Beating the Recession

“We serve two markets successfully: the North Rhine Westphalia region and the Netherlands and will welcome more than 2 million passengers by the end of this year, so things are developing quite well for us,” Ludger van Bebber, Niederrhein. (FWNG)

Tom Allett asked the CEO’s of five German airports how their fortunes have been affected by the current economic downturn.

“We serve two markets successfully: the North Rhine Westphalia region and the Netherlands and will welcome more than 2 million passengers by the end of this year, so things are developing quite well for us,” Ludger van Bebber, Niederrhein. (FWNG)

 
While the size of the operation at the world’s largest airports means that they will effectively pass through the ‘credit crunch’ outwardly unscathed, the operators of most other airports find themselves in more challenging circumstances.  I wanted to hear the views from bosses of both mid-size and smaller airports, so I looked to all points of the German compass and posed the same six questions to five of the country’s CEO.
 
Question 1
While the ‘Frankfurts and Munichs’ of this world will always survive, it is a little more difficult for everyone else, so what are the main challenges you face in the current downturn?
 
Joerg Schumacher, CEO, Flughafen Frankfurt-Hahn
“We are optimistic with regard to the time after the crisis.  We are convinced that Frankfurt-Hahn will be one of the airports that could profit from the current downturn.  In the passenger segment we host the biggest and most successful Low-Cost Carrier, Ryanair, which is presently the only airline even growing in the current economic environment.  In the cargo segment we have outstanding location advantages like the approval of 24/7 operation, a cost effective round-the-clock service combined with capacity and slot availability.  Our main challenge will be to convince even more airlines to use the high quality facilities and the location economies of Frankfurt-Hahn airport.”
 
Dierk Näther, MD, Flughafen Leipzig Halle GmbH
“The development of passenger traffic over the past few years has continued to proceed non-cyclically and has been characterised by both continual periods of growth as well as temporary regressions that are in line with the global crisis within the industry sector.  However, the current summer flight schedules show that airlines and tour operators are continuing to count on the Leipzig/Halle base.  Compared with the previous year’s summer season, we are recording a similar array of flight destinations and weekly flights for business and private travellers.  Nevertheless, the development of passenger volume is, of course, as the current worldwide trend shows, determined by the overall economic situation.
“In contrast to the passenger traffic, in 2008 Leipzig/Halle, handling over 440,000 tonnes of air cargo emerged as the third largest air freight hub in Germany after Frankfurt and Cologne/Bonn.”
 
Ludger van Bebber, MD, Flughafen Niederrhein GmbH
“To date we are not directly affected by the recession, but we note that cheap tickets are getting more important for travellers in these difficult times and that pushes up the load factors on the 44 Ryanair routes at our airport.”
 
Karl-Heinz Krüger, MD, Flughafen Nürnberg GmbH
“Our tried and tested strategy of maintaining development continuity and a broad range of choice to our customers, thus offsetting the first signs of the economic crisis at a very early point in time, has proven successful so far.  In order to face further changes in the market, which are to be expected, we will, however, have to readjust our processes and continue to increase cost efficiency.  By doing so we’re making ourselves fit to face the challenges posed by the market.”
 
Maria Muller, CEO, Rostock-Laage-Güstrow GmbH
“With regional airports you do exactly what their ‘bigger’ colleagues are doing.  Look at all the cost drivers and optimise your budgets.  Postpone certain investments and put even more strength into sales and marketing.
The biggest challenge for us comes from the reduction of the tour operator charter flights.  They took out a lot of capacity and we are certainly missing this segment of income.”
 
Question 2
How do you balance your short-term survival against long-term viability?


Joerg Schumacher, Frankfurt Hahn
“The economic and financial crisis, which has considerably depressed world air traffic since the end of 2008, certainly affects us at Frankfurt-Hahn.  In the first quarter of 2009 we faced a 38% drop in airfreight cargo tonnage (flown freight) compared to the same period in 2008.

“Our tried and tested strategy of maintaining development continuity and a broad range of choice to our customers, thus offsetting the first signs of the economic crisis at a very early point in time has proven successful so far,” Karl-Heinz Krüger, Nuremburg. (FNG)

During the same period, 689,014 passengers used Frankfurt-Hahn, 7% less than in the first quarter 2008.  However, we have always pursued a long-term strategy.  We will use the downturn as an opportunity to improve our infrastructure.  Our main shareholder, the Land Rhineland Palatinate, has decided to form a development company, which will redevelop some of the available space around the airport.  We are certain that one of our future objectives will be to focus on increasing profits within the non-aviation sector, as this is where we see the best potential for continuous development.”
 
 
Dierk Näther, Leipzig Halle
“Thanks to the launch of the European DHL hub and the involvement of Lufthansa Cargo, which is followed by the launch of AeroLogic at the end of June, we are optimistic about the long-term development of the base.
“As far as passenger traffic is concerned, we want to strengthen the airport’s profile as a gateway to the interesting, cultural and historical regions of Saxony and Saxony Anhalt.  By continuing to intensively advertise these holiday destinations, we intend to reach this goal.”
 
Ludger van Bebber, Niederrhein
“As per my answer to the previous question, we’re not struggling with the recession.”
 
Karl-Heinz Krüger, Nuremburg
“Part of the long-term strategic direction of this enterprise, a strategy we’ve applied for many years now, is, among other things, a continuous optimization of processes and the restructuring of our internal organization.  In order to counteract the current crisis we’re making full use of short-term savings potentials and we will continue to push ahead with further cost savings.”
 

