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The evolution of the European aviation network, 1990–1998
Journal of Air Transport Management 7 (2001) 311–318
The evolution of the European aviation network, 1990–1998 Guillaume Burghouwta, Jacco Hakfoortb,* b
a Utrecht University, Faculty of Geographical Sciences, P.O. Box 80115, 3058 TC Utrecht, Netherlands CPB Netherlands Bureau of Economic Policy Analysis, P.O. Box 80510, 2508 GM Den Haag, Netherlands
Abstract The deregulation of US aviation has led to drastic changes in route structures and to widespread adoption of the hub-and-spoke system. This paper investigates whether deregulation in the European Union has led to a similar pattern. The study uses time schedule data for all airports in the European Union during the period 1990–1998 and analyses both intra-European and intercontinental scheduled services. At the airport level, we find no evidence for the concentration of intra-European traffic on a small number of hubs. Air traffic to intercontinental destinations, however, is increasingly concentrated on hub airports. At the route level, a type of hub-and-spoke structure has developed. Here, the national carriers remain the dominant players. The market share of low-cost carriers has increased but is still very small. This paper concludes that a number of imperfections on the supply side of the market constrain the effect of European deregulation on competition. r 2001 Elsevier Science Ltd. All rights reserved. Keywords: European aviation network; Deregulation; Cluster analysis
1. Introduction The deregulation of the US airline industry has become the subject of many academic and public policy studies (Meyer and Menzies, 2000). The evidence from these studies indicates that US consumers have reaped large and lasting benefits from the liberalization of the US aviation market. One of the unanticipated developments after deregulation has been the widespread adoption of the hub-and-spoke system that has drastically changed route structures (Viscusi et al., 1998). By combining point-to-point traffic with transfer traffic at a central hub, airlines are able to offer a wider variety of destinations to consumers with high daily frequencies at these airports. Concentration of traffic on the hub may lead to cost savings for airlines, especially for those airlines with high marginal costs per passenger (Brueckner and Spiller, 1994; Pels, 2000). In contrast to the wide array of empirical studies regarding the deregulation of the US airline market, the empirical evidence with respect to the evolution of the European aviation network after deregulation is still somewhat limited. Theoretically, one can argue that a number of factors will make that the adoption of the *Corresponding author. Tel.: +31-70-3383358; fax: +31-70338350. E-mail address: [email protected] (J. Hakfoort).
hub-and-spoke system will not be as strong as in the US (Berechman and de Wit, 1996): *
*
*
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Travel distances within Europe are shorter: This means that for a significant number of intraEuropean flights, transfer via a hub is no option. Competition from other transport modes: The European high speed rail service in particular forms an effective competitor of intra-European flights (CAA, 1998, p. 363). National interests: Nijkamp (1996) argues that national interests stand in the way of the emergence of a limited number of hubs in Europe. Intercontinental bilateral regulation versus European deregulation: Although the European aviation market is completely deregulated as of April 1, 1997, European airlines still depend on bilateral agreements between their country of registration and third countries for their intercontinental services. These airlines cannot simply change their hub airport or merge without losing their portfolio of intercontinental destinations (see Oum et al., 2001).
To add to the evidence of the evolution of the European aviation network after deregulation, this paper examines this network for the period 1990–1998. We consider both intra-European and intercontinental scheduled services and use cluster analysis to examine the growth of services between all European airports. Two sets of
0969-6997/01/$ - see front matter r 2001 Elsevier Science Ltd. All rights reserved. PII: S 0 9 6 9 - 6 9 9 7 ( 0 1 ) 0 0 0 2 4 - 2
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results are provided: at the airport level and at the route level. The airport level results allow us to examine possible hub-and-spoke formation in the European aviation network. The route level results give insight into the relative market shares of the ‘flag carriers’ compared to new entrants such as the ‘low–cost, no frills airlines’ and regional carriers. After a concise literature review in the next section, Section 3 describes the methodology and the data. Section 4 reports the empirical results on the airport level and Section 5 reports the results on the route level. Section 6 concludes.
2. Literature review The number of empirical studies that investigate the evolution of the complete European aviation network after deregulation is rather limited (for a description of the deregulation of the European aviation network see Hakfoort, 1999). We can make a distinction between studies on the airport level and studies on the route level. 2.1. Studies at the airport level A number of studies investigates the (likely) development of the European aviation network from the perspective of the airports. Reynolds-Feighan (1995) examines the future of regional airports in the European Union. Given the evidence from the US, she expects that the connectivity of these smaller airports will decrease dramatically because airlines will no longer consider routes from and to these airports profitable. Her empirical analysis for Irish and English airports supports this claim. Caves (1997) examines the future of European aviation network based on empirical evidence with regard to the major European airports. He concludes that the so-called hinterland hubs with a large domestic market have good opportunities to maintain their position as primary, intercontinental hubs. Caves also expects the growth of the point-to-point network to be less than of the hub-and-spoke network (a similar result as found in the US). He provides no evidence to support this claim, however. On the basis of an analysis of the geographical location of the major airports in Europe, Dennis (1998) shows that Frankfurt, Paris Charles de Gaulle and Amsterdam Airport Schiphol are most likely to become the leading European hubs. His analysis does, however, not take account of airfares and considers only the major airports in Europe. De Wit et al. (1999) examine the development of the intra-European aviation network. They consider intraEuropean flights from all European airports with
scheduled flights and find that inter-regional traffic loses market share. The study does not consider intercontinental traffic originating from European airports. 2.2. Studies at the route level While all the studies mentioned above take the airport or airport city as the starting point for the analysis, an extensive study by the Civil Aviation Authority (CAA, 1998) considers the development of competition on the route level. The CAA finds that competition on the route level, as measured by the number of airlines offering a scheduled service, is still rather limited. In 1997 77% of all intra-European routes were serviced by either one or two airlines. While the CAA study is impressive, the study does only consider intra-European routes and airlines that are registered in Europe. In summary, the evidence on the evolution of the European aviation network is far from complete. Most studies only consider the major airports in Europe and limit the analysis to intra-European flights. This paper tries to add to the evidence by considering domestic, intra-European and intercontinental flights originating from all European airports that have scheduled services over the period 1990–1998 and performing an analysis both at the airport level and at the route level.
