Major hubs: the real strongholds of airlines

Business people can praise them or criticise them, but it is now a well-established fact that the major hubs have become indispensable. These powerful hubs - some sixty major airports worldwide in all - concentrate the bulk of air traffic, connecting the entire planet.

By The Editor -

Published on 16/12/2014

Paris Charles de Gaulle, London Heathrow, Frankfurt... but also Atlanta, Chicago, Toronto, Hong Kong, Singapore, Dubai or Sao Paulo... Every business traveller regularly passes through one or other of these airports, which are key centres for air traffic worldwide. Because of the large number of destinations and frequencies offered, these strategic hubs all lay claim to the coveted status of 'hub'. A product of American deregulation, this model has proved its worth since it first appeared in the United States in the late 1970s. At the time, agreements under the aegis of the International Air Transport Association (IATA) were shattered, bringing down the established monopolies and making way for intense competition to win and retain passengers.

At a time when airlines were (already) under pressure to cut operating costs, how could they be present in all markets at the same time? The answer to this question, and the most rational way of serving the largest possible number of destinations, was the "hub and spoke" principle, i.e. a global offer of services through a set of connections via one, two or three central hubs. The economic rationality of these hub-and-spoke networks, justified by many American executives by the motto "... the hub and spoke", is a key factor in the success of the new network.we can't serve all destinations direct".has found an echo in the rest of the world. In the 1990s, national carriers first in Europe and the Middle East, then in Asia, set up their own international hubs. The model has continued to evolve over the last fifteen years, even gaining in power with the rise of major global alliances.

In this context, the terminals are being reconfigured according to the needs of the alliances at the various hubs. At London Heathrow, terminals 3 and 5 have become the bases for British Airways and its oneworld partners, while SkyTeam has taken over terminal 4 and Star took possession of the terminal 2 facilities in summer 2014. At Paris CDG, terminals 2D, 2E, 2F and 2G are at the heart of the Air France hub, while terminal 1 has become the centre of Star Alliance operations.

Alliance games and double hubs

Today, a large proportion of air traffic transits through some sixty nerve centres, some of which even house the hubs of two alliances. This is particularly true of Chicago O' Hare, the "home, sweet home" of both American Airlines (oneworld) and United Airlines (Star Alliance). However, Asia has the largest number of these 'double hubs', with Seoul Incheon (Korean Air/SkyTeam and Asiana/Star Alliance), Shanghai-Pudong (China Eastern/SkyTeam and Air China/Star Alliance), Singapore (SIA/Star Alliance and Qantas-Jet Star/oneworld) and Taipei (China Airlines/SkyTeam and Eva Air/Star Alliance). In Europe, on the other hand, few hubs offer large-scale competition between the alliances. This is probably due to the unparalleled density of hubs, which in fact compete with each other. However, there is Madrid, both a oneworld hub with Iberia and a SkyTeam hub with Air Europa, and Düsseldorf, a mini-hub for Lufthansa (Star Alliance) and a oneworld hub through Air Berlin. In Moscow, the alliances clash again, but this time by airport, with SkyTeam at Sheremetyevo and oneworld at Domodedovo.

Fortresses of the Middle East

Even rarer are the "fortress hubs", the non-alliance hubs supported by a single carrier. Most of them are in the Middle East. In the space of five years, under the leadership of the very powerful Emirates, Dubai has become one of the world's top 10 airports in terms of passenger traffic. In 2008, Dubai was ranked twentieth with 37.5 million passengers, and seventh last year with 66.5 million! Far ahead of Doha, Qatar Airways' hub with 23.2 million passengers in 2013, and Abu Dhabi, Etihad's hub with 16.6 million passengers. On a smaller scale, there is also Casablanca. Royal Air Maroc's hub handles more than seven million passengers a year and is positioned as a bridge between Europe and North and West Africa.

