Page 1

On the agenda: Investing in airports Airport profile: Frankfurt and global operator Fraport Special report: The buying game Plus: Shopping malls, Future design & Car parking

Investing in airports: Challenges and opportunities February-March 2017 Volume 22 Issue 1 www.aci.aero


OPINION ;OLTHNHaPULVM[OL(PYWVY[Z*V\UJPS0U[LYUH[PVUHS

Airport World Editor Joe Bates +44 (0)1276 476582 joe@airport-world.com Design, Layout & Production Mark Draper +44 (0)208 707 2743 mark@airport-world.com Sales Director Jonathan Lee +44 (0)208 707 2743 jonathan@airport-world.com Sales Manager Ellis Owen +44 (0)208 274 1540 ellis@airport-world.com Advertising Manager Andrew Hazell +44 (0)208 384 0206 andrewh@airport-world.com Subscriptions subscriptions@airport-world.com Managing Director Jonathan Lee +44 (0)208 707 2743 jonathan@aviationmedia.aero Published by Aviation Media Ltd PO BOX 448, Feltham, TW13 9EA, UK

Website www.airport-world.com

Airport World is published six times a year for the members of ACI. The opinions and views expressed in Airport World are those of the authors and do not necessarily reflect an ACI policy or position. ISSN: 1360-4341 The content of this publication is copyright of Aviation Media Ltd and should not be copied or stored without the express permission of the publisher. Printed in the UK by The Magazine Printing Company using only paper from FSC/PEFC suppliers www.magprint.co.uk

Let’s talk politics Airport World editor, Joe Bates, reflects on changing political times and the potential impact they may have on airport development ahead of the Airport Economics & Finance Conference and Exhibition in London.

P

olitics is one topic you are supposed to avoid talking about at work in a bid to keep the peace, and I must confess that I wholeheartedly agree with the sentiment as it can stir up some strong emotions. Having said that, sometimes the issues are just so big it is hard to escape falling in to the trap! Who, for example, would have thought that more than eight months after the Brexit vote in the UK, heated debates would still be going on in offices, factories, pubs and clubs up and down Britain about the wisdom of leaving the European Union? While across the pond and around the globe similar conversations are being had about the merits of new US President, Donald Trump, who certainly appears to have divided opinion like no other White House resident in my lifetime. Will Trump be good for the US aviation industry? Well, he talked the talk at a meeting with airport and airline leaders in early February, promising to change the lack of investment in the nation’s transportation infrastructure, which he claimed had left the country with “obsolete airports, an obsolete plane system, obsolete trains, and bad roads.” Indeed, in a promising sounding address to the media on February 9, he said: “Our airports used to be the best, now they are at the bottom of the rung. We want to help you [aviation leaders] realise your goals by rolling back burdensome regulation, lowering the overall tax burden on American businesses and developing our aviation infrastructure.” Sounds encouraging, and ACI-NA representatives at the meeting that included president and CEO, Kevin Burke; Chicago Department of Aviation commissioner, Ginger Evans; Los Angeles World Airports CEO, Deborah Flint; and executive director of the Port Authority of New York and New Jersey (PANYNJ), Patrick Foye, certainly seemed to like what they heard from the new President.

“We greatly appreciate the President’s persistent, vocal support for building airport infrastructure as a key component of improving the passenger experience, rebuilding our nation, growing our economy, and creating jobs,” said ACI-NA’s Burke. “During the meeting, the President stated four times that America must modernise and rebuild our airports. We can quickly fund and undertake these much needed infrastructure projects with no federal budget impact by giving airports more control of local investment decisions. “We estimate that 2.1 million jobs could be created while enhancing the passenger experience simply by removing federal limits on the local user fee known as the Passenger Facility Charge.” Only time will tell what the reality holds for US airports and for Britain’s airports after Brexit, of course, but both examples just go to show how bigger political events inevitably impact on airports around the world. Creating the right political, regulatory and economic environment for investment is obviously crucial for any industry, and aviation is no exception, especially as governments look to upgrade key infrastructure to meet growing demand. In this ‘investing in airports’ themed issue of Airport World you will be able to read about all of the big airport privatisation projects of 2016 and what’s possibly in store for the year ahead. Also in the spotlight are airport shopping malls; car parking charges; the future of airport design; security innovation; DFW’s cargo master plan; the economic challenges and opportunities faced by airports in today’s volatile geo-political landscape; and Fraport’s global airport portfolio, which includes Frankfurt Airport. Finally, I look forward to seeing you all at ACI’s first major event of 2017, the annual Airport Economics & Finance Conference and Exhibition in London on March 20-22, where Brexit, among a host of other topics, will be on the agenda.

AIRPORT WORLD/FEBRUARY-MARCH 2017

AW

3


CONTENTS

In this issue Issue 1 Volume 22

3 Opinion Airport World editor, Joe Bates, reflects on changing political times and the potential impact they may have on airport development ahead of the Airport Economics & Finance Conference and Exhibition in London.

