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Air Europa Part 2: European hub airports' connectivity - how do they compare with Dubai?

Part 1 of this report reviewed comments by Javier Hidalgo, CEO of Air Europa's parent group Globalia that its Madrid hub could become as significant a hub as Dubai - a "hub like Dubai".

In this case however its main role would be to link Latin America with Europe. Latin America is Air Europa's most important source of revenue and growth and parent Globalia has a large hotel and tourism businesses for which it would seek to stimulate demand, capturing some of the transit traffic as it passes through Spain.

In Part 2 this report assesses and classifies the connectivity of Europe's main hubs and how they compare with Dubai.

For Part 1 of this report, please see Air Europa's parent Globalia aims for Madrid Airport to become a hub "like Dubai"

Europe's hub airports divide into three broad categories

For many, the phrase "a hub like Dubai" is likely to be interpreted as meaning a hub with extensive connectivity to all regions of the world.

This prompts an analysis of Europe's hub airports with respect to the number of destinations that they serve outside Europe, as illustrated in the chart below.

Ranked by the number of destinations outside Europe, they range from Helsinki, with 19, to Paris CDG, with 135 (week of 21-Aug-2017, source: OAG). These European hub airports group themselves fairly neatly into three categories, arranged almost (but not entirely) according to their ranking.

The first category can be called European niche hubs; the second category is European middle sized hubs, and the third is the grouping European global hubs.

European hub airports: number of destinations outside Europe, week of 21-Aug-2017

European niche hubs: geographically focused connectivity

The first category, European niche hubs, includes those located on Europe's periphery, whose location leads to a sharp geographical focus in their connectivity with regions outside Europe. Their intercontinental networks are mainly focused on only one or two other regions.

Most (but not all) of these airports are based in smaller countries, but they use their connectivity niche to generate higher traffic levels than would otherwise be possible based on O&D demand alone.

European niche hubs: number of destinations outside Europe by region, week of 21-Aug-2017

This category includes Helsinki, Reykjavik, Dublin, Lisbon and Moscow Sheremetyevo.

Helsinki is strongly focused on Asia Pacific (74% of its destinations outside Europe; Reykjavik on North America (100%); Dublin on North America (79%); Moscow Sheremetyevo on Asia Pacific (69%) and Lisbon on both Latin America (35%) and Africa (40%).

Brussels Airport can also be included in this category, although it is unlike the others in that it is not peripherally located in Europe and its location is not the main reason behind its particular geographic connectivity focus. It is included in this category because it has a sharp geographical focus (Africa, 59% of its destinations outside Europe), and because it does not fit in the other two categories.

European niche hubs: proportion of destinations outside Europe by region, week of 21-Aug-2017

 

Africa

Asia Pacific

Latin America

Middle East

North America

Helsinki

0%

74%

0%

11%

16%

Reykjavik

0%

0%

0%

0%

100%

Dublin

4%

0%

0%

17%

79%

Moscow SVO

7%

69%

4%

11%

9%

Lisbon

40%

2%

35%

5%

19%

Brussels

59%

7%

9%

9%

16%

European middle sized hubs: broadly based connectivity

The second category, European middle sized hub airports, includes those whose connectivity outside Europe is broadly based across three, four or five other regions, but which are smaller than the global hubs.

European middle sized hub airports: number of destinations outside Europe by region, week of 21-Aug-2017

This category includes Copenhagen, Zurich, Munich, Rome Fiumicino and Madrid.

Each one of them has at least 10% of its ex Europe destinations in four or five other regions. Three of them have one region that accounts for more than one third of their ex Europe destinations: Copenhagen (40% North America), Zurich (34% North America) and Madrid (41% Latin America).

Madrid is the least geographically diversified among this category, in terms of its connectivity with other regions.

Its 41% dependence on its main region, Latin America, is greater than any equivalent figure for the other airports in the category, and it has two regions that account for only 10% (Asia Pacific and Middle East). With this focus on one region, Madrid is unlike Dubai.

European middle sized hub airports: proportion of destinations outside Europe by region, week of 21-Aug-2017

 

Africa

Asia Pacific

Latin America

Middle East

North America

Copenhagen

17%

17%

0%

26%

40%

Zurich

19%

19%

13%

15%

34%

Munich

24%

15%

8%

23%

31%

Rome FCO

22%

22%

16%

17%

22%

Madrid

19%

10%

41%

10%

20%

European global hubs

The third category, European global hub airports, contains the continent's five largest airports.

As with the second category, their connectivity outside Europe is broadly based across the other regions of the world.

European global hub airports: number of destinations outside Europe by region, week of 21-Aug-2017

This category consists of the four big Western European hubs – namely Amsterdam, London Heathrow, Frankfurt and Paris Charles de Gaulle, together with Istanbul Ataturk.

