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© European Organisation for the Safety of Air Navigation This document is published by EUROCONTROL in the interests of the exchange of information. It may be copied in whole or in part, providing that EUROPEAN ORGANISATION FOR THE SAFETY OF AIR NAVIGATION WP2 - Scenarios of future evolution of the European transport network Final version CARE II: The airport of the future: Central link of intermodal transport? Contract N° C/1.102/CEE/EC/04 Version : 2.0 Edition Date : 12/22/2004 Reference : M3S/ATM/CARE-AIRCIT/EEC/WP2/2.0 File name : WP2 2.0.doc Status : Final Class : Restricted this copyright notice and disclaimer are included. The information contained in this document may not be modified without prior written permission from EUROCONTROL. EUROCONTROL makes no warranty, either implied or express, for the information contained in this document, neither does it assume any legal liability or responsibility for the accuracy, completeness or usefulness of this information.

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© European Organisation for the Safety of Air Navigation

This document is published by EUROCONTROL in the interests of the exchange of information. It may be copied in whole or in part, providing that

EUROPEAN ORGANISATION FOR THE SAFETY OF AIR NAVIGATION

WP2 - Scenarios of future evolution of the European

transport network

Final version

CARE II: The airport of the future: Central link of intermodal transport?

Contract N° C/1.102/CEE/EC/04

Version : 2.0 Edition Date : 12/22/2004 Reference : M3S/ATM/CARE-AIRCIT/EEC/WP2/2.0 File name : WP2 2.0.doc Status : Final Class : Restricted

this copyright notice and disclaimer are included. The information contained in this document may not be modified without prior written permission from EUROCONTROL. EUROCONTROL makes no warranty, either implied or express, for the information contained in this document, neither does it assume any legal liability or responsibility for the accuracy, completeness or usefulness of this information.

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WP2 - Scenarios of future evolution of the European transport network CARE II: The airport of the future: Central link of intermodal transport? __________________________________________________________________________________________

Ref. : M3S/ATM/CARE-AIRCIT/EEC/WP2/2.0

Document Change Record

The following table records the complete history of the successive editions of the present document.

Version Date Reason for Change Sections / Pages Affected

0.a 10/04/2004 Draft 0.b 10/06/2004 Analysis of Group 7

Addition of the Executive summary Addition of the scope of the document Addition of Concluding remarks

Section 2.2.7

0.c 10/26/2004 Definition of globalisation Addition on section on world economy Changes in the names of scenarios Addition of the reference to the European Commission in the scope of the study Addition of comparisons between scenarios

Section 3.1.1.1 Section 3.1.1.2

Section 3.2 Section 1.1

Section 3.3

0.d 11/04/2004 Consequences on the airport of the future Section 3.4.1 0.e 11/19/2004 Consequences on passengers

Freight demand Business passengers demand

Section 3.4.2 Section 2.2.2.2 Section 2.2.2.3

1.0 11/30/2004 Changes taking into account suggestions and comments made by the steering group

All sections

2.0 12/22/2004 Introduction of tables 5 and 6 in executive summary Definition of instability

Executive summary

Section 3.2

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Ref. : M3S/ATM/CARE-AIRCIT/EEC/WP2/2.0

Table of Contents

DOCUMENT CHANGE RECORD ................................................................................................... II

TABLE OF CONTENTS....................................................................................................................III

EXECUTIVE SUMMARY................................................................................................................. IV

ACRONYMS .......................................................................................................................................VI

LIST OF FIGURES .......................................................................................................................... VII

LIST OF TABLES .............................................................................................................................. IX

1 INTRODUCTION....................................................................................................................... 10 1.1 SCOPE OF THE STUDY............................................................................................................. 10 1.2 SCOPE OF THE DOCUMENT..................................................................................................... 10 1.3 REFERENCES.......................................................................................................................... 11

2 KEY AND RESULTING FACTORS ........................................................................................ 14 2.1 IDENTIFICATION OF FACTORS ................................................................................................ 14

2.1.1 Key factors..................................................................................................................... 14 2.1.2 Resulting Factors .......................................................................................................... 18 2.1.3 Relationships between Key and Resulting factors......................................................... 20

2.2 ANALYSIS AND EVOLUTION OF FACTORS .............................................................................. 21 2.2.1 Group 1: World economy, Oil prices, World geopolitics, Mobility .............................. 21 2.2.2 Group 2: Development of new technologies outside transport, Freight transport demand, Passenger demand on business markets ......................................................................... 32 2.2.3 Group 3: Transport policies, Transport infrastructure development, Environmental and sustainable development concerns ................................................................................................ 37 2.2.4 Group 4: Passenger demand on leisure markets........................................................... 43 2.2.5 Group 5: Operators’ strategies, transport technologies ............................................... 46 2.2.6 Group 6: Multimodal cooperation, Multimodal competition, Unimodal competition .. 54 2.2.7 Group 7: Traffic, Congestion ........................................................................................ 56

3 SCENARIOS................................................................................................................................ 60 3.1 BASE ELEMENTS .................................................................................................................... 60

3.1.1 Group 1.......................................................................................................................... 60 3.1.2 Group 2.......................................................................................................................... 64 3.1.3 Group 3.......................................................................................................................... 64 3.1.4 Group 5.......................................................................................................................... 67

3.2 STUDIED SCENARIOS.............................................................................................................. 68 3.2.1 Scenario A: continuing instability ................................................................................. 68 3.2.2 Scenario B: growing instability..................................................................................... 72 3.2.3 Scenario C: global stability........................................................................................... 73

3.3 COMPARISONS OF SCENARIOS ............................................................................................... 75 3.4 CONSEQUENCES OF SCENARIOS............................................................................................. 76

3.4.1 Consequences of scenarios on the airport of the future ................................................ 76 3.4.2 Consequences of scenarios on passengers .................................................................... 78

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4 CONCLUDING REMARKS...................................................................................................... 79

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WP2 - Scenarios of future evolution of the European transport network CARE II: The airport of the future: Central link of intermodal transport? __________________________________________________________________________________________

Ref. : M3S/ATM/CARE-AIRCIT/EEC/WP2/2.0

Executive Summary

The study “The airport of the future: central link of intermodal transport?” aims at analysing what could be the role of intermodal transport or intermodality between air and the other transport modes for the airport of the future; by elaborating European scenarios of transport network evolution by putting more focus on French and Portuguese ones, and identifying the social costs and revenues relative to these scenarios. The Work-Package 2 aims at building these European scenarios at a 15-20 years time horizon. When studying what could be the role of intermodal transport in the airport of the future, it is essential to determine the factors to be taken into account in our analysis. The difficulty lies in the large number of factors impacting on the development of transport modes and in their complex relationships. However among these factors it is important to differentiate the key factors that are the basic factors influencing the transport demand and supply (such as the world economy, the oil prices, etc.) from the resulting factors which are the consequences of the key factors evolution (such as the level of traffic, of congestion, etc.). The relationships between these Key and Resulting factors are used in the scenarios building.

As baseline of our scenarios we consider that the evolution trends of some of the key factors will be the same for all of the studied scenarios. However, the extent of these trends can change between the scenarios. The association of the various nuances of these trends and of the key factors’ relationships has led to consider three scenarios: a scenario A assuming a continuation in the current instability situation, a scenario B assuming an evolution toward a strong instability situation and a scenario C considering a situation of global stability.

Passenger demand Scenario

Economic growth

level Environmental

concerns International

tensions Oil prices Business Leisure

Freight demand

A1 Strong Moderate Moderate increase High increase Moderate increase

High increase

A A2

High

Moderate Moderate Moderate increase High increase Moderate increase

High increase

B Low Weak High High increase Weak increase

Weak increase

Moderate increase

C Moderate Strong Weak Weak increase High increase High increase

Moderate increase

Table 1: Main key and resulting factors evolutions in all scenarios

The differences in the factors’ evolutions will influence the level of competition and cooperation and as a consequence the level of use of intermodal agreements between air operators and other transport operators.

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Scenario

Level of use of air/HST

intermodal agreements on

passengers’ markets

Level of use of air/rail intermodal

agreements for airport access

Level of use of air/bus intermodal

agreements for airport access

Level of use of air/rail intermodal

agreements on freight markets

Level of use of air/road intermodal

agreements on freight markets

A1 Moderate Moderate Moderate High Moderate A

A2 Weak Weak Moderate Moderate Moderate

B Weak Weak Weak Weak Weak

C High High Moderate High Moderate

Table 2: Scenarios’ results in terms of airport intermodality

Analysis of these scenarios tends to show that a good economic growth may not be sufficient for strongly developing airport intermodality, especially air/rail intermodality. In particular, the levels of environmental constraints and the oil prices play an important role in this development by influencing the transport and infrastructure policies, and the transport prices. An increase in demand, in a situation of global world stability, coupled with strong environmental concerns and capacity constraints at airports, is the most favourable situation for the development of intermodal solutions.

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Consequences on the airport of the future will then vary according to the scenarios. If Scenarios A1 and C will lead airports to provide air/rail intermodal facilities and will use these facilities as competitive advantages, scenarios A2 and B will not incite them to invest on such facilities.

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Acronyms

AEEL Aviation Economics and Econometrics Laboratory ANA Aeroportos de Portugal, SA ASK Available Seat Km ATC Air Traffic Control ATM Air Traffic Management CARE Co-operative Actions of R&D in EUROCONTROL CDG Charles de Gaulle ENAC Ecole Nationale de l’Aviation Civile FSC Full Service Carrier GDP Gross Domestic Product GNI Gross National Income HSR High Speed Rail HST High Speed Train IATA International Air transport Association LCC Low Cost Carrier TGV Train à Grande Vitesse WP Work-Package

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List of figures Figure 1: Relationships between Key Factors and Resulting Factors ................................................... 20 Figure 2: GDP growth ........................................................................................................................... 21 Figure 3: GNI per capita and population in the EU15 area ................................................................... 22 Figure 4: Growth rate of foreign direct investments in EU15 area ....................................................... 23 Figure 5: Memberships in International Organizations and peacekeeping financial contributions of EU

States ............................................................................................................................................. 24 Figure 6: Internet users in EU15 states as a share of the total population............................................. 25 Figure 7: Average crude oil price.......................................................................................................... 26 Figure 8: OECD Macro-economic indicators in sustained higher oil price by region/Country ............ 27 Figure 9: OECD inflation rate and average crude oil prices ................................................................. 28 Figure 10: Passenger-km per capita vs. GDP per capita ....................................................................... 29 Figure 11: Passenger-Km per person and per year (1997) .................................................................... 30 Figure 12: Modal share of passenger-km across the different world regions (1997)............................ 30 Figure 13: Freight traffic in world regions in 1990............................................................................... 31 Figure 14: Rail freight traffic in 1970 and 1990.................................................................................... 31 Figure 15: Road freight traffic in 1970 and 1990.................................................................................. 32 Figure 16: Example of web-conferencing interface .............................................................................. 33 Figure 17: US Ecommerce 1998-2003.................................................................................................. 34 Figure 18UK air freight 1992-1998....................................................................................................... 35 Figure 19: Answers to the question “In which of the following ways do you use the Internet for your

flight arrangements?” .................................................................................................................... 36 Figure 20: Evolution of infrastructure investments in EU15 by mode between 1980 and 1995........... 37 Figure 21: Modal share of infrastructure investments in EU15 ............................................................ 38 Figure 22:Composition of external costs of transport in EU-15 plus Norway and Switzerland by cost

category ......................................................................................................................................... 38 Figure 23: Composition of external costs of transport in EU-15 plus Norway and Switzerland by

transport mode............................................................................................................................... 39 Figure 24: Length of new high-speed railways in the European Union................................................ 40 Figure 25: Map of the recommended priority projects on the trans-European transport network ........ 43 Figure 26: Passenger transport demand and GDP [Ref 24]................................................................... 44 Figure 27: Growth of GDP and International tourist arrivals................................................................ 45 Figure 28: Fuel use for a 1600-km trip on various airplanes................................................................. 48 Figure 29: New commercial airplanes efficiency trend ........................................................................ 49 Figure 30: Fuel used by transport mode................................................................................................ 49 Figure 31: Decibels per aircraft operations ........................................................................................... 50 Figure 32: Roadmap for 2010 solutions ................................................................................................ 50 Figure 33: Noise reduction technology ................................................................................................. 51 Figure 34: Scope of airframe noise reduction technologies .................................................................. 51 Figure 35: technology contributors for the environment....................................................................... 52 Figure 36: 2020 vision targets ............................................................................................................... 52 Figure 37: Modal shares of passengers transport demand EU15 .......................................................... 55 Figure 38: Short and medium terms evolution of the air market structure............................................ 56 Figure 39: Traffic by mode of transport for passengers in EU15.......................................................... 57 Figure 40: Modal split of passenger traffic in EU15............................................................................. 57 Figure 41: Traffic by mode of transport for goods in EU15 ................................................................. 58 Figure 42: Modal split for freight transport in EU15 ............................................................................ 58 Figure 43: Percentage of demand not met in 2000, 2005, 2010............................................................ 59

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Figure 44: World share of GDP in 1995 and 2020................................................................................ 61

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Ref. : M3S/ATM/CARE-AIRCIT/EEC/WP2/2.0 Figure 45: World energy consumption by fuel type, 1970-2020 .......................................................... 62 Figure 46: Oil prices evolution in three cases, 1970-2025 (2002 dollars per barrel) ............................ 62 Figure 47: Oil price forecast.................................................................................................................. 63 Figure 48: Crude oil reserves in three cases, 1990-2025 (billions barrels) ........................................... 63 Figure 49: Crude oil production in three cases, 1990-2025 (billions barrels), according to the degree of

technology advances...................................................................................................................... 64 Figure 50: Projected global carbon dioxide emissions.......................................................................... 65 Figure 51: Emissions of CO2 by sector in the European Union ........................................................... 66 Figure 52: European high-speed network 2020..................................................................................... 67

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List of tables Table 1: Main key and resulting factors evolutions in all scenarios ..................................................... IV Table 2: Scenarios’ results in terms of airport intermodality ................................................................. V Table 3: Internal and external key factors ............................................................................................. 15 Table 4: value of US online sales and users worldwide online purchase & banking transactions........ 34 Table 5: Recommended priority projects on the trans-European transport network............................. 42 Table 6: Historical and future improvements in new production aircraft energy efficiency (%).......... 68 Table 7: Main key and resulting factors evolutions in all scenarios ..................................................... 75

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Table 8: Scenarios’ results in terms of airport intermodality ................................................................ 76

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1 Introduction

1.1 Scope of the study In a context of a fast evolution of the air transport market, the future of the Air traffic Management will not only be linked to the improvements in technologies, but also to the evolution of traffic flows. Despite the current difficulties in air transport, forecasts (as those considered by ACARE [Ref 1]or EUROCONTROL [Ref 11] still mention strong traffic increases for years to come. One of the main solutions chosen by the European Commission (in the White Papers on Transports [Ref 15].) for coping with airport congestion problem and transports’ pollution is to develop intermodal transports to air. This development is an important objective of the European Commission since Intermodality and multimodality are at the heart of the 2001 European Commission white papers on transport. One of the main priority objectives to be attained by 2010 is to link-up transport modes for successful intermodality.

The intermodality development will depend on three main factors: how competition inside air transport will evolve, how the infrastructure will deal with traffic increases and capacity constraints, and how competition and cooperation will be developed between transport modes. The evolution of these three factors and their interplay would shape what could be the “airport of the future”.

