last few years. The country tends to be slightly more expensive than some in the region, but the currency is quite stable.” Cartagena is an hour’s flight from Bogotá and just two and a half hours from Miami, and the US is its key target market – it narrowly beats Argentina as the biggest supplier of visitors. The two countries’ tempestuous relationship has meant US airlines have been slow to offer direct flights, but jetBlue began a non-stop service from New York JFK in November and Spirit Airlines has operated from La Guardia via Fort Lauderdale for about four years. United Airlines operates a codeshare with Avianca. “The US is so close that it can be a huge market for us, but because of the safety issues for many years there was a travel warning, even though Cartagena has always been a safe city,” Pereira said. “Now we are targeting massive growth from the US, particularly from the northeast and west coast.” Pereira has another obvious target area, Latin America. He names Lima, Santiago and Buenos Aires as his choices for direct flights. Cartagena has successfully attracted charter flights from Italy, but Pereira is keen to regain others from Madrid and Barcelona that have been absent in the last few years. “We believe firmly that the numbers are there, but at the moment they are going through Bogotá or Panama,” he said.
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Colombia
2011 2011 COPbn1 % of total
Direct contribution to GDP 9,696 Total contribution to GDP 29,895 Direct contribution to employment 4,418 Total contribution to employment 4,959 Visitor exports 5,938 Domestic spending 14,169 Leisure spending 14,120 Business spending 6,240 Capital investment 6,369
1.6 5.0 2.4 5.5 5.3 2.4 2.4 1.0 4.7
2012 Growth2 4.7 4.8 2.7 2.6 6.7 4.1 4.8 5.2 10.6
2011 constant prices & exchange rates; 22012 real growth adjusted for inflation (%); 32012-2022
1
annualised real growth adjusted.
Source: World Travel & Tourism Council.
Spain may be able to muster a direct charter because of the attraction of a common language, but other countries’ leisure carriers may put Cartagena a little further down the list. Perhaps a good comparison, albeit a much bigger one, is Brazil’s colonial city, Salvador. A decade ago, this was the subject of the UK’s only attempt at charter flights to Brazil, a venture heavily focused on beach tourism, which lasted only one season. Even with the spotlight on Brazil with the World Cup and Olympics, it is doubtful that this will be revived, as the chief icon, Rio de Janeiro, will only cement its position with these events. Cartagena arguably does not have this handicap, as there is little desire among mainstream tourists to visit Bogotá. Developments like the Boeing 787, with its reduced operating costs, will make charters operations more economically feasible, but perhaps only with third party support.
Promotion of tourism and industry is the responsibility of Proexport Colombia, the government-run agency. Its spokesman, Javier Hendez, believes the tourism potential around Cartagena is “enormous” once sectors like golf, diving and gastronomy are properly embraced. The catalyst for growth is certainly there, as Proexport estimates that the Cartagena region will add 2,500 hotel rooms to its existing stock of 5,500 by 2014. Hendez believes the conference market has particular prospects, as it will help to fill these rooms in the off-peak season. “The walled city has great potential as the headquarters for conferences and conventions,” he said. “Cartagena has played host to internationally important events and it’s one of Colombia’s most developed cities. It has the infrastructure, tour operators, connectivity and personnel trained to handle large-scale meetings.” RN
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Isle of plenty ASM’s Ralph Anker explores the network development of the biggest of the Canary Islands, Tenerife.
L
ocated around 1,000km south west of the Iberian Peninsula and just 300km west of the coast of Africa, Tenerife is one of seven major land masses that comprise the Canary Islands. It is the largest, most visited and most populated of the seven islands that include El Hierro, La Palma, La Gomera, Gran Canaria, Fuerteventura and Lanzarote. Between them the airports serving these islands handled almost 33 million passengers in 2012, down 6.3% from just over 35 million in 2011. Among the islands, Tenerife handled the most, with 8.5 million passengers using Tenerife Sur Airport (South) and a further 3.7 million using Tenerife Norte Airport (North). Tenerife’s location makes it a popular destination for northern Europeans (especially tourists from the UK and Germany) during the winter months, when sunshine and warmth are in short supply and even the traditional summer holiday destinations around the
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Mediterranean are unable to guarantee warm and sunny weather. During the northern hemisphere winter months, Tenerife still typically enjoys daytime temperatures of between 20 and 30 degrees Celsius and rainfall is something of a rarity.
Two markets Tenerife is the only one of the Canary Islands to be served by two separate major commercial airports, both operated by AENA. Tenerife Sur Airport (TFS) located on the island’s south coast handles the vast majority of international flights and is the gateway to the main hotel, holiday and leisure facilities. Tenerife Norte Airport (TFN) located in the north-east corner of the island is primarily used for inter-island services as well as domestic routes to mainland Spain. The island’s capital, Santa Cruz de Tenerife, is also located in the north-east of the island. The two airports are linked by an excellent coastal road and the journey time
between the two airports is around one hour. Apart from providing quicker access to the main tourist destinations, TFS is less operationally constrained than TFN, where flights are not allowed to depart before 07:30 and arrive back after 23:30. This can be a problem as mainland Spain is one hour ahead, making it difficult to connect conveniently with some flights out of Madrid, the airport’s single busiest route. Although almost 99% of TFN’s traffic is domestic, it does have one interesting international, long-haul route that operates year-round. Santa Barbara Airlines flies year-round to Caracas in Venezuela, while Air Europa offers seasonal flights to the same destination. Over the last decade, the island’s annual passenger number, have hovered between 11 million and 13 million. Between 1999 and 2006 passenger numbers were growing modestly, but fell slightly in each of 2007 and 2008 (see top graph on page 29). In 2009, the number of tourists fell by 10%, but rebounded in 2010 and 2011.
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ASM Tenerife airports traffic 1999-2012 – annual passengers (millions)
ASM SIGNS DEAL WITH TENERIFE TOURISM Tenerife Norte (TFN)
Tenerife Sur (TFS) Source: AENA.
Tenerife Sur top 12 airlines – annual passengers 2011-12
2011
2012
Source: AENA.
Tenerife Sur top 15 country markets – annual passengers 2011-12
TFS 2010
Passenger numbers at TFS fell by a modest 1.5% in 2012 (the average across all Spanish airports was a reduction of 5%), but the demise of Star Alliance member, Spanair, in January 2012, and local carrier Islas Airways in October 2012, has resulted in TFN’s traffic falling by 9% in 2012.
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TFS 2011
Source: AENA.
Ryanair now leading airline at Tenerife Sur In recent years, TFS has seen the rapid growth of LCCs complementing and, in some cases, replacing charter airlines on several European routes. Traffic figures from AENA show that in 2012 the leading airline at TFS was Ryanair, with over
Just before Christmas, Tenerife’s Vice President and Minister for Tourism, Carlos Enrique Alonso Rodriguez and Tony Griffin, senior vice president of ASM, signed an agreement in Tenerife whereby ASM will help Turismo De Tenerife to develop the air service networks from Tenerife Sur and Tenerife Norte. Particular focus will be placed on developing direct links to west Africa, European hubs and North America. The contract is initially for a 12-month period.
1.5 million passengers, almost twice as many as the next biggest carrier Thomson Airways, the UK charter airline which is part of TUI Travel. TUIfly and Jetairfly also both belong to TUI Travel and feature among the top 12 airlines. The Thomas Cook Group, Europe’s second biggest holiday company, is also represented with three of its airlines: Thomas Cook Airlines (UK), Condor (Germany) and Thomas Cook Scandinavia (see middle graph). The rise of Ryanair at the airport has been rapid as it only launched flights to Tenerife in December 2006 (from its home base in Dublin) before making the airport a base in February 2011. This winter the Irish LCC is serving some 30 destinations across Europe, including 10 destinations in the UK and seven in mainland Spain. Given the mix of airlines, it is not surprising that the leading country markets in terms of passenger numbers are the UK, Spain and Germany. These three markets accounted for almost 70% of all passengers at TFS in 2011 and 2012. Among the fastest-growing country markets in 2012 are Russia (+29.1%),
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ASM Tenerife Sur airport seasonality – monthly passengers 2010-12
TFS 2010
TFS 2011
TFS 2012 Source: AENA.
10 THINGS TO DO IN TENERIFE
While Tenerife is best known for its family friendly hotels, beaches and warm, winter sunshine, the island has much more to offer the discerning visitor. Routes News has selected 10 less obvious things to see and do while visiting the island: 1. Visit the Auditorio de Tenerife, a remarkable concert venue, similar in style to the Sydney Opera House, designed by the famous Spanish architect, Santiago Calatrava. It is home to the Tenerife Symphony Orchestra and located on the waterfront in the capital of the island. 2. For children, no visit to Tenerife would be complete without a trip to the Thai-themed Siam Park “The Water Kingdom”. Multiple water rides from the gentle and leisurely to downright terrifying offer something for everybody. 3. Mount Teide in the middle of the island is the highest mountain in Spain at 3,718m. Reach the very top by funicular to take in stunning views of the island. There is an astronomical observatory at the top as well. 4. Attend the Carnival of Santa Cruz de Tenerife, the second biggest in the world after Rio. This year the celebrations take place from February 6-17 of and this year’s theme is Bollywood. 5. They might not be up there with FC Barcelona and Real Madrid but Tenerife has its own professional football team, Club Deportivo Tenerife. As of January 2013, they were top of Group 1 in the Segunda Division B (Spain’s third division). Their impressive home stadium can host 24,000 spectators and back in 2001/02 the club played in the top Spanish league, La Liga, having gained promotion the previous season under current Chelsea coach Rafael Benitez. 6. Whale watching. The area between Tenerife and neighbouring La Gomera is a great place to watch whales and dolphins all year round. 7. Play golf. There are nine golf courses on the island for those who want to chance their arm at conquering bunkers, fairways and greens. 8. Visit the Fisherman’s Museum in Puerto Santiago. The façade is designed by the renowned French painter and sculptor Bernard Romain. 9. “Clash of the Titans” tour. Large chunks of the 2010 Warner Brothers movie were shot on location in Tenerife. Tourists are now guided on how to locate the places used for filming some of the key scenes. 10. Visit Acantilados de Los Gigantes “Cliffs of the Giants”. These are near vertical cliffs along the western edge of the island reaching up to 500m in places.
