Zurich airport’s business plan shredded

Zurich airport's management will have to review its expansion plans Keystone Archive

Swissair Group's decision to transfer most of its routes to its regional subsidiary, Crossair, is likely to force a radical re-thinking of Zurich airport's business strategy.

On Tuesday, shares in Unique, the company that runs the airport, were suspended to prevent their freefall as the airport faces the loss of its main customer.

Plans to turn Zurich airport into a huge international hub will now have to be shelved as the new airline radically scales back its operations. In addition, Crossair is based in Basel and may choose to run much of its business from there.

More will become clear as the month progresses and the airline’s new network takes shape, but the future of Zurich airport now looks likely to be more in the frame of a second division European airport.

“I doubt very much it can survive as a hub but it will remain an important international airport,” says Pierre Condom, the managing director of the aviation magazine, Interavia.

“There are many airports in Europe, Geneva for instance, that are not hubs but do very good business and are very useful to their community,” he adds.

Catalyst for consolidation

There are too many airlines and too many hubs in Europe and analysts say there will be a shakeout of both as the attacks in the United States act as a catalyst for an overdue period of consolidation.

For the past few years, Zurich airport has been a building site with the construction of a SFr2.3 billion expansion including a huge parking bay for aircraft, a new terminal and a shopping centre linked by a railway.

It was given the go-ahead when the authorities expected a 50 per cent increase in annual passenger traffic to 34 million. Now passenger numbers are expected to fall 11 per cent by the end of next year to around 20 million.

Construction work on the expansion is too advanced for it to be abandoned now and the vast empty spaces of the new terminal are likely to bear witness to a flawed strategy that many say should have been avoided.

“The airport will be too big,” says Condom, “though management will hope for an expansion in air travel in the long-term. But at least for the next decade it will be too big.”

Meanwhile, the airport has imposed a recruitment freeze and put a stop to any new investment.

Watching Unique stock

The immediate effects of the Swissair Group’s radical restructuring will not only be felt by its own employees and shareholders. Unique’s stock, still 49 per cent owned by the canton of Zurich, is likely to plummet when it resumes trading.

Not only is the canton set to see its investment in Zurich airport fall, making it difficult to carry through further planned divestment, the scaling back of operations is also likely to have an adverse effect on the local economy.

“For sure it’s not good news,” explains Condom, “It’s too soon to say exactly how bad the effect will be because we are waiting to see what the new airline’s plans are and what connection there will be with Zurich.”

“But Zurich will lose some of its status because the airport was also an economic hub.”

Chance for Basel

For Basel, however, the decline of Zurich airport could present an opportunity for growth although Condom says it won’t assume its role as a hub.

“It’s good news for Basel but it’s a bi-national airport under different constraints and it will never be a hub because of the proximity of other hubs. But activity there will grow.”

For Geneva, the effects are likely to be minimal, though, as Condom says, any crisis represents an opportunity for others to gain an advantage.

In future, it’s likely that many people will view the demise of Swissair and the scaling back of Zurich airport as wholly predictable and, for some, even welcome.

Local pressure groups have long argued that Switzerland did not need an airport the size of the expanded Kloten and had campaigned against the noise and disruption it would bring. Shareholder value, they said, was being put ahead of the concerns of local people.

Many analysts say too that both the Swissair Group and Zurich Airport have long been trying to punch above their weight on the international stage. There is sympathy for those immediately affected but little surprise that the ambitions of the airline and the airport have finally been unmasked.

by Michael Hollingdale