8 Time to shine Asia-Pacific gateways once again lead the way in ACI’s Airport Service Quality (ASQ) customer satisfaction awards, winning all the global best airport by size categories.

12 ACI news Sabrina Guerrieri brings us news of the theme for this year’s ASQ Forums and a prestigious award for ACI World director general, Angela Gittens.

15 View from the top ACI World director general, Angela Gitttens, reflects on the economic and social benefits of investing in airports.

16 In the spotlight Chairman of the Executive Board, Dr Stefan Schulte, talks to Joe Bates about his ambitions and development plans for Frankfurt Airport and the Fraport Group’s global airport portfolio.

25 Interesting times ACI World’s director of economics, Stefano Baronci, considers how today’s volatile geo-political landscape creates challenges and sometimes new opportunities for airports and investors.

26 The buying game Modalis chief executive, Curtis Grad, takes stock of the airport deals of 2016 and considers what might be in store for the year ahead.

AIRPORT WORLD/FEBRUARY-MARCH 2017

5


CONTENTS

Director General Angela Gittens Chair Declan Collier (London, UK) Vice Chair Bongani Maseko (Johannesburg, South Africa) Immediate Past Chair Fredrick J Piccolo (Sarasota, USA)

30 Shopping, anyone? Joe Bates reports on the rise of the airport shopping mall and talks to Westfield and AIRMALL about the appeal of aviation and their future development plans.

32 Vision of the future What next for airport terminals? Joe Bates reviews a handful of ongoing expansion projects and talks to some of the industry’s most influential architects about possible design changes in the future.

37 Cool runnings! A new study reveals that car parking, so important to the bottom line of most airports, is becoming increasingly innovative and dynamic, writes Ivo Favotto.

41 Speaks volumes Airport World takes a closer look at Dallas/Fort Worth International Airport’s plans to grow its cargo business in 2017.

43 Project Watch New York’s LaGuardia Airport is to be transformed by the construction of a new central terminal that will pave the way for the creation of one single passenger facility.

45 ACI’s World Business Partners The latest news from ACI’s World Business Partners.

46 People matters Dr Richard Plenty and Terri Morrissey reflect on: Uncertainty.

Treasurer Arnaud Feist (Brussels, Belgium) ACI WORLD GOVERNING BOARD DIRECTORS Africa (2) Saleh Dunoma (Lagos, Nigeria) Bongani Maseko (Johannesburg, South Africa) Asia-Pacific (9) Sheikh Aiman Al-Hosni (Muscat, Oman) Kjeld Binger (Amman, Jordan) Kenichi Fukaya (Tokyo, Japan) Fred Lam (Hong Kong) Seow Hiang Lee (Singapore) Xue Song Liu, (Beijing, China) Kerrie Mather (Sydney, Australia) Emmanuel Menanteau (Phnom Penh, Cambodia) PS Nair (Delhi, India) Europe (7) Daniel Burkard (Moscow, Russia) Declan Collier (London, UK) Robert Deillon (Geneva, Switzerland) Arnaud Feist (Brussels, Belgium) Elena Mayoral Corcuera (Madrid, Spain) Augustin de Romanet (Paris, France) Sani Şener (Istanbul, Turkey) Latin America & Caribbean (3) Ezequiel Barrenechea (Lima, Peru) Martin Eurnekian (Buenos Aires, Argentina) Andrew O’Brian (Quito, Ecuador) North America (7) Lew Bleiweis (Asheville, USA) Joyce Carter (Halifax, Canda) Howard Eng (Toronto, Canada) Deborah Flint (Los Angeles, USA) Joe Lopano (Tampa, USA) Tom Ruth (Edmonton, Canada) William Vanecek (Buffalo, USA) Regional Advisers to the World Governing Board (9) Zouhair Mohamed El Aoufir (Rabat, Morocco) Michael Kerkloh (Munich, Germany) Tan Sri Bashir Ahmad Abdul Majid (Kuala Lumpur, Malaysia) Candace McGraw (Cincinnati, USA) Robinson Misitala (Livingstone, Zambia) Joseph Napoli (Miami, USA) Hector Navarrete Muñoz (Merida, Mexico) Brian Ryks (Minneapolis-St Paul, USA) Stefan Schulte (Frankfurt, Germany) Observer World Business Partner Observer Tunde Oyekola (El-Mansur Atelier Group) Correct as of March 2017

6

AIRPORT WORLD/FEBRUARY-MARCH 2017


ASQ WINNERS 2016

Time to shine Asia-Pacific gateways once again lead the way in ACI’s Airport Service Quality (ASQ) customer satisfaction awards, winning all the global best airport by size categories.

