Marius Barbu (FHW Berlin),

1
German Airport Performance
Research Workshop
Changes in the Structure ofGerman Airports
Charges

• Marius Barbu (FHW Berlin),
• David B. Heinz (FHW Berlin)
• Prof. Dr. Jürgen Müller (FHW Berlin)

Berlin 10th October, 2008
2
Introduction

• Objective of the study
• Analyse the structure of charges for German
  airports, levels and trends
• Results
• The structure of charges have changed
• Share of variable charges is higher than in the
  past and it follows and ascendant trend
• Further analysis
• Causes
• Effects

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Homogenous Clusters of Airports
2005 Total Length of Runway(s) Nr. of Runways Terminal Size (sqm) Nr. of Gates Nr. Of Check In Counters Passengers Aircraft Movements
Small
Bremen BRE 2038 1 36000 10 40 1.7 Mio 33600
Dresden DRS 2508 1 55000 12 24 1.78 Mio 29000
Münster FMO 2170 1 35000 18 38 1.5 Mio 28600

Medium
Köln CGN 8137 3 200000 55 80 10 Mio 140000
Hamburg HAM 6916 2 90000 55 108 11.8 Mio 134000
Stuttgart STR 3345 1 121000 70 116 10 Mio 140000
Tegel TXL 5447 2 27000 18 103 11.7 Mio 137000

Big
Frankfurt Frau 12000 3 800000 174 386 52 Mio 476000
München MUC 8000 2 500000 218 311 30.6 Mio 386000
Düsseldorf DUS 5700 2 285000 84 142 16.5 Mio 189000
Source Airports websites, internet open
databases, GAP databases
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Relevant fleet mix
Share of the fleet mix, in the total number of
flights
Fleet Mix
Small Airports
Four aircraft families cover the majority of
Flights, for all clusters -----------------------
----------- Representative fleet mix
Medium-sized Airports
For Frankfurt Airport, the number of B747 was
not taken into consideration
Big Airports
Source Own calculations using Arbeitsgemeinschaft
Deutscher Verkehrsflughäfen (ADV) data
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Levels of variabilization, 2007
Clusters comparison
Small Airports
Medium-sized Airports
Big Airports
Source Own calculations using Public Charges
Manuals Aircraft characteristics
were taken from manufacturers official
webpage Assumptions Seat Loading Factor 80
Ground Handling was excluded

• Share of variable charges is considerably high
  for big airports
• Charges tend to be more variable as the
  dimension of airports increases Reasons ??

6
Trends in variabilization, 2003-2007
Clusters comparison
Share of variable charges Cluster detail
Source Own calculations

• The variabilization process follows similar
  patterns inside clusters
• All airports increased the share of variable
  charges, over the period

8
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Trends in variabilization, 2003-2007
Cluster Comparison - Averages
Source Own calculations

• The variabilization process is less pronounced
  in the case of small airports
• All clusters show an increase in the share
  variable charges
• In the case of medium and big airports, this
  increase is close to 50

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Reasons (a)
1
2
3
Increase in demand Airline efficiency Seat
Loading Factor (SLF)
Are airlines pushing?
Do aircrafts become lighter?
?
?
Other?!
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Reasons (b)
3. Do aicrafts become lighter?
Source Airbus Official Website
There is not evidence that aicrafts become
lighter which can induce a shift towards more
passenger related charges
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Effects

• Risk Sharing Between Airlines and Airports is
  changing Airports now bear more risk than in
  the past
• Are the airports aware?
• Is it a real risk or just a theoretical one?
• Infrastructure developments may get under stress
• Does it affect the decisions regarding new
  infrastructure projects? (is this supplementary
  airport risk playing a role or not)

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Conclusions

• From an economic point of view the development of
  the charges structure can give us important clues
  about the welfare and allocative efficiency of
  pricing policies in the aviation industry.
• Airport charges, in Germany, became more
  passenger related in the last period.
• This move towards variabilization increases the
  risk on the airports side
• It is not clear what is the main cause and/or if
  the risk shifting puts the airports under stress
  (now or in the near future)
• Futher research
• Identify other possible causes
• Try to quantify the risk (making it measurable)
  simulation based

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• Thank you for your attention.

GERMAN AIRPORT PERFORMANCE
A Joint Project of University of Applied
Sciences Bremen Berlin School of Economics
(FHW) Int. University of Applied Sciences Bad
Honnef
Contact
Jürgen Müller (FHW Berlin) jmueller_at_fhw-berlin.de
Marius Barbu (FHW Berlin) ms.barbu_at_gmail.com
David Ben Heinz (FHW Berlin) davidbenheinz_at_googlem
ail.com
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Discussions

• Why small airports present the lowest degree of
  variabilization?
• How plausible are the first two causes we
  identified? (increase in demand, airlines are
  pushing to pass the risk)
• What other causes can be identified?
• How much relevant is the risk the airports are
  facing, as charges become more passenger related?
  Can it be quantified?
• Are infrastructure developments affected?

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Comments and Feedback from The Audience (a)

• Differences in Seat Loading Factor (SLF) can be
  an explanation why small airports have lower
  degree of variabilization than mediumbig ones
• Include Real LCC airports also in research (as
  small airports), to have a better view on the
  power exerted by airlines on small airports
• The problem is that would be hard to analyze the
  various incentive schemes, like subsidies
  (especially those that are not published)
• Try to look also to the levels of charges
  (expensiveness), not only structure
• Add some case studies to the paper, which might
  confirm or not the results
• Try also a step analysis and cluster the airports
  not only by scale, to get a more relevant view.
  Suggestions for clustering
• congestion level, regulation (how they are
  regulated), Competition, LCC.
• Other possible reasons for why airports switched
  towards more passenger related charges
• capacity restraints
• they simply adapted to the cost structure

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Comments and Feedback from The Audience (b)

• It would be interesting to see also how the share
  of different types of aircrafts changed over
  time, inside the fleet mix and not only
• Analyse again if aircrafts really become lighter
  or not. There might be evidence that aircrafts do
  become lighter if we keep the same seating.
• The risk discussed in the paper, may exist only
  in the short-term, represented by a decrease in
  the SLF. In the medium term, the SLF might be
  restored by the airlines, which will also
  decrease in the number of flights. This, in turn
  would bring the airports to the initial
  cost-revenue balance.
• Try to change the fleet mix for big airports
  cluster, because the present one is not enough
  relevant. There (big airports), the most revenues
  are brought by big aircrafts (B747, A330, A340).
• One big problem is that charges manuals published
  by airports, may not reflect the real pricing
  schemes that are applied in practice. Are
  airlines really paying according to the charges
  manuals?