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Switzerland (+26.1%), Norway (+14.4%) and Sweden (+13.2%). In contrast, passenger numbers from Italy were down almost 19%, French routes saw a drop of almost 13% and the biggest market of all, the UK, was down just 2% (see bottom graph on page 29). Tenerife’s geography and weather mean that TFS’s seasonality profile is unusual for an airport in a warm country, with traffic peaking during the winter months rather than in summer (see graph above). This makes it similar to some airports in Europe, which receive a boost from ski traffic in winter, such as Geneva.
British Airways returns in 2013 New TFS services launched in 2012 included Ryanair services to Asturias and Leeds/Bradford, as well as Monarch to East Midlands, Norwegian to Oslo Torp and Volotea to Nantes. Apart from these low-cost services, there was also a new twice-weekly service from Moscow Sheremetyevo operated by Aeroflot with Ilyushin IL-96s, which helped to boost the number of Russian tourists. This summer will see the launch of additional new services by Germania (weekly to Bremen), Monarch (to Leeds/Bradford) and Norwegian to its new base at London Gatwick from September 5. British Airways will also be returning with scheduled flights to TFS starting from March 31, when it will operate five weekly flights using Boeing 737-400s. Another flag carrier making a welcome re-appearance is SAS, which resumes seasonal, weekly flights from Oslo at RN the beginning of July.
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Natural selection
It may have secured its first Emirates service late last year, but Lyon-Saint Exupéry Airport is not resting on its laurels, writes Steven Thompson.
I
t would be fair to say that 2012 ended on something of a high for Lyon-Saint Exupéry. In December it welcomed one of the world’s fastest-growing airlines, Emirates, to its gates after it launched a five times weekly service. Earlier the same year, the airport officially opened its new €24 million low-cost terminal. Attracting Emirates was quite a coup. The airport gained the service to Dubai ahead of rivals Marseilles, Toulouse and Bordeaux, which were also available under the current UAE-France bilateral regime. According to Emirates, cargo also underpins the route’s value, with the addition of Lyon now giving Emirates SkyCargo a weekly capacity of more than 1,000 tonnes spread across the belly-hold of 31 return passenger flights serving Paris, Nice and Lyon.
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On the radar The Dubai route has also seen Lyon attract other suitors. “The first flights from Emirates have been very promising,” explains Aéroports de Lyon’s marketing director, Stéphane Geffroy. “It’s really going according to plan, based on the passenger load factors and cargo as well. Part of Lyon’s attractiveness is its cargo potential. Emirates are very pleased with that. We think the route will be a big success. “Emirates is a great addition and puts us on the radar for Asia and South Africa. It also brings additional passengers – up to 10,000 in the first 12 months. We’ve had a lot more interest in Lyon since the launch. We’ve had airport delegations from Japan and China since the launch. It will accelerate the process of promoting Lyon to Asia and South Africa.” Unsurprisingly, a route to China is a long-held ambition for Lyon – Beijing,
Shanghai and Hong Kong are on its wish list – and Geffroy adds that while a link to any one of these cities is unlikely to happen overnight, the airport firmly believes it will happen in the coming years. “All these three destinations would make sense,” he adds. “What we want to do is make sure Emirates is a success first. Our potential is growing rapidly and, sooner or later, there will be a direct service between Lyon and China. It will be two to three years before it will happen but we are confident.” Low-cost is a growing market for Lyon, as evidenced by its revamped Terminal 3, complete with a new 10-gate satellite. The airport handled just under 8.5 million passengers in 2012 and the figure is expected to rise to 11 million by 2016, primarily driven by demand from the low-cost sector.
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Lyon Airline 1 EasyJet
11
Market share % 27.75 10
2 Air France
24.45
3 Lufthansa
8.07
4 Air Algerie
5.49
5 Tunisair
3.87
6
6 Aigle Azur
2.89
5
7 Turkish Airlines
2.65
8 Air Méditerranée
2.64
9 Air Austral
2.45
10 Iberia
2.02
11 Others
17.72
9 8 1
7
Lyon-Saint Exupéry Airport 4
Low-cost growth EasyJet is Lyon’s biggest low-cost airline, Ryanair is notably absent, having elected to operate services from the nearby Saint-Étienne – Bouthéon Airport. “Low-cost was zero five years ago, now it is at 22% to 23%, and we think it will go up to 35% within five years and maybe higher,” says CEO Philippe Bernand. “We think, in Lyon, that low-cost and legacy traffic will be closer in the future. Conventional traffic will take some aspects from the low-cost model and low-cost will take some things from conventional. “In Lyon, for example, easyJet has a strong focus on business clients. We built this extension with both in mind. Boarding and arrivals are separate but the commercial area is shared.”
New facilities Connected to Terminal 3 by underground tunnel, the 5,000sqm satellite building has separate arrivals and departures floors and a 500sqm retail area. The satellite also boasts pre-boarding rooms at the behest of the low-cost carriers,
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3 2 Source: OAG Analyser.
effectively meaning that passengers are primed to step straight onto the plane the minute it is ready. The new facilities are a huge boost for Lyon-Saint Exupéry, although the airport is far from finished in terms of new infrastructure, because of an anticipated 35% rise in low-cost passengers over the next five years and the influx of football fans expected for the 2016 European Football Championships in France. In fact, 2016 is the unofficial deadline for completion of the €260 million first phase of its T1–T3 development. Key elements of the project are the extension of Terminal 1 and the construction of a new centralised 10,000sqm commercial area at the heart of the airport. The plans will give low-cost passengers access to 4,500sqm of premium shopping facilities before they go to the T3 satellite to catch their flights. When the T1–T3 project is complete, Lyon will boast 70,000sqm of additional floor space and the capability to handle aircraft up to the size of the A380 at Terminal 1.
Air France number one But while Lyon looks to the low-cost market, it is not fixated on it. Air France remains the airport’s number one client, and while the airline remains firmly attached to its hub-and-spoke model out of Paris Charles De Gaulle International Airport (CDG), Lyon will still do everything it can to accommodate the national flag carrier. “We see movement towards lowcost,” says Geffroy. “Clearly there’s an acceleration in that area but Air France is still our first customer. We will work with them to up their activities in Lyon. We think there is potential to grow their business out of Lyon. “The Air France model is focused on a platform for long-haul from Paris CDG. We believe Air France has to find a model in Lyon because it is such a large market. It is the number one airline out of Lyon. They fly to a number of destinations that they don’t fly to from other regional airports. “We will help them to grow where we can. It is important for us and them. But when it comes to long-haul, Air France
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Lyon
are focused on Paris. So if we want to develop our own long-haul then it won’t be with Air France.” Lyon is targeting routes to New York and Montréal, among others. Closer to home, Geffroy points to Warsaw, Stockholm, Tel Aviv and Moscow as destinations the airport would like to secure. “We’re also looking at Greece and North Africa quite closely,” he adds. A major partner with Only Lyon – the city’s PR arm and its international brand – the airport is keen to shout about everything Lyon has to offer. Lyon is, to all intents and purposes, France’s second city. Greater Lyon has 1.3 million residents, there is double this amount in the wider Lyon urban region, and the airport has a catchment area of 15 million. According to Lyon, it is second only to Paris for ‘the three Es’ – exports, economy and education – and is the number one region in France for industry. The city has a rich history, dating back to Roman times – it is a UNESCO World Heritage site. The city is the birthplace of the earliest motion picture camera – the
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It depends on the capacity of France to develop. The country was late to the game with low-cost carriers. Our goal is 35%, but it could be up to 40% Lumière brothers invented the cinematograph camera here in 1895, an event celebrated annually with the Lumière Film Festival launched in October 2009. The city’s famous Festival of Lights also attracts millions of visitors to the region each December. Above all, however, Lyon is known and renowned for its food. It has swathes of ‘bouchons’ serving traditional Lyonnais cuisine, as well as 16 Michelin starred restaurants, including four with two stars and one with three.
Finally, it is, of course, right on the doorsteps of the Alps, and so the airport is seeking to position itself as “a gateway to the Alps for ski holidays” says Geffroy. “What we try to do is to be accurate and honest with the airlines about the potential here and also to provide them with a competitive package. We make sure they are as confident as possible that they can convert the potential of Lyon into passengers and sales. We’re trying to do the RN basics right.”
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April 15 – 17, 2013
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Scan me with your phone!
Blue-sky thinking Ronald Kuhlmann reports on jetBlue’s innovative business model and its impressive growth over the last decade.
