Airport World, Issue 1, 2015

In the spotlight: Economics & finance Airport report: Denver International IT innovation: Improving the bottom line Plus: People matters & Project watch

Investing in airports

February–March 2015 Volume 20 Issue 1 www.aci.aero

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Airport World Editor Joe Bates +44 (0) 20 8831 7507 joe@airport-world.com Design, Layout & Production Mark Draper +44 (0) 20 8831 7504 mark@airport-world.com Erica Cooper+44 (0)20 8831 7562 erica@aviationmedia.aero Website Design & Production José Cuenca +44 (0) 20 8831 7517 jose@aviationmedia.aero Sales Director Jonathan Lee +44 (0) 20 8831 7563 jonathan@airport-world.com Advertising Manager Kalpesh Vadher +44 (0) 20 8831 7510 kalpesh@airport-world.com Andrew Hazell +44 (0) 20 8831 7518 andrewh@airport-world.com Subscriptions Charlotte McCormack +44 (0) 20 8831 7509 subscriptions@airport-world.com

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In it for the long-haul

Editor, Joe Bates, reflects on Airport World’s 20th anniversary, healthy investor interest in airports across the globe and looks forward to the Airport Economics & Finance Conference in London.

W

hen I first walked into the Airport World office in the autumn of 2000, I would have laughed out loud if you’d told me I’d still be here more than 15 years later and celebrating the 20th anniversary of the magazine with everyone this year!

It wasn’t that I didn’t plan sticking around – publisher, Jonathan Lee, is my only other colleague to remain from that day – I just didn’t think that the airport industry was exciting enough to keep me in the job that long. I was clearly wrong as aviation remains one of the most dynamic, ever evolving and talked about industries in the world today, and I am truly glad to be part of it.

I’m also happy to say that the content of Airport World continues to deliver the same winning mix of analysis and discussion.

Indeed, this ‘economics & finance’ themed issue contains outstanding articles on airport business models, privatisation projects and the A to Z of global airport operators.

Other quality features include an in-depth focus on developments at Denver International Airport, delivering value through IT, airport leadership and Mexico City’s planned new gateway.

Looking to the future, I hope you will help us continue to raise the bar in 2015 by becoming more involved with your favourite airport magazine. After all, we want to deliver the content you want most, so don’t be shy in coming forward with feedback and suggestions for future articles.

I’d also like to hear from you if you have any particular favourite Airport World story from the past that we could possibly re-visit in our special 20th anniversary issue later this year. I know I have mine!

And don’t forget that Airport World is a great way to deliver your message to the market as we are the only ACI magazine with a truly global readership – 5,000 copies are mailed to nearly 600 members operating 1,860 airports across the planet every other month – while our bi-weekly newsletter is mailed to more than 10,000 subscribers.

We value your interest in Airport World as much as we do your input and support.

As you will discover in this issue, interest in investing in airports either through buying an equity stake in the existing airport operator, completing a PPP transaction or winning a new operating concession or management contract appears to be on the rise again.

Indeed, a consortium spearheaded

by France’s Aéroports de Paris (ADP) and VINCI Airports was awarded the concession to operate Santiago’s Arturo Merino Benítez International Airport as Airport World went to press!

All in perfect timing for ACI’s Airport Economics & Finance Conference in London (25-27 February), which promises to be bigger and better than ever before.

I look forward to seeing you there. AW

AIRPORT WORLD/FEBRUARY-MARCH 2015

3

CONTENTS

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Issue 1 Volume 20

In this issue 3 Opinion Editor, Joe Bates, reflects on Airport World’s 20th anniversary, healthy investor interest in airports across the globe and looks forward to the Airport Economics & Finance Conference in London.

8 ACI news 11 View from the top ACI World’s director general, Angela Gittens, discusses the trend toward public-private partnerships and the resultant need for key performance indicators and benchmarks.

12 Hitting new heights Denver International Airport has been winning friends and influencing people for 20 years now and its ambition to do better shows no sign of slowing down, writes Graham Newton.

17 Big business The 2014 ACI Airport Economics Report shows that airport revenues remained stable despite the fragile state of the global economy, writes economics director, Rafael Echevarne.

20 The buying game Mark Weighell and Simon Morris provide their thoughts on some of the key airport transactions of 2014 and speculate what the year ahead might hold for sales and acquisitions.

AIRPORT WORLD/FEBRUARY-MARCH 2015

5

CONTENTS

Director General Angela Gittens Chair Fredrick J Piccolo (Sarasota, USA) Vice Chair Declan Collier (London, UK) Immediate Past Chair Yiannis Paraschis (Athens, Greece) Treasurer Stefan Schulte (Frankfurt, Germany) ACI WORLD GOVERNING BOARD DIRECTORS Africa (3) Pascal Komla (Lomé, Togo) Bongani Maseko (Johannesburg, South Africa) Robinson Misitala (Livingstone, Zambia)

22 The A-Z of global airport operators Who owns and operates the world’s airports? Joe Bates investigates and talks to some of the key players involved.

37 Business resilience Airports need to develop business models that plan for uncertainty and prepare for change to succeed in today’s operating environment, writes LeighFisher’s Andy Carlisle.

40 Delivering value through IT Constantly evolving technology presents new opportunities for airports to improve the bottom-line, writes Amadeus’ Julien Dersy.

43 Project watch New Mexico City International Airport.

45 ACI’s World Business Partners 46 People matters Dr Richard Plenty and Terri Morrissey provide their thoughts on: The psychology of risk management.

Asia-Pacific (8) Dennis Chant (Gold Coast, Australia) Kenichi Fukaya (Tokyo, Japan) Saud AR Hashem (Jeddah, Saudi Arabia) Seow Hiang Lee (Singapore) Kerrie Mather (Sydney, Australia) Emmanuel Menanteau (Phnom Penh, Cambodia) PS Nair (Delhi, India) New appointment pending Europe (7) Declan Collier (London, UK) Arnaud Feist (Brussels, Belgium) Michael Kerkloh (Munich, Germany) Tonci Peovic (Bol, Croatia) Stefan Schulte (Frankfurt, Germany) Sani Sener (Istanbul, Turkey) José-Manuel Vargas (Madrid, Spain) Latin America & Caribbean (3) Fernando Bosque (Guadalajara, Mexico) Martin Eurnekian (Buenos Aires, Argentina) Héctor Navarrete Muñoz (Merida, Mexico) North America (7) Thella Bowens (San Diego, USA) James Cherry (Montréal, Canada) Fredrick J Piccolo (Sarasota, USA) Mark Reis (Seattle, USA) Maureen Riley (Salt Lake City, USA) Tom Ruth (Edmonton, Canada) William Vanecek (Buffalo, USA) Regional Advisers to the World Governing Board (8) Aaron Adderley (Hamilton, Bermuda) Haluk Bilgi (Tunis, Tunisia) Howard Eng (Toronto, Canada) Deborah Ale Flint (Oakland, USA) Tan Sri Bashir Ahmad Abdul Majid (Kuala Lumpur, Malaysia) Andrew O’Brian (Quito, Ecuador) Zouhair Mohamed El Oufir (Rabat, Morocco) 1 vacancy (Europe) Observer World Business Partner Board Chairperson Greg Fordham (Airbiz) Correct as of February 13, 2015

6

CELEBRATING 20 YEARS OF AIRPORT WORLD

ACI WORLD NEWS

World in motion ACI reaffirms its commitment to excellence in airport operations and passenger satisfaction.

A

CI started 2015 with a re-launch of its Airport Service Quality (ASQ) programme, a passenger service benchmarking tool for airports worldwide.

To date, ASQ has helped over 300 airports from around the world benchmark and improve their passenger experience.

This exciting new phase of the programme will see ACI co-operate with a new service provider, TNS Canada, part of the Kantar Group, one of the world’s biggest market research providers.

Across the globe, passengers are demanding higher levels of service.

Likewise, regulators are paying closer attention to airport service provision and quality of service delivery. Competition among airports has reached new heights as structural and ownership changes bring new stakeholders and business models into the industry.

The backbone of the programme is the ASQ Survey. Each year, some 550,000 passengers worldwide participate in the survey. Passengers at ACI member airports participating in the ASQ programme are surveyed about their on-the-day experience for a minimum of 1,400 passenger surveys per year.

The ASQ Survey covers 34 key service areas and includes eight major categories such as access, check-in, security, airport facilities, food and beverage, retail and more.

All participating airports use the same survey questions, creating an industry standard set of responses that allows participants to track and analyse their performance, as well as benchmark results against airports across the globe. All participating airports can view the ASQ survey results of all other participating airports on a confidential basis.

More than ever, ASQ is a programme designed with member and passenger needs in mind. I’m looking forward to seeing the positive change the initiative continues to make in the passenger experience over the coming months and years

Angela Gittens, ACI director general Gone are the days when airports were merely points of departure and arrival. Today, airports are complex, multi-functional travel centres offering a wide range of services. Indeed, many have non-aeronautical revenues reaching 50% of total revenues.

Airports have become key drivers of social and economic progress in cities, regions and countries the world over.

In this fast-changing landscape, ASQ is the key to understanding how to increase passenger satisfaction and improve business performance.

ASQ research is in place in airports that serve more than half the world’s 6.6 billion annual passengers and provides unique insight into: • which services passengers’ are demanding; • how passengers rate an airport’s delivery of those services; • how passengers demands are changing over time; and • how airports compare to each other in a specific market or around the world.

To make the ASQ programme fully responsive to member needs, ACI has formed an ASQ Steering Group to guide the rollout and an Advisory Group to generate new ideas and best practices for passenger service research and benchmarking.

The revamped programme now features new interactive online deliverables, including a sample plan management tool; quarterly sample plans; an online reporting portal to deliver tailored and dynamic analyses; enhanced static reports; better data quality control and audit processes; and increased programme transparency and reliability.

8

CELEBRATING 20 YEARS OF AIRPORT WORLD

Benchmarking allows participants to compare their airport’s performance against industry best practices. Through the use of key performance indicators, participants see where their airport under – and over – performs; where improvements are required; and where investment is most likely to deliver the biggest return.

Benchmarking offers a broad range of benefits, allowing participants to: • get an independent perspective on performance; • identify areas of opportunity; • understand passengers’ needs, priorities and expectations; • prioritize improvement opportunities; • set and monitor performance expectations; and • manage change effectivly Benchmarking is one of the most powerful tools available to give airports an understanding of their current situation, and to point the way to improvements. Indeed, the ASQ Survey is the leading passenger satisfaction benchmarking programme in the airport industry today.

“ACI’s commitment to representing our members’ best interests underscores everything we do, and the improved ASQ programme is an excellent example,” enthuses ACI World’s director general, Angela Gittens.

“More than ever, this is a programme designed with member and passenger needs in mind. I’m looking forward to seeing the positive change the initiative continues to make in the passenger experience over the coming months and years.”

The enhanced ASQ programme has already been rolled out at airports around the world, with more expected to participate in the weeks and months ahead.

ACI WORLD NEWS

ACI events

2015

2015

2015

2015

2015

February 25-27

August 31-Sept 2

April 27-29

June 24-26

September 16-18

ACI Airport Economics & Finance Conference & Exhibition London, United Kingdom

ACI World and Latin America & Caribbean Annual Conference & Exhibition Panama City, Panama

ACI Asia-Pacific Assembly, Conference & Exhibition Amman, Jordan

ACI Europe General Assembly, Congress & Exhibition Prague, Czech Republic

The Trinity Forum Hong Kong, China

ACI offices ACI World Angela Gittens Director General PO Box 302 800 Rue du Square Victoria Montréal, Quebec H4Z 1G8 Canada Tel: +1 514 373 1200 Fax: +1 514 373 1201 aci@aci.aero www.aci.aero

ACI Fund for Developing Nations’ Airports Angela Gittens Managing Director Tel: + 1 514 373 1200 Fax: +1 514 373 1201 acifund@aci.aero

ACI Africa Ali Tounsi Secretary General Casablanca, Morocco Tel: +212 660 156 916 atounsi@aci-africa.aero www.aci-africa.aero

ACI Latin America & Caribbean Javier Martinez Botacio Director General Panama City, Panama Tel: +507 238 2691 jmartinez@aci-lac.aero www.aci-lac.aero

ACI Asia-Pacific Patti Chau Regional Director Hong Kong SAR, China Tel: +852 2180 9449 Fax: +852 2180 9462 info@aci-asiapac.aero www.aci-asiapac.aero

ACI Europe Olivier Jankovec Director General Brussels, Belgium Tel: +32 (2) 552 0978 Fax: +32 (2) 502 5637 danielle.michel@aci-europe.org www.aci-europe.org

ACI North America Kevin Burke President & CEO Washington DC, USA Tel: +1 202 293 8500 Fax: +1 202 331 1362 postmaster@aci-na.org www.aci-na.org

As of January 2015, ACI accounts for 590 regular members operating 1,850 airports in 173 countries. In 2014, airports worldwide welcomed 6.6 billion passengers and handled 100 million metric tonnes of cargo and 83 million aircraft movements. ACI is a non-profit organisation whose prime purpose is to advance the interests of airports and to promote professional excellence in airport management and operations.

AIRPORT WORLD/FEBRUARY-MARCH 2015

9

ACI VIEWPOINT

View from the top ACI World’s director general, Angela Gittens, discusses the trend toward public-private partnerships and the resultant need for key performance indicators and benchmarks.

O

ver the past 20 years, airports have evolved from being simply public-sector infrastructure providers into sophisticated, business-oriented service providers.

This transformation has occurred mainly as a result of the realisation by governments around the world that airports are major engines of socio-economic growth for the territories they serve and that with the right management in place, airports can be run efficiently and in many instances be self-sufficient.

An increasing number of countries are calling on the private sector for the development of aeronautical infrastructure, be it in the form of outright privatisations or public-private partnerships (PPPs).

In order to attract this much needed investment, economic regulatory interventions should be minimal; moreover, the right economic regulatory incentives should be in place to ensure investment in airport infrastructure.

The direct and indirect costs associated with airport regulation can be considerable, particularly when regulation is applied to already competitive markets.

The regulatory format applied should seek to minimise the costs to all parties while maximising the potential benefits. This can be achieved by the regulator standing back and allowing the market participants to determine an acceptable outcome for themselves.

The regulator has the power to step in to avoid any abuses, but otherwise has an oversight role.

Markets can change rapidly and future requirements are unknown.

Airport regulation should not be locked in to one approach but rather be flexible to changing market and economic conditions. Finally, the ultimate purpose of economic regulation is to protect the interests of the end user, the consumer – that is passengers and shippers.

