Annual Report 2016

Message from the CEO

The year 2016 was, for various reasons, an exciting, intense and turbulent year for Royal Schiphol Group. It was also a year in which we pulled out all the stops to celebrate the airport's 100th anniversary. Highlights included meetings with our partners and neighbours, receiving the 'Royal' designation and His Majesty the King's visit on our birthday, 19 September. The European Aviation Summit convened at Schiphol this year, bringing European aviation leaders together to discuss current issues facing the industry. It was also a year of unexpectedly strong growth in passenger volumes, which presented some major challenges.

Pressure on capacity and quality

In its centenary year, Amsterdam Airport Schiphol welcomed a record 63.6 million passengers, representing a 9.2% increase compared to 2015. This growth was most noticeable in Departure Hall 1 (passengers to destinations within the Schengen area), where passenger numbers rose by 17%. The unexpectedly strong growth may in part be due to airlines requesting additional slots in order to ensure they have sufficient capacity for future growth now that the capacity limit of 500,000 air transport movements is approaching. Cheaper plane tickets also contributed to higher demand, leading to increased passenger flows throughout the year. This has led to significant pressure both on the capacity and the quality of our airport. Added to this were the heightened terrorism alert, structural under-staffing at the Royal Netherlands Marechaussee and a number of operational disruptions.

Swift and adequate response

Thanks to the flexibility and ingenuity of many, we were able to act swiftly and effectively to ensure a safe and successful 2016. We are immensely grateful to our own employees and those of our partners for their commitment. Looking ahead, that commitment will remain vital to keep pace with the forecast continued growth of the aviation industry. Over the coming years, major investments to create additional space at Schiphol will be needed to keep capacity and quality up to par. Our motto is: Perform today. Create tomorrow. This means that we are working today to build the Schiphol of tomorrow, while at the same time offering a good product at a competitive rate during the construction period. As a case in point, as of 1 April 2016 our airport charges went down by an average of 11.6%.

Big investments ahead

Schiphol's new pier and terminal are set to significantly expand airport capacity. In 2016 we received the green light for construction, and preparatory work is now under way. The new pier will be finished in late 2019, and the new terminal in 2023.

To guarantee sufficient capacity and quality in the interim, Schiphol is building a temporary departure hall on top of Baggage Hall South. This decision was taken in September 2016 and the temporary hall will be commissioned in April 2017.

Working in cooperation with the Amsterdam Metropolitan Area and the Ministry of Infrastructure and the Environment, investments are also being made to improve access to Schiphol through the modification and expansion of roads, the railway station, bus station, Schiphol Plaza and Jan Dellaertplein. These plans are still in the decision-making phase.

Lelystad setback

Under the selectivity policy we are working to create additional capacity not only at Amsterdam Airport Schiphol but also at Lelystad Airport. The Alders Agreement provides for Lelystad to take over a sizeable number of flights from Schiphol, mostly non-Mainport-related holiday flights to destinations around the Mediterranean. All of the contracts for construction of the new terminal and runway were signed in June 2016, work got off to a flying start and the infrastructure will be in place in April 2018. Therefore, it came as a disappointment to learn in late 2016 that Air Traffic Control the Netherlands (LVNL) will not be able to have air traffic control in place by that date, resulting in the delay of the opening of Lelystad. We are now seeking firm assurances from the Ministry of Infrastructure and the Environment and LVNL that Lelystad Airport will be ready to open in April 2019 with immediate capacity for 4,000 flights a year.

Clarity on selectivity

As Schiphol is nearing the limits of its capacity, discussions about the selectivity policy are becoming more urgent. In the Alders Agreement it was determined that further growth would be premised on selectivity, with Schiphol to focus on Mainport-related air traffic: in other words, to destinations that contribute most to prosperity in the Netherlands.

With the increase in the number of low-cost carrier flights, Schiphol has been accused of disregarding the selectivity policy. However, it is not up to Schiphol to decide which airlines can land here. That is laid down in international laws and regulations, and the slots are subsequently issued by an independent slot coordinator. Schiphol's role in the selectivity policy therefore consists in nothing more nor less than facilitating the decisions of others. We call on the government to provide more clarity on the selectivity policy, what it entails and who bears responsibility for what.