Given physical and nuisance constraints the extension of present airports may be difficult and new airports may have to be located far from city centres. Numerous questions can then be raised. Will these airports of the future be newly built airports or will they be located on the site of existing regional airports? Will these “airports of the future” become competitors of existing airports, or will they be complementary? Will the different transportation modes cooperate in developing intermodal transports? When trying to answer to these questions, it becomes essential to take into account the passenger perspective as well as the global transportation politics envisioned for the future. These elements will indeed mainly determine what could be the transport network evolution scenarios. According to the considered scenarios, impacts on the various economic actors could be different. What would be the effects on air transport actors in terms of activity, cost and revenue levels?

The study “The airport of the future: central link of intermodal transport?” aims at providing answers to all these questions when considering the global transport network. This constitutes an innovative aspect since the evolution of each transport mode was so far envisaged without taking necessarily into account the evolution of the other modes, and ignoring the possibility that the modes could be cooperative instead of being competitive only. An other innovative aspect of this study lies in the analysis of the intermodal transport as a way to tackle what could be the airport of the future. Indeed, this study considers the intermodality between all the possible transport modes (air, rail, road, bus, subway, etc.) by not only determining how the different modes can become intermodal transports, but also by identifying the impacts of the implementation of intermodal transport systems on the airport of the future and on passengers.

The objective of the study is therefore to elaborate European scenarios of transport network evolution by putting more focus on French and Portuguese ones, and identifying the impacts of these scenarios in terms of development of intermodality.

1.2 Scope of the document

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The objective of this work package is to build scenarios of transport evolution in the next 15-20 years

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Ref. : M3S/ATM/CARE-AIRCIT/EEC/WP2/2.0 in order to determine what could be the role of intermodal transport in the airport of the future. As before building these scenarios it is essential to determine the factors to be taken into account in our analysis, we decompose this work package in two parts. The first part of the document (Chapter 2) presents the identification of Key factors and Resulting factors that have to be taken into account for the elaboration of scenarios (at a 15-20 years horizon), as well as the mutual influences of these factors. Section 2.1 provides the list of identified Key factors and Resulting factors that will influence what will be the airport of the future. Section 2.1.3 studies the mutual influences between these categories of Key and Resulting factors so as to determine what will be the role of intermodality for the airport of the future and the consequences on these airports. The second part of the document (Chapter 3) first of all presents, in section 3.1 the fundamental assumptions used for building the scenarios and then details, in section 3.2, the three considered scenarios aiming at determining what would be the evolution of the intermodality between air and the other transport modes at a 15-20 years time horizon, according to the combined evolution of the key factors. Chapter 4 provides concluding remarks on this work package by comparing the scenarios in terms of impact on the level of intermodal cooperation.

1.3 References

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[Ref 1] ACARE “The economic impact of air transport on the European economy”, Advisory Council for Aeronautical Research kin Europe, September 2003

[Ref 2] ADDA Jacques “La mondialisation de l’économie », Vol 1 et 2, Collection Repère Edition de la découverte, 2002

[Ref 3] AIRBUS “Global market forecasts 2003-2022”, 2003

[Ref 4] ALTERNATIVES ECONOMIQUES “Special Edition”, 4th semester 2004, n°62

[Ref 5] BOEING “Current market outlook”, BOEING Commercial airplane, 2004

[Ref 6] BOEING “Fuel Efficiency, we’ve come a long way…”, Aviation Operational Measures for Fuel and Emissions Reduction Workshop, Mark Janes, Boeing Commercial Airplanes, Ottawa – Canada, 5-6 November 2002

[Ref 7] CARDEBAT Jean-Marie “La mondialisation et l’emploi, Collection Repères, éditions la découverte, 2002

[Ref 8] CUSTOMER SERVICE SURPASSES LOYALTY PROGRAMS in BUSINESS TRAVEL DECISION, “Accenture” June 2004

[Ref 9] DEPARTMENT OF TRANSPORT “UK air freight study report”, 2000

[Ref 10] ENERGY INFORMATION ADMINISTRATION “Annual energy outlook 2004 with projections to 2025”, January 2004

[Ref 11] EUROCONTROL “Medium and long term sustainable growth in air transport”, EEC Note No 11/02, September 2002

[Ref 12] EUROCONTROL “Scenarios of the long-term forecast (2010-2025)”, STATFOR, 2004

[Ref 13] EUROCONTROL « Forecast of annual number of IFR flights (2004-2010)”, STATFOR, European Air Traffic Management Programme, 2004

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[Ref 14] EUROPEAN AERONAUTICS “A vision for 2020: Meeting society’s needs and winning global leadership”, Report of the group of personalities – January 2001

[Ref 15] EUROPEAN COMMISSION “White Paper, European transport policy for 2010: time to decide” European Communities, 2001

[Ref 16] EUROPEAN COMMISSION “European union energy and transport in figures 2003”, Directorate general for energy and transport, 2003

[Ref 17] EUROPEAN COMMISSION “Priority projects for the trans-European transport network up to 2020”, Directorate general for energy and transport, June 2003

[Ref 18] EUROPEAN CONFERENCE OF MINISTERS OF TRANSPORT “The spread of congestion in Europe”, Conclusions of Round Table 110, Paris 12-13 March 1998

[Ref 19] EUROPEAN ENVIRONMENT AGENCY “Investment in transport infrastructure”, 2001

[Ref 20] EUROPEAN ENVIRONMENT AGENCY “Freight transport”, TERM 2001

[Ref 21] EUROPEAN ENVIRONMENT AGENCY “Capacity of transport infrastructure networks”, 2001

[Ref 22] EUROPEAN ENVIRONMENT AGENCY “External cost of transport”, TERM 2002 25 EU

[Ref 23] EUROPEAN ENVIRONMENT AGENCY “Transport emissions of air pollutants (NOx, NMVOCs, PM10, Sox) by mode”, TERM 2002 03 EU

[Ref 24] EUROPEAN ENVIRONMENT AGENCY “Passenger transport demand by mode and purpose”, TERM 2003 12a EEA 17

[Ref 25] EUROPEAN UNION “Europe at a crossroad: the need for sustainable transports”, 2003

[Ref 26] EUROPEAN UNION “Aircraft Noise Research Activity & Challenges”, Moscow, October 20-21, 2003

[Ref 27] FOREIGN POLICY “Measuring globalisation”, 2004

[Ref 28] GIRAUD Pierre-Noel “Mondialisation, inégalités et efficacités des politiques économiques”, Pierre Noël Giraud cahier de recherche du CERNA 99-A-1, 1999

[Ref 29] HIGH LEVEL GROUP “High level group on the trans-European transport network”, 27 june 2003, Report

[Ref 30] IATA “Air/rail Intermodality study”, February 2003

[Ref 31] Intergovernmental Panel on climate change “Aviation and the global atmosphere”, 2001

[Ref 32] INTERNATIONAL ENERGY AGENCY « Analysis of the impact of high oil prices on the global economy”, May 2004

[Ref 33] ITA “Le transport aérien à l’horizon 2020: Eléments de réflexion prospéctive », ISBN 2-908537-13-3, 1995

[Ref 34] KIISKILA K., KALENOJA H. “Leisure time mobility – Future trends and sustainable development, International Conference in Kouvola, September 2001

[Ref 35] LEONARD Yves “Mondialisation et inégalités”, Cahiers français, 2002

[Ref 36] M3 SYSTEMS, ANA, ENAC “WP1: Review of the current intermodality situation”,

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EUROCONTROL note, September 2004

[Ref 37] NATIONAL INTELLIGENCE COUNCIL “Global trends 2015: A dialogue about the future with non governments experts”, December 2000

[Ref 38] NETHERLANDS BUREAU FOR ECONOMIC POLICY ANALYSIS “Worldscan – the core version”, December 1999

[Ref 39] RODRIGUE Jean-Paul, “Urban transport problems », 2003, http://www.people.hofstra.edu/geotrans/eng/ch6en/conc6en/ch6c4en.html

[Ref 40] Rolls Royce “The outlook 2003/4”, 2004

[Ref 41] STIGLITZ AND WALSH “Economics” Third Edition, glossary

[Ref 42] The World Bank “Poverty in an age of globalisation”, October 2000

[Ref 43] UNION INTERNATIONALE DES CHEMINS DE FER “Passenger traffic study 2010/2020 », February 2003

[Ref 44] WORLD BUSINESS COUNCIL FOR SUSTAINABLE DEVELOPMENT “Mobility 2001: World mobility at the end of the twentieth century and its sustainability”, 2001

[Ref 45] WORLD CLASS MANUFACTURING “The Lessons of Simplicity Applied” by Richard J. Schonberger

[Ref 46] WORLD TOURISM ORGANIZATION “Inbound tourism – Tourist arrivals by purpose of visit”, 2003

[Ref 47] WORLD TOURISM ORGANIZATION “Tourism and world economy”, 2003

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2 Key and Resulting factors When studying what could be the role of intermodal transport in the airport of the future, it is essential to determine the factors to be taken into account in our analysis. The difficulty lies in the large number of factors impacting on the development of transport modes and in their complex relationships. However among these factors it is important to differentiate the Key factors that are the basic factors influencing the transport demand and supply (such as the world economy, the oil prices, etc.) from the Resulting factors which are the consequences of the key factors evolution (such as the level of traffic, of congestion, etc.). The relationships between these Key and Resulting factors will help in the scenarios building. Section 2 hence presents the identification of Key factors and Resulting factors that have to be taken into account for the elaboration of scenarios (at a 15-20 years horizon), as well as the mutual influences of these factors. Section 2.1 provides the list of identified Key factors and Resulting factors that will influence what will be the airport of the future. Section 2.1.3 studies the mutual influences between these categories of Key and Resulting factors so as to determine what will be the role of intermodality for the airport of the future.

2.1 Identification of factors

2.1.1 Key factors

We will define in this study the “Key Factors” as factors basically influencing the future development of the transport and intermodality. Our focus shall be air transport, but since intermodal solutions are by nature using several transport modes, we have to consider as well other relevant transport modes and their evolution. Thus, the airport of the future shall be shaped by all transport modes evolution and intermodal development

The Key Factors impacting on the future development of transport can then be divided in external and internal factors. External factors are factors not related to the transport activity. We propose in this study to consider six external key factors: world economy, world geopolitics, oil prices, environmental awareness, mobility and development of new technologies (non aeronautical). Each of these factors can then be split into several elements that we will call “key variables”.

Internal factors are factors directly related to the transport activity. We study three internal factors: the transport policies, the transport operator’s strategies, and the aircraft (or aeronautical related) technologies.

These Key Factors are presented in Table 3.

It is important to note that most of these Key Factors are also taken in consideration in many studies performing air traffic forecasts such as AIRBUS [Ref 3], BOEING [Ref 5], Intergovernmental Panel on climate change [Ref 31], ITA [Ref 33], Rolls Royce [Ref 40], ACARE [Ref 1] or EUROCONTROL [Ref 13] [Ref 12].

The main difference of this study with those already performed is that we consider Key Factors relative to transport modes other than the air (such as rail, road, etc.). It is particularly the case for Key factors such as Transport policies and Environmental concerns.

A second difference is that our aim is not to provide air traffic forecasts but more to analyse how these Key Factors are linked together so as to determine how changes in these variables can impact on the future development of air transport and intermodal transports at airports.

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Ref. : M3S/ATM/CARE-AIRCIT/EEC/WP2/2.0

External Key Factors External Variables Internal Key Factors Internal Variables

World economy

• Economic growth

• Revenue distribution

• Unemployment

• Commercial exchanges

• Demographic trends

• Pace of globalisation

Operators’ strategies

• Rail opening to competition

• Airlines’ strategies on business markets

• Airlines’ strategies on leisure markets

• Integrators strategies

• Alliances and mergers

World geopolitics

• New European countries

• Emergence of continents (Asia, Africa)

• International tensions

• Development of terrorism

Transport policies

• European Commission policy on transport

• National policies on transport

• Bilateral agreements

• Infrastructure policies

Oil prices

Transport technologies

• New aircraft development

• Impact of A380

• Improvement in energy consumption

• Improvement in aircraft noise

Environmental and sustainable development concerns

• Environmental policies

• Development of clean energy for transport

• Social awareness of the environment

Mobility

• Intrinsic propensity of people to travel regardless of their revenue, the transport price, etc.

• Travel habits

• Tourism trends

Development of new technologies

• Video conference

• Information technologies

Table 3: Internal and external key factors

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Ref. : M3S/ATM/CARE-AIRCIT/EEC/WP2/2.0 2.1.1.1 World economy

This factor groups the main elements characterizing the world economic and social situation and relevant to transport evolution: the pace of globalisation and the level of commercial exchanges, the world economic growth and the distribution of wealth (revenue distribution, unemployment, demographic trends).

One of the more important elements is the economic growth, which is the increase in the value of goods and services produced by an economy. It is conventionally measured as the percent rate of increase in real Gross Domestic Product, or GDP.

The demographic trends also influence the world economic situation. Indeed the purchasing power represented by the income per capita is directly influenced by the fertility rate.

Globalisation is the trend towards the closer integration of the countries of the world. It can then concern several domains such as information technology, finance, trade, personal communications, politics and travel. The globalisation level plays an important role in the world economy by increasing the level of exchanges, the level of international investments, by relocating industries between countries …

It indirectly impacts the revenue distribution inside countries but also between them. The delocalisation of firms in developing countries leads to an increase in the unemployment rate in older industrialized countries and in the revenue inequalities in those countries.

The distribution of wealth is likely to strongly influence the air transport demand: below a certain level of revenues, people do not travel by plane. An unequal distribution shrinks the “stock” of people likely to travel by air. Conversely, a more equal revenue distribution means a larger access to air transport for all the population.

By impacting the GDP level, the level of commercial exchanges is as well an essential indicator of the good health of the economy

2.1.1.2 World geopolitics

Geopolitics analyses politics, history and social science with reference to geography. Geopolitics traditionally indicates the links and causal relationships between political power and geographic space; in concrete terms it is often seen as a body of thought assaying specific strategic prescriptions based on the relative importance of land power and sea power in world history.

World geopolitical events are hence various. They can concern the introduction of Cyprus, Czech republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia in the European Union in May 2004, as well as the economic emergence of Asian and African continents, the existence of international tensions or local conflicts, or the development of international terrorism movements.

2.1.1.3 Oil prices

The price of oil fluctuates quite widely in response to crises or recessions in major economies, because any economic downturn reduces the demand for oil. On the supply side the OPEC cartel uses its influence to stabilise or raise oil prices but within a limited reach. Supply is also widely influenced by local conflicts in production regions.

2.1.1.4 Environmental concerns and sustainable development

Environmental integration means making sure that environmental concerns are fully considered in the decisions and activities of other sectors.

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Environmental integration became a priority in the EU’s 5th Environmental Action Programme (1993-

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Ref. : M3S/ATM/CARE-AIRCIT/EEC/WP2/2.0 2002), in response to issues raised at the Earth Summit in Rio in 1992. Since 1997, it is a requirement under the EC Treaty. Article 6 of the Treaty states that "environmental protection requirements must be integrated into the definition and implementation of the Community policies […] in particular with a view to promoting sustainable development". In 2001, the European Council adopted the EU Sustainable Development Strategy, which provides a long-term vision that involves combining a dynamic economy with social cohesion and high environmental standards. It requires a new emphasis on policy coordination and integration. Among the nine sectors having produced integration strategies, transport is one of the first sectors invited to do so in June 1998. Successful integration requires that environmental objectives are formulated and included in the process at the same time and level of commitment as economic and social objectives.