3. Methodology and data In order to examine the evolution of the European aviation network, we have to classify airports with regard to their function in the airport hierarchy. Previous studies have used a number of different methods of classification including the methods proposed by the US Department of Transportation (DOT), the US Federal Aviation Administration (FAA) and Graham (1998). All the methods use the potential or realized capacity of airports as single classification variable. The DOT classification is based on the number of passengers departing from a certain airport as a percentage of the total number of passengers departing. Given that we only have data on capacity and not on the number of passengers (see description of the data below), this classification is not suitable for our purposes. The FAA method is based on airport regions rather than on individual airports. Finally, the classification used by Graham (1998) considers also nonscheduled flights at smaller airports. Our data set registers scheduled services only. As an alternative to the three classifications mentioned above, we employ cluster analysis based on Ward’s method. Ward’s cluster method minimizes the within-cluster sum of squares over all partitions at each stage of the clustering procedure (see e.g.
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Hair et al., 1998). It tends to combine clusters with a small number of observations. Since the airport network has a clear hierarchical structure, Ward’s method seems appropriate. We choose to cluster the airports into five clusters. First, we do not want to create too many clusters for the sake of interpretation. Second, experiments with the cluster analysis indicate that the smallest change in the agglomeration coefficient occurs using five clusters as compared with three, four, six or seven clusters (these results are available upon request from the authors). Multi-dimensional scaling (as compared to classification based on capacity only) is appealing because capacity alone does not capture the hub structure of an airport fully. It only measures size but not connectivity. Therefore we use the following three variables in the cluster analysis: 1. average seat capacity between 1990 and 1998 to capture the size of the airport; 2. the average number of destinations between 1990 and 1998 to capture the connectivity of the airport and 3. the average number of intercontinental destinations between 1990 and 1998 to capture the intercontinental orientation of the airport. Our dataset consists of OAG/ABC data for the years 1990–1998. The OAG/ABC data set contains variables based on published information on scheduled flights. Variables include departure airport, destination airport, flight frequency, airplane type and seat capacity for each flight and the number of stops during the flight. The data are based on a representative week in July of each year. The OAG/ABC data suffer from a number of limitations. First, OAG data only provides insight into scheduled flights and not into realized demand or supply. Load factors, weather conditions, technical problems and congestion can lead to differences between the two. Given that we are interested is in the structure of the aviation network, we do not consider this to be much of a problem. Second, the OAG data only registers scheduled services. We have deleted full freight flights from the data set and consider passenger flights (including the so-called ‘combi’ flights) only. Finally, the data set that is available to us only lists direct flights. Cluster analysis with Ward’s method results in the following five airport categories: *
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4 primary hubs: London Heathrow, Paris Charles de Gaulle, Frankfurt and Amsterdam. These airports have both a extensive intercontinental and intraEuropean connectivity and a high capacity; 11 secondary hubs: e.g. Brussels, Madrid, Rome and Munich. These large airports have extensive intraEuropean connectivity but a lower level of intercontinental connectivity than primary hubs;
*
*
*
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12 medium airports: e.g. Lisbon, Barcelona, Helsinki. Other national or large regional airports with a limited number of intercontinental destinations but with a reasonable level of intra-European connectivity; 34 small airports: e.g. Cologne, Naples and Porto. Airports with a limited number of primarily European destinations; 485 very small airports: e.g. Rotterdam, Antwerp and Florence.
Table 1 provides descriptive statistics for the five airport categories. In the next two sections we analyze the evolution of the European aviation network using this classification on the airport level (Section 4) and on the route level (Section 5). For the purposes of our research we define ‘Europe’ as all EU countries and Norway, Switzerland, Monaco and Gibraltar (excluding overseas territories and Eastern Europe).
4. Empirical results: the airport level Total seat capacity of the European aviation network has grown by 59% between 1990 and 1998. The growth of intercontinental traffic (73%) and intra-European traffic (77%) has both been above the 70%. Domestic traffic has increased by 37% over the same time period. This growth can be explained partly by the recovery of the European economy after the recession and the Gulf crisis at the beginning of the nineties (CAA, 1998). After 1993, most European economies recovered quickly and doubled fuel prices fell back quickly to normal levels. The result was an increase in the demand for air travel. These growth rates are not evenly distributed over the five airport categories (see Table 2). The small airports and the secondary hubs have shown above average growth, while the growth rate for primary hubs, medium airports and very small airports is below average. A closer look at the data reveals that these aggregate trends obscure important differences in growth rates between individual airports. On the one hand, airports such as London Stansted and Clermont-Ferrand grew by more than 500% (starting from a very low base). On the other hand, a number of very small airports lost all their scheduled services according to our data set. Our data set shows no clear change in the share of different categories of airports in seat capacity on domestic flights. Most of the domestic flights take place from very small and small airports (around 34% and 22%, respectively). However the share of the five categories of airports in non-domestic intra-European traffic has changed over the period 1990–1998 as is evident from Table 3.
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Table 1 Descriptive statistics of the five clusters of airports in the sample, 1990, 1995, 1998a 1990
1995
1998
Capacity in number of seats per week
Primary hubs Secondary hubs Medium airports Small airports Very small airports
218,074–611,094 82,733–272,895 27,880–158,311 2079–104,882 18–32,258
315,484–736,253 117,281–390,843 48,465–183,595 11,313–146,585 20–39,070
437,901–855,459 152,413–392,552 48,665–241,537 14,542–174,722 18–46,212
Number of destinations
Primary hubs Secondary hubs Medium airports Small airports Very small airports
138–177 71–129 23–72 4–45 1–21
169–200 97–132 45–83 18–65 1–28
163–242 101–157 42–98 18–84 1–33
Number of intercontinental destinations
Primary hubs Secondary hubs Medium airports Small airports Very small airports
65–97 16–61 5–32 0–33 0–3
92–120 36–68 9–32 0–24 0–4
97–143 37–80 13–27 0–28 0–5
Number of airports in the sample
Primary hubs Secondary hubs Medium airports Small airports Very small airports
a
4 11 12 34 406
4 11 12 34 376
4 11 12 34 399
Source: OAG/ABC; own calculations.
Table 2 Evolution of seat capacity per cluster of airports 1990–1998 (1990=100)a
Primary hubs Secondary hubs Medium airports Small airports Very small airports Total a
1990
1991
1992
1993
1994
1995
1996
1997
1998
100 100 100 100 100 100
104 105 103 103 96 103
115 113 111 108 103 111
123 118 112 111 107 115
122 122 114 117 113 118
122 128 119 127 121 124
137 146 133 149 133 140
145 151 140 161 145 148
157 160 151 173 154 159
Source: OAG/ABC; own calculations.
