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OTHER ARTICLES Last modified on June 4, 2012

Power shift

Airports are changing business strategies and the way their existing facilities are used to accommodate airline alliances, writes Ian Putzger.
The planned 2014 opening of Heathrow’s new Star Alliance terminal (T2), perhaps tells us all we need to know about airline alliances – they are here to stay and their influence on the way airports operate and do business is growing.

So much so, in fact, that an ever-increasing number of international hubs are either building dedicated new facilities for alliances or changing how they use their existing terminals to better accommodate them.

One such operator is Sydney Airport, which recently unveiled plans to create two alliance-based precincts, each of which would accommodate the entire operations of one of the airport’s major domestic airlines and its international partners, namely Qantas and Virgin Australia.

According to the airport, this will make better use of the existing facilities, provide for more gates and aircraft parking capacity and allow for future terminal expansion, without changing the existing operating restrictions.

It insists that passengers would enjoy faster connect times and more efficient airline and airport operations, while the airport would benefit from reduced turnaround times, dramatically lower towed runway crossings and a better environmental footprint through reduced aircraft emissions.

If it gets the blessing of all stakeholders, the new vision could be a reality by 2019.

Sydney’s vision reflects the growing heft of airline groups and alliances. At Singapore Changi, for example, alliance traffic accounted for some 56% of all passenger volume in 2011 and the figure is around 82% at Frankfurt, with Star (75%) leading the way ahead of SkyTeam (3%) and oneworld (4%).

Solomon Wong, executive vice president of consulting group InterVISTAS, notes that alliances command 77% to 80% of global traffic today.

And airline consolidation appears to have added another powerful impetus to the alliance momentum.

“We put a clause in our airline agreements to go ahead unilaterally on moves that would accommodate airline consolidation, and some six years later we are enacting that clause,” says Seattle-Tacoma’s aviation operations director, Michael Ehl.

“Continental Airlines has brought its ticket counter next to United’s, but the pair are going to move to the southern part of the airport within the coming 12 months, as the northern area is designated for the consolidation of the Alaska Airlines Group, which has shown strong growth. Concourse A in the southern section will host the members of the Star Alliance.”

In most cases, alliances’ efforts to exploit synergies are centred around better connectivity, observes Wong. He points to Munich as a successful example, where connection time has come down from 70 minutes in 2003 to 25 minutes today.

The airport authorities at San Francisco and Atlanta have tried to align spots for alliance partners where possible, but ultimately the timing of flights is determined at the other end of the route.

“It’s not about the spoke coming to Seattle; it’s about the hub in the home country,” remarks Ehl.

To minimise distances for passengers between flights, consolidation of alliance activities in specific areas is widely regarded as the best step. At Frankfurt, the Star Alliance is clustered in Terminal 1, while SkyTeam and oneworld are in separate halls in T2.

“Having alliance members together in one terminal is easier from an operations standpoint, so it was in our interest to make this happen and help maintain our status as a major transit hub,” says Fraport spokesman, Robert Payne.

At Tokyo Narita, the consolidation of Star Alliance members in one place in 2006 halved connection times for those carriers from 90 to 45 minutes, says Wong.

However, not everybody is enamoured with clustering airline groups. In Singapore, for example, a common terminal for alliance partners is not on the cards any time soon.

“In terms of terminal allocation, we currently don’t dedicate terminals for the respective alliances as we prefer to have the flexibility to allocate airlines to terminals in a manner that would spread capacity utilisation across all our terminals,” remarks Donald Tan, vice president for airline development of the Changi Airport Group (CAG).

“Notwithstanding this, Changi Airport has an efficient people mover system that facilitates transfers between Changi’s main terminals.”

And in some places bringing domestic flows into the picture adds a significant layer of complexity.

At San Francisco International Airport (SFO), for instance, the gateway had to develop a secure connector for Star Alliance passengers to move between the domestic terminal and the area in the international terminal occupied by United and its partners.

After transit distances for passengers, luggage is the next big alliance concern. Frankfurt has a central baggage system for all airlines. The system for the planned Terminal 3 will be linked to the existing set-up with a high-speed transfer system. According to Payne, the system allows for bags to be entered from any point.