For the owner, the challenge is to transparently determine that those interests are indeed being protected through the use of key performance indicators (KPIs) and benchmarks. This is not simple since airports are such specific, local entities, even while they serve the global marketplace.

As we say, when you’ve seen one airport, you have seen one airport.

Nonetheless, governments must know how asset holders perform.

For its part, ACI continues to provide member airports with KPIs through an exhaustive statistical analysis of the data it collects.

Given that airports are complex businesses which operate in unique and evolving physical, financial and regulatory environments, the use of international benchmarks provides quantifiable barometers of industry activity.

As we look toward to the seventh Annual ACI Airport Economics & Finance Conference & Exhibition – organised this year in co-operation with the World Bank – ACI World is working hard on this year’s edition of its Airport Economics Report.

As always, the report covers indicators across many areas, ranging from financial performance and employee and fixed asset productivity to airport operations, as a means of giving airports the edge they need to compete in a highly complex and fast-changing industry.

By the same token, this issue of Airport World contains its own range of useful information, from an A to Z report on global airport operators and an article on changing airport business models written by LeighFisher’s Andy Carlisle to a round-up of the latest privatisation deals across the globe and much more.

I hope you enjoy the business intelligence contained herein and I look forward to seeing you at the ACI Airport Economics and Finance Conference & Exhibition.

AW

AIRPORT WORLD/FEBRUARY-MARCH 2015

11 11

AIRPORT REPORT: DENVER

Hitting new heights

Denver International Airport has been winning friends and influencing people for 20 years now and its ambition to do better shows no sign of slowing down, writes Graham Newton.

W

hen Denver International Airport (DIA) opened in February 1995 its Fentress-designed peaked roof – reminiscent of the surrounding snow-capped mountains – drew admiring glances from passengers and aviation insiders alike.

The aesthetic appreciation soon gave way to more practical matters but again DIA hit its mark. Airline clients talked openly of the most efficient airport in the US system.

Twenty years on, DIA is intent on maintaining the feel-good factor.

CEO, Kim Day, admits that the iconic facility brings with it a responsibility to plan wisely and build to a quality and design that complements and enhances the existing architecture.

“Denver International Airport was built with growth in mind,” she says. “The airport has 53 square miles of land, making it the second largest physical airport in the world. At full build-out the airport can grow from its current six-runway design, serving 53 million passengers a year to 12 runways, serving 100 million passengers a year.”

A stepping stone on the path to this ultimate build-out is the Hotel and Transit Center Program. Part of the original vision for the airport, this includes three independent, yet physically integrated, projects:

12

CELEBRATING 20 YEARS OF AIRPORT WORLD

•

•

•

The 519-room Westin Denver International Airport Hotel, which will include a 26,000 square foot conference centre for up to 2,500 people. It opens at the end of 2015.

A public transit centre serving the regional bus system and the new commuter rail line connecting Denver International Airport to downtown Denver in about 35 minutes. Service begins in early 2016.

A 82,000 square foot open air public plaza, an urban space at the airport, which will be a venue for performances and exhibits as well as a location for relaxation and dining.

“The design of the Hotel and Transit Center provides wonderful new amenities for passengers and a great location for corporate meetings,” enthuses Day. “The hotel is designed to create a dynamic, urban feel that maximises views of the city, the Rocky Mountains, the airfield and Jeppesen Terminal while providing connectivity to the airport.”

Meanwhile, the downtown rail connection has been described as a “game-changer” and recaptures the convenience more associated with Denver’s former airport, Stapleton.

AIRPORT REPORT: DENVER “Our location makes us appealing for companies that may want to distribute products throughout the US and the world,” says Day. “Our sheer size provides the ability for corporations to scale their operations as they grow. And our non-stop access to more than 180 locations around the world allows businesses to extend their reach around the globe.

“Together, this region can serve the needs of any business that wants to take advantage of the connectivity of metro Denver’s air and ground transportation system, highly motivated and well-educated workforce, and business-friendly environment.”

The passenger experience

As for the public plaza, that will add to the ever-improving passenger experience. It is designed to be an accessible and welcoming venue for arts and entertainment, integrating DIA into the community like never before and providing a true city experience at the airport.

Land of opportunity DIA is taking that city experience concept seriously. The airport has more land for commercial development than any other airport in North America. “This gives us a big competitive advantage and opportunities for sustainable economic growth that most airports in the world envy,” Day notes.

“In the near-term, about 10% of this land contains the infrastructure needed for aviation-centric, mixed-use development that might include hotels, logistic centres, training facilities, office, retail and industrial projects. We also have two additional commuter rail stations under construction that are ideal for true transit-oriented development.”

Until now, this potential development has been referred to as Airport City Denver. But the terminology is changing and the airport’s land development programme will in future be known as DEN Real Estate.

The focus remains the same though – leveraging the airport’s extensive land, geographic location, global connectivity and regional assets for economic development and aeronautical growth.

At the heart of DIA’s appeal is the passenger experience.

Winning customers’ hearts and minds means listening to what they want and continuing to seek innovative ways to engage with them.

The airport has already responded to an array of desires.

Developments at DIA range from improved Wi-Fi coverage to a five-gate expansion on Concourse C for Southwest Airlines.

The new Southwest space features integrated technology – iPads can be used to order beverages, receive concierge service, check e-mail and review flight status. Improved seating includes electrical outlets, cup holders and individual tables.

Another element in enhancing the customer experience is the transformation of the airport’s shopping and dining options. In September and early October 2014, DIA hosted a Beer Garden at the heart of the Jeppesen terminal, allowing travellers and airport patrons to sample local draft beer. The plan is to repeat this annually.

A total of 21 new shopping or dining locations opened last year.

The food options range from a table awarding-winning restaurant, Root Down, to Steve’s Snappin’ Dogs, a family-owned local favourite offering a wide variety of hotdogs and burgers. Other new venues include Elway’s, a fine dining establishment, Cru food and wine bar and a health food option in Etai’s Bakery Café.

“Our food offerings have not only got better, they have got better for you,” Day enthuses. “What used to be a smattering of fast food options has transformed into a wide range of dining destinations that offer new local tastes alongside established national brands.

We earned the number one ranking for healthiest airport food in the country from the Physician’s Committee for Responsible Medicine.”

Improved nutrition may gave give customers renewed energy for shopping. Recent retail additions include MAC Cosmetics, TulehRuche, ExpressSpa, the Tattered Cover bookstores and Final Approach. The latter facility has reimagined the cell phone waiting lot by offering food, fuel, a children’s area, flight information boards and free Wi-Fi.

Traffic trends Passenger traffic at DIA hit an all-time high in 2014 when a record 53.4 million (+1.7%) people passed through its facilities. Indeed, the airport set new monthly records for passenger throughput in January, February, April, May, September and October and saw the launch of new services to destinations such as Tokyo and Panama City.

Days enthuses: “We will continue to build on this momentum as we work to add new destinations, better customer amenities and services that ensures Denver International Airport’s place on the world map.”

The total cements its status among the top five busiest airports in the US and top 20 globally for passenger traffic.

AIRPORT WORLD/FEBRUARY-MARCH 2015

13

AIRPORT REPORT: DENVER

Face of the future: Denver’s new HTC. Image courtesy of Gensler/Ryan Gobuty.

14

On the right track

Healthy finances

DIA’s planned new $544 million Hotel and Transit Center (HTC) is often referred to as being the new front door for the Jeppesen Terminal.

According to lead designer Gensler, when the HTC opens, visitors will enter the terminal through a partly covered outdoor public plaza that will attract locals as well as passengers as it hosts a variety of facilities and special events.

“Among the possibilities are farmers markets, concerts, and even small sporting events, all of them designed to draw people, including the people who live in the city and region, out to the airport,” says Gensler’s Denver based design director, Brent Mather.

Surrounding and rising above the plaza will be a 519-key Westin Hotel and Conference Center offering spectacular views of the Rocky Mountains, a rooftop pool and two restaurants, both of which will have a distinct Denver feel.

Mather reveals that beneath the plaza via a four-story escalator is the “nerve centre” of the whole development – the terminus of the new East Rail Line connecting DIA to downtown Denver. That rail line will open in 2016.

“A soaring glass-and-steel train canopy establishes a sense of place and engages the hotel conference centre. Adjacent to the train hall is a pick-up and drop-off for regional and local buses,” enthuses Mather.

“While any one of those elements is impressive, the sum total and bigger picture is more potent: Denver is now bringing its airport into the urban fold.

“The vision and concept for the new HTC has always been one: to melt those 20 miles between city centre and airport and create a terminal that is a springboard to downtown Denver and a travel destination unto itself, albeit one that is very much of Denver.”

Gensler is the lead designer on the HTC project, which is being managed by Parsons, and involves the participation of more than 116 different companies.

They include Anderson Mason Dale Architects (associate architect); Iron Horse Architects (associate architects), SA Miro (structural engineers) and Mortensen (hotel construction) as well as a vast team of consultants such as Gresham Smith & Partners (graphic signage design), URS Corporation (special systems), Hughes Engineering (fire protection) and Ambient Energy (sustainability).

A number of factors has helped Day manage the plethora of developments at DIA. Arguably most important is the airport’s strong financial position.

“Our financial strength has benefitted from extensive planning and the strong passenger growth we have seen over the past four years, which has helped us to outperform the objectives we established in our 10-year financial strategy,” Day informs.

“Our long-term plan focuses on balancing three primary metrics (cost per enplaned passenger, cash on hand and debt coverage) while funding ongoing maintenance and facility upgrades. We work hard to maintain competitive operating costs for our airline partners.

“Our plan also supports the airport’s need to adapt to changing markets and economic climates. We established targets against which we can manage and measure performance.”

She also places emphasis on the airport leadership team, empowering and encouraging them to outperform their own vision of their abilities.

According to Day, a key part of her job is to keep them focused on the overall strategic vision of the city and the airport, while providing them with the resources to accomplish their individual strategic and tactical plans.

“I try not to micro-manage, while keeping a pulse on the details of individual initiatives,” she says. “That is a difficult rope to walk, but I think it is vital. I also think personal touches like handwritten notes, face-to-face conversations and birthday cards sent to all employees’ homes help to create a culture of caring and collaboration, and makes individuals at all levels of the organisation feel a part of something bigger, inspiring them to contribute.”

Externally, Day notes the imperative to build a relationship of transparency and trust with the Mayor (Day’s boss), the city council, other elected officials and the overall business community.

“As a public agency, it is important to maintain the public trust, by making fair and ethical decisions in all that we do,” she concludes.

AW

CELEBRATING 20 YEARS OF AIRPORT WORLD

SPECIAL REPORT: ECONOMICS SPECIAL REPORT: & FINANCE A-Z

Big

business The 2014 ACI Airport Economics Report shows that airport revenues remained stable despite the fragile state of the global economy, writes economics director, Rafael Echevarne.

D

espite economic uncertainties and the downside risks that have persisted across the world’s markets, global airport revenues have remained “largely unperturbed” based on results for the 2013 financial year.

Indeed, aeronautical income, non-aeronautical income and non-operating income – the three components of a typical airport’s income stream – all experienced sound growth rates in 2013 compared to the previous year.

In essence, growth in key emerging market airports has circumvented the slowdown in the Eurozone and other more mature markets.

Industry income as a whole grew by 5.4% over 2012, reaching $131 billion in 2013 (See table below). On a regional basis, European airports hold the greatest proportion of global airport income (38%). This is followed by Asia-Pacific (28%) and North America (22%).

Although Europe occupies a significant proportion of the world’s airport revenues, it has experienced the weakest growth in overall revenues at 2.3% year-over-year. In particular, with the Euro-area downturn, non-aeronautical revenues decreased by 3.5%. Notwithstanding, the region also experienced a decrease in total costs by 3.2%.

As expected, the regions with the highest growth in revenues also have the highest growth in passenger traffic. Asia-Pacific, the Middle East and Latin America-Caribbean saw overall revenues increase by 11.8%, 11.6% and 6.8% respectively.

However, the growth in costs varies markedly from one region to the next. The Latin America-Caribbean region recorded the greatest gains in total costs from 2012 to 2013.

Distribution of aeronautical income (2013) Ground handling* 4%

Other* 13% Passenger Charges 42%

Terminal rentals 12% Landing charges 21%

Source: ACI Airport Economics Survey (2015).

Estimated industry revenues and costs (millions of US dollars) Total revenue

2013/2012 % change

Aeronautical revenue*

2013/2012 % change

Nonaeronautical revenue**

2013/2012 % change

Total cost (operating + capital costs_

2013/2012 % change

Africa

2,900

3.9%

2,100

11.3%

800

-6.8%

2,100

-3.9%

Asia-Pacific

37,000

11.8%

18,800

12.9%

18,200

10.7%

25,800

6.2%

Europe

49,800

2.3%

30,100

6.1%

19,700

-3.2%

42,100

-2.5%

Latin AmericaCaribbean

7,000

6.8%

4,400

5.5%

2,600

9.3%

5,100

11.4%

Middle East

8,700

11.6%

4,400

5.7%

4,300

18.4%

7,400

6.4%

North America

25,500

4.4%

13,900

0.6%

11,600

9.6%

22,700

4.2%

World

130,900

5.4%

73,700

5.9%

57,200

4.9%

106,500

1.9%

*Includes ground handling income **Includes non-operating income

AIRPORT WORLD/FEBRUARY-MARCH 2015

17

SPECIAL REPORT: ECONOMICS A-Z & FINANCE

Distribution of non-aeronautical income by region (2013) Africa

Retail concessions

Car parking

Real estate Rental car income or rent concession

44%

15%

18%

Food & Beverage

Advertising

Utility recharges

Fuel & oil

Aviation catering service

Other

1%

8%

3.7%

1.3%

0.3%

5%

4%

Asia-Pacific

33%

8%

23%

1%

3%

4%

3.4%

1.4%

0.4%

22%

Europe

35%

15%

19%

2%

5%

2%

5.6%

0.8%

0.3%

16%

Latin AmericaCaribbean

25%

9%

14%

3%

6%

5%

1.7%

3.5%

0.5%

33%

Middle East

49%

8%

11%

2%

5%

3%

2.7%

7.0%

1.4%

12%

North America

8%

39%

13%

17%

7%

6%

0.0%

0.0%

0.0%

9%

World

27%

20%

18%

6%

5%

4%

3%

1%

0.3%

16%

*Includes car parking concessions revenue and revenue from airport-operated parking lots.