Table 3 Share of different categories of airports in intra-European seat capacity (excluding domestic), 1990–1998 (%)a
Primary hubs Large hubs Medium airports Small airports Very small airports Total a
1990
1991
1992
1993
1994
1995
1996
1997
31 31 17 12 8 100
32 31 18 13 7 100
31 31 17 13 8 100
31 31 17 14 7 100
30 30 17 15 8 100
27 31 17 17 9 100
27 31 16 17 10 100
26 29 17 18 10 100
Source: OAG/ABC; own calculations.
The share of both primary and secondary hubs has decreased while the share of small and very small airports has gone up. Our findings are in line with the results of de Wit et al. (1999) and suggest that new entrants to the European aviation market (in particular low-cost airlines) have used smaller airports to provide new services.
The picture is quite different, however, if we look at intercontinental flights. Capacity on these destinations shows a clear concentration on the four primary hubs at the expense of all other airport categories (see Table 4). One of the primary reasons for this concentration is the emergence of global airline alliances. London Heathrow serves as the primary hub for the Oneworld
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G. Burghouwt, J. Hakfoort / Journal of Air Transport Management 7 (2001) 311–318 Table 4 Share of different categories of airports in intercontinental seat capacity, 1990–1998 (%)a
Primary hubs Large hubs Medium airports Small airports Very small airports Total a
1990
1991
1992
1993
1994
1995
1996
1997
1998
44 37 10 8 1 100
46 38 11 5 0 100
45 39 10 5 1 100
47 37 10 5 1 100
48 36 10 5 1 100
48 35 10 6 1 100
50 34 9 6 1 100
50 34 9 6 1 100
50 34 9 5 1 100
Source: OAG/ABC; own calculations.
Table 5 Capacity on different route types, 1990–1998 (1990=100)a
Spoke–spoke Hub–spoke Hub–hub Intercontinental a
1990
1991
1992
1993
1994
1995
1996
1997
1998
100 100 100 100
98 108 103 97
104 113 108 118
105 116 112 130
108 124 107 131
116 130 104 137
129 151 116 150
145 156 120 161
155 166 126 173
Source: OAG/ABC; own calculations.
alliance, Frankfurt for the Star alliance, Paris Charles de Gaulle for the Air France/Delta alliance and Amsterdam for the Northwest/KLM alliance (EURAFOR, 2000). It is in the line of expectation that the trend towards concentration of intercontinental capacity on primary hubs will continue. In summary, our results at the airport level show that the European aviation market has grown considerably over the period 1990–1998. In contrast to the US market, the so-called primary hubs have shown below average growth overall and in particular with respect to their share in non-domestic, intra-European capacity. There is, however, a clear concentration of intercontinental traffic originating from the four major airports in Europe.
Table 5 shows the evolution of capacity on each of the route types. The growth of hub–spoke routes (66%) is higher than the growth of both spoke–spoke routes (55%) and hub–hub routes (26%). This is consistent with the formation of a hub-and-spoke network. Additional evidence (not reported here) shows that deregulation of European air transport has brought about a boost for cross-border traffic in particular for hub–spoke and spoke–spoke traffic. In contrast to earlier studies (Graham, 1998) we find that major airlines do not consolidate their position on domestic markets but try to feed passengers from foreign spoke airports to their hubs. For example, the share of domestic hub–spoke traffic of Lufthansa to Frankfurt decreased from 64% in 1990 to 54% in 1998. 5.1. Flight frequency and aircraft size
5. Empirical results: the route level Next, we turn to the analysis at the route level. There are four route types: (1) hub–hub routes (defined as routes between primary or secondary hubs and primary or secondary hubs), (2) hub–spoke routes (between primary or secondary hubs and medium, small or very small airports), (3) spoke–spoke routes (between medium, small or very small airports and medium, small or very small airports) and (4) intercontinental routes (routes between European airports and airports outside Europe, e.g. Amsterdam–Bangkok. The OAG data allows us to examine the evolution of seat capacity, the number of flights, the average frequency of flights, the average flight capacity (aircraft size) on each of the route types. We will also examine the number of airlines per route and the market share for different route types.
On average, the mean flight frequency on the European network has grown from 12.6 to 14.6 flights per route per week over the period 1990–1998. Spoke– spoke routes show the smallest increase in frequency. We can even observe a decline of frequency between small airports and very small airports. All other routes between individual airport categories (not shown here) have positive growth rates. As expected, flight frequency has increased for hub–spoke routes. Apparently, Europe’s flag carriers and their regional partners try to feed more passengers to the hub at a higher frequency. Growth in flight frequency has been accompanied by a growth in aircraft size on these routes. Hub–hub and intercontinental routes also show an increase in flight frequency between hub airports and intercontinental routes. However the increase in flight
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When we first consider the total number of European airlines, the total number between 1990 and 1998 has remained stable over the period 1990–1998. In 1998, 134 EU airlines offered scheduled services in the European aviation network against 129 airlines in 1990. Some lowcost carriers such as EasyJet and Virgin Express have entered the market while a number of subsidiaries of national airlines were fully integrated into these airlines. An example is Aviaco that was fully integrated into Iberia at the end of the 1990s. However, when we take into account non-EU carriers which use their fifth, sixth and seventh freedom rights to operate services within Europe, the total number of airlines has decreased slightly from 209 in 1990 to 166 in 1998. This is because non-EU carriers have reduced their services on intra-European routes. Global airline alliances offer a substitute for the traffic of non-EU carriers within Europe. Table 6 shows the number of airlines offering services on domestic, EU international and intercontinental flights. Changes between 1990 and 1998 appear to be small. The share of EU international routes served by only one airline has even gone up by 7% points. On domestic routes, the share of duopoly routes has increased a little. The distribution on intercontinental routes remains about the same. Of course, the number of competitors on a route is an imperfect indicator for the level of competition in the European aviation network. In order to examine competition further, research should also consider indirect competition via other (hub) airports, alternative travel methods available to travelers and entry barriers for new carriers (Reynolds-Feighan, 2000). An analysis of the market share of different airline types shows that the market share of national airlines such as BA and KLM has remained more or less stable over the period 1990–1998 (Table 7). They increased their market share significantly on hub–hub routes. The low-cost airlines have gained market share in particular on spoke–spoke routes and to a smaller extent on
frequency is somewhat offset by a downscaling of (average) aircraft size. One of the reasons for the downscaling of aircraft size is the retreat of nonEuropean carriers from the hub–hub routes as a result of the emergence of global airline alliances. These nonEuropean carriers primarily used wide bodied aircraft at the beginning of the nineties. After 1990, their European alliance partners have taken over their services within Europe. Another reason is the end of the dominance of the Boeing 747 for long distance (intercontinental) traffic. Between 1990 and 1998 the share of Boeing 747 flights in the total amount of intercontinental flights decreased from 23% to 15%. Increasingly, smaller aircraft types as the A340 and the Boeing 777 have been used. In summary, average flight frequency has gone up slightly in the examined period. This growth is, however, unevenly distributed among the route types. A significant number of spoke–spoke routes has experienced a decrease in mean flight frequency, indicating lower service quality for passengers on these routes. Aircraft size has gone up on all route types, except on intercontinental routes and routes connecting Europe’s primary hubs. The retreat of non-EU carriers from intra-European routes and the introduction of smaller long distance aircraft types are likely to be the causes of this downscaling. 5.2. Number of competitors at the route level One of the objectives of European deregulation process was an increase of competition which could lead to a better quality of air service for consumers and lower fares. Our data set allows us to examine the number of airlines active on a given route. We distinguish between four types of airlines: national airlines (including their subsidiaries), regional airlines, low-cost airlines and airlines not registered in the EU but active on intra-European routes (=non-EU airlines).
