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Hanover-Langenhagen hopes for growth
By Sebastian Steinke
With a triumphant side-swipe at his much bigger competitor, Munich, Raoul Hille, Chief Executive of Hanover Airport, compares the financial results of the two airports. “We earn more than Munich. They are 50 million euros in the red, whereas we are making a 10 million euro profit.” As one of the first four airports to be partially privatised (Hamburg, Hanover, Düsseldorf and Frankfurt) out of 17 international airports in Germany, Hanover is operating strictly to budget. Flughafen Hannover-Langenhagen GmbH is owned jointly by three shareholders: the city of Hanover, capital city of Lower Saxony, and Hannoversche Beteiligungsgesellschaft mbH, each have a 35% stake in it, while the remaining 30% is held by Fraport AG.
“Our framework conditions are different,” is how Hanover airport's chief executive, who has been in the job since 2004, describes the requirements under partially privatisation. “First of all the shareholders want a certain return on their investment. Secondly, we can only finance growth from our own resources or from the equity market, and thirdly, the public sector has made it clear that due to budgetary constraints it no longer either can or wants to provide financial support even in the long term.” It is Hille's job to therefore find a profitable middle course between circumspect investment for the purposes of securing the future and prudent cost control to keep the airport in the black. “One cannot earn money from glass architectural cathedrals alone,” he says, alluding to a cost-conscious expenditure policy.
On the market, he explains, there are primarily two models of successful airport operation: the big hubs for network carriers, which in Germany means Frankfurt and Munich, and the airports which have a high proportion of low-fare airlines, such as Frankfurt-Hahn and Cologne. But often an excessively costly infrastructure is erected, as the planners are hoping that the airport will boost the regional economy, irrespective of whether it is operating at a profit.
“We are not a hub and we have no plans to become one either. If that had been intended, the decision would have to have been made 50 years ago. But we are not a 'low-fare airport' either.” Rather, “we are a classic full-range supplier with a high proportion of tourist flights, which account for 60% of our business.” Hille has no reservations about no-frills airlines. But unlike the brand new airports on greenfield sites which concentrate overwhelmingly on this segment of the market, he is incessantly at pains to avoid cannibalising the business of his existing customers by allowing in new, no-frills competition. His central task is to control the traffic volume in such a way that “we can grow, but profitably.”
To ascertain Hanover's market potential more clearly, Hille has promoted Sales and Marketing into separate departments of the company and has built up its IT department. “I need transparency as to how much I am earning from which customer, so that I know at the click of a button how much negotiating leeway I have in the market.”
In 2005 Hanover achieved a spectacular double success. After attaining above average growth of 7.4%, the number of passengers rose to 5.6 million, surpassing the previous record from the year of Expo 2000. But even more important was a trebling of the annual post-tax profit to euro 9.6 million. As he disclosed in an interview with FLUG REVUE in the middle of November, Hille is expecting the figures for 2006 to at least match the previous year. At the same time, however, there has been a “minor setback”, namely, Hanover's home airline, Hapagfly, and its parent company, TUI AG, which are both based in Hanover have sold a number of aircraft over the last year and cut back their services by a painful 15%. At least the booking figures for the blue-and-red jets are once more looking good this winter, and in 2007 Hille is expecting a clear increase in TUI capacity of around 6% once Hapagfly and HLX have merged operationally, as planned.
The temporarily poor form of Hanover's major customer, TUI, has been made up for by traffic growth in other areas, especially as regards domestic flights flown by the Lufthansa Group airlines, Swiss and Eurowings, and also by Air Berlin with dba. The introduction of an additional dba connection to Munich on top of the Lufthansa services, is viewed in Hanover as the ideal example of a new airline establishing a foothold in Hanover. The airport itself apparently recognised the additional passenger potential on this route and actively invited dba in to tap the unused potential. “In the olden days, 80% of travellers went by rail as flying was too expensive. Today the number of flights to Munich has doubled without Lufthansa losing any passengers.”
