The World Airport Report

LAST YEAR WAS A BUMPER YEAR FOR
airports around the world as they posted their fifth consecutive year of traffic increases,
reaching a passenger throughput of 4.9 billion. This was up 6.5% on 2006, and the rate also surpassed the 4.9% increase recorded between 2005 and 2006 (see Table 1). Since the industry bottomed in 2002, passenger traffic has grown at an average annual rate of 5.7%, bringing 1 billion new passengers into airports, an increase of 32% over the five years.

But the outlook for the current year is gloomy, warns Mathieu Blondel, manager at Arthur D. Little in Paris, which concluded a comprehensive analysis of world airport passenger traffic and is presenting it in cooperation with ATW for a second year. "It was tasting paradise before flying back to purgatory," he summarizes. Based on traffic trends for the first five months of the current year, the consultancy forecasts a slowdown in airport passenger traffic growth.

"The growth rate of 2007 will not be maintained in 2008. All indicators are showing a significant slowdown except in 'small' markets like the Middle East and Latin America where RPKs in the first five months of the year rose 11% and 17.3% respectively," Blondel says. Africa and Asia showed a deceleration in growth, whereas traffic in Europe and North America stagnated at last year's rate.

"The big question," he believes, "is how the winter will evolve. While certain regions including Russia, Asia and the Middle East will keep fueling air traffic demand, a slowdown of the overall growth rate in passenger throughput to 2%-4% can be anticipated." ADL predicts a reduction of ultra-long flights owing to record high oil prices and a boom in hubs in the Middle East as well as the possibility of hubs in West Africa. "At the current kerosene prices, a stopover at a hub gives about 20% lower operating costs compared to an ultra-long flight. Hubs in the Gulf benefit from their geographic position and their based carriers are very competitive, also owing to the fact that they buy oil cheaper. Because of all this, airports in the Middle East are poised to continue to post high growth," he argues.

Middle East Record

In fact, airports in the Middle East recorded their best growth of the past decade in 2007, with an increase of 12.3%, up from 9.1% in 2006. Moreover, they exceeded the performance of their counterparts in Asia, taking possession of second place in terms of the fastest-growing region, according to ADL. Equally noteworthy is that a Gulf airport entered the ranks of the Top 20 largest Intercontinental hubs for the first time last year, with Dubai International, hub of Emirates Airline, taking 18th place by handling 34.3 million passengers, up 16.3% over 2006.

Three Gulf platforms are among the world's Top 10 best performing Intercontinental hubs (Table 2) despite the fact that as a region the Middle East represents just 2.7% of world airport passenger traffic. Abu Dhabi International, home to expansionary Etihad Airways (ATW, 4/08, p. 42), enjoyed the fastest relative growth of all Intercontinental hubs, increasing its passenger throughput by 24.1% to 6.6 million. Qatar Airways' Doha base took the third rank with a 23.6% rise to 10.8 million passengers.

European and Asian airports in aggregate accounted for 64% of the global growth last year. In 2006 the two regions contributed 75%. The decline is owing to the recovery of traffic passing through North American airports, which rose a firm 3.5% in 2007. "North America [defined as the US and Canada] was back on the growth track last year and contributed 18% of the world growth," Blondel says. Although this was "still below the world average, [it] represents a fair performance for a large and mature market." In 2006, passenger traffic increased only 0.7%.

Europe was marked by healthy growth in the western portion (defined as the 27 EU member states plus Norway, Iceland, Switzerland and Albania as well as Turkey), which was up 6.3%, and the strong dynamism of airports in Eastern Europe and Russia/CIS, which ended 2007 with a lofty 19% gain in passenger throughput.

"Russia and the CIS really have become a booming region for air traffic owing to a high GDP growthRussia's GDP jumped 8% in 2007, or twice the world average rateand the population benefiting from this strong economy," he says. Conversely, Western Europe "is losing ground despite the fact it is growing in size [with the enlargement of the EU]." Airports in Western Europe accounted for 28.7% of passenger traffic in 2007, down from a 29.9% share in 2006. Asia's slice of the world pie was 23%. By comparison, in 2003 Asia held a mere 15.4% share of the world's passenger traffic.

