Stockholm looks to international markets as domestic market shrinks

Logo LFVStockholm’s Arlanda airport (part of the LFV group which operates most of Sweden’s airports) is one of three major hubs in Scandinavia along with Copenhagen and Oslo. However, following a significant slump in 2002 and 2003 that saw annual traffic fall from 18 million to just 15 million, passenger numbers have been gradually recovering and are now close to the peak level attained in 2000. During this period Oslo has overtaken Stockholm for the title of second busiest airport in Scandinavia.

CHT ARN 96-07
Source: LFV

Although international traffic recovered to pre-2001 levels by 2006, domestic traffic is still declining and is currently 25% down compared to seven years ago.

Image: Hall of Fame at Stockholm Arlanda.
The Hall of Fame at Stockholm Arlanda.

Good all-year round demand

Arlanda experiences steady all-year round demand with peaks in March, June and September.

CHT ARN Seasonality
Source: LFV

The peak to off-peak ratio (June to January) of between 1.3 and 1.4 is reasonably low. Growth in the last two years has averaged between two and three percent as international traffic has flourished while domestic traffic continues to decline.

Why is domestic demand falling?

The dramatic and on-going decline in the domestic air market is a relatively rare phenomenon. Analysis of the top 16 domestic routes from Arlanda in 2000 (all with annual traffic volumes of more than 100,000 passengers) and 2006 shows that all routes have seen traffic declines, with two down over 50%.

CHT dom 06 v 00
Source: LFV

Many of these routes have relatively short sector lengths of less than 500 kilometres and a plot of traffic reduction against sector length suggests that the shortest sectors have been particularly badly hit. Improved rail services, capacity reductions by SAS and a general lack of competition on many domestic routes, combined with political and media pressure on consumers about the environmental damage done by air transport have all combined to suppress demand. Local analysts expect domestic demand to continue to fall by up to 1% per annum until 2015.

Image: SkywaysSAS and its domestic partner Skyways operate almost 80% of domestic flights from Arlanda and provide over 70% of capacity. Flynordic, the former Finnair subsidiary now owned by Norwegian, provides serious competition on three routes to Lulea, Ostersund and Umea. Sterling provides competition on the key trunk routes to Malmo and Gothenburg by operating 22 weekly departures on each route. These two LCCs currently have around 15% of domestic frequency from Arlanda and around 24% of capacity.

International growth but what about Italy?

Image: Stockholm advertNot surprisingly Sweden’s Nordic neighbours feature prominently in the top 10 country markets from Arlanda. Germany, UK, France and Spain all feature as might be expected, but Italy ranks only 16th by capacity in winter with only Rome and Milan served.

CHT Top 10 countries
Source: OAG Max Online for w/c 28 January 2008

The US makes it into the top 10 thanks to SAS, Continental and Malaysia Airlines all serving New York Newark with SAS also operating to Chicago O’Hare to feed into alliance partner United’s major hub. Delta plans to start an Atlanta link from June. A direct link to the Middle East was started by Qatar Airways to Doha at the end of November utilising an A319 while SAS began direct services to Bangkok in competition with Thai Airways. SAS and Air China already both serve the Chinese market with flights to Beijing.

While SAS is still the leading airline in international markets it has less than 40% of international capacity and frequencies.

Airline Frequency Share Capacity Share Number of International Routes
SAS 37.7% 38.6% 33
Lufthansa 7.3% 6.8% 4
Blue1 8.8% 5.7% 4
Sterling 4.6% 5.7% 13
Finnair 5.1% 4.6% 1
Source: OAG Max Online for w/c 28 January 2008

This winter LCCs have a modest 14% of international capacity with neither easyJet nor Ryanair serving Arlanda and Air Berlin having just a daily Berlin Tegel flight. Sterling recently added direct services to Brussels, Dortmund and East Midlands plus weekly flights to Chambery and Salzburg for ski enthusiasts.

Competition from Skavsta?

Though Ryanair does not serve Arlanda it has a growing presence at Stockholm Skavsta located around 100 kilometres south-west of Stockholm and this winter started 15 new routes to take its range of destinations to 28. Fellow LCC Wizz Air also operates to Skavsta from several of its Polish bases. However, journey time from Skavsta to downtown Stockholm is much longer than with the impressive Arlanda Express which takes just 20 minutes.

Image: Arlanda Express


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