BY THE MARKETING DEPARTMENT OF AMSTERDAM AIRPORT SCHIPOL
To help benchmark itself against key competing hubs and monitor its progress in maintaining a global network of destinations, Schiphol has created a hub index
Hubs around the world are under increasing pressure to perform. Not only do they act as crucial economic drivers for the cities and regions that they serve, but they must often do so within tight environmental or infrastructure constraints. So how should a hub set about ensuring that it delivers maximum value from its available resources? At Amsterdam Airport Schiphol the answer has been to focus on maintaining and developing a competitive network of core intercontinental destinations, or "mainports".
To measure its success, the airport has set up the Mainport Marketing Index (MMX), a quantitive tool designed to monitor the quality of this network and also to help rank the airport's performance against that of its main competitors.
The index defines a mainport as a major hub airport that connects a region to the world and which is a catalyst for the economic development of that region. The network is defined as the number of scheduled destinations served and the number of frequencies available to those destinations. Schiphol's mainport network consists of the number of intercontinental destinations served and frequencies offered - but not every destination outside of Europe can be regarded as a mainport. To qualify, an intercontinental destination must meet one or more of four key criteria:
The destination must have global or regional importance, which would capture such cities as New York and Tokyo, as well as Johannesburg and Sao Paulo. The city's airport system must serve as a hub or gateway to the region, such as in the case of the Detroit and Cincinnati hubs in the USA, but also the Venezuelan capital Caracas or Abidjan in Cote d'Ivoire. The destination must be linked with other European mainports, especially one or more of the big four systems at London, Paris, Frankfurt and Amsterdam The route offers market opportunities for more than one airline. This can be an important factor to attract incoming business travellers who may prefer to fly with their own home carrier or alliance and not the one which dominates at the destination hub. Quite apart from the continuing pull of national flag-carriers, the choice could be influenced by factors such as corporate agreements with airlines and travel agencies or loyalty programmes.On this final point, it is also true that greater competition between different carriers or alliances can result in lower fares and therefore stimulate more inbound tourism. In fact, the challenge for many European airports will be to maintain connections with the inter-continental hubs of alliances other than that of their own national carrier. For example, although it is home to the KLM/Northwest Airlines "Wings" alliance, Amsterdam should seek to attract and maintain long-haul Star Alliance flights to hub airports such as Washington, Chicago, Sao Paulo, Singapore and Bangkok, in addition to short-haul feeder services to the alliance's European bases at Frankfurt, Copenhagen and Heathrow.
In setting its targets, the marketing department at Amsterdam Airport Schiphol has defined 70 intercontinental destinations as mainport destinations from a European perspective. The selection is based on criteria such as:
total and international passenger volumes; the economy of the surrounding metropolitan area; number of frequencies to major European airports; the presence of a hub carrier; the role of the airport system and city for its region.Based on these criteria, 70 key destinations were selected for each of five world regions: North America (26 cities), Asia-Pacific (19), Middle East (10), Africa (8) and Latin America/Caribbean (7). The strength of the North American market is such that the list could have been made up almost entirely of cities from this key region, supplemented by only a few cities in Asia-Pacific. However, to ensure a more even geographical spread, the most important destinations in each of the five regions (see map illustration, above right, and city listings) are included.
Naturally, the number of destinations can fluctuate over the years, depending on the developments of the economy and shifts within the airline industry, including the state of alliances. And although a destination may fit the definition of a mainport, it may be highly unlikely to be included in the network of some of the big European hubs, at least in the near future. So Amsterdam would not perhaps expect to connect with Sydney or Santiago de Chile.
Also worth noting is the fact that mainport destinations are defined in terms of cities rather than individual airports. The only exception to this is the New York and New Jersey metropolitan area. Due to its pre-eminence as arguably the world's leading business centre, and also because of the large number of transatlantic flights, this area has been distinguished in two separate mainport destinations: New York (JFK airport) and Newark (New Jersey).
The next step has been to develop the MMX index - a quantative set of measures against which to benchmark the quality of Amsterdam's mainport network and the success of its marketing efforts. The index is based around a ranking of the top ten competing European mainports: London, Paris, Frankfurt, Amsterdam, Munich, Zurich, Milan, Brussels, Copenhagen and Manchester.
Again, the competitor mainports are not analysed in terms of individual hubs, but as systems which include all airports with intercontinental services. Thus, London comprises Heathrow, Gatwick and Stansted; Paris is the aggregate of Charles de Gaulle and Orly; while Milan consists of Malpensa and Linate.
The MMX analysis compares the intercontinental networks of these competing mainports on three key factors: 1. Destinations - the number of the 70 mainport destinations served by direct flights; 2. Frequencies - the total number of weekly frequencies to all directly served mainport destinations; and 3. Competition - the proportion of frequencies operated by the dominant or "home" airline alliance. At this stage, available seat capacity has not been taken into account. Although this could in future provide greater depth and detail to the comparison, it would be unlikely to make any significant change to the results of the analysis. If anything, bringing seat capacity into the equation would serve to accentuate the existing gap between the competing mainports, as, generally speaking, those with the highest number of destinations and frequencies also have the largest available capacity.
Performance ranking
The performance of the networks of the ten cities with regard to destinations and frequencies is expressed as a combined indexed score. An index of 100 is set for each element based on the average score of the ten competing cities. So if a hub achieved the average number of frequencies (scoring 100) but to twice the destinations (scoring 200), it would achieve a combined indexed score of 300.
Performance on the final element - competition - is expressed separately as the proportion of frequencies to the mainport destinations operated by the home airline alliance compared with another carrier. This ratio can be seen as a measure of the amount of competition the home carrier alliance faces in its intercontinental network at its hub - although not necessarily at individual route level. And in general competition is good, since it provides choice to the passenger, which in turn may lead to additional business and leisure traffic.
