Expansion through stronger hubs and network development

Hub-to-hub and point-to-point operations are complementary in serving demand for air travel. They will always depend on the demand and competitive conditions prevailing on each market. To understand the benefits from an environmental perspective, a marginal approach and data on actual operations involving the entire transport chain (including road and rail) is required. In any case, hubs will always constitute a very efficient mode of operation in terms of connectivity, passenger choice and environmental impact. For example, linking five cities on both sides of two hubs will necessitate only 11 flights to connect all cities, while the pure point-to-point network will require as many as 66 flights. In addition, if the number of airports is increased, the number of routes needed in a pure point-to-point network grows rapidly in a parabolic manner.

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Therefore, a network containing 100 airports - a fairly typical number for a international mainline carrier - would require 50 times more routes, and for the very large carriers with networks covering 150 airports, as many as 75 times more routes, with their associated frequencies and fuel burn and added burden to the network�s infrastructure. The connection through a hub generally means a
better rail offering to the major hub cities both in terms of frequency and speed. Hubs will generally be closer compared to a point-to-point international long-haul connection. The shorter distances and the subsequent weight savings in terms of fuel required improve overall fuel efficiency. In short, hubs will most often mean fewer flights, less fuel, lower emissions and reduced noise.
On the market side, in order to understand and effectively forecast the future market for commercial aircraft, it is important to fully incorporate a view on how the future network will evolve from the situation today.

Factors driving network evolution include market deregulation, airline competition and strategies, emerging markets and, from the aircraft manufacturers, the types of aircraft and technology that will be deployed on this future network. From a forecast perspective, this means there is a need to take the actual network and the airlines� operations, and apply the forecast passenger traffic growth in a way that logically grows this network, both in terms of existing city pairs (organic growth) and in terms of new routes. These developments are interrelated and inseparable. Therefore, with intercontinental traffic forecast to nearly triple in the next 20 years, Airbus expects this growth to be accommodated by both adding new non-stop services and through the strengthening of existing city pairs, primarily between major centres of population.

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Cities are getting larger. Over the course of early history, from the era of Memphis in Egypt until the industrial revolution, the size of the world�s largest cities remained relatively unchanged. By 1825, London had become the largest city in the world and continued to grow. Then in 1925, New York became the world�s largest city. Since the 1980s, the order of these top three cities (Tokyo, Mexico City and New York), has remained the same; they have simply become much bigger. In 1969, when the 747 was introduced, there were four mega-cities in the world, with populations of more than ten million people. Today, as the A380 is being introduced, there are 26 such mega-cities and by 2015 there are expected to be 33. As many as 22 of them will be in Asia.
The four mega-cities of 1970 were inhabited by a combined total of 43 million people. Today�s 26 mega-cities are home to 500 million people. Urbanisation is increasing fast. In 1970, the global urbanisation rate was 20%, but today, more than half the world�s population is living in urban areas. By 2030, that figure will increase to two thirds of the population, as more than 1.8 billion additional people are expected to move from rural to urban areas. For example, in China, the urban population will increase from 44% today, to 64%, which is much closer to that of Japan. As well as being highly populated, mega-cities, such as Tokyo, New York, Los Angeles, Shanghai, Rio, Buenos Aires and Mumbai are also the most vibrant and dynamic cities in the world. They offer more and better jobs because they are global business centres, with the resulting effect of a higher propensity for air travel by their inhabitants. Such cities are also main destinations for a booming international tourism market, as a result of the high concentration of cultural and historical attractions that they offer.

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A network of cities

The three attributes helping to define global hub cities are that they are mega-cities, large centres of operations for particular airlines (such as Frankfurt, Atlanta) and large connecting cities (such as Dubai, Singapore). These global hub cities are economic, business, population, political, or strategic centres. There are currently 32 global hub cities around the world, including Tokyo, New York, Paris, Beijing and London. International passenger and cargo traffic is very concentrated at these global hub cites; in fact, as many as 77% of long-haul passengers want to fly to, from or between them. These global hub cities will continue to experience a high growth in passenger volume, which will be driven by increasing local demand between the cities.

The second source of growth for the hub cities is connecting traffic, which is set to continue expanding, as many markets will still have insufficient demand for direct international service. Interestingly, one source of connecting traffic is passengers who could in fact fly directly if they wanted to. For example, in 2006, 20% of those flying between Europe and Asia selected a connecting route, even though they could have taken a direct service. There are several reasons for this. Many passengers prefer to connect due to the breadth of the schedule offered at major hub cities, both in terms of frequency and destination. Passengers may also choose to fly via a hub to take advantage of a stopover, because they prefer the service of an airline operating from these large hub cities, or - and in many cases this is the more important reason - because of a lower ticket price. Despite the anticipated opening of more than 70 new non-stop Europe-Asia routes in the next ten years, primarily to China and India, connecting traffic will continue to grow. Other main flows show similar patterns reinforcing Airbus� view that connecting traffic will remain essential and will mainly pass through existing hubs.