T

here is clearly no stopping Asia-Pacific’s airports which once again demonstrated their customer service credentials by winning a host of awards in ACI’s annual Airport Service Quality (ASQ) passenger satisfaction survey. Bigger and better than ever with more airports participating (318) and more award categories, a record-equalling 62 gateways have been recognised for their customer service excellence in 2016. Incheon International Airport once again scooped the coveted prize for the world’s best airport handling over 40 million passengers. It is the third year running that the Seoul gateway has won the honour, this time finishing ahead of three airports that couldn’t be separated for joint second place – Singapore Changi and India’s Delhi-Indira Gandhi and Mumbai-Chhatrapati Shivaji airports. China’s Beijing Capital International Airport was third to complete a memorable clean sweep for Asia-Pacific. Customer service champion Incheon also won Best Airport in the Asia-Pacific region for the 12th successive year and Best Airport by Size and Region in the Over 40mppa category in the Asia-Pacific region. Asia-Pacific airports actually triumphed in all the global by size categories and, for the first time in quite a few years, there were new winners in three of the five groups – Taipei Taoyuan (25-40mppa), Haikou Meilan (15-25mppa) and Hyderabad/Tianjin Binhai (5-15mppa), although in Haikou Meilan’s case it was reclaiming the crown in last won in 2014. Jaipur International Airport has retained its status as the best airport on the planet in the global 2-5mppa category, only this time the Indian gateway has to share the honour with Guayaquil in Ecuador and Sochi in Russia. Both Guayaquil and Sochi are multiple award winners and impressed again in 2016. The former being named Best Airport in Latin America and Caribbean (LAC) for the fourth successive year and Sochi winning Best Airport in Europe outright after sharing top spot with Moscow Sheremetyevo and St Petersburg-Pulkovo in 2015. The 2016 results also saw Sochi hold on its title of Best Airport by Size in Europe in the 2-5mppa section and Guayaquil winning the equivalent award for the LAC region, which introduced the category for the first time. Other new category winners are Punta Cana in the Dominican Republic and Queen Alia in Amman, which finished top of the pile for airports handling between 5-15mppa in ACI’s LAC and Middle East regions respectively. Punta Cana also did well in the Best Airport by Region category, finishing equal second in LAC with Nassau’s Lynden Pindling International Airport. Quito and Aruba’s Queen Beatrix International Airport (Oranjestad) came third. Fellow Dominican Republic gateway, Puerto Plata, won Best Airport in LAC handling Under 2mppa and Queen Beatrix lifted the Most Improved Airport award for the region.

8

AIRPORT WORLD/FEBRUARY-MARCH 2017

Best Airport by Size 2–5 MILLION PASSENGERS PER YEAR First place (tie) Second place (tie) Guayaquil Srinager Jaipur Toronto Billy Bishop Sochi

Third place (tie) Langkawi Ottawa

5–15 MILLION PASSENGERS PER YEAR First place (tie) Second place (tie) Hyderabad Changchun Tianjin Hohhot

Third place (tie) Amman Chiang Mai Cochin Indianapolis Jacksonville

15–25 MILLION PASSENGERS PER YEAR First place Second place (tie) Haikou Sanya Seoul Gimpo

Third place Denpasar

25–40 MILLION PASSENGERS PER YEAR First place Taipei Taoyuan

Second place Shenzhen

Third place Hangzhou

OVER 40 MILLION PASSENGERS PER YEAR First place Second place (tie) Seoul Incheon Delhi Mumbai Singapore

Third place Beijing

Queen Alia’s success in the new 5-15mppa category made up for it losing out on a hat-trick of wins for being Best Airport in the Middle East, its thunder in 2016 being stolen by Abu Dhabi International Airport. It was runner up though, narrowly edging out Dubai (DXB), which easily retained its status as the world’s busiest international airport last year. Abu Dhabi International Airport, which expects to open its eagerly awaited new Midfield Terminal later this year, also won an award for the Most Improved Airport in the Middle East. US President, Donald Trump, should take note that Indianapolis and Jacksonville shared joint top spot with Toronto’s Billy Bishop City Airport for the accolade of Best Airport in North America.


ASQ WINNERS 2016

You win again: The 2016 ASQ winners include many familiar names and some new ones, much like last year, whose victorious airports are pictured above.

Best Airport by Region UNDER 2 MILLION PASSENGERS PER YEAR Africa Bloemfontein Europe Murcia Latin America-Caribbean Puerto Plata North America Saskatoon It is the fifth year in a row that Indianapolis International Airport has won the award. El Paso, Ottawa and Tampa were joint runner’s up while six gateways shared third place – AustinBergstrom, Dallas Love Field, Edmonton, Halifax, San Antonio and Winnipeg. Indianapolis also retains its No. 1 ranking in the Best Airport by Size and Region category for North America for airports handing between 5 and 15 million passengers yearly. And Indiana’s ASQ champion and Jacksonville finished joint third in the global Best by Size category for airports handling between 5-15mppa, sharing the honour with Queen Alia (Jordan), Chiang Mai (Thailand) and Cochin (India) airports. In the other Best by Size and Region categories for North America, the award winners are Saskatoon (Under than 2mppa); Toronto Billy Bishop (2-5mppa); Tampa (15-25mppa); Minneapolis (25-40mppa); and Dallas/Fort Worth (Over 40mppa). Elsewhere in the world, Sir Seewoosagur Ramgoolam International Airport (SSR International) in Mauritius has cause to celebrate after winning Best Airport in Africa for the third consecutive year, once again pipping South Africa’s Durban (2nd) and Cape Town (3rd) airports to the honour. South Africa did have one out and out ASQ winner though, Bloemfontein’s Bram Fischer International Airport, which won awards for the Best Airport in Africa handling under 2mppa and the Most Improved Airport in Africa.