Aeronautical revenue The ratio of aircraft versus passenger-based income by region varies significantly across the regions, with airports in Europe, Latin-America-Caribbean and the Middle East gaining a high proportion of their revenues from passenger-related charges, while North America has a more equal ratio of one income source versus the other.

On the whole, there is greater reliance on passenger-based revenues, which accounted for 66% of the two types of aeronautical revenues in 2013, down slightly from 69% the previous year.

The pie chart on the previous page provides a detailed breakdown of aeronautical income at a global level beyond passenger and aircraft-related charges, although these charges represent a combined 63% of all aeronautical revenues.

Terminal rentals paid by airlines for space utilisation account for almost 12% of global aeronautical income and are mainly limited to North America.

Source: ACI Airport Economics Survey (2015).

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Retail concessions

Advertising

Car parking *

Utility recharges

Real estate income or rent

Fuel and oil

Rental car concession

Aviation catering service

Food and beverage

Other

* Includes car parking concessions revenue and revenue from airport-operated parking lots.

Source: ACI Airport Economics Survey (2015).

Non-aeronautical revenues Non-aeronautical sources of income, of course, not only provide diversification in an airport’s income portfolio but also serve as an additional cushion during economic downturns.

And because aeronautical revenues do not always cover the costs of running an airport, non-aeronautical revenues are a vital component of the airport’s income statement and, ultimately, its bottom line.

Retail concessions remain the leading source of non-aeronautical income for airports, representing 27% of non-aeronautical income. Car parking income and property income/rent, follow retail concessions as the leading secondary sources of income at 20% and 18% respectively (See pie chart right).

The table above provides the regional breakdown of nonaeronautical income by source. The Middle East has the highest proportion of non-aeronautical income attributed to the leasing of or revenue-sharing from retail concessions.

North America continues to be the world leader in generating revenue from car parking services at 39%, whereas Asia-Pacific has the highest proportion of real estate income or rent, representing 23% of the region’s non-aeronautical revenues.

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CELEBRATING 20 YEARS OF AIRPORT WORLD

Airport costs In 2013, the world’s airports incurred estimated total costs of around $106.5 billion. Operating expenses form 62% of total costs and capital costs account for 38%, which is not suprising considering the infrastructure intensive nature of the aviation industry. The largest expense item reported was personnel cost – accounting for 35% of operating expenses – followed by contracted services (23%), communications, utilities, energy and waste (8%), administration (7%) and maintenance (5%).

Depreciation on infrastructure accounts for 60% of capital costs, with interest expenses representing 36%.

Total costs have increased at a lower rate than overall revenues. This is favourable for an airport operator’s bottom line, as a slight increase in overall margins is achieved for the industry.

On aggregate, the latest global results on airport income and costs suggest that a certain level of resilience is present within the industry, particularly among the world’s major airport operators.

The survey generated responses from 652 airports for the 2013 financial year. Together, these airports handled 4.36 billion passengers or about 70% of the world’s passenger traffic.

AW

SPECIAL REPORT: ECONOMICS A-Z & FINANCE

The buying game Mark Weighell and Simon Morris provide their thoughts on some of the key airport transactions of 2014 and speculate what the year ahead might hold for sales and acquisitions.

I

nvesting in airports appears to be back in fashion. Multiples are rising, deals continue to conclude successfully, and the global economy continues to trend upwards. Everything’s looking rosy.

It feels like 2007 again, right? Right?

Speaking for ICF Aviation, our transaction advisory business is busier than it has been for more than five years. Expectations for 2015 are high. The drought of 2009-2012 seems to be behind us.

But, as ever, it’s not that simple. It is undeniable that investments in airports are picking up – and that should be viewed positively – but the road ahead looks rather bumpy.

The geopolitical situation in the Middle East and CIS remains tense and uncertain; the BRICs are losing their former lustre; and the European economy is stagnant and fragile. More about the future later, first, lets look at some of the highlights of last year.

Hit and misses of 2014 There were a good number of airport transactions successfully completed during the year, with one of the big success stories being the sale of a 50% stake in Toulouse–Blagnac Airport to the Chinese-led Symbiose Consortium for a reported €308 million (16 times its EBITDA).

The consortium was widely reported as being solely a Chinese entity but actually includes the Montréal-based construction firm SNC-Lavalin.

Nevertheless, the sale caused some raised eyebrows among industry watchers – and some unease among the French establishment – as it had been widely expected that the asset would end up with either VINCI or ADP, both bidding and both (possibly crucially) French.

Elsewhere, the contract to build a new terminal building at New York’s LaGuardia Airport was slated to be awarded during the summer.

Then the decision slipped to early autumn, then the end of the year.

A result is still awaited.

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CELEBRATING 20 YEARS OF AIRPORT WORLD

Given recent history, and governor Cuomo’s recent announcement of a new rail line to the airport, which would probably change the economics of the deal, a swift conclusion looks unlikely at best.

The feeling remains that selecting a consortium to replace LaGuardia’s outdated Central Terminal Building might (possibly, hopefully) trigger a wave of privatisations in the United States.

In our view, the capital investment this could release would renew and reinvigorate a slew of outdated and outmoded assets.

Indeed, it could be transformational: the benefits to strained state and city finances are obvious; the benefits to the travelling public – though enhanced service levels and a more enjoyable travelling experience – perhaps less so, but in our opinion are equally important.

Conversely, abandoning the deal, and leaving the bidding parties with substantial costs, could send a powerful message that it is simply too difficult to invest in a US airport.

Investors may, for example, view potential issues such as political interference, sceptical and intransigent airlines and labour unions and an unappealing regulatory framework as too big a risk to undertake, especially given the expected upsurge in attractive investment alternatives elsewhere in the world.

As you might imagine, our fingers remain firmly crossed for a successful closure of the deal.

Other notable successes in 2014 include the keep-it-in-the-family sales of Aberdeen, Glasgow and Southampton from Heathrow Holdings to Ferrovial Aeropuertos.

Similarly, Macquarie’s Bristol Airport stake went to the airport’s co-owner, Ontario Teachers’ Pension Plan, while Fraport acquired 14 regional airports in Greece, although it won’t take over their operation until later this year.

SPECIAL REPORT: ECONOMICS SPECIAL REPORT: & FINANCE A-Z :HLJKWHG $YHUDJH (9 (%,7'$

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Elsewhere, F2i sold a 49% stake in its airport holding to Ardian and Credit Agricole, and rumours persist that the new infusion of capital will prompt a renewed focus from F2i to capture a further stake in Milan airport operator SEA, currently majority owned by the City of Milan. We will wait and see.

Multiples in 2014 continued their upward trend. While still below the values reached during 2005 and 2007 – BAA and then HOCHTIEF must still be wondering how they ended up paying that much for Budapest – the transactions for which we have data had an average EV/EBITDA of 18x, well above the nadir of 11x following the 2008 economic crisis.

Creeping into January 2015, the concession to operate Billy Bishop Toronto City Airport’s passenger terminal was sold to a Canadian consortium led by InstarAGF Asset Management.

Not an investment for the faint-hearted, the airport is dependent on Porter, a regional turboprop carrier that was the previous owner of the terminal building. Porter accounts for 75% of current traffic and the only other significant operator – Air Canada – has, at best, an ambivalent attitude to the airport.

What next in 2015?

In the UK, all eyes are on the Airports Commission’s findings on which of London’s airports should be permitted to build a new runway. After being established just two short years ago, the recommendation will be delivered to the UK government during the summer, in the wake of an election in May. While the new government would not be bound by the recommendation, the Commission’s independent report should, we hope, provide sufficient political ‘cover’ to finally address the critical shortage of capacity in the south east of England.

Whether the Commission recommends Heathrow or Gatwick as the recipient of a new runway, long-standing uncertainties would be resolved and it seems plausible that Global Infrastructure Partners (GIP) will look to exit one (or both) of their Gatwick and London City airport investments.

GIP has had part-ownership of the latter since 2005, and currently enjoys a 75% share. The airport is awaiting planning permission for an additional pier and adjacent hotel, which should add substantial value to the asset.

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Buoyed by the success of Toulouse–Blagnac, the part-privatisation of either or both of Nice Côte d’Azur or Lyon–Saint Exupéry airports is a possibility. The relinquishment of the stake in Toulouse to a foreign consortium should boost interest from overseas investors.

Athens was a prime contender for the sale of a further tranche of the government’s holdings or for a concession extension. However, the new government is likely to be firmly opposed to a sale.

The proposed sale of Kansai Airport near Osaka, Japan (pictured on page 20), has attracted around 20 interested parties.

However, the bid requires significant Japanese equity and we believe that potential equity providers are wary of aspects of the deal, and are reluctant to engage seriously with the transaction.

As a result, we believe that the outlined deadlines will probably be extended.

Elsewhere, transaction activity in India is expected with Chennai International Airport looking the standout candidate. Manila–Ninoy Aquino International Airport is another strong contender, as are the larger regional airports in The Philippines.

In Saudi Arabia, a Build-Operate-Transfer concession for a new airport in Taif is expected to be launched later in the year, continuing the privatisation programme embraced by the Saudi authorities.

While in the Caribbean, St Lucia and Kingston, Jamaica, are seeking airport investment. Heading south to Brazil, the federal government is expected to start a third round of airport privatisations later this year, with Curitiba, Recife and Cuiabá in the frame.

So, despite the economic and political travails in a number of parts of the world – not least the implications of the Greek election results, and ongoing upheaval in the Middle East – we think the airport world once again looks an interesting and promising place to invest.

If you’re looking at the sector we wish you the best of luck, AW although you’re unlikely to need it.

About the authors Simon Morris and Mark Weighell have worked on a number of privatisation projects over the years. Morris is currently head of ICF’s Airports Practice and can be contacted at simon.morris@icfi.com

AIRPORT WORLD/FEBRUARY-MARCH 2015

21

SPECIAL REPORT: ECONOMICS A-Z & FINANCE

The A-Z of global airport operators Who owns and operates the world’s airports? Joe Bates investigates and talks to some of the key players involved.

Airports Company South Africa (ACSA) World Headquarters: Johannesburg, South Africa.

Airports 100% owned and operated: Johannesburg-OR Tambo, Cape Town, Durban–King Shaka, Upington, East London, George, Kimberley, Port Elizabeth and Bram Fischer (Bloemfontein) airports in South Africa.

Others: ACSA has a 10% stake in the GVK-led MIAL consortium, which operates Mumbai–Chhatrapati Shivaji International Airport in India, and manages São Paulo–Guarulhos courtesy of its 10% interest in the concessionaire responsible for operating the Brazilian gateway until 2032.

Plans to expand/reduce portfolio: ACSA claims that outside of South Africa it will “endeavour to identify and participate in select airport management and operating concession opportunities as part of its overall growth strategy”.

News: In 2014, ACSA signed a memorandum of understanding (MoU) to provide advisory and technical services on all airport-related matters to Ghana Airports Company Limited.

In São Paulo, ACSA counts its consortium partners as Brazilian companies Invepar and OAS, which between them have a controlling 51% stake in Guarulhos International Airport. State-owned Infraero has the remaining 49% shareholding.

At the time of deal in the summer of 2012, ACSA’s then acting managing director, Bongani Maseko, stated: “This is a great opportunity for ACSA as

22

CELEBRATING 20 YEARS OF AIRPORT WORLD

we realise that in order to grow the business, we have to look beyond South African borders. In particular we are focusing on emerging markets such as India, Brazil and Africa.

“We managed to secure an opportunity in India a few years ago, we now have Brazil and are pursuing similar ventures in Africa. Winning the bid in Brazil will enhance ACSA’s brand and better position it in the market place as a serious participant in global airport investment and management.”

Aena Internacional World Headquarters: Madrid, Spain.

Airports 100% owned and operated: Parent company, Aena, operates 46 airports and two heliports in Spain including Adolfo Suárez MadridBarajas and Barcelona El Prat airports.

Others: Aena’s international trading subsidiary has interests in 15 airports in the UK, Colombia and Mexico.

It has a controlling 51% shareholding in London Luton Airport in the UK; 37.89% and 50% stakes respectively in Colombia’s Cartagena de Indias (SACSA) and Cali Alfonso Bonilla Aragón (Aerocali) airports; and a 33.3% interest in Aeropuertos Mexicanos del Pacífico (AMP), strategic partner of Grupo Aeroportuario del Pacifico (GAP), which operates 12 Mexican gateways that include Guadalajara, Tijuana, Puerto Vallarta, Los Cabos, La Paz and Manzanillo.

SPECIAL REPORT: ECONOMICS SPECIAL REPORT: & FINANCE A-Z

ADP: Continuing to expand The Aéroports de Paris (ADP) Group continues to be very much more than just an equity investor in airports.

Through its wholly-owned-subsidiary ADP Ingénierie (ADPI), for example, ADP is also a major player in airport design and engineering studies, carrying out over 140 projects worldwide.

It is currently working on expansion projects at a host of airports that include Tocumen (Panama), Moroni (Comoro Islands), Bahrain (Bahrain), Clark (The Philippines) and Zanzibar (Tanzania).

Through its 49% stake in TAV Construction, ADP claims to be a world leader in airport construction, its projects including the New Doha international Airport and the ongoing upgrade of Abu Dhabi International Airport.

Finally, ADP and TAV Airports have teamed-up with travel retail specialists (respectively Lagardère Services and Gebr Heinemann) to set up joint ventures that directly operate duty-free shop at their main airports.

ADP chairman and CEO, Augustin de Romanet, tells Airport World: “We are one of the world’s top three airport companies

with interests in nearly 40 airports across the globe and our strategy is to make the Aéroports de Paris Group a world leader in airport design, construction and operations. To achieve this goal, we’ll develop a much more integrated approach and tap the synergies between the group’s different entities, especially ADPM, TAV and ADPI”.

In February, the Chilean government named ADP-led Nuevo Pudahuel consortium as the winner of the concession to operate Santiago’s Arturo Merino Benítez International Airport for 20 years from October 1, 2015.

De Romanet, enthuses: “This airport offers strong potential for growth and the creation of new routes that will enable it to become one of the main entry points to Latin America from Europe, the United States and soon, from Asia.

“This project, which is consistent with our international strategy, will allow Aéroports de Paris to make full use of its expertise as a major airport operator and its engineering know-how.”

Plans to expand/reduce portfolio: Aena continues to consider new business opportunities worldwide, although in the last few years it has shed its TBI-owned assets and its interest in Colombia’s Baranquilla– Ernesto Cortissoz International Airport ended in February 2012 when Aeropuertos de Caribe’s 15-year concession expired.