Table 6 Number of competitors according to route type, 1990–1998 (in % of the total number of routes)a Domestic
1990 1991 1992 1993 1994 1995 1996 1997 1998 a
EU international
Intercontinental
1 actor
2 actors
>2 actors
1 actor
2 actors
>2 actors
1 actor
2 actors
>2 actors
86 87 87 88 88 85 85 82 83
11 10 10 9 11 12 12 14 14
3 3 3 3 2 3 3 4 3
60 60 63 66 67 68 67 67 67
30 30 29 25 26 26 25 23 24
10 9 9 10 7 6 8 10 9
68 70 68 68 70 68 69 69 68
27 24 26 27 25 27 26 26 26
6 6 6 5 5 5 5 5 5
Source: OAG/ABC; own calculations.
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G. Burghouwt, J. Hakfoort / Journal of Air Transport Management 7 (2001) 311–318 Table 7 Share of different airline categories in total intra-European seat capacity (%)a All routes
Regional National Extra-EU Low-cost Total a
Hub–hub
Hub–spoke
Spoke–spoke
1990
1998
1990
1998
1990
1998
1990
1998
22 71 7 0 100
23 71 1 4 100
6 76 18 0 100
8 86 3 3 100
16 79 5 0 100
19 78 1 2 100
42 54 3 1 100
38 53 0 9 100
Source: OAG/ABC; own calculations.
hub–hub routes. Low-cost carriers have been most successful on hub–hub routes or on spoke–spoke routes. Regional airlines have gained market share on hub–spoke routes and perhaps surprisingly on hub–hub routes. These airlines are increasingly operating under code share agreements with the national airlines and function as a feeder for long distance traffic of the flag carriers. The overall picture is, however, that national airlines still dominate the market. Although their relative market share has gone down somewhat they still remain the most important players on the European aviation scene. This picture is even stronger when we consider that we have not adjusted our data to reflect airline alliances (see Oum et al., 2001 for a discussion) which might lead to an even stronger role for the national airlines and their partners. As mentioned above, most regional airlines operate under alliance agreements with national airlines. For example, almost fifty city pairs under Lufthansa fligth codes were operated by regional partners such as Air Littoral and Air Dolomiti (CAA, 1998). Based on this evidence it seems that deregulation has not proved to be a complete and convincing success with respect to direct competition on the route level. While a number of routes have seen new entrants such as Easyjet and Virgin Express, this is certainly not true for all routes. National airlines have been able to secure or even improve their competitive position on the European market. The scope for more competition is limited due to a number of obstacles on the supply side of the market. Congestion, missing markets for slot, inefficient operation of the European air traffic control provide important barriers to entry for new airlines (Hakfoort, 1999).
6. Concluding remarks In this paper we have analyzed the evolution of the European aviation network in the period 1990–1998 using OAG/ABC data on all European scheduled services between 1990 and 1998. Cluster analysis was employed to classify all European airports into five groups.
At the airport level, we have shown that there is no clear trend of concentration of intra-European traffic on the primary hubs. However, the primary hubs have increased their market share with respect to intercontinental flights. We expect that the emergence of global airline alliances will lead to increased concentration of this intercontinental traffic. Our results suggest that smaller airport types have become more important in handling intra-European traffic and show further potential for growth. At the route level, our findings support the findings by de Wit et al. (1999) that a type of hub-and-spoke structure has developed. Hub-spoke routes have shown a faster capacity growth than both hub–hub and spoke– spoke routes. It seems that the European aviation network becomes more and more a multi-layered network with primary hubs only dominant with respect to intercontinental flights. Within this network, average flight frequency has increased but this growth is unevenly distributed in space and higher for hub–hub and hub–spoke routes than for spoke–spoke routes. Part of the spoke–spoke routes has even faced a decline in mean flight frequency. Hub–spoke routes show an increase in aircraft size while hub–hub routes are confronted with smaller mean aircraft size. Finally, we have shown that there is no evidence of more direct competition over the period 1990 to 1998. New airlines have entered the market and in particular low-cost airlines such as EasyJet and Ryannair have been successful in increasing their market share on hub– hub and spoke–spoke routes. However, the national airlines remain the dominant players in the European aviation network. Global airline alliances and the integration with small, regional airlines strengthen their position further. Non-EU carriers have retreated from the dense intra-European routes. A number of imperfections on the supply side of the market makes that deregulation has not had the effect on competition it might have had. Acknowledgements The authors would like to thank the Civil Aviation Department of the Netherlands and in particular
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Thalicia Wei-Yun for the use of the data set. Aisling Reynolds-Feighan, participants of the ATRG 2000 conference in Amsterdam, anonymous referees and colleagues at the CPB Netherlands Bureau of Economic Policy Analysis and Utrecht University provided very useful comments on an earlier version of this manuscript. All remaining errors are ours.