2.1.1.5 Mobility

The purpose of transportation is the fulfilment of a demand for mobility. Mobility is the intrinsic propensity of people to travel regardless of their revenue, the transport price, etc. The level of mobility is hence directly related to the travel habits which are not only influenced by the available transport supply but also by other factors such as the perception of the level of safety and security of the different transport modes or also the desire/need of travelling in another region, country or continent. Tourism trends can then be largely affected by all these factors.

2.1.1.6 Development of new technologies

New technologies used at a 20 years time horizon are already under development, or at least foreseen. They mostly concern what is called “new information and communication technologies”. They could be classified into two main groups: technologies impacting transport demand, and technologies impacting transport supply and conditions (for example technologies improving productivity and helping to lower costs)

Some technologies impacting transport demand we already experience today: communication technologies like videoconference or web conferencing, can be used in some cases as substitutes to business transport. Conversely, e-commerce, using the web, has a positive impact on freight transport, by increasing commercial exchanges on a worldwide basis.

Other technologies impacting transport demand that we see appearing today concern the management of information inside the company and the optimisation of processes. For example the “just in time” concept, consisting (roughly) in minimizing the stocks in an industry, relies on information technologies and efficient transport solutions. This concept, although not new in itself, can be more heavily developed by relying on “real time” information systems, developed by logistics providers.

Let us note that these information technologies that firms rely more and more, are also sources of costs reductions. Those information technologies could well change the organisation of transport companies and make them more costs efficient and more productive.

2.1.1.7 Operators’ strategies

In a now highly deregulated air transport market, the airlines develop different strategies. Major airlines with their hub networks have a comprehensive grasp on the markets. On the other hand, “low costs” airlines and charters have more specialized strategies (“niche” strategies) and an extremely efficient cost structure. As high-speed train networks is growing, rail tends to competewith air on short haul (on distances of less than about 1000 km or three hours by high speed train). According to the markets conditions (regulations, congestion, economic situation…) these operators will react differently on their market segments (business or leisure; short, medium or long-haul).

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In addition, new European transport policies such as opening of rail to competition can also modify the market share and affect the operators’ strategies.

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Ref. : M3S/ATM/CARE-AIRCIT/EEC/WP2/2.0 2.1.1.8 Transport policies

Transport policies aim at satisfying the transport demands while taking in consideration economic, social and environmental implications. In Europe, if the main policy trends are adopted by the European Commission, each country remains responsible of its own transport policies. Local governments also have some autonomy in that respect. These policies result in investment decisions concerning transport infrastructures as well as new regulations such as for instance the opening of new markets to competition.

2.1.1.9 Transport technologies

Aircraft technologies evolve with the aircraft operators’ needs and the level of environmental concerns. The development of the A380 comes indeed in the framework of the airlines’ increasing demand of large aircraft and of the wish to reduce the airport congestion and the pollution level.

Current environmental concerns associated to the increasing airline demand to reduce their fuel cost (especially the low-cost carriers) lead aircraft manufacturers to develop technologies aiming at reducing aircraft fuel consumption. In addition the increasing complaints of airports’ neighbours on the level of noise lead aircraft manufacturers to develop less noisy engines and frames.

2.1.2 Resulting Factors

The key factors we identified have in turn an impact on transport. Transport demand, infrastructure development, traffic and congestion levels are all determined by the key factors’ evolution. We call these resulting factors, and detail them in the following sections.

The level of competition and cooperation inside modes and between them will be particularly highlighted, since it is the focus of our work to study intermodality between air and other modes.

2.1.2.1 Transport demand

The demand for transport considered in this study concerns the demand for airport intermodal transports. As defined in WP1 ([Ref 36]), there are two types of airport intermodality. The first type concerns airport access to the city centre while the second concerns the integration of the airport in the regional or national network of other transport modes. This means that the transport demand considered in this study is related as well to the air transport as to all the intermodal transport modes to air such as train, bus, etc.

We consider that the demand for transport is a “desire” of transport for leisure reasons or a “need” of transport for business reason. Indeed in our model the price mechanism is an internal mechanism resulting from the equilibrium between the demand and the supply of transport. Hence, the price of transport is subjacent and does not appear as a factor in our analysis.

Features of the demand not only depend on the type of the user (passenger or freight), but also on the evolution of Key Factors relative to the world economy, the oil prices or the world geopolitics. Indeed, these factors impacts on people mobility since they directly influence their desire to travel and their transport mode preferences. In addition by affecting the commercial exchanges these factors influence the demand for freight transport as well as the transport demand of business passengers.

It is then possible to identify three Resulting Factors relative to the transport demand:

• Passenger demand for transport on leisure markets,

• Passenger demand for transport on business markets,

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• Freight transport demand.

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Ref. : M3S/ATM/CARE-AIRCIT/EEC/WP2/2.0 2.1.2.2 Competition and cooperation

If the levels of competition and cooperation are dependent on one another, they are also largely influenced by the operators’ strategies. Indeed the tendency inside a same transport mode can be that operators specialise their offer for instance on short, medium or long haul or in contrary that they operate on all these markets. In the first case the level of competition between operators would be low while it would be high in the second case.

In addition the level of competition between different modes also differ according to operators strategies. For instance aircraft operators can choose to compete with rail on city-pairs deserved by the high-speed train or conversely choose to focus on markets where the high-speed train is not present. The second case can lead to intermodal agreement between air and rail where rail may become a feeder to air.

Resulting Factors relative to competition and cooperation are therefore:

• Unimodal competition,

• Multimodal competition,

• Multimodal cooperation.

2.1.2.3 Infrastructure development

For each transport mode, the decision of building of new infrastructure mainly depends on transport policies. Indeed these policies can favour one mode compared to another, for instance for environmental reasons. The investment decisions also depend on the level of traffic growth, and on the level of economic growth.

The infrastructure development can then be considered as a Resulting Factor.

New transport infrastructure considered in this study includes as well new airports, new roads, new railway infrastructure, etc.

2.1.2.4 Traffic and congestion

Without surprise, the level of traffic can be considered as a Resulting Factor since it is a resultant of the evolution the various Key Factors and of their relationships. In particular the operators strategies have a large impact on the level of traffic since for instance air operators can choose to increase or reduce their flight frequencies by changing the aircraft size which will impact the air traffic level. This level of traffic combined with the infrastructure capacity impact the level of congestion

The Resulting factors relative to traffic and congestion are:

• Traffic level by transport mode,

• Congestion level by transport mode.

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Nevertheless it is important to note that the evolution of all these Resulting factors is not only related to the evolution of the key factors presented in section 2.1.1. Indeed, the evolution of one Resulting factor is often closely related to the evolution of the other Resulting factors. For instance, factors such as the level of traffic, the development of transport infrastructures, the multimodal competition, the multimodal cooperation, all impact the level of congestion by transport mode. As a consequence the evolution of a Resulting factor is the combined resultant of the evolution of Key factors and of the other Resulting factors.

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2.1.3 Relationships between Key and Resulting factors

All the key factors influencing the air transport and as a consequence the airport of the future are likely to act on one another. These interactions are complex since often indirect.

The aim of the project being to determine the role of the intermodality between air and the other transport types for shaping the airport of the future, we focus on the mutual influences existing between categories of Key and Resulting Factors impacting the level of airport intermodality. These influences will be named relationships.

These relationships are presented in Figure 1: Relationships between Key Factors and Resulting Factors. This diagram represents the relationships between Key and Resulting factors, which finally influence the level of airport intermodality. In order to provide a clear representation of these relationships we have chosen to group the Key and Resulting Factors according to their mutual influence but also according to their influence on other groups. Key and Resulting factors are then pooled in seven groups, each being composed of 1 to 4 factors. We review the factors in each group and their interactions in the following sections, as well as the links between groups.

Oil prices World geopolitics

World economy

Passenger demand on leisure markets

Transport policies

Environmental and sustainable development concerns

TransportInfrastructure development

Operators’strategies

Multimodalcooperation

Multimodalcompetition

Group 1

Group 6

Group 4

Group 5

Group 3

Development of newTechnologies outside transport

Freight transport demand

Passenger demand on business markets

Group 2

Legend:

Transporttechnology

Key factor

Resulting factor

BChanges in factor A impact on factor B

Mobility

Unimodalcompetition

Traffic Congestion

Group 7

A

Level of airport intermodality

Figure 1: Relationships between Key Factors and Resulting Factors

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Ref. : M3S/ATM/CARE-AIRCIT/EEC/WP2/2.0 2.2 Analysis and evolution of factors

2.2.1 Group 1: World economy, Oil prices, World geopolitics, Mobility

2.2.1.1 World economy and world geopolitics

The relationships between the evolution of the world economy and the world geopolitics were confirmed these last 4 years by the economic recession following the 11th September terrorist attacks in New-York. Numerous economic indicators generally considered as representative of States’ economic health collapsed between 2000 and 2001. The world GDP growth rate hence fell from 3.94% to 1.32% during the period (: GDP growth). Europe, which was not spared by this crisis, saw its GDP growth rate divided by two.

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This GDP growth rate limitation associated to a population increase in the EU15 area resulted in a decrease in the European revenue per capita represented by a decrease in the GNI per capita reaching 7% between 2000 and 2001.This decrease went on in 2002 in a context of a general terrorism fear and the war in Afghanistan.

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G N I p e r c a p i t a in c o n s t a n t $ U S a n d t o t a l p o p u la t io n in M il l io n s o f p e r s o n s

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Figure 3: GNI per capita and population in the EU15 area (Source European Commission [Ref 16] and World Bank)

If this European GDP evolution can be partly explained by a reduction of 3% (source European Commission [Ref 16]) between 2000 and 2001 in the European trades of goods and services (importation in Europe and exportation from Europe), it is strongly related to globalisation policies influenced themselves by geopolitical events. From 2001, features of the globalisation have changed. This globalisation appears to evolve less in terms of trade and investments than in the previous years. Indeed, the world geopolitical situation coupled with the economic recession lead States to strongly reduce the volume of their investments in foreign countries. In the EU 15 area, this situation was translated into a drop of States’ foreign direct investments (both investments from foreign countries and investments of EU15 states in foreign countries) of 55% in 2001 and 31% in 2002.

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G r o w t h r a t e o f f o r e ig n d ir e c t in v e s t m e n t s ( in f lo w s + o u t f lo w s ) in E U 1 5 a r e a

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Figure 4: Growth rate of foreign direct investments in EU15 area

(Source Foreign Policy [Ref 27]) Besides this decrease in foreign investments, European States pursued their financial implication in peacekeeping started in 2000, by increasing fourfold their dedicated resources to global peacekeeping efforts between 2000 and 2001. Pressed by the international geopolitical context they invested in 2001 the highest amount ever spent for peacekeeping, that is to say 1 244 Millions Euros, and on the same time increased their memberships in International Organizations.

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Figure 5: Memberships in International Organizations and peacekeeping financial contributions of EU States

(Source Foreign Policy [Ref 27]) However, globalisation involves far more than the ups and downs of economic cycles. Non-economic drivers of global integration are indeed essential to be taken into account.

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In particular, Internet connections increased strongly and constituted a powerful accelerator of the globalisation. In 2002, the world’s total number of Internet hosts (computer permanently tied to the internet) inched up at less than one tenth the rate of the previous rate (source Foreign Policy [Ref 27]). In Europe, by following a quite constant growth, the percentage of Internet users as a share of the total population was multiplied by 2.75 between 1998 and 2002.

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I n t e r n e t u s e r s i n E U 1 5 s t a t e s a s a s h a r e o f t h e t o t a l p o p u l a t i o n

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Figure 6: Internet users in EU15 states as a share of the total population

(Source Foreign Policy [Ref 27]) The proliferation of other forms of communication also allowed people to interact with one another around the world. International telephone traffic continued to grow up 9 million minutes to a total of 135 billions minutes in 2002 (more than 21 minutes per person of the planet) (source Foreign Policy [Ref 27]). In 2002, for the first time, the worldwide number of mobile phone per capita exceeded the number of fixed telephone lines, with 18.98 mobile subscribers for 100 inhabitants compared to 17.95 fixed line subscribers (source Foreign Policy [Ref 27]). These non-economic variables helped compensate for the weakening of the international economy and deepened global linkages overall. This would tend to show that the main impacts of world geopolitics on the world globalisation would more be in terms of changes in globalisation features than in terms of reduction of the global integration.

2.2.1.2 World geopolitics and oil prices

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The world geopolitical situation has always influenced the oil prices. The observation of the evolution of the oil price between 1970 and 2004 (Figure 7: Average crude oil price) shows that price increases generally followed geopolitical events affecting producers of petrol countries such as the Irak-Iran war or the Kuwait invasion. In addition if decreases in oil prices often occur at the end of these conflicts, they are also often associated with an increase of the oil production. More recently the weak decrease in oil prices in 2001 was the consequence of the World trade Centre terrorist attacks. Indeed, this price decrease was partly due to the decrease in the world oil demand mainly linked to the sharply lower jet fuel demand. The decision of OPEC countries to temporary stop the production restraints also allowed this price reduction.

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Figure 7: Average crude oil price

(Source: International Energy Agency [Ref 32]) In addition to geopolitical events, geopolitical uncertainty can also influence the oil prices ‘evolution. The International Energy Agency ([Ref 32]) explains that the reason of the current unstable market is mainly because of geopolitical uncertainty.

2.2.1.3 World economy and oil prices The level of oil prices plays an important role in the health of the world economy by being an essential determinant of global economic performance. As the International Energy Agency stresses ([Ref 32]): “an oil price increase leads to a transfer of income from importing to exporting countries though a shift in the terms of trade. The magnitude of the direct effect of a given price increase depends on the share of the cost of oil in national income, the degree of dependence on imported oil and the ability of end-users to reduce their consumption and switch away from oil”. At the same time the economic impact is strongly related to the magnitude of the price variation and the duration the price is sustained at the same level. Impacts on the economy can be observed in terms of changes in inflation rates, GDP or unemployment rate. Impacts of oil price increase on these economic indicators have been estimated by the International Energy Agency ([Ref 32]) by assuming a sustained 10$ increase in oil price per barrel between 2004 and 2008 (the unit barrel price increasing from $25 to $35). These impacts appear to vary considerably across OECD countries, according to their oil importation dependence (Figure 9: OECD inflation rate and average crude oil prices). European countries in the EURO zone are globally more economically penalized than the United-States or Japan in the short term, due to their strong dependence on oil imports. Hence, Euro-zone countries would suffer an annual 0.5% decrease in their GDP level during the two first years.

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Figure 8: OECD Macro-economic indicators in sustained higher oil price by region/Country

(Source: International Energy Agency [Ref 32]) A higher oil price would also contribute to increase the unemployment level. The international Energy Agency ([Ref 32]) estimates that this additional increase of $10 on the barrel price would lead to a higher 0.1% OECD rate of unemployment than in the base case. In the EURO-zone, the unemployment rate would increase in the same proportion than the in US (+0.5%) in 2004 and 2005. This percentage has been evaluated by assuming that real wages would be fully adjusted downwards due to the deterioration in terms of trades and incomes. If this adjustment could not be possible, the unemployment rate growth could be greater.

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The inflation evolution can also be closely related to the oil price variations. Indeed, recent trends show a clear correlation between oil price fluctuations and short-term changes in the inflation rate (consumer price index)(Figure 9: OECD inflation rate and average crude oil prices).