News: In February 2015 the Spanish government finally completed an initial public offering (IPO) for the sale of a 49% stake in Aena SA (formely Aena Aeropuertos) to private investors. The flotation, which was five times over subscribed, is expected to raise €8.7 billion. Spain’s biggest ever IPO, carried out on the Madrid Stock Exchange on February 11, follows the government’s decision to scrap a deal to sell a 21% stake to three “cornerstone investors” – Corporación Financiera Alba (8%), Ferrovial (6.5%) and British investment fund TCI (6.5%).

Plans to expand/reduce portfolio: ADP is actively looking to expand its global airport portfolio both in terms of equity and non-equity investments such as management, technical, design and construction contracts.

News: It has a 45% stake in the Nuevo Pudahuel consortium that will assume responsibility for operating Santiago’s Arturo Merino Benítez International Airport for 20 years from October 1, 2015. Its consortium partners are VINCI Airports (40%) and Astaldi (15%). In the US, ADP has teamed up with Goldman Sachs and TAV Airports in its bid to win the concession to build and operate the planned new Central Terminal Building at LaGuardia. Subsidiary, ADP Ingénierie (ADPI), recently won the competition to design Terminal 1 at Beijing’s planned new mega hub.

Airports Worldwide (AWW) Aéroports de Paris (ADP) World Headquarters: Paris, France.

Airports 100% owned and operated: Aéroports de Paris (ADP) owns and operates Paris CDG, Paris-Orly and Le Bourget airports.

Others: Through its 38% stake in TAV Airports, ADP has interests in Istanbul Atatürk, Ankara Esenboga, Izmir, Milas Bodrum and Gazipasa in Turkey and Medina (Saudi Arabia), Monastir and Enfidah (Tunisia), Tbilisi and Batumi (Georgia) and Skopje and Ohrid (Macedonia).

ADP has an 8% stake in the Schiphol Group and in Europe, whollyowned subsidiary Aéroports de Paris Management (ADPM) has interests in Liege (25.6%) and Zagreb (20.8%).

In Guinea, ADPM owns 29% of Conakry Airport operator, SOGEAC, and in Central America holds a 25.5% of the shares in Mexico’s Servicios of Tecnología Aeroportuaria (SETA), which in turn has a 16.7% stake in the Centre-North Airports Group, operator of 13 airports that include Monterrey and Acapulco.

Elsewhere, it has 10% stake in ATOL, which built and operates the new terminal at Sir Seewoosagur Ramgoolam International Airport in Mauritius and a 5% interest in MATAR, operator of the Hajj Terminal at Jeddah’s King Abdulaziz International Airport. In neighbouring Jordan, ADPM has a 9.5% shareholding in Queen Alia International Airport operator, AIG.

Head office: Orlando, Florida, USA. Airports 100% owned and operated: Belfast International Airport in Northern Ireland.

Others: Airports Worldwide (formerly ADC&HAS Airports Worldwide) manages, operates, and develops commercial service terminals at Florida’s Orlando– Sanford International Airport courtesy of a management concession up to 2037.

Through its 100% ownership of TBI Airport Management, AWW manages the International terminal complex (including concourses E and F) at Hartsfield-Jackson Atlanta International Airport and three other US gateways – Burbank Bob Hope Airport in California and Georgia’s Middle Georgia Regional and Macon Downtown airports. It also performs common resource management and ramp control at Raleigh Durham International Airport’s Terminal 2.

In Europe, it has a controlling 90.1% interest in Stockholm Skavsta, while in Central and South America, Airports Worldwide has 48.75% and 45% stakes respectively in the operators of San José’s Juan Santamaría International Airport (AERIS Holding Costa Rica) and Liberia–Daniel Oduber Quirós International Airport (Coriport).

Plans to expand/reduce portfolio: The addition and successful integration of TBI’s airport assets into its airport portfolio has significantly expanded AWW’s global presence. It states that its current focus is on asset stewardship and delivering service excellence to all customers and counterparties.

AIRPORT WORLD/FEBRUARY-MARCH 2015

23

SPECIAL REPORT: ECONOMICS SPECIAL REPORT: & FINANCE A-Z News: Airports Worldwide is a joint venture between Borealis Infrastructure, the infrastructure investment arm of OMERS, one of Canada’s largest pension plans, HAS Development Corporation (HASDC) – the development affiliate of the Houston Airport System – and Toronto-based Airport Development Corporation (ADC).

Quote: “We take the trust as a steward of vital infrastructure assets very seriously, and are committed to a partnership approach and long-term focus on making the companies we invest in even stronger,” says Larry Gouldthorpe, president, Airports Worldwide.

America Corporation International (ACI) World Headquarters: Montevideo, Uruguay.

Airports 100% owned and operated: None.

Others: ACI, formerly known as Corporación América SA (CASA), holds an 85% stake in Aeropuertos Argentina (AA2000), which operates Buenos Aires’s Ezeiza International Airport and Aeroparque Jorge Newbery and 31 other airports across Argentina.

Elsewhere in Argentina, America Corporation International operates and has 85% and 80% stakes respectively in the Patagonian airports of Bahia Blanca and Neuquen, which are not part of the AA2000 group of airports.

In Uruguay, courtesy of its controlling stake in the Puerta del Sur (formerly CerealSur) consortium, ACI manages Montevideo– Carrasco and Laguna del Sauce-Punta del Este airports.

Its most recent additions are Brasília-Presidente Juscelino Kubitschek and Natal–São Gonçalo do Amarante in Brazil, which the group operates through Inframérica. Inframérica – a 50/50 joint venture with Infravix Emprendimentos – has a controlling 51% stake in Brasilia’s airport (where state owned Infraero is the only other shareholder) and a 100% interest in the Natal gateway, located in the state of Rio Grande de Norte, where it has a 25-year concession.

In Ecuador, ACI operates Guayaquil–José Joaquín de Olmedo courtesy of its 50% stake in the TAGSA consortium, and through 100% owned subsidiary, ECOGAL, runs Seymour Airport in the Galapagos Islands.

As part of its global reach, ACI also manages Zvartnots Airport in Yerevan (Armenia) and in Italy has 53% and 49% stakes respectively in the operators of Pisa (SAT) and Florence (ADF) airports and a small shareholding in Sicily’s Vincenzo Florio Trapani–Birgi Airport.

ACI also has interests in six gateways in southern Peru (Arequipa, Juliaca, Puerto Maldonado, Tacna and Ayacucho) due to its joint ownership of Aeropuertos Andinos del Peru with Andino Investment Holding. Both companies also make-up the Kuntur Wasi consortium, which will build and operate Cuzco’s new Chincheros Airport.

Plans to expand/reduce portfolio: Plans to expand in the Latin American region and is currently looking at some possible tenders in Colombia, Jamaica, Belize and Brazil.

News: America Corporation International claims to be the world’s biggest airport operator based on the fact that it currently operates 53 airports across seven countries. Owned by billionaire Eduardo Eurnekian, ACI is a multi-national holding with more than 8,000 staff based across the Americas, Europe and Asia. In 2014 it bought stakes in Pisa and Florence airports in Italy and its Kuntur Wasi consortium won the tender to build and operate Chincero Airport in Peru for 40 years. The airport will be located half way between Cuzco and Machu Picchu.

AviAlliance: Long-term investor After a successful 12 months in which it rebranded itself as AviAlliance (formerly HOCHTIEF AirPort) and successfully re-financed Budapest Airport, the company appears ready to expand again.

Managing director, Holger Linkweiler, says: “Just over one year ago we began a new phase in our history with a new name and new owners. We’ve considered this time as a kind of litmus test for our team, our business model and ourselves. That’s all the more reason why we’re so pleased with what we’ve accomplished in the past months.

“The highlight has been the very successful refinancing of Budapest Airport. The situation seemed anything but favourable the year before as Hungary was still struggling with the consequences of the financial crisis and the airport lost its most important client, Malév, due to bankruptcy.

However, a strong will to overcome adversity and the skilled performance of the airport’s management team made the current success possible.”

On its website, AviAlliance states that it is not an “in-and-outagain operator” and that its goal of looking to boost the long-term prospects of its airports ensures that the company commits itself to them for an indefinite period or for at least 20 years.

AviAlliance World Headquarters: Essen, Germany.

Airports 100% owned and operated: None.

Others: AviAlliance (formerly HOCHTIEF AirPort) holds controlling 52.67% and 47% stakes respectively in the consortiums responsible for operating Hungary’s Budapest Franz Liszt and Tirana airports.

Elsewhere in Europe, in collaboration with investment partner AviAlliance Capital, it has a 40% interest in Athens International Airport, 30% in Düsseldorf Airport and 49% in Hamburg Airport.

Plans to expand/reduce portfolio: Although it has not been active in the market for a few years in terms of new investments, under the new ownership of Canada’s Public Sector Pension Investment Board (PSP Investments) it has the funds to develop its airport portfolio and, as a result, continuously reviews its investment opportunities.

News: In 2014 AviAlliance increased its stake in Budapest Airport by acquiring an additional 3% stake in the Hungarian gateway from Goldman Sachs. It is one of 20 bidders to express an interest in the twin airport concession in Osaka (Kansai and Osaka-Itami), Japan.

Changi Airports International (CAI) World Headquarters: Singapore.

Airports 100% owned and operated: None.

Others: The international investment arm of Singapore Changi operator, Changi Airport Group (CAG), has a 40% share in the consortium responsible for operating Rio de Janeiro’s Tom Jobim International Airport (Galeão).

CAI also has a 30% stake in Basel Aero, which is trusted to develop the airports of Krasnodar, Sochi, Anapa and Gelendzhik in Krasnodar Krai in southern Russia. Fellow stakeholders in the joint venture include Russia’s Basic Element group and the OJSC Sberbank of Russia.

AIRPORT WORLD/FEBRUARY-MARCH 2015

25

SPECIAL REPORT: ECONOMICS A-Z & FINANCE And it has a 32% shareholding in Bengal Aerotropolis Project Ltd, which is developing a greenfield airport and township in Durgapur in West Bengal, India.

Plans to expand/reduce portfolio: It is one of 20 bidders shortlisted for the concession to operate Kansai and Osaka-Itami airports in Japan.

News: CAI entered a new phase of development in August 2014 when its Concessionária Aeroporto Rio de Janeiro S/A consortium took over responsibility for operating, maintaining and developing Tom Jobim International Airport for the next 25 years. The new airport operator is in effect a special purpose company whose stakeholders are an CAI-Odebrecht TransPort consortium (51%) and state-owned Infraero (49%).

DAA/Aer Rianta International (ARI) World Headquarters: Dublin, Ireland.

Airports 100% owned and operated: Dublin and Cork in the Republic of Ireland.

Others: Retail subsidiary, ARI, holds a 20% stake in Germany’s Düsseldorf International Airport and a 11% interest in Hermes Airports Ltd, operator of Larnaca and Paphos airports in Cyprus.

ARI remains one of the world’s biggest duty free operators with operations in 11 countries that include Bahrain, Canada, China and India.

Plans to expand/reduce portfolio: No equity investments are planned, although DAA has made no secret of its plans to develop its management and consultancy business, particularly in the areas of retail and car parking services.

Egis Group World Headquarters: Guyancourt, France.

Airports 100% owned and operated: None.

Others: In South America, it has a 10% stake in the consortium responsible for operating São Paulo’s Viracopos International Airport.

In Europe it operates Antwerp and Ostend-Bruge airports in Belgium and through subsidiary, Egis Projects, has a 20% stake in Hermes Airports, which operates Larnaca and Paphos airports in Cyprus.

In French Polynesia, Egis has a 30-year concession to operate Tahiti Faa’a Airport and has a five year renewable contract to manage Bora Bora, Raiatea and Rangiroa airports.

In Africa, it has a 29.5% stake in the consortium awarded the 25-year concession to operate, develop and expand Brazzaville, Pointe Noire and Ollombo airports in the Democratic Republic of Congo; a 17.5% interest in the concessionaire for Libreville Airport in Gabon; and a 35% shareholding in the company responsible for operating Abidjan Félix Houphouët-Boigny International Airport in the Ivory Coast.

Plans to expand/reduce portfolio: Egis continues to expand its portfolio bidding on airport tenders that meet its criteria of handling between 1mppa and 10mppa and offer the potential to grow.

News: Egis, which is 75% owned by France’s Caisse des Dépôts Group, entered into the global airport market in 1988 when it was awarded a 30-year concession to run Libreville International Airport in Gabon and now manages 14 airports in seven countries across the globe through dedicated subsidiary, Egis Airport Operation.

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CELEBRATING 20 YEARS OF AIRPORT WORLD

CAI: Growing places The global ambitions of the Changi Airport Group (CAG), through international investment arm Changi Airports International (CAI), shows no sign of slowing down in 2015.

Indeed, CAI is one of 20 investors to be shortlisted for the concession to operate Kansai and Itami airports in Osaka, Japan.

It recently signed a contract with the Maldives Airports Company Limited to provide consultancy services to support the development of Male’s Ibrahim Nasir International Airport, and extended its management contract for King Fahd International Airport in Dammam, Saudi Arabia, until June 2015.

And together with consortium partners Yongnam Holdings and Japan’s JGC Corporation, CAI – through subsidiary Changi Airport Planners and Engineers (CAPE) – has been named as the winning bidder by Myanmar’s Department of Civil Aviation for the design, construction, operation and maintenance of Hanthawaddy International Airport and its facilities on the basis of a public-private partnership agreement for a 30-year concession period.

In terms of non-equity investments, CAI continues to advise the Brunei Economic Development Board on plans to upgrade and develop Brunei International Airport.

So, what criteria do airports need to meet to be of interest to CAI? “Besides the opportunity for growth, the regulatory regime and political stability, we look at airports where we could make a difference in terms of creating or enhancing their investment value,” says Jose Pantangco, CAI’s managing director for consultancy and business development.

Pantangco notes that CAI takes a medium to long-term view of its investments. “We are a single-class asset investor – we only invest in airports and do this because we understand airports and their dynamics within the aviation systems well,” he tells Airport World.

CAI sold its 8% stake in Gemina SPA, the holding company of Aeroporti di Roma (AdR) in May 2013, which at the time was in merger talks with Atlantia.

“We decided to divest our interests in Gemina as CAI’s stake in the merged entity would have been substantially diluted,” says Pantangco.

