The Hubbub of the Airport Hub

If you go to Schiphol airport on the right day, you’ll be greeted by a friendly robot designed to lead patrons to their gate. The airport already has brilliantly designed egress and getting to the correct gate is possible for even the most exhausted travelers, making the robot somewhat redundant. But it serves a marketing purpose, and a way for the airport to be more appealing to potential fliers – a competitive purpose.

“Everyone wants to make effective use of their time,” Robert O’Meara, Director of Media & Communications for Airports Council International Europe, said. “Which makes the idea of being able to gather so many different things in one location is quite attractive.

There nearly isn’t an industry left that doesn’t exist in an airport in some capacity. Now in some airports you can even go to an IKEA and buy a washing machine if you wanted.

This is the epitome of the modern airport – transformed from a runway into what is now dubbed a “city” by some. Its evolution is a story of the creation of a free-market and the spirit of economic competition.

economy

Airports are business now, but they weren’t always seen that way. It’s only more recent that they’re being viewed more as commercial enterprises than as public infrastructure.

In 1993 European airspace was fully liberalized, about 20 years after America deregulated its own. Before, everything was tightly regulated, bureaucratic, and controlled by each state. But once it was liberated, there was an increase in the number of routes flown, as well as the number of operators flying each one, according to Louise Butcher in her paper “Aviation: European Liberalization.”

This was an early sign of increased competition. Liberalization allowed for the creation of the low-cost airlines we see in Europe today, and set the stage for the modern airport.

Airports were now able to influence the routes; they courted airlines to open new routes with their airport by openly competing with lower fees and a more attractive environment for the patron. A 2012 study by Copenhagen Economics discovered that 96 percent of all European airports, small or large, are actively marketing their airport to airlines.

topsCompetition and growth could skyrocket, mostly unchained from their previous restraints.

“Deregulating in general allows companies to offer new services. It’s a very stimulating way to open new businesses,” said Hans Meckelenkamp, an aviation finance and economy professor at the University of Applied Sciences Amsterdam.

In the case of the airline industry, deregulation lead to an increase in airline routes due to the creation of new nonstop routes, according to an early 2000’s paper titled “Consequences of E.U. Airline Deregulation in the Context of the Global Aviation Market.”

Now 63 percent of European citizens live within a two hours’ drive of at least two airports creating a significant market for airports to compete for passengers, according to (Copenhagen study).

“With long-haul connectivity in particular, these airports are really keen to make sure people are aware of the benefits of using their airport rather one of one of the competitors,” O’Meara said.

Along with increased competition, privatization has also influenced the development of airports.

“Most publicly owned airports now operate as commercial entities at arms-length from government, while private ownership is a feature of the largest airports,” the Copenhagen Economics study said.

This arms-length, paired with competition seems to be the perfect formula for airports to develop into something more.

“There’s something to be said as well for the fact that the spirit of competition drives them across a number of different areas of the business,” O’Meara said.” It can be the number of new airline routes they have attracted, it can be the passenger experience, who has the best free Wi-Fi, big brand names in the terminal, working on lowering carbon emissions, and lots of other things.

“All of which has helped lower the cost of air travel as well.”

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