Airline Split Operadons
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Airline Split Opera-ons Dra final report October 16th, 2017 Confiden'al; for internal use only Execuve summary Key conclusions airline split operaons research Dra1 § The opening of Lelystad Airport may result in airlines operang from/to both Schiphol and Lelystad, serving the same catchment area, in a split operaon set up. This research describes what kind of airline split opera-on models exist and under which condions such operaon may or may not be sustainable. The basis for this research is an extensive analysis of flight schedules complemented with market developments. Client envisions a Traffic Distribu'on Rule (VVR) and requested to imply its implicaons. § The term ‘airline split operaons’ refers to network configuraons where an airline operates from its home base to mul'ple des'naons in the same catchment area or where an airline operates from another airport than its original home base in the same catchment area. The main types of split operaons are: ‘mul-airport’, ‘outside base’, ‘addional base’, and ‘second home base’. For the Dutch situaon the ‘second home base’ type is not relevant § All three relevant types of split opera-ons are being operated by airlines in the Dutch market for a long -me. From all regional airports in the Netherlands ‘outside base’ operaons are executed, while airlines have established ‘addional bases’ at Eindhoven and RoYerdam (partly due to the lack of development poten'al at Schiphol). Foreign airlines, mainly network carriers, but also low cost airlines, operate flights from their foreign home base to a second airport in the Netherlands next to Schiphol (‘mul+-airport’) or have done so in the past § The ‘Addi)onal base’ -type is well-suited for Lelystad from a market demand perspec've. Scale seems to offset inconveniences and extra cost of a split operaon in comparable cases. The opening hours as part of the license of Lelystad (06h00 un'l 23h00/24h00) meet the condi'ons that airlines require for a base. A more challenging requirement is the minimum scale of this type of operaon. The typical start-up size of a base is 3 – 4 aircras resul'ng in approx. 6.000 – 10.000 ATMs per year. This will not be possible from day 1 at Lelystad. The start-up period needs to provide airlines a credible perspec've to develop towards that viable scale in 2 to 3 years from an efficiency point of view § The ‘Mul)-airport’-type fits in terms of scale and desired opening hours at Lelystad. The operaonal condions demanded by the airlines are minimal, however, the commercial drawbacks compared to a ‘single-airport’ operaon appear to be significant and therefore liMle growth from the market can be expected. Restric'ons at Schiphol as a consequence of the VVR can, however, drive some demand for this type of operaon at Lelystad. An analysis of SEO shows that with the current VVR approx. 7.500 flights (mainly by Turkish and Moroccan airlines) currently being operated at Schiphol, might be subject to either move to Lelystad, or alternavely be cancelled § The ‘Outside base’-type (the ‘W’-operaon) has long been applied by Dutch charter airlines to regional airports. There are no objec-ons from a cost- and operaonal feasibility point of view, viability of a W-operaon relies on yield perspec've. Both volume (ATMs) and schedule reQuirements (mostly during the middle of the day) can be well fied at Lelystad. However, there is a clear trend in the Netherlands and in Europe that the charter model loses in importance against scheduled operaons. A VVR that reliefs Schiphol of leisure flights in the morning (block 2) and a1ernoon (block 6) needs to imply a free choice in slot 'me at Lelystad, in order for a carrier to make a 2nd or 3rd turn at Lelystad instead of at Schiphol § ‘Mul+-airport’ and ‘Outside base’ types of operaon could be considered by airlines as a way to start building presence at an airport with the aim of developing into an ‘addional base’, provided that the desired volume of that base can be achieved within an acceptable 'me frame (2-3 years) 2 Confiden'al; for internal use only Agenda Dra1 Contents Airline Split Operaons § Introduc-on § Airline split operaon in the Netherlands § Detailed review of airline split operaon models - ‘Addi'onal base’ - ‘Mul'-airport’ - ‘Outside base’ § Relevant insights for the development of Lelystad Airport 3 Confiden'al; for internal use only Goal of this research is to define airline split operaons models, determine condions airlines require for each model and relate those to Lelystad airport Dra1 Framework of assignment Applied methodology Objecve § Mapping the different models of airline § Mapping airline split operaons through archetypes split operaons based on case studies § Mapping the typical airline operang hours and the size Scope § The split