W
hen it launched operations in 2000, jetBlue brought something new to the skies of the US. With a single-class product that combined amenities such as spacious leather seating, and live TV and radio at a cut price, jetBlue’s product was not only structured differently from anything on offer from US legacy carriers, but also broke with Southwest’s low-cost model. Starting with a network serving points from New York’s John F Kennedy International Airport (JFK), jetBlue quickly expanded to Boston and then added overnight west coast flights, significantly increasing the utilisation of its growing fleet of A320s. Proving a hit with travellers, the carrier became profitable within its first six months of operations and it continued to grow in the post-9/11 world, adding destinations and aircraft such as the E190 and a new base at Boston Logan, while its rivals shrank or descended into bankruptcy. Fast-forward to today and jetBlue continues on a strong trajectory, adding new routes into the Caribbean and the US north-east as competitors such as
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American Airlines (AA) have withdrawn, as well as expanding its international reach through ever more airline partnerships, to become a major player on the US aviation scene. “The Caribbean extending down to Colombia has been the engine for our growth as we became Boston’s leading carrier,” Scott Laurence, jetBlue’s VP of network planning, explains to Routes News. “Increasingly we are building schedules that are popular with people; this is about attracting key markets and higher frequency markets.”
New York and Boston JetBlue is the biggest carrier at JFK and Boston Logan by seats. The airline holds a 24% share at each and, with its JFK expansion, the airport has seen its passenger throughput rise approximately 45% (by 14.8 million passengers) between 2000 and 2011. Its operations also signalled a revitalisation for JFK, a facility that had been losing passengers as international flights bypassed the long-standing New York gateway. Since 1995, aircraft movements and passenger numbers had remained
essentially stagnant, leaving a capacity gap in the world’s largest aviation market. The new airline saw the hole and took the chance to fill it. In the 12 months between August 2011 and August 2012, jetBlue handled 11.9 million passengers at JFK, making it clear where most of that increase was generated. And in Boston, the year-on-year growth has been 10% as operations have ramped up. This year the carrier added Grand Cayman, in the Cayman Islands, Cartagena in Colombia and Samaná in the Dominican Republic to its New York offering. Initially seen as a leisure carrier ferrying people between the north-east and Florida, jetBlue began to attract business travellers and changed the network and focus accordingly. According to Laurence, in peak season they still get up to 15 hours of utilisation from the A320s and 13 for the E190s, despite the challenges of much of their network being on the east coast. Because of the challenges in the north-east, they look forward to the arrival of the A321 (the airline has 30 on order), which will add 40 seats per operation over the A320.
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jetBlue
JetBlue CEO, Dave Barger, talks with a passenger at New York JFK’s Terminal 5.
In Boston, despite the airport’s closed footprint, jetBlue is anticipating further expansion next year that will give it a total of 24 gates at Logan, more than enough to manage the anticipated expansion. Like JFK’s T5, the Logan renovation is being orchestrated by Gensler, and will provide the terminal with service perks that characterise the unique touches that the airline has tried to engineer into its value proposition. When completed, the facility will offer 32 domestic and nine international counters. Initially, the airline conformed to the low-cost template through its single-type fleet, the airplane of choice being the A320 and remaining the only aircraft operated until 2005 when the Embraer E190 entered into service. It was one of the first ‘new generation’ carriers to add an additional aircraft type and the decision to do so became a topic among aviation observers, many believing that the model required single-type operations. That has not proven to be the case and the E190s provide a scheduling flexibility and seat count alternative that have shown to be fully compatible with efficient, low-cost operations.
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“If you look at our presence in Boston, it is these aircraft [the E190] that are predominating. There is a lot of demand for multiple frequencies and we see opportunities to bring in the A321 into the market in the New Year,” Laurence explains. In 2013, A321s will begin to arrive, increasing capacity on heavily travelled routes, while in 2016, A320neos will begin to replace older A320s, adding a bit of range and lowering operating costs. The neos will be especially welcome on transcontinental services where winter westbound flights can require an en route stop at Salt Lake. The neo’s 4% improvement in range should be enough to make such operations history. While it continues to add domestic destinations, new service from Providence has just begun, Charleston is coming and it has stuck its nose under the door in Charlotte where it is looking to grow on US Airways’ home turf. The ascendency of Charlotte as a banking and financial hub makes it an important inclusion for business travellers and the E190 capacity is ideally sized to begin such a challenge.
The lure of the sun But the real growth news is in the Caribbean and near South America (what they call “the deep South”). JetBlue’s coverage of the Caribbean continues to expand, helped more than just a little by the decision of AA to draw down its presence at San Juan. It is refreshing its terminal facilities and building a network that not only connects SJU to mainland cities but also to other Caribbean points. Service already exists to Bogotá and Cartagena has been added. During discussions, markets in Brazil were seen as attractive but the range of the current fleet makes such service a medium, rather than short-term, prospect. Laurence added that continued expansion southward is at the top of the airline’s short-term agenda. He added that much of the region is “very attractive but that an investment in the larger aircraft required (for more distant cities) would exceed the 6%-8% capacity growth that has been jetBlue’s norm”. Its unique business model has well served jetBlue so far and it currently needs no big changes. When the airline was
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jetBlue
mentioned as a possible merger partner with post-bankruptcy AA, the rumours were quickly quashed by Dave Barger, the airline’s CEO, who said: “We’re just not interested in participating in the consolidation path, either being acquired or in acquiring another company. Independence is our plan today, and it’s our path on a go-forward basis.” According to the jetBlue sales folk, this drive into business markets has been accelerated by the corporate policy decision of many firms to use the “lowest logical fare” rather than being tied exclusively to a carrier or group of carriers. Between Boston and Washington Reagan, jetBlue offers 10 daily frequencies, creating a strong competitive offer on one of the nation’s most heavily travelled routes. And, as we know, frequent use builds loyalty and accumulates points. The carrier’s decision to serve and then expand in Boston has been fully vindicated. Unlike New York, which is a hub city for a number of airlines, Boston had no dominant carrier and since the demise of Eastern has not had a single major player operating to Florida; another hole to be filled.
Plenty of partners But jetBlue’s desire for independence has not dulled its desire to expand its international partnerships. The carrier currently has 22 agreements in place with carriers across the globe, ranging from tiny Cape Air to industry giants like Emirates, Singapore and Lufthansa.
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In each case, the agreements provide interlining across jetBlue’s JFK and Boston hubs for connections between a host of domestic and foreign destinations. According to Laurence, they continually try to build on the existing partnerships, extracting the greatest value in each case. He said that the current basket of partners is working well and they are not “waiting for the phone to ring”. And the reasons and benefits are equally diverse. For AA, which has doubled down on its cornerstone operational model, jetBlue provides feed from many interior points that AA no longer serves with its own flights. For Star Alliance members, jetBlue offers a connection network to and from JFK and Logan that is not provided by the alliance partners, with Star’s primary New York connection point at United’s Newark base. Unaligned carriers like Emirates, El Al and Royal Air Maroc similarly benefit from a network that encompasses a large basket of destinations that would require multiple agreements for the same coverage. But, of course, the chief beneficiary is jetBlue, which through such agreements has primary access to thousands of international passengers who transit its two primary bases. Plus the added side benefit that newcomers who might not know of the carrier are immediately exposed to the product – a great way to make a first impression!
True Blue and true believers Its loyalty programme, ‘True Blue’, has just enhanced its appeal with the roll-out of True Blue Mosaic, an enhancement of the current scheme for very frequent travellers which provides added benefits for members, such as extra legroom, early boarding and additional free bags. The programme also has links to other airlines, car rental companies, hotels and a branded credit card. These enhanced perks are especially targeted at frequent business travellers who may enjoy more direct and frequent benefits than can be realised in larger, legacy offerings. A conversation with jetBlue staff and management leaves the impression of confidence in jetBlue’s service, clientele and future. As one of the sales managers said: “When we are an alternative for business travel, people like us and we become their preferred carrier, offering a better product and greater frequency in many prime markets.” And Laurence sees it as being in a good position as it faces problems such as pilot shortages. He said it has “the draw of a strong successful company working in their favour”. People no longer see the company as an “alternative”, but rather as a fully recognised and established player in the market, having created a “value airline” that is “working well, is profitable and sustainable”. JetBlue intends to keep it RN that way and build from there.
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The sporting life
Brazil’s hosting of the 2014 FIFA World Cup and Olympic Games in 2016 offers plenty of opportunities and challenges for airlines.
L
ast summer’s Olympic Games in London were generally judged to have been a great success. One of the key reasons for this was that new stadiums and transport infrastructure improvements were delivered on time, a second was that organisation was good and customer service levels were rated highly. Now, the spotlight turns to Brazil – which is hosting next year’s football FIFA World Cup and the 2016 Olympics – and a colossal amount of work is needed to bring the country’s infrastructure up to a level where it will be capable of handling millions of fans and provide a good service. Many of the country’s airport systems are already creaking under the strain of
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managing more passengers than they were designed to handle, the result of strong economic growth, and extensive upgrade work is required to bring them up to scratch. Brazil is also actively seeking to increase tourism generally, and new facilities will help the country to achieve this. So with the clock ticking, will Brazil be ready to host both events? And what are the benefits of hosting? “Tourism and mega-events are increasingly interdependent,” Carlos Vogeler, chairman of affiliates for the United Nations World Tourism Organization, tells Routes News. “The impact of hosting mega-events is far longer lived than a few weeks. The hosting of these events is also a unique opportunity to showcase a country and its tourism positioning, attracting
more visitors over the long-term through the development and implementation of legacy strategies. “For Brazil as a host country, every real spent on the 2014 World Cup and 2016 Olympic Games has to be regarded as a long-term investment. Moreover, the impact in terms of image is worth millions of reals.” “The eyes of the world will be turned towards Brazil,” says Marcelo Pedroso, director of international markets for Brazilian state tourism promotion agency Embratur. “These large sporting events will have global repercussions for Brazil. These are fantastic opportunities to transform and reinforce the image of Brazil as a modern and diverse nation. What the spectators view on the TV,
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Brazil
Number of flights between city pairs and weekly supply of seats 20,001 – 145,094
(27)
8,001 – 20,000
(71)
3,001 – 8,000
(80)
1,001 – 3,000
(90)
Less than 1,000
(162)
Airports with regular flights 130
online, and in magazines and newspapers goes far beyond the competitions – they see the whole nation.” Brazil’s Sports Ministry believes construction spending leading up to the World Cup will hit $15.8 billion, and Embratur estimates 600,000 foreign visitors will attend the four-week tournament – contributing to an estimated 7.2 million total overseas visitors next year. The infrastructure needs are massive, with 12 stadiums in the process of being either upgraded or rebuilt, not to mention additional road and rail improvements; will everything be finished on time? “When it comes to the stadiums, the preparation for the FIFA World Cup is on track and we have the unique opportunity to test half of the 12 arenas during this year’s FIFA Confederations Cup,” said a spokesperson for FIFA. “Regarding the general infrastructure, the Local Organising Committee, FIFA, the Federal Government and the 12 host cities have achieved a very high level of integration. This makes us confident that the necessary infrastructure will be in place come 2014.” Infraero recorded a mean average increase in passengers of 11.8% between 2003 and 2012.
