airport systems planning & design / rdn dr. richard de neufville professor of engineering...

Airport Systems Planning & Design / RdN

Dr. Richard de Neufville

Professor of Engineering Systems and

Civil and Environmental Engineering

Massachusetts Institute of Technology

Current Status of the Airport / Airline Industry


Current Status of the Air Transport Industry

Objective: To define current situation and major new factors

Airline and Airport RankingsMajor Trends

• Shrinking, Bankruptcy of Legacy Airlines• Losses in Transfer Hubs: St Louis, Pittsburgh• Rise of Innovative Carriers: Southwest, Fedex • And Secondary A/Ps: Providence, Ft Lauderdale• Demand for Low Cost Buildings at Airports


Major Recent Events

Disappearance of Major Airlines TWA, Swissair, Sabena

Mergers JAL and JAS (2002) ; Air France + KLM (2004)

America West + US Airways; Lufthansa + Swiss (2005) United +bmi (UK)?? + Aloha???; Gol + Varig (2007)

Major Bankruptcies… and recoveries United, US Airways, Delta, Air Canada, Northwest

Surge by Low-Cost, Chinese, Cargo Carriers Air Tran, Ryanair, easyjet, AirAsia Cathay Pacific, China Airlines, EVA


Electronic Ticketing

Big Savings – up to $3 billion for air transport industry Less staff, less space, less rent… $1 per E ticket vs. ~$10 per paper ticket

Status >70 % of all tickets worldwide (Dec. 2006) Over 86% in Canada ~ 83% in UK, >1/2 in Asia Pacific Some airlines at 100%: Southwest, RyanairSource: IATA WATS


Bar Coded boarding passesCommon Use Kiosks

Bar Coding Estimated savings: $3.50 per ticket, or

about $2.5 Billion/year for 100% use IATA Goal: 100% by 2010

Common Use Kiosks Estimated Savings $ 2.50 per check in 49 airports had CUSS by end of 2006

Source: IATA WATS


Principal drivers of air transportation industry

Long-term annual decrease in air fares: Driving comparable annual worldwide traffic growth – aircraft

size, engines, composite materials

Low-cost carriers Southwest, AirTran, Jet Blue, Westjet, Ryanair, easyjet, AirAsia New business practices

Commercialization: market economy management replaces…

government ownership and economic regulation

Globalization: transnational airline alliances and airport groups

Technical innovation: e-commerce, RJs, satellite-based navigation


Annual Decrease in Air Fares

Estimated Real Yields

60

70

80

90

100

110

1993 1997 2001 2005

Year

Rel

ativ

e ce

nts

/Rev

enu

e P

ax-K

M

Source: IATA WATS


IATA Members’ Traffic, Revenues, Yield, and CPI

Source: IATA World Air Transport Statistics

0

50

100

150

200

250

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

Pe

rce

nt

of

19

91

Traffic Revenues Yield Inflation


Interpretation of Trends

Over past 13 years… Yields (revenues/unit distance) have

dropped about 20% While inflation has risen about 50% So: costs on a constant basis cut in half Thus: traffic doubled Implying price elasticity about -1.3 > -1.0 So total revenues grow as price drops


World Traffic, (Pax-Km x 109) World and IATA

Year IATA

IATA World share, % IATA World2006 3426 3914 87.5 4 52005 3275 3708 88.3 6 02004 3082 3722 82.8 13 13.62003 2704 3236 83.5 (0.4) 12002 2770 3196 86 (1) (1)2001 2652 2912 91 (4) (4)2000 2757 3018 91 4 (2)1999 2657 3074 86 6 61998 2514 2888 87 7 41990 1600 2186 73 18 81987 1042 1763 59 9 81982 712 1263 56 4 41977 600 1036 58

Pax-km, Billions Annual Growth %

Source: IATA World Air Transport StatisticsNote: Changed Series; now includes charter travel


Non-IATA Members

As of 2006, many airlines in the top 50 worldwide were not in IATA… Southwest, Jetblue, AirTran, Spirit, Westjet Ryanair, easyjet Frontier, Hawaiian, Skywest Condor