“In addition, Atlantia had a diverse range of business activities such as toll road operations which, as a single class asset investor in airports, were not of interest to CAI.” The merger took effect in December 2013.

CAI continues to show an interest in the dynamic Chinese market, although a change in Chinese government policy in relation to foreign investment in the country’s airports means that proposed projects with the Shenzhen Airport Group and Nanjing Lukou Airport failed to materialise.

SPECIAL REPORT: ECONOMICS A-Z & FINANCE

Egis: More than just an equity investor Although boasting a significant airport portfolio, Egis is quick to point out that it is much more than just a pure equity investor and is actively looking for new opportunities where it can bring “value added services” to airports, principally through engineering, consulting and management contracts.

Indeed, it currently offers a wide portfolio of services ranging from strategic consulting, infrastructure, system engineering and air traffic management related activities to the provision of specialised turn-key equipment through to airport management.

These currently include carrying out engineering services for the planned new Nouakchott Airport in Mauritania, conducting a feasibility study for the development of Oran Airport in Algeria and providing preliminary design studies for the planned new Ouagadougou–Donsin Airport in Burkina Faso.

It is also involved in projects at Jomo Kenyatta airport in Kenya and King Khalid International Airport in Saudi Arabia, the latter involving plans to upgrade the gateway’s airside facilities.

When Egis does invest in an airport its looks at gateways handling up to 10 million passengers per annum, ideally focusing on ones in the 2mppa to 5mppa bracket with growth potential both in terms of traffic and revenues.

So are all its airport concession projects successful in terms of making money? “Egis is satisfied with the results of the concessions in which it is involved,” notes director, Jean-Paul Desgranges.

Fraport AG World Headquarters: Frankfurt, Germany.

Airports 100% owned and operated: Frankfurt Airport.

Others: Elsewhere in Europe, Fraport has a controlling 97.99% interest in Slovenia’s Ljubljana–Jože Pučnik Airport; a 35.5% stake in St Petersburg–Pulkovo operator Northern Capital Gateway; a majority 60% stake in the Fraport Twin Star Airport Management AD consortium responsible for running Bulgaria’s Black Sea gateways of Burgas and Varna; a 30% equity stake in Hanover Airport; and a 51% interest in Antalya Airport concessionaire, ICF Airports.

In Peru, Fraport has a controlling 70.1% interest in Jorge Chavez International Airport operator, Lima Airport Partners (LAP), while in Asia it has a 24.5% share in Xi’an Xianyang International Airport (China) and a 10% shareholding in the DIAL consortium formed to operate and develop Delhi’s Indira Gandhi International Airport.

Elsewhere in Asia, Fraport has an 18.75% stake in Tradeport Hong Kong Ltd, operator of a high-tech logistics centre at Hong Kong International Airport.

Plans to expand/reduce portfolio: Maximising and developing its existing assets is an ongoing priority although Fraport continues to participate in global tenders. It views China as ‘a land of opportunity’ and has set up Shanghai Frankfurt Airport Consulting Services Co Ltd (SFACS) – a 50/50 joint venture with the Shanghai Airport Authority – to explore opportunities in the country. It is also keeping tabs on possible new opportunities in Asia, Europe and the Americas.

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He cites soaring traffic figures at its African airports, a soon-to-open new terminal at Brazzaville, the new terminal and expanding route network at São Paulo–Viracopos in Brazil, and the ongoing upgrade of Tahiti Faa’a Airport in French Polynesia as examples of how Egis’ involvement has made a difference.

“By providing efficient airport management, making investments, focusing on route development, developing extraaeronautical activities and sharing best practices we aim to make the concession profitable and strong enough to pass through crisis such as we currently face in Cyprus and recently experienced in Abidjan,” says Desgranges.

As a long-time and long-term investor, what do you think have been the biggest changes to the airport investment market over the past 20 years?

“I think the fact that long-term investment in airports has become more and more attractive to investors and that competition is more fierce today than ever before,” says Desgranges.

“New actors with a high ability to invest continue to emerge from the developing countries. Who would have thought 20 years ago that Chinese investors, for example, would buy a 49.9% stake in Toulouse Blagnac Airport in France?

“The extra competition has led to rising prices and, in some cases reach levels where achieving a good return on the investment is high.”

News: Last year was a big one for Fraport, which completed major deals for new assets in Slovenia, Greece and the USA. It paid €177 million to Slovenian Sovereign Holding (SDH) to acquire a 75.5% stake in Ljubljana–Jože Pučnik Airport Airport operator, Aerodom Ljubjljana, and has since increased its stake to 99.7% subject to regulatory approval.

In Greece, the Hellenic Republic Assets Development Fund (HRADF) named Fraport and partner, the Copelouzos Group, as the preferred investor and operator of 14 regional airports viewed as vital to the country’s tourism sector. The consortium bid €1.23 billion for the 40-year management concession for the gateways – Aktio, Chania (Crete), Kavala, Kefalonia, Kerkyra (Corfu), Kos, Mitilini, Mykonos, Rhodes, Samos, Santorini, Skiathos, Thessaloniki and Zakynthos – and is expected to take over their operation by autumn 2015.

It also gained a foothold in the US market by acquiring 100% of AMU Holdings Inc, which owns AIRMALL USA. AIRMALL USA manages the retail concessions at Boston Logan, Cleveland, Pittsburgh and Baltimore/Washington airports.

On the reverse side of the coin, Fraport’s multi-year management contracts at Riyadh–King Abdulaziz and Jeddah–King Khalid international airports in Saudi Arabia and at Cairo International Airport in Egypt came to an end in 2014. None involved an equity investment.

Quote: Talking about the AIRMALL deal, Fraport AG’s executive board chairman, Dr Stefan Schulte, says: “The retailing business at our Frankfurt home-base has always been a growth engine and we have repeated this success story consistently over the years at our other group airports worldwide. With the acquisition of AIRMALL, we have established a promising platform for developing our US business in the future.”

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GMR Group World Headquarters: Bangalore, India.

Airports 100% owned and operated: None.

Others: In partnership with local company Megawide Construction Corporation, GMR has a 25-year operating concession for Mactan-Cebu International Airport in The Philippines.

On home turf in India, GMR operates the gateways of Hyderabad and Delhi, courtesy of 63% and 54% shareholdings respectively in operators GMR Hyderabad International Airport (GHIAL) and Delhi International Airport Ltd (DIAL).

GMR counts MAHB (11%), the government of Andhra Pradesh (13%) and Airports Authority of India (13%) as its partners at Hyderabad’s Rajiv Gandhi International Airport, which opened in 2008.

Its partners at Indira Gandhi International Airport in Delhi are Airports Authority of India (26%), Fraport (10%) and MAHB (10%).

Plans to expand/reduce portfolio: GMR is looking to grow the business and has ruled out the disposal of any more assets after selling its 40% stake in Istanbul–Sabiha Gökçen International Airport operator, ISGIA, to Malaysian Airports Holdings Berhard (MAHB) for $310 million and the Maldives government’s decision to re-nationalise Malé International Airport where it had a controlling 77% interest in the airport operator.

News: GMR is one of the bidders in the ongoing tender for Japan’s Kansai and Osaka-Itami airports. It is also keeping tabs on the planned privatisation of a further six airports in The Philippines.

GVK World Headquarters: Secunderabad, India.

Airports 100% owned and operated: None.

Others: It has a majority 50.5% stake in the consortium responsible for operating Mumbai’s Chhatrapati Shivaji International Airport and a 43% interest in Bengaluru’s Kempegowda International Airport.

Outside of India, GVK manages the commercial operation at Bali’s Denpasar International Airport.

Plans to expand/reduce portfolio: Subsidiary GVKPIL has signed an MoU with Indonesia’s state-owned Angkasa Pura Airports to develop a new greenfield gateway at Yogyakarta in central Java.

News: GVK entered the airport market in 2006 when the Indian government decided to privatise Mumbai’s Chhatrapati Shivaji International Airport. Its fellow shareholders in operating company, MIAL, are ACSA (10%), Bidvest (13.5%) and AAI (26%).

Incheon International Airport Corporation (IIAC) World Headquarters: Incheon, South Korea.

Airports 100% owned and operated: Incheon International Airport in South Korea.

Others: It has a 10% stake in Khabarovsk Novy Airport in eastern Russia and a series of management and consultancy contracts at gateways across the world including Erbil and Dohuk in Iraq, Manila and Puerto Princesa in The Philippines and Juanda in Indonesia, the latter through subsidiary PT Mitra Incheon Indonesia.

GMR: Bold ambitions GMR Infrastructure’s president and CFO, Sidharath Kapur, accepts that there is a risk to any airport investment and admits that some advised the company against bidding in the tender for Mactan-Cebu, but says the chance to operate the airport was just too good an opportunity to turn down.

Talking about the Mactan-Cebu deal at the recent Investing in Airports Summit in Athens, Kapur, said: “Cebu is an interesting airport for us as it handles a good mix of tourism and business traffic and Cebu is a large base for call centres in The Philippines.

“The Philippine economy is growing, indeed its GDP is increasing by an average of 5% per annum and shows no sign of slowing down. Traffic is growing and tourism – largely driven by the low-cost carriers – is on the rise in Cebu, soaring by 20% in 2013 to 1.6 million passengers per annum. The airport has a lot going for it.”

The GMR/Megawide Construction Corporation’s winning bid of $365 million for the 25-year concession was around 3% higher than the second highest offer and, as part of the terms of the deal, it has pledged to upgrade the gateway to allow it to accommodate up to 30mppa.

The first phase of this involves the construction of a new Terminal 2 that would allow the existing terminal to be renovated and used purely as a domestic terminal.

The new operators – which only assumed responsibility for operating the airport on November 1, 2014 – also plan developing other facilities across the Mactan-Cebu site, which will take its total capital expenditure to around $740 million during the course of the 25-year concession.

Kapur, however, believes that this will be money well spent as GMR predicts passenger growth to rise from around 7mppa today to 28mppa over the next 25 years.

“The airport has great potential, particularly when it comes to opportunities to increase its non-aeronautical revenues, as today’s lack of facilities simply doesn’t encourage passengers to spend money,” says Kapur.

“When you see how many big-spending passengers travel to the Maldives from Korea, China and Japan, there is so much that can be done to change this.”

As part of the terms of the concession, GMR cannot sell its assets in Mactan-Cebu for seven years, but Kapur insists that this is not an issue as the company is looking upon the deal as a long-term investment.

“We are looking at things from a country perspective and there are six more airports coming up for privatisation in The Philippines and all are smaller than Cebu. We now have a wonderful base to grow further in the country.”

GMR has a 40% stake in the joint venture with Megawide Construction Corporation (60%), although the construction cost associated with modernising the airport will be split equally between the two.

AIRPORT WORLD/FEBRUARY-MARCH 2015

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SPECIAL REPORT: ECONOMICS A-Z & FINANCE Plans to expand/reduce portfolio: Incheon has previously expressed an interest in acquiring shares in “two or three international airports” in the Asia-Pacific region.

News: Subsidiary, PT Mitra Incheon Indonesia, is currently providing consultancy services to Indonesian airport operators PT Angkasa Pura I and II for the development of new commercial facilities at Juanda Airport’s existing terminals and the expansion of the existing terminal at Jakarta’s Soekarno-Hatta International Airport.

IIAC’s decision to invest in Khabarovsk Novy has coincided with one of the most successful periods in the Russian gateway’s history in terms of awards, investment in new facilities and passenger growth.

In terms of non-equity investments, MAHB continues to expand its airport management expertise outside Malaysian shores. Recent projects include providing basic airport operations training to staff at Myanmar’s Nay Pyi Taw International Airport.

News: MAHB now 100% owns Istanbul–Sabiha Gökçen International Airport operator, ISGIA, after buying out former shareholders GMR and Limak. Talking about the deal, Ghazali, says: “The successful acquisition is a significant milestone for MAHB. It gives us access to an attractive offshore asset and will enhance MAHB’s presence in Turkey. Furthermore, it is testament to our confidence in the continued great performance of our Turkish management team in Sabiha Gökçen and our commitment to this strategic investment.”

Macquarie Infrastructure and Real Assets (MIRA) World Headquarters: London, UK. Airports 100% owned and operated: Aberdeen, Glasgow and Southampton airports in the UK courtesy of the joint venture between a MIRA-managed fund and Ferrovial Aeropuertos.

Others: MIRA-managed infrastructure funds also have stakes in Copenhagen Airports alongside Ontario Teachers’ Pension Plan (OTPP) and the Danish Stage; Brussels Airport alongside OTPP and the Belgian state; Delhi and Hyderabad Airports, via GMR Airports, and a majority shareholding in Hobart Airport, alongside Retirement Benefits Fund.

Plans to expand/reduce portfolio: MIRA does not speculate on possible acquisitions/sales. It is, however, one of 20 bidders shortlisted for the concession to operate Kansai and Osaka-Itami airports in Japan.

News: The recent €1.3 billion purchase of Aberdeen, Glasgow and Southampton airports from Heathrow Airport Holdings (HAH) – investor ASG Airports Limited is a 50/50 joint venture between Macquarie European Infrastructure Fund 4 and Ferrovial Aeropurtos – followed the sale of a 50% stake in Bristol Airport held by the first Macquarie European Infrastructure Fund, which is reaching maturity. The stake was sold to OTPP, making it the sole shareholder.

The former Australian Stock Exchange (ASX) listed fund Macquarie Airports (MAp) sold its stakes in Bristol, Copenhagen and Brussels Airports to OTPP in 2009 in an asset swap arrangement whereby it increased its stake in Sydney Aiport by acquiring OTTP’s share. This single asset business is now independently listed on the ASX as Sydney Airport.

Malaysia Airports Holdings Berhad (MAHB) World Headquarters: Kuala Lumpur, Malaysia.

Airports 100% owned and operated: Istanbul–Sabiha Gökçen in Turkey and Kuala Lumpur International Airport and 38 other Malaysian gateways that include the international airports of Langkawi, Kota Kinabalu, Kuching and Penang.

Others: In India, Malaysia Airports has interests in Hyderabad–Rajiv Gandhi and Delhi–Indira Gandhi airports courtesy of 11% and 10% stakes respectively in operating companies GHIAL and DIAL. Plans to expand/reduce portfolio: Managing director, Datuk Badlisham Ghazali, has indicated that it is ready to look for “meaningful” new investment opportunities overseas. Officially, MAHB says that it will continue to monitor all of its existing investments overseas and explore new opportunities that revolve around airport concessions and privatisation projects both inside and outside of Malaysia.

