1. Current Status of the Airport / Airline Industry
Dr. Richard de Neufville
Professor of Engineering Systems and
Civil and Environmental Engineering
Massachusetts Institute of Technology
Airport Systems Planning & Design / RdN 

2. Current Status of the Air Transport Industry
Objective: To define
current situation and major new factors
Airline and Airport Rankings
Major Trends
Shrinking, Bankruptcy of Legacy Airlines
Losses in Transfer Hubs: St Louis, Pittsburgh
Rise of Innovative Carriers: Southwest, Fedex
And Secondary A/Ps: Providence, Ft Lauderdale
Demand for Low Cost Buildings at Airports
Airport Systems Planning & Design / RdN 

3. Airport Systems Planning & Design / RdN 
Major Recent Events
Disappearance of Major Airlines
TWA, Swissair, Sabena
Mergers
JAL and JAS (2002) ; Air France + KLM (2004)
America West + US Airways; Lufthansa + Swiss (2005)
United +bmi (UK)?? + Aloha???; Gol + Varig (2007)
Major Bankruptcies… and recoveries
United, US Airways, Delta, Air Canada, Northwest
Surge by Low-Cost, Chinese, Cargo Carriers
Air Tran, Ryanair, easyjet, AirAsia
Cathay Pacific, China Airlines, EVA
Airport Systems Planning & Design / RdN 

4. Airport Systems Planning & Design / RdN 
Electronic Ticketing
Big Savings – up to $3 billion for air transport industry
Less staff, less space, less rent…
$1 per E ticket vs. ~$10 per paper ticket
Status
>70 % of all tickets worldwide (Dec. 2006)
Over 86% in Canada
~ 83% in UK, >1/2 in Asia Pacific
Some airlines at 100%: Southwest, Ryanair
Source: IATA WATS
Airport Systems Planning & Design / RdN 

5. Bar Coded boarding passes Common Use Kiosks
Bar Coding
Estimated savings: $3.50 per ticket, or about $2.5 Billion/year for 100% use
IATA Goal: 100% by 2010
Common Use Kiosks
Estimated Savings $ 2.50 per check in
49 airports had CUSS by end of 2006
Source: IATA WATS
Airport Systems Planning & Design / RdN 

6. Principal drivers of air transportation industry
Long-term annual decrease in air fares:
Driving comparable annual worldwide traffic growth – aircraft size, engines, composite materials
Low-cost carriers
Southwest, AirTran, Jet Blue, Westjet, Ryanair, easyjet, AirAsia
New business practices
Commercialization:
market economy management replaces… government ownership and economic regulation
Globalization:
transnational airline alliances and airport groups
Technical innovation:
e-commerce, RJs, satellite-based navigation
Airport Systems Planning & Design / RdN 

7. Annual Decrease in Air Fares
Source: IATA WATS
Airport Systems Planning & Design / RdN 

8. IATA Members’ Traffic, Revenues, Yield, and CPI
Source: IATA World Air Transport Statistics
Airport Systems Planning & Design / RdN 

9. Interpretation of Trends
Over past 13 years…
Yields (revenues/unit distance) have dropped about 20%
While inflation has risen about 50%
So: costs on a constant basis cut in half
Thus: traffic doubled
Implying price elasticity about -1.3 > -1.0
So total revenues grow as price drops
Airport Systems Planning & Design / RdN 

10. World Traffic, (Pax-Km x 109) World and IATA
Airport Systems Planning & Design / RdN 

11. Airport Systems Planning & Design / RdN 
Non-IATA Members
As of 2006, many airlines in the top 50 worldwide were not in IATA…
Southwest, Jetblue, AirTran, Spirit,
Westjet
Ryanair, easyjet
Frontier, Hawaiian, Skywest
Condor
Source: IATA WATS
Airport Systems Planning & Design / RdN 

12. Airport Systems Planning & Design / RdN 
Airports by millions of pax, 2006 (ACI data from IATA WATS; US- Bold, hubs- italics)
Airport Systems Planning & Design / RdN 

13. Airports by millions of pax, 2006
In 2006, airport traffic stagnated at many airports
San Francisco has lost a lot
Big increases in
New Hubs – such as Madrid, Philadelphia
Secondary airports – London/Stansted
Asia, especially China, Thailand and Dubai!
Thus, significant changes in ranking over last several years
Airport Systems Planning & Design / RdN 

14. Airport Systems Planning & Design / RdN 
Airports by millions of pax, 2006 (ACI data from IATA WATS; US- Bold, hubs- italics)
Airport Systems Planning & Design / RdN 

15. Changes in Transfer Hubs
Big changes in recent years
New Hubs
Big: Paris/de Gaulle, Amsterdam, Madrid
Medium: Dubai; London/Stansted, Munich
“Close” of old hubs
Pittsburgh (US Airways shrunk to Philadelphia)
St Louis (TWA merged out of existence)
Zurich (collapse of Swissair)
Airport Systems Planning & Design / RdN 

16. Current Major Airport Projects
Atlanta, Toronto Airport Makeovers
(Bangkok), Kobe Major New Airport
Osaka/Kansai; Tokyo/Haneda Runway landfills
Singapore Massive new Terminal
Shanghai/Pudong New Runway, Terminal
Paris/de Gaulle; DFW Pax Buildings, APM
London/HRW Terminal 5 ($8 billion)
Frankfurt A380 base (and T3?)
Madrid ; Miami/Intnatl Runway, Buildings
Doha (Qatar); Dubai Major Projects
Airport Systems Planning & Design / RdN 