Nearing limits

The increase in passenger volumes means that Schiphol is rapidly nearing the limit of its growth potential. Under its agreement with the local community, Schiphol will be allowed to grow to a maximum of 500,000 air transport movements per operating year through the end of 2020. In 2016, we reached almost 479,000 air transport movements. Scope for further growth therefore is limited. Given that Schiphol is committed to the agreements it has made with the local community, it will not be long now before we will have to disappoint airlines. We have already asked the slot coordinator not to issue more than 500,000 slots.

Forward-looking agreement framework

The trajectory for Schiphol's development has been established for the period through the end of 2020, but what will happen after this is unclear. Agreement on a definitive course is urgently needed and must be reached in 2017 so that the airport, airlines, local residents and authorities all know what to expect further down the road.

Consultation with partners and the local community will be vital as we plot the course of Schiphol's future. Important as such consultation is, however, it is our experience that decision-making is sometimes unnecessarily protracted. It would make a great difference if we could incorporate the principles of flexibility, manoeuvrability, decisiveness and speed in the various consultation bodies that are concerned with Schiphol.

We would like to work with everyone involved to establish a forward-looking agreement framework focused on the objectives rather than the means, and balancing the need for noise mitigation, Mainport development and quality of life. Such an agreement framework will provide the solid foundation we seek for Schiphol's future sustainable growth.

Sustainable growth

The Sustainable Development Goals provide an incentive for us to make our business processes more sustainable and take the lead in the mobility debate. Royal Schiphol Group wants to assume greater leadership in these efforts. By anticipating future developments and embedding sustainability in our processes, we are demonstrating how growing airports and growing metropolitan regions can go hand in hand. Like our neighbouring municipalities, we are well aware of the need for circular enterprise and are taking concerted action to achieve it. Apart from partnering with local parties, we also seek to join forces with other airports. During Airports Going Green, the leading industry conference on sustainability, Schiphol therefore took the initiative for the signing of the Airports Sustainability Declaration, in which airports around the world have expressed their ambition to work together to make airports more sustainable.

Schiphol Action Agenda

In the Schiphol Action Agenda published in late April, the Dutch government affirmed the importance of Schiphol in promoting prosperity and well-being in the Netherlands. The Action Agenda sets out a number of measures to further improve Schiphol's competitive edge. According to the government, Schiphol's continued growth in balance with its surroundings is vital to enable it to compete with other airports in Europe and with rapidly growing airports in Turkey and the Gulf States. Royal Schiphol Group welcomes the Schiphol Action Agenda, although more must be done. The Action Agenda leaves various loose ends to which we will continue to draw attention, in the interests of our competitive position.

Digital services vital

Sustainable growth, capacity expansion and quality improvement not only concern our physical environment but also entail digital solutions. The Digital Airport Programme was set up to accelerate the implementation of such solutions, putting Schiphol on the path to becoming the leading digital airport by 2019. We want to guarantee the best and smoothest possible travel experience by offering passengers more control over the travel process and personalised information through our digital channels such as the new Schiphol website and app launched in late 2016. In 2016 we also began testing innovative equipment for scanning hand baggage so that passengers will no longer have to unpack liquids and laptops. No-Q Passport Control was also expanded in 2016, in cooperation with the authorities.

Creating success together

We create Schiphol's success together. We are grateful to our partners and neighbours for helping us to make Schiphol a success for the past 100 years. For example, our home carrier KLM and other airlines continually expand their networks, which boosts Schiphol's appeal. We also look to the government to create the right preconditions, among other things by ensuring sufficient capacity at the Royal Netherlands Marechaussee. Unfortunately this was not the case in 2016, nor will it be in 2017, despite promised expansion. The long queues continue to be a point of concern. Together with the government we are working hard to further digitise the border process, and we have every confidence that these efforts will be fruitful. Constructive collaboration and commitment from all sector partners will enable us to remain successful going forward.

Economic and social benefits

The sustainable growth of all Royal Schiphol Group airports and of Amsterdam Airport Schiphol in particular is a collaborative effort and serves a much broader interest. By connecting the Netherlands with the rest of the world, aviation provides economic and social benefits that are vital to the country's development. We are well aware of the challenges we face. Royal Schiphol Group is ready to take on those challenges as we head into the next 100 years. The aviation industry and the future of the Netherlands depend on it.

Jos Nijhuis

President & CEO of Royal Schiphol Group

Read further: Key events in 2016