Best Airport by Size and Region ASIA-PACIFIC 2–5 million passengers per year 5–15 million passengers per year 15–25 million passengers per year 25–40 million passengers per year Over 40 million passengers per year

Jaipur Tianjin Haikou Taipei Taoyuan Seoul Incheon

EUROPE 2–5 million passengers per year 5–15 million passengers per year 15–25 million passengers per year 25–40 million passengers per year Over 40 million passengers per year

Sochi Porto Vienna Moscow Sheremetyevo London Heathrow

LATIN AMERICA-CARIBBEAN 2–5 million passengers per year 5–15 million passengers per year

Guayaquil Punta Cana

MIDDLE EAST 5–15 million passengers per year

Amman

NORTH AMERICA 2–5 million passengers per year 5–15 million passengers per year 15–25 million passengers per year 25–40 million passengers per year Over 40 million passengers per year

Toronto Billy Bishop Indianapolis Tampa Minneapolis Dallas/Fort Worth

AIRPORT WORLD/FEBRUARY-MARCH 2017

9


ASQ WINNERS 2016

Best Airport by Region AFRICA (Over 2 million passengers per year) First place Second place Third place Mauritius Durban Cape Town

ASIA-PACIFIC First place Second place (tie) Third place (tie) Seoul Incheon Delhi Beijing Mumbai Haikou Singapore

EUROPE First place Second place Third place (tie) Sochi Moscow Sheremetyevo Dublin Malta Porto Zurich

MIDDLE EAST First place Abu Dhabi

Second place Amman

Third place Dubai

NORTH AMERICA First place (tie) Second place (tie) Indianapolis El Paso Jacksonville Ottawa Toronto Billy Bishop Tampa

Third place (tie) Austin-Bergstrom Dallas Love Field Edmonton Halifax San Antonio Winnipeg

LATIN AMERICA-CARIBBEAN First place Second place (tie) Guayaquil Nassau Punta Cana

Third place (tie) Oranjestad Quito

Europe’s airports are used to missing out in the global by size categories, but this says more about the fierce competition they face on the world stage than anything else, as any regular reader of Airport World will know that customer service excellence and innovation is alive and kicking across the continent’s airports. In addition to Sochi, star ASQ performers from the continent in 2016 included Moscow Sheremetyevo, which was runner up for Best Airport in Europe, and joint third placed Dublin, Malta, Porto and Zurich airports. In terms of the Best by Size and Region awards in Europe, Murcia (Under 2mppa); Porto (5-15mppa), Vienna (15-25mppa), Moscow Sheremetyevo (25-40mppa) and London Heathrow (Over 40mppa) took the honours – the latter two for the second successive year. Discussing soaring ASQ satisfaction scores at Heathrow in the final quarter of 2016, the gateway’s chief operating officer, Normand Boivin, remarked: “We are delighted our hard work has been recognised by our most important critics, our passengers.

