A Dutch dilemma – How do you balance the needs of transfer passengers and point-to-point demand and maintain fair competition for airlines into your biggest city market?

The European Commission (EC) is reaching the conclusion of a six week consultation procedure concerning proposed traffic distribution rules between Amsterdam Schiphol Airport and Lelystad Airport and it is understood that many airlines are not entirely happy with the criteria selected to distribute traffic between the airports. After launching the procedure on 27-Jul-2018 the 07-Sep-2018 deadline for comments is fast approaching.


Summary:

  • The European Commission (EC) is reaching the conclusion of a six week consultation into proposed traffic distribution rules between Amsterdam Schiphol and Lelystad Airport;
  • How you ensure and maintain that key transfer flow while supporting origin-destination markets and at the same time delivering a level playing field for airlines is a tough dilemma for the authorities;
  • Draft paper under consultation sets 10% value as threshold for defining point-to-point (<10%) and hub building transfer (>10%) traffic;
  • Local study suggests a decrease in value added of more than EUR4 billion and the loss of 55,000 jobs if Amsterdam loses its current hub capability.

Amsterdam Schiphol Airport is one of Europe’s primary hub airports and the hope is that position will be maintained into the future despite its increasing capacity constraints. But how you ensure and maintain that key transfer flow while supporting origin-destination markets and at the same time delivering a level playing field for airlines is a tough dilemma.

It is not as easy as simply blocking the future operations of LCC and leisure airlines and sending them from Amsterdam to Lelystad and maintaining the operations of KLM and its SkyTeam partners at Schiphol and were the strongest connectivity is provided. In its consultation paper, the Dutch Government has tried to set a benchmark for what routes are defined hub building transfer flights and which would be described as point-to-point flights.

That threshold is 10%, and in its wording the paper is careful to describe any service switch to Lelystad would be “voluntarily moved” from Schiphol with the vacated slots “have to be used for transit services”. This figure is based on an average transfer rate of all flights from Schiphol Airport measured over the five calendar years prior to the publication of the designation or across more than ten flights a year in the three years prior to the publication of the designation.

This criteria means that based on its existing network, 195 destinations (airports linked, some of which are no longer served) would remain served from Amsterdam, while 149 would be moved to Lelystad. The proposed traffic distribution rule would take up to 10,000 aircraft movements per annum from Schiphol up to 2023 and 45,000 movements thereafter, mainly narrowbody operations, albeit the list of markets with less than 10% transfer share includes markets such as Islamabad, Lahore, Mombasa, Orlando Sanford, Philadelphia and Zanzibar.

CHART – Amsterdam Schiphol is currently linked to 264 markets, dominated by a wide European network of 165 destinations, many of which could be switched to Lelystad based on the parameters of the consultancy paperSource: CAPA – Centre for Aviation and OAG (data: w/c 27-Aug-2018)

A recent study by the SEO Amsterdam Economics research group highlights the importance of maintaining a hub at Schiphol and notes that “without connecting passengers most intercontinental destinations currently served from Schiphol Airport cannot be operated viably”. It notes that the same holds for an important part of the European network. “To be able to operate a premium hub network of high-quality connections sufficient peak hourly capacity is essential,” it explains.

Its analysis shows that the loss of a hub operation at Schiphol Airport would result in a decrease in value added of more than EUR4 billion and the loss of 55,000 jobs – that’s almost half of the estimated EUR9 billion value added of Schiphol Airport and the 114,000 jobs it provides. The negative effects on consumer welfare as a result of longer travel times and higher ticket prices are estimated at more than EUR630
million.

CHART – There are already capacity hotspots at Schiphol, especially in the inbound and outbound peaks between 08:50 and 09:59Source: CAPA – Centre for Aviation and OAG (data: 27-Aug-2018)

It is clear there are already capacity hotspots at Schiphol, especially in the inbound and outbound peaks between 07:50 and 10:39 and in the evening between 18:20 and 21:39, when available capacity is scarce. The SEO Amsterdam Economics report says that in many 20 minutes brackets in these periods, the declared capacity is “almost fully utilised”. Without a solution it suggests this issue would spread to “substantial capacity shortages” during these inbound and outbound peaks at Schiphol Airport.

Lelystad Airport is expected to be opened for traffic in 2020, and while many airlines may not wish to move from Schiphol (even with the significant marketing incentives likely to be on offer to soften the move), some are already looking seriously at the opportunity the new commercial airport could offer. One of these is Lufthansa Group subsidiary Eurowings which says it is “flexible when it comes to routes and bases”. Its director regional management Dusseldorf, Jan Taube, is reported as stating: “Lelystad is also possible for the slightly longer term… We respond to the market and if there is a chance we strike.”