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Schiphol Group World Headquarters: Amsterdam, the Netherlands.

Airports 100% owned and operated: Amsterdam Schiphol, Lelystad and Rotterdam The Hague in Holland.

Others: It has a majority 51% stake in Holland’s Eindhoven Airport, owns 8% of Aéroports de Paris (ADP), and through Schiphol Australia has an 18.72% interest in Brisbane Airport operator, BAC Holdings Limited.

It also 100% owns New York JFK Terminal 4 operator, JFKIAT, courtesy of subsidiary Schiphol USA. Plans to expand/reduce portfolio: None stated.

News: On its website, Schiphol states: “We carry out our international activities in order to strengthen the Schiphol Group and the Mainport [Amsterdam Schiphol]. To that end, we seek partnerships with major international airports that are of particular significance to the Mainport.

“We collaborate closely with our partner Aéroports de Paris, in which we have an 8% cross-participation interest. In addition, we are involved with Terminal 4 at JFK International Airport in New York and at airports in Australia, Hong Kong, Aruba and Sweden. Over the past two decades, many of these activities have seen positive development. In all, they account for over a quarter of the Schiphol Group’s results.”

SNC-Lavalin Aéroports World Headquarters: Montréal, Canada.

Airports owned and operated: None.

Others: Its extensive portfolio of 16 French operated airports includes the business/general aviation airports of Vannes (Brittany), Chalon-sur-Saône (Burgundy), Rouen, Le Havre and Cherbourg in Normandy, Angoulême-Cognac (South-West of France), Dijon (Burgundy) and Francazal (Toulouse GA airport).

It also manages the regional airports of Tours (Chateaux de la Loire), Lourdes and Nimes, where scheduled and charter services are operated all year around. Overseas, it operates Mayotte’s Dzaoudzi-Pamandzi Airport (Comoros islands in the Indian Ocean) and Saint-Martin’s Grand Case Airport (Caribbean).

Elsewhere, SNC-Lavalin Aéroports has a 38.75% interest in the Malta Mediterranean Link Consortium that manages Malta International Airport and is the new operator of one of Spain’s privately owned airport, Castellón– Costa Azahar.

Plans to expand/reduce portfolio: None revealed.

News: SNC-Lavalin Aéroports is the strategic partner of the Chinese consortium (Symbiose) that has a 50% stake in Toulouse-Blagnac Airport in France.

SPECIAL REPORT: ECONOMICS A-Z & FINANCE

Vantage Airport Group: 20 years and counting Vantage became one of the first companies to build up a global airport portfolio when it landed its first contract to manage LF Wade International Airport in Bermuda in 1995.

Since then it is has been involved with 27 airports – transitioning 19 from public to private management – and has managed $2.5 billion in airport development and construction projects and $4 billion in airport financing.

Indeed, it is currently part of a consortium with equity partners Skanska ID and Meridiam Infrastructure bidding for the concession to redevelop and operate the Central Terminal Building at LaGuardia Airport in New York.

“The appeal of the project at LaGuardia lies in building and operating a world class airport terminal in a world class city. It is the kind of project at which Vantage excels,” explains Vantage Airport Group’s president and CEO, George Casey.

It has, however, decided not to bid on renewing its involvement with Santiago’s Arturo Merino Benítez International when the current concession expires in September 2015.

“We chose not to bid on the new concession,” says Casey. “We continually assesses our network and emerging opportunities, ensuring a balance between expanding our network and adding value to our current airports.”

What key lessons have you and the Vantage Airport Group learned about investing in airports over the past 20 years?

Casey says: “Over the past two decades, Vantage Airport Group has left its mark on 27 airports around the world. As one of the first to be involved in the global trend of airport privatisation, investment and management, we believe our focus on people, performance and place has led the evolution of the company and the work we do to make airports better.

With a dedicated focus in the airport sector, Vantage claims to measure performance in the value it adds to safety, efficiency and the profitability of its network airports.

“Vantage’s financial performance drives our ability to add value at our airports and enhance their overall success as well as identify growth opportunities for our network,” Casey tells Airport World.

TAV Airports Holding World Headquarters: Istanbul, Turkey.

Airports 100% owned and operated: Istanbul Atatürk, Ankara Esenboğa, Izmir Adnan Menderes and Antalya–Gazipasa in Turkey, and Skopje Alexander the Great and Ohrid St Paul the Apostle airports in Macedonia.

Others: It has a controlling 76% stake in the companies responsible for operating Tbilisi and Batumi airports in Georgia and holds a majority 67% shareholding in both Monastir Habib Bourgiba and EnfidhaHammamet airports in Tunisia.

In Saudi Arabia the TAV-led Tibah Airports consortium (TAV, Saudi Oger and Al Rajhi Holding Group each with a 33.3% stake) has a 25-year concession to operate Medina’s Prince Mohammad Bin Abdulaziz International Airport. Elsewhere, in Turkey, TAV was awarded a 20-year concession to operate Milas-Bodrum Airport. It currently operates the domestic terminal and will officially start operating the international terminal on 22 September, 2015.

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He also believes that another element of the company’s success is the strength of its global team and its partnerships with the community at each location.

“Our people take knowledge from one site and share it across the network, developing best practices and generating efficiencies,” he notes. “They also work closely with local stakeholders, who may be members of government or leaders in the business community, to ensure Vantage staff understand local customs and culture, and what the region needs from its airport.”

Vantage’s partner airport, Vancouver International Airport (YVR), was arguably a pioneer in developing the ‘sense of place’ concept at airports and Vantage has learned from this and attempted to create something similar at all its airport projects.

“Local art, architecture, building materials and colour schemes unite to create an experience that is unique to each airport’s roots,” says Casey. “This approach helps foster a sense of homegrown pride for locals and delivers an authentic first and last impression of the destination to travellers.

“At Nassau’s Lynden Pindling International Airport, for instance, every detail reflects the beauty and warmth of The Bahamas, from the terminal’s undulating roofline and turquoise-tinted colour palette to a striking art installation featuring a flock of painted flamingos and conch shells incorporated into the flooring materials.”

TAV also has a 15% stake in the ZAIC consortium that has a 30-year concession to operate and develop Zagreb Airport in Croatia.

Its consortium partners are Aéroports de Paris Management (ADPM), Bouygues Bâtiment International (BBI), Viadukt (a Croatian construction company), Marguerite Fund, and IFC, a member of the World Bank Group.

Plans to expand/reduce portfolio: The addition of more airports is almost a certainty.

News: TAV has teamed up with Aéroports de Paris (ADP) and Goldman Sachs in its bid to win the concession to build and operate the planned new Central Terminal Building at LaGuardia.

Quote: TAV Airports Holding CEO, Sani Şener, notes: “We have come a long way and we have an even longer way to go. In less than two decades we have managed to create one of the strongest brands that Turkey has to offer to the rest of the world. We have become a regional powerhouse in airport operations and have formed the largest airport platform in the world through our partnership with Aéroports de Paris.”

SPECIAL REPORT: ECONOMICS SPECIAL REPORT: & FINANCE A-Z

Vantage Airport Group World Headquarters: Vancouver, Canada.

Airports 100% owned and operated: John C Hamilton International Airport in Canada.

Others: Vantage holds a 25.5% stake in MBJ Airports Ltd, the concessionaire at Sangster International Airport in Montego Bay, Jamaica, and an 11% holding in Hermes Airports Ltd, which runs Larnaca and Paphos airports in Cyprus.

Elsewhere, it has a 10-year contract ending in April 2017 to manage and develop Nassau’s Lynden Pindling International Airport on behalf of government of the Bahamas. It also has a 10% shareholding in the SCL consortium at Chile’s Santiago–Arturo Merino Benítez International Airport, although the concession is due to expire in September 2015.

In addition to Hamilton, elsewhere in Canada, Vantage operates Kamloops Airport and St John’s North Peace Regional Airport in British Columbia and Greater Moncton International Airport in New Brunswick.

Plans to expand/reduce portfolio: Vantage is the lead member of the LaGuardia Gateway Partners consortium bidding for the concession to redevelop and operate New York–LaGuardia’s Central Terminal Building.

News: Recent highlights for Vantage’s network include breaking ground on an Air Cargo Logistics Facility at Hamilton as well as completing a runway overlay and the opening of the first-ever World Duty Free store in the Caribbean at Montego Bay’s Sangster International Airport. In April 2014, Vantage sold its equity holding in Peel Airports.

Vienna Airport Group World Headquarters: Vienna, Austria.

Airports 100% owned and operated: Vienna International Airport.

Others: It has a 22.84% interest in Malta International Airport due to its majority stake in the Malta Mediterranean Link Consortium and a separate 10.1% shareholding in the Maltese gateway held by wholly owned subsidiary VIE Malta Ltd. Elsewhere it is a member of the KSC Holding, which holds 66% of the shares in Slovakia’s Kosice Airport.

Plans to expand/reduce portfolio: It is likely to be a quiet year for the group after the 2014 sale of its 25.15% stake in Germany’s Friedrichshafen Airport back to the city and the district of Bodensee.

News: In its last business report the company states that its strategic investments in Malta and Kosice “developed well” during the nine months ending September 30, 2014, with traffic rising at both airports by 6.7% and 53.7% respectively.

VINCI Airports World Headquarters: Rueil-Malmaison, France.

Airports 100% owned and operated: None.

Others: VINCI holds a 50-year concession to operate, build and develop the 10 airports on Portugal’s mainland (Lisbon, Porto, Faro, Beja), the Azores (Ponta Delgada, Horta, Flores, Santa Maria) and Madeira (Funchal and Porto Santo).

In south east Asia, VINCI operates Cambodia’s three international airports of Phnom Penh, Siem Reap and Sihanoukville courtesy of its 70% stake in operator Cambodia Airports.

At home in France, VINCI Airports manages ten gateways that include Clermont-Ferrand Auvergne, Chambéry Savoie, Grenoble Isère, Rennes Bretagne, Quimper Cornouaille, Poitiers Biard and Ancenis (courtesy of mid-to short-term contracts), Nantes Atlantique and Saint-Nazaire Montoir through an 85% stake and long-term concession, and Rennes Bretagne and Dinard Bretagne courtesy of a 49% interest in the consortium responsible for operating the airports until 2024.

Plans to expand/reduce portfolio: Always looking for new opportunities.

News: In February, the Chilean government named VINCI’s Nuevo Pudahuel consortium as the winner of the concession to operate Santiago’s Arturo Merino Benítez International Airport for 20 years from October 1, 2015. It has a 40% stake in the consortium, which also includes ADP (45%) and Astaldi (15%). Subsidiary, Vinci Construction Grands Projects, will co-build the new airport terminal with Astaldi.

VINCI is among many bidding for the concession to run Kansai and Osaka-Itami airports in Japan.

Zurich Airport AG World Heaquarters: Zurich, Switzerland.

Airports 100% owned and operated: Zurich Airport.

Others: In Brazil, Zurich Airport has a 25% stake in the private consortium which has a controlling 51% interest in the concessionaire awarded the rights to operate Tancredo Neves–Confins International Airport for 30 years.

In Chile, through a 49% stake in A-port Chile and 62% interest in operating arm A-Port Operaciones, Zurich Airport has concessions to run Iquique–Diego Aracena and Antofagasta–Cerro Moreno airports until 2016 and 2023 respectively.

In the Caribbean, A-Port Operaciones operates Curaçao International Airport where it has a minority 7.5% shareholding in concessionaire Curaçao Airport Partners NV (CAP). CAP’s major stakeholder is Brazilian partner CCR (79%).

Zurich Airport also has a 5% shareholding in Bangalore International Airport Ltd (BIAL), operator of Bengaluru’s Kempegowda International Airport, which opened in May 2008.

Elsewhere, Zurich Airport acts as an operational advisor to 11 airports in Kazakhstan, and affiliate A-port Operaciones Colombia has a technical service agreement with Bogotá–El Dorado International Airport operator, OPAIN. Plans to expand/reduce portfolio: Actively looking for expansion opportunities in the Latin America, Europe, Middle East, North Africa and Caribbean regions.

News: In late 2013, Zurich Airport’s consortium comprising it and Brazilian infrastructure firm Companhia de Concessões Rodoviárias (CCR) won the auction for a 30-year concession to operate Brazil’s Tancredo Neves–Confins International Airport in conjunction with state-owned Infraero. They hold a 51% stake and Infraero the remaining 49%.

As part of the deal, Zurich Airport provides commercial and operational advice to the airport and has nominated its operational and commercial officers.

AIRPORT WORLD/FEBRUARY-MARCH 2015

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Airport ownership: A never ending story

The jewel in the crown of Ferrovial Aeropuertos, Heathrow Airport.

Spanish giants Abertis and Ferrovial are effectively no longer global airport operators after the disposal of their international assets.

Spain’s Abertis all but exited the global market in December 2014 when 100% owned subsidiary, Desarrollo de Concesiones Aeroportuarias, completed the sale of its 33% stake in Aeropuertos Mexicanos de Pacífico (AMP) to Mexican partner Controladora Mexicana de Aeropuertos (CMA) for €180 million. AMP owns a 17.41% interest in Grupo Aeroportuario del Pacifico (GAP), which operates 15 airports in Mexico including Tijuana and Guadalajara.

The deal follows the 2013 disposal of London Luton to an Aena-led consortium and the sale of its stake in its TBI owned assets in Europe (Belfast and Stockholm Skavsta), the US (Orlando Sanford) along with a handful of terminal management contracts in the US to Houston based Airports Worldwide.

The Bolivian government’s shock decision to renationalise airport operator, SABSA, in 2013 saw it take back control of La Paz–El Alto, Santa Cruz–Viru Viru and Cochabamba–Jorge Wilstermann airports nine years before the end of its 25 year concession.

TBI was a subsidiary of Abertis (90%) and AENA (10%)-owned Airport Concessions and Development Limited (ACDL).

To many the speed of the sale of its airport portfolio (it shed €835 million of assets in 2013, which included the €60 million sale of Cardiff Airport to the Welsh government) following a change in its business strategy has been impressive, particularly as others appear to struggle to offload their unwanted airports.

Its only remaining airport assets are a controlling 74.5% stake (currently up for sale) in the MBJ consortium responsible for operating Montego Bay’s Sangster International Airport and a 14.7% shareholding in the operator of Santiago de Chile’s Arturo Merino Benítez International Airport, although the concession comes to an end in September.