Source: IATA WATS


Airports by millions of pax, 2006 (ACI data from IATA WATS; US- Bold, hubs- italics)

Airport Annual %2004 2006 2006 2004 2003 2002 2001 2000 1993 2000-2006

1 1 Atlanta 84.8 83.6 78.8 76.6 75.9 80.2 47.8 1.02 2 Chicago / OHare 76.2 75.4 69.4 66.5 66.8 72.1 65.1 0.93 3 London / Heathrow 67.5 67.3 63.2 63.0 60.7 64.6 47.6 0.74 4 Tokyo / Haneda 62.2 62.3 63.2 61.1 58.7 56.4 41.5 1.75 5 Los Angeles / Internatl 61.0 60.7 55.0 56.2 61.0 68.5 47.8 -1.86 6 Dallas / Ft. Worth 60.1 59.4 53.2 52.8 55.2 60.7 49.7 -0.28 7 Paris / de Gaulle 56.8 50.9 47.9 48.1 48.0 48.2 25.7 3.07 8 Frankfurt / Main 52.8 51.1 48.1 48.1 48.6 49.4 31.9 1.120 9 Beijing 48.5 34.9 24.4 27.2 24.2 21.7 * 20.610 10 Denver / International 47.3 42.4 37.5 35.7 36.1 38.7 32.6 3.711 11 Las Vegas 46.2 41.4 36.3 35.0 35.2 36.9 22.5 4.29 12 Amsterdam / Schiphol 46.1 42.5 39.8 40.6 39.5 39.6 20.1 2.713 13 Madrid 45.5 38.5 35.4 33.7 34.0 32.8 17.3 6.517 14 Hong Kong / C L K 44.0 36.7 26.4 33.5 32.6 32.7 24.4 5.814 15 Bangkok 42.8 38.0 29.1 30.5 30.6 29.6 17.1 7.418 16 Houston / Bush 42.6 36.5 34.1 34.4 34.8 35.2 20.3 3.515 17 New York / Kennedy 42.6 37.4 31.7 28.9 29.4 32.8 26.8 5.012 18 Phoenix 41.4 39.5 37.4 35.6 35.5 35.9 23.5 2.619 19 Detroit / Metro 36.4 35.2 32.7 32.4 32.3 35.5 24.2 0.416 20 Minneapolis / St. Paul 35.6 36.8 33.2 32.6 35.2 36.7 23.4 -0.522 21 New York / Newark 35.5 31.8 29.6 29.0 30.5 34.2 25.8 0.626 22 Singapore 35.0 30.4 23.1 27.4 28.1 28.6 18.8 3.724 23 Orlando / International 34.8 31.1 27.3 26.7 28.2 30.8 21.5 2.223 24 London / Gatwick 34.2 31.5 29.9 29.5 31.2 32.1 20.1 1.121 25 San Francisco / Internatl 33.5 33.5 28.8 30.7 34.6 41.2 32.0 -3.127 26 Miami / International 32.5 30.2 29.6 30.1 31.7 33.6 28.7 -0.525 27 Tokyo / Narita 31.8 31.1 23.5 25.8 25.4 27.4 20.0 2.730 28 Philadelphia 31.8 28.5 24.7 24.4 23.9 24.9 16.5 4.629 29 Toronto / Pearson 31.0 28.7 24.7 25.9 28.0 28.8 20.5 1.335 30 Jakarta 30.9 25.7 18.6 * * * *

Millions of PassengersRank


Airports by millions of pax, 2006

In 2006, airport traffic stagnated at many airports • San Francisco has lost a lot

Big increases in

• New Hubs – such as Madrid, Philadelphia• Secondary airports – London/Stansted• Asia, especially China, Thailand and Dubai!