The first, and probably most important element of a hub strategy, is its geographical position. Even more so than its local market. After all, a hub must be located at the crossroads of major traffic flows. This, for example, favours an airport like Zurich Kloten, which, despite a population of just two million, handled more than 23.5 million passengers in 2013, a third of them transfer passengers. By contrast, Tokyo, with its population of 24 million, cannot claim to be a global hub, unlike the major North Asian hubs of Seoul, Incheon, Guangzhou and Hong Kong. Indeed, Japan's off-centre position, on the fringes of the major Asian corridors, favours point-to-point rather than transfer traffic, with the exception of connections to Japan and, to a lesser extent, flights between North America and Asia. For example, the number of transfer passengers at Narita, Tokyo's main international airport, barely exceeded 16 % of the 35.5 million passengers recorded in 2013.

The same is true of Johannesburg, which may be Africa's leading airport with 18.5 million passengers, but its geography on the edge of the continent puts it at a disadvantage. Addis Ababa, Casablanca, Cairo and Nairobi are emerging as the main African hubs, and have invested in new facilities in recent years.

Other factors can play a part in the establishment of a hub. Financial weight is one of them, and also explains the role played by Zurich, the centre of European finance. The economic position of Lyon and Milan has also justified the creation of regional hubs in these cities. But today, airport management strategy plays a major role. After all, it can all be a question of intelligent marketing. Selling your hub well can elevate it to the status of a global hub. This is the case in Europe for airports that tend to be on the fringes of the continent's major traffic flows, but which have nonetheless succeeded in becoming major hubs. For example, with the help of marketing, Helsinki Vantaa airport has positioned itself as a major link between Europe and Asia. All passenger services have been re-evaluated to offer a quality equivalent to that offered by the largest Asian hubs. For its part, Vienna retains its pre-eminence in traffic to Central and Eastern Europe and the Middle East, while Lisbon is by far the leading gateway from the European continent to Brazil. The Portuguese capital is linked to a dozen cities in its former colony.

Some small airports, with less than two million passengers, have even become niche hubs. This is particularly true of Reykjavik in Iceland, which has established itself as a hub serving secondary destinations in North America. In the same vein, outside Europe, the Royal Jordanian airline presents Amman as the hub of the 'Levant'. In Asia, Sri Lanka boasts an excellent geographical location at the crossroads of Europe, Asia and Africa, and these airlines consider that their market represents a quarter of the world's population.

Major Hubs by Alliance

This globalisation of supply is proving damaging for Europe, whose hubs are gradually becoming marginalised. According to a study by Airports Council International Europe, the Old Continent has seen its market share in transfer traffic eroded over the last decade. According to the association, connectivity outside the European Union fell by 10 % over the decade 2004-2013. This means that fewer travellers are thinking of flying from Mexico to Jakarta via Amsterdam or Paris CDG. Conversely, flights from North America and Europe to Asia are now increasingly being handled by the major Gulf airports, which have increased the number of direct routes to every continent on the planet.

One figure is enough to illustrate the scale of the phenomenon: if we add up the number of potential connections at the three main Gulf airports (Dubai, Doha and Abu Dhabi), we get double the connectivity offered by Europe's three biggest hubs, namely London Heath row, Paris CDG and Frankfurt. In total, between 2008 and 2014, the number of potential connections grew by just 4 % in Europe, a long way behind the Middle East, whose connectivity grew by 46 % over the same period, Asia, which posted growth of 34 %, and even Africa (+26 %).

What is it that still favours European hubs? This time, it's certainly the potential population living around the major hubs. With 745 million inhabitants, the continent has one of the highest demographic densities on the planet. In 2014, Europe generated a flow of 1.6 billion passengers through some 440 airports. The power of the national airlines - Air France, British Airways, Lufthansa and Iberia to name but a few - and the importance of business and leisure traffic mean that transferring via a European airport is still an unavoidable alternative for many businessmen. The Old Continent now needs to give itself the means to implement this hub policy. With the prospect of 20 of the continent's largest airports reaching saturation point by 2035, time is running out.