Meeting demand

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ADEL ALI: Air Arabia’s CEO says the industry needs to invest today in the infrastructure to meet the demands of tomorrow.

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AIR ARABIA: The airline’s CEO says too many Middle East airports are underdeveloped.

Are secondary airports needed in the Middle East?

The need for new airports, especially secondary airports and those catering to low-cost carriers has never been greater, according to Air Arabia CEO Adel Ali.

Speaking at a conference earlier in the year in Dubai, Ali said that too many Middle East airports were underdeveloped or overly congested. He claimed the industry needed to invest today in the infrastructure to meet the demands of tomorrow.

Is it the case that secondary airports are vital to sustaining the industry's growth or are the expansion projects already underway in the region enough to cater for demand?

If we take Europe as a prime example (for that is where most of the secondary airports have materialised during the last ten years) we see that such airports, which typically, sometimes exclusively, host low cost carriers (LCCs) have often been the only airports experiencing significant growth, especially in the aftermath of the 9/11 terrorist attacks.

And often that growth has been dramatic, with gains of even 50% or more in a single year, albeit often from a small base.

In some cases these airports were previously moribund, municipally operated facilities; in others (and quite frequently), they have been conversions from military use.

In the UK, while many of the big city airports hosting legacy airlines (e.g. at London, Manchester, Birmingham) stagnated, new or transformed small airports catering to the LCCs emerged in or near cities like Liverpool, Sheffield and Glasgow.

Liverpool's John Lennon Airport is an excellent example. Successive public and public-private ownership over almost 70 years had failed to deliver a profitable airport that provided even basic services for local residents and visitors.

A new, private owner since 1998, part of a large property development company, identified a low cost niche in the market that the closest major airport (Manchester) was failing to cater for, and identified an airline to fill the gap-Easyjet, which was seeking a northern England base.

Subsequently its rival, Ryanair was enticed to expand its own operations, to the extent that Ryanair now offers more than twice as many routes (46) as Easyjet does.

There is little route overlap, while at Manchester, which has belatedly raised its game in the LCC segment, there are up to four carriers vying for traffic to the southern Spanish beach resorts and cities for example.

Liverpool grew from just 500,000 passengers a year in the late 1990s to almost 5.5 million last year and by 2020, infrastructure investment will have reached US$1,120 million. It is but one example of such dramatic growth at secondary regional airports in Europe.

But the owners took some serious risks. Even now the airport is not profitable, mainly because of the huge infrastructure investment that was required, although it may make a small profit this year.

Doncaster-Sheffield Airport, a military conversion that is in the same corporate stable, and a similar type of airport, is losing money and there are fears for its future.

The critical economic factors at Liverpool were, the ‘propensity to fly' in the northwest England region, second only to that in the southeast (London); the fact that, because of traffic congestion in the southeast area, airlines were seeking to open new routes in the regions, away from London and the support (financial and operationally) of the parent company.

Another excellent example of parent company support is at Frankfurt Hahn Airport, also another military conversion, which is majority-owned by Fraport, and which is also yet to make a net profit, after ten years of trying.

The risk factors were, would passengers be prepared to by-pass their own ‘local' airport in order to travel to Liverpool, which was not easily accessible by personal vehicle or public transport?; would the ultimate determinant be the low cost of the ticket (actual or perceived)?; could an airport be developed solely by one business segment, i.e. LCCs? Should we not hedge our bets by encouraging legacy airlines as well?

In Liverpool's case (and this is also true at Hahn), associating the airport with one segment only proved to be a successful strategy. Airline passengers from well beyond its anticipated catchment area soon began to choose it automatically for intra-European leisure and VFR flights, at the expense of its rivals.

Soon, sufficient mass was built up that flights could be introduced where there was known business segment demand and the management was aided by the entry into the European Union of a raft of new member states in 2004 and 2007.

This immediately opened up opportunities for the incumbent airlines to provide services to émigrés, when they made their arrival flight and also when they returned home (frequently) to visit their families.

And each new air service reinforced the message that Liverpool is no longer merely an ‘alternative' airport.

Of all these factors though, the most important one is the mentality of British nationals towards low prices. For decades, perhaps generations, the British have taught themselves that ‘trade price' is to be sought after; quality is a secondary consideration.

Once potential passengers learned that the accepted airline price leaders operated at Liverpool they soon made a beeline for it, no matter how far they had to travel, or how many other airports they passed en route.

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