17. Airline Rankings 2006 (Pax-Km, billions)
Source: IATA WATS
Airport Systems Planning & Design / RdN 

18. Airline Rankings 2006 (Passengers, millions)
Source: IATA WATS
Airport Systems Planning & Design / RdN 

19. Airline Rankings 2006 (Freight Tonne-Km, Billions)
Airport Systems Planning & Design / RdN 

20. Airline Rankings 2006 (Freight Tonne, millions)
Airport Systems Planning & Design / RdN 

21. Airport Systems Planning & Design / RdN 
Main Freight Airports
Sources:
ACI “Top 30 Airports” 2004
FAA CY 2005 Cargo Landings
Hubs in Blue.
Airport Systems Planning & Design / RdN 

22. Airline Market “Caps” Jan 07 (=price/share x shares) $ billions
Airport Systems Planning & Design / RdN 

23. Airline Market “Caps” Jan 07 (=price/share x shares) $ billions
Airport Systems Planning & Design / RdN 

24. Airport Market “Caps” (=price/share x shares)
Many airports are economically more powerful than airlines!
Airport Systems Planning & Design / RdN 

25. Airport Systems Planning & Design / RdN 
Airline Alliances
Star Alliance -- United, Lufthansa + Swiss, Air Canada, Thai, US Airways, ANA, Singapore, LOT, SAS, Air New Zealand, Thai, TAP, bmi, South African, Asiana, Austrian, Spanair, plus regionals
oneworld American, British, JAL,Aer Lingus, Finnair, Iberia, Qantas, Cathay Pacific, Lan Chile, Malev, Royal Jordanian
SkyTeam Air France + KLM, Alitalia, Czech, Korean, Continental, Delta, Northwest, Aeromexico, Aeroflot
Airport Systems Planning & Design / RdN 

26. Alliances’ Market Shares 2006
Airport Systems Planning & Design / RdN 

27. Airport Systems Planning & Design / RdN 
New Types of Airlines
Cargo Integrators
UPS, Fedex, DHL
Role of “Post Offices” ??
Low-Cost Carriers
Point-to-point: Southwest, Jetblue, Ryanair, Air Asia, Gol (Brazil)
“Network”: Easyjet, AirTran
Quasi-Network: Southwest??
The innovators are the most profitable and valuable airlines
Airport Systems Planning & Design / RdN 

28. Challenge to Traditional Network Carriers
Is their business model working?
Will people pay enough for convenience of
easy connection at hubs
big expensive passenger buildings
travel agents
If not, what will they do?
Squeeze out costs (wages, standards) and survive on a more modest scale?
Manage by having “cheap” partners
Delta -- Song; United -- Ted… (hasn’t worked)
Disappear? TWA, Sabena, Swissair…
Merge? KLM, America West, Japan AS…
Airport Systems Planning & Design / RdN 

29. Airline Seat-Mile Costs, 06 Q1
Source: US DOT, BTS,
Airport Systems Planning & Design / RdN 

30. Airline Seat-Mile Costs, 05
Source: US DOT, BTS,
Airport Systems Planning & Design / RdN 

31. Effect of Low-Cost Carriers
Market Share becoming dominant
US: About 45%
Europe: 12% + 20% charters = 1/3 of total
Inter-Asia: only 6% as of summer 2004
Real Yields have dropped by 1/3 in past decade
Source: IATA WATS and McKinsey and Co.
Airport Systems Planning & Design / RdN 

32. Southwest compared to Leading Domestic Competitors
Sources US FAA, Bureau of Transportation Statistics and Airfleets. net
Airport Systems Planning & Design / RdN 

33. Consequences for Traffic
Cheaper travel will increase traffic
Where will it go?
To traditional hubs of legacy majors?
To/from leisure locations and homes?
Yucatan, Malaga, Bali, etc
To secondary airports?
Miami/Ft. Lauderdale, Los Angeles/Ontario, London/Stansted, Frankfurt/Hahn, Rome/Ciampino, etc.
Airport customers likely to demand new locations, cheaper facilities
Airport Systems Planning & Design / RdN 

34. Consequences for Airports (1)
“Low cost airlines” are causing the development of “low cost airports”
Secondary airports: Boston/Providence, Miami/Fort Lauderdale, London/Luton
Inexpensive terminals, designed for new ways of handling passengers – such as Jetblue facility at New York/Kennedy
Compare Boston Delta and Jetblue facilities:
Pax per gate about 500,000 pax for Jetblue, about half for Delta
Airport Systems Planning & Design / RdN 

35. Consequences for Airports (2)
Struggle of “low cost” and “legacy” airlines extending to competition between “low cost” and traditional main airports
Boston/Providence vs. Boston/Logan
Miami/International vs Miami/Ft Lauderdale
London/Heathrow vs. London/Stansted
Bangkok/Suvarnabhumi vs. B/Don Muang
Airport Systems Planning & Design / RdN 

36. Airport Systems Planning & Design / RdN 
Bottom Line ...
The nature of the Airport Business is changing dramatically
Not clear that airport professionals fully recognize full implications
Strong professional tensions …
Some examples (not for publication)
Airport Systems Planning & Design / RdN 