Thus, significant changes in ranking over last several years


Airports by millions of pax, 2006 (ACI data from IATA WATS; US- Bold, hubs- italics)

33 31 Munich 30.8 26.8 24.0 23.0 23.6 23.1 12.5 5.631 32 Rome / Fuimicino 30.1 28.1 25.8 25.0 25.6 25.9 18.8 2.732 33 Sydney 30.0 28.1 24.2 23.4 24.3 23.5 16.6 4.637 34 Barcelona 30.0 24.5 22.5 21.2 20.7 19.8 * 8.628 35 Seattle / Tacoma 30.0 28.7 26.7 26.7 27.0 28.4 18.8 0.936 36 Charlotte 29.7 24.7 23.1 23.6 23.2 23.1 17.3 4.844 37 Dubai 28.8 21.7 * * * * *39 38 Seoul/Incheon 28.4 24.2 * * * * *34 39 Boston / Logan 27.7 26.1 22.8 22.6 24.2 27.4 24.0 0.246 40 Shanghai/Pudong 26.8 21.1 * * * * *

41 Guangzhou 26.8 * * * * * *38 42 New York / LaGuardia 25.8 24.4 22.5 21.3 21.9 25.2 19.8 0.440 43 Paris / Orly 25.6 24.0 22.4 23.1 23.0 25.4 25.3 0.141 44 Mexico City 24.7 23.0 21.7 20.3 20.6 20.7 * 3.247 45 Kuala Lumpur 24.1 21.1 * * * * *49 46 London/Stansted 23.7 20.9 18.7 * * * *

47 Istambul 23.3 * * * * * *48 Taipei 22.9 * * * * * *

42 49 Washington / Dulles 22.8 22.7 17.0 17.9 20.0 * 2.345 50 Manchester (UK) 22.8 21.5 19.5 18.6 19.5 12.8

48 Miami/ Fort Lauderdale 21.0 * * * * *43 Cincinnati 22.0 21.2 20.9 17.3 22.5 12.3 7.250 Washington/Baltimore 20.7 19.7 19.0 * * *

St. Louis / Lambert 20.4 25.6 26.7 30.5 19.9 0.3Seoul/Gimpo 19.8 21.0 22.0 36.7 22.6 -1.2

Honolulu 19.4 21.1 21.1 22.7 22.0 -1.2Palma de Mallorca 19.1 17.8 19.2 12.4 5.4

Osaka / Itami 18.8 * 19.3 20.5 *Fukuoka 18.8 * * * *


Changes in Transfer Hubs

Big changes in recent years

New Hubs Big: Paris/de Gaulle, Amsterdam, Madrid Medium: Dubai; London/Stansted, Munich

“Close” of old hubs Pittsburgh (US Airways shrunk to Philadelphia) St Louis (TWA merged out of existence) Zurich (collapse of Swissair)


Current Major Airport Projects

Atlanta, Toronto Airport Makeovers (Bangkok), Kobe Major New Airport Osaka/Kansai; Tokyo/Haneda Runway landfills Singapore Massive new Terminal Shanghai/Pudong New Runway, Terminal Paris/de Gaulle; DFW Pax Buildings, APM London/HRW Terminal 5 ($8 billion) Frankfurt A380 base (and T3?) Madrid ; Miami/Intnatl Runway, Buildings Doha (Qatar); Dubai Major Projects


Airline Rankings 2006 (Pax-Km, billions)

Source: IATA WATS

Airline 2006 2004 2003 2002 1995 1992 Annual % 02-06

American 224 209 193 196 165 157 3.6United 189 184 167 176 180 149 1.8Delta 159 158 144 153 137 130 1.0

Air France 123 107 99 99 50 37 6.1Continental 123 101 91 91 57 69 8.8Northwest 117 118 110 116 101 94 0.2

British 115 106 100 99 94 72 4.0Lufthansa 115 109 97 94 62 49 5.6Southwest 108 87 77 71 22 13.0

JAL 89 95 76 83 70 55 1.8Singapore 88 77 64 74 48 37 4.7

Qantas 79 74 69 73 52 31 2.1Emirates 74 * * * * *

Air Canada 72 66 59 69 * * 1.1KLM 72 63 57 59 44 31 5.5

Cathay Pacific 71 57 43 49 * * 11.2

China Southern 69 54 * * * *USAirways 60 65 61 64 61 56 (1.6)