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Source: Secretaria de Aviaçäo Civil.
With 12 host cities spread across thousands of miles, teams, officials, media and fans will be clocking up frequent flier miles getting from game to game. This presents a golden opportunity for Brazil’s airlines. GOL’s strategy is particularly focused on domestic city pairs and it could reap significant benefits. “GOL will not change its fleet plan because of the World Cup and Olympics. Rather the company will [make use of] the additional traffic to increase the load factor – which nowadays is near 70%. We will therefore get an opportunity to maximise the extra 30% in the operation,” explains GOL’s head of IR and planning, André Brandi Carvalho. The airline recently ordered 60 new B737 MAX aircraft from Boeing and announced new routes to Miami and New York. GOL – which owns the rights and brand of former flag carrier Varig – purchased rival domestic carrier Webjet in 2011, ostensibly to gain access to the latter’s slots at busy airports like São Paulo’s international gateway, Guarulhos (GRU), and Rio de Janeiro’s domestic airport, Santos Dumont (SDU).
Carvalho confirms: “The deal was done to increase penetration in strategic Brazilian aviation markets – such as Santos Dumont and Guarulhos. These airports represent the majority of passenger traffic volume in the domestic system.” Beyond the World Cup, the summer 2016 Olympics will see the city’s two airports – and its roads and urban rail – put to the test when as many as 380,000 visitors enter the former Brazilian capital. Again, many new sporting venues are under construction, as is transport infrastructure, and the hope is that everything will be finished on time. If the authorities are nervous about overruns, they’re certainly not showing it. Embratur’s forecast for the total number of visitors in the country in 2016 is 7.9 million. With massive numbers of passengers seeking to pass through Brazil in 2014 and 2016, some heavyweight upgrades of airport facilities are vital. Much of this work would have had to be completed at some point anyway, as the country’s powerful economy is driving frenetic aviation growth, and equipment is in need of updating – but the
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Brazil Major South American airports 30
Airports > 2mm Pax Total Pax – Brazil 25
Total Pax – South America Symbols 2014 FIFA World Cup
20
2016 Olympic Games Concession
15
10
5
0 GRU
BOG
CGH
BSB
GIG
SCL
LIM
CCS
EZE
SSA
SDU
CNF
AEP
POA
CWB
REC
VCP
FOR
UIO
GYE
MDE
CLO
BEL
FLN
MAO
NAT
VIX
GYN
CGB
CTG
Source: Secretaria de Aviaçäo Civil.
two giant sporting events have made this a priority for President, Dilma Rousseff. Or as Sidrônio Henrique Gomes de Araujo from Brazilian state airport authority Infraero perhaps understates it: “Infraero’s work for the World Cup and Olympics until 2014 is quite expansive.” He goes on to specify what the work involves: “Passenger terminal makeovers, new control towers, expansions and improvements to runways and apron systems at the strategic Infraero-managed airports located in the World Cup and Olympics host cities – Rio Galeão, Confins, Manaus, Fortaleza, Porto Alegre, Curitiba, Salvador, Recife and Cuiabá.” When pressed on the specifics of what Infraero wants to achieve, Gomes de Araujo explains to Routes News: “There are passenger terminal makeovers at Galeão, Confins, Manaus, Fortaleza and Cuiabá, the enlargement of Galeão’s main runway and improvements to the apron system – and also construction of a new control tower in Salvador.”
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He adds: “Last year, Infraero also finished many improvements to its airports, such as the passenger terminal makeovers for Natal and São Luís, the installation of passenger modules in Porto Alegre, Teresina and Imperatriz, and the refurbishment of the runway and apron system in Curitiba. We also concluded works on the airports currently under private concession – such as refurbishments and expansions in Brasília.” The cost? $2.9 billion of direct investment by Infraero – up to and including 2014. But to realise its goals, the Brazilian government has turned to overseas investment and expertise to modernise its gateways. The first candidates are São Paulo-Guarulhos, Viracopos serving Campinas and Brasilia which are to be run on a Build Operate and Transfer (BOT) basis by a series of consortia. “In the case of the Brazilian airports, we use the term ‘concession’ to make clear that the process is regulated by a contract which, among other things, predicts the return of the assets to the state after some period of time – 20 years in the case of Guarulhos (GRU),
25 years for Brasilia (BSB) and 30 years for Campinas/Viracopos (VCP),” says Rogério Teixeira Coimbra, secretary for regulatory policy at Brazil’s Civil Aviation Authority. Brazilian state apparatus is also looking on the projects with a spirit of generosity – the BNDES National Development Bank authorised a $236 million loan to the Brasilia airport concession team in December 2012 to underwrite works which will take capacity from 15.4 million passengers to 20.7 million in 2014 and 24.4 million in 2016. Most of this cash will go on a new terminal with 15 air bridges – along with associated apron and aircraft parking development, new access roads and car parks. Teixeira Coimbra explains the works are to be phased based on ‘demand triggers’. “When demand reaches a predetermined value for each airport, the concessionaries must initiate the next phase of expansion. The concessionaries must fulfil quality requirements based on service levels – in this case IATA’s Level C – among other requirements listed in the contracts.
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Brazil
Additionally, Infraero has a share of up to 49% in the consortia. “Tariffs are regulated based on a ‘price-cap’ model with non-discriminatory discounts widely admitted. We have six types of tariffs: boarding, landing, parking, cargo, storage and a newly created connecting fee.” São Paulo’s Guarulhos is Brazil’s main international gateway, with a network serving cities in Asia, Africa, Europe and North America. The work going on here involves a new terminal for 7 million passengers a year, plus 20 air bridges, 12 remote stands and runway expansion. GRU’s concession was awarded to a consortium including Brazilian infrastructure firm Invepar, OAS and several pension funds. Invepar is also involved in highway construction and the Rio Metro extension – which is also scheduled to be complete in time for the World Cup. Airports Company South Africa (ASCA) is also part of the consortium and its head of communications, Solomon Makgale, explains to Routes News that the airport operator may
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be well placed for the job, given its prior experience of the 2010 FIFA World Cup hosted by South Africa. “We faced a number of challenges ahead of the World Cup in 2010 in South Africa. However, all of the airports [ended up] ready. In this project, quick-wins are being identified and implemented to show improvement to GRU already.” But whether it’s big or small projects, investment is forthcoming at all levels. “The government has an extensive programme of investment in regional airports which aims to increase the availability of airport infrastructure in locations with low air transport access,” points out Coimbra. “The investment plan at regional airports recently approved by the Secretariat of Civil Aviation comprises $115 million for airports located outside metropolitan areas.” He adds: “It’s important to emphasise the dual role that the investment meets at smaller airports – on one side it meets a pent-up demand and, as a result, increases the welfare of the population, on the other
it constitutes an important vector of regional development.” The World Cup and the Olympics will both underscore the new democratic Brazil’s startling economic (and political) transformation. Between 2003 and 2011, Infraero recorded average passenger growth rates of 11.8%. New airlines such as Azul have invigorated the market. Manufacturer Embraer has won orders for its E Jets series. “Brazil is also an extremely important tourism source market, thanks to its economic performance, rising middle class and strong currency,” points out Dr Carlos Voegler. “Tourism expenditures grew by an impressive 30% in 2011, reaching $21 billion. This has positioned Brazil as the third largest outbound market in the Americas after the USA and Canada.” If Brazil can get its airports and stadiums completed in time, you can be confident they will host international sporting events that will be talked about for all the right reasons for a long time to come. RN
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@LondonCityAir New routes from 2013 http://bit.ly/T4f0u8
Being social
@SOU_Airport Is there somewhere you wish Southampton Airport would fly to? Let us know here http://bit.ly/UzbudL
Routes News takes a look at the latest innovative ways airlines and airports are using social media.
@zrh_airport Yesterday, InterSky had their first flight from Zurich to Graz/Austria. Welcome! pic.twitter.com/74KQeT8P
NEWS GATWICK CEO PREDICTS EMIRATES WILL LAUNCH A380 SERVICE Gatwick Airport’s CEO has revealed during a live Q&A on Twitter he expects the first A380 service from the gateway to be operated by Emirates. Replying to a question during the hour-long #askgatwick session about the most likely contender to operate the jumbo from Gatwick for the first time, Stewart Wingate said: “@planemadblog @flying_emirates have the biggest fleet on order so we expect it’s them!” Emirates has already flown the A380 to the airport in a trial flight last July to celebrate its 25th anniversary at Gatwick. The airport is currently installing permanent A380 boarding bridges. Until then, temporary boarding bridges are in place that would allow scheduled A380 services from summer 2013 onwards. Wingate also stated there were currently no plans for rival airlines to operate the Manchester–London Gatwick route after BA pulled out, and said he was actively encouraging LCCs to begin operating connecting flights from the UK gateway. Other questions included whether a New York flight would be brought back in 2013 and plans for a second runway.
