by Kevin Rozario (London, United Kingdom)
The decision by airport operators Aéroports de Paris (ADP) and Royal Schiphol Group (RSG) not to renew their HubLink industrial cooperation, brings to an end a partnership existing since the end of 2008 that involved a cross-equity investment agreement for 8% of the share capital of each party.
The writing was on the wall in October 2020 last year when the French and Dutch companies – which respectively run the hubs of Paris Charles de Gaulle (CDG) and Amsterdam Schiphol (AMS) – extended the alliance for just a year. At the time they said: “The current context of uncertainty resulting from COVID19 makes it necessary to postpone the decision on the future of this alliance.”
A year later – even though 2022 is expected to see a post-COVID revival – there has been a parting of ways, with the two entities untying the knot over the coming months.
The cooperation expired on November 30, 2021 and, according to a statement, the unwinding of the cross-shareholding between ADP and RSG has begun. There is a clear mechanism for this which came into effect on the above date. The process involves an orderly sale of shares over a period of 18 months until May 30, 2023.
The tie-up between the two airports – among the top six busiest international airports in the world pre-pandemic – had come on the back of the merger of their core SkyTeam alliance carriers: Air France and KLM in 2004.
The point of HubLink was to capitalize and consolidate on that merger to make both CDG and AMS a super-hub, albeit in two locations, making it more competitive against not just European rivals but those in the Middle East. The deal represented a strategic move that could generate a set of mutual benefits for both companies in core areas of their business.
Hublink set out to do the following:
- improve the competitiveness of the two groups through the consolidation of a dual hub
- enhance the attractiveness of both groups through greater harmonization of the layout and signalling at their terminals, and by the coordinated improvement of their passenger processes (check-in, information, and security)
- reinforce relationships of the two groups with their largest customers, including the Air France-KLM Group
- optimize operational efficiency and reduce expenditure through volume pooling of some purchasing
- grow non-aviation activities like retail, innovation and digital through the exchange of know-how.
The two groups also intended to become front-runners in sustainable development, by combining their efforts to improve energy efficiency, developing the use of renewable energy, and reducing greenhouse gas emissions.
So what have been the achievements of Hublink in the time that it was alive and well, and what next?
According to ADP and RSG there were many benefits from the alliance in very diverse areas. Their respective teams worked together on a regular basis on initiatives and joint projects, and also discussed operational issues.
The cooperation program was led by the PMO (Program Management Office) of each group, with the intention of encouraging continuous exchanges and strengthening synergies. Examples include:
- improved handling of flights between Paris and Amsterdam thanks to the introduction of dedicated waiting lines at the security check, and by broadcasting information in both languages at the gate
- coordinated purchasing strategies for both groups linked to operational services with the aim of identifying new shared purchasing opportunities for the future
- an employee exchange system between Groupe ADP and Schiphol developed in 2011 to promote the sharing of specific skills and know-how in the two companies. In 2019, several short missions (3-6 months) were organised in both directions (Schiphol employees at Groupe ADP and vice versa).
There were also supposed benefits during the COVID19 era. For example, in the spring of 2020, at the height of the pandemic, the operational teams of ADP and RSG regularly discussed, within the framework of HubLink, how to adapt passenger processes and airport infrastructures in order to ensure that they met new health requirements.
Under discussion were a multitude of topics: the closure of terminals, interactions between security requirements, temperature measurement technologies, disinfection methods, communication of health measures etc, while also limiting physical contact with passengers. Combining resources this way aimed at efficiently protect passengers and employees.
At the same time, the two groups looked at solutions to support the resumption of traffic such as the deployment of medical corridors between airports in cooperation with airlines; defining of new standards within international bodies such as ACI or EASA; and the implementation of PCR testing areas. Both airports claim that this sharing of expertise between them “has proved particularly valuable”.
Furthermore, there have been some external benefits. In July 2017, Aéroports de Paris and Schiphol Group renewed a four-year cooperation agreement with Incheon International Airport Corporation in South Korea, the operator of Seoul’s main airport, for a second time. This partnership, which does not include the acquisition of holdings, consists essentially of the exchange of information and fosters the swapping of best practices.
Though HubLink is now history, and cross-shareholdings will soon end, both airports retain stakes in several other airports which may have financially better prospects over time.
In 2021, RSG had international activities focused on delivering operational knowledge and expertise to NewYork JFK, Brisbane, Hobart and Aruba airports, as well as its deal with Groupe ADP. Among these, ADP had the biggest negative contribution to Schiphol’s financial results at €16 million (for the period January 1 to June 30, 2021). In comparison, Brisbane’s contribution increased to €12 million last year; JFK’s contribution increased to €13 million; and Hobart was negative to the tune of €3 million.
Meanwhile ADP expanded its international activities last year. Through Turkey’s TAV Airports, in which it has a 46.12% stake, ADP acquired Almaty Airport, the largest airport in Central Asia, last April. The French group also won the concession for Medan airport, Indonesia’s fourth largest airport, through a consortium led by India’s GMR Airports in November 2021 in which ADP has a 49% stake.
Both hubs see their international stakes as a way to continue to exchange expertise and ideas between airports worldwide through staff secondments and ‘knowledge networks’. These networks are especially important in the data and digital spaces and in the commercial domain.
For a description of the technicalities of the exit agreement between Aéroports de Paris and Royal Schiphol Group, see page 190 of ADP’s 2020 Universal Registration Document.
[Main image: Charles de Gaulle Airport. Courtesy of ADP]