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Figure 9: OECD inflation rate and average crude oil prices

(Source: International Energy Agency [Ref 32]) On the opposite a lower price than in the base case of the oil price would bring economic benefits. When assuming a sustained $7 fall in the price per barrel from 2004 to 2008, the international Energy Agency ([Ref 32]) obtains that GDP would increase by 0.3% while inflation and unemployment rate would decrease by 0.4% and 0.2% respectively.

2.2.1.4 Mobility

Mobility is the intrinsic propensity of people to travel regardless of their revenue, the transport price, etc. This ability is not only related to the available transport infrastructures but also to the behaviours in terms of transportation. However the variety of the available transport infrastructures inside a state or a world region as well as the level of transport services’ supplies and demands is closely related to its economic level.

Passenger mobility

The World Business Council for Sustainable Development ([Ref 44]) stresses that incomes drive travel demand across the globe. In low-income regions people take only one to three trips per days: one trip is dedicated to a combination of work and education and sometimes another to personal affairs. In richer industrialized regions people take more than three trips per day and the average trip distance rose by a factor of 2 or 3. In these regions people dedicate 20% to 25% of their trip to the combination of work and education.

The World Business Council for Sustainable Development ([Ref 44]) observes, “people tend to increase the distances they travel roughly in proportion to increases in their income.

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Figure 10: Passenger-km per capita vs. GDP per capita shows the high level of correlation between the GDP per capita and the level of passenger-km per capita. This figure clearly shows that the higher income level, the higher the individual transport quantity.

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Key:

CPA: China and other centrally planned Asia

SAS: Bangladesh, India, and Pakistan

PAS: Pacific Asia

AFR: Kenya, Nigeria, South Africa, Zimbabwe and other Sub-Saharan Africa

FSU:Former Soviet Union

PAO: Australia, Japan, and New Zealand

MEA: Middle East and North Africa

EEU: Eastern Europe

LAM: Latin America and Central America

WEU: European Community, Norway, Switzerland and Turkey

NAM: Canada and United States

Figure 10: Passenger-km per capita vs. GDP per capita Source World Business Council for Sustainable Development ([Ref 44])

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Nevertheless, Europeans travel about a third less than North Americans in terms of distance (Figure 11: Passenger-Km per person and per year) at the same GDP per persons. This difference is due to a lower level of demand related partly to the higher population density and the higher transport prices in Europe than in the United States.

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Figure 11: Passenger-Km per person and per year (1997)

Source World Business Council for Sustainable Development ([Ref 44])

All these factors also influence the modal share, which differs considerably between world regions (Figure 12: Modal share of passenger-km across the different world regions (1997)). If rail use is particularly high in Pacific OECD bus share is very large in Asia and Africa. The automobile accounts for at least 50% of the distance travelled in most of the regions.

Figure 12: Modal share of passenger-km across the different world regions (1997)

Source World Business Council for Sustainable Development ([Ref 44])

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Freight mobility

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Ref. : M3S/ATM/CARE-AIRCIT/EEC/WP2/2.0 If the geography plays an important role in determining how freight is moved, infrastructure development and political factors are also essential. In particular, although the United-States, Russia, Western Europe and China all have an extensive rail network, the European rail freight traffic is from 5 to 9 times weaker than in the three other states (Figure 13: Freight traffic in world regions in 1990). This is due to the fact that Europe has not developed its rail network as an integrated system, which results in a non-unified heavy-haul rail freight network.

Figure 13: Freight traffic in world regions in 1990

Source World Business Council for Sustainable Development ([Ref 44]) This lack of unification has led to a modal transfer of freight traffic from rail to road. While rail freight traffic declined by 10%, road freight traffic doubled between 1970 and 1990.

Figure 14: Rail freight traffic in 1970 and 1990

Source World Business Council for Sustainable Development ([Ref 44])

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Figure 15: Road freight traffic in 1970 and 1990

Source World Business Council for Sustainable Development ([Ref 44]) The World Business Council for Sustainable Development ([Ref 44]) explains, “Freight facilitates and highlights the complex interdependent nature of the global economy”. Hence, some factors such as political interests, public concerns, hazards to safety and tranquillity, etc. influence freight mobility and can constitute challenges to sustainable freight mobility.

2.2.2 Group 2: Development of new technologies outside transport, Freight transport demand, Passenger demand on business markets

2.2.2.1 New technologies

We can identify two main effects technology development can have on transport: one is an effect on transport demand, and the other is an effect on transport supply.

Concerning transport demand, new technologies that can be mentioned are the development of videoconference and web conferencing. These technologies, already available today, can be seen in a limited measure to a substitute to business travel. Several forms exist: firms having different production units can for example have invested into dedicated equipments in order to perform meetings without having to move. With the Internet and high-speed networks, web conferencing can be developed with only standard PCs and dedicated software, and join several people in a virtual meeting. The main difference so far, between those two communication techniques, is that with web-conferencing, participants do not see each other’s, and communicate through writing and not talking.

However, as J.P. Husson points out concerning videoconference (Ref.[19]), this kind of virtual meeting has an interest mostly when participants already know each other and only need to exchange information or discuss upon a given subject. If they have to make decisions, or solve conflicts, virtual meetings will not be efficient. The same is true when people do not know each other’s. Therefore, videoconference will have interesting performances for firms having different location (which becomes more frequent in a global economy).

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The same is true for web-conferencing: Web-conferencing is a more recent form of communication, and it is so far characterized by the fact that it uses writing communication to join people working on a

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Ref. : M3S/ATM/CARE-AIRCIT/EEC/WP2/2.0 PC. They can also exchange files, and see what is on a given PC of the network. Voice (and image) can also be added if needed on such systems. It is convenient for multi-site firms to communicate and work.

Figure 16: Example of web-conferencing interface

The future of these communication technologies depends partly on transport costs, time, reliability and safety. For example, if transport safety is challenged by terrorism, these media can have an impact on business transport demand. Similarly, if transport costs increase, or transport congestion worsens, they will be seen as more appealing for companies, who may see opportunities to decrease costs.

On the transport demand side, other technologies can have an impact: the Internet and the development of e-commerce may increase the demand for freight transport.

E-commerce is increasing substantially, and this growth is forecasted to go on (see table). It includes business-to-business transactions (between companies) and business to customer’s transactions.

The impact on freight transport is however hard to quantify, although it can be seen as clearly positive.

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Value Of US Online Sales, 2003 to 2008 Year Total (USD billion) 2003 $95.7 2008 $229.0 By 2008, 10% of total US sales will be completed online Over 63 million US households will shop online in 2008

Users Worldwide - Online Purchase & Banking Transactions

Transaction type 1999 2000 2002

Purchased a product or service online 28% 36% 62%

Conducted an online banking transaction 17% 20% 37%

Table 4: value of US online sales and users worldwide online purchase & banking transactions

(Source: Ipsos-reid, Forrester research 2003)

Figure 17: US Ecommerce 1998-2003

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(Source: Ipsos-reid, Forrester research 2003)

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Finally, all the information technologies, enabling firms to produce more efficiently, have an impact on transport supply by reducing the costs of production. The electronic ticketing is an (much publicized) example of such technologies. Other technologies, coupled with the use of e-commerce, can help reduce the costs of transport.

2.2.2.2 Freight transport demand Based in a study concerning UK airfreight ([Ref 9]) the total UK airfreight market was in 1998, 2.353 million tonnes, accounting domestic, international freight and mail tonnes, as shown in the following table:

Figure 18UK air freight 1992-1998

(Source: CAA)

It is noticed that the market grown by an average of 8,72% per annum (period 1992-98), mostly in result of the performance in the sector extra EC freight. On the other hand, the intra European freight, has also grown, but at a lower rate of 7.7% per annum. The remaining segments are smaller, but have grown at approximately 6% per annum. It is useful to consider the value of goods that are transported by air, since the proportion carried through this mode, consists of a small volume, when considering the other modes. But, nevertheless, the value is very high. Also important is the relationship between the amount of freight carried in passenger aircraft and that carried in freighters and has to be taken into account, when thinking and taking decisions about the development of the industry. The growth of freighters is significantly higher than for passenger aircraft.

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The development of new technologies will not affect negatively the freight transport demand. On the contrary, the growing use of Internet / e-commerce – mostly in the high value goods segment, plus the logistics applications used to control the shipping needs, from order processing to pick-up or drop-off scheduling, policy compliance, will allow a more complete management of the transportation activity and add a positive impact to the client bottom line. The extremely fast web-based services will, without any doubt, have a very positive impact on the demand for freight transport, considering all the transport modes, but as demonstrated above, the high value goods are carried in a highest proportion through Air, so this mode is expected to achieve a good performance, concerning all the scenarios that might occur in the future.

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Ref. : M3S/ATM/CARE-AIRCIT/EEC/WP2/2.0 In this study, we will only consider high value freight since it is the only freight category susceptible to be carried by air.

2.2.2.3 Passenger demand on business markets Business passengers are the original market for air transport, and they still constitute today about half of the passengers transported by scheduled airlines (48% in France in 2001, according to the French civil aviation, 48% in the USA in 1993, according to an ITA study). Airlines keep a watchful eye on this market segment because business travellers are the ones that enable them to make profits. These passengers are not very sensitive to prices, but they are concerned about flexibility, service, and comfort. They travel for their companies, and therefore are not paying themselves the tickets. Although the share of business travellers is still very important, it is likely to be reduced in the future (at least in proportion of total travellers, if not in quantity) because the growth of leisure travels is nowadays much more important. This means that major airlines will have to adapt to a smaller share of business travel in the future. Moreover, this market segment is very sensitive to the economic situation, and in periods of crisis, business travel demand can be reduced dramatically, like, for example in the latest crisis period beginning in 2001. In periods of crisis, indeed, companies try to reduce their travel expenses, and reduce the number of travels, or use more the economic class to travel. They are also very sensitive to terrorism threats, and in case of security uncertainties, the alternative modes of communications (video conference) could be more heavily relied upon for conducted business. A recent survey relalised in UK, in June 2004 ([Ref 8]), shows that the use of online travel services is growing significantly. The majority (89 percent) reported that they were looking for flight times and availability online. On the other hand, 68 percent purchase airline tickets online and 21 percent performed online check-in for the flight. The majority of the persons assumed that the use of low-cost air carriers for business travel would remain about the same or increase over the next six months. Answering to the question “In which of the following ways do you use the Internet for your flight arrangements?”:

Figure 19: Answers to the question “In which of the following ways do

you use the Internet for your flight arrangements?” Source Customer Service Surpasses Loyalty Programs in Business Travel Decisions ([Ref 8])

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Ref. : M3S/ATM/CARE-AIRCIT/EEC/WP2/2.0 The issues treated above prove that, when planning a business travel, the use of Internet is getting more and more important and seen as a common tool today. Businessman generally prefer to travel for attending meetings, despite the cost and time involved. Nevertheless new technologies, used already nowadays – videoconference and web conference – can be the solution chosen by businessman to avoid travelling by plane. This was the case after the 11th September terrorist attacks where the video-conference and web conference industry benefited from people’s reluctance to fly.

2.2.3 Group 3: Transport policies, Transport infrastructure development, Environmental and sustainable development concerns

2.2.3.1 Transport policies and evolution of transport infrastructure in Europe

Until the beginning of the 90s, European transport policies mainly aimed at providing the necessary infrastructure, in order to respond to the increasing transport demand and to the congestion problems. The level of investment in transport infrastructure grew from 40% between 1980 and 1992. In order to support the rapid growth in air traffic, investments in airports infrastructure have been multiplied by 2.5 over the same period (Figure 20: Evolution of infrastructure investments in EU15 by mode between 1980 and 1995).

Figure 20: Evolution of infrastructure investments in EU15 by mode between 1980 and 1995

Source European Environment Agency [Ref 19]

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Despite their high growth, such investments only represents 5% of the total infrastructure investments while the share of road investments reached 66% in 1995, this percentage remains almost unchanged since 1980 (Figure 21: Modal share of infrastructure investments in EU15). For example, in 1970, there were 1 500 kilometres of highways in France, for 6 000 in Germany; in 2003, there are 11 000 km, compared to 11 700.

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Figure 21: Modal share of infrastructure investments in EU15

Source European Environment Agency [Ref 19]

2.2.3.2 Transport policies and the environment

The importance of environmental concerns plays nowadays an essential role in the choice of transport policies and as a consequence, on the development of transport infrastructures.

When European countries became aware of the existence of external costs of transports, they realised the magnitude of their impact on society (representing 8% of the European GDP in 2000, source European Environmental Agency [Ref 22]). External costs represent the costs affecting society but not directly born by the transport user who caused them. When decomposing the external costs of transport by cost category, the European Environmental Agency shows that 55% of these costs are related to environmental nuisances such as climate changes, air pollution or noise.

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Figure 22:Composition of external costs of transport in EU-15 plus Norway and Switzerland by cost category

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Source European Environment Agency [Ref 22]

In addition, the decomposition of these external costs by transport mode shows that passenger cars are responsible for 58% of the total external cost, this percentage increasing to 92% when taking into account the whole road transport activity. Because of this large percentage of road traffic, the share of rail and bus transport in the total external cost is negligible.

Figure 23: Composition of external costs of transport in EU-15 plus Norway and Switzerland by

transport mode Source European Environment Agency [Ref 22]

When Europe became aware of the disastrous consequence of the environmental pollution on society and of the role of transports in this pollution, transport policies started taking into consideration the environmental aspects and came with the objective of increasing investment in sustainable development and to promote sustainable mobility1. From 1992, the Common transport Policy hence introduced certain sustainability objectives such as using existing infrastructure more efficiently and re-directing demand towards modes with spare capacity, and environmental advantages. These considerations were then translated into a wish to develop an integrated European transport system, to revitalize rail and combined transports, in order to reverse the trends of a large share of in road traffic.

A concrete application of these transport policies is the High-Speed Rail network, the High-Speed Train being considered as one of the transport mode the less damageable for the environment. As a result of these policies, the European High-Speed rail network is 9 times longer in 2002 than in 1981 (Source European Commission [Ref 16]), where this length almost tripled between 1990 and 1999. In 2001, the High-Speed rail network has grown to more than 2700 km of high capacity high-speed track, and the growth is expected to go on for reaching almost 4400 km in 2018 (Figure 24: Length of new high-speed railways in the European Union).

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1 Sustainable mobility : the aim is to satisfy current transport and mobility needs without compromising the ability of future generations to meet these needs

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Figure 24: Length of new high-speed railways in the European Union

Source European Environmental Agency [Ref 21]

A second concrete application of these policies is the development of airport rail links. In 2004 at least 46 European airports are directly connected to railways.

The degree of consideration of environmental aspects and the notion of the sustainable development in transport policies directly influence the choice in transport infrastructure that has to be developed. In general, the highest the environmental concerns, the largest the investments in railway infrastructures (including high-speed rail, tramway, metro, etc.). High level of environmental concerns does however not lead to a complete stop in road infrastructures’ investments.

Nevertheless, this degree of consideration is strongly correlated to the world economic situation. For instance, the annual drop of 3% between 1993 and 1995 in transport infrastructure investments (Figure 20: Evolution of infrastructure investments in EU15 by mode between 1980 and 1995) was mainly related to the slow economic growth, which happened after 1990. Hence despite the decision of promoting the rail infrastructure in European transport policies, the investment level in this category of infrastructure decreased between 1994 and 1995.

2.2.3.3 Trans-European transport network for 2020

Since European funds2 are available for identified infrastructure projects, the European commission has defined priority projects (through a work group called high level group on the TEN-T).