10

AIRPORT WORLD/FEBRUARY-MARCH 2017

Most Improved Airport Africa Bloemfontein Asia-Pacific Makassar Europe Krakow Middle East Abu Dhabi Latin America-Caribbean Oranjestad North America Columbus “We are committed to delivering the world’s best airport service and this year we will build on this success by further improving transfer passengers’ experience, reducing time at immigration and delivering a more personalised service for all passengers in 2017. “We will continue to find new ways to make them [passengers] feel excited about coming to Heathrow as well as delivering a high standard of service for years to come.” Kraków (Poland), Columbus (USA) and Sultan Hasanuddin International Airport in Makassar (Indonesia) won Most Improved Airport awards for Europe, North America and Asia-Pacific respectively. Back in Asia-Pacific, Jaipur was another double winner after retaining its Best Airport by Size and Region title in the 2-5mppa category for Asia-Pacific. Following suit in terms of being two time winners in the 2016 ASQ awards are Tianjin, Haikou Meilan and Taipei Taoyuan who followed up their success in the global by size categories with top spots in the respective 5-15mppa, 15-25mppa and 25-40mppa awards for the Asia-Pacific region. Other Asia-Pacific airports to do well included Srinagar and Langkawi, which finished joint second and third respectively in the global Best by Size category for airports handling 2-5mppa; and China’s Changchun Longjia and Hohhot Baita (Inner Mongolia) airports for finishing joint second in the global Best Airport by Size category for 5-15mppa. In the other global Best by Size awards, Sanya Phoenix and Seoul Gimpo were joint second, and Bali’s Denpasar–Ngurah Rai International Airport third, in the 15-25mppa category; and China’s Shenzhen Bao’an and Hangzhou airports were second and third respectively in the 25-40mppa group. ACI World director general, Angela Gittens, was quick to heap praise on the ASQ winners and all 318 airports to take part in the organisation’s 2016 benchmarking programme. She said: “I am delighted that as we celebrated the 10th anniversary of helping airports understand how best to serve their customers with the ASQ Programme, we see our largest group of winners ever. “These airports have dedicated themselves to delivering a stellar customer experience. Promoting a culture of continuous service improvement has become a matter of gaining competitive advantage and optimising non-aeronautical revenue performance. “ACI proudly recognises these accomplishments and we look forward to seeking more effective, efficient and profitable ways of serving the flying public together.” The ASQ Awards Ceremony will be held at the 27th ACI Africa/ World Annual General Assembly, Conference & Exhibition in Port Louis, Mauritius, on October 16–18 October 2017. AW


ACI WORLDHEAD NEWS RUNNING

World in motion Sabrina Guerrieri brings us news of the theme for this year’s ASQ Forums and a prestigious award for ACI World director general, Angela Gittens.

A

CI World’s Airport Service Quality (ASQ) programme, the only worldwide programme to survey passengers at the airport on their day of travel, continues to expand and go from strength to strength. A record 318 airports from 84 countries took part in the 2016 programme – a process that involved carrying over 600,000 individual surveys in 41 languages – and even more gateways are expected to participate in 2017 as ACI’s customer satisfaction benchmarking survey moves into its eleventh year. Winning an award, however, is only part of the ASQ programme, which is designed to help airports improve their customer service offering to passengers by being able to benchmark their own performance and learn about best practice from others. And one of the ways it does this is by holding three ASQ Forums yearly. ACI recently revealed that the theme for 2017 events will be ‘Cultivating a customer experience airport community’. This theme recognises that putting the passenger first is a shared priority among all aviation stakeholders and the role of all members of the airport community in cultivating a culture of customer service excellence. The first ASQ Forum will take place from April 26–28 in Haikou, China; the second in Prague, the Czech Republic, from September 13-15; and the third in Detroit, Michigan, USA, from October 2-4. “The venues for this year’s ASQ Forums are diverse, and we expect attendees at each event to take away unique, regionally informed insights into how they can develop a culture of customer experience at their airport,” says Antoine Rostworowski, ACI World’s director of airport customer experience and technology. “In keeping with past ASQ Forums, participants can expect an engaging mix of presentations, discussion sessions, networking opportunities, and new ASQ programme tools and insights to ensure no stone is left unturned as we explore this year’s theme.” The winners of the 2016 awards can be viewed on page 8 of this issue and online at www.aci.aero/Airport-Service-Quality/ASQ-Awards. Talking about the incredible customer service efforts of all the 2016 ASQ winners and reflecting on the fact that some gateways have finished at the top of their respective categories for a number of years, ACI World director general, Angela Gittens, says: “These airports have dedicated themselves to delivering a stellar customer experience. “Promoting a culture of continuous service improvement has become a matter of gaining a competitive advantage and optimising non-aeronautical revenue performance. “The common denominator among all of these airports is their focus on cultivating a robust culture of customer service – delivered not only from frontline staff, but from their entire airport community.”

12

AIRPORT WORLD/FEBRUARY-MARCH 2017

The ASQ Awards Ceremony for the 2016 winners will be held at the 27th ACI Africa/World Annual General Assembly, Conference & Exhibition in Port Louis, Mauritius, October 16-18, 2017. For more information on ACI’s ASQ programme, visit: www.aci.aero/ Airport-Service-Quality/ASQ-Home.

We salute you ACI World’s director general, Angela Gittens, has been selected as the recipient of the 2017 National Aeronautic Association’s (NAA) Cliff Henderson Trophy. Permanently displayed at the Smithsonian National Air and Space Museum in Wasington DC, the Henderson Trophy was established in 1960 to honour Clifford Henderson, the creator and managing director of the world-renowned National Air Races. Henderson’s work stimulated a generation’s interest in aviation and challenged the state of the art in aviation development. The trophy is awarded to “…a living individual, group of individuals, or an organisation whose vision, leadership or skill made a significant and lasting contribution to the promotion and advancement of aviation and aerospace in the United States.” Previous recipients include Colonel Joseph Kittinger, Marion Blakey, The United States Air Force Academy, Anne Morrow Lindbergh, Lieutenant General James Doolittle, Senator Barry Goldwater, Clarence ‘Kelly’ Johnson, Scott Crossfield and the 2016 recipient, George Carneal. “Angela has been a game changer everywhere she has been,” stated Greg Principato, president and CEO, NAA. “Because of her work, aviation in the United States and around the world is safer, more secure and more efficient for all users.” Gittens remarked: “I am deeply honoured to be awarded the 2017 Cliff Henderson Trophy and to be in the company of such an august body of former recipients. “This is one of the most prestigious and long standing awards in the aviation industry and I am humbled that the NAA should select me for the 2017 award.” NAA will present the trophy to Gittens at an NAA luncheon on April 20, 2017, in Arlington, Virginia.