With 25 destinations in eastern Europe, Hanover can also describe itself as a major player in that market too. This specialist market has evolved over the last few decades from charter flights for emigrants of German origin from eastern European states into the Lower Saxon immigration center of Friedland. The CIS spectrum stretches from Alma Ata to St Petersburg and Saratov. Today Russia and the CIS states are no longer unusual destinations but a lucrative growth market which the airport nurtures by employing a Russian-speaking marketing specialist. “We are making it clear to the airlines that they are welcome here and not second or third class customers,” says Hille, explaining his airport's success in eastern Europe. Since 6 September Aeroflot has returned to Hanover, with a scheduled service from Moscow Sheremetyevo 2. The present three times weekly Tu-154 service is to be stepped up in 2007 to daily flights operated with the A319.
Many passengers on this route no doubt rub their eyes in amazement after landing, as the airport buildings in Germany and Russia are (almost) identical, since the terminal building in Sheremetyevo 2 has virtually the same construction design as the buildings at Hanover airport, having been built by the same West German construction companies employed for the Moscow Olympic Games in 1980. Hanover supplemented its two concourses A and B by a third concourse C in 1998, i.e. just in time for Expo 2000. As a result, there are 75,000 square metres of usable space, 20 aircraft parking positions close to the building and 88 check-in counters.
To stimulate non-aviation business, which is becoming increasingly important on the revenue side – price pressure on the handling side is growing constantly – construction work on a new euro 35 million terminal programme, “AirportPlus”, which will provide additional shopping floorspace, commenced at the beginning of September 2006. As Hille points out, “This has only got under way since we really started making money.” At the centre of the project is the demolition of the old multi-storey car park 1 and construction of a larger new building on the site by the end of 2008. The idea is that in the future, anyone leaving the car park on foot will access the modernised terminal buildings through a new shopping level where they will be tempted to indulge in some shopping. The terminals are to be upgraded with a new baggage sorting and conveying system, improved security facilities, larger waiting areas and new taxiways, the total investment coming to an impressive euro 80 million. The visitors' terrace is also to be enlarged to attract further customers.
They had even been on the verge of introducing an aviation history visitor attraction in the new building and of taking over and exhibiting a private collection of aircraft from Hanover Laatzen. However, because the airport is the subject of frequent visits by classes of schoolchildren, the airport would have had to get the exhibition texts revised, but it was impossible to reach agreement with the Laatzen owners of the aircraft collection.
Few people realise it, but there is a fourth ground handling area in Hanover, Terminal D. Once conceived as a hub for Condor's charter operations, today it is used for military transportation purposes by the Bundeswehr and, above all, by the British Royal Air Force (RAF). Some weeks only one flight movement is handled, but when, as at the beginning of November, the British troops in Iraq are being relieved, it is not unusual to see RAF TriStars landing and taking off several times a day.
The military terminal D would theoretically be an ideal base for no-frills airlines. But a few years ago the airport gave easyJet the brush-off out of consideration for the expansion plans of HLX, which at that time had already been based in Hanover. Despite this, low-cost flights account for no less than 20% of traffic at “HAJ”, as it is known in the airport world. Hille looks across with scepticism at neighbouring Bremen, where Ryanair is set to operate from a terminal of its own from the spring. “That will cost us 1% of our passenger growth,” Hille comments, and goes on to talk about the central location of Hanover, which is both a curse and a blessing.
The airport's transport links are second to none, with many fast Deutsche Bahn ICE services from Hanover Central railway station plus a direct suburban railway service to the airport. At the same time the Langenhagen site is surrounded by numerous, frequently highly subsidised competing airports: Bremen, Dortmund, Münster, Paderborn, Hamburg, the research airfield of Braunschweig, Kassel with its ambitious expansion plans, Leipzig and even Berlin with easyJet. But in the long term Hille believes this could have a positive effect as well: “We are advancing step by step here, our feet are firmly on the ground rather than in Cloud-Cuckoo-Land. But in 25 years' time we will be bigger than Hamburg as they can't grow any further due to their runways.”
With its three runways, Hanover is the third busiest airport in Germany, handling up to 60 coordinated flight movements per hour and with terminal capacity for ten million passengers. Hille is committed to selective growth with new direct flights in the long-haul area and is expecting to introduce new routes as far as China in the next two or three years.
From FLUG REVUE 1/2007
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