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EURAFOR, 2000. Airline alliances. An EURAFOR study. European Civil Aviation Conference, Frankfurt. Graham, B., 1998. Liberalization, regional economic development and the geography of demand for air transport in the European Union. Journal of Transport Geography 6 (2), 87–104. Hair, J.F., Anderson, R.E., Tatham, R.L., Black, W.C., 1998. Multivariate data analysis. Prentice-Hall, Upper Saddle River. Hakfoort, J.R., 1999. The deregulation of European air transport: a dream come true? Tijdschrift voor Economische en Sociale Geografie 30 (2), 226–233. Meyer, J.R., Menzies, T.R., 2000. The continuing vigil. Maintaining competition in deregulated airline markets. Journal of Transport Economics and Policy 34 (1), 1–20. Nijkamp, P., 1996. Liberalization of air transport in Europe: the survival of the fittest? Research Memorandum 1996-11, Vrije Universiteit, Amsterdam. Oum, T.H., Yu, C., Zhang, A., 2001. Global airline alliances: international regulatory issues. Journal of Air Transport Management 7, 57–62. Pels, E., 2000. Airport economics and policy. Efficiency, competition and interaction with airlines. Ph.D. Thesis, Vrije Universiteit, Amsterdam. Reynolds-Feighan, A.J., 1995. European and American approaches to air transport liberalisation: some implications for small communities. Transportation Research A 29 (6), 467–483. Reynolds-Feighan, A.J., 2000. The US Airport hierarchy and implications for small communities. Urban Studies 37 (3), 557–577. Viscusi, W.K., Vernon, J.M., Harrington Jr., J.E., 1998. Economics of regulation and antitrust, 3rd Edition. The MIT Press, Cambridge, MA.
The evolution of the European aviation network, 1990–1998 Guillaume Burghouwta, Jacco Hakfoortb,* b
a Utrecht University, Faculty of Geographical Sciences, P.O. Box 80115, 3058 TC Utrecht, Netherlands CPB Netherlands Bureau of Economic Policy Analysis, P.O. Box 80510, 2508 GM Den Haag, Netherlands
Abstract The deregulation of US aviation has led to drastic changes in route structures and to widespread adoption of the hub-and-spoke system. This paper investigates whether deregulation in the European Union has led to a similar pattern. The study uses time schedule data for all airports in the European Union during the period 1990–1998 and analyses both intra-European and intercontinental scheduled services. At the airport level, we find no evidence for the concentration of intra-European traffic on a small number of hubs. Air traffic to intercontinental destinations, however, is increasingly concentrated on hub airports. At the route level, a type of hub-and-spoke structure has developed. Here, the national carriers remain the dominant players. The market share of low-cost carriers has increased but is still very small. This paper concludes that a number of imperfections on the supply side of the market constrain the effect of European deregulation on competition. r 2001 Elsevier Science Ltd. All rights reserved. Keywords: European aviation network; Deregulation; Cluster analysis
1. Introduction The deregulation of the US airline industry has become the subject of many academic and public policy studies (Meyer and Menzies, 2000). The evidence from these studies indicates that US consumers have reaped large and lasting benefits from the liberalization of the US aviation market. One of the unanticipated developments after deregulation has been the widespread adoption of the hub-and-spoke system that has drastically changed route structures (Viscusi et al., 1998). By combining point-to-point traffic with transfer traffic at a central hub, airlines are able to offer a wider variety of destinations to consumers with high daily frequencies at these airports. Concentration of traffic on the hub may lead to cost savings for airlines, especially for those airlines with high marginal costs per passenger (Brueckner and Spiller, 1994; Pels, 2000). In contrast to the wide array of empirical studies regarding the deregulation of the US airline market, the empirical evidence with respect to the evolution of the European aviation network after deregulation is still somewhat limited. Theoretically, one can argue that a number of factors will make that the adoption of the *Corresponding author. Tel.: +31-70-3383358; fax: +31-70338350. E-mail address: [email protected] (J. Hakfoort).
hub-and-spoke system will not be as strong as in the US (Berechman and de Wit, 1996): *
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Travel distances within Europe are shorter: This means that for a significant number of intraEuropean flights, transfer via a hub is no option. Competition from other transport modes: The European high speed rail service in particular forms an effective competitor of intra-European flights (CAA, 1998, p. 363). National interests: Nijkamp (1996) argues that national interests stand in the way of the emergence of a limited number of hubs in Europe. Intercontinental bilateral regulation versus European deregulation: Although the European aviation market is completely deregulated as of April 1, 1997, European airlines still depend on bilateral agreements between their country of registration and third countries for their intercontinental services. These airlines cannot simply change their hub airport or merge without losing their portfolio of intercontinental destinations (see Oum et al., 2001).
To add to the evidence of the evolution of the European aviation network after deregulation, this paper examines this network for the period 1990–1998. We consider both intra-European and intercontinental scheduled services and use cluster analysis to examine the growth of services between all European airports. Two sets of
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results are provided: at the airport level and at the route level. The airport level results allow us to examine possible hub-and-spoke formation in the European aviation network. The route level results give insight into the relative market shares of the ‘flag carriers’ compared to new entrants such as the ‘low–cost, no frills airlines’ and regional carriers. After a concise literature review in the next section, Section 3 describes the methodology and the data. Section 4 reports the empirical results on the airport level and Section 5 reports the results on the route level. Section 6 concludes.
2. Literature review The number of empirical studies that investigate the evolution of the complete European aviation network after deregulation is rather limited (for a description of the deregulation of the European aviation network see Hakfoort, 1999). We can make a distinction between studies on the airport level and studies on the route level. 2.1. Studies at the airport level A number of studies investigates the (likely) development of the European aviation network from the perspective of the airports. Reynolds-Feighan (1995) examines the future of regional airports in the European Union. Given the evidence from the US, she expects that the connectivity of these smaller airports will decrease dramatically because airlines will no longer consider routes from and to these airports profitable. Her empirical analysis for Irish and English airports supports this claim. Caves (1997) examines the future of European aviation network based on empirical evidence with regard to the major European airports. He concludes that the so-called hinterland hubs with a large domestic market have good opportunities to maintain their position as primary, intercontinental hubs. Caves also expects the growth of the point-to-point network to be less than of the hub-and-spoke network (a similar result as found in the US). He provides no evidence to support this claim, however. On the basis of an analysis of the geographical location of the major airports in Europe, Dennis (1998) shows that Frankfurt, Paris Charles de Gaulle and Amsterdam Airport Schiphol are most likely to become the leading European hubs. His analysis does, however, not take account of airfares and considers only the major airports in Europe. De Wit et al. (1999) examine the development of the intra-European aviation network. They consider intraEuropean flights from all European airports with
scheduled flights and find that inter-regional traffic loses market share. The study does not consider intercontinental traffic originating from European airports. 2.2. Studies at the route level While all the studies mentioned above take the airport or airport city as the starting point for the analysis, an extensive study by the Civil Aviation Authority (CAA, 1998) considers the development of competition on the route level. The CAA finds that competition on the route level, as measured by the number of airlines offering a scheduled service, is still rather limited. In 1997 77% of all intra-European routes were serviced by either one or two airlines. While the CAA study is impressive, the study does only consider intra-European routes and airlines that are registered in Europe. In summary, the evidence on the evolution of the European aviation network is far from complete. Most studies only consider the major airports in Europe and limit the analysis to intra-European flights. This paper tries to add to the evidence by considering domestic, intra-European and intercontinental flights originating from all European airports that have scheduled services over the period 1990–1998 and performing an analysis both at the airport level and at the route level.