ACI WORLD NEWS

ACI events

2017

2017

2017

2017

2017

March 20-22

September 17-20

June 12-14

October 14-18

April 10-12

Airport Economics & Finance Conference and Exhibition London, UK

ACI-NA Annual Conference & Exhibition Fort Worth, USA

ACI Europe General Assembly, Congress & Exhibition Paris, France

ACI Africa General Assembly, Conference & Exhibition/ACI World Annual General Assembly Port Louis, Mauritius

ACI Asia-Pacific Regional Assembly, Conference & Exhibition Doha, Qatar

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: +507 830 5657/58 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 December 2016, ACI accounts for 617 regular members operating 1,884 airports in 173 countries. In 2015, airports worldwide welcomed 7.1 billion passengers and handled 105 million metric tonnes of cargo and 86 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 2017

AW

13


View from the top

ACI VIEWPOINT

ACI World director general, Angela Gitttens, reflects on the economic and social benefits of investing in airports.

A

irports have the potential to be generators of value for many different stakeholders ranging from passengers, airlines and investors to surrounding economies and communities. They are widely regarded as critical generators of employment opportunities and thus economic growth and urban regeneration. Airports have a far reaching catalytic impact in that their economic activity covers many other industrial sectors, from tourism, construction, air freight, hotels, transport and maintenance, to electronics, pharmaceuticals, perishables and more. These wider economic activities occur beyond the aviation sector but are supported by the connectivity that aviation brings between geographical areas. For aviation and airports to continue being generators of value for all stakeholders involved, investment in airports is vital. The increasing demand for air travel requires better use of existing infrastructure, development of new infrastructure and the right investment approaches to bridge gaps in infrastructure financing. Without agreement on a way forward, there could be constraints on the ability of States to meet future demand and reap the socio-economic benefits of increased airport and airline operations. According to the Air Transport Action Group (ATAG), 2014 saw the air transport industry generate an estimated 9.9 million direct jobs worldwide, or $664.4 billion of the world’s Gross Domestic Product (GDP). The airport sector specifically is responsible for 5.95 million of those jobs, accounting for $398.6 billion in GDP, with airport operators employing 450,000 positions, accounting for $30.2 billion in GDP. In addition, the air transport supported 11.2 million indirect jobs, accounting for $761.4 billion in GDP; 5.2 million induced jobs, accounting for $355 billion in GDP; and generated 36.3 million catalytic jobs or $892.4 billion in GDP. The air transport industry in total supported a whopping 62.7 million jobs and generated $2.7 trillion in GDP. Taking a closer look at two mature aviation markets, Europe and the US, helps to illustrate the impact of air transport on the economy and social wellbeing. According to The Economic Impact of Commercial Airports in 2013 – a study commissioned by ACI EUROPE – every year European airports and their associated aviation activities support almost 12.4 million jobs and contribute €675 billion toward Europe’s GDP, representing 4.1% of the European economy.

Similarly, ACI North America estimated that in 2013, 485 commercial airports in the US supported 9.6 million jobs, creating an annual payroll of $358 billion and producing an annual output of $1.1 trillion. The latest analysis by the Port Authority of New York and New Jersey titled, The Economic Impact of the Aviation Industry on the New York – New Jersey Metropolitan Region, showed that in 2015, the regional airport system served an estimated 123 million passengers (excluding Atlantic City Airport) and handled more than two million tons of cargo. The total combined impact of aviation operations, capital spending and tourism resulted in 588,800 total jobs, $30.6 billion in wages and $84.7 billion in sales or economic activity. The contributions that aviation makes are essential in all regions of the world and should not be taken for granted. Therefore, aviation policies must be far-sighted to incentivise public and private investment in infrastructure development to meet the capacity challenges of the future. Countries and industries must invest in better air connections if they aim to benefit from increased trade, investment, tourism activity and productivity. Regulation has its place, but it should be proportionate, fit for purpose and streamlined. The economic impact of airports and the ways in which all parties can collectively benefit from airport investment will be key topics at the upcoming Airports Council International (ACI) 9th Annual Airport Economics & Finance Conference and Exhibition, organised in co-operation with the World Bank. Along similar lines, the conference will also cover such pertinent topics as: challenges to air traffic liberalisation; delivering growth and ensuring route development; the potential impacts of Brexit; the value of airports, and the exploration of policy solutions on a range of airport business disciplines. And ahead of the conference at the ACI/World Bank Annual Aviation Symposium, you will have a chance to hear industry experts speak on risk and opportunities of airport Public/Private Partnerships from all fronts. I look forward to seeing you in London for a must-attend event for executives from airports large and small looking to address the key economic and finance issues of our industry. AW

AIRPORT WORLD/FEBRUARY-MARCH 2017

15


AIRPORT REPORT: FRANKFURT

In the spotlight Chairman of the Executive Board, Dr Stefan Schulte, talks to Joe Bates about his ambitions and development plans for Frankfurt Airport and the Fraport Group’s global airport portfolio.

