Spain’s Hollow Domestic Flight Change: Regulatory Interference Highlights How Well Airlines Self-Regulate

Spain’s announcement of plans to switch domestic flights to rail services is another step on the journey to increased intermodal activity. This follows similar steps taken in France last year and will undoubtedly be replicated over the next few years in other countries as the pressure grows on carbon emissions.

There is of course the obligatory “get out of jail” card around connections to hub airports that link with international routes which will be open to all sorts of interpretations by airlines and airports. However, in theory any existing flights that compete against a two-and-a-half-hour train journey in Spain will be at risk.

Taking that two and a half hour criteria and accepting that train times can vary dramatically across Europe we’ve applied a two-hundred-mile criteria to identify what routes could be impacted by the imposition of a similar constraint in other countries. We’ve also assumed that over water sectors such as those between the Balearics and the Spanish Mainland will always be permitted. So, against those caveats what is the likely impact of such a regulation across Europe?

Airlines HAve Always Competed With Rail Services

The first thing to recognise is that airlines have always competed with rail services and in many cases created connecting products where practical. In Switzerland the national airline and railway company has offered seamless connectivity for many years, promoted by images of happy holiday makers dropping their luggage off at railway stations. In Germany, Deutsche Bahn and Lufthansa offer through rail/air ticketing and even in the UK the Heathrow Express is sold by many airlines as an inclusive product.

Airlines accept that - certainly in constrained airports - the use of a valuable slot for a domestic low-yielding service can be a waste of a valuable resource, unless significant high yielding connecting traffic can be secured on a year-round basis. Many regional airports in Europe have incentivized new domestic services only to see the flights disappear once the incentives run dry.

The table below highlights how the frequency of services on what were some of Europe’s busiest domestic air routes have reduced dramatically over the years. A combination of increased direct services, some airline collapses or consolidation, and improved rail connectivity created a better use for those slots.

The levels of frequency have reduced by over 50% across the selected airport pairs with some notable changes; Barcelona – Madrid and the AVE train services resulting in a two-thirds reduction in flight frequency, Manchester – London Heathrow posting similar frequency reductions as the higher train (but not speed) frequency between the two cities has impacted service levels. Manchester has also seen a near threefold increase in direct international services from the airport to destinations in Western Europe which negates the need for connecting via an intermediate airport.

Very simply, airlines (and indeed hub airports) would wherever possible find a better use of a slot resource for any service other than a domestic flight and indeed those domestic flights that continue to operate are typically carrying very high proportions of valuable connecting traffic, much of which will be travelling in premium travel cabins. 

Spanish Routes At Risk

In theory any route that is less than a two-and-a-half-hour train journey and is not carrying connecting passengers to other international flights is at risk, but in reality those types of routes have always been at risk, airlines do not waste valuable resources on such services.

Indeed, in the case of Spain’s announcement, it might just be coincidental that the AVE Madrid – Barcelona service is scheduled at around 2:45 so scheduled flights between the two cities will not be included. The highest profile route that might be affected is the Madrid – Valencia market where train services take just under two hours, however, even here as the chart below shows three-quarters of bookings are connecting through Madrid and within the 25% of local traffic it is likely that there is an element of self-connecting traffic. With such a high connecting traffic share it seems that this route would certainly pass the criteria of having connecting traffic to international markets!

Spain’s latest piece of regulation and attempt at reducing carbon emissions appears to fail at the simplest test, and with very few routes likely to be impacted it looks more like a hollow piece of green washing rather than anything else. Ultimately, as has been proven on many occasions and in many markets, airlines are best left to self-regulate their networks and operate those connecting domestic flights that they feel are commercially viable. Where that isn’t the case we are already seeing intermodal connectivity is a growing way forward.