Air China Ltd 60 * * * * *ANA 58 55 52 54 43 38 1.9Thai 55 51 45 * * * NA


Airline Rankings 2006 (Passengers, millions)

Source: IATA WATS

Airline 2006 2004 2003 2002 1995 1992 Annual % 02-06

American 100 92 89 94 80 86 1.6Southwest 96 81 66 64 * 28 12.5

Delta 74 87 84 90 87 83 (4.4)United 69 71 67 69 79 67 0.0

Northwest 56 56 53 54 49 44 0.9Lufthansa 51 48 44 44 33 27 4.0Air France 49 45 44 43 * 14 3.5

ANA 49 46 43 44 38 35 2.8JAL 49 52 34 34 29 24 11.0

China Southern 49 39 * 21 * * 33.3Continental 47 41 38 40 35 38 4.4

Ryanair 41 28 23 21 * * 23.8US Airways 36 42 41 47 58 55 (5.9)

British 36 35 35 34 32 25 1.5China Eastern 35 21 * * * *

easyjet 28 22 22 21 * * 8.3Air China 31 24 * * * *

Iberia 28 26 25 24 * * 4.2SAS 25 20 20 23 19 14 2.2

Alitalia 24 22 22 22 21 20 2.3Qantas 24 24 24 24 * * 0.0

Air Canada 23 21 20 23 * * 0.0


Airline Rankings 2006 (Freight Tonne-Km, Billions)

Airline 2006 2004 2003 2002 1995 1992 % Change 02-06

Fedex 15.1 14.6 13.2 13.0 7.0 5.8 4.0UPS 9.3 7.4 6.7 6.6 * * 10.2

Korean 8.8 8.3 6.9 6.0 4.3 2.7 11.7Lufthansa 8.1 8.0 7.3 7.2 5.8 4.3 3.1Singapore 8.0 7.1 6.7 6.8 3.7 2.9 4.4

Cathay Pacific 6.9 5.9 5.2 4.8 2.8 1.7 10.9

China Airlines 6.1 5.6 4.7 4.5 * * 8.9Air France 5.9 5.4 4.9 4.9 4.4 3.3 5.1Cargolux 5.2 4.7 4.3 4.2 * * 6.0

EVA 5.1 5.5 4.7 4.1 * * 6.1Emirates 5.0 3.5 2.6 * * * 30.8

British 4.7 4.8 4.2 4.1 3.3 2.5 3.7KLM 4.7 4.5 4.1 4.0 3.6 2.4 4.4

Japan 4.7 4.9 4.4 4.4 3.8 3.2 1.7Northwest 3.2 3.3 3.0 3.0 2.8 2.7 1.7Air China 3.2 2.6 * * * *Asiana 2.9 2.7 2.6 2.6 * * 2.9


Airline Rankings 2006 (Freight Tonne, millions)

Airline 2006 2004 2003 2002 1995 1992 Annual % 02 - 06Fedex 7.15 7.00 6.50 6.41 3.40 2.80 2.9UPS 4.29 4.02 3.28 3.21 * * 8.4

United 1.75 1.61 1.18 1.03 0.53 0.49 17.5Korean 1.60 1.52 1.75 1.26 0.85 0.57 6.7

China Airlines 1.34 1.74 1.08 1.00 * * 8.5Singapore 1.29 1.13 1.04 1.03 0.59 0.39 6.3Lufthansa 1.20 1.15 1.02 1.03 0.98 0.74 4.1

Cathay 1.20 0.97 0.88 0.85 0.52 0.35 10.3Japan Airlines 1.14 1.19 0.97 0.92 0.84 0.69 6.0

Emirates 1.14 0.79 0.62 * * * 28.0China Eastern 0.88 0.68 * * * *

EVA 0.83 0.86 0.74 0.62 * * 8.5Air China 0.82 0.65 0.55 * * *Air France 0.81 0.77 0.69 0.68 0.66 0.53 4.8