DELTA UNVEILS NEW IPAD APP Delta Air Lines has launched a new app for iPad and an update to its iPhone app. Version 2.0 of Fly Delta allows passengers to view and access e-Boarding Pass, book flights and add extras to their existing booking, including seat upgrades, priority boarding and in-flight Wi-Fi. Its new iPad app allows users to explore the destinations Delta flies to, with guides featuring shopping, dining and other tourist information. There is also a ‘glass bottom’ feature to track the progress of their flights and bring up information about the places they are flying over.
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@iah Check out @AirChinaNA’s #boeing 777-300ER that will be flying between #Houston & #Beijing: http://youtu.be/5TDzkodcDc
@TurkishAirlines Ever been to Colombo in Sri Lanka? Join us on February 1st when we start flying there via the Maldives! pic.twitter.com/ uPMP9zE1
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Social media promote the DreamWorks’ film Madagascar 3: http://youtu.be/ Mr89NW12xDY There are flash mobs at the airport every now and then. The latest was in December when a group of students performed a dance routine.
ONLINE WITH:
Markus Haapamäki, communications specialist and head of social media at Finavia, talks to Routes News about the group’s award-winning social media strategy. How many followers do you have on Twitter and likes on Facebook? Twitter.com/HelsinkiAirport: 9,980 Facebook.com/HelsinkiAirport: 4,599 Facebook.com/Lentoasema: 7,498 The ‘Lentoasema’ page includes all 25 airports operated by Finavia. Helsinki won SimpliFlying’s Best Airport on Social Media accolade last year. What was it that impressed the judges? In addition to general tweeting and regular posting on Facebook, I think we succeeded in engaging the travelling community and implementing some of their fascinating ideas. One of these was the Airport Book Swap, which allows passengers to pick up a book or drop off books for others to enjoy free of charge. The Book Swap station, completed last spring, was designed via the photo sharing service Pinterest, with the public getting the opportunity to provide ideas for the location’s interior decoration
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and the rules of book swap: http://pinterest. com/qualityhunters/helsinki-airportbook-swap/ It was judged to be a good example of teamwork and passion to improve the travelling experience. The award panel also praised Helsinki Airport’s emergence and creativity, which “has been one of impact and delight”. What is your social media strategy? We like to think that smooth travelling starts online. What we would like to see in our social media channels is an interaction with our passengers, improving their travelling experience, but also sharing accurate information with the public, allowing people to become aware of who we are and what is on offer for them when they get to our airports. Finally, the best result has got to be if we can invent something new via interaction with our passengers via our social media channels. Have flash mobs taken place at Helsinki Airport? Here’s one which took place last summer at the check-in area in Terminal 2 to
How did your ‘Quality Hunters’ initiative with Finnair make use of social media? The Quality Hunters online community was born out of our decision along with Finnair to hire seven Quality Hunters to travel the world and come up with suggestions for making air travel more convenient. This has now snowballed into a truly global community. We used five channels to power Quality Hunters: LinkedIn for recruiting, Facebook for sharing, Twitter worked as a central channel (@QualityHunters), YouTube was a platform for videos, and finally we had a blog, our digital home (www.qualityhunters2.com). Do you use social media to talk to airlines? Our social media channels, Twitter, Facebook and YouTube, are aimed at travellers but of course we talk to airlines and retweet their messages too, if necessary. Generally speaking, have Scandinavians embraced social media? To Finns, I’d say social media is more and more a day-to-day experience, though they probably don’t see it as “social media” as much as a simple way to be in contact with your friends. Facebook still rules here but I find that Twitter is now rising fast. What new social media campaigns can we expect to see from Finavia in 2013? Let’s see! Work for smooth travelling continues. We also have to work for bringing the amount of followers and likes up.
GET INVOLVED! Do you want the global route development community to hear what you have to say? Let us know at: oliver.clark@routes-news.com
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On the right track With a second international airport under development and the modernisation of Tribhuvan Airport ongoing, Nepal hopes to offer a more attractive proposition for airlines, writes Mark Smullian.
I
t would be fair to say that traffic growth at Tribhuvan International Airport (TIA), the gateway to the landlocked country of Nepal, has not come without its challenges. Websites used by travellers are replete with stories over recent years of congested facilities and lengthy queues, and even TIA’s own site acknowledges in an extraordinarily frank fashion the difficulties experienced by travellers before and during the recent renovations. “You may have faced immense difficulties while getting out of TIA during your arrival due to the inconvenience caused by the extension and expansion of TIA,” it says. “We sincerely apologise for this. Whatever may have been the cause –
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delay of baggage handlers, hassle by the street urchins loitering around TIA… we at TIA are working very hard to make your stay here as smooth as possible.” But perhaps these challenges are the price that must be paid while TIA modernises its facilities to attract new international airlines and passengers. Highlights from last year include the first Malaysia Airlines and AirAsia flights to Kuala Lumpur, more Druk Air services and a new Rak Airways service to Ras Al-Khaimah in February. And infrastructure improvements are now beginning to take shape. TIA now has a longer runway and larger terminal facilities, and plans are afoot for an entirely new international airport to open
10 years from now to relieve some of the pressure. Initial works have started on this project, which are expected to lead to a new $600 million single runway airport built at Nijgadh in the Bara District of south-eastern Nepal. South Korean construction firm LandMark Worldwide is leading the airport project, which is intended to handle 15 million passengers annually and accommodate aircraft up to the size of an Airbus A380. Completion is about a decade away, at which point Tribhuvan will most likely be downgraded to domestic status. The improvements at TIA saw the runway extended by 300m to 3,350m, 1.4km of
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Nepal
additional taxiway, improved drainage, power supplies and runway lighting system, while its terminal building has been reconfigured and the domestic terminal renovated. This work was supported by the Asian Development Bank (ADB) to the tune of $80 million, all but $10 million as a loan repayable over 32 years, although that sum included improvements to three remote domestic airports in areas inaccessible by road at Lukla, Rara and Simikot. The Nepalese government put up the other $12 million needed for the project. Dong-Kyu Lee, transport specialist in ADB’s South Asia Department, said at the time: “Providing safe and reliable aviation access to the country will attract more tourists and greatly contribute to Nepal’s economy.”
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Speaking to Routes News, the country’s Culture, Tourism and Civil Aviation Minister, Posta Bahadur Bogati, said: “There have been improvements to the infrastructure at Tribhuvan. “We have expanded the runway and increased the circulation space in the buildings, also there is now more space for the taxiway. It is now less crowded, so can take more flights.” The longer runway “makes for safer landings”, he noted. Well aware of some of the past criticism of long and bewildering queues in the airport buildings, the minister said there were now improved facilities for passenger processing, with “better layout at immigration and customs with CCTV to spot where problems are arising so they can be addressed”. Despite this, the present airport cannot cope long-term, which is why the Nepalese government has designated Nijgadh as its successor. “It will take 10 years to build, but in the meantime there are three regional airports, used only for domestic flights now, which will be upgraded to take foreign ones,” the minister said. These are at Lumbin in the country’s west, Pokhara in the centre and Biratnagar in the east. Nepal Airlines also hopes, he said, to buy two wide bodied aircraft for direct flights to Europe and America “but that will take some time”, with no date set for this. This is what the Nepalese government hopes for and, whatever the exact truth of TIA’s shortcomings, they seem to have done little damage to the flow of tourists, which increased by 22% between 2010 and 2011. The Nepalese government is hoping to attract yet more visitors and carriers in 2013, and will promote tourism by marking the diamond jubilee of the conquest of
Mount Everest by Sir Edmund Hillary and Sherpa Tenzing. But until Nijgadh opens, Nepal must pull off the balancing act of boosting its economy by attracting an increased flow of visitors through an airport that cannot really cope. In addition to Everest, Nepal’s tourist attractions include 10 national parks, 10 UNESCO world heritage sites, 327 peaks that may be climbed out of a total of 1,300, trekking, rafting and paragliding, and – more unusually – elephant polo, Himalayan golf and Ayurvedic health treatments. The Nepal Tourism Board plans to increase the average length of visitors, stay up from its current 11.6 days to 13 days by 2015. Visitor flows to Nepal rose steeply in 2011, to 735,932 from 602,867 in 2010, an increase of 22.1%, according to the board. From long-haul destinations, 163,290 came from Europe, a 10.2% increase, with the UK accounting for the largest single cohort at 38,039. Visitor numbers from the US and Canada were up 16% to 53,079 and those from Australia and New Zealand by 12.8% to 21,173. Yet direct flights to Kathmandu do not reflect this. Only the little-known Dutch carrier Arkefly – part of the TUI Group – flies direct from Europe and TIA lists no direct flights at all from the Americas. Thus, apart from those flying in from other Asian locations, almost all visitors must change either at Delhi or in one of the Gulf states, taking advantage of services from carriers Air India, Jet, Gulf, Etihad and Bahrain. Visitors using Delhi thus normally face either a night in the airport to make a connection or the expense and inconvenience of getting an Indian visa, while those changing in the Gulf might
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Nepal have to tolerate lengthy transfer times, and neither of these factors is helpful to Nepalese tourism. They may, though, have less effect on migrant Nepalese workers, who make up a substantial part of the passenger load to the Gulf. Airlines welcome TIA’s renovation, although they are not rushing to provide extra flights. An Etihad spokesman said its daily A330-200 service from Abu Dhabi was established because, “Nepal is a strong potential market for both inbound and outbound passengers. The route also aims to promote tourism in both directions and strengthen relations between Nepal and the United Arab Emirates. “Nepal is primarily a labour-oriented market but there is tremendous potential in the business and leisure travel segments. It is also a major tourist destination, notably for trekking and holidays.” Etihad would like to see Tribhuvan open for 24 hours a day since, as it points out, “more than 25 international airlines are operating within a restricted period of time”. It rates aircraft handling facilities as up to satisfactory standards, but says the airport would still benefit from new refuelling bowsers and trucks and extensive training for refuelling staff. Austrian Airlines did once fly to Kathmandu as a direct service from Europe, but dropped this in 2007 during a now-resolved period of political instability in Nepal, and has no plans to return. Arkefly has flown to Kathmandu from Amsterdam Schiphol weekly since October 2009, but operates only during the winter season. It flies a Boeing B737 with 183 seats and “if the amount of passengers wouldn’t be in line with what we expected, we wouldn’t fly to Nepal”, a spokeswoman said.
