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Internet: Contact: GERMAN AIRPORT PERFORMANCE GERMAN AVIATION BENCHMARKING.

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Presentation on theme: "Internet: Contact: GERMAN AIRPORT PERFORMANCE GERMAN AVIATION BENCHMARKING."— Presentation transcript:

1 Internet: www.gap-projekt.dewww.gap-projekt.de Contact: info@gap-projekt.deinfo@gap-projekt.de GERMAN AIRPORT PERFORMANCE GERMAN AVIATION BENCHMARKING partner/sponsor: How to break the vicious circle? Monopoly bidding for public service obligation route networks in Norway Branko Bubalo GAP Research Project branko.bubalo@googlemail.com GAB Final Project Meeting Berlin, June 20 th 2012 GAB Meeting Berlin – 20.06.2012 – Branko BubaloPage 1

2 GERMAN AIRPORT PERFORMANCE GERMAN AVIATION BENCHMARKING Contents 1.Introduction 2.Problem description and available data 3.Set up of the matrices 4.Iterations and results for case study on Finnmark and North-Troms Network 5.Conclusions and further research Page 2GAB Meeting Berlin – 20.06.2012 – Branko Bubalo

3 GERMAN AIRPORT PERFORMANCE GERMAN AVIATION BENCHMARKING Introduction Norway has the largest PSO network in Europe The Norwegian Ministry spends increasingly more subsidies for PSO routes each year (More than it receives from Dividends) For the majority of the tenders there is only one bidder (with two minor bidders for individual city-pairs) Tender for 16 separate Networks There are two main limitations for competition: –Mostly STOL runways (<1200 meters) –Demanded level-of-service in the tender documents (minimum aircraft size/number of seats and pressurized cabin) Page 3GAB Meeting Berlin – 20.06.2012 – Branko Bubalo

4 GERMAN AIRPORT PERFORMANCE GERMAN AVIATION BENCHMARKING Motivation Which routes require the most subsidies (per passenger)? What causes increasing subsidies (with stable demand)? Are the compensations/subsidies justified and how do the airline costs compare with other carriers? Page 4GAB Meeting Berlin – 20.06.2012 – Branko Bubalo Operating YearYear-on-Year change 2007- 2008+7.6% 2009+15.7% 2010+11.4% 2011+5.5% Increase 2007 to 2011+46.1 %

5 GERMAN AIRPORT PERFORMANCE GERMAN AVIATION BENCHMARKING Prerequisites Page 5GAB Meeting Berlin – 20.06.2012 – Branko Bubalo Tender documents with historic data on O/D passengers and revenues Annual subsidy paid for each PSO network segment -> Objective: Calculating operating costs and subsidies by city-pair Calculating average ticket fare

6 GERMAN AIRPORT PERFORMANCE GERMAN AVIATION BENCHMARKING Set up of the Origin-Destination Matrices Given: PAX-[#]**[#]: n x n-Matrix Revenue- [#] Key:Km-Distances-[#] Formulas: Average Fare = Revenue- [#] / PAX-[#] Revenue-Passenger Kilometer (RPK)-[#] = PAX-[#] x Km-Distances-[#] Revenue per RPK-[#] (RRPK; Yield) = Revenue- [#] / RPK-[#] Profit (“-”) or Subsidy (“+”) per RPK = Cost per RPK (CRPK) - RRPK Page 6GAB Meeting Berlin – 20.06.2012 – Branko Bubalo

7 GERMAN AIRPORT PERFORMANCE GERMAN AVIATION BENCHMARKING Overview Finnmark and North-Troms PSO Network Page 7 Distances in Kilometers TO FROMALFBJFBVGHFTHVGHAAKKNMEHSOJTOSVAWVDS ALF 246232791457125220395174293246 BJF246 3822114627998823414185860 BVG23238 1961162561314632540094 HFT79221196 8661257156143211275240 HVG14514611686 14720673226297204180 HAA7127925661147 30421789151331292 KKN25298131257206304 1653444238338 MEH203824615673217165 292365140131 SOJ9534132514322689344292 79388341 TOS17441840021129715142336579 466420 VAW293589427520433183140388466 55 VDS24660942401802923813134142055 1/3 of the Total Subsidies Around 135.000 PAX p.a. Average Fare about 490 NOK (65 Euro) 1,500 NOK Subsidy per PAX (200 Euro)