Some important projects, like the new Berlin airport, are not on this list, because the group considered that such a project could be financed through fees, and therefore did not need financial aid from the community. On the contrary, the identified projects (see Table 5: Recommended priority projects on the trans-European transport network, and Figure 25: Map of the recommended priority projects on the trans-European transport network) present uncertainties concerning their final cost and future income. This is the reason why partial public financing through the community is needed. Those projects “have strong socio-economic benefits by reducing costs (internal and external), and by improving the quality of transport and inducing spatial development” ([Ref 17]).

The parliament and council adopted this proposal on April 29, 2004. The problem of finding funds to

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2 with a limit of 10% so far but the commission is hoping to be able to increase its share of financing up to 20%.

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Ref. : M3S/ATM/CARE-AIRCIT/EEC/WP2/2.0 finance those projects is however not yet solved. As pointed out in the 2001 white paper on transport [Ref 15], infrastructure projects suffer from a lack of interest from private investors, and national public investments are limited and not adapted to international projects.

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We can remark that most projects are non-road projects, with the rail having the larger share. This is consistent with the approach of sustainable mobility, and re-balance of transport modes in Europe, towards more environmental friendly modes. The air is absent from this list (with the exception of Malpensa airport which is completed), but this does not mean that air projects are to be shunted, but rather that they should be self financed 1 with a limit of 10% so far but the commission is hoping to be able to increase its share of financing up to 20%.

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Table 5: Recommended priority projects on the trans-European transport network

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Figure 25: Map of the recommended priority projects on the trans-European transport network

2.2.4 Group 4: Passenger demand on leisure markets

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Although it is quite impossible to evaluate the real transport demand, since information on the non-satisfied demand are generally not available, it is easier to deal with the revealed transport demand since it corresponds to the passenger traffic data. The revealed or satisfied transport demand is hence generally considered as representative of the transport demand.

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Ref. : M3S/ATM/CARE-AIRCIT/EEC/WP2/2.0 If all the key factors of Group 1 influence the level and features of passengers’ transport demands, the situation of the world economy has the stronger impact. Indeed, the correlation between this transport demand and the situation of the economy is very strong (Figure 26: Passenger transport demand and GDP) between 1991 and 2000; the average annual growth in passenger-km was identical to the annual GDP growth (2.1%).

Figure 26: Passenger transport demand and GDP [Ref 24]

The European Environment Agency identifies several factors underlying the strong relationships between passenger transport demand and economic growth:

• The main factor mainly relates to the transport demand of leisure passengers since it concerns the growing level of incomes over the period. The income growth results in a rise in the total transport demand (considering that people spend more or less the same share of their disposable income on transport: around 11 to 12%, source European Environmental Agency). Additional budget allows more frequent, faster, farther and more luxurious travels.

• Another major factor is the increase in travel distances which has become possible thanks to increasing speeds, lower prices, better quality of transport and improved infrastructures.

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Hence leisure passengers are very sensitive to the economic situation since the evolution of their levels of disposable income is closely related to the economic growth. This implies that a weak economic growth rate will result in a decrease in the general transport demand for leisure purposes. Indeed, when comparing the growth in international tourist arrivals with the GDP growth, the World Tourism Organization (Figure 27: Growth of GDP and International tourist arrivals) observes that when world economic growth exceeds 4%, the growth of tourism volume tends to be higher. On the opposite when GDP growth falls below 2%, tourism growth tends to be even lower.

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Figure 27: Growth of GDP and International tourist arrivals

Source World Tourism Organization [Ref 44] It is however important to note that the International tourist arrivals taken in consideration by the World Tourism Organization does not only represent the transport demand for leisure purpose. Indeed the World Tourism Organization also includes the travel for business and professional purpose in the number of international arrivals. Nevertheless, when considering the leisure purposes group (leisure recreation, holidays, visit to friends and relatives and religion), the World Tourism Organization estimates that these leisure purposes represent 77% of the total arrivals. This means that changes in tourist arrivals are mainly due to changes in leisure passengers’ demands. Unfortunately data on travel purposes are not available, preventing us from analysing what is the relation between GDP growth and leisure passenger transport demand. Another key factor influencing the leisure passengers’ demand is the world geopolitical situation. In particular the existence of international tensions can largely affect the transport demand for leisure purpose. This happened after the terrorist attacks of the 11th September in New York when the leisure passengers demand de creased for fear of new terrorist attacks.

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This demand decrease mainly affected air transport, which appears to be very sensitive to international tensions. Under the combination of a weak economy and the 11 September attacks, the air transport demand declined by more than 2% in 2001, mainly on long-haul trips. Nevertheless this decrease cannot be attributed in totality to leisure passengers since business passengers also reduce their demand for air travel.

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A r r i v a l s b y m o d e s o f t r a n s p o r t

0

5 0

1 0 0

1 5 0

2 0 0

2 5 0

3 0 0

3 5 0

4 0 0

A i r R o a d R a i l W a te r N o t s p e c i f i e d

1 9 9 0

1 9 9 52 0 0 0

2 0 0 1

World inbound tourism by mode of transport Source World Tourism Organization [Ref 46]

At the same time, leisure passengers feeling more secure in road and rail transport shifted a part of their transport demand (mainly short and medium-hauls) to these two transport modes. In 2001 the road and rail transport demand increased by 1% and 3% respectively. When affecting the mobility of leisure passengers, the world economy as well as the geopolitical context directly influence their transport demand. If leisure passengers would tend to decrease their air transport demand in case of international tensions, they would tend to shift part of their demand to competitive transport modes perceived as safer, such as road and rail.

2.2.5 Group 5: Operators’ strategies, transport technologies

2.2.5.1 Operators’ strategies

The airlines:

In Europe we can see four main types of airlines: the majors, the charters, the “low costs” and the regional airlines.

The majors, which are the main “old” national European airlines, have begun restructuring shortly before (British Airways) or after the liberalization of air transport in Europe (that took place between 1987 and 1997). They have developed and perfected a strategy of “hub and spoke” network (centred in Paris for Air France, London for British Airways,…) and are trying to extend their operations through alliances with other main airlines of the world. They have what could be called a “global strategy”: extended reach (if possible world network), short and long haul flights, for all types of passengers (business and leisure).

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The charter airlines are also airlines existing before the liberalization process. They offer non-

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Ref. : M3S/ATM/CARE-AIRCIT/EEC/WP2/2.0 scheduled flights during the holiday seasons to tourism destinations. They are operating together with the tour operators to offer package tours (flight + hotels + activities +…) to leisure passengers. They are what can be called in economics “niche” operators, in the sense that they have a highly specialized strategy, and do not try to operate on the same markets as the majors (there is however some overlap on some destinations).

The so-called “low costs” carriers are new operators in Europe. They entered the European markets during the liberalization process. Their strategy is also highly specialized: they operate scheduled short haul flights between European cities, on rather dense traffic routes, from secondary airports. They have a limited on-board service, sell their tickets through the Internet and have high aircraft utilization with only one (or two) types of planes in their fleet. All these characteristics concur to enable them to have low costs, and this is the reason why they are called, rather misleadingly “low costs” carriers. From a zero market share at the end of the nineties, they now have nearly 20% of intra-European market share.

The regional airlines are today mostly subsidiaries of the majors. They are operating regional routes in order mainly to feed the hubs of the main airlines. Independent regional airlines tend to disappear. Their main problem is high costs and low traffic.

The trends we can observe today, concerning the airlines’ strategies, are the following:

• The majors tend to concentrate through alliances and mergers. It is foreseeable that in the near future, European majors will continue restructuring along those lines, inside three groups, corresponding to the alliances; Star Alliance (Lufthansa), Sky team (Air France, KLM) and Oneworld (British Airways). They will try to consolidate their positions in European main airports, and use regional airlines as feeders for their hubs. In certain circumstances, as we will see later in the scenarios, they might also use rail operators as feeders, through intermodal agreements.

• The “low costs” will try to pursue their growth, focusing on secondary airports, and low costs. Some of them however, like Easyjet, are trying to penetrate majors’ markets by flying to and from major airports. This tendency shall remain limited as long as airport slots remain allocated through “grandfather rights” at major airports. Grandfather rights ensure that only incumbent airlines have access to main congested airports, by allocating take-off and landing slots through an anteriority rule. It this rule was to be dropped, as the European commission currently wishes, things may change substantially, by allowing low costs carriers to penetrate major European airports. Some of them may find appealing to have access to the most profitable short haul markets. Will the low costs venture on longer haul routes, and try to compete with the majors on those routes? It is dubious, because their main advantage lies in their ability to operate efficiently with an extremely high aircraft utilisation (around 12 hours a day), and changing the structure of their flights would lead to a change in that strategy and could imply higher costs. However that is a possibility, which needs to be examined, especially in the case that majors become weaker or have financial difficulties.

• Charters face a difficult period ahead. They are competitors with the majors on some routes and with the low costs on others. They are not highly profitable like the low costs, partly because they are not in control of their sales and programs, but resort to the tour operators for these aspects. Some charters are already trying to change into low costs carriers, (like MyTravel by creating MyTravel Lite) but so far not very successfully. Operating scheduled flights, all year round, and selling tickets themselves is a challenge that they still have to master.

The rail operators:

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Although the markets are much less competitive in rail, the deregulation of the sector in under way, and some competition may appear progressively between rail operators. The strength of rail

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Ref. : M3S/ATM/CARE-AIRCIT/EEC/WP2/2.0 development, for passengers and freight, will depend largely on economic conditions and European and national policies, particularly regarding the environment and the development of new infrastructure. It will also depend on the coordination of infrastructure management in order to improve the interoperability conditions throughout Europe.

Finally, the dynamism of the operators to respond to passengers and freighters needs and demands will be the key to the rail future as an efficient way of transporting people and freight. Today, rail transport for freight is not a real alternative to road transport: for example rail freight is travelling through France at an average speed of 16km, and freight activities induce large losses each year (450 millions of euros in 20033) for the French rail operator SNCF…

2.2.5.2 Transport technologies

If many improvements in aircraft technologies have already been made, this trend is expected to go on the next 15-20 years. . Fuel Efficiency Airplane fuel has decreased in the period between 1955 and 2000. The relative fuel use per seat-Km, in percentage, for a 1.600-Km trip on various airplanes, has gone down around 70%, from the Boeing 707-320 in the sixties until the Boeing 757-300 in year 2000, its initial service year.

Figure 28: Fuel use for a 1600-km trip on various airplanes

And efficiency improvements continue:

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3 Source : La Tribune,26/3/2004

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Figure 29: New commercial airplanes efficiency trend

Airplanes are very competitive on fuel efficiency:

Figure 30: Fuel used by transport mode

Passengers and Cargo, Maintainability, Reliability, Cost, Range, Noise, Cruise Mach, Landing Speed, Cruise Altitude, Take off Field Length and specially EMISSIONS and FUEL ECONOMY. All of the mentioned before have as driver the SAFETY issue. Fuel economy is affected by Operational and Technological Factors. In the second ones, we can mention Lift (aerodynamic), Thrust (propulsion efficiency), Weight (structural efficiency) and Drag (aerodynamic). Both Engine Companies and Airframers work together to improve fuel efficiency.

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Fuel efficiency, seen as a improvement in Aircraft Technology, is motivated by current constraints that airlines - but also all the other agents involved in air transport – should face, like policies related with environmental concerns and other requirements, specially for reducing fuel cost – in particular for ‘Low Cost Carriers’, this is an very important issue.

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Ref. : M3S/ATM/CARE-AIRCIT/EEC/WP2/2.0 . Noise Reduction and Emission Reduction Following the ‘European Aircraft Noise Research Initiative’ - Current Aircraft Noise Projects and ACARE Strategic Research Agenda, we can see, departing from year 2000, the noise reduction objectives and technology paths (current projects):

Figure 31: Decibels per aircraft operations

The projects roadmap for 2010 solutions:

Figure 32: Roadmap for 2010 solutions

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Ref. : M3S/ATM/CARE-AIRCIT/EEC/WP2/2.0 The main innovations consists in: Noise Evaluation of Advanced Engine Concepts; Validation of Novel Noise Reduction Solutions - Low Noise Engine Component Design, Nacelle and Nozzle Liner Concepts, Active Noise Control Applications, Inlet and Nozzle Advanced Design; Adaptation of Solutions to Helicopter Engine; Validations of Airframe Noise Reduction Solutions – Landing Gear, High Lift Devices. Taking a look at the current Noise reduction technology:

Figure 33: Noise reduction technology

And improvements in Noise Reduction:

Figure 34: Scope of airframe noise reduction technologies

The following chart shows the technology contributors for the Environment:

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Figure 35: technology contributors for the environment

All the technological improvements, like the Efficient Aircraft, Quiet Aircraft, Efficient Engine and the Clean Engine, are expected to lead to the following results: CO2 reduction by 50%, 10 Db reduction by Aircraft operation and NOx reduction by 80%. We can recognize two complementary paths, where the Efficient Aircraft and the Efficient Engine are environmentally friendly architectures and the Quiet Aircraft and the Clean Engine are Environmental Technologies. One of the works going on currently is related with the development of the Fixed Wing Aircraft and its Noise Goals:

Figure 36: 2020 vision targets

Some consequences in result of these developments will be:

- Minimum affordable impact on environment; - Low production & operating costs;

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- Inside out design for space & comfort.

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Ref. : M3S/ATM/CARE-AIRCIT/EEC/WP2/2.0 . A vision for the future

In 2020, European aeronautics is the world’s number one. Its companies are celebrated brands, renowned for the quality of products that are winning more than 50% shares of world markets for aircraft, engines and equipment. Though coming in all sizes from multinational corporations to small and medium-sized enterprises, their position is built on formidable competitiveness in all areas, from research to design, from product development and support to manufacturing, operation and maintenance.

The public sector plays an invaluable role in this success story. Governments, together with the European Union, are operating joint programs for the management of the air transport system that range from a single safety authority to a unified approach to airspace management, and a common perspective on airport planning.

Goals for the European Aeronautics Industry

A new framework that allows and encourages companies to work together more effectively in setting and achieving their industrial priorities. This will strengthen competitiveness and improve responses to changing market conditions; Achieve new standards of quality and effectiveness so that Europe has at its disposal the most competitive research system in the world; Make more determined efforts to match the synergies between civil and military research achieved by competitors, despite differences of political structure; Halve the "time to market" for new products with the help of advanced electronic analytical, design, manufacturing and maintenance tools, methods and processes.

Safety, Environment and European Air Transport System Goals

Aircraft will achieve a five-fold reduction in the average accident rate of global operators and will drastically reduce the impact of human error. Higher standards of training for aircraft operations and maintenance and for air traffic management.

Total engagement by the industry in the task of studying and minimizing the industry’s impact on the global environment, a reduction in perceived noise to one half of current average levels. Eliminate noise nuisance outside the airport boundary by day and night by quieter aircraft, better land planning and use around airports and systematic use of noise reduction procedures, a 50% cut in CO2 emissions per passenger km (which means a 50% cut in fuel consumption in the new aircraft of 2020) and an 80% cut in nitrogen oxide emissions.

An air traffic management system that can handle 16 million flights a year with 24-hour operation of airports and a more flexible and efficient use of European air space, a seamless European Air Traffic Management system mainly based on a civil global satellite system and Integration of air transport into an efficient multi-modal transport system.

European Governments Parliament Goals

Adopt more flexible approaches to the industry that encourage rather than hinder its adaptation to changes in the market, acknowledge that the competitiveness of industry is based both on civil and defence related products and that this has to be taken into account in optimizing the R&T system.