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Old Buddhistic statues on Bhaktapur Square, Kathmandu, Nepal.
But Arkefly says that despite the improvements to TIA “we have no reasons to increase our flights to Nepal”. Namgyal Sherpa, executive director of Thamserku Trekking, whose family owns domestic carriers Yeti and Tara Airlines, remains unimpressed with TIA’s offer. “The causes of problems are bad management, poor supervision, outdated method of immigration process, untrained and unqualified staff and an old airport which is not equipped to handle the increasing volume of travellers every year,” he said. He welcomes the idea of expanding regional airports to accommodate international flights but notes that these are only plans at this stage. “If this does happen, then it will definitely be one of the best solutions or
alternatives for current problems and also in the development of these regions.” Yeti had a short-lived partnership for international flights with Sharjah’s Air Arabia, which was terminated by the latter in the last decade, and it is now seeking a partner with which to resume international services. Sherpa said: “We have just renewed our international licence and we are in talks with a few investors from Middle East, but nothing concrete at the moment.” TIA’s improvement will help to resolve the immediate capacity problems, but if Nepal’s tourism grows as the government plans, the country will need to attract new carriers, including, it hopes, direct ones from Europe and America. But what the carriers really need is the new airport, and that is at least a decade away. RN
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A tale of two airports
I
Dr John Kasarda reports on the impressive recovery of Belo Horizonte’s Tancredo Neves Airport from a traffic nadir to become a thriving international gateway.
t’s an increasingly common story. An older commercial airport that’s located near to the city centre reaches saturation with limited or no prospects for expansion. Based on traffic forecasts, a new state-of-the-art airport is built on the periphery of the metropolitan area with considerable expansion capacity, but with far greater travel time between the airport and the urban centre. What should be done with the old airport? If it is kept open, how should routes be distributed between the two airports? In many cases, the older airport is simply closed, with all flights transferred to the new peripheral airport. In others, the older city airport remains open, ostensibly as a domestic facility, but manages to compete effectively by retaining and often winning new passengers and by doing so stifling the growth of the new airport; accessibility and convenience trump modern facilities.
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The latter was the case at Belo Horizonte in Brazil, with major consequences for passengers, cargo and route development at the new airport, but also its anticipated surrounding economic development. This story has a happy and quite remarkable ending for the new airport. But it took tough decisions on route redistribution and major land-based infrastructure investment for this to occur. Let me explain.
Pampulha and Confins Pampulha’s Carlos Drummond de Andrade Airport, located 8km from downtown Belo Horizonte, opened in 1933 as a support facility for the Brazilian Air Force and became the city’s commercial gateway in 1936 when Panair do Brasil launched a flight between Belo Horizonte and Rio de Janeiro. Pampulha’s traffic expanded substantially in the latter part of the 20th century in
tandem with the growth of Belo Horizonte, the capital of the State of Minas Gerais and Brazil’s third largest metropolitan area containing 5.2 million residents. By the 1970s, Pampulha had reached capacity. While periodic facility upgrades occurred, it was cramped and outdated by emerging airport standards. Its single runway had no parallel taxiway and with Belo Horizonte’s urban expansion surrounding the airport, further infrastructure development was precluded. There was no option but to construct a new airport. The site selected was Confins, a semi-rural municipality on the northern periphery of the metropolitan area, 38km north of Belo Horizonte. The airport opened in 1984 as Brazil’s most modern aerodrome, with a terminal equipped to handle 5 million passengers. Known for decades simply as Confins, the airport was formally renamed Tancredo Neves International Airport (TNIA) in 1986 after the former Brazil president.
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Belo Horizonte Number of passengers at TNIA & Pampulha, 1994–2011
Number of passengers
Tancredo Neves International Pampulha
Source: Infraero.
Like Pampulha, TNIA was operated by government airport agency, Infraero. Early forecasts showed that TNIA could be handling up to 20 million passengers by 2020, many of them international. The original design therefore called for two long-range runways and four 300,000sqm passenger terminals to meet forecasted demands. The problem was that, for 20 years after TNIA’s opening, the passengers didn’t arrive. By 2004, the airport was handling under 400,000 passengers, in fact 10 years after opening, the new airport actually began to shrink while Pampulha’s traffic skyrocketed. Between 1994 and 2004, Pampulha’s passenger volume grew from 735,010 to 3,194,715 (nearly four times official capacity), creating chaotic conditions. During this same 10-year period, TNIA’s passenger volume plummeted from 900,476 to 388,580 – only 19% of its single terminal’s capacity. TNIA’s biggest challenge, as noted, was accessibility. A distance of 38km from downtown was no match for Pampulha’s 8km. Moreover, the narrow, winding roadway through the hills from Belo Horizonte to TNIA was congested with dangerous intersections. This frequently made the trip from the centre to the new airport more than 90 minutes, with a taxi ride costing
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more than $40. TNIA’s time-cost accessibility was simply too high to compete against Pampulha, despite its state-of-the-art facilities and the old airport’s constraints.
Bold recovery It became clear to federal and state agencies that if TNIA’s poor surface accessibility was not addressed the airport might forever be labelled a ‘white elephant’. All hopes for it becoming Belo Horizonte’s 21st century engine for economic development would be dashed. Led by the Minas Gerais State Secretariat for Economic Development, huge investments commenced in 2005, upgrading the 18km segment of TNIA’s highway to the downtown, making this a limited access four-lane expressway, starting nearest the airport. Other upgrades were made along this corridor called Linha Verde (Green Line) closer to Belo Horizonte along with improving airport area access roads. Within three years, travel time from the downtown to the airport was cut nearly in half. A related accessibility challenge is being met by the development of a new northern metropolitan ring road that will connect the TNIA area to many of Belo Horizonte’s time-critical businesses and industries that are located at the opposite side of the
metropolitan area. Expressways are also being built to major economic clusters that will form the backbone of the Belo Horizonte Aerotropolis (airport-integrated urban economic region). An even bolder, yet equally critical, action was taken by the State of Minas Gerais and Infraero in March 2005. Legislation was enacted to restrict Pampulha Airport to aircraft with no more than 50 passengers. This had the effect of shifting 130 daily flights from Pampulha to TNIA, immediately boosting the newer airport’s passenger volume to approximately 3 million, a nearly 10-fold increase. TNIA’s enhanced route structure had a reinforcing effect through transfers supporting more routes development, catalysing passenger growth. TNIA’s passenger volumes accelerated, climbing to 5.6 million in 2009, 7.3 million in 2010, 9.5 million in 2011 and an estimated 11.5 million in 2012. In 2011, TNIA became the second fastest growing airport in the world, just behind Brazil’s Campinas-Viracopos International Airport, whose percentage increase was on a much lower base. By late 2012, TNIA was serving 233 flights per day to 32 cities throughout Brazil. The airport also has five flights to four international destinations: two to Miami
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Belo Horizonte Highway improvements & economic clusters around TNIA.
(American Airlines and TAM), one to Panama City (Copa Airlines), one to Lisbon (TAP Portugal) and another to Buenos Aires (GOL) via São Paulo. Pampulha itself has carved out a successful new niche as a regional airport for interstate flights to many of Minas Gerais’ 90 regional airports and adjoining states. It also serves as a hub for corporate jets and other general aviation aircraft meeting urban business community needs.
Economic impact As strategic decisions were being implemented to substantially upgrade TNIA’s surface connectivity and concentrate all major commercial flights at the newer airport, other strategic decisions were being implemented to attract industry, foster business development and create jobs at and outward from TNIA. This included Minas Gerais government officials working with the Federal Ministry of Finance, Brazil Customs and Infraero to establish special economic zones at TNIA, making it Brazil’s first airport to activate the country’s new industrial airport policies. Firms locating in these special economic zones receive tax relief, customs facilitation and other business advantages. The state, through its Secretariat for Economic Development, recruited Brazil’s
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largest airline, GOL, to set up a major maintenance repair and overall facility at TNIA, creating 1,100 well-paying jobs. At the same time, virtually all-state government jobs were relocated to an architecturally spectacular Administrative City constructed along the Green Line to TNIA. More than 16,000 are currently employed in this Administrative City, with further commercial development evolving around it. The Administrative City is part of a broader Belo Horizonte Aerotropolis plan that covers a radius of 20km around TNIA. Aerospace is a major target, with an expansive aerospace training and technology center (CTCA) being developed in Lagoa Santa about 6km from the airport where Embraer is locating its engineering research facility. Local universities are also cooperating with the National Civil Aviation Agency to provide pilots and university students with advanced aeronautical training facilities, and aircraft component manufacturers are being solicited. Approximately 8km south of the airport, a major multi-modal logistics platform is under development. North of the airport, IBM is working in partnership with five other entities to construct a $500 million
semiconductor production facility that will be the most modern in the southern hemisphere. A high-tech aerotropolis corridor is in the works that will constitute the spine for other microelectronics, biotechnology and time-critical industries that benefit from airport access. Most of this development would not have taken place without the strategic vision and bold actions of Minas Gerais State government officials in partnership with others to make TNIA far better connected by surface and by air. State officials are working diligently to intensify service on existing routes and foster new domestic and international routes. In the process, they are demonstrating that connectivity drives competitiveness and corresponding economic development – a remarkable achievement indeed. RN
ABOUT THE AUTHOR John D Kasarda is director of the Center for Air Commerce at the University of North Carolina, USA. john_kasarda@unc.edu and www.aerotropolis.com. He advises airports and governments around the world on aviation-driven development.
