Burghouwt, G. and De Wit, J. (2005) “Strategies of multi-hub airlines and the implications for national aviation policies”, Airneth report 1., Workshop, 28 October 2005, The Hague, The Netherlands

The objective of the Airneth workshop network strategies of multi-hub airlines and its implications for national aviation policies', held on 28 October 2005 in The Hague, was two-fold. Firstly, to gain insight into the most relevant insights with respect to multi-hub network development in the academic world. Secondly, to assess the consequences for policy-making with regard to the development of Schiphol and Paris as primary hub airports in the network of Air France-KLM. The prospect for Schiphol as a secondary intercontinental hub besides Paris Charles de Gaulle in the Air France-KLM network is a "no, but" story.

From a network economic point of view, the use of a multi-hub system with hubs located in close proximity to each other is always more cost intensive than a single hub system due to the loss of density economies and the duplication of complexity costs. Given the larger OD market of Paris Charles de Gaulle and its larger network, Paris Charles de Gaulle is likely to be the preferred hub for Air France-KLM. However, hub-bypassing, strategic positioning capacity restrictions at the principal hub, complexity costs of giga-hubs, bilateral restrictions and better aircraft utilisation may overcompensate the loss of density economies and the duplication of complexity costs. In such cases, a network with multiple hubs may be the preferred network configuration. The policy options for national aviation policy and airport policy to stimulate or steer the development of Amsterdam Schiphol as a secondary hub are limited.

Hubs are a means to achieve network quality, not a goal in itself. Maintaining network quality at Amsterdam Schiphol should be the main objective. Providing airport and airspace peak-hour capacity and reliability is the key-element for the growth of any hub, including Schiphol. A level playing field for Schiphol vis-à -vis Paris Charles de Gaulle and other hubs has to be guaranteed in order to ensure a fair starting position for Schiphol in the competitive struggle. One should be careful with the facilitation of low-cost airlines at a secondary hub such as Schiphol. Although low-cost carriers are beneficial to an airport in many ways, they could also ravage the relatively small OD market of a secondary hub and drive down the yields of the hub-carrier. The Netherlands could give seventh freedom rights to other major airlines if active hubbing at Amsterdam should decline.

Seventh freedom rights may force the hub-carrier to develop the secondary hub to keep out competition. On the other hand, seventh freedom carriers may provide Schiphol with long-haul network quality. If active hubbing by Air France-KLM should decline, having the option to develop low-cost carrier activities at the airport is important in order to ensure short-haul network quality.

See also:

• Presentation and papers Airneth workshop 'Network strategies of multi-hub airlines'