Facilitate greater integration of European, national and private research programs so that maximum value is obtained from available funds and ensure that education policies are directed at supplying the engineers, scientists and other skills aeronautics badly needs.

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Act rapidly to implement the European Union’s economic reform agenda including adoption of

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Ref. : M3S/ATM/CARE-AIRCIT/EEC/WP2/2.0 measures to encourage mobility, such as cross-border portable pensions and mutual recognition of qualifications, and to promote the rapid growth of electronic networks, e-commerce and e-business.

Ensure closer and more effective coordination of the positions of European governments in international institutions whose work impacts the aeronautics industry, supporting the creation of level playing-fields worldwide (e.g. the International Civil Aviation Organization, the International Telecommunications Union, the World Trade Organization).

. The Aircraft of Tomorrow

Literally thousands of systems work together within a modern aircraft: the airframe itself, the engines, the navigation systems on the flight deck are a few of the “high tech” ones, but seat, galley and many other technologies play their part. Aircraft may be acquiring new shapes and sizes by 2020 to improve the technical efficiency of the air transport system and to raise their safety and environmental performance. Flying wings could offer more efficient and quieter solutions, airships may finally establish themselves as a cheap alternative for carrying freight, and convenience flying could be a reality with tilting wings that allow vertical take-off and landings. The super-liners able to carry 1200 or more passengers may need new airport systems to handle them, folding wings to avoid occupying too much airport space, and entrances and exits of a size once found only on passenger ships.

In the meantime, today’s aircraft will continue to be improved by technology advances. Second-generation composite materials and use of hybrid laminar flow over the entire aircraft could make vast contributions to reducing aircraft weight and air drag, thereby reducing fuel consumption.

Future aircraft technologies will also concern the development of small aircraft with high performances. For instance the Eclipse 500TM, from Eclipse Aviation, is the future of personal aviation, expected to reach the market in 2006. This high-performance, five-to-six-seat twin-engine plane is designed to carry passengers over fairly short routes, using state-of-the-art technology. According to company information, the Eclipse 500 is significantly safer, easier, and less expensive to fly tan comparable jets.

In addition, Eurocopter plans that the use of rotorcraft for accessing airports should increase during the next 15-20 years.

2.2.6 Group 6: Multimodal cooperation, Multimodal competition, Unimodal competition

The future evolution of multimodal cooperation, multimodal competition and unimodal competition in the European Union is closely associated with the transport operators strategies that will derive from transport and environmental polices and infrastructure development. If the transport market is left to be a fully competitive market without capacity constrains, the transport operators will follow the market needs and, regardless of the development scenarios, there should be and increase of competition between modes instead of cooperation. In fact, transport operators are regulated and still depend, to a large extent, of governments transport policies for the supplying of infrastructures. This means that the level of cooperation between modes will depend on the development of strategies followed to cope with the increasing travel demand. In the last decade the modal shares of passengers transport in Europe have been quite stable. The main changes are a significant increase of air travel and a small decrease of bus and rail travel.

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Figure 37: Modal shares of passengers transport demand EU15

(Source EEA) Most of cooperation examples between air and rail correspond to situations where capacity problems in airports or land access were found. The modal shift results of this cooperation are still insufficient to have any effect on European modal shares. The connection between Seville and Madrid illustrates to some extent the effect of multimodal cooperation and competition. With the entry into service of the high-speed train (AVE) between Madrid and Seville the market share for flying fell from 40% to 13%. The great majority of point-to-point passengers shifted to the train. The air market share is made of passengers that are doing connections in Madrid – This is a clear situation of multimodal competition. On the other hand, the new Cidad Real Airport (a green field project airport located 210Km south of Madrid) that is directly served by the AVE Madrid-Seville will be an example of multimodal cooperation. In this case the airport is being built in an area with a very small catchments potential, but the majority of passengers are expected to arrive by train and connect to air. Another import issue is the European airline market. This is the most competitive transport mode and its market structure is changing rapidly. Presently several types of airlines with a low level of specialization compose the airline industry. Former flag carriers provide long haul services, regional feeding services, and point-to-point services. In addition to this there are regional carriers operation in regional markets, LCCs and Charter operators. Analysts consider that in the next years (medium term) specialization will be the key. Different type of airlines will merge and specialize in different markets. Basically we will have Global Network Carriers or full service carriers (FSC) that will provide connections and long haul flights; Regional carriers that will act as FSC feeders and point-to-point full service providers; Low Cost Carriers (LCCs) that will provide low fare point-to-point services.

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Medium term

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Figure 38: Short and medium terms evolution of the air market structure

(Source: adaptation from Morgan Stanley Equity Research)

2.2.7 Group 7: Traffic, Congestion

The evolution of the Key and Resulting factors of the previous groups and the features of their relationships all determine the level of traffic of each transport mode.

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From 1970, road transports are the main used modes for passenger transports (Figure 39: Traffic by mode of transport for passengers in EU15). Besides this road preponderance, the air mode has increased its market shares by 50% between 1990 and 2000 (Figure 40: Modal split of passenger traffic in EU15) to the detriment of railway, bus and coaches.

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T r a f f i c b y m o d e o f t r a n s p o r t f o r p a s s e n g e r s i n E U 1 5 ( i n m i l i o n s o f p a s s e n g e r s K m )

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Figure 39: Traffic by mode of transport for passengers in EU15

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Source European Commission [Ref 16]

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Contrarily to passenger transport where only one transport mode predominates, freight is mainly carried by two transport modes: road and sea (Figure 41: Traffic by mode of transport for goods in EU15). If the road modal share tends to be the highest since 1990, the sea modal share was still 40% in 2000 (Figure 42: Modal split for freight transport in EU15).

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Source European Commission [Ref 16]

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This level of traffic combined to the available capacity, which is also, a consequence of all the factors’

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Ref. : M3S/ATM/CARE-AIRCIT/EEC/WP2/2.0 evolutions, determine what are the congestion levels. In general, the most saturated transport modes are road and air transports.

Road congestion in Europe is mainly a problem in few cities and on some main routes. Otherwise, congestion is mainly a problem due to weather congestion and holidays. Hence congestion is not a widespread problem in the European network as a whole but can lead to critical problems when it does occur. The European Conference of Ministers of Transport (ECMT) underlines that congestion is largely due to a long-term policy of restriction on investment in transport infrastructure. The ECMT observes, “Congestion tends to spread in time and space rather than in intensity. The factors behind the diffuse spread of congestion are growth in car ownership – and the stable or declining cost of car use – and population density, which makes congestion a regional, and certainly not a national or even les international, phenomenon”. The recurrence and unpredictability of congestion affect all users, but especially freight haulers for whom congestion means additional staff and equipment costs.

When analysing the forecasted trend of air transport demand in Europe IATA [Ref 30] concludes that the current congestion situation of the main hub could increase in the next 6 year. Many hubs would be congested by 2005 meaning that a substantial proportion of airlines requesting slots would not be satisfied. As stressed by IATA [Ref 30], the percentage of unsatisfied demand for slots would vary from 6 to 26% among the 9 main European airports in 2005 and would reach 13 to 40% in 2010.

Figure 43: Percentage of demand not met in 2000, 2005, 2010

(Source IATA [Ref 30])

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3 Scenarios As baseline of our scenarios we will consider that the evolution trends of some of the key factors will be the same for all of the studied scenarios. However, the extent of these trends can change between the scenarios. Section 3.1 presents these base assumptions, while section 3.2 details the three considered scenarios aiming at determining what would be the evolution of the intermodality between air and the other transport modes at a 15-20 years time horizon, according to the combined evolution of the key factors.

3.1 Base elements

This section presents the elements considered as fundamental trends for the next 15-20 years, and which will be used in all scenarios. Each group of key factor is hence analysed in order to determine which key factors could be considered as presenting fundamental trends in our scenarios’ time horizon.

3.1.1 Group 1

3.1.1.1 Globalisation

In group 1, where all the economic environment is considered, not much can be assessed as “certain”. Some trends however, can be reasonably thought to go on, like the globalisation process.

Although there is a widespread use of this word, there is no precise or widely accepted definition of the term globalisation. It could be summarized as “ the global circulation of goods services and capital, but also information ideas and people” ([Ref 42]). It could also be defined as: “the closer integration of the countries of the world—especially the increased level of trade and movements of capital—brought on by lower costs of transportation and communication” ([Ref 41]).

The globalisation pace, which has increased in the 1980s and 1990s, has enabled people in some developing countries to reach higher income levels, longer life expectancy, better schooling, less poverty (as in China, India, Hungary and Mexico). But other countries, like particularly in sub-Saharan Africa, the Middle East, and the former Soviet Union, have stayed largely aside from this process, and consequently, are poorer than before.

In countries benefiting from the integration in the world economy, the number of poor remain high: 46.7% of people in china live with less than 2 dollars a day, and the figures reach 79.9% in India ([Ref 4])

The revenue gap between countries benefiting from the globalisation process, and countries that remain outsiders (less politically or economically stable countries, where international investment does not flow) is wide.

As the World Bank report points out: “there is compelling evidence that globalisation has played an important catalytic role in accelerating growth and reducing poverty in developing countries. Its impact on inequality is more complex: global inequality has been reduced because of the inclusion of the more populous developing countries in the benefits of globalisation, but many countries are still falling behind and there has been some increase in inequality within countries with a large number of poor”. ([Ref 42]).

We will assume as basic assumption that the globalisation process will go on for the next 15-20 years. This assumption is also used by ACARE when building all its scenarios [Ref 1].

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This globalisation process should lead to more delocalisation of companies from older industrialized countries to younger ones, and an upward trend in unemployment in the former, at least for some time,

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Ref. : M3S/ATM/CARE-AIRCIT/EEC/WP2/2.0 since those economies are likely to adapt progressively to the change in industrial structure. This in turn, should contribute to an increase in the revenue inequalities, unless specific redistribution policies are implemented.

These consequences are also forecasted by the Netherlands Bureau for economic policy analysis, which estimates that the globalisation development would result in a shift of centres of productions from OECD countries to Asia allowing Asia to double its GDP share between 1995 and 2020.

Figure 44: World share of GDP in 1995 and 2020

Source Netherlands Bureau for economic policy analysis [Ref 38]

The economical and social situation will determine the development of business, leisure and freight travel demand, by defining the patterns and intensity of business relationships, the income levels of individuals, the prices of transport and the world stability background.

3.1.1.2 World Economy

The world economy is slowly evolving, with developing and transition countries taking a larger share of world GDP. J. F. Rischard, vice president of The World Bank (in “forces reshaping the world economy”, J.F. Rischard), estimates that by 2020, china will be the largest world economy. Other countries like India, or regions like Asia, Latin America, or Eastern Europe, may become new economic powers.

Although such evolutions are largely uncertain, the world of 2020 may be more balanced than today, where about 15% of people consume 85% of goods and services.

In terms of traffic, it means that new markets will emerge, inside and outside Europe. With the growth of individual income comes the growth in transport demand from these new countries. Inside Europe, the integration of Eastern European countries (EU and non-EU ones) should lead to new traffic flows from east to west.

3.1.1.3 Oil prices

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Oil is expected to remain the dominant energy fuel as it has been for decades (Figure 45: World

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Ref. : M3S/ATM/CARE-AIRCIT/EEC/WP2/2.0 energy consumption by fuel type, 1970-2020). In the industrialized world, increases in oil use are projected primarily in the transportation sector, where there are currently no available fuels to compete with oil products.

Figure 45: World energy consumption by fuel type, 1970-2020

Source US department of energy

Most analysts consider that oil prices are on an upward medium to long-term trend. When projecting the evolution of oil prices from 2004 to 2025 the Energy Information Administration proposes three scenarios. The main differences between these scenarios are in the first year of forecasts since it is considered that the oil price can either significantly increase or decrease. Although these three scenarios differ on the oil price trends at the first year of forecast, they all consider that the long-term trend would be an increase in the oil prices.

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Figure 46: Oil prices evolution in three cases, 1970-2025 (2002 dollars per barrel)

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Source Energy Information Administration [Ref 10] This assumption of long-term increase is also made by the US Energy Information Agency Forecast and is used by STATFOR [Ref 12] when building their long-term forecasts.

Figure 47: Oil price forecast Source STATFOR [Ref 12]

Except for the unlikely discovery of new important oil fields, the costs of exploiting current field is going to increase due to the exhaustion of “easier to exploit” fields. Indeed, the Energy Information Administration forecasts that whatever the oil price level, the reserves of oil prices will quite constantly decrease over a long time period (Figure 48: Crude oil reserves in three cases, 1990-2025 (billions barrels)).

Figure 48: Crude oil reserves in three cases, 1990-2025 (billions barrels)

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Source Energy Information Administration [Ref 10]

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Ref. : M3S/ATM/CARE-AIRCIT/EEC/WP2/2.0 As a consequence, the total oil production is also expected to decrease over the period. However, The Energy Information Administration forecasts that rapid technology advances could limit this decrease by raising oil production slightly.

Figure 49: Crude oil production in three cases, 1990-2025 (billions barrels), according to the

degree of technology advances Source Energy Information Administration [Ref 10]

3.1.2 Group 2 The development of new communication and information technologies should go on, with consequences that are however not clear. On freight and cargo, information technologies have a rather positive impact. The development of e-commerce should lead towards more freight being transported, but the magnitude of the impact is hard to assess. The European Environment Agency [Ref 20] reinforces this assumption by explaining that Internet and e-commerce should stimulate the “just-in-time” deliveries, since the e-customers wish to receive their order as soon as possible. As a result of a more global trade, haulage distances should be increased. Concerning leisure passengers, the generalisation of e-ticketing and internet “dynamic holidays packaging” is facilitating leisure trips and lead to a decrease in airlines costs, as well as other travel improvements, which has a positive impact on demand. For business passengers, the video-conference systems being more adequate, they may lead to a smaller demand for travel, but again the order of magnitude of this effect depends largely on the context (the fear of terrorism for example could be very effective in promoting these video-conference systems).

3.1.3 Group 3 Environmental policies influence transport policies, and both have consequences on infrastructure development. Environmental policies trend to more stringent, as public worries on climate changes and environmental deterioration become stronger.

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These effects are indeed expected to increase the next 10-15 years, as shown in the projections made by the Energy Information Administration (Figure 50: Projected global carbon dioxide emissions) on

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Ref. : M3S/ATM/CARE-AIRCIT/EEC/WP2/2.0 the emissions of Carbon dioxide (the principal greenhouse gas). These projections show U.S. emissions increasing by 1.2 percent annually between 1995 and 2015 absent any policy interventions. The emissions for the other 28 industrialized nations that are members of the Organization of Economic Cooperation and Development (OECD) are expected to increase at a similar rate. Developing (non-OECD) countries, with 81 percent of the world population and per capita emission rates that are currently very low, are expected to increase emissions dramatically as nations such as China and India fuel economic development with fossil energy. The Energy Information Administration projects that non-OECD carbon emissions will increase at an annual rate of 2.9 percent between 1995 and 2015.

Figure 50: Projected global carbon dioxide emissions Source Energy Information Administration [Ref 10]

At the current time, the transport sector is responsible for 28% of European Union emissions of carbon dioxide. Among the emissions due to the transport activity, 84% comes from road vehicles and 13% from aircraft. While CO2 emissions from industry are expected to decrease in line with the EU’s commitment under the Kyoto protocol those from transport are expected to rise. The European Union [Ref 25] estimates that in 2010 they will be 40% higher than they were in 1990, despite the target of reducing by 8% greenhouse gas emissions during this period. This strong evolution of the air pollution should then stimulate environmental concerns and influence environmental policies and consequently transport policies, which should aim at developing the European rail network.