B

eing in the spotlight is nothing new for Frankfurt Airport or owner and operator, Fraport AG, with barely a week seeming to pass without them making headlines somewhere across the globe. Germany’s busiest airport and Europe’s fourth biggest passenger gateway is, of course, of great interest to media outlets across the world, as are Fraport’s ever-growing portfolio of global business interests, and Airport World is no exception to the rule. Indeed, in the first few weeks of this year we ran stories about Frankfurt Airport’s new hanging gardens, a unique new retail offering and the recognition of Fraport as one of the world’s most sustainable companies. And we could have run so many more stories because Frankfurt Airport continues to innovate and impress in terms of its facilities and customer offerings, and in March this year, Fraport enters the next phase of its global development with the start of the concession to run 14 regional airports in Greece. So, where do we possibly start? Well, the first thing to probably say is that, for the most part, the global news being generated by Fraport is hugely positive, and that speaks volumes about how Frankfurt Airport and the international assets of Fraport are faring under the leadership of Dr Stefan Schulte.

Highs and lows Schulte joined Fraport as CFO in 2003 and since succeeding the retiring Wilhelm Bender as chairman in September 2009 has led Frankfurt Airport through significant infrastructure enhancements while simultaneously expanding Fraport’s business activities outside of Germany. The Frankfurt Airport (FRA) upgrade has included the opening of Pier A-Plus, the inauguration of a fourth runway, the redesign of the Terminal 1 forecourt and other developments aimed at enhancing the customer experience. When asked about the highs and lows of his seven-and-a half years in the hot seat, Schulte says: “The highs would be the inauguration of the new runway in 2011, the recent ground-breaking ceremony for the new Terminal 3, the opening up of the airport to low-cost traffic and the expansion of our international business. “The lows would probably be the protests that took place after the opening of the new runway. Suddenly, we had a lot of people

16

AIRPORT WORLD/FEBRUARY-MARCH 2017

newly affected by aircraft noise, and knowing how to react to this and adopt the right strategy to address the issue made for a difficult half a year or so.” On the plus side the new runway has proved pivotal in allowing Frankfurt Airport to expand its long-haul route network over the last five years despite the enforced imposition of a night curfew between 11pm and 5am.

Traffic trends Schulte says “geo-political factors” caused a slight dip in traffic numbers at Frankfurt Airport last year, although the 60.79 million passengers (-0.4%) was enough to maintain its status as Europe’s fourth busiest gateway just ahead of Istanbul–Atatürk with 60.19 million. Aircraft movements were also down 1.1% in what Schulte refers to as a “difficult year” for the airport, although cargo volumes climbed 1.8% to 2.1 million tonnes in 2016. “Traffic development wasn’t easy, but we kept things more or less stable due to a good end to the year after a slowdown in the summer caused by geo-political factors across the world,” says Schulte.


AIRPORT REPORT: FRANKFURT

“We are, however, optimistic about the year ahead as the strong end to 2016 and our decision to attract more traffic from the low-cost segment, which will see Ryanair launching flights here at the end of March, makes us confident that 2017 will be better in terms of passenger growth.”

Growing the hub Discussing the reasons behind the move to welcome Low-Cost Carriers (LCCs) to FRA, Schulte notes that budget carriers are experiencing tremendous growth in the point-to-point market across Europe and that the airport risked losing market share if it didn’t accommodate them. Compared to other European countries, LCCs currently have a smaller share of the German market, but this is changing, says Schulte, noting that the market is heating up and that Fraport cannot ignore this challenge and opportunity. Ryanair will be joined at FRA by Wizz Air on May 22 and Eurowings from 2018, although he insists that that the gateway remains very much an inter-continental hub for Lufthansa, the Star Alliance and other legacy carriers.

“Our focus will always be on developing Frankfurt as an intercontinental hub as this is our core business and our infrastructure has been created for this,” says Schulte. “LCCs have, however, changed the way people travel in Europe and continue to open up more destinations, so adapting to accommodate this segment makes sense as it will further boost our connectivity and drive traffic growth.” Ryanair and all the LCCs that follow them will operate from a dedicated new area that is being set aside for low-cost traffic. German national flag carrier, Lufthansa, remains the biggest airline in Frankfurt currently accounting for around 66% of the airport’s annual passenger traffic.