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Mergers and acquisitions Headline Lida Mantzavinou examines the major airline restructures and consolidations of the Standfirst past year and gives her predictions for the future shape of the market.
O
ver the last five years the airline industry has witnessed a strong wave of consolidation in an attempt to generate profits from synergies, cost-efficiencies and economies of scale. Liberalisation and the rise of low-cost carriers combined with global factors such as the slowing of economic growth, physical disasters and fluctuating fuel prices, currently at an average of US $120/barrel versus $80/barrel five years ago, representing 30% of total operating costs, versus 14% a decade ago, have made for tough operating conditions. And while demand has been rising year-on-year and airlines have become more sophisticated in delivering value to passengers, profits have remained elusive. In some cases this has led to airline failures. The year 2008 was the worst year for the airline industry, with 108 airlines ceasing operations. Since then, in total, 375 airlines have ceased operations, twice the number of airline start-ups. Others have implemented major restructuring programmes and consolidation has been a key response to achieving sustainable profitability. This has taken the form of costcutting, fleet modernisation, streamlining route networks and revenue management systems, among other measures.
Moving forward Airline operating costs are expected to decrease slightly in the next two years as expectations of an increase in oil supply by Saudi Arabia and new US supplies drive down fuel bills.
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However, the implementation of new environmental measures, which Frost & Sullivan expects to come into force in 2014, such as the ETS that can add 1% to an average return fare, will pose an additional burden on airlines. In the meantime, biofuel usage in aviation will remain on the fringe, as it still remains an expensive alternative. Airlines will need to implement cost-cutting programmes that will most likely entail job losses as this is, after fuel, their second highest operating cost. Airline privatisation is expected to intensify as governments struggle to finance unprofitable businesses, especially in Europe, Africa and the US. Successful privatisations have been taking the form of capital restructuring, selling directly to one large investor or a number of investors, aviation or non-aviation related, IPOs in the case of strong domestic equity markets, optimisation of route network and fleet rationalisation by leasing aircraft and forming a single fleet that will allow lower maintenance costs. As the industry is still very inefficient, consolidation will intensify in the next few years, driven by legacy and LCCs, in the form of mergers and acquisitions, as well as strategic partnerships. Implementation of major restructuring programmes will remain key to raising profitability. Unification of revenue management processes across an airline group’s global locations, coordination of flight schedules and redeployment of aircraft are some of the steps that airline groups will have to adopt for sustainable profit generation.
Regulations do not yet allow full ownership or effective control of airlines by foreign investors and this is still a deterrent to foreign direct investment. Nonetheless, restrictive bilateral agreements and congested airports make small shareholding stakes increasingly attractive, particularly in Europe. For example, Etihad acquired stakes in Aer Lingus and airberlin. Similarly, Air China has expressed an interest in acquiring a stake in LOT, while TAP Portugal and Scandinavian SAS are still “in play� as acquisition targets. We expect financial benefits stemming from airline group restructuring to be realised from the end of 2013 onwards, with union agreements and organisational restructuring being enforced and group synergies being realised. Many weaker airlines will be forced to cease operations, while others will become acquisition targets for foreign investors that are willing to expand inorganically and benefit from valuable route networks. The LCC model will gain greater momentum as more airlines launch operations in Africa and Asia, and bid for legacy carriers. Finally, alliances are going to provide a key platform for strong cross-border partnerships; for instance, within SkyTeam between KLM and Delta and within oneworld between Iberia/ BA and Qantas. This process has varied across the globe:
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Airline Running restructures head
EUROPE – Group restructuring, hybrid business models and inorganic LCC growth European airlines have been the worst performers worldwide, generating marginal net profits in recent years. Major airlines such as Spanair and Malev went bankrupt in 2012. Large groups, such as Lufthansa, Air France/KLM and IAG, are implementing major restructuring and cost-reduction programmes, strengthening their low-cost and regional subsidiaries: Iberia Express and potentially Vueling for IAG, Germanwings for Lufthansa and Transavia for Air France/KLM. All airline groups continue to rationalise their fleet, optimise their networks, while increasing connections from regional hubs, in an attempt to compete on price and claw back market shares from the LCCs. Unable to substantially decrease fuel costs, IAG, Lufthansa and Air France/KLM are aiming to decrease operating costs by reducing staff numbers by 13,000 by 2014, and reducing costs or debt by €450 million (IAG), €200 million (Lufthansa) and €4 billion (Air France/KLM) by 2015. LCCs such as Ryanair are attempting to grow inorganically, by leveraging on their strong cash flow and capturing larger market share from the big airline groups that are facing financial difficulties. Competition rules and additional charges imposed by the ETS continue to restrain growth.
CONSULTANT VIEWPOINT: Likely in the short-term Frost & Sullivan expects more consolidation to take place within Europe in the next few years and competition in the short-haul market to intensify once airline groups see the benefits from their restructuring programmes by 2014. The main airlines will continue to focus on the long-haul and premium traffic segments where profit margins are higher, leveraging on their strong presence in key European hubs, such as Lufthansa in Frankfurt and Air France/KLM in CDG and Amsterdam Schiphol.
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ASIA – Legacy carriers expanding through regional and low-cost subsidiaries likely in the medium term Strong GDP growth of around 10% and air traffic growth of 10% in 2012, high aircraft utilisation rates and large aircraft orders and deliveries to 2016 in Asia-Pacific are key drivers. LCCs are expanding rapidly by leveraging on deregulation. LCC penetration increased from 1.1% in 2001 to 14% in 2008. Legacy carriers are responding with the launch of their own LCCs. A notable example is that of Singapore Airlines Limited (SIA) which launched Tiger Airways in 2004 and two subsidiaries thereafter in Australia and the Philippines and Singaporebased Scoot.
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Running Airline restructures head
NORTH AMERICA – Strong consolidation and transcontinental joint ventures Since 2008, consolidation in North America has been strong. Delta/North West, United/Continental and Southwest/ AirTran merged in order to overcome financial difficulties through cost-cutting and economies of scale, while others such as American Airlines could not avoid Chapter 11. Major airlines have been strengthening international collaboration through alliances and forming transatlantic joint ventures such as Delta Air Lines and Virgin Atlantic.
CONSULTANT VIEWPOINT: Likely in the short-term Frost & Sullivan expects more consolidation to take place in North America with a potential merger between American Airlines and US Airways, while the big three players will seek to strengthen their position globally through collaboration with foreign partners within the alliances.
LATIN AMERICA – Large carriers entering alliances and forming mergers, domestic carriers going bankrupt CONSULTANT VIEWPOINT: Likely in the short-term The region has witnessed consolidation through mergers, such as LATAM and Avianca-Taca, that are expected to operate under one brand by 2013. Alliances are enabling Latin American carriers to grow and strengthen cooperation with North American carriers. Prominent examples of this development include Aeromexico strengthening its partnership with Delta within SkyTeam, Aerolineas Argentinas joining the same alliance in 2012, AviancaTaca strengthening cooperation with US Airways within the Star Alliance and LATAM cooperating with American Airlines within oneworld. By 2013, LATAM will need to decide on joining one of the alliances as a merged entity.
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AFRICA – Major legacy airlines growing organically on the domestic front; aiming for greater international presence through foreign partnerships The African aviation market will grow strongly in the next decade. By 2030, Africa’s fleet will double to 1,210 aircraft, 60% being additions to existing fleets. The major legacy airlines are growing domestically through regional partnerships and through the launch of low-cost subsidiaries, and internationally through foreign partnerships. Prominent examples of this trend include South African Airways launching LCC subsidiary Mango to serve the market within Africa and strengthening its partnership with Emirates and Qantas. The LCC business model has been making strides through the launch of independent LCCs such as Fastjet.
CONSULTANT VIEWPOINT: Likely in the medium-term The main focus of African carriers will be capturing a higher percentage of the domestic market and expanding to China, India and Latin America to take advantage of the ‘Southern Silk Road’ linking Africa, Asia, Latin America and the Middle East.
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Airline Running restructures head
MIDDLE EAST – Gulf-based carriers and Turkish Airlines are driving the market through organic and inorganic growth strategies Emirates, Etihad and Qatar have a unique business model owing to their ownership structure being 100% owned by their respective governments. Etihad has been growing inorganically through codeshare agreements (33 up to 2012) and share acquisitions (in four airlines up to 2012), with such trends expected to intensify in the short-term. UAE carriers are looking into penetrating the different markets through acquisitions that will allow them to overcome the ownership and control rules that are still troubling the global airline industry. For example, in the European region, Etihad purchased a 29% equity stake in airberlin in 2012, allowing it to leverage on its network and partnerships. Etihad is eager to enter the French and Netherlands markets through partnerships with Air France/KLM. Recently, Etihad acquired a 3% stake in Aer Lingus and is aiming to increase it as the Irish government is looking to sell its 25% stake. Etihad recently increased its stake in Virgin Australia to 10%, while its counterpart Emirates entered a close
ABOUT THE AUTHOR:
relationship with Qantas to re-route its Kangaroo routes via Dubai. Etihad is also eager to cooperate/collaborate with Chinese airlines, such as Hainan and China Eastern airlines, and acquire stakes in Indian airlines, such as Jet Airways. Turkish Airlines has registered strong growth and is expanding both its Airbus and Boeing fleets. It is aiming at expanding its reach by strengthening cooperation with other carriers within alliances, such as Star Alliance and the Arab Air Carriers Organisation.
