Schiphol Group operates in an environment that is subject to change. That means that we continuously have to respond to events and developments within and beyond the aviation sector, on which we keep a close eye. Below, we describe the trends affecting aviation, our customers and our business operations and results.
Developments in the aviation sector
The aviation sector operates under challenging conditions. Airline revenues are under pressure from the economic crisis in Europe since 2009. In 2012, this crisis continued to have a significant impact on the confidence and spending limits of consumers, businesses and governments. Furthermore in 2012, European hub carriers also had to deal with increasing competition, which included low-cost carriers and Middle-Eastern and Turkish airlines that are rapidly expanding their European operations.
The aviation sector was faced with increasing costs in 2012, in part as a result of higher fuel and energy prices. The sector was also confronted with additional security measures, such as the 100% screening of goods. We also foresee a future increase in investments in security measures, such as the central security concept for non-Schengen flights.
Despite the challenging conditions, the aviation sector as a whole has proven that it is able to grow: in 2012, the number of passengers at Schiphol Airport increased by 2.6 percent to 51 million. In addition, we anticipate further growth in the medium term. Over the next ten years, the number of passengers at Schiphol is expected to increase by approximately 25%.
Trends and developments that affect our business operations and results
- Major developments in the aviation sector. The major airlines in Europe that make use of the hub airports are faced with an increase in competition from low-cost airlines and new market participants. New participants from the Middle-East and Turkey, in particular, are expanding their position on the European market. Air France-KLM is also experiencing this increase in competitive pressure.
- Increasing influence of technological developments. The introduction of new types of aircraft, such as the Airbus 380 and the Boeing 787, gives a new boost to the development of the aviation sector. This will also have an inevitable effect on Schiphol Airport, both in relation to our market position and our infrastructure. These new types of aircraft can bridge greater distances and are able to skip a hub. With large aircraft, traffic between hubs may intensify. The network of long-distance destinations will expand. Larger aircraft require larger aircraft stands. The increase in the number of passengers per flight will also increase the pressure on, for example, the baggage handling systems.
- Airlines aim for cost reduction. For airlines, a competitive cost level is essential for maintaining and developing their network. Declining revenues and increasing costs, such as higher fuel prices, affect profitability. This means that load factors and the efficiency of the processes at the airport are also very important.
- Economic developments have consequences for traffic volumes. The current economic situation is increasingly reflected in passenger and cargo volumes, especially in Europe. This effect is partly compensated by the growth in traffic to and from South America, China and other Asian countries.
- Increased competition between airports. A strong airport stays strong if its customers are satisfied: passengers, airlines and other users such as tenants and visitors. Quality perception and sufficient capacity are essential elements of a good competitive position. Schiphol is faced with an increase in competition in both transfer and destination traffic. Europe's main hub airports, such as London Heathrow, Paris Charles de Gaulle and Frankfurt, have made substantial investments in capacity and quality over the past years to safeguard or expand their competitive position. The transfer market is also experiencing competition from the airports of Dubai and Istanbul. Destination traffic at Schiphol is experiencing competition from surrounding airports in Belgium and Germany where low-cost airlines in particular are expanding their activities. In view of the above, Schiphol urgently needs to invest in quality and capacity.
- More stringent security requirements. On a worldwide scale, the requirements for airport security are becoming more stringent. This also applies to Schiphol. Schiphol aims to combine an efficient security process with higher comfort for passengers. We foresee additional future investments in the area of security, such as the central security concept for non-Schengen flights. This requires major changes to the existing infrastructure.
- Corporate responsibility. Limiting noise impact remains an important aim for the region. Schiphol attaches great importance to the dialogue that takes place within the Alders Platform and the agreements with respect to selective growth. These agreements, which are laid down in the Aviation Policy Document, are the compass for the further development of Amsterdam Airport Schiphol and the regional airports. Two global sustainability issues that are particularly relevant to the aviation sector are climate change and the reduced availability of commodities.
- Consumers more critical. The uncertain financial situation in Europe has had a negative effect on consumer confidence. At Schiphol airport, this effect is seen mainly in the form of a decrease in the average spending by European passengers. The average spending of passengers from other parts of the world is still increasing, which is largely attributable to the further improvement of the range of products and services offered at the airport. There is also an increase in the demand for high-end brands, a high level of service and more 'experience'.
- Challenges in the real estate market. The Dutch real estate market is being confronted with lower revenues, lower occupancy levels and declining property values. To date, we are seeing a different picture at the Schiphol location: occupancy levels have risen and rental income has increased. Central, multifunctional locations in city centres and at strategically positioned multimodal hubs, such as the Schiphol location, have not lost their appeal.
- Legislator is an increasingly important stakeholder. Laws and regulations determine to a large extent the freedom of movement and the investment capacity of airports. Legislators and supervising bodies around the world, including those in the Netherlands, are increasingly exercising their influence on the quality and the cost development of large airports.