With a 9.5%, increase in traffic last year, airports in Asia were still above the world average and well ahead of their counterparts in North America and Western Europe, owing mainly to the explosion of domestic traffic in China and India but also, and increasingly, in Indonesia and Vietnam. Oceania, defined as Australia, New Zealand and the Pacific Islands, showed a slower growth rate than the rest of the region as it was characterized by a more mature market, low inbound tourism flow (a 1.4% increase in tourist arrivals and departures in 2007) and expensive currencies. Yet passenger traffic still climbed 5.5%.

GDP and Tourism

According to ADL's analysis, airport passenger growth last year was driven by a still flourishing world economy and the strength of emerging tourism markets. Worldwide GDP rose 3.7%, down from 4% in 2006, despite the hike in the price of jet fuel from an average of $70 a barrel in January 2007 to $110 by December. Airlines outside the US were insulated from some of this increase owing to the strength of their local currencies against the greenback so, for example, European airlines saw average jet fuel prices rise from €55 to €75.

The weak dollar also contributed to dynamic tourism flows, as did the rising middle class in India and China. According to the UNWTO World Tourism Barometer, the travel and leisure sector enjoyed an impressive global growth rate of 6.1% in 2007, equating to an additional 898 million tourists. Tourism really boomed in Asia, posting a 10.4% growth.

Airport passenger growth remained
within the usual 1-2x GDP multipliers of underlying airline traffic growth in most geographical areas, yet there were exceptions in both directions, with Pakistan and Taiwan underperforming and Turkey and Russia outperforming the historic benchmark. As in 2006, India, Mexico and Poland remained well above industry standards, while the EU's Eurozone airports continued to grow more than twice as fast as GDP. The US returned to normality. On a worldwide level, world passenger traffic grew 1.7 times the rate of GDP and "thus was close to the top of the curve," reckons Blondel.

Regional Winners

Examining traffic by airport type (see Airport Definitions, p. 59 ) reveals that Regional platforms and Intercontinental hubs clearly were behind the growth in Asia/Oceania last year, while North America was led by Regional platforms and Secondary hubs (Table 3). In Western Europe, growth was fairly evenly distributed across all platforms. On a global basis, Regional Platforms again enjoyed the highest year-on-year growth on a percentage basis, up 7.3% against a 5.6% rise for Intercontinental hubs and 5.4% for Secondary hubs.

Regional airports also have been the most consistent performers since 2001 (Table 4), achieving average annual increases of 5.3% between 2001 and 2007. This compares with 4.3% for the Intercontinental and Secondary hubs. Some 52% of the world's passengers used a regional airport last year compared to 47.4% in 2001 (Table 5).

Intercontinental and Secondary hubs have seen their share decline from 32.8% to 30.1% and from 19.8% to 18.5% respectively.

The so-called low-cost airportsplatforms served almost exclusively by LCCsgrew faster than others over the 2001-07 period, especially in Western Europe (Table 6), but over the last two years the gap has been narrowing as LCCs increasingly spread their wings to main airports. For example, Ryanair opened a base at Madrid Barajas and Vueling at Paris CDG.

Interestingly, the mini-trend toward opening purpose-built low-cost terminals at major airports has not necessarily led to a boom in LCC traffic, data show. "Airports that opened an LCC terminal beside their traditional infrastructure did not reach the highest growth level although it was a good response to a specific and local issue," Blondel concludes. In Western Europe, airports with a low-cost terminal show distinctly lower growth rates than their counterparts. "Airports should really evaluate if it is worth investing in a separate low-cost terminal to boost traffic; it is not a magic recipe for growth." he advises.