3. Methodology and data In order to examine the evolution of the European aviation network, we have to classify airports with regard to their function in the airport hierarchy. Previous studies have used a number of different methods of classification including the methods proposed by the US Department of Transportation (DOT), the US Federal Aviation Administration (FAA) and Graham (1998). All the methods use the potential or realized capacity of airports as single classification variable. The DOT classification is based on the number of passengers departing from a certain airport as a percentage of the total number of passengers departing. Given that we only have data on capacity and not on the number of passengers (see description of the data below), this classification is not suitable for our purposes. The FAA method is based on airport regions rather than on individual airports. Finally, the classification used by Graham (1998) considers also nonscheduled flights at smaller airports. Our data set registers scheduled services only. As an alternative to the three classifications mentioned above, we employ cluster analysis based on Ward’s method. Ward’s cluster method minimizes the within-cluster sum of squares over all partitions at each stage of the clustering procedure (see e.g.
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Hair et al., 1998). It tends to combine clusters with a small number of observations. Since the airport network has a clear hierarchical structure, Ward’s method seems appropriate. We choose to cluster the airports into five clusters. First, we do not want to create too many clusters for the sake of interpretation. Second, experiments with the cluster analysis indicate that the smallest change in the agglomeration coefficient occurs using five clusters as compared with three, four, six or seven clusters (these results are available upon request from the authors). Multi-dimensional scaling (as compared to classification based on capacity only) is appealing because capacity alone does not capture the hub structure of an airport fully. It only measures size but not connectivity. Therefore we use the following three variables in the cluster analysis: 1. average seat capacity between 1990 and 1998 to capture the size of the airport; 2. the average number of destinations between 1990 and 1998 to capture the connectivity of the airport and 3. the average number of intercontinental destinations between 1990 and 1998 to capture the intercontinental orientation of the airport. Our dataset consists of OAG/ABC data for the years 1990–1998. The OAG/ABC data set contains variables based on published information on scheduled flights. Variables include departure airport, destination airport, flight frequency, airplane type and seat capacity for each flight and the number of stops during the flight. The data are based on a representative week in July of each year. The OAG/ABC data suffer from a number of limitations. First, OAG data only provides insight into scheduled flights and not into realized demand or supply. Load factors, weather conditions, technical problems and congestion can lead to differences between the two. Given that we are interested is in the structure of the aviation network, we do not consider this to be much of a problem. Second, the OAG data only registers scheduled services. We have deleted full freight flights from the data set and consider passenger flights (including the so-called ‘combi’ flights) only. Finally, the data set that is available to us only lists direct flights. Cluster analysis with Ward’s method results in the following five airport categories: *
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4 primary hubs: London Heathrow, Paris Charles de Gaulle, Frankfurt and Amsterdam. These airports have both a extensive intercontinental and intraEuropean connectivity and a high capacity; 11 secondary hubs: e.g. Brussels, Madrid, Rome and Munich. These large airports have extensive intraEuropean connectivity but a lower level of intercontinental connectivity than primary hubs;
*
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12 medium airports: e.g. Lisbon, Barcelona, Helsinki. Other national or large regional airports with a limited number of intercontinental destinations but with a reasonable level of intra-European connectivity; 34 small airports: e.g. Cologne, Naples and Porto. Airports with a limited number of primarily European destinations; 485 very small airports: e.g. Rotterdam, Antwerp and Florence.
Table 1 provides descriptive statistics for the five airport categories. In the next two sections we analyze the evolution of the European aviation network using this classification on the airport level (Section 4) and on the route level (Section 5). For the purposes of our research we define ‘Europe’ as all EU countries and Norway, Switzerland, Monaco and Gibraltar (excluding overseas territories and Eastern Europe).
4. Empirical results: the airport level Total seat capacity of the European aviation network has grown by 59% between 1990 and 1998. The growth of intercontinental traffic (73%) and intra-European traffic (77%) has both been above the 70%. Domestic traffic has increased by 37% over the same time period. This growth can be explained partly by the recovery of the European economy after the recession and the Gulf crisis at the beginning of the nineties (CAA, 1998). After 1993, most European economies recovered quickly and doubled fuel prices fell back quickly to normal levels. The result was an increase in the demand for air travel. These growth rates are not evenly distributed over the five airport categories (see Table 2). The small airports and the secondary hubs have shown above average growth, while the growth rate for primary hubs, medium airports and very small airports is below average. A closer look at the data reveals that these aggregate trends obscure important differences in growth rates between individual airports. On the one hand, airports such as London Stansted and Clermont-Ferrand grew by more than 500% (starting from a very low base). On the other hand, a number of very small airports lost all their scheduled services according to our data set. Our data set shows no clear change in the share of different categories of airports in seat capacity on domestic flights. Most of the domestic flights take place from very small and small airports (around 34% and 22%, respectively). However the share of the five categories of airports in non-domestic intra-European traffic has changed over the period 1990–1998 as is evident from Table 3.
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Table 1 Descriptive statistics of the five clusters of airports in the sample, 1990, 1995, 1998a 1990
1995
1998
Capacity in number of seats per week
Primary hubs Secondary hubs Medium airports Small airports Very small airports
218,074–611,094 82,733–272,895 27,880–158,311 2079–104,882 18–32,258
315,484–736,253 117,281–390,843 48,465–183,595 11,313–146,585 20–39,070
437,901–855,459 152,413–392,552 48,665–241,537 14,542–174,722 18–46,212
Number of destinations
Primary hubs Secondary hubs Medium airports Small airports Very small airports
138–177 71–129 23–72 4–45 1–21
169–200 97–132 45–83 18–65 1–28
163–242 101–157 42–98 18–84 1–33
Number of intercontinental destinations
Primary hubs Secondary hubs Medium airports Small airports Very small airports
65–97 16–61 5–32 0–33 0–3
92–120 36–68 9–32 0–24 0–4
97–143 37–80 13–27 0–28 0–5
Number of airports in the sample
Primary hubs Secondary hubs Medium airports Small airports Very small airports
a
4 11 12 34 406
4 11 12 34 376
4 11 12 34 399
Source: OAG/ABC; own calculations.