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Figure 51: Emissions of CO2 by sector in the European Union

Source European Union [Ref 25]

In particular, in the White Paper on Transport, the European Commission aims at revitalizing the railways. It hopes to achieve this by several measures:

The opening of a transeuropean rail freight market by 2008,

A gradual opening of international passenger services,

Removal of technical barriers (interoperability, safety)

A better allocation of capacity (especially for freight)

Modernisation of services The building of future rail links (across the Pyrenées for example)

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UIC considers then an extension of the high-speed rail network when forecasting the rail traffic by 2020. They assume that the high-speed network length in Europe will more than double by 2010 and will nearly quadruple by 2020.

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Figure 52: European high-speed network 2020

Source Union Internationale des Chemins de fer [Ref 43] In addition, as congestion becomes more problematic, the European Union aims at improving the allocation of existing capacity. As a consequence, policies shall concentrate on solving it, by managing demand within the existing capacity rather than providing new infrastructure, mostly by changing the balance of modes (through pricing and infrastructure building). This should globally benefit public transports, as they are more efficient than private car. Nevertheless the level of benefit within different modes should be different. This is the case for air transport since airports are part of the congested infrastructure, and policies shall focus on a more optimal use of the infrastructure (larger aircraft, redefinition of slot allocation…).

3.1.4 Group 5 The numerous airport neighbouring’s complaints on the environmental nuisances (pollution, noise) generated by the air transport activity play in important role in the increasing environmental preoccupations. The main evolutions of aircraft technology should then concern the reduction in noise as well as the pollution emission. On the same time, the strong sensitivity of aircraft operators, especially of Low Cost carriers to oil price levels should lead aircraft builder to develop technologies allowing reducing the fuel consumption. This last assumption is also made by AIRBUS when forecasting the traffic at a 20 years time horizon. AIRBUS [Ref 3] takes indeed into account that in the long run increasing oil prices and environmental pressure will rightly provide strong incentives to improve the fuel efficiency.

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This assumption is also coherent with the view of the Intergovernmental Panel on climate change [Ref 31], which forecasts the fuel efficiency of new production aircraft could improve by 20% from 1997 to

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Ref. : M3S/ATM/CARE-AIRCIT/EEC/WP2/2.0 2015 (Table 6: Historical and future improvements in new production aircraft energy efficiency (%)). 10% of this fuel efficiency improvement should be related to the improvement in aerodynamic drag and airframe weight and to a greater use of high-bypass engines with improved nacelle designs. 10% of this fuel efficiency improvement should be related to a reduction in the fuel consumption during propulsion phases.

Time period Airframe Propulsion Total

Percent per year

1950 to 1997 30% 40% 70% 1.13%

1997 to 2015

10% 10% 20% 1.02%

Table 6: Historical and future improvements in new production aircraft energy efficiency (%) Source Intergovernmental Panel on climate change [Ref 31]

The low-cost carriers are becoming the main competitors of major airlines in intra-European point-to-point short and medium distance flights between secondary European airports. The Deutsche Bank Research estimates that the market share of low-cost carriers will increase from 10% to 20-25% by 2010. As for Major airlines the current trend of air transport market concentration and restructuring should go on leading to the existence of three to four full service carriers “monopolizing” the medium-haul connections and the long distance flights in the European market. New rail transport technologies should concern the improvement of the interoperability of the European railway network and a better capacity optimisation, as it is planned by the European Commission [Ref 15]. The European Commission indeed underlines that improving the train ability to run on any stretch of the network is an indispensable factor in Europe's competitive railway system.

3.2 Studied scenarios

If we take in consideration the fundamental trends for the next 15-20 years of the base elements presented in section 3.1 when building the scenarios, we also allow the extent of this trends to vary. The association of the various nuances of these trends and of the key factors’ relationships defined in section 2.1.3 has led us to consider three scenarios: Scenario A assuming a continuation in the current instability situation, scenario B assuming an evolution toward a strong instability situation and scenario C considering a situation of global stability. The term “instability” will refer in this work-package to the existence of international tensions.

If some of the base assumptions are also taken in consideration in other studies performing evolution scenarios such as for instance EUROCONTROL [Ref 13] [Ref 12], the elaborated scenarios are different from those already existing. Indeed, it is important to remember that the aim of these scenarios is not to provide air traffic forecasts but to determine what could be the role of the airport intermodality in the airport of the future. As a consequence of this main focus, we obtain innovative scenarios with highlights of their consequences on airport of the future and passengers are highlighted.

3.2.1 Scenario A: continuing instability

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The continuation of the globalisation process and a good economic growth in new and old industrialised countries lead to an increase in world trade but favour inequalities. The increase in the unemployment rate in older industrialized countries, due to delocalisation of firms, leads to an increase

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Ref. : M3S/ATM/CARE-AIRCIT/EEC/WP2/2.0 in the revenue inequalities in those countries, with social policies kept at today’s level, or even curtailed. Since older industrialized countries have to face a rise in inequalities at home, they are not much concerned about helping poorer countries and international economic aid remains at today’s level. This leads to more tensions in those countries, due to the high level of poverty and inequalities, and also to more tension between nations. Younger industrialized nations, (like China) also face a rise in inequalities, leading to internal tensions. Poverty is still at a high level in many countries. There is a moderate growth in terrorism, favoured notably by enduring poverty and the rise of inequalities. International tensions are higher than today, but there are no major conflicts. Oil prices being closely related to the economic growth and international geopolitical context, they strongly increase. This leads in turn to higher transport prices. The investments in new telecommunication technologies are maintained. The use of videoconference leads to a moderate demand shift in business passenger travel, since people still have cultural reservations to its use on a large scale. The use of IT technologies and Internet boost the demand for freight transport, since more business is conducted on a world basis (although this is somehow mitigated by the increase in transport prices). As a consequence, leisure passenger demand increases moderately due to high level of economic inequalities between world states, the geopolitical context and a moderate fear of terrorism. On the other hand, the business passengers as well as the freight demand strongly increase due to the good economic growth and the increase in world trade. Consequences of this scenario will vary according to the level of environmental concerns leading to consider two different sub-scenarios.

3.2.1.1 Scenario A1: Strong environmental concerns In developed countries, and specifically Europe, the environmental concerns are strong. The transport policies are taking those concerns into account, and are therefore oriented towards the development of more environmental friendly modes than road (trucks and private cars) (and air) such as rail or buses for passengers and sea or rail for freight Infrastructure investments are important, since growth is strong and transport demand is on the rise. Investments are done in all transport modes but are therefore more important on rail infrastructure. Airport congestion worsens, and this leads to constraints on payload and noise levels for aircraft using main airports in Europe, and to increase the use of secondary airports. Despite the increasing air congestion, FSCs still have enough slots for performing all their flights and have moderate incentive to shift most of their short and medium-haul flights on HST in order to free slots. The high level of oil prices combined with environmental concerns, gives incentives to aircraft manufacturers to invest in technologies aiming at decreasing aircraft fuel consumption, and aircraft noise.

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The congestion at major airport will lead to an increase of point-to-point intra-European flights to smaller regional airports (operated by regional carriers and LCCs). Major airlines benefit from the high business transport demand but suffer on short haul trip from competition of LCCs and HST. Majors concentrate and restructure, and three to four large operators “monopolize” the medium haul connections and the long distance flights in the European market. Low-cost airlines still increase their market shares on leisure segment on short and medium-haul trips, but are in competition with the increased number of HST connections, mainly in the business segment in shorter European routes. In

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Ref. : M3S/ATM/CARE-AIRCIT/EEC/WP2/2.0 Intra-European leisure market LCCs dominate. Charters operators loose large market shares to the low-cost airlines. They go on developing new long-haul holiday products or converting operation into low-cost flights. Impact on airport intermodality: FSCs do not need to shift most of their short and medium-haul flights on HST in order to free slots. Hence despite the strong development of HST infrastructure over Europe there is only a moderate use of intermodal agreements on short haul trips between majors and rail operators. These agreements are used by FSCs as a way to counter the Low-Cost carriers and to free slots for long haul flights (using bigger airplanes thus increasing the number of passengers per slot). Moreover, the strong investments on rail access to main airports, especially in dedicated airport trains, favour the existence of intermodal agreements between air and rail operators allowing passengers to check-in for their flight at the rail station. Besides to these air/rail agreements, the development of secondary airports leads to the development of air/bus intermodal agreements in order to favour the airport access by public transport. Rising costs of freight road transport leads to a revival of rail freight transport, on infrastructures left “vacant” (because of HST new infrastructure). This also leads to intermodal agreements with air/maritime operators and rail operators for freight transport. The following table illustrates, from a modal perspective, the level of unimodal/multimodal competition and/or cooperation to be expected within the different scenarios framework. The tables are organized by mode of transport and not by type of service. Therefore, within the same mode one could expect different levels of competition and/or cooperation, accordingly to the type of services provided (ex. Mode: Rail -Competition with air for regional city-to-city services / Cooperation with air in urban airport access services).

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Level of competition

Air Rail Road Sea

Unimodal competition

Moderate Moderate Competition between FSCs and LCCs for intra- European point-to-point market. FSCs competition in long haul markets

Moderate Cooperation between Full Service Carriers and High Speed Trains operators, for providing alternatives to the lack of airport capacity. Moderate cooperation between air and rail operators for airport access

Multimodal cooperation

Moderate

Moderate cooperation between air and bus in secondary airports

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Moderate Cooperation between conventional rail, inland waterways and road freight transport for providing alternatives to the lack of road capacity.

Multimodal competition

Moderate Moderate Competition between European Low Cost Carriers and rail mainly for point-to-point intercity business travel.

Moderate Competition with HST for intercity passengers and freight transport.

3.2.1.2 Scenario A2: Moderate environmental concerns When environmental concerns are only moderate, European transport policies choose to develop infrastructure so as to quickly respond to the traffic demand and the congestion problems. The trend is therefore to cope with rising travel demand by adding extra capacity to airports and roads. If states still invest on rail infrastructure they have weak incentives to invest mainly on extra-capacity on HSR links between cities. European states will have more incentives to invest on rail access to airports. Investments on airports also aim at increasing their capacity by enlarging terminals of main and secondary airports. The high level of oil prices combined with environmental concerns, gives incentives to aircraft manufacturers to invest in technologies aiming at decreasing aircraft fuel consumption, and aircraft noise. The competition for market shares between airlines increases. Air transport is responsible for the majority of intercity travel in Europe. Major full service airlines concentrate and restructure and three to four large operators “monopolize medium-haul connections and the long distance flights in the European market. They benefit from the high business transport demand but suffer on short haul trip from competition of LCCs and HST. FSCs indeed compete with LCC in point-to-point trips using the added airport capacity. Low-cost airlines still increase their market shares on the leisure segment on short haul trips. Charters loose large market shares to the low-cost airlines. Impact on airport intermodality: With an increase in airport capacity, airlines are able to cope with the demand growth without needing to cooperate with other modes. In addition, the limited development of HST infrastructure over Europe also prevents a large use of intermodal agreements on short haul trips between Majors airlines and rail operators, but they still continue to conclude these agreements each time it is possible in order to counter the LCCs. On the same time, the number of air/rail intermodal agreements relative to the airport access is limited due to the moderate development of rail access. The main development of intermodal cooperation concerns the air/bus agreements concluded both on main and secondary airports. Despite the rising costs of freight road transport, this one still to represent the main freight transport mode. The development of freight transport by air allows the increasing number of intermodal agreements between air and road. Nevertheless, since investments are made in roads, freight continues to travel by road.

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Level Air Rail Road Sea Unimodal competition

High High Competition between FSCs and LCCs for

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intra- European point-to-point market. FSCs competition in long haul markets Weak Cooperation between rail and airports, and between HST and FSCs Weak cooperation between air and rail operators for airport access

Multimodal cooperation

Weak/Moderate

Moderate Cooperation between conventional rail and road freight transport

Multimodal competition

Weak Weak Competition with rail for intercity passengers.

Weak Competition with rail and sea for freight.

3.2.2 Scenario B: growing instability In this scenario, the growing international tensions due to terrorism and increasing inequalities (between world regions, countries, and inside countries) are not resolved, and instability prevails in several world regions. European economic growth is weak, and firms moderately accelerate the delocalisation process. Indeed if European firms expect to reduce their costs of production when delocalising, they on the same time, fear the strong international tensions. This leads to partial deindustrialization of older industrial countries, unemployment and strong inequalities. In the rest of the world, globalisation leads to improvements for some countries, but not for many others, which suffer from political instability and enduring poverty. In the context of this global instability, oil prices increase strongly leading to high transport prices. Fear of terrorism leads to a decrease in the mobility of business and leisure passengers while the globalisation allows a good level of freight mobility. Increase in leisure and business passengers’ transport demand is all the weaker that transport prices are high. Only freight transport demand is well oriented, although weak economic growth and high prices dampens transport growth. The low passengers’ mobility level favours the investments in the developments of new telecommunication technologies. These technologies are heavily used, especially videoconference, since fear of terrorism leads firms to curtail their transport expenditures. The use of IT technologies and Internet boost the demand for freight transport, since more business is conducted on a world basis (although this is somehow mitigated by the increase in transport prices). In a context of economic crisis in Europe the environmental concerns are weak. Despite a strong popular pushing for increasing environmental concerns, the main aim is to find a way to quickly revitalize the economic growth and not to impose new environmental constraints that could impedes this revitalization process.

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Capacity increase is not an issue. European existing airport, rail and road capacity have to cope with

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Ref. : M3S/ATM/CARE-AIRCIT/EEC/WP2/2.0 the existing demand, since anyway the weak economic growth does not enable heavy investments. As a consequence, no new big projects on transport infrastructure and airport access are launched meaning that States have weak incentives to invest on rail infrastructure and on airport infrastructure. The association of the low economic growth and the high level of oil prices strongly incites aircraft manufacturers to invest in technologies aiming at decreasing the aircraft fuel consumption and allows the building of cheaper aircraft to build and operate. European full cost carriers bear a strong decrease in business passenger demand. Low cost strongly increase their market shares thanks to the transfer of the leisure and (some) business passenger demand from the FSCs to LCCs, and also thanks to the increase of shorter travels inside the European Union (passengers favour shorter travel, inside “safer” areas). Impact on airport intermodality: HSR also benefits from the increase of shorter travels inside the European Union, but intermodal projects remain limited by the lack of infrastructure development. In general, operators do not feel the need for cooperation, as they are fighting for passengers and market shares. Air/rail intermodal agreements relative to airport access are scarce due to the small number of airport connections by rail. Only bus and air manage to moderately develop intermodal agreements. The increase in freight transport demand is translated into an increase in the freight transport by truck, and road/rail intermodal agreements are scarce due to the lack of rail infrastructure development. Nevertheless, the moderate increase in freight demand enables the development of air/road intermodal agreements, even if the number of these agreements remains small. Level Air Rail Road Sea Unimodal competition

Moderate High Competition between airlines.

Multimodal cooperation

Weak Weak Cooperation between rail and airports.

Weak cooperation between road and air for freight transport

Multimodal competition

Moderate High Competition with rail for passengers.

