Gothenburg to Become the Next Swedish Hub

Serving a regional, point-to-point market with a prevalence for high levels of business traffic, Göteborg (Gothenburg) Landvetter traditionally loses traffic to other airports, such as Stockholm Arlanda, Oslo and Copenhagen that offer much bigger networks and can connect passengers to other destinations, both short and long haul.

Passenger leakage also occurs via ground transport as well as via larger International hubs. The prime surface leakage occurs via car with the Oresund bridge; a quick way to access Copenhagen, and the a high-speed rail link to Arlanda.

However, City Airline is now trying to change consumer habits and develop Goteborg as a mini hub. The commuter carrier is set to play a key role in the airport's "Göteborg Transfer" project and € 9.9 million investment over two-years to transform its network from a point-to-point to a hub-and-spoke operation.

Swedish Domestic Network

Landvetter is the third largest airport in the Swedish domestic market, with 7 domestic destinations and 163 weekly departures (or a 6% market share of all Swedish domestic departures). This compares to Sweden's largest airport, Stockholm Arlanda, which has a total of 658 weekly domestic departures and 24% market share of the domestic market. Plus, Stockholm Bromma also takes a key slice of domestic traffic, with a 16% market share. The Stockholm Arlanda hub provides the primary competition as it has a total weekly network of 1812 weekly flights domestically and internationally and serves over 90 destinations.

In Goteburg, City Airline is the third biggest airline (In terms of number of flights, behind SAS, whom it partners with - and Lufthansa). City Airline currently serves 19 destinations from Landvetter (including several seasonal services) and has just announced its intentions to introduce ten domestic routes for the Autumn timetable.

In turn, the carrier hopes to serve 1.2 million passengers during 2011, which it hopes to feed to over forty new onward European destinations. City Airline has a growing fleet of two ERJ-135 (37 seats) and three ERJ-145 (49 seats). The carrier is also adding two larger MD-87 aircraft to serve future leisure destinations from GOT.

Traffic Leakage

Air traffic leakage from GOT to major European hubs is demonstrated below, where the airport's top five International markets are to: Copenhagen, Frankfurt, Helsinki, Amsterdam, Oslo and Munich, whilst there are 46 weekly departures to Arlanda.

Source: Flightbase

The Case for a Hub at a Second City: Can it Work?

Traditionally in Europe legacy carriers have either avoided building secondary hubs, or they have failed. For instance British Airways in Manchester and Birmingham, Air France in Lyon and Iberia in Barcelona, Crossair in Basel tried a regional hub with high levels of connecting traffic with little success. The only carrier in Europe that has successfully sustained a dual hub strategy is arguably Lufthansa. Can City Airline prove to be an exception to the rule, building a mini-hub?

City Airline will be able to develop a connecting product focused on selected niche traffic flows. The carrier will be able to develop the product at a fraction of the costs of its larger partner SAS.

Then there is the Goteborg market itself which is the key driver. Goteborg has a high density of some of Europe's most well-known brands, including Eriksson, Volvo and Nokia.

The challenge will be targeting markets not served by Copenhagen, Stockholm or Oslo, particularly Copenhagen given its market position as "Scandinavia's hub". Also given the location of Goteburg, the airport will not offer improved elapse times for key feeder markets in Sweden, Norway and Finland.

Routes News has examined eight of City Airlines' planned new routes from Gothenburg and can reveal that six of these have no current service:

The absence of competition suggests that Gothenburg Landvetter is not looking to compete with the bigger European markets - such as Stockholm, or Copenhagen, which have established themselves through large networks and can combine point-to-point with long haul connections and leisure traffic.

Finn Johnsson, chairman of the City Airline board is confident that the new routes will attract business as well as leisure passengers. Over 4.2 million people live in the catchment areas served by the new domestic routes, according to its research.

"We believe that passenger numbers will rise quickly due to the large number of potential passengers in the catchment areas and the speed of service we can offer. This will mean that the operation will become profitable as early as the second quarter of 2011," says Johnsson.

The Challenges

It remains to be seen whether a niche hub can work without the pulling power of alliance links.
Because they are surrounded by SAS/LH, they would be wise to consider a partnership (say with Finnair or KLM) to feed their services at GOT too.

It should also be noted, however that several of the Swedish regional points can only sustain ARN services off the back of PSO contracts. Additionally, some of the Swedish regional airports had connections to CPH but lost them because of the lack of local and connecting traffic. The population needs to get to the capital, and this is increasingly being done by train.

A reliance on business traffic will bring some difficult periods with the inevitable drop in traffic during the summer months and other key holiday periods.

The choice of City Airline equipment could be questioned as they use the Embraer 145 - a high operating cost aircraft for Europe these days - note that LH is halving its 50-seater fleet in DUS because the regional jet market is tough to compete on cost.

Only time will tell whether City Airline will able to make a success of GOT as second Swedish hub.

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