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Aviation History
2002
2002 - 1139.PDF
operations - and has abolished landing fees for 737-weight aircraft. Adapting airport operations to suit no- frills airlines is a "seductive" strategy, says Lufthansa airport economist Hartmuth Posner, but can take airports heavily into the red, as the preferential conditions they offer the carriers eat into profit margins. In addition, if the airports are owned by local or national governments, as is often the case in mainland Europe, offering advan tages to new LCCs may constitute illegal government subsidy. However, adapting to suit no-frills carri ers may be the only way for airport author ities to maintain the flow of passengers through the terminals on which both their aviation (landing and passenger fees) and non-aviation (for example, concession rental, parking and retail) revenues depend. Airports such as Amsterdam Schiphol, says Schiphol chief financial officer Piet Verboom, accept that they will make a loss on their aviation business to keep passen ger numbers high enough to turn a profit from non-aviation sources, which often account for most airport revenue. Resistance from airport operators con tinues to restrict low-cost expansion. It has two causes: political; and concern over profits. Politically, most European airports are still owned and operated by local or national governments. While many flag carrier airlines are now nominally outside state control, there are still often strong links between airline and state. Although under European law the degree of state aid is severely limited, flag carriers can also be protected by restricting the growth of com petitors in the flag carrier's home market. The bitter fighting, especially in Germany, shows exactly how determined a well- established flag carrier can be to defend its quasi-monopoly on domestic traffic. Political and profit Even without political pressure, airport op erators are often concerned that low-cost airlines will take away«from full-service pasengers and replace them with low-cost passengers, who will provide less revenue for the airport - by travelling there on pub lic transport rather than driving and park ing, for example - or by spending less in the airport's shops. As Tretheway points out, however, this perception is incorrect. LCC passengers tend to spend less, but visit the shops more frequently - chiefly for food, which is not provided by the airlines. In troubled times for full-service carriers, airports may have to revise prices to suit the low-cost carriers, which are, after all, providing most of their growth. As for the issue of customer conveni ence, research comparing the US LCC Southwest and the full-service carrier Northwest indicates passengers accept that driving further to the airport is part of the penalty for flying on an LCC. Aviation economist Michael Levine says Southwest is "actually a hub (rather than a point-to- point] system, with feeder networks of peo ple driving their cars". Passengers are con tent to drive 2h to board a Southwest flight, and three and a half hours for a Westjet flight in Canada, but will not drive for longer than than lh for a Northwest flight. Part of the added value in the Northwest product is the convenience of having the aircraft land closer to the passenger. Less visible to the passenger are over head costs. Most of the LCCs have started from scratch, rather than evolving, as most full-service carriers have, from state-owned monopolies. This means that LCCs do not have long lists of retired staff on generous pensions; they are not stuck with networks of loss-making international routes oper ated for reasons of politics or prestige Buzz, spun off from KLM uk, sis striving to reduce its cost base www.flightinternational.com FLIGHT INTERNATIONAL 9-15 APRIL 2002 31
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