Frankfurt’s top status at risk in battle for air traffic

Date: 04/09/1997

By Bruce Barnard

FRANKFURT, the biggest airport in continental Europe, could pay a heavy price for having friends in high places.

The German government lobbied frantically to water down and delay the introduction of a Union directive to liberalise airport groundhandling to protect the country's top airport. But this protection could boomerang as Frankfurt stands aloof from the rush by its rivals, in Germany as well as in the EU, to shake off the shackles of public ownership, expand abroad and allow competition on the Tarmac.

Frankfurt has redoubled its efforts to create a joint holding company to combine all German airports to sharpen their competitive edge. “Now is the time to decide,” said Manfred Schölch, deputy chairman of the airport.

It is not in danger of losing its ranking as Europe's top airport for passengers - 38.8 million in 1996 - and cargo. Investment is running at an all-time high of around 1 million ecu every day as the owner/operator Flughafen Frankfurt/Main AG (FAG) boosts capacity and improves facilities.

But, in time, FAG risks losing market share to more nimble niche airports and to its larger competitors which are investing beyond their perimeter fences.

By contrast, Frankfurt has mainly concentrated its energies on its home turf. And while privatisation sweeps the industry, from Italy and Austria to the Netherlands and Denmark, Frankfurt remains securely in the hands of the local authorities, a handy jobs and cash cow.

The decision to delay competition in groundhandling until 2002 reflects a concern to protect jobs in a sector that contributes much more to Frankfurt's revenues than, say, those of London Heathrow, where duty-free sales are the biggest money-spinner. But while BAA, Heathrow's owner, is preparing to cushion a fall in this income when duty-free sales in the EU end in mid-1999, Frankfurt is only now looking for alternative revenues.

Frankfurt's defences were bolstered recently by a post-Cold War dividend in the shape of part of a US airforce base hugging its own land. That is being developed at a furious pace to close the gap with its arch rival Schiphol in the fast-moving distribution and logistics sector.

The competition is encircling Frankfurt. Schiphol has attacked its eastern flank by taking a stake in Vienna airport, and planned high-speed rail links to the Netherlands could allow Amsterdam to lure away some of Frankfurt's long-haul business. Schiphol's decision to license a third groundhandler, Ogden of the US, triggered a 20&percent; drop in rates, making the airport more attractive to cost-conscious carriers.

Europe's big airports face new challenges from second tier rivals who have made steady inroads into the market by catering for low-cost, no-frills carriers like Ryanair, easyJet and Debonair. But this market is no longer restricted to these carriers following the announcement that British Airways has hired consultants to mull over the possibility of setting up its own no-frills operation. Frankfurt could be front-line victim of this coming revolution unless it changes its ways.