“It’s a large investment, but if somebody changes teams, it does not really matter. The cost is challenging, but in the long run, it will enable future possibilities,” he says.

Compared to luggage system requirements, alliances’ interest in adjoining or common check-in areas is less pronounced, although some carriers have embraced it with apparent gusto.

At Hartsfield-Jackson Atlanta, Delta and its SkyTeam partners share ticket counters and a baggage system, reports Louis Miller, general manager of aviation.

Since international alliance members often have only a small number of flights out of the markets served by their regional partners, it would make perfect sense to share check-in facilities and costs.

On the other hand, brand recognition, particularly in the premium segments, puts a dampener on airlines’ willingness to hand over the check-in process to alliance partners, Wong says.

He has noted some interest in common check-in areas, but points out that there are reservations about sharing check-in staff. “It might be more beneficial to have a single Star kiosk, but I don’t see that ever happening,” he adds.

In light of the hue of their balance sheets, airlines might be tempted by the cost savings associated with operating shared lounges with their alliance partners, lest valued service elements are lost.

“When leases came up for renewal at SFO, airlines had the chance to hand back legacy lounges and consolidate, but not a single carrier availed itself of the opportunity,” says associate deputy airport director, Gary Franzella.

Frankfurt does not have any generic airline lounges. “Even in an alliance, individual branding is still important,” comments Payne.

Wong agrees that airlines readily admit passengers from their alliance partners into their lounges but they feel strongly about their own brand identity.

However, there are exceptions. At Hartsfield-Jackson, American and United do not have international flights and hence no lounges in the international area. These carriers have expressed interest in common lounges, Miller says.

To the immense frustration of some airport executives, figuring out what, exactly, airline alliances are after is hard to gauge, as the groups themselves rarely figure in the communication process.

“We work closely with all alliance members individually, but we would like a dialogue with Star Alliance representatives as well as the individual airlines,” says Ole Wieth Christensen, director of airline sales and route development at Copenhagen Airport.

He is surprised how slow alliances have been to leverage their joint muscle and by their lack of initiative. Neither with slot allocation nor with joint procurement or in the facility planning process has he seen any move from an alliance, as such.

“So far they have not really had an operational impact. We have not seen a co-ordinated approach from alliances,” he comments.

“This is not only a wasted opportunity for the alliances, it also makes it more difficult for the airport to maximise its potential and develop a better cost platform.”

Most airport executives report that their communication has been with individual airlines when it comes to day-to-day operational matters. For the most part, issues pertaining to alliances have been discussed with the respective group’s major carrier on site.

“If you have a large, dominant hub carrier, you expect that one to be the spokesman for the alliance,” admits SFO’s Franzella.

Copenhagen’s Christensen remarks: “We have a strategic partnership with SAS, we share our plans,” while Miller comments that Hartsfield-Jackson’s communication with the SkyTeam has been funnelled through Delta.

On top of the guesswork what might be welcome by a particular alliance, airports’ ability to include these groups in their strategic planning is hampered by question marks over the longer-term composition of an alliance.

Airport executives readily point to a number of carriers that have switched camps, such as Continental which switched from SkyTeam to the Star Alliance.

“There has been terminal hopping among airlines as alliances grow and airlines join groups. At one point we had quite a few airlines changing over in one big sweep, but it went well,” recalls Payne.

Like others, he stresses the need for a flexible set-up in order to adapt easily to changes in the carrier line-up and concomitant requests for modifications from the carrier in question.

“Most of the systems that airlines need to process the passengers are owned by the Airport Authority [Hong Kong]. They are common use facilities, through which we have the flexibility to accommodate the requests of airlines or alliances,” comments Rebecca Ho, head of corporate communications.

Seattle-Tacoma is headed in a similar direction. “We will rely more and more on common facilities,” says Ehl, adding that this is very important in the event of a break-up of an alliance.

While Changi’s Tan doesn’t favour allocating terminals to specific airlines, he is quick to point out that he does appreciate alliances and regards any shifts within alliances as a business opportunity for CAG.

“Commercial decisions such as changes in alliances create new opportunities for us to cultivate both existing and prospective airlines for traffic and network growth at Changi,” enthuses Tan.

“If such a situation arises, we will do what we can to try and capitalise on it.”

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