operaon models that are of operaon for each archetype based on analyses of relevant for the Dutch airport schedule data § The focus on which condi'ons (operang § Enriching the insights by analyzing the development of hours, number of allowed flights) are these archetypes over 'me and by gathering necessary for the airlines to succeed the informaon about why certain developments happen split operaon (on instruc'on, no conversaons with the airlines were held) Out of scope § An assessment of negave effects if not all condi'ons for a split operaon are met § Describing the expected condi'ons for airlines to operate in a split operaon at Lelystad Airport, based on the archetypes and the impact of the envisioned Traffic Distribu'on Rule (VVR) Disclaimer: the research in this report assumes that the basic airport infrastructure (accessibility, ground facili'es) is in place and that the Traffic Distribu'on Rule (VVR) is in force 4 Confiden'al; for internal use only There are 5 ways an airline can operate from/to an airport of which 4 can be classified as split operaons Dra1 ARCHETYPES FOR THE WAY AIRLINES OPERATE FROM/TO AN AIRPORT No split opera)on Increasing degree of split opera)ons SECOND HOME SINGLE-AIRPORT MULTI-AIRPORT OUTSIDE BASE ADDITIONAL BASE BASE Operang flights from Operang flights from Operang flights on a Operang flights from Operang a substan'al a base to an airport a base to mul'ple route where neither an addi'onal base number of flights from that is the only one airports located in the departure nor arrival where aircra and a second home base Descripon within that catchment same catchment area airport are a base of crew are based near the current home area the airline (W- base operaon) • Market opportunity • Market opportunity • Market opportunity • Market opportunity • Limited growth (only at bigger (o>en charter airlines • Limited growth opportuni'es current metropoles) flying commissioned home base Drivers opportuni'es on • Forced (if primary by tour operators) current base • Somemes defensive des'naon has no capacity to grow) • Germania at MST • KLM at LIN and MXP • Transavia from GRQ/ • easyJet at CDG and • Bri'sh Airways at LHR • TK at RTM and AMS MST to Spain ORY and LGW Examples • KLM at LHR and LCY • Transavia at MUC 5 Confiden'al; for internal use only The ‘mul-airport’-, ‘outside base’- and ‘addional base’-types of a split operaon are relevant for the Dutch market Dra1 SECOND HOME SINGLE-AIRPORT MULTI-AIRPORT OUTSIDE BASE ADDITIONAL BASE BASE • Most common • Mul'ple airlines fly • Charter airlines • A number of airlines • Seng up a second archetype: serving or have been flying flying from regional already have a base home base hardly one airport in a in the past both on airports is a long- other than at occurs and only market from the Amsterdam and standing prac'ce Schiphol (RoYerdam appears at growth base other regional • In the Netherlands, and Eindhoven) limitaon and/or at • No split operaon airports in the these ‘outside base’- • Especially low cost enormous and therefore out of Netherlands flights are usually airlines are s'll metropolis (London, scope for this • Volumes are small done by Dutch increasing the Paris) research (mostly less than 10 airlines number of bases • There is no need for flights a week/ 1.000 • A condi'on for this a similar model in ATMs a year) type of operaon is the Netherlands, • Mostly foreign the availability of neither is this size airlines enough movements. possible at Lelystad In 'me, this (for example 44k archetype is possible flights at LGW by BA) at Lelystad Relevance for development of Lelystad/Dutch context 6 Confiden'al; for internal use only The three relevant types of a split operaon show a very disncve traffic paern at regional airports Dra1 Des'naon Z Des'naon Z Des'naon Z Des'naon Y Des'naon Y Des'naon Y Des'naon X Des'naon X Des'naon X ADDITIONAL BASE Regional airport in the Netherlands 06h00 24h00 Home base Home base Home base Home base Home base Home base Home base Home base MULTI-AIRPORT Other Dutch airport Regional airport in the Netherlands 06h00 24h00 Des'naon X Des'naon X or Y Des'naon X or Y OUTSIDE BASE Home base Home base (W-operaon) Regional airport in the Netherlands 06h00 24h00 7 Confiden'al; for internal use only Agenda Dra1 Contents Airline Split Operaons § Introduc'on § Airline split opera-on in the Netherlands § Detailed review of airline split operaon models - ‘Addi'onal base’ - ‘Mul'-airport’ - ‘Outside base’ § Relevant insights for the development of Lelystad Airport 8 Confiden'al; for internal use only All three relevant types of airline split opera-ons are currently operated by mulple airlines at regional airports in the Netherlands Dra1 KEY AIRLINES OPERATING IN THE NETHERLANDS CATEGORIZED PER AIRPORT AND ARCHETYPE Mul'-airport Outside base Addi'onal base Home base • The fact that