The MMX can fluctuate, taking into consideration that airline alliances change over time and destinations and frequencies are added or dropped. Therefore the MMX analysis is carried out annually using schedule data for a representative week in the summer season.
It soon becomes clear for summer 2001 that London heads the rankings with a large margin (see table above). This is predominantly due to the high number of frequencies available, which is nearly twice that of its nearest competitors - Paris and Frankfurt. These are close to each other, with Paris offering more frequencies and Frankfurt more destinations. Amsterdam occupies the fourth position followed at some distance by Zurich and Milan, which start to fall below the average of 466 weekly frequencies to 40 destinations.
In terms of competition, the near-total dominance of the Star Alliance at Copenhagen with respect to intercontinental traffic is striking. Amsterdam, Zurich, Milan and Frankfurt are also quite dependent on their home carrier alliance. This is less the case at Munich, Brussels, Paris and London, whereas at Manchester even the share of the Star Alliance - the alliance with the highest number of intercontinental flights - is relatively modest.
In 2001, New York (JFK) was the most important mainport destination, attracting more than 7% of all frequencies from the 10 mainports combined. It was followed by Chicago, Toronto, Newark, Tel Aviv and Washington. Only five destinations are linked to all ten European mainports: Chicago, Newark, Tel Aviv, Toronto and Washington. At the other end of the spectrum, Sapporo, Nagoya and Bogota receive fewer than 14 frequencies per week. They have nevertheless been included in the analysis due to their importance as business centres in a large economy or as a regional gateway.
Risers and fallers
How the index has moved compared with the previous year provides some interesting insights as to the relative performance of the ten hubs. It is clear that Paris, Amsterdam, Munich and Manchester improved their positions at the expense of London, Frankfurt, Zurich, Milan, Brussels and Copenhagen.
A striking conclusion is that the focus on building frequencies to existing destinations instead of adding new destinations continues. Growth to a daily or even twice-daily flight takes a high priority to make routes more attractive for business travel and to connect with more banks at the hub airport. Overall in summer 2001, the ten top mainports recorded a combined total of weekly frequencies at 4,662, up by 3.5% on the 4,503 a year earlier. The total of (duplicated) mainport destinations served went up by only five to 400.
London remains the most important mainport in Europe, although its position has declined slightly in 2001. The net number of destinations did not change (Pittsburgh was added, Santiago de Chile was dropped), but frequencies grew by less than the average. As a result the dominance of the oneworld alliance has edged down by a couple of percentage points.
Paris overtook Frankfurt to take second position in 2001 by a small margin. Paris added two new destinations (Calgary and Vancouver), but gained second place due to the large increase of frequencies, mainly added by the SkyTeam alliance. Frankfurt gained three new mainport destinations (Abidjan, Denver and Phoenix) but the number of frequencies declined.
Amsterdam, retaining fourth place, did not see a change in the number of destinations (Calgary and Philadelphia were added, Buenos Aires and Sydney were dropped), but the growth of frequencies to the mainport destinations was among the highest, up 10%.
Zurich, not yet affected by the Swissair collapse, remained in fifth place, gaining Amman as a destination but losing Seoul and Cincinnati. Milan remained in sixth place but its network quality reduced as five destinations were eliminated (Bangkok, Detroit, Johannesburg, Nairobi and Sydney) and only one added (Bahrain). Brussels emerged, even having lost Miami, Orlando and Johannesburg, but gaining routes to Dallas/Fort Worth, Philadelphia and Toronto.
The highest growth in the 2001 MMX analysis was recorded by Munich, which saw five mainport destinations added (including Hong Kong, Singapore, Los Angeles and Rio de Janeiro). The number of frequencies per week rose more than 12%.
At the bottom of the index Manchester saw a substantial increase in frequencies (added by bmi british midland of the Star Alliance), while Copenhagen experienced an ever-stronger domination by its home carrier alliance (also Star, courtesy of SAS).
The next MMX analysis for June 2002 will make interesting viewing given the turmoil that has affected the aviation industry in the wake of 11 September. At present it looks as though the ten European mainports will struggle to maintain their tally of frequencies and destinations. Given the current volatile state of the industry, it is virtually impossible to predict who will gain and who will not. But whatever the overall result, there will surely be winners and losers as the MMX analysis tracks the performance of each mainport relative to the average.
Mainports North America 26 Atlanta Boston Calgary Charlotte Chicago Cincinnati Dallas/Fort Worth Denver Detroit Houston Los Angeles Miami Minneapolis/St Paul Montreal New York (JFK) Newark Orlando Philadelphia Phoenix Pittsburgh San Francisco Seattle St. Louis Toronto Vancouver Washington Latin America 7 Bogota Buenos Aires Caracas Mexico City Rio de Janeiro Santiago de Chile Sao Paulo Africa 8 Abidjan Accra Cairo Cape Town Casablanca Johannesburg Lagos Nairobi Middle East 10 Abu Dhabi Amman Bahrain Beirut Dubai Jeddah Kuwait Riyadh Tehran Tel Aviv Asia/Pacific 19 Bangkok Beijing Delhi Hong Kong Jakarta Karachi Kuala Lumpur Manila Melbourne Mumbai Nagoya Osaka Sapporo Seoul Shanghai Singapore Sydney Taipei Tokyo
About the authors
The Mainport Marketing Index (MMX)has been created by the airline marketing department at Amsterdam Airport Schiphol in order to benchmark the development of the hub. The department is tasked with generating business from airline customers - both incumbents and new entrants.The targets are two-fold:to maintain market share among Europe's top 10 mainports; and to develop a competitive mainport network.
Source: Airline Business