Private Matters

Twenty-five percent of world airport traffic flowed through privatized airports last year, and since 2001 privatized airports have grown significantly faster than government ones, with an average annual growth of 6.1 % versus 4.2% (Table 7). The trend is especially apparent in Asia (Table 8), while seven of the world's 10 fastest-growing privatized airports are in Europe (Table 9). These include Frankfurt Hahn, Bratislava (see story, p. 33) and Liverpool (see story, p.42 ). Six of the 10 biggest traffic contributors were in Asia, including Delhi Indira Gandhi International (see story, p. 37 ) and Mumbai's Chattrapathi Shivaji International.
Full privatization has not yet occurred in a meaningful way in the US market, but that is expected to change in the next 12-18 months as Midway Airport is placed in the private sector under plans by the Chicago city government.
DEL and BOM also featured among the Top 10 fastest-growing Intercontinental hubs last year, in relative growth as well as in absolute figures (Table 2).
The 2007 Top 10 best-performing Intercontinental hubs contain some noteworthy changes compared to 2006: A US airport (New York JFK) entered the group in terms of relative growth and two, JFK and Hartsfield-Jackson Atlanta International, entered the Top 10 in absolute growth. Madrid added the most passengers of any airport in absolute figures in 2007, 6.6 million, overtaking Beijing, which added 5.1 millionas many as JFK.

Most of the world's 10 worst-performing Intercontinental hubs are still in the US (Table 10). Cincinnati Northern Kentucky experienced the greatest decrease in traffic, down 3.1% or 0.5 million passengers. This, however, was vastly improved compared to the 28.7% decline (6.5 million passengers) posted in 2006 as Delta Air Lines restructured under Chapter 11 before emerging mid-2007.

"Airport systems," which ADL describes as two or more airports existing within a radius of 100 km. regardless of ownership or control status (e.g., Montreal Trudeau/Ottawa International in Canada or Guangzhou International/Shenzhen International/Hong Kong International in China), account for about half of world passenger traffic, yet they do not grow much faster than airports that are not in a "system." Four of the world's fastest-growing systems were in Eastern Europe, while most of the biggest contributors to traffic volume were in Asia, led by Guangzhou/Shenzhen/HK, a combination that added 43.3 million passengers between 2001 and 2007. The Dubai/Abu Dhabi/Sharjah "system" grew 16%, adding 26 million passengers over the same period.

Traffic by Region

North America remained the largest contributor to airport traffic with 1.59 billion passengers (1.49 billion in the US and 99.8 million in Canada), representing a 32.5% share of the world. Compared to 2006, passenger traffic rose 3.4% in the US and 5.5% in Canada.

"US airports posted a good performance, certainly given the fact that the US economy grew modestly," Blondel notes. GDP growth was 2.2%, down from 3.4% in 2006 when US domestic enplanements rose a meager 0.3%. International tourist arrivals grew 4.7%, fostered by the favorable dollar exchange rate for foreign visitors (against a 0.5% rise in 2006), and Air Transport Assn. member airlines recorded a 4.9% gain in international traffic, maintaining the slowing trend of the prior years (5.4% in 2006, 9.4% in 2005 and 14% in 2004).
By contrast, domestic traffic was back to growth with a 3.2% increase versus a -0.2% decline in 2006. According to Blondel, this may be explained by the yield evolution. "Domestic fares were flat whereas international fares did go up."

Throughput at the primary or Intercontinental hubs recovered compared to 2005-06, when they suffered a 1.4% decrease in traffic, yet the 2.3% average increase kept them below the world average (Table 11). This was attributable to the continuing network rationalization undertaken by the major network carriers at several hubs. For example, CVG's 3.1% traffic loss is linked directly to Delta's capacity reductions and Minneapolis-St. Paul International's 1.3% loss resulted from Northwest Airlines' restructuring. Chicago O'Hare also posted a fractional traffic loss because it struggled with capacity issues. ATL did quite well, recording a 5.3% increase in passenger traffic, adding 4.9 million passengers, and JFK was the best-performing Intercontinental hub overall in North America reflecting JetBlue's growth and the buildup of Delta's international services. JFK has been North America's fastest-growing hub since 2001, posting a 63% lift in passenger traffic.