8 GERMAN AIRPORT PERFORMANCE GERMAN AVIATION BENCHMARKING Subsidies per route for two Scenarios Page 8GAB Meeting Berlin – 20.06.2012 – Branko Bubalo Profit/Loss per Route in NOK (thousands) April 2008 – March 2009 Route areas 1 and 2 TO FROMALFBJFBVGHFTHVGHAAKKNMEHSOJTOSVAWVDSTotalt ALF -633-618-93 -8,258 -9 -3-26,574 -36187 BJF -5-4,473-57 -1,553-65 -1,213-4-832 -8200 BVG-39-12 -1,963 -1,087-9 -109-3-964 -4184 HFT-1,937-1,626-1,426 -3,849-1,349-4,652-6,011-10 -62-14,105 -35027 HVG -110-4,145 -525-67 -30 -920 -5698 HAA-176-30-23-735 -80 -2,458 -125 -3627 KKN-5,488-2,240-1,327-6,978-864 -2,133-78 -2,915-3,121 -25146 MEH-528-38-15-8,158-133 -441 -7-962 -1,108 -11390 SOJ2-21-8-982 -116-101 -3,810 -201 -5241 TOS -4,866-3,255 -11-1,471 -4,126-4,313 -12 -18053 VAW-2,136-28-24-2,904 -2,670 -138 -7900 VDS-20,017-434-175-12,334-916 -2,537-1,735-59 -551 -38758 Total -30321-9940-6875-42764-5830-2820-21918-14248-4475-8582-3550-48087-199410 Profit/Loss per Route in NOK (thousands) April 2008 – March 2009 Route areas 1 and 2 TO FROMALFBJFBVGHFTHVGHAAKKNMEHSOJTOSVAWVDSTotalt ALF -116-112-2 -731 0 0-3,562 -4524 BJF 1-597-5 115-6 -10241 -618 BVG-80 -338 -2 -90-38 -396 HFT-156-261-232 695-75-536-113 -9-1,864 -3247 HVG 2636 -78-6 -5 -115 -204 HAA2802-22 10 40 -2 -24 KKN-57514333-821-62 -180-9 411,303 -1647 MEH-84-32-261-3 -61 -90 -85 -589 SOJ911-48 -20 276 -21 -109 TOS -575-346 -3-90 -295182 -3 -1310 VAW-35191-553 10 17 -904 VDS-2,09417-11-1,739-63 953-221-10 15 -4137 Total -3268-956-701-4382-135-165-1429-841-21-113-12-5687-17710 Scenario I: Operating costs of 4 NOK per RPK (0.53 EURO per RPK) Result in 17.7 million Kroners (2.35 million Euro) in subsidies. Scenario II: Operating costs of 13.6 NOK per RPK (1.81 EURO per RPK) Result in 199.4 million Kroners (26.5 million Euro) in subsidies.

9 GERMAN AIRPORT PERFORMANCE GERMAN AVIATION BENCHMARKING Results for Finnmark and North-Troms PSO Network Page 9GAB Meeting Berlin – 20.06.2012 – Branko Bubalo 2010WideroeBlue1SASNorwegianFed Ex Southwest AirlinesRyanair CRPK in NOK4.021.051.400.611.260.540.30 (Source: Own Illustration)

10 GERMAN AIRPORT PERFORMANCE GERMAN AVIATION BENCHMARKING Conclusions Wideroe may have considerably lower operating expenses, as what is stated in the tender application. Since Wideroe is the sole bidder, because of its unique fleet of Dash-8 aircraft, it could claim whatever costs. The current tender rules have no mechanism to deal with monopoly bidders and abuse. -> The Essential Air Services (EAS) system in the US awards new carriers with the tender, in cases where this airline can provide the service with lower or without subsidies, even during the tender period (see Isabel Santana 2007). -> More research needed in direct comparisons of the two systems, the legal background and the required network subsidies. Page 10GAB Meeting Berlin – 20.06.2012 – Branko Bubalo

11 GERMAN AIRPORT PERFORMANCE GERMAN AVIATION BENCHMARKING Thank you for your attention! Questions? Suggestions and Comments are welcome. branko.bubalo@googlemail.com www.gap-projekt.de Page 11GAB Meeting Berlin – 20.06.2012 – Branko Bubalo


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