Social-economic function of air transport and the role of governments
When compared to other modes of transportation, speed is the principal competitive advantage of air transport. Especially for long distance travel, there is no better alternative to the airplane in particular for the movement of people. With respect to the transport of goods, the high cost of air transport means a very low number of global exchange in terms of volume (about 3%) but very high in terms of value (about 35%).
Air transport is by definition global, but, as opposed to almost all sectors involved in global exchange of goods and services, is not subject to the regulations of the WTO and is characterized by a high level of political oversight. Governments, both national and local, are the kingpins for the air transport market from the definition of flight connections to the regulation and almost always the management of airports. In fact, the control of commercial routes has been historically strategic to guarantee the security and wellbeing of a territory.
The interest of governments in air transport, beyond its strategic importance, is also due to its high direct, indirect and induced social and economic impacts. In direct terms, the contribution of air transport to world’s GDP is higher than that of the pharmaceutical, textile and automotive sectors. Airports are among the principal generators – both direct, indirect and induced, on site and off site – of income, employment and therefore fiscal flow. Considering all of this, for example, Frankfurt airport, with over 78,000 employees working in more than 500 companies, represents by far the largest “plant” of a big manufacturing country like Germany.
In conclusion, direct air connectivity (especially intercontinental) represents a crucial factor in making a region more competitive and attractive. More direct connections usually translates into higher growth for the territory served by an airport. Commercial trade with foreign countries, tourism, investments both entering and exiting and migratory dynamics are the principal drivers of demand in air transport, and are, at the same time, the sectors that most benefit from air connectivity. As Colin Matthew, CEO of Heathrow Airport, writes:
Our history as an island-trading nation should give us a clue. We do well in specialist industries that require global mobility – businesses that either need to meet clients around the world, or attract talent form across the globe. Part of our competitive advantage is rooted in the UK having had the world’s largest port or airport on its shores for the past 350 years.
One can affirm that direct aerial connectivity is the public good produced by the joint activity of airports and companies that justify, a fortiori, the interest of the State in this sector with regard to the public interest, not necessarily guaranteed by mere market dynamics.
Milan in the global flows of aerial transport
Within the context of global flows of air transport, Milan and the area of its primary airport, Malpensa, are relatively peripheral. It contrasts with the dimensions and characteristics in the local economic and social context. In fact, the catchment area of Malpensa has excellent ranking at the national and European level, with regard to any parameter one wants to make between these directly related to the creation of demand for air transport (demographic dimensions, GDP, GDP per capita, international trade, touristic and migratory flows).
In effect, Milan’s three airports represent all together the third source of local demand for air transport in Europe, with around 35 million passengers in 2013. But, Malpensa is not ranked as third European airport in terms of passenger traffic: it is only 21st. Above all, Milan’s direct intercontinental connectivity is a quarter of London’s. It is also lower than that of smaller and less international European cities and regions. Why?
There are many reasons, some structural and others political. Among the first to be included are the reasons connected to geography and history, two fundamental determinants of aerial transport movements.
The geographic position of Italy, considering the position of the principal world markets of air transport, is not favorable. Air routes are designated according to geodetic curves: to connect any Italian city to New York or Tokyo, which are respectively at the latitude of Naples or Lampedusa island, one takes off towards the northwest or northeast grazing Canada or flying over Siberia. A large hub airport located north of the Alps could easily attract passengers with flights from Italian airports in order to board them on intercontinental flights to North America or the Far East; the contrary would be much more difficult. Helsinki for example, is a small city in a small country, but benefits from an extremely favorable position to capture European passengers bound for China on direct flights, just as Lisbon serves as a gateway to Latin America. Geography is the principal competitive advantage – together with inexhaustible resources poured into airline companies by respective governments – of the recent success of airlines situated in the Persian Gulf, which, above all, are looking to intercept and redirect to its own hubs the movement between the large European market and the fast-growing Asian market.
As for history, there are differences between having been a capital of a vast colonial Empire and having been a city in a country like Italy, which had colonies very close to its borders. London has this past as a colonial empire, over and above its exceptional demographic and economic dimensions, and its strategic geographic position for routes to North America. Just as Madrid has a similar relationship with Latin America. Milan and Rome do not have this history.
Among political reasons, one must consider a peculiarity in the Italian air transport policy. Italy is the only European country in which the conjunction of the regulation concerning airports and the strategy of the national carrier (a State own company) has produced a condition in which peak supply of air transport does not coincide with the peak of demand. If, on the one side, almost 2/3 of the demand (in terms of the value of tickets sold in Italy) is generated by northern regions (1/3 only in the area of Milan), on the other side the Alitalia hub is elsewhere, in Rome.