Charlotte Douglas International took the top spot as the region's fastest-growing Secondary hub, increasing its traffic by 3.7 million passengers or 12.4%, and Montreal International was the best Canadian performer (Table 12). CLT crossed the 30 million passenger threshold for the first time and ranks 30th in the world with 33.4 million.
Traffic growth at Secondary hubs and Regional platforms was boosted "by the strong recovery of domestic traffic, the dynamism of LCCs compared to full-service carriers that were still restructuring and the early effect of open skies agreements, with some airlines trying to develop direct international flights from those airports," Blondel summarizes, noting that a domestic LCC, Southwest Airlines, is now the world's largest carrier in terms of passengers (ATW, 7/08, p. 5).

The strong growth of US LCCs compared to their full-service competitors benefited Regional Platforms and large primary hubs (Table 13). Passenger throughput at Intercontinental hubs housing a based LCC rose 3%, above the average growth of 2.3% and well above the increase registered by their counterparts without a based LCC. JFK's 11.9% gain in passenger traffic corresponds to JetBlue's 15.2% lift in passengers carried.

While the effect of LCCs on primary hubs increased, the historic correlation between the growth of network airlines and of their hubs is weakening, according to Blondel (Table 14). "In 2007, the growth of the main North American hubs, Intercontinental as well as Secondary, was not closely linked to the traffic growth of the main network carriers based at these hubs," he concludes. But there are some exceptions: Air Canada, for example, posted a passenger increase of 3.1% last year and its hubs at Montreal and Toronto-Pearson saw their passenger throughput rise by 2.4%. In contrast, American Airlines recorded no gain in passengers carried last year though its hubs at Dallas/Fort Worth, Chicago O'Hare and Miami yet MIA added 1.2 million passengers. Overall, Intercontinental hubs handled 34% of North American passenger traffic in 2007 and Secondary hubs 23%. Regional airports processed 679 million, representing 43% of the region's total.

Europe

In Europe, regional airports handled more than half (55%) of the total passenger traffic and Intercontinental hubs accounted for 24%. With an overall 6.3% growth, Western Europe exceeded the world average and the 6.1% growth rate achieved in 2006 when it hosted special events such as the FIFA World Football Cup and the Torino Winter Olympic Games. Regional Platforms "benefited from the dynamism of regional transport and no-frills operators," Blondel says, as they increased their passenger throughput by 6.7%, whereas hubs showed a below-region average growth rate (Table 15).
European Low Fares Airline Assn. member airlines transported 120.7 million passengers in 2007, a 14% year-on-year increase. European regionals carried 7.5% more passengers, according to the European Regions Airline Assn., and the major network carriers grew 4.1% at a pace close to that of the prior years (4.5% in 2006 and 4.7% 2005).

Regional Platforms, however, were not the only airports in Western Europe to expand owing to the continuing ascent of LCCs. "The 'low-cost carrier' effect is no longer true for Regional Platforms as a group; no-frills operators are now developing larger hubs where they are looking for additional volumes," Bondel comments, citing easyJet at CDG and Milan Malpensa and Ryanair and U2 at Barajas.
Intercontinental hubs that host based LCCs grew on average five times faster than their counterparts without based LCCs (Table 16). On the other hand, Regional Platforms with based LCCs did not grow significantly faster than those without based LCCs, confirming a trend already observable last year, according to ADL. Moreover, the low-cost effect seemed to weaken in particular at regional airports that host bases of more than one LCC (Table 17).

Madrid once again enjoyed the strongest performance among Europe's Intercontinental hubs and crossed the 50 million threshold for the first time, despite the failure of Air Madrid (Table 18). With 52.1 million passengers last year, it overtook Amsterdam Schiphol, which posted 3.7% growth to 47.8 million, as Europe's fourth-largest major hub after Heathrow, CDG and Frankfurt. The traditional "Big Four" all posted below-average growth: LHR and FRA suffered from capacity shortages and AMS from environmental restrictions. Heathrow had the least growth and once again was the only European platform to appear among the Top 10 worst-performing Intercontinental hubs. Munich was the region's second-fastest-growing Intercontinental hub despite the downsizing of Germanwings' operations there.

