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Munich growth pushes pax figures above 30 million
By Sebastian Steinke
As Michael Kerkloh, CEO of Munich airport, pointed out in an interview with FLUG REVUE held in Terminal 2 in the middle of December, “Our Terminal 1 alone processes as many passengers as Cologne/Bonn airport and Terminal 2 handles more passengers than all three Berlin airports together.” There is no question about it: as Germany's number two airport which was expected to have processed over 30 million passengers in 2006 when we went to press, Munich airport has long featured in the global league. Over two-thirds of these passengers are handled in Terminal 2. Most of the credit for this development is due to Lufthansa, which continually provides fresh impetus to growth into the Bavarian regional capital by introducing new routes and this winter will be handling 4,678 flight movements per week in Terminal 2, which has been open since the summer of 2003.
For the first time in Europe, an airport operator and an airline have joined forces to finance between them the construction and operation of this Euro 1.2 billion terminal. As the majority partner, the airport company FMG took over 60 percent of the shares, with Lufthansa taking the remaining 40 percent.
With a new daily service to Denver due to commence on 31 March 2007, the airline will be establishing its tenth long-haul connection from Munich. Four days earlier, on 27 March, a new three times a week Airbus A340-300 service to the Korean capital of Seoul will be introduced, continuing on to the industrial metropolis and harbour city of Pusan.
The expansion course is also making itself felt in Bavaria in the form of new jobs. Lufthansa alone has increased its workforce of 7,154 in “MUC” (Munich's airport code) by 750 jobs during this winter. Including its subsidiaries, airport operator FMG employs another 7,415 people. In its recent survey of the location as a place of employment published in mid-November, Munich airport (both terminals) counted a total of 27,400 employed persons, 40 percent of them women, at 554 public bodies and companies right by the airport on 30 June 2006. These included 624 apprentices in 24 occupational groups. Within the last two and a half years on average four new jobs have been created here every day. The average income according to the airport survey is a very solid Euro 32,000 per year, and in fact this average figure is artificially depressed due to the fact that 6,000 of the employees are in part-time employment. According to a rule of thumb, every direct airport job creates a further two jobs in the surrounding area. For example, Lufthansa alone booked around 100,000 hotel overnight stays in Munich in 2005 directly.
“We are an economic engine. Our airport is now the second biggest employer in Bavaria after Audi in Ingolstadt,” says CEO Kerkloh. “As a result we enjoy extreme stability in the region; economic fluctuations have been virtually eliminated.” Every year the airport alone pours Euro 900 million into the region in the form of wages and salaries.
Even if the year 2006 offered two special attractions in the form of the World Cup and the papal visit, Munich has achieved this successful growth against a background of a somewhat weak general economic situation. As the economic indicators in Germany have now improved significantly, the airport director expects the pace of growth to accelerate still further.
Instead of the 16 long-haul aircraft it deploys here today, Lufthansa is already planning to expand to 20 the number of long-haul jets stationed by the River Isar in the summer of 2007, increasing this to 30 in 2010 and 45 in 2015, assuming that the airport expands as expected. Every single aircraft brings 150 new jobs in the cockpit and cabin, plus up to 300 further jobs in the subsidiaries and regional service providers and boosts the total capital by Euro 150 million, equivalent to a medium-sized company, so Lufthansa promises.
The positive knock-on effect of Terminal 2 is slowly turning into a problem for the airport as utilisation is very unevenly distributed. In Terminal 1 to the west, sometimes activity grinds to a halt outside the peak hours, or rather, outside the booming area of the low fare airlines like Air Berlin. Meanwhile new partners of the Star Alliance are constantly pushing their way into transit terminal 2. Due to the well looked after, modern equipment, the generous waiting areas and extensive shopping opportunities, it is especially popular among many passengers. Here a minimum transit time of only 30 minutes is guaranteed. As in Frankfurt, a separate hub control centre ensures that where delays occur, reducing the time available to catch connecting flights, passengers are collected directly from the aircraft and taken by minibus to the connecting flight. This service is available even for Economy passengers.
Transfer passengers are essential to every hub airport, as local residents alone are not sufficient in number to fill the big long-haul jets. An actual example illustrates this point: on 21 November 2005 flight LH 458 from Munich to San Francisco had onboard 26 passengers who began their journey in Munich and connecting passengers from 39 other places. The biggest groups were 41 visitors from Florence, 16 from Delhi, 14 from Athens and 11 from Genoa.
Italians, especially the well-to-do North Italians who are fond of travel, are a particularly important target group in Munich. “The Munich airport company appreciated that with the help of Air Dolomiti it could extend its catchment area beyond the usual 100 kilometres to one to two hours as the crow flies,” explains Michael Kraus, CEO and President of the Verona-based Italian regional airline. “It is not difficult for northern Italy to orient itself towards Munich. The regional airports there need an entry point to the global network, and that is only possible with a hub. The more long-haul flights come to Munich, the better the prospects for Air Dolomiti.”
