2015 Annual Report

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Message from the CEO

Aviation is a fascinating sector. The interests and interdependencies are huge and the sector is constantly evolving. For an ambitious market player like Schiphol Group, the key is to distinguish itself.

Mainport Schiphol is in an excellent position thanks to its extensive network of connections. Schiphol is expanding more rapidly than several of its European counterparts and its cost level is competitive. This position should not be taken for granted however. The domestic market is relatively small, the focus of the global economy is shifting and competition continues to intensify, both within and outside Europe. But there are also opportunities: more people than ever are travelling by air and new markets are developing at a rapid pace.

Strategy for 2016-2020

In 2015 Schiphol Group adapted its strategy for the 2016-2020 period. The core of this strategy is to increase connectivity by investing in capacity and quality and to facilitate the growth of activities at Amsterdam Airport Schiphol and our other airports as effectively as possible. Our strategy is based on five key principles: Top Connectivity, Excellent Visit Value, Competitive Marketplace, Development of the Group and Sustainable & Safe Performance.

Mainport Schiphol's strength lies in its dense network of destinations, the majority of which are served by our home carrier KLM and its partners. It is this network that makes Schiphol one of Europe's key hubs. Our connectivity generates growth and jobs for the Amsterdam metropolitan area and the Netherlands as a whole. Our aim is to expand this network, focusing on destinations that create the most value for the Dutch economy.

Competitive rates

Airport charges are a key income source for airports. However, competitive pricing is crucial to maintaining a strong international position. In 2015 the airport charges were reduced by 6.8% and we announced a further 11.6% reduction with effect from 1 April 2016. This decision was motivated by higher than expected passenger volumes and effective cost control. In the years ahead, passenger numbers will continue to grow and we want to be able to accommodate and facilitate this growth going forward. To that end we will have to make substantial investments, which will eventually push airport charges up again. Our intention is to provide for gradual adjustments where possible.

Continued investment

Investments to strengthen, enhance and enlarge our infrastructure are urgently needed. Our largest planned investments will be in a new pier and terminal, modernising the bus and railway station, building new access roads, upgrading Schiphol Plaza and Jan Dellaertplein and the demolition and construction of parking facilities. These measures are needed for us to continue offering travellers and airlines an excellent product. The definitive decision regarding these investments is expected soon. Several tenders for the construction of the new pier and terminal have already been initiated, with the new pier now scheduled to be completed in 2019 and the new terminal building to open in 2023. Since passenger numbers will continue to grow in the meantime, Schiphol will be reaching the limits of its capacity in the coming years. Operational constraints are unavoidable at peak times, and some tough choices will need to be made that will affect all parties operating at the airport.

Quality under pressure: accessibility

Access to Amsterdam Airport Schiphol is currently under pressure and this could potentially undermine our competitive position. The railway station and bus station are too small and the railway tunnel does not offer sufficient capacity either, causing frequent disruptions for travellers and airport employees. In view of the anticipated growth in passenger numbers, the problems will only increase if we do not take appropriate action. Schiphol has already been calling for extension of the North-South metro line for some time now. Though investments are essential, until national and regional authorities assume their responsibility no real solution will be possible.

Quality under pressure: renovations and heightened threat level in the Netherlands

Other developments also placed constraints on the quality of our services. Setbacks in construction made it impossible, for instance, to complete the renovation of Departure Lounge 2 in 2015. This delay adversely affected our service to passengers and placed a considerable strain on our business partners, as borne out in our internal quality surveys and external rankings. At the new central security filters the security process is being optimised to enhance the passenger experience. The Royal Netherlands Marechaussee lacks sufficient capacity to man all of the desks at peak times, resulting in regular queues at passport control. This is an important issue for Schiphol, in view of long-term demands being made on the Royal Netherlands Marechaussee in connection with the nationwide fight against terrorism and immigration issues.

Role of government

Maintaining a strong and competitive aviation sector requires more than just changes at operational level. The government also plays a role by setting priorities, making the right choices, creating optimal conditions, eliminating unnecessary rules and costs, ensuring fair competition and, where necessary, making investments and collaborating closely with the sector.

It would be helpful if, after seven years of thinking and talking, the evaluation of the Aviation Act was transformed into legislation and the government pushed forward the implementation of the New Environmental Standards and Enforcement System. Agreement on the regional authorities' plans to build new housing in the vicinity of Schiphol can only be reached under strict conditions, as Schiphol believes this must be viewed alongside other elements of the Alders Agreement and the airport's long-term growth beyond 2020.

Working in cooperation with KLM and Air Traffic Control the Netherlands, Schiphol Group established a list of action points in 2015 in which we ask the government to provide more direction and adopt a more integrated approach, assess how it might contribute to a more competitive cost structure, provide clarity regarding selectivity policy and contribute ideas and resources to improving landside accessibility of the airport. We were pleased to learn that the Ministry of Infrastructure and the Environment is taking these points as input for the Aviation Action Plan.

Connecting to compete & complete

As an aviation company, Schiphol Group has a key social and economic function. We call this connecting to compete and connecting to complete. We are determined to set a strong example in the public sphere, for instance through initiatives targeting emissions and circularity. Amsterdam Airport Schiphol aims to be the world's most sustainable airport, which is reflected in the fact that Sustainable & Safe Performance is one of the five pillars of our core strategy. Schiphol is one of the airports most actively pursuing emissions reductions. In addition, we take measures to enhance the quality of life for local residents and to promote the use of clean transport vehicles, efficient energy use, smart reuse and recycling of residual waste flows and the long-term employability of our staff. The interests of people, the environment and the community play a fundamental part in our daily operations, which is also illustrated by our commitment to the principles of the United Nations Global Compact.

Schiphol is ambitious, both in connecting to compete and connecting to complete. Running an airport is all about people – about providing our services to travellers and airlines. Schiphol has been doing this for one hundred years now and will be celebrating its centenary in 2016. Yet instead of a hundred years old, we feel young. We are bursting with energy and vitality and are continuing full speed ahead. Aviation is a fascinating sector and one that is constantly evolving, and Schiphol has got what it takes to keep playing a prominent role in the global vanguard.

Jos Nijhuis

President & CEO of Schiphol Group