Turkish Airlines, Swiss International Air Lines, Lufthansa, British Airways and SAS strongly supported their hubs' traffic; nonetheless, several European hubs witnessed a "disconnection" from their home carriers (Table 19). MAD, for example, grew at an impressive 13.8% despite Iberia's negative passenger growth of 3.4%; Rome Fiumicino and Milan Malpensa grew at a multiple rate of Alitalia.

By country, Spain, Italy, Germany and Turkey were the biggest contributors to Western Europe's traffic growth (Table 20). Together they accounted for 56% of the 84.5 million additional travelers through the continent's airports last year. Passenger traffic developed tremendously in 12 EU accession countries owing to their entry into the bloc: They recorded a CAGR of 14.9% for the 2004-07period. CAGR for the EU's 15 older members was 5.8%, and the average for the whole of the EU was 6.4%. Airports in the EU15, however, added 184.2 million new passengers in 2004-07 while the 12 new entrants added just 24.8 million, of which Poland contributed 9.7 million.

Moscow Domodedovo enjoyed the greatest incremental passenger growth among Regional platforms that handle more than 1 million passengers as it recorded 3.4 million additional passengers in 2007. Antalya was second with 3.1 million new passengers. Russia's main airports posted a strong 18.9% traffic growth in 2007. Domestic travel accounted for half of all passengers, followed by Western Europe and Northeast Asia (Table 21). Turkey registered an impressive 13.4% growth to 64.2 million passengers, marked by the continuous expansion of Istanbul Ataturk and AYT (Table 22). Growth was driven mainly by domestic traffic.

Asia/Pacific

Airport traffic in the Asia/Pacific region reached high levels again, up 9.5% following a robust 9.7% growth in 2006. China and India continued to pull demand with a 70% share of the region's traffic volume increase in 2007 (Table 23). According to ADL, China's airports handled some 395.4 million passengers, up 16.7%. This translates into an additional 56.6 million passengers compared to 2006. China accounted for 54% of the region's growth or 17% of the world growth.

Throughput at Indian airports rose 19.9% to 97.6 million whereas traffic in the region's second-largest market, Japan, increased just 0.8% to 200.4 million owing to continued route and capacity restructuring at Japan Airlines and ANA. New Zealand's airports reversed the traffic loss recorded in 2006, growing 6.3% last year, and Australia's airport traffic climbed 5.7% to 101.6 million. Vietnam and the Philippines recorded significant growth rates, up 25.8% and 20.4% respectively.

"Domestic markets are fueling country and regional growth," Blondel says. "The strong economic development, particularly in China and India, with an emerging middle and upper class has really stimulated air traffic demand. The growth of international tourism, up 10.5% versus a worldwide average of 6.1%, also had an impact and sustained the primary hubs' growth."

Domestic traffic accounted for 54% of China's total growth last year. Travel to Europe contributed only 5% and North America 4% (Table 24). In India, the imbalance between domestic and international travel was even more pronounced; domestic traffic accounted for 96% of the growth in passenger throughput in 2007 (Table 25). In Vietnam, 63% of the 3.9 million additional passengers last year flew within the country whereas in Indonesia domestic travel soared 118%, compensating for the decrease in traffic to/from Northeast Asia and Oceania.

Low-Cost Effect

The rapid development of LCCs and emergence of new entrants competing with traditional national flag carriers fostered mainly domestic growth, although it also stimulated international traffic. Paradoxically, Regional Platforms and Secondary hubs with a based LCC grew more slowly than their counterparts with no LCC base. Low-cost airlines supported the growth of Delhi, Mumbai, Sydney and Kuala Lumpur.

Blondel believes low-cost stimulation is less visible in Asia, where LCCs and new entrants in general usually share the same airports with incumbent legacy carriers and there are few exclusively low-cost airfields (Table 26). He adds: "In China, national airlines are still pulling growth whereas the rest of Asia is pulled by new entrants." The growth of most of the region's main hubs was not pulled by the main carrier with the exception of Qantas and China Southern Airlines (Table 27).