“Long term, we believe in the growth of air traffic, due to the fact that our region has a super high inbound potential and – next to Bavaria – is one of the best-booked tourist destinations in Germany,” Maria Muller, Rostock.

Maria Muller, Rostock
 
“Our short term survival is backed up by our shareholders.  Long term we believe in the growth of air traffic, due to the fact that our region has a super high inbound potential and – next to Bavaria – is one of the best-booked tourist destinations in Germany.  German tourists avoid Spain and choose holidays at our own beautiful coasts and landscapes.”

 
Question 3
Are there any measures you have already been forced to introduce because of the downturn?
 
Joerg Schumacher, Frankfurt Hahn
“At present we have applied for 20% short-time-working in the administration at the employment bureau.  We still have negotiations with our work council.”
 
Dierk Näther, Leipzig Halle
“Against the backdrop of the current crisis, cost optimisation is our top priority.  This means that all expenses must be scrutinised again.  Furthermore, our company benefits from its lean and flexible structure, especially during these times.”
 
Ludger van Bebber, Niederrhein
“No, as our traffic currently grows by more then 50we are taking measures to deal with the increasing traffic.”
 
Karl-Heinz Krüger, Nuremburg
“No.”
 
Maria Muller, Rostock
“Last winter we cut back the working hours for our staff until this March.  For the summer season we are on full working hours again, but next winter we might have to cut back staff hours again.”
 
Question 4
How well is your airport equipped to deal with the recession?
 

“We have an outstanding local economy, an outstanding infrastructure set-up in the heart of Europe and last but not least, a highly motivated team,” Joerg Schumacher, Frankfurt Hahn. (FFH).

Joerg Schumacher, Frankfurt Hahn
 
“We believe that Frankfurt-Hahn is well positioned in the current economic downturn.  We have strong stakeholders: the Land Rhineland Palatinate (65.5%) and the Land Hessen (17.5%), which are committed to our business concept.  Additionally, we have an outstanding local economy, an outstanding infrastructure set-up in the heart of Europe and last but not least, a highly motivated team.”
 
Dierk Näther, Leipzig Halle
“Leipzig/Halle ranks among one of the most modern European airports and has a 24/7 operating permit for freight flights.  We have a parallel runway system that enables the two 3,600-metre long tracks to operate independently from one another and is not subject to any weight or slot restrictions.  Furthermore, the airport is linked to the trans-European motorway network as well as the inter-city rail network of Deutsche Bahn.  With the combination of these features and the area and capacity reserves available at Leipzig/Halle, the airport offers planning and investment protection to prospective investors.”
 
Ludger van Bebber, Niederrhein
“We run a very flexible and quick reacting airport administration.  We always keep down costs.  We have very professional partners who deliver the best service at lowest cost to passengers and airlines.  These are the main factors to deal with any change in the economical environment.”
 
Karl-Heinz Krüger, Nuremburg
“In the past few years we’ve been able to develop a solid market geared towards the people and economy of the Nuremberg Metropolitan Region by operating this business in a sustainable manner with a continuous expansion of traffic supported by reliable partners.”
 
Maria Muller, Rostock
“I guess nobody is well equipped for the recession.  An airport is influenced by so many outside factors that you can’t streamline.  If people lose their jobs or another flu epidemic strikes, there is little you can do to change things.”
 
Question 5
How do you see the future developing?
 
Joerg Schumacher, Frankfurt Hahn
“Despite the challenging conditions, we are looking forward with optimism.  We are sure that we will have the opportunity to take advantage of the economic crisis and generate new airline clients, and to grow in the future.”
 

“I see considerable grounds for Leipzig/Halle to be developed in the medium term so that it ranks at number two among the German air freight hubs,” Dierk Näther, Leipzig Halle. (FLHG)

Dierk Näther, Leipzig Halle
 
“I see considerable grounds for Leipzig/Halle to be developed in the medium term so that it ranks at number two among the German air freight hubs.”
 
Ludger van Bebber, Niederrhein
“We feel very confident that the future will be good to us.  Passenger figures are still increasing above average.  Ryanair will base its 7th aircraft here in July and charter traffic is developing as well.  We serve two markets successfully; the North Rhine Westphalia region and the Netherlands and will welcome more than 2 Million passengers by the end of this year, so things are developing quite well for us.”
 
Karl-Heinz Krüger, Nuremburg
“Despite a drop in demand the airport’s management team expects a passenger level of about 4 million for 2009.  According to current assessments, growth isn’t expected until 2010 at the earliest.  In the medium term, we expect to be able to return to pre-recession growth levels.”
 
Maria Muller, Rostock
“The Future?  Looking towards 2010, we expect to have a very tough business year, but we certainly won’t relax for a minute; we will be very active on the sales side.  We will work harder and longer to achieve results. As for the long term future, again, we are lucky that our region has become a very trendy vacation spot and that airlines are able to find a good ‘new playground’ for passengers, which want to fly directly into this region to spend a nice short-break at the beach.”
 
 
The leaders who took part on this article; from the top, in their airports’ alphabetical order; Joerg Schumacher, CEO, Flughafen Frankfurt Hahn; Dierk Näther, MD, Flughafen Leipzig Halle; Ludger van Bebber, MD, Flughafen Niederrhein; Karl-Heinz Krüger, MD, Flughafen Nürnberg GmbH and Maria Muller, CEO, Flughafen Rostock-Laage-Güstrow GmbH.