CONSULTANT VIEWPOINT: Unlikely in the short and medium-term We expect Turkish will partner with Lufthansa within Star Alliance, competing with the other alliances that are attracting UAE carriers. Now is the right time for foreign carriers to enter the financially troubled European region as the big European airline groups, including IAG, Lufthansa and Air France/KLM, are reporting substantial revenue losses and are being undervalued in the stock market. UAE carriers will be seeking partnerships in the fastgrowing regions of Latin America and Africa, with airlines such as LATAM or AviancaTaca and Kenya Airways or Royal Air Maroc.
Lida Mantzavinou is a commercial aviation consultant at Frost & Sullivan.
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RN
eventsupdate Image courtesy of Bechtel.
World Routes comes to the USA
T
his year will see Routes head to the United States for the first time, when the 19th World Route Development Forum takes place in Las Vegas, Nevada, this October. World Routes is the largest and most important commercial aviation networking forum of its kind, and the place where the world’s airlines, airports and tourism authorities gather annually to plan air services and discuss strategies for the global aviation industry. The 2013 event promises to help the host, the Las Vegas Visitors and Convention Bureau, deliver on its objectives of new international air services for the city and also to bring the air service development community up to speed with the latest developments it has to offer. “Las Vegas is excited to be the first World Routes host destination in the United States, and we’re looking forward to welcoming the world’s aviation community to the entertainment and convention capital of the world,” said Cathy Tull, senior vice president of marketing for the Las Vegas Convention and Visitors Authority. “Las Vegas is more vibrant than ever and continues to reinvent itself as an international tourism destination. We look forward to hosting the delegates for the 2013 World Route Development Forum and creating a memorable experience that will showcase everything Las Vegas has to offer.” The city has more than 150,000 hotel rooms – more than any other destination in the US – most of which are within a 15 minute drive to McCarran International Airport, which makes the city a true hub for aviation, events and tourism. In the past two years, the Las Vegas tourism industry has invested more than $9.2 billion in new and enhanced experiences for visitors, including new restaurants, updated rooms, museums, world-class entertainers and a new international air terminal. Tourism is the number one industry in Las Vegas, generating more than $40 billion annually, and its popularity shows no sign of declining as a record 40 million visitors from across the globe passed through the US’s ‘Sin City’ in 2012.
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Along with tourists attracted to the entertainment capital of the world, Las Vegas is also a thriving business destination hosting more than 19,000 annual meetings and trade shows with almost five million attendees in 2012. McCarran International Airport, co-host of the event, opened its new $2.4 billion state-of-the-art Terminal 3 on 27 June last year. It provides the airport with an additional 14 gates, seven for flights and seven domestic for domestic services, raising the gateway’s capacity to 53 million passengers per annum. The terminal’s US Customs and Border Protection area boasts 22 lanes and claims to shows the first ‘destination-specific welcome experience in the country’, a welcome video and multiple Las Vegas art pieces. With eight miles of baggage conveyors, and a terminal building that stretches for almost half a mile, the 1.9 million square foot, three-storey building is the largest modern public works project in the history of the State of Nevada. In 2012, McCarran was the fastest growing US airport for international air service, the seventh busiest in the North America, and the 20th busiest in the world, handling an average of 114,000 passengers daily on 35 airlines servicing 140 destinations through 928 daily flight operations. Last year also saw a 10% increase in passenger traffic with 41.7 million passengers. Indeed, such is the draw of Las Vegas that World Routes delegate numbers are expect to soar this year. The organisers are also introducing a number of key developments to the event programme, which they hope will prove equally as popular. All delegates who are registered to attend the event in Las Vegas will gain complimentary access to the World Routes Strategy Summit as part of their entrance fee; the pre-scheduled face-to-face meetings will continue exclusively for stand holders and there will be even more relevant content added to the programme.
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Events update
upcoming events
World Routes October 5–8, 2013 Las Vegas, USA
The global meeting place for every airline and airport
Chinese carriers recognise Indian opportunity Asia’s route development community will descend on Mumbai this March to meet, do business and help shape the continent’s air networks of the future. Over 600 key decision makers from across the Asia-Pacific region and beyond are expected to gather in India’s the financial and entertainment capital for the event, which will be hosted by Chhatrapati Shivaji International Airport (CSIA). The airport, one of India’s greenest and most high-tech gateways, is managed by Mumbai International Airport Pvt Ltd (MIAL), a consortium spearheaded by the GVK Group. Registrations are significantly up on the same time last year for the 2012 event, with network planners and leading industry figures from 64 airlines already signed up for Mumbai. India is an important market, and for airports wishing to do business with Indian carriers, Routes Asia in Mumbai is certainly an event not to be missed. Airlines such as Air India, Jet Airways, Spicejet and IndiGo are all expected to attend with very senior delegations along with Air India Express and JetLite. The event also promises a large Chinese presence with Air China, Hainan Airlines and China Southern Airlines all confirming their attendance in recent weeks, whilst the Low Cost Carrier (LCC) sector will also be well represented with attendance from Jetstar Airways, LionAir, The AirAsia Group and Tiger Airways. The appeal of doing business in Asia and the fast expanding markets of China and India also means that more airlines from other regions than ever before will be present in Mumbai. They include Gulf carriers Emirates, Etihad and Qatar Airways; American Airlines and Finnair whilst both South African Airways and Kenya Airways will attend the event for the first time. For more information visit www.routesonline.com
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Routes Americas February 10–12, 2013 Cartagena, Colombia Routes Asia March 17–19, 2013 Mumbai, India Routes Europe May 12–14, 2013 Budapest, Hungary
Routes CIS TBA
Routes Africa July 7–9 July, 2013 Kampala, Uganda
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tel and nt of the International Ho ws Dr Ghassan Aidi, preside Ne es (IH&RA), talks to Rout r. Restaurant Association e global hospitality secto th in s nd tre t es lat e th t abou industry How did the global hotel perform in 2012?
extremely The hotel industry performed m rate is well last year. The average roo by 4% in high once again, increasing the the first half of the year, while PAR) (rev m roo le ilab ava per revenue n 6%–7%. was also excellent at betwee in which one 2012 was also the first year tionally. billion tourists travelled interna owing We are one of the fastest-gr global industries and we are billion forecasting we will reach 1.6 tourists by the year 2020.
ed the This is why we have launch n, which is Emeraude Hotelier certificatio ent a set of hospitality managem size any of els hot p hel to s ine guidel grammes implement environmental pro footprint. and reduce their emissions reasing Other key objectives are inc TW UN O; our lobbying work with the the we will continue to defend the and ers mb me our of ts interes . sector in general worldwide
facing What are the big challenges ry? ust the international hotel ind
are Which parts of the world in wth gro t ges big the seeing st visitor numbers and the mo ? ted new hotels being construc
ts are Asia, The top performing marke Europe in South America, USA and for new that order and the demand 2, 458 development is huge. In 201 ms new hotels with 82,476 roo ion and reg fic aci a-P Asi the in opened 385,113 some 1,767 hotels totalling rooms are in the pipeline. day Remember that each single 10 new hotels are opening somewhere in the world.
s in What are your key objective 2013 for IH&RA?
is to A key objective for IH&RA tainability in continue to champion sus is a the hospitality sector. Tourism ma a jor fast-growing sector, and is ation and contributor to local job cre living, but increasing the standard of we also need to encourage responsibility environmental and social growth. to reduce the impact of its
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our issues, In order of importance: lab a global sustainability, the need for ion, standard of hotel classificat R, NOI improving room rates, RevPA which can and access to banks loans and be invested in new hotels gs. ldin bui ting exis ing nis moder
ry and How can the hospitality indust er to eth tog the aviation industry work s? ber encourage greater visitor num es for a Creating, together, packag allow given destination which will ing they tourists to find out everyth -window need to know through a one shopping experience.
what Are guests expectations of g? gin a hotel should offer chan
just to offer Yes, it is no longer enough facilities; good customer service and s are technology is a must. Guest rs them looking for the hotel that offe Wi-Fi free both a free breakfast and broadband. Hotels must also the Internet embrace technology and e to attract if they are going to continu international customers.
Factfile ORGANISATION:
International Hotel and Restaurant Association (IH&RA)
Web address: www.ih-ra.com Headquarters: Lausanne, Switzerland Year founded: 1869 Membership: 50 brands estimated to comprise 300,000 hotels and 7 million restaurants worldwide
What would you like to see rt governments do to suppo ir the in s the hotel sector respective countries?
do is to The first thing they need to k at the loo es ntri lower VAT; some cou to cow h cas a as hospitality industry n bee e hav y the e generate the revenu k Yor w Ne . ere wh unable to make else s rge cha ich is an example, wh . enormous taxes equal to 15% . 23% In Croatia, VAT is e and We need to cut the red tap obtain to s ces pro tion make the facilita hotel a rate ope and a licence to build d nee you ia, Ind In much smoother. rs yea six in s mit to obtain 100 per el. Finally, before you can open a hot the job ve lea to d governments nee ir the to els hot ir of classifying the ply sim it and n atio local hotels associ t. distorts the marke
RN
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