Ferrovial Aeropuertos has essentially been just a UK airport operator since the 2010 sale of its stake in Italy’s Naples International Airport, although it is actively looking to rejoin the global airport operators club in 2015.

It is, for example, one of 20 bidders to be shortlisted in the tender for Japan’s Kansai and Osaka-Itami airports and in February narrowly lost out to the ADP/VINCI Airports led consortium awarded the new concession for Santiago’s Arturo Merino Benítez International Airport in Chile.

The Spanish government’s U-turn on a decision to sell it a 6.5% interest in Aena Aeropuertos was also a blow, but it remains undeterred in its ambitions to grow its airport business.

“We are always looking to add to our airport portfolio,” says Ferrovial Aeropuertos’ CEO, Jorge Gil. Today, Ferrovial has a 25% stake in London Heathrow and elsewhere in the UK owns and operates Aberdeen, Glasgow and Southampton airports after ASG Airports Limited, its joint venture with Macquarie Infrastructure and Real Assets (MIRA), completed the €1.3 billion purchase of the gateways from subsidiary Heathrow Airport Holdings (HAH) in December 2014.

Asked recently whether Ferrovial paid over the odds for BAA when it bought it in 2006, HAH’s CEO, John Holland-Kaye, said: “I cannot speak for Ferrovial, but let me answer that in this way and say that Heathrow alone is worth £7 billion (€9 billion) more today than BAA when they bought it.

“Today it has a regulated asset base of £15 billion (€19 billion), so I’d call that a good deal to me. Heathrow has always been the jewel in the crown.”

SEA Aeroporti de Milano is another to still technically be a global airport operator courtesy of its 8.5% stake in Aeropuertos Argentina 2000, although the reality is it has wanted to sell the shareholding since 2011 but its attempt to dispose of its assets to date have not been approved by country’s airport regulator.

In contrast to SEA and Abertis, Morrison & Co/Infratil Airport Holdings has successfully offloaded its international airport assets, in 2013 selling Glasgow Airport to the Scottish government and fellow UK gateway Manston to a private investor leaving it with just a 66% stake in Wellington International Airport in New Zealand.

Morrison & Co Airport Group, which reports to have taken part in 40 privatisation and secondary sale transactions over the years, continues to show an interest in expanding its airport portfolio, however, as its flirtation with a bid for London Stansted demonstrated.

It also claims to manage “significant investments” in a number of listed European airports on behalf of institutional and retail clients.

AIRPORT WORLD/FEBRUARY-MARCH 2015

AW

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SPECIAL REPORT: ECONOMICS SPECIAL REPORT: & FINANCE A-Z

Business resilience Airports need to develop business models that plan for uncertainty and prepare for change to succeed in today’s operating environment, writes LeighFisher’s Andy Carlisle.

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n recent years the global economy has been subject to almost unprecedented turbulence, which has resulted in a climate of uncertainty, and the aviation industry has proved particularly vulnerable to external events such as terrorism, pandemics, and extreme weather.

Indeed, rapid change in consumer markets and technologies is creating a situation in which businesses should increasingly expect future disruptive factors to challenge ‘business as usual’ models.

While often perceived as an operational issue, resilience is an increasing feature of airport business management, and shapes how business models evolve to meet new challenges.

Airlines have become more cost-sensitive; alliances are expanding; many Middle Eastern carriers are aggressively growing; growth is becoming more centred on emerging markets; new aircraft offer market opportunities; and the private sector is taking an increasing role in the global industry.

In this context, resilience means managing risk and capitalising on opportunities. It involves preparing and organising for change. No one can predict the future, but certain strategies can build a more resilient business model that can better cope with change. No one wants to think about what might go wrong, but avoiding the issue is not a sustainable strategy.

A number of interdependent variables drive airport business performance and, although traffic – passenger and cargo – is just one element of an airport’s business plan, it directly drives an airport’s revenue and costs, and influences every part of the business and its operations.

Exploring the potential variability of demand enables assessment of the likely impact on cost, revenue, and capital investment needs – which in turn influence the planning of facilities and operations.

This provides a foundation for looking at ways to offset the financial impact that results from lower traffic levels, such as revenue enhancement or cost-reduction measures.

However, in contrast to many other businesses, airports have a high proportion of fixed costs and the long-term nature of airport planning means that investment decisions are hugely reliant on the assessment of future demand.

These decisions have to be made without certainty of the future, but there are, nevertheless, a number of strategies that airports can adopt to improve business resilience, as Budapest Airport discovered when it had to completely re-think its business strategy following the February 2012 collapse of its main carrier, Malév Hungarian Airlines.

The Budapest experience It is difficult not to overstate the former importance of Malév to Budapest Airport as, at the time of its demise, it accounted for 37% of the gateway’s passengers and generated almost 50% of its income.

The airport’s management team responded by initiating a series of co-ordinated actions to rebuild the traffic base and mitigate the financial impacts of the Malév collapse and, arguably, was so successful in its efforts that by the end of 2012 the year-on-year fall in total passenger numbers was only 4.7%.

Although many network carriers ramped up their services to help compensate for the loss of Malév’s operations, it was the low-cost sector – primarily Ryanair and Wizz Air – that really took advantage of the situation by filling the void.

Recognising the strategic opportunity that had been created by the demise of Malév, on the day of its bankruptcy both Wizz Air and Ryanair announced the launch of nearly 40 new routes. This had knock-on impacts for other European airports, as aircraft were quickly redeployed to provide the capacity to aggressively target the vacant Budapest slots.

Many other airlines also reacted to the situation by increasing the frequency of existing flights or expanding their capacity by using larger aircraft to serve Budapest. Consequently, load factors improved significantly, but the number of aircraft movements fell by around 23,000.

While management was very proactive in its response to the collapse of Malév, it is also true that many airlines had been anticipating the situation and rapidly adjusted their networks to take full advantage. They recognised the strategic opportunity to grab market share: quickly moving capacity from lesser performing routes.

Low-cost carriers increased their market share at Budapest from 26% in 2011 to 52% in 2012. To meet the new requirements of full-service and low-cost carriers within a single terminal building, the airport offered different service standards and created separate areas on the apron.

Airlines can now choose between different products, with associated differences in cost, that are in line with their needs. The airport, for example, has introduced a differentiated gate boarding product.

There are two aspects to note in the Malév collapse. Firstly, the underlying strength of the Budapest market, which had been growing strongly before the collapse, was attractive to airlines. Activity had been constrained in the years leading up to the crisis by the dominance and financial weakness of Malév.

The rebuilding of the traffic base therefore did not significantly dilute aeronautical revenue yields as one might have expected.

AIRPORT WORLD/FEBRUARY-MARCH 2015

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SPECIAL REPORT: ECONOMICS A-Z & FINANCE EBITDA as a percentage of turnover at 50 airports worldwide

100 80 60

CAGR +1.1%

47%

46%

51%

52%

54%

2002 2003 2004 2005 2006 2007 2008 2009 2010

2011

2012

49%

48%

48%

50%

50%

51%

49%

48%

40 20 0 2000 2001

Source: LeighFisher Airport Performance Indicators.

Source: LeighFisher Airport Performance Indicators

Secondly, Budapest Airport had an organised air service marketing team that had prepared for the eventuality of a Malév collapse and may have already had draft agreements in place with other carriers. It was therefore able to immediately respond to the opportunities that quickly emerged.

Management took a number of immediate actions to reduce the direct costs of operations. Firstly, they closed the old Terminal 1 and concentrated all operations at Terminal 2. This not only immediately reduced operating and maintenance costs, but optimised commercial revenue as T2 included a recently enhanced commercial offering, known as SkyCourt. In time, the T2 retail mix was fine-tuned to reflect the new passenger profile.

The old Terminal 1 re-opened in 2012 as a conference and event venue providing new commercial opportunities. This highlights the benefits of having flexible infrastructure that can be adapted as market conditions change.

In addition, the airport accelerated a planned cost-reduction programme.

Wages were frozen, the headcount of airport staff was reduced by 25%, and new working practices and shift patterns were introduced.

Given that Malév was the main cargo customer, a planned cargo city development was deferred, and instead some existing buildings were refurbished to be let to new customers.

The airport was certainly under no illusion about the importance of developing a diverse new range of revenues to compensate for the loss of Malév’s income, which included a significant amount of rent from buildings across the airport site. Planning for the development of a new business park continued as planned for a while, although final development was put on hold.

Collectively these responses meant that Budapest Airport’s EBITDA fell from €104 million in 2011 to €100 million in 2012, so profitability fell proportionately less than traffic.

This demonstrates that in replacing the Malév traffic, the airport had not significantly diluted its yields, and that its aggressive cost control and efficiency measures had successfully mitigated the inevitable short-term drop in commercial and property income.

Lessons learnt from Budapest The overall lesson learnt from the Budapest Airport/Malév episode is that the airport’s management team had prepared well for the potential collapse of its largest customer. The risk had been present for several years so they had already fully analysed the potential repercussions, understood the business risks, and prepared business contingency plans.

Choosing not to simply focus on traffic replacement or emergency cost reduction, they also took a series of co-ordinated actions that ultimately minimised the negative impact on profitability.

The extent to which the private ownership and operation of Budapest Airport both allowed – and indeed required – it to plan for and respond to the events in the way it did would be interesting to find out.

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CELEBRATING 20 YEARS OF AIRPORT WORLD

Whatever the answer, the undeniable fact is that traffic has continued to grow at Budapest Airport since 2012. Indeed, its annual throughput exceeded 9mppa for the first time last year when 9.1 million passengers (+10.6%) passed through its facilities.

The airport also successfully closed a €1.3 billion refinancing in September 2014, during which the resilience of the airport’s business model was a key focus. LeighFisher advised the lenders on the transaction.

Conclusion Airports are typically resilient businesses. Research by LeighFisher indicates that from 2000-2012 EBITDA as a percentage of turnover rose at a compound annual growth rate of 1.1% across a basket of fifty airports worldwide, as illustrated in the graph above.

There are few examples of a commercial service airport closing (unless it is being replaced by a new greenfield airport in the same region), whereas there have been many airline bankruptcies, especially in the deregulated era.

That in itself creates risk for airports given an airport’s revenue is vulnerable to traffic fluctuations. However, airports can counteract their vulnerabilities with commercial activity to enhance long-term revenue resilience more effectively than many other types of infrastructure.

Privatisation over the past 25 years has brought a greater focus on airports’ financial performance. Airports already have many resilient features, but contingency planning, risk profiling, and managing dependencies can improve resilience.

Regular strategic planning exercises can be useful to identify the future challenges and develop strategies that can respond to change and capitalise on opportunity. One cannot predict what lies round the corner with certainty, so it is necessary to look ahead, since to plan for only one possible future is inconsistent with enhancing business resiliency.

Airports will need to be, and remain, alert to the rapid changes now taking place on every front. Regulation and business priorities will, increasingly, converge on improving the passenger experience, but within the context of a constrained operating and infrastructure footprint.

Managing the risk of market, regulatory, and environmental disruption is only one aspect of building resilience. On the positive side, new and potentially disruptive technology has the ability to deliver greater profitability from enhanced revenue, processing efficiency, and more efficient use of airport capacity.

AW

About the author Andy Carlisle is managing director of LeighFisher’s EMEA Aviation Practice. He can be contacted at andy.carlisle@leighfisher.com

IT INNOVATION

Delivering value through IT Constantly evolving technology presents new opportunities for airports to improve the bottom-line, writes Amadeus’ Julien Dersy.

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alling government support for airport infrastructure, strict regulations and high operational costs are just a few of the business challenges faced by airports today, ensuring that there is typically little room for profit margin.

Keeping a close watch on capital expenditure and leveraging innovative solutions to manage existing assets better are essential for an airport’s success. So, how can airports employ technology to improve operational and commercial performance and avoid losing out to competitors?

There are a number of different techniques airports can deploy to use IT to improve efficiency while reducing costs.

Application virtualisation Many airports are turning to centralised IT models, most notably cloudbased common use systems. Using these platforms is a cost effective approach to customised and flexible passenger processing. Whereas previous common use solutions ran off local servers, cloud-based common use systems allow airlines and ground handling firms to separate applications from hardware and leverage cloud technology to access passenger processing systems.

These systems eliminate the need for costly on-site hardware such as servers running in expensive datacenters as the platform is typically hosted in a single centralised data processing facility where resource pooling across airports around the world becomes possible.

Additionally, in the cloud environment, providers can use thin client machines. These benefits also deliver energy efficiencies through less power consumption but also reduced cooling energy spend which in turn contribute to a reduction in CO2 emissions.

The use of virtualisation and thin clients mean that airport hardware no longer needs to be evolved to meet the increasing computing demands of ever richer and more complex airline applications, this is now delivered by the cloud.

Variable cost model: outsourcing IT Due to economies of scale, dedicated cloud providers can generally obtain and operate a server with the latest technology much more affordably than airports or airlines.

Travel providers can now have an easily scaleable server infrastructure, rather than paying to maintain a potentially excessive number of servers.

Paying only for what you consume makes cloud environments a good choice for many customers.

A real world example of this is Amadeus’ Altéa system, which is also priced on a transaction-based model according to the number of passengers boarded. Cost is directly proportional to the amount of

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CELEBRATING 20 YEARS OF AIRPORT WORLD

business conducted so customers only invest more when their businesses are progressing.

Similarly, by outsourcing IT to the cloud, costs and responsibilities relating to system maintenance and upgrades lie with the cloud provider, rather than the airport. This frees up specially trained employees from on-site duties to focus on more strategic initiatives.

The economic benefits of software as a service enables small airports with low IT budgets and limited IT personnel to enjoy the same level of rich IT services as larger airports. For example, we offer a cloud-based light and affordable alternative to airport operational database solutions designed for small and medium-sized airports as it allows them to bypass high licence and installation costs.

With airlines and airports regularly needing to replace and update their infrastructure, the ease of updating cloud-based resources is also a significant advantage.

Cloud providers often have plug-ins that allow them to integrate with other providers – saving the time and expense associated with updating and integrating inherited hardware systems.

Beyond aeronautical revenue There is a wider economic case for IT than simply cutting operating costs.

Physical space and manpower in airports are valuable commodities.

Freeing up space and staff time thanks to cloud-computing can create lucrative retail opportunities or time to service passengers, and maximise revenue potential.

Furthermore, access to enriched passenger data through passenger verification and voluntary enrolment systems allows airport operators to proactively offer tailored services to improve the passenger travel experience.

This could be offering lounge upgrades, upselling airport loyalty programmes and duty free allowances.