The importance of these major hub cities can be further demonstrated by the fact that 50% of the world�s 100 fastest growing city pairs are between the 32 global hub cities mentioned earlier and almost all others involve a hub at one end or the other. The importance of large aircraft to these markets can be demonstrated by the fact that all of the top five airlines responsible for most of the growth on these routes have ordered the A380.

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Network segmentation explained:

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Using a broad route classification makes it easier to understand how growth will be allocated across the future network:

Today, most global hub cities are interconnected. The markets amongst these cities continue to benefit from strong "organic" growth, i.e. growth generated by existing routes, through large increases in local and connecting traffic. These are and will remain trunk routes, where a significant portion of the future fleet of very large aircraft will be operated.
Opportunities between hub and secondary cities are the most common source of new routes. These new routes, which still rely on a large proportion of connecting passengers, will absorb part of the overall growth. Typically, existing routes in this category are operated by a single airline, targeting one daily flight. Once this daily frequency is achieved, larger aircraft than those required to start operations are used to accommodate any additional organic growth.
Routes between secondary cities are marginal. Many of these markets have no need for a daily flight and represent just 8% of total traffic today.

The single most important driving factor of network evolution is that traffic will grow 1.7 times faster than the number of routes on the network.

Bigger routes linking bigger cities

Over the last 30 years, global hub-to-hub routes and hub-to-secondary routes have grown at exactly the same pace. Today 225 long-haul routes, from a total of 1,500 worldwide, link the 32 global hub cities to each other and account for almost half of all long-haul traffic. These hub-to-hub routes continue to grow organically thanks to the dynamism of the associated cities. Additionally, 45% of the capacity ASK (Available Seat Kilometres) on these routes is currently operated by aircraft with more than 350 seats. Today, these are typically 747s, but the number of A380s on these routes will increase steadily from 2008. These routes are and will remain very important markets for airlines, as they will continue to absorb between 30% to 70% of all growth, depending on the specific flow. It will, therefore, be important for airlines to maintain and even enlarge their presence in these key markets.

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Between Europe and Asia, this pattern of growth will see the very largest routes grow organically, with the addition of nearly 15 million seats by 2015, providing market opportunities for very large aircraft, like the A380.
Routes from these global hub cities to secondary cities will have greater opportunity to grow through new routes, although they will continue to see considerable growth on existing routes. There will be as many as 61 new city pairs in that segment. In fact, if hub-to-secondary routes are anticipated to grow by more than 16 million seats by 2015, as many as eight million of these will come from existing routes. This organic growth will be achieved by an increase in frequencies and aircraft size. New routes will add another eight million seats. Given the diversity of the source of this growth (organic, frequencies, capacity, leaner new routes), the flexibility offered by an extensive family of aircraft with strong commonality, such as the A350 XWB, will be an asset in serving this market.These routes will be ideal markets for both small and intermediate twin aisle-aircraft.
Finally, it is on the secondary-to-secondary routes, that will experience the smallest growth, compared to routes linked to a global hub.
Most hub-to-hub routes are, and will all ultimately become very large routes, which have more than 1,000 passengers one way, on a daily basis. Today, 47 such routes exist on the long-haul market, of which 60% are linked to Asia and account for a quarter of the worldwide long-haul traffic. The number of these large routes is forecast to more than treble in the next 20 years, with passenger volumes also growing to reach an average of 2,000 passengers per route, per day, by 2026. Aircraft with greater capacity will, therefore, be necessary to accommodate this growth on markets that are already well served in terms of frequency.

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Today, the North America to Asia network is not as mature as the Europe to Asia network. There are currently 80 city pairs in operation on this market. Over the next 20 years, as many as 70 additional routes will be added and they will have enough origin-destination traffic to justify a minimum of three weekly frequencies on a sustainable profit basis by their opening year.
As for Europe to Asia, most of the route openings will involve a global hub city at either end. North American demand is concentrating on large cities as in Asia, a situation exacerbated by the fact that the global hub cities are also major airline hubs.

By 2015, the core hub-to-hub routes are expected to represent 70% of the trans-Pacific and North America to India traffic; some 36 million seats available per year.






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