Just how efficient are Europe's hubs? December 1998

In the second of two articles on hubbing, Dr Nigel Dennis, senior research fellow at the University of Westminster’s Transport Studies Group, looks at the prospects for European hubs.

While all the US Majors have built up networks of hubs to cover the main traffic flows in the region, in Europe national boundaries have tended to obstruct this type of arrangement and airlines have ended up dominating several airports in close proximity in their home country — e.g. BA at Heathrow, Gatwick, Manchester and Birmingham; and Lufthansa at Frankfurt, Dusseldorf and Munich. This is less efficient from a competition viewpoint and these operations may be defensive in nature (i.e. to block another carrier from getting in). However, the emphasis may be changing through the creation of alliances that can reach new markets — e.g. Swissair is building links with Sabena and Austrian to extend its influence into northern and eastern Europe while running down Geneva operations, which parallel those at Zurich. The poor performance of secondary European hubs demonstrates the advantage to airlines in concentrating services on the major airports.

BA’s investments in TAT/Air Liberte and Deutsche BA have the potential to increase competition by offering an alternative to entrenched national carriers. Although EU domestic services were deregulated from April 1997, it remains difficult to set up a hub in another country because the most lucrative long–haul services are still controlled by bilaterals. BA’s attempt to feed Air Liberte at Orly with long–haul alliance partners services (e.g. American) looks about to be thwarted by the French government forcing all long–haul routes to CDG — where, of course, Air France is impregnable.

Hubs offer the major airlines one of the stronger defences against low–cost new entrants. Contrary to popular opinion, most of the heavily dominated hubs in the US have been left alone by the low–cost carriers. For example Denver has been avoided by Southwest despite lying in the middle of its home territory and Northwest has a virtually clear run at Minneapolis, as does US Airways at Pittsburgh. The new entrants tend to focus on either dense local markets, often using a secondary airport (e.g. Baltimore for Washington, Oakland for San Francisco) and/or the busier non–hubs e.g. Kansas City, Omaha.

The scope for new entrants in Europe is more limited: shortages of capacity coupled with high airport charges make opportunities scarcer. It is also rare to find the abandoned inner city airports that have been used so successfully in the US (e.g. Dallas Love Field and Chicago Midway). At London, for example, low–cost airlines have been obliged to use Luton or Stansted, which pushes up surface access costs and travel times.

Performance of European hubs

The Transport Studies Group has carried out research over the last 10 years into the performance of the major European airlines and hubs and some of this work is summarised below.

The wave concept which has been deployed to devastating effect in the US is less well developed in Europe. KLM at Amsterdam is one of the better examples with three principal waves (0800- 1000 hours, 1200–1400 and 1800–2000). There is an emerging fourth wave at 1430–1630. Heathrow in contrast has almost a uniform distribution of flights, as one runway is used for departures and one for arrivals and BA has about 38% of slots in each time period. This has a negative impact on connectivity and makes it difficult to develop any systematic method for interlinking services because the timetable is not symmetric.

Although a wave pattern is more critical at the small- and medium–sized hubs where frequencies are low, even at the major hubs their theoretical advantage can rapidly be eroded without this. In particular, a wave arrangement is necessary to ensure convenient connections on a round trip basis as most passengers wish to make a return journey. With a random schedule pattern, many connections will require a change of airlines (e.g. a passenger arriving at Heathrow on BA from Seattle is equally likely to find the first connection to Frankfurt to be on Lufthansa or BA). This breaks the ‘seamless service’ concept and pricing may be unattractive to anything other than full fare passengers. Alternatively, passengers may have to wait hours for a connection on the same airline. It is therefore inevitably the main airline at hubs (plus feeder partners) that has the motivation to re–organise its schedules in this way.

The table (below left) analyses to what extent flights are concentrated into waves at the major hubs (a connectivity ratio of 1 indicates the scheduling is no better than random, whereas 2 creates twice as many linkages and most US hubs would be closer to a figure of 3).

KLM at Amsterdam, Sabena at Brussels and Lufthansa at Frankfurt stand out as having reasonably well co–ordinated schedules; Swissair at Zurich is the other good example along with one or two of the smaller hubs, such as Vienna. Air France has recently moved towards a wave pattern with a major investment in airport facilities by ADP to improve CDG’s position as a hub airport. BA, Alitalia and Iberia have little more than a random pattern of movements through the day.

The table (right) analyses airlines providing the fastest routings through European hubs. It considers not just transfer times (which is relatively easy to calculate), but takes into account the entire journey time from origin to destination (i.e. it also considers the speed of aircraft — jet versus turboprop — and, most importantly, the circuitry in routing via different hubs). For this table schedules in 40 city pairs (Europe–long–haul) without direct service have been ranked by overall journey time for travel on January 15th 1998. These were chosen to give a good geographical spread around Europe and the world in relation to the patterns of demand. None of the end points is a major European hub so that all hubs have comparable opportunity to compete for this traffic.

Several rules were created for this analysis. Linkages had to satisfy the published IATA Minimum Connect Times (MCTs) but were compiled with reference to all flights of all scheduled carriers, not merely connections published or listed in the OAG. Only connections between non–stop flights were considered. Services requiring a wait of more than six hours at the transfer point were discarded and this also eliminated any connections requiring a night stop. Only results for on–line or code–share services of the major carriers at each airport are presented here.

An airline that provided the fastest routing in every sample market would receive a score of 100%. If an airline has no service in a particular market it scores zero. The table below shows that Lufthansa is in the lead due to the combination of its extensive network and fast connections. Air France and KLM are close behind. Swissair, despite having much thinner long–haul services, narrowly overtakes BA due to fast schedules and a strong performance in southern Europe where other hub options are poor. This also demonstrates the importance of scheduling and MCTs. Air France is the major improver since 1995 while BA at Heathrow has slipped badly. This is because Heathrow’s services have not increased over this time in the way that has been possible at the other major airports. Indeed, some thin routes have been relegated to Gatwick and although high frequencies and multiple daily connections are possible on some of the trunk markets, only the best service on the chosen day counts towards the score. The ‘second division’ of hubs includes Lufthansa at Munich, scoring 13% (up from only 1% in 1995), and Sabena at Brussels with 15%. A wide variety of airlines can provide service in one or two markets only — e.g. Iberia is worth considering for Latin America but rarely otherwise. Although these results are subject to sample variations, the five major hubs appear to be well ahead of the rest. The ranking of the smaller hubs is somewhat affected by the limited sample of markets chosen but none shows any particular flair.