FLUG REVUE April 2002: Kopenhagen airport excells as hub

COPENHAGEN PLAYS THE HUB GAME

By Christiane Rodenbücher

To anyone walking on the floors panelled with wood from south-east Asia and the West Indies or on the marble and granite slabs through the terminals and passenger handling areas of Copenhagen's Kastrup airport, the fact that this is an airport is not immediately apparent. Instead one is greeted by light-flooded arcades, galleries exhibiting the works of selected Scandinavian artists, 1.7m high bronze statues, a modern building with spacious dimensions, a fountain constructed out of bronze and Travertine marble. The fancy shops and restaurants reflect a mixture of European countries, elegant shopping malls, and it is only when one looks out of the windows that one realises one is in the biggest airport in the north of Europe.

The concept of "class rather than quantity” has been pursued by management of the airport eight kilometres to the south of Denmark's capital city on the island of Amager since the early 1980s, and in fact extremely successfully, as the year 2000 proved. That year passengers voted Copenhagen airport the world's best airport in a survey organised by IATA.

For Niels Boserup (58), President and Chief Executive Officer (CEO) of Copenhagen Airports A/S (CPH), the company that operates the airport, the priority is to create an airport in which passengers feel good through functional aesthetics in design and architecture. "I am satisfied when people like coming here, and I believe that an airport can help make starting a journey enjoyable by offering a relaxed atmosphere and attractive art.”

Scandinavian Airline Systems (SAS), the oldest airline in the world, has made Copenhagen its central hub. Its most important connections are the routes to Stockholm, Amsterdam, Frankfurt and London, with Stockholm at times being served by more than one service per hour. These four airports are the biggest rivals to Copenhagen which, as a speciality, offers regional routes not only to Scandinavia but also to Poland and the Baltic states. Thanks to its favourable geographical location to the north of Europe, a lot of passengers who want to travel to north America or south-east Asia would, according to Boserup, choose Copenhagen as their departure airport or transfer hub. Direct flights are operated from here to New York, Chicago, Seattle, Washington, Tokyo, Beijing, Bangkok, Singapore, Delhi and many other destinations.

However, according to Boserup it is difficult to establish more trunk routes at present as the airlines that offer intercontinental flights need to "get back on course” first. Nevertheless, he is working on connecting other European cities to Copenhagen, for example, Kiel, Rostock and Leipzig, so as to make the airport attractive to more transfer passengers. An important strategic decision against the background that the number of domestic scheduled air services is "declining dramatically”. Out of 18 million passengers per year, more than 15 million use international airline connections. The relatively small number remaining travel on domestic and chartered services.

The proportion of transit passengers at Copenhagen airport is currently stable at around 50%. "Our status as a hub seems to have helped us a lot here since 11 September,” says Boserup. Management had expected passenger numbers to grow by between 4% and 6% in 2001, but thanks to the terrorist attacks this did not happen. Despite this, in the fourth quarter of 2001 passenger volume dropped by "only” 4.9% compared with the same period of the previous year, an achievement that puts Copenhagen ahead of many major European airports that compete with it for business. Altogether over 18 million passengers flew in 2001 – the same figure as in the previous year. In 2000, the airport made a profit of 437 million Danish krone (58.8 million Euro) on a turnover of 1,847 million dkr (248.6 million Euro). The figures for 2001 are broadly similar.

In 2002, however, both profit and turnover are expected to be below the figures for 2001, according to Boserup. "Because we promised not raise our handling charges, we expect our results to be slightly down for 2002.” The annual results also reflect 420,000 tons of air cargo business as well as operations run by subsidiaries in property management, management consultancy and slot allocation, plus a number of affiliated companies that include the Norwegian airport of Rygge Sivile, Newcastle airport in the UK and nine airports in Mexico.

"In Mexico we took advantage of a favourable opportunity,” explains Boserup. "There we are exploiting the commercial potential and building shopping centres where previously there were none. We are investing in runways and other capacities. Mexico is one of the most popular holiday regions in the world.” Newcastle airport is an expanding airport in a region that is enjoying above-average growth for Europe, hence the 49% financial stake in it. "And we shall invest in airports again in the future. We are only interested in subsidiaries that have something to do with airports,” says Boserup, who has been CEO since 1991 of the CPH A/S public limited company, which is listed on the Copenhagen stock exchange with a capital of 910 million dkr (122.5 million Euro). CPH's success, according to Boserup, is the result of slow, cautious growth. Most of the investment has gone into the operating side and long-term loans.

But the future of the airport in Copenhagen also depends heavily on external factors, namely SAS's financial situation, interest rates and exchange rate fluctuations. Denmark is not a member of the EU eurozone. However, Boserup expects that Denmark and Sweden will soon become convinced of the advantages of the euro and apply for membership. But at present the countries have such close relations with Europe that he is not seriously worried about the exchange rate risk. And as for Star Alliance member SAS, he believes that "compared with other airlines, SAS is on a sound financial footing and is better prepared for tough times like the period since 11 September”.

Since the terrorist attacks, SAS has been pursuing a different strategy from that of most of the airlines, namely it has embarked on a hard-nosed expansion course. It has increased its holding in the Spanish airline Spanair to 74%, and its growth plans also include taking over its Norwegian rival Braathen and acquiring a 49 per cent stake in Air Baltic. It is also renewing its fleet and is purchasing 97 new aircraft for 4 billion Swedish krone (678 million Euro). The investment needed to adapt to the new conditions in aviation comes with a high price: SAS is to cut back its workforce from 2,500 to 31,000. Its pre-tax profit for the first six months of 2001 was down by 70%. In the third quarter of 2001 the airline posted a loss of 213 million skr (36.6 million Euro) compared with a profit of 343 million skr (58.9 million Euro) in the same period of the previous year. Despite this, SAS CEO Jörgen Lindgaard is sticking to his course of expanding SAS into an intercontinental airline. There are even plans to build a separate SAS terminal in Copenhagen. "The bigger airlines have their own terminal, and we are planning to do the same at Copenhagen airport.” SAS recently hit the headlines because of illegal price-fixing agreements with Danish competitor Maersk Air and had to pay a fine of 356 million skr. (61.2 million Euro), and it is likely to have to make compensation payments as well. Nevertheless, CPH President Niels Boserup is confident that SAS's image will not be tarnished as a result, and he is also convinced by the expansion strategy. "I can only lend my support to this plan.”

When Boserup speaks of the future of Copenhagen airport, his eyes gleam. "We are working on a future gateway with three airports. The airport in Kastrup will then be available as a hub and for longer distances, and the airports in Roskilde and Sturup will take over the point-to-point traffic. But that will take a few more years to come about.”

From page 74 of FLUG REVUE 4/2002

Last updated 8 March 2002

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