China Southern 0.79 0.67 0.58 * * *Northwest 0.72 0.75 0.67 0.65 0.72 0.48 2.7

EAT 0.71 0.60 0.52 0.55 * * 7.3British 0.69 0.71 0.63 0.61 0.52 0.39 3.3Asiana 0.66 0.69 0.68 0.56 * * 4.5

ANA 0.66 0.61 0.59 0.54 0.46 0.38 5.6Cargolux 0.65 0.57 0.52 0.45 0.43 * 11.1

KLM 0.59 0.56 0.52 0.52 0.55 0.37 3.4Thai 0.56 0.54 0.51 0.53 0.38 0.24 1.4

Malaysian 0.54 0.55 * * * *American 0.52 0.54 0.51 0.51 0.64 0.51 0.5

Source: IATA World Air Transport Statistics


Main Freight Airports

Sources:

ACI “Top 30 Airports” 2004

FAA CY 2005 Cargo Landings

Hubs in Blue.

Airport Tons,Millions

Memphis 3.6Hong Kong 3.1Tokyo/Narita 2.4Anchorage 2.6Seoul/Incheon 2.1Los Angeles Internatl. 1.9Frankfurt/Main 1.8Singapore 1.8Miami 1.8Louisville 1.8Taipei 1.7New York/Kennedy 1.7Chicago/O'Hare 1.5Shanghai/Pudong 1.6Paris/de Gaulle 1.6Amsterdam 1.5London/Heathrow 1.4Dubai 1.2Bangkok 1.1Indianapolis 0.99New York/Newark 0.95Atlanta 0.77Dallas/Fort Worth 0.74San Francisco/Oakland 0.59San Francisco/Internatl 0.59Philadelphia 0.55Los Angeles/Ontario 0.52Cincinnati/Covington 0.25


Airline Market “Caps” Jan 07 (=price/share x shares) $ billions

Airline Market Cap Airline Type Went Bankrupt? UPS 80.5 Integrated Freight Fedex 33.4 Integrated Freight Singapore 14.0 Ryanair 12.6 Low Cost Lufthansa 12.3 Southwest 12.1 Low-Cost British 11.8 Air France 11.3 Cathay Pacific 9.7 Qantas 7.7 ANA 7.0 American 6.5 GOL 5.6 Low-Cost easyJet 5.1 Low Cost Japan AL 4.9


Airline Market “Caps” Jan 07 (=price/share x shares) $ billions

United 4.9 Yes US Airways 4.7 Yes Continental 3.7 Yes Iberia 3.3 Korean 2.7 jetBlue 2.5 Low Cost SAS 2.4 Thai 2.2 Virgin Blue 2.0 Low Cost Air Canada 1.9 Yes Alitalia 1.8 Alaska 1.6 Westjet 1.4 Low Cost Finnair 1.3 Air Tran 1.1 Low Cost AirAsia 1.0 Low-cost Allegiant 0.5 Low-Cost Northwest 0.4 Yes Delta 0.3 Yes Hawaiian 0.2 Source: finance.yahoo.com, IATA WATS, and industry estimates


Airport Market “Caps” (=price/share x shares)

Many airports are economically more powerful than airlines!

Airport US$, Billions2001 2002 2003 2004 2005 2006 2006 (or 2005)

BAA (UK) 6.13 6.2 5.1 5.5 5.95 9.32 18.98Fraport * 25.6 19.6 23 31 60 6.99Copenhagen 770 589 460 885 1312 240 0.35AIAL (New Z.) 3.46 4.54 5.27 6.75 1.9 2.0 1.82Beijing 2.03 1.82 1.65 2.33 2.9 5.3 2.58Vienna 39.1 34.6 31.5 43.8 50.3 63.3 1.71ASUR (Mexico) 18.1 13.4 13.9 18.4 32.9 39.1 1.18Zurich 201 124 34 101 174 NA 0.71Malaysia 1.54 2.15 1.46 1.41 1.7 NA 0.49Florence * * 15.8 9.8 31.1 NA 0.12Source: Jane's Airport World, Summer issues and market quotes