3.2.3 Scenario C: global stability The globalisation process goes on. At the same time, the rise of social and humanitarian movements, as well as the revival of social policies enable a more equal increase and distribution of revenues. International instability is weak, and this allows for a moderate economic growth throughout most regions of the world. This international context associated to a moderate economic growth reduce the tensions on the oil prices. If oil prices increase due to the decrease in oil production they are not so volatile than in previous scenarios .

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As a result, there is a high general passengers’ mobility level, since more people have access to decent

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Ref. : M3S/ATM/CARE-AIRCIT/EEC/WP2/2.0 revenue. This moderate economic growth associated to the globalisation process stimulate the freight mobility. The investments in new telecommunication technologies are moderated. The use of videoconference leads to a moderate demand shift in business passenger travel, since people still have cultural reservations to its use on a large scale. The use of IT technologies and of the Internet boosts the demand for freight transport, since more business is conducted on a world basis. This lead to a moderate increase in the demand level for freight transport, while the economic and geopolitical context is mainly favourable to business and leisure passengers whose level of transport demand highly increase. In developed countries, and specifically Europe, the environmental concerns are strong. The European transport policies are taking those concerns into account, and are therefore oriented towards the development of more environmental friendly modes than road (trucks and private cars) (and air) such as rail or buses for passengers and sea or rail for freight. Investments are indeed done in modes that have smaller environmental impacts. The investment in extra airport capacity is minimal. The level of infrastructure investments in Europe is constrained by the moderate economic growth but on the same time stimulated by the high transport demand and environmental concerns. Investments mainly concern rail infrastructure, and favour intermodal solutions, for short to medium trips in order to reduce the strong air and road congestion due to the high transport demand. Airport congestion worsens, and this leads to constraints on payload and noise standards for aircraft using main airports in Europe, and to the development of secondary airports. The strong environmental concerns give moreover incentives to firms to invest in technologies aiming at decreasing aircraft fuel consumption, and aircraft noise. In addition, the high increase in passengers’ transport demand stimulate the development of large aircraft in order to decrease the noise and congestion level as well as the energetic efficiency European Major airlines benefit from the high business transport demand but suffer on short haul trip from competition of LCCs and HST. Major airlines concentrate and restructure, and three to four large operators monopolize the medium to long distance markets inside Europe. The congestion at major airports leads to an increase of point-to-point intra-European flights to smaller regional airports (operated by regional carriers and LCCs). In intra-European leisure markets LCCs are dominant. Impact on airport intermodality: Major FSC carriers take advantage of the HST investment to cope with the strong congestion at major European airports. Multimodal cooperation for small and medium haul flights are high between HST and FSCs, as major airlines try to free slots for long haul flights (using bigger airplanes thus increasing the number of passengers per slot). These intermodal agreements are also used by FSCs as a way to counter the Low-Cost carriers. Moreover, the investments on rail access to main airports, especially in dedicated airport trains, favour the existence of intermodal agreements between air and rail operators allowing passengers to check-in for their flight at the rail station. Besides to these air/rail agreements, the development of secondary airports leads to the development of air/bus intermodal agreements in order to favour the airport access by public transport.

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Moderate costs of freight road transport do not stimulate freight operators to switch many of their freight transport from road to rail. As a result most of the freight intermodal agreements are concluded between air and road operators.

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Ref. : M3S/ATM/CARE-AIRCIT/EEC/WP2/2.0 Level Air Rail Road Sea Unimodal competition

High High Competition between FSC for intra- European point-to-point market. FSCs competition in long haul markets

High Cooperation between Full Service Carriers and High Speed Trains operators, for providing alternatives to the lack of airport capacity. High cooperation between air and rail operators for airport access

Multimodal cooperation

High/Moderate

Moderate Cooperation between conventional rail, inland waterways and road freight transport for providing alternatives to the lack of road capacity.

Multimodal competition

Moderate Moderate Competition between European Low Cost Carriers and rail mainly for point-to-point intercity business travel.

Moderate Competition with HST for intercity passengers and freight travel.

3.3 Comparisons of scenarios

The purpose of this section is to provide a more comprehensive understanding of the differences between all the studied scenarios by presenting their differences in terms of key and resulting factors’ evolutions and by comparing their consequences on the level of airport intermodality.

Table 7: Main key and resulting factors evolutions in all scenarios presents the main evolution of key and resulting factors in Scenarios A1, A2, B and C.

Passenger demand Scenario

Economic growth

level Environmental

concerns International

tensions Oil prices Business Leisure

Freight demand

A1 Strong Moderate Moderate increase High increase Moderate increase

High increase

A A2

High

Moderate Moderate Moderate increase High increase Moderate increase

High increase

B Low Weak High High increase Weak increase

Weak increase

Moderate increase

C Moderate Strong Weak Weak increase High increase High increase

Moderate increase

Table 7: Main key and resulting factors evolutions in all scenarios

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Ref. : M3S/ATM/CARE-AIRCIT/EEC/WP2/2.0 The differences in the factors’ evolutions will influence the level of competition and cooperation and as a consequence the level of use of intermodal agreements between air operators and other transport operators.

Scenario

Level of use of air/HST

intermodal agreements on

passengers’ markets

Level of use of air/rail intermodal

agreements for airport access

Level of use of air/bus intermodal

agreements for airport access

Level of use of air/rail intermodal

agreements on freight markets

Level of use of air/road intermodal

agreements on freight markets

A1 Moderate Moderate Moderate High Moderate A

A2 Weak Weak Moderate Moderate Moderate

B Weak Weak Weak Weak Weak

C High High Moderate High Moderate

Table 8: Scenarios’ results in terms of airport intermodality As shown in Table 8: Scenarios’ results in terms of airport intermodality, scenario C would be the most favourable scenario for the development of airport intermodality, even if this scenario does not assume a good economic growth. In the framework of these scenarios a good economic growth would not be sufficient for strongly developing airport intermodality. In addition, the globalisation process would stimulate economic growth but may result in unequal wealth distribution. It would lead to mixed effects on multimodal cooperation for passenger transport and to positive effects on freight transport growth and multimodal cooperation. The studied scenarios also highlight the importance of environmental concerns on the development of airport intermodality since this factor influence numerous factors such as transport policies, transport prices, etc.

3.4 Consequences of scenarios

3.4.1 Consequences of scenarios on the airport of the future

Airports reaction to intermodality will be driven by to major forces - Governmental policies and market opportunities. From the Airport perspective, the development of infrastructures and services for supporting intermodality can originate from governmental pressures with the objective of stimulating the increase of intermodal travel, or from a market opportunity of enlarging its catchment area, make a more efficient use of existing capacity and improve landside access conditions.

3.4.1.1 Scenario A1

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In scenario A1 the moderate incentives of air carriers to cooperate with HSR operators will not allow the development of a great number of air/rail agreements for inter city travel. Besides, investments on

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WP2 - Scenarios of future evolution of the European transport network CARE II: The airport of the future: Central link of intermodal transport? __________________________________________________________________________________________

Ref. : M3S/ATM/CARE-AIRCIT/EEC/WP2/2.0 rail access to airport will lead a moderate development of intermodal agreements for airport ground access. Nevertheless airports will use the existing multimodal infrastructures as a way to increase their competitiveness by creating the operational conditions for airlines to perform agreements with rail operators.

Secondary airports will develop low cost solutions based on buses to enlarge their catchment areas and to improve landside access conditions, in order to give better market conditions to Low Cost Carriers.

Airports will tend to use existing infrastructures as a support for existing air cargo intermodal operations.

In this scenario the Airport of the Future will take advantage of all the existing conditions and infrastructures to provide intermodal facilities and use this as a competitive advantage.

3.4.1.2 Scenario A2

In A2 scenario the increase in airport capacity will capture most of airport founds. Airports will tend to develop their one business, which is aviation, instead of favouring other modes.

Investments in intermodality will by driven, mostly by governmental polices, rather than by market opportunities. Market conditions and the existing capacity will not favour agreements of any kind between air and rail for passenger’s intercity transport or land access.

Secondary airports will develop low cost solutions based on buses to enlarge their catchment areas and to improve landside access conditions, in order to give better market conditions to Low Cost Carriers.

In this scenario the Airport of the Future will react to the market by increasing its air capacity rather than providing facilities for intermodal solutions. Only secondary airports will use intermodality as a competitive advantage.

3.4.1.3 Scenario B

In scenario B the existing airport capacity will be enough to cope with the existing demand levels.

Investments in intermodality will by driven, mostly by governmental polices, rather than by market opportunities. Market conditions and the existing capacity will not favour agreements of any kind between air and rail for passenger’s intercity transport or land access, therefore airports will not be motivated to invest in intermodal support facilities.

Secondary airports will develop low cost solutions based on Buses to enlarge their catchment areas and to improve landside access conditions, in order to give better market conditions to Low Cost Carriers

Airports will tend to use existing infrastructures as a support for existing air cargo intermodal operations.

In this scenario the market will not force any substantial changes to the Airport of the Future positioning. Only secondary airports will use intermodality as a competitive advantage.

3.4.1.4 Scenario C

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In C scenario the high investments in HST associated to the strong airport congestion will allow the development of a great number of air/rail agreements for inter city travel and in airport ground access. Airports will use the existing multimodal infrastructures and create new infrastructures as a way to

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Ref. : M3S/ATM/CARE-AIRCIT/EEC/WP2/2.0 increase their competitiveness by creating the operational conditions for airlines to perform agreements with rail operators. By doing this, Airports will be able to cope with increasing demand, high environmental pressures and at the same time enlarge their catchment area, make a more efficient use of existing capacity and improve landside access conditions.

Secondary airports will develop low cost solutions based on Buses to enlarge their catchment areas and to improve landside access conditions, in order to give better market conditions to Low Cost Carriers.

Airports will tend to develop new infrastructures as a support for existing and future air cargo intermodal operations.

In this scenario the Airport of the Future will create new intermodal infrastructures and take advantage of all the existing conditions to provide intermodal facilities to cope with increasing travel demand.

3.4.2 Consequences of scenarios on passengers

3.4.2.1 Scenario A1

As a consequence of a moderate development in air/rail agreements, the passenger demand for intermodal travels should be moderate. Passengers will consider air and rail transport as competitors. The highest growth in intermodality demand should concern the airport access by the use of rail and/or bus.

3.4.2.2 Scenario A2 In Scenario A2, passenger demand should be more concentrated in Air Transport, as a result of the low focus from economic and market agents in creating inter-modal solutions. If these solutions will not be seen as good market opportunities, it will however result in appealing alternatives for users in airport access.

3.4.2.3 Scenario B

In scenario B, the picture is almost the same as in the previous Scenario. Nevertheless, the demand for air/rail intermodal transport should be low due to the weak level of air/rail agreements for airport access. The main growth in intermodal transport demand should concern the air/bus transport in secondary airports where operate Low cost Carriers.

3.4.2.4 Scenario C

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From the passenger perspective, the development of a great number of air/rail agreements for intercity travel and airport ground access, will allow more alternatives, when planning his trip, taking into account factors like fare, trip time and frequency. On the other hand, the good operational conditions will have a positive impact in the travel quality noticed by passengers. Low cost solutions in secondary airport access will be also well received by passengers / users. In this scenario, passengers will have all the available transport modes inter-acting to better serve them.

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WP2 - Scenarios of future evolution of the European transport network CARE II: The airport of the future: Central link of intermodal transport? __________________________________________________________________________________________

Ref. : M3S/ATM/CARE-AIRCIT/EEC/WP2/2.0

4 Concluding remarks The identification of factors impacting on the development of transport modes has led to distinguish two types of factors: the Key factors which are the basic factors influencing the transport demand and supply (such as the world economy, the oil prices, etc.) and the Resulting factors which are the consequences of the Key factors evolution (such as the level of traffic, of congestion, etc.).

If these Key Factors are also taken in consideration in many studies performing air traffic forecasts, the main difference of this study with those already performed is that we consider Key Factors relative to other transport modes than the air (such as rail, road, etc.). A second difference is that our aim is not to provide air traffic forecasts but more to analyse how these Key Factors are linked together so as to determine how changes in these variables can impact on the future development of air transport and consequently of intermodal transports at airports.

All the key factors influencing the air transport and as a consequence the airport of the future are likely to act on one another. These interactions are complex since often indirect. In the context of this study the attention is focused on the relationships between categories of Key and Resulting Factors impacting multimodal cooperation.

Associated to the fundamental trends of some key factors that we assume to occur for the next 15-20 years, these relationships have allowed building three scenarios. Indeed, as baseline of our scenarios we consider that the evolution trends of some of the key factors is the same for all of the studied scenarios. For instance we assume that globalisation will go on, that oil prices will increase in the long-term, that the development of new communication and information technologies will go on, etc. If these trends are assumed to be the same in all the scenarios, their extent can change.

The association of the various nuances of these trends and of the key factors’ relationships has led us to consider three evolution scenarios of the airport intermodality: scenario A assuming a continuation in the current instability situation, scenario B assuming an evolution toward a situation of strong instability and scenario C considering a situation of global stability.

Analysis of these scenarios tends to show that a good economic growth may not be sufficient for strongly developing airport intermodality, especially air/rail intermodality. In particular, the levels of environmental constraints and the oil prices play an important role in this development by influencing the transport and infrastructure policies, and the transport prices. An increase in demand, in a situation of global world stability, coupled with strong environmental concerns and capacity constraints at airports, is the most favourable situation for the development of intermodal solutions (scenarios A1 and C).

This appears clearly in the scenario A2 with moderate environmental constraints, where despite a good economic growth, the development of air/rail intermodal agreements is weak. In this scenario, although the transport infrastructure investments are high (allowed by the good economic growth), most of these investments are attributed to road and air infrastructure, in order to rapidly cope with the increasing transport demand. The lack of rail development infrastructure is then an obstacle to the air/rail intermodality development.

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We are in a situation of strong environmental concerns in scenario A1 and scenario C. In both scenarios, the globalisation process goes on. In scenario C, the rise of social and humanitarian movements, as well as the revival of social policies enables a more equal distribution of revenues than in scenario A1. For this reason, transport demand is higher, and this results in a stronger traffic growth. As a consequence, a higher number of air/rail intermodal agreements are expected than in scenario A1 where the globalisation implies strong revenue inequalities (although the economic growth is higher in this scenario). Indeed if both scenarios assume strong environmental concerns and mainly develop rail infrastructure, the airport capacity constraints are higher in scenario C and Full Services Carriers are constrained to shift a larger part of their short and medium-haul flights to High Speed Trains in order to free slots for long-haul flights, what leads to numerous intermodal

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Ref. : M3S/ATM/CARE-AIRCIT/EEC/WP2/2.0 agreements.

At the same time the multimodal cooperation for freight transport would take advantage of the globalisation development and of investments in new communications technologies. The more important the environmental concerns (and consequently the rail infrastructure development), the more numerous intermodal agreements between air and rail.

Consequences on the airport of the future will then vary according to the scenarios. If Scenarios A1 and C will lead airports to provide air/rail intermodal facilities and will use these facilities as competitive advantages, scenarios A2 and B will not incite them to invest on such facilities.

Other main remarks concern the technological advances, which will make possible that the air traffic continues to grow, even in a setting of crisis due to the increase of oil prices. In a prosperous setting, the environmental constraints will not be able to have a negative impact on air traffic. In addition, the expected safety increases, will have a very positive impact in the use of air transportation, in anyone of the scenarios.

By building different scenarios of evolution of airport intermodality Work Package 2 provides important frameworks for Work-package 3. When analysing more precisely the case of France and Portugal, WP3 will consist in choosing the more appropriate scenarios for each country and in evaluating the impact of these scenarios on the development of airport intermodality.

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