Regional platforms grew the fastest (Table 28), outpacing Intercontinental hubs, which took the lead in prior years. As a matter of fact, Asian hubs no longer dominate the world scene in terms of traffic growth. Only threeNew Baiyun in Guangzhou, BOM and DELare included in the Top 10 fastest-growing Intercontinental hubs compared to six in 2006. Beijing Capital International and Pudong in Shanghai no longer are in the Top 10, although their 2007 passenger growth10% and 8% respectivelyis still impressive considering the large base on which that growth was achieved. PEK added 5.1 million passengers last year, pushing its total throughout to 53.6 million.
It now ranks No. 8 in ACI's list of the world's busiest airports, surpassing JFK, and most likely will pass FRA this year.

Middle East

Growth of passenger throughput at airports in the Middle East was marked by the continuous ramp-up of Dubai International, which remained by far the region's largest airport (Table 29). It handled 4.7 million additional passengers last year compared to 2006 and added 20 million in the last six years, accounting for 40% of the region's growth between 2001 and 2007 (Table 30). Other leaders in this six-year period are Sharjah owing to the rapid expansion of based LCC Air Arabia and Doha, which grew an impressive 280% in large part on the wings of Qatar Airways. DOH posted a higher relative growth than DXB last year, as did Abu Dhabi. As previously mentioned, all three feature in the Top 10 fastest-growing Intercontinental hubs.

"The Middle East now seems to be in order of battle as each of the main airports is now linked to a main airline: DXB/Emirates, Oman/Oman Air, Abu Dhabi/Etihad, Bahrain/Gulf Air, Doha/Qatar Airways," Blondel observes. "The battle between the Middle Eastern hubs and between Middle Eastern and European and North American hubs will be fierce. Today DXB, DOH and AUH are leading the race for volume and growth but Saudi Arabia airports recovered last year, benefiting from Saudi Arabian Airlines' restructuring. 2008 will be a year of intense competition," he sums up.

South Africa, Egypt and Morocco have been the strongest contributors to growth in Africa since 2001, accounting for 64% of the region's growth in absolute terms (Table 31). Passenger throughput at airports in Egypt rose 14.8% to 28 million last year on the back of flourishing tourism. Moroccan airports enjoyed a 16.5% increase. Cairo, Egypt's largest, posted a 16.7% gain and EgyptAir's recent entry into Star Alliance will have a positive effect on growth. Hurghada on the Red Sea and Sharm El Sheikh at the tip of the Sinai Peninsula boosted passenger volumes 14.1% and 10.2% to 5.5 and 5.6 million passengers respectively.

Tunisian airports competed against Morocco and other Mediterranean countries to attract leisure traffic and tourism: Tunis posted a 7.7% increase, Djerba off the coast of Tunisia rose 5.4% and Monastir 1.9%.

Latin Dynamism Latin America was dynamic and posted an 8% rise in passenger traffic, but that came mainly from airports in two countries, Mexico and Brazil, that accounted for 62% of the increase (Table 32). Brazil's Sao Paulo-Guarulhos International was the only Latin American airport to appear among the 10 fastest-growing Intercontinental hubs with a gain of 13% to 18.8 million passengers. Last summer, following the runway excursion accident involving a TAM A320 at Sao Paulo's close-in Congonhas, the government imposed extensive flight restrictions that led to a significant amount of traffic being diverted to Guarulhos, which may help to explain its strong performance. It also likely reflects the international ramp-up of TAM and Gol/Varig's continuing growth.

Elsewhere, Mexico's airports recovered from the damage caused by Hurricane Wilma as they posted a robust 15.8% growth last year, twice the increase reported in 2006. The rise in domestic traffic was supported by the continuing expansion of LCCs such as Avolar, Viva Aerobus and Alma, which now have an estimated 40% market share. Passenger throughput was equally marked by the hike in international arrivals from the US and Canada.

Chile experienced strong growth, adding 2.5 million passengers. ADL cited 5% GDP growth and the arrival of Gol into the market with a 7% share. Responding to the challenge of LCCs, LAN introduced lower fares while Chile also attracted increased tourism from Brazil and Argentina.