Table 2 Evolution of seat capacity per cluster of airports 1990–1998 (1990=100)a
Primary hubs Secondary hubs Medium airports Small airports Very small airports Total a
1990
1991
1992
1993
1994
1995
1996
1997
1998
100 100 100 100 100 100
104 105 103 103 96 103
115 113 111 108 103 111
123 118 112 111 107 115
122 122 114 117 113 118
122 128 119 127 121 124
137 146 133 149 133 140
145 151 140 161 145 148
157 160 151 173 154 159
Source: OAG/ABC; own calculations.
Table 3 Share of different categories of airports in intra-European seat capacity (excluding domestic), 1990–1998 (%)a
Primary hubs Large hubs Medium airports Small airports Very small airports Total a
1990
1991
1992
1993
1994
1995
1996
1997
31 31 17 12 8 100
32 31 18 13 7 100
31 31 17 13 8 100
31 31 17 14 7 100
30 30 17 15 8 100
27 31 17 17 9 100
27 31 16 17 10 100
26 29 17 18 10 100
Source: OAG/ABC; own calculations.
The share of both primary and secondary hubs has decreased while the share of small and very small airports has gone up. Our findings are in line with the results of de Wit et al. (1999) and suggest that new entrants to the European aviation market (in particular low-cost airlines) have used smaller airports to provide new services.
The picture is quite different, however, if we look at intercontinental flights. Capacity on these destinations shows a clear concentration on the four primary hubs at the expense of all other airport categories (see Table 4). One of the primary reasons for this concentration is the emergence of global airline alliances. London Heathrow serves as the primary hub for the Oneworld
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G. Burghouwt, J. Hakfoort / Journal of Air Transport Management 7 (2001) 311–318 Table 4 Share of different categories of airports in intercontinental seat capacity, 1990–1998 (%)a
Primary hubs Large hubs Medium airports Small airports Very small airports Total a
1990
1991
1992
1993
1994
1995
1996
1997
1998
44 37 10 8 1 100
46 38 11 5 0 100
45 39 10 5 1 100
47 37 10 5 1 100
48 36 10 5 1 100
48 35 10 6 1 100
50 34 9 6 1 100
50 34 9 6 1 100
50 34 9 5 1 100
Source: OAG/ABC; own calculations.
Table 5 Capacity on different route types, 1990–1998 (1990=100)a
Spoke–spoke Hub–spoke Hub–hub Intercontinental a
1990
1991
1992
1993
1994
1995
1996
1997
1998
100 100 100 100
98 108 103 97
104 113 108 118
105 116 112 130
108 124 107 131
116 130 104 137
129 151 116 150
145 156 120 161
155 166 126 173
Source: OAG/ABC; own calculations.
alliance, Frankfurt for the Star alliance, Paris Charles de Gaulle for the Air France/Delta alliance and Amsterdam for the Northwest/KLM alliance (EURAFOR, 2000). It is in the line of expectation that the trend towards concentration of intercontinental capacity on primary hubs will continue. In summary, our results at the airport level show that the European aviation market has grown considerably over the period 1990–1998. In contrast to the US market, the so-called primary hubs have shown below average growth overall and in particular with respect to their share in non-domestic, intra-European capacity. There is, however, a clear concentration of intercontinental traffic originating from the four major airports in Europe.
Table 5 shows the evolution of capacity on each of the route types. The growth of hub–spoke routes (66%) is higher than the growth of both spoke–spoke routes (55%) and hub–hub routes (26%). This is consistent with the formation of a hub-and-spoke network. Additional evidence (not reported here) shows that deregulation of European air transport has brought about a boost for cross-border traffic in particular for hub–spoke and spoke–spoke traffic. In contrast to earlier studies (Graham, 1998) we find that major airlines do not consolidate their position on domestic markets but try to feed passengers from foreign spoke airports to their hubs. For example, the share of domestic hub–spoke traffic of Lufthansa to Frankfurt decreased from 64% in 1990 to 54% in 1998. 5.1. Flight frequency and aircraft size
5. Empirical results: the route level Next, we turn to the analysis at the route level. There are four route types: (1) hub–hub routes (defined as routes between primary or secondary hubs and primary or secondary hubs), (2) hub–spoke routes (between primary or secondary hubs and medium, small or very small airports), (3) spoke–spoke routes (between medium, small or very small airports and medium, small or very small airports) and (4) intercontinental routes (routes between European airports and airports outside Europe, e.g. Amsterdam–Bangkok. The OAG data allows us to examine the evolution of seat capacity, the number of flights, the average frequency of flights, the average flight capacity (aircraft size) on each of the route types. We will also examine the number of airlines per route and the market share for different route types.
On average, the mean flight frequency on the European network has grown from 12.6 to 14.6 flights per route per week over the period 1990–1998. Spoke– spoke routes show the smallest increase in frequency. We can even observe a decline of frequency between small airports and very small airports. All other routes between individual airport categories (not shown here) have positive growth rates. As expected, flight frequency has increased for hub–spoke routes. Apparently, Europe’s flag carriers and their regional partners try to feed more passengers to the hub at a higher frequency. Growth in flight frequency has been accompanied by a growth in aircraft size on these routes. Hub–hub and intercontinental routes also show an increase in flight frequency between hub airports and intercontinental routes. However the increase in flight
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When we first consider the total number of European airlines, the total number between 1990 and 1998 has remained stable over the period 1990–1998. In 1998, 134 EU airlines offered scheduled services in the European aviation network against 129 airlines in 1990. Some lowcost carriers such as EasyJet and Virgin Express have entered the market while a number of subsidiaries of national airlines were fully integrated into these airlines. An example is Aviaco that was fully integrated into Iberia at the end of the 1990s. However, when we take into account non-EU carriers which use their fifth, sixth and seventh freedom rights to operate services within Europe, the total number of airlines has decreased slightly from 209 in 1990 to 166 in 1998. This is because non-EU carriers have reduced their services on intra-European routes. Global airline alliances offer a substitute for the traffic of non-EU carriers within Europe. Table 6 shows the number of airlines offering services on domestic, EU international and intercontinental flights. Changes between 1990 and 1998 appear to be small. The share of EU international routes served by only one airline has even gone up by 7% points. On domestic routes, the share of duopoly routes has increased a little. The distribution on intercontinental routes remains about the same. Of course, the number of competitors on a route is an imperfect indicator for the level of competition in the European aviation network. In order to examine competition further, research should also consider indirect competition via other (hub) airports, alternative travel methods available to travelers and entry barriers for new carriers (Reynolds-Feighan, 2000). An analysis of the market share of different airline types shows that the market share of national airlines such as BA and KLM has remained more or less stable over the period 1990–1998 (Table 7). They increased their market share significantly on hub–hub routes. The low-cost airlines have gained market share in particular on spoke–spoke routes and to a smaller extent on
frequency is somewhat offset by a downscaling of (average) aircraft size. One of the reasons for the downscaling of aircraft size is the retreat of nonEuropean carriers from the hub–hub routes as a result of the emergence of global airline alliances. These nonEuropean carriers primarily used wide bodied aircraft at the beginning of the nineties. After 1990, their European alliance partners have taken over their services within Europe. Another reason is the end of the dominance of the Boeing 747 for long distance (intercontinental) traffic. Between 1990 and 1998 the share of Boeing 747 flights in the total amount of intercontinental flights decreased from 23% to 15%. Increasingly, smaller aircraft types as the A340 and the Boeing 777 have been used. In summary, average flight frequency has gone up slightly in the examined period. This growth is, however, unevenly distributed among the route types. A significant number of spoke–spoke routes has experienced a decrease in mean flight frequency, indicating lower service quality for passengers on these routes. Aircraft size has gone up on all route types, except on intercontinental routes and routes connecting Europe’s primary hubs. The retreat of non-EU carriers from intra-European routes and the introduction of smaller long distance aircraft types are likely to be the causes of this downscaling. 5.2. Number of competitors at the route level One of the objectives of European deregulation process was an increase of competition which could lead to a better quality of air service for consumers and lower fares. Our data set allows us to examine the number of airlines active on a given route. We distinguish between four types of airlines: national airlines (including their subsidiaries), regional airlines, low-cost airlines and airlines not registered in the EU but active on intra-European routes (=non-EU airlines).