Share Price, Local Money


Airline Alliances

Star Alliance -- United, Lufthansa + Swiss, Air Canada, Thai, US Airways, ANA, Singapore, LOT, SAS, Air New Zealand, Thai, TAP, bmi, South African, Asiana, Austrian, Spanair, plus regionals

oneworld American, British, JAL,Aer Lingus, Finnair, Iberia, Qantas, Cathay Pacific, Lan Chile, Malev, Royal Jordanian

SkyTeam Air France + KLM, Alitalia, Czech, Korean, Continental, Delta, Northwest, Aeromexico, Aeroflot


Alliances’ Market Shares 2006

Star 566 14Skyteam 452 12oneworld 461 12Alliances 1479 38Total 3914

Alliance

Source: IATA WATS

2006Pax km billions

% of World


New Types of Airlines

Cargo Integrators UPS, Fedex, DHL Role of “Post Offices” ??

Low-Cost Carriers Point-to-point: Southwest, Jetblue, Ryanair,

Air Asia, Gol (Brazil) “Network”: Easyjet, AirTran Quasi-Network: Southwest??

The innovators are the most profitable and valuable airlines


Challenge to TraditionalNetwork Carriers

Is their business model working? Will people pay enough for convenience of

• easy connection at hubs• big expensive passenger buildings• travel agents

If not, what will they do? Squeeze out costs (wages, standards) and

survive on a more modest scale? Manage by having “cheap” partners

• Delta -- Song; United -- Ted… (hasn’t worked) Disappear? TWA, Sabena, Swissair… Merge? KLM, America West, Japan AS…


Airline Seat-Mile Costs, 06 Q1

Source: US DOT, BTS, www.bts.gov/press_releases/ 2006

0.02.04.06.08.0

10.012.014.016.018.020.0

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6.0

8.0

10.0

12.0

14.0

16.0

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US

Airw

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Airline Seat-Mile Costs, 05

Source: US DOT, BTS, www.bts.gov/press_releases/ 2005


Effect of Low-Cost Carriers

Market Share becoming dominant US: About 45% Europe: 12% + 20% charters = 1/3 of total Inter-Asia: only 6% as of summer 2004

Real Yields have dropped by 1/3 in past decade

Source: IATA WATS and McKinsey and Co.


Southwest compared toLeading Domestic Competitors

Fleet Size Airline

Domestic Traffic

(millions, 2006)

Average Aircraft

Age (years) 2006 2007

Change

%

Southwest 96.3 9.8 445 491 + 10

American 76.3 14.1 699 672 - 3

Delta 63.4 13.3 434 428 - 3

Sources US FAA, Bureau of Transportation Statistics and Airfleets. net


Consequences for Traffic

Cheaper travel will increase traffic Where will it go?

To traditional hubs of legacy majors? To/from leisure locations and homes?

• Yucatan, Malaga, Bali, etc To secondary airports?

• Miami/Ft. Lauderdale, Los Angeles/Ontario, London/Stansted, Frankfurt/Hahn, Rome/Ciampino, etc.

Airport customers likely to demand new locations, cheaper facilities


Consequences for Airports (1)

“Low cost airlines” are causing the development of “low cost airports” Secondary airports: Boston/Providence,

Miami/Fort Lauderdale, London/Luton Inexpensive terminals, designed for new

ways of handling passengers – such as Jetblue facility at New York/Kennedy

• Compare Boston Delta and Jetblue facilities:• Pax per gate about 500,000 pax for Jetblue,

about half for Delta


Consequences for Airports (2)

Struggle of “low cost” and “legacy” airlines extending to competition between “low cost” and traditional main airports Boston/Providence vs. Boston/Logan Miami/International vs Miami/Ft Lauderdale London/Heathrow vs. London/Stansted Bangkok/Suvarnabhumi vs. B/Don Muang


Bottom Line ...

The nature of the Airport Business is changing dramatically

Not clear that airport professionals fully recognize full implications

Strong professional tensions … Some examples (not for publication)

airport systems planning & design / rdn dr. richard de neufville professor of engineering...

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