With over 600 flights per week and up to 14 destinations, Air Dolomiti is an important customer in Munich, along with Lufthansa CityLine. “In the morning we fly out of the decentralised markets into the hub and in the evening we go back again,” is how Kraus describes his entrepreneurial concept.
As part of this, in Terminal 2, not far from its bus gates, for the past year Air Dolomiti and the airport operating company have jointly maintained a dedicated area of the terminal with an Italian flavour, known as the “Spazio Italia”. Here there is not only a big cafeteria which, apart from Bavarian beer and veal sausages, serves only Italian food and drinks, but there is also an Italian-speaking service counter and a small exhibition area used by Italian companies for publicity events.
On the airport side, the 74 percent FMG subsidiary Eurotrade Flughafen München Handels-GmbH runs the “Spazio Italia” plus about another 80 shops, 39 of them in Terminal 2. Its five business fields include press and travel requisites, duty-free goods, textiles, luxury brands and catering.
“In 2006 we succeeded in increasing our revenues by 15.7 percent on the back of just seven percent more passengers,“ says Eurotrade's CEO, Hellmut Gebhardt, discussing the annual figures in an interview with FLUG REVUE. In 2006 they sold 30,000 watches “from the Swatch to the Rolex” alone at the airport. He describes his business area as a “gushing source of money”. The long-haul routes have brought more and more foreign customers who are addicted to consumer goods. His analysis goes like this: “The normal Japanese man likes buying luxury brands. The most popular passenger is the Russian. He buys everything and pays in cash. But the best passenger is the Korean. He is keenest on the duty-frees.” When it comes to catering, the Bavarian local speciality of “Airbräu” is the fastest selling item in the airport.
The increasing retail revenues are the product of careful advance planning. At the moment Gebhardt is preoccupied with the upper level 5 of the terminal, which is located in the non-Schengen area, that is, behind passport control. “We see ourselves as floor space developers.” Up here, far from the main passenger flow, there is still room for experimentation. Thus, for example, Aran, a Bavarian alternative bakery from Regensburg, has been persuaded to add some local colour by opening a branch here which, as well as bread specialities and sandwich fillings and spreads, also serves “fair trade” coffee.
Right next door is a shop selling erotica. “That shop is doing really well, especially among women,” comments the Eurotrade CEO. This sex shop, said to be the first one in the world to be found at an airport's airside, has been deliberately positioned here, behind the security barriers, so that passengers are spared the potential embarrassment of having to show their new purchases at the control desk. However, travellers to the USA have to endure one further check.
By 2008 the entire Terminal 2 will be required under new EU regulations to not only be separated into Schengen and non-Schengen areas (selected EU domestic traffic without passport checking versus other traffic with passport checking), but will also have to have clearly divided “clean” and “unclean” areas for arriving passengers. This distinction refers not to bodily cleanliness but to whether the airport of embarkation lies within or outside of the harmonised EU security controls. Under this system an American passenger is viewed as “unclean” despite having undergone stringent checks on departure in America and has to undergo further checks before entering the terminal. Additional glazed passageways along the apron frontage will direct the flow of passengers first to control gates, if required.
When it comes to directing the flow of passengers in Terminal 2, once again the retail experts of Eurotrade have a say in the matter. They always try to position the aircraft assigned to connecting flights at the most distant gates possible so that, to get to them, transfer passengers have to walk a long way, past rows of shops tempting them to make a purchase. On the other hand if the time allowed to get to a connecting flight is less than 40 minutes there is nothing for it but to forgo this way of stimulating demand. The airport is currently having some special SAP-based software developed which will reconcile the complicated requirements of this “contact improvement”.
Airport CEO Kerkloh views the growing non-aviation business in Munich with satisfaction and expects a “clear profit” for 2006. He is expecting to receive the regional planning notices for construction planning of the third runway at the end of February, following which the zoning application can be submitted. The third, 4000m long parallel runway in the north-east is expected to enable the hourly number of flight movements to be increased potentially from 90 to 120, opening the way to further growth. “Our corporate objective is to be the most attractive transfer airport in Europe in 2010,” says Kerkloh.
In ten years from now, by which time Frankfurt airport will have been expanded and Berlin BBI will have opened, he expects Munich to be handling 45 million passengers with three runways. Then, to use Kerkloh's words, despite the still disputed financing and despite the continuing resistance of the city of Munich, he expects Transrapid magnetic levitation trains to operate a direct service from Munich Central station to the airport. Deutsche Bahn is hoping to gain the necessary formal planning approval in the autumn of 2007.
From FLUG REVUE 2/2007
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