Each one of them has at least 10% of its ex Europe destinations in four or five other regions (apart from Istanbul, which has only three regions accounting for more than 10%).

Three of them have one region that accounts for more than one third of their ex Europe destinations, but only just: London Heathrow (35% North America), Istanbul Ataturk (36% Africa) and Paris CDG (Africa 41%, skewed by a high number of destinations in North Africa, most of which are primarily point to point leisure focused).

Istanbul is a little different from the other four in that its connectivity is more overtly based on sixth freedom transfer traffic between the regions of the world (although this is also material to the other four airports, particularly Frankfurt and Amsterdam).

Istanbul is also the only one that specifically bases this connectivity on its geographic location. In this respect, Istanbul is like Dubai.

European global hub airports: proportion of destinations outside Europe by region, week of 21-Aug-2017

 

Africa

Asia Pacific

Latin America

Middle East

North America

Amsterdam

27%

21%

19%

8%

24%

London LHR

14%

30%

7%

13%

35%

Frankfurt

21%

24%

14%

12%

28%

Paris CDG

41%

19%

13%

9%

19%

Istanbul IST

36%

26%

4%

25%

9%

Dubai: a niche hub grown very large

Dubai International Airport has 179 destinations outside its home region of the Middle East. This is more than the highest equivalent figure for any European airport, namely Paris CDG, which has 135 destinations outside Europe.

However, in spite of Dubai's image as a hub connecting all regions to all regions, its connectivity is not quite so diversified as might be assumed by some.

There are only three regions that account for more than 10% of its destinations outside its home region of the Middle East and it has two regions accounting for more than one third: Asia Pacific (41%) and Europe (34%). Its other strong region is Africa (17%). Dubai currently has only 7% of its destinations in North America and 1% in Latin America.

This pattern of regional connectivity reflects its geography. In a sense, Dubai is just a geographical niche hub grown very large.

Dubai International Airport: number of destinations outside Middle East by region, week of 21-Aug-2017

'A hub like Dubai' also has another interpretation

This analysis has identified three broad categories of hub airport in Europe. In ascending order of the number of destinations served outside Europe, the categories are niche hubs, middle sized hubs and global hubs. The boundaries between categories can be blurred and there are, of course, differences within each category.

Madrid, the main hub of Air Europa, has been identified in this analysis as a middle sized hub, but it also strongly displays characteristics of the niche hubs, where geography focuses the airport on one main region for connectivity. In that respect, Madrid is not like Dubai, and seems unlikely to become so.

However, rather than making claims for Madrid to evolve into a Dubai-like global hub (or Air Europa's ability to drive such an evolution from its position as Madrid's number two airline), Mr Hidalgo was really talking about Dubai's success in promoting itself as a destination in its own right.

Connecting hubs also need O&D demand

Transfer traffic is the key to Dubai International Airport's size, but Dubai O&D traffic is also very important – much more so than would be expected from the population of Dubai.

The reasons for the strength of its O&D demand are complex. The very high proportion of expats in the Dubai population is certainly a major part of it (a factor not replicated in Madrid to anything like the same extent); but so too is inbound tourism.

In a number of the European niche hubs that have a high level of transfer traffic, the airline, airport and public bodies have worked to promote inbound tourism in order to augment O&D demand.

This is positive for the local economy and positive for the airline, since O&D traffic is typically higher yield than transfer traffic and helps to sustain a wider range of routes.

For example, Finnair, which also owns a tourism business, markets the Nordic region in Asia and offers a stopover product to encourage connecting passengers to stay in Helsinki, Finland, or the wide region. TAP launched its Portugal Stopover in summer 2016 to encourage long haul passengers who connect in Lisbon or Porto to stop for up to three days.

For Icelandair, which includes tourism services and hotels in the group, 38% of passengers carried were inbound visitors to Iceland in 2016 (50% were transfer passengers between Europe and North America).

See related reports:

Mr Hidalgo's comments suggest a big vision

Madrid is already an important destination in its own right, but inbound tourism is skewed heavily towards European visitors. In addition to Air Europa, the Globalia Group also owns hotels and tour operator businesses, which should be an asset in helping to promote stopovers in Madrid to Latin American passengers (although it does not own hotels in Madrid).

Mr Hidalgo made the comments about creating a hub like Dubai while he was on a tour of Latin America looking for opportunities to expand the group's hotel and tourist business there (he also expressed interest in Brazilian airport privatisation). Globalia's expansion plans in Latin America are aimed more at driving outbound tourism from Spain.

However, Mr Hidalgo's Dubai analogy suggests that he also aims to stimulate inbound tourism from Latin America to Madrid. Fulfilling that aim to a significant degree still seems distant, but nothing was ever achieved without lofty ambition and fresh thinking. As already illustrated by Air Europa's accord with Ryanair, Globalia's new CEO has both.

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