On the other hand, numerous attempts to transform Malpensa into a hub airport, made by Alitalia as well as by other European airline companies capable of managing the best continental hubs (KLM and Lufthansa Group), were compromised by the high dispersion of air transport options between the different airports of the Milanese airport system (specifically Linate). This dispersion was in turn the fruit of political decisions.
In fact, there is no other European city comparable to Milan as local demand for air transport with three airports (all within 50 km of each other) all offering international flights and all having an infrastructural and legal capacity of handling over 10 million passengers per year. Quite contrary, in other parts of Europe the rule is crystal-clear: one city-one airport. And this is more true even for big centers such as Amsterdam, Madrid and Monaco. When there is a second airport, it is generally placed far away from the city center, as in Frankfurt (125 km) or Barcelona (90 km). In the rare cases where they are closer, they are much more limited in terms of operation, like Bromma of Stockholm which offers mostly domestic flights with a total of only 2.3 million passengers per year as opposed to the 20.6 million of Arlanda, the primary airport.
In these conditions, the mechanics of a hub with flights fed by additional demand to the local service (which is the principal leverage for the organization of international flights) becomes hard to sustain because of two phenomena: the loss of intercontinental passengers from secondary airports to European hubs (i.e. Milano Linate – Paris Charles De Gaulle – Chicago) which reduces the amount of local demand; the dispersion of passengers on flights coming from the same city and directed to secondary airports (i.e. Napoli – Milano Linate), which makes feeder flights to the primary airport economically unsustainable (i.e. Napoli – Milano Malpensa).
Therefore, it is not by chance that Malpensa is the only primary European airport that runs on only 50% of the total capacity of Milan’s area airports.
It is not by chance, as we noticed, that Malpensa is the only airport in the history of world commercial aviation that has seen three attempts to operate as a hub in only 15 years, all failed and explicitly attributed to the dysfunctional attitude of the Milanese airport system. It has been an event so singular to merit the dishonorable mention of world’s worst practice in airport planning from the OCSE together with the famous case of Mirabel Airport in Montreal.
The absence of a hub serving the area the highest demand for aerial traffic in Italy and the consequent loss of traffic towards the principal European hubs make evident how Italy represents the second continental market for almost all European companies after their own domestic market. This quite clearly explains the structural crisis that Alitalia has gone through for the last thirty years and its substantial failings as a major company.
Just to make one example: it is very showing, that Milan provides direct flight service to only three destinations (New York, Toronto and Miami) in the most important intercontinental market (North America) from Europe, while Monaco – a city with similar geography, history, demographics and socio-economic profile, and with a local demand for air transport that is significantly lower – can on the contrary provide direct flight service to at least a dozen intercontinental destinations.
The dysfunction in the organization of intercontinental flights within the Milanese airport system (mostly the fruit of political decisions) results in the absence of a strong European company, in defense of the Milan area market, capable of building its own hub with an adequate supply of intercontinental flights. This is the principal reason for the mostly peripheral situation of Milan (and of Italy, which remains the 8th market in the world for seats offered) with respect to global flows of aerial transport. This situation leads to a loss of potential growth and development for the economic and social system.
 AA.VV., Aviation: The Real World Wide Web (Oxford Economics, 2009).
 Cfr. AA.VV., The social and economic impact of airports in Europe (York Aviation – ACI Europe, 2004).
 Aviation: The Real World Wide Web, cit.
 Fraport at a glance (Fraport website, 2013).
 AA.VV., One hub or none: The case for a single UK hub airport (Heathrow Ltd, 2012).
 P. Beria and A. Laurino, Atlante dei flussi e delle opportunità del trasporto aereo nell’area milanese (Politecnico di Milano for Globus et Locus and SEA, 2013). In addition, AA.VV., Airport Industry Connectivity Report 2004-2014 (ACI Europe e SEO aviation economics, 2014).
 Local demand for air transport indicates the number of passengers coming from or going to the area served by the airport, excluding passengers that are making a transfer through the airport (flight connection).
 AA.VV., Analisi periodica sull’accessibilità aerea del sistema aeroportuale lombardo (Unioncamere Lombardia – Certet Bocconi, latest available data: 2012).
 Dossier reserved Alitalia, published by “La Stampa”, 2006.
 AA.VV., Airport capacity expansion strategies in the era of airline multi-hub networks (OCSE – International Transport Forum, Discussion paper n. 5, 2013).
 AA.VV., Alitalia’s long-haul network and Etihad’s short-haul feed are enhanced with Etihad’s proposed stake (CAPA – Centre for Aviation, 2014).