Technology can also create commercial opportunities. Airport passenger services such as parking, self-service check-in, lounge access, and ground transportation can be integrated into the travel booking chain, and encourage passengers to pre-purchase these outside the airport environment as natural add-ons.

New channels such as mobile apps allow airports to target passengers directly as they travel through the airport and deliver more personalised content, to grow non-aeronautical revenue.

Optimisation of airport assets Perhaps the most valuable economic benefits of technology comes from optimising existing assets. This often has the added benefit of improving the passenger experience.

IT INNOVATION

By moving operations to the cloud, airports can free up space from unnecessary on-site infrastructure.

Cloud-based common use systems are location-independent, which allows users to provide temporary desks to handle peaks, disruption, or check in passengers off-site such as at conferences, cruise terminals, or train stations.

Tablets and iPads mean that staff can be more mobile, and the increase of self-service check-in and bag drops allows for a more fluid passenger flow.

Of course, smoother operations mean fewer delays, saving airlines and airports costly compensation charges. However, one example of the deeper economic benefits of greater efficiency is London Gatwick’s use of our airport collaborative decision making (A-CDM) portal.

The portal, also built around cloud integration, allows users (airport operators, airlines, ground handlers, air traffic management) to see real-time flight, passenger and other operational data, and predict future flight problems three-to-four hours into the future.

With access to accurate data, airport stakeholders can make informed decisions to rapidly deal with potential disruption. Having implemented the portal, Gatwick has increased its runway capacity to 55 flights per hour – equivalent to an additional two million passengers per year – creating a substantially increased revenue stream.

Delivering value to airline customers As airlines and airports move to one common platform and share equipment, there will be more transparency and collaboration to improve airport operations and the overall passenger experience.

Airlines will realise immediate cost benefits with cloud airports as they will no longer be required to connect to directly to each and every airport but instead a single connection to the cloud is what is needed.

If an airport has these systems in place, it can cut costs for airlines by reducing delays, the need for on-site infrastructure, and running costs. This will undoubtedly please an airport’s existing airline customers, and make it appear more attractive to potential new ones.

Furthermore, by having IT in the cloud, airports are being opened up for external organisations to run them. Having reliable, easily deployable systems in place is an automatic way to strengthen an airport group’s bid to take on another franchise.

Technology can fundamentally drive business efficiency, and as a result improve an airport’s short and long-term economic situation in a tough environment. As the ability to rapidly ‘turn-on’ new cloud solutions grows – with limited up front capital investment – it will be those airport operators that can spot and respond to these new opportunities that will flourish.

The world of technology is moving more quickly than ever before and so too are the opportunities to harness it for the benefit of the bottom-line. AW

About the author Julien Dersy is Amadeus’ director of airport IT product management. He can be contacted at jdersy@amadeus.com

AIRPORT WORLD/FEBRUARY-MARCH 2015

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PROJECT WATCH

New Mexico City International Airport

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ccording to architect Foster + Partners, Mexico City’s new $9 billion airport will “revolutionise” airport design as its 470,000sqm terminal will be enclosed within a “continuous lightweight grid-shell, embracing walls and roof in a single, flowing form, evocative of flight”.

In line with the wishes of Mexico’s Secretariat of Communications and Transport, the airport is also set to be one of the most sustainable on the planet, its single terminal building being designed to use less materials and energy than a cluster of buildings.

Its creators say the LEED Platinum design structure will harness the power of the sun, collect rainwater, provide shading, direct daylight and allow fantastic views – all while achieving a high performance envelope that meets high thermal and acoustic standards.

Indeed, for large parts of the year, the airport will be able to maintain ‘comfortable temperatures’ inside the building without the need for additional heating or cooling systems.

Foster + Partners’ chairman and founder, Lord Foster, says: “Stansted Airport’s reinvention of the conventional terminal in the 1990s was emulated worldwide – this breaks with that model for the first time.

“It pioneers a new concept for a large-span, single airport enclosure, which will achieve new levels of efficiency and flexibility – and it will be beautiful. The experience for passengers will be unique.

“Mexico has really seized the initiative in investing in its national airport, understanding its social and economic importance and planning for the future. There will be nothing else like it in the world.”

Construction news

Los Angeles International Airport has awarded a $961 million contract to design and build its new Midfield Satellite Concourse (MSC) North to a Turner-PCL joint venture, in collaboration with Corgan and Gensler. Components of the project include an approximately 800,000 squarefoot, five-level concourse with 11 aircraft gates located on the LAX airfield, 1,300 feet west of the new Tom Bradley International Terminal (TBIT).

The gates will accommodate a variety of aircraft types up to and including the Airbus A380 and Boeing 747-8i, and the concourse will be approximately 132 feet wide (east-west) and 1,295 feet long (north-south).

Key facts • The airport will be located on an 11,400-acre site about six miles from Mexico City’s existing Benito Juarez International Airport.

• It will have three runways and a capacity of 52mppa upon opening in 2020.

• The design team comprises Foster + Partners, FR-EE (Fernando Romero Enterprise) and Netherlands Airport Consultants (NACO).

• NACO with Royal HaskoningDHV and Mexican engineering consultancies Grupo TADCO and Grupo SACMAG are designing the runways, airfield and support buildings.

• With planned future expansions, the airport will ultimately have six runways and the capacity to handled 120mppa.

In addition to being part of the consortium designing the terminal, NACO – part of Royal HaskoningDHV – is a member of the joint venture which has won the tender to design the runways, taxiways, platforms and support buildings for the new airport, which is being built on the site of a former lake.

Its partners are fellow Dutch company Royal HaskoningDHV and Mexican engineering consultancies Grupo TADCO and Grupo SACMAG. Rudolf Mulder, project manager at Royal HaskoningDHV, says: “We will extensively study the soil, its water balance and flood risks so we can safely design all runways and other civil works on this former lakebed.

“Our experience in coping with soft soils and flooding is the result of the fact that coming from the Netherlands we live in a delta below AW sea level ourselves, and work on projects in delta areas globally.”

Airfield improvements including new taxiways/ taxilanes, aircraft apron, and service roads surrounding the concourse, as well as utility lines and facilities for domestic water, fire suppression water, sanitary sewer, storm drains, natural gas, electrical, fuel and communications infrastructure.

Underground tunnel facilities to provide passenger, baggage, and utility connections between the MSC and TBIT. Other construction components include the demolition of existing facilities, a small annex to New TBIT that will serve as a connection point to the MSC, and the build-out of a Project Management Office.

The MSC North Project will be delivered in two phases with phase 1 for design and preconstruction services with the design work scheduled to be completed late 2016.

The project will be constructed in compliance with LAWA’s sustainability guidelines and will meet the energy and water-conservation requirements of the Los Angeles Green Building Code.

Construction duration is approximately three years with completion of the facility scheduled for 2020.

The total budget for the project is nearly $1.25 billion, which includes construction hard costs, project contingency, and allowances for additional project components.

AIRPORT WORLD/FEBRUARY-MARCH 2015

43

WBP NEWS

The latest news from ACI’s World Business Partners

New Munich deal for Morpho

Morpho through its subsidiary Morpho Detection, has announced a contract with the District Government of Upper Bavaria for the deployment of its high-speed CTX 9800 DSi explosives detection system (EDS) at Munich Airport.

Once deployed, the computed tomography (CT) based CTX 9800 will be used to screen all passenger checked baggage – referred to as Level 1 screening – for select high-risk flights.

In addition, CTX 9800 will be used to help Munich prepare for a full transition to Standard 3 explosives screening capabilities in accordance with approaching European Civil Aviation Conference (ECAC) mandates. Karen Bomba, president & CEO, Morpho Detection, says: “By reducing false alarms and time-intensive manual inspections of checked luggage, CTX 9800 is delivering on Morpho’s commitment to help airports prepare for approaching regulatory mandates and security challenges.”

On the radar

A trial to enable General Aviation (GA) pilots to use the full ADS-B functionality of their Mode S transponders has been kicked off by NATS, with support from the CAA and AOPA UK. The trial, which began in December 2014, has seen pilots encouraged to connect their transponders to a non-certified GPS receiver in order to start broadcasting their position via ADS-B. Doing so will allow them to track their aircraft in real-time, while with an additional receiver it will help increase awareness of nearby ADS-B equipped aircraft. While NATS doesn’t rely on ADS-B to detect aircraft, it believes that encouraging the GA community to use it will deliver additional capabilities in the air and on the ground, and make the UK’s busy airspace even safer and more efficient.

Jonathan Smith, NATS General Aviation Lead, said: “The aim of the trial is for NATS and the GA community to understand whether uncertified GPS positions can be used to deliver real safety benefits.

This could be in the form of traffic alerts in the cockpit, enhanced situational awareness or even information being spoken directly into a GA pilot’s headset.”

“In addition, GA pilots will start to become visible on apps like Planefinder and FlightRadar24, which we think is very exciting for the community.”

A second element of the trial will see the introduction of a new prototype device called the Low Power ADS-B Transceiver (LPAT), which is being developed by NATS with Funke Avionics. LPAT is being positioned as a portable, battery powered and affordable device that will provide the minimum functionality needed to make a GA pilot visible to other airspace users, as well as to provide warnings against other suitably equipped aircraft.

Camas Training Location: Tremblay-en-France, France Contact: Patrick Grandoulier, CEO Email: aurelien.largeau@ camasformation.fr Website: www.camastraining.com Camas is the leader in airport and aviation training. Thanks to its unique experience and expertise, Camas works for the most prestigious companies worldwide, enabling them to maintain a high level of quality of service through custom-made training programs for their staff. Camas has more than 200 trainers available anytime, anywhere. The company trains more than 21,000 people every year, whether it is initial or refresher training, and has its own e-learning platform.

Camas also offers dedicated solutions to professionals, such as recruitment, audits and consulting.

Kent Ridge Consulting Co Ltd Location: Xiamen, China Contact: Lilian Yan, overseas market development manager Email: yanll@krgroup.com.cn Website: www.krc.com.cn/en/ Kent Ridge Consulting Co Ltd (KRC) has long been engaged in professional services in airports and aviation and has collaborated with more than 50 airports across the Asia-Pacific region.

The Aviation Research Center of Kent Ridge consistently studies the developmental strategy of the aviation industry on a global scale while serving local clients.

It provides a comprehensive range of consulting services including strategy, human resource management, terminal planning and business development, and air city planning.

OAG Aviation Location: Luton, UK Contact: Mory Camara, ACI representative Email: mory.camara@oag.com Website: www.oag.com OAG is relied upon globally for essential aviation information and insight. Only OAG has the capability to deliver accurate, comprehensive and up-to-the-minute aviation data with the expertise to convert this information into market-leading intelligence and innovative travel solutions.

AIRPORT WORLD/FEBRUARY-MARCH 2015

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HUMAN RESOURCES

PEOPLE

matters Developing risk awareness Dr Richard Plenty and Terri Morrissey provide their thoughts on: The psychology of risk management.

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irports that manage risk transparently well are more likely to be attractive to investors and better able to attract the capital they need to develop.

The ability to assess, manage and take well judged risk lies at the heart of successful business leadership, but to do so well is a challenge. Whilst there is an excellent body of work on risk management focusing on the objective assessment of risk and how this can be most effectively managed and controlled, managing ‘mindset’ remains difficult.

Commercial organisations can struggle to ensure that peoples’ attitudes and behaviours strike a sensible balance between excessive caution and reckless adventure. Too wary, and the business may fall behind; too risky, and ethics may be compromised and financial disaster could ensue.

The aviation industry has long been expert in finding ways of minimising operational, safety and security risks through the use of standardised processes, procedures and protocols which have a bedrock of ‘nonnegotiable’ operating practices. However, as the industry continues its shift out of public ownership and becomes increasingly commercial and competitive, a different approach is required for non-safety critical systems.

Managing risk in these circumstances requires an understanding of psychology and the factors which influence individual decisionmaking rather than focus on regulation and organisation procedures. Initiative, pro-activity, entrepreneurial spirit and empowerment are all desirable features of the high performance

46

organisation. These features can be stifled by unnecessary bureaucracy.

People’s propensity for risk-taking depends on the nature of the situation – the size of the risk, the degree of choice, and the likely consequences. It is also shaped by: • Organisation culture: The organisation’s values and reward system, exemplified by the role model behaviours of leaders, managers and peers.

• The perceived risk: This is likely to be influenced by recent runs of ‘success’ or ‘failure’ (those on a winning streak take more risks), publicity, and emotional cues.

• Personality and risk appetite: People fall into different ‘risk types’ with different styles and approaches to taking risk, depending on their need for excitement, their tolerance of uncertainty and ambiguity and how anxious they become when faced with the unknown.

The key to managing risk in a high performance culture is to develop an awareness of it and thus raise the standard of ‘risk intelligence’ in the organisation. This can be done by encouraging greater transparency, openness and dialogue.

Building awareness of individual propensity to take risks provides an excellent starting point to help identify and review those situations where risk judgements are critical.

Breadth and depth of knowledge and relevant expertise helps people to be more objective, confident and sound in their judgements.

Invest in developing risk awareness, and reap the returns!

CELEBRATING 20 YEARS OF AIRPORT WORLD

Melbourne Airport CEO, Chris Woodruff, has served notice of his intention to leave his position by June 30, 2015, at the latest.

Woodruff, who has led operator Australia Pacific Airports Corporation (APAC) for seven-and-a-half years, believes that with the airport’s new-look Terminal 4 set to open shortly the time is right to step aside and let a new CEO lead the next phase of the gateway’s expansion.

Munich Airport’s president and CEO, Dr Michael Kerkloh, has announced that his “long-haul flight” at the gateway will continue for at least another two years after agreeing to the supervisory board request to remain in office until the end of 2018.

Denver International Airport has made two key senior appointments after naming two new executive vice presidents (EVP). Ken Greene has been selected as the new chief operating officer EVP who will lead the business unit that includes airport infrastructure management, technologies, airport operations, the hotel and transit center and special projects. Bhavesh A Patel is the airport’s new chief revenue officer EVP in charge of the commercial, concessions and real estate business unit.

Heathrow Airport Holdings has named Michael Uzielli as its new chief financial officer. He is currently finance director for British Gas and will succeed the outgoing José Leo in March. At British Gas, Uzielli gained a reputation for driving revenue growth and for building strong relationships with the government and energy industry regulators.

About the authors Dr Richard Plenty and Terri Morrissey are directors of This Is... and run top team workshops on contemporary leadership issues including the psychology of risk. They can be contacted at info@thisis.eu

AW