Table 6 Number of competitors according to route type, 1990–1998 (in % of the total number of routes)a Domestic
1990 1991 1992 1993 1994 1995 1996 1997 1998 a
EU international
Intercontinental
1 actor
2 actors
>2 actors
1 actor
2 actors
>2 actors
1 actor
2 actors
>2 actors
86 87 87 88 88 85 85 82 83
11 10 10 9 11 12 12 14 14
3 3 3 3 2 3 3 4 3
60 60 63 66 67 68 67 67 67
30 30 29 25 26 26 25 23 24
10 9 9 10 7 6 8 10 9
68 70 68 68 70 68 69 69 68
27 24 26 27 25 27 26 26 26
6 6 6 5 5 5 5 5 5
Source: OAG/ABC; own calculations.
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G. Burghouwt, J. Hakfoort / Journal of Air Transport Management 7 (2001) 311–318 Table 7 Share of different airline categories in total intra-European seat capacity (%)a All routes
Regional National Extra-EU Low-cost Total a
Hub–hub
Hub–spoke
Spoke–spoke
1990
1998
1990
1998
1990
1998
1990
1998
22 71 7 0 100
23 71 1 4 100
6 76 18 0 100
8 86 3 3 100
16 79 5 0 100
19 78 1 2 100
42 54 3 1 100
38 53 0 9 100
Source: OAG/ABC; own calculations.
hub–hub routes. Low-cost carriers have been most successful on hub–hub routes or on spoke–spoke routes. Regional airlines have gained market share on hub–spoke routes and perhaps surprisingly on hub–hub routes. These airlines are increasingly operating under code share agreements with the national airlines and function as a feeder for long distance traffic of the flag carriers. The overall picture is, however, that national airlines still dominate the market. Although their relative market share has gone down somewhat they still remain the most important players on the European aviation scene. This picture is even stronger when we consider that we have not adjusted our data to reflect airline alliances (see Oum et al., 2001 for a discussion) which might lead to an even stronger role for the national airlines and their partners. As mentioned above, most regional airlines operate under alliance agreements with national airlines. For example, almost fifty city pairs under Lufthansa fligth codes were operated by regional partners such as Air Littoral and Air Dolomiti (CAA, 1998). Based on this evidence it seems that deregulation has not proved to be a complete and convincing success with respect to direct competition on the route level. While a number of routes have seen new entrants such as Easyjet and Virgin Express, this is certainly not true for all routes. National airlines have been able to secure or even improve their competitive position on the European market. The scope for more competition is limited due to a number of obstacles on the supply side of the market. Congestion, missing markets for slot, inefficient operation of the European air traffic control provide important barriers to entry for new airlines (Hakfoort, 1999).
6. Concluding remarks In this paper we have analyzed the evolution of the European aviation network in the period 1990–1998 using OAG/ABC data on all European scheduled services between 1990 and 1998. Cluster analysis was employed to classify all European airports into five groups.
At the airport level, we have shown that there is no clear trend of concentration of intra-European traffic on the primary hubs. However, the primary hubs have increased their market share with respect to intercontinental flights. We expect that the emergence of global airline alliances will lead to increased concentration of this intercontinental traffic. Our results suggest that smaller airport types have become more important in handling intra-European traffic and show further potential for growth. At the route level, our findings support the findings by de Wit et al. (1999) that a type of hub-and-spoke structure has developed. Hub-spoke routes have shown a faster capacity growth than both hub–hub and spoke– spoke routes. It seems that the European aviation network becomes more and more a multi-layered network with primary hubs only dominant with respect to intercontinental flights. Within this network, average flight frequency has increased but this growth is unevenly distributed in space and higher for hub–hub and hub–spoke routes than for spoke–spoke routes. Part of the spoke–spoke routes has even faced a decline in mean flight frequency. Hub–spoke routes show an increase in aircraft size while hub–hub routes are confronted with smaller mean aircraft size. Finally, we have shown that there is no evidence of more direct competition over the period 1990 to 1998. New airlines have entered the market and in particular low-cost airlines such as EasyJet and Ryannair have been successful in increasing their market share on hub– hub and spoke–spoke routes. However, the national airlines remain the dominant players in the European aviation network. Global airline alliances and the integration with small, regional airlines strengthen their position further. Non-EU carriers have retreated from the dense intra-European routes. A number of imperfections on the supply side of the market makes that deregulation has not had the effect on competition it might have had. Acknowledgements The authors would like to thank the Civil Aviation Department of the Netherlands and in particular
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Thalicia Wei-Yun for the use of the data set. Aisling Reynolds-Feighan, participants of the ATRG 2000 conference in Amsterdam, anonymous referees and colleagues at the CPB Netherlands Bureau of Economic Policy Analysis and Utrecht University provided very useful comments on an earlier version of this manuscript. All remaining errors are ours.
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