New Terminal 3 At the southern side of Frankfurt Airport, Fraport has started construction of the brand new Terminal 3, the first phase of which will cost about €3 billion and include a 90,000sqm complex comprising a central building and two piers boasting a total of 24 gates.

AIRPORT WORLD/FEBRUARY-MARCH 2017

17


AIRPORT REPORT: FRANKFURT

The new terminal will cover a total floor space of around 306,000sqm and initially be equipped to handle 14 million passengers per year when it opens in 2023. “We need Terminal 3 to be able to accommodate future demand as we already have a shortage of contact gates and are expected to reach our current capacity of 68 million passengers within a few years,” comments Schulte.

Customer service Having long since realised the importance of good customer service, it should come as no surprise to learn that Fraport’s efforts have been noticed by others, and in 2016 it was named as one of Germany’s customer service champions in the annual ‘Top Service Deutschland’ list compiled by German business magazine Handelsblatt, the University of Mannheim and ServiceRating. Frankfurt Airport has certainly cranked up its customer service initiatives in the last few years in a bid to make sure that visitors enjoy their airport experience. New passenger friendly additions include the opening of yoga rooms, installation of ‘silent chairs’ where people can rest and unwind, and trials of a free entertainment system that allows passengers to watch the latest movies, TV shows and music releases on their mobile devices. FRA was one of the first airports to offer free Wi-Fi and continues to lead with a host of innovative digital initiatives such as the home delivery of duty free goods and pre-booking of car parking, retail and F&B offerings online. “Putting our passengers and airline customers first is at the heart of our business, and a leadership focus area, as new infrastructure is just a commodity to get something done,” states Schulte. He notes that it is important to always look forward and constantly innovate in terms of passenger services as the needs of travellers will inevitably change over time. “Today’s travellers want less personal interaction with staff at airports than in the past, which is one of the reasons why we introduced our digital platforms,” he says.

18

AIRPORT WORLD/FEBRUARY-MARCH 2017

Fraport’s global airport portfolio In addition to its Frankfurt Airport home base, Fraport has a stake in a number of international assets in Europe, Latin America and Asia-Pacific that will soon be joined by 14 regional Greek airports (see page 19). Last year marked the 10th anniversary of its Bulgarian concession, during which time Schulte notes that it has tripled traffic at the Black Sea gateways of Burgas and Varna to 4.5mppa and invested more than €180 million on enhancing their facilities. And he is equally quick to point out that Fraport’s efforts in Peru – where it has a controlling 70.01% stake in Lima Airport Partners (LAP) – have led passenger numbers at Jorge Chavez International Airport to grow by an average of 10.6% per annum since the concession began 16 years ago. Putting that in perspective, he reveals that 19 million passengers passed through Peru’s gateway to the world in 2016 compared to just 4.5 million in 2001. Indeed, such has been the growth that the airport needs to further expand and Fraport is currently talking to the Peruvian government about the possibility of extending its 30-year concession by 10 years to 2041. He also reveals that Fraport continues to look for opportunities to expand its global business either through direct equity investments or winning management and consulting contracts. “We keep a close eye on the market and are always looking for assets and business opportunities where we can manage and develop complex airport infrastructure or alternatively provide a number of airport related services,” says Schulte. “Our international business strategy can best be summed up by the desire to make money, bring in our special know-how to increase an airport’s operational performance and also make the Fraport Group a little less dependent on Frankfurt Airport.” He says that the business plan is very much focused on asset development, so points out that a very efficient, well run airport making maximum use of its infrastructure and facilities is unlikely to be on Fraport’s radar.


AIRfORIS COUNCll INTERNATIONAL

II

-

·----·--

- :- -

iEXCIEl:DATASE['. 1, I AVAILABLE FOR PURCHASE -

.

Ge.ographic Airport size

Economic g:roupmg

(i.e., <1 million passengers to >40 million passengers}

te .g., advanced economies, emerg.ing and developing economies; BAICS, etc.)

Ownership

Regulatory· model

(Le., public, p ivate, µubJic-private partnership}

Globa 1 I indicators for over 800 .airpo ts, representing 73% of the world's passenger traffic �,ww.aci.aero/Publications/New-Releases or+ 1 514-373-1243


AIRPORT REPORT: FRANKFURT

Fraport also 100% owns AIRMALL, which operates the shopping malls at Baltimore/Washington, Boston Logan, Cleveland and Pittsburgh airports in the US (See page 30). In fact, so successful has its overseas investment strategy been that Schulte reveals that 40% of Fraport’s profits in 2015 came from its international assets. He also believes that having a big airport portfolio allows for certain synergies, such a sharing best practice solutions for retail and other services, and makes it easier to overcome any downturns in the business. “I believe it helps to have a bigger portfolio because it is difficult to foresee what the future might hold in 10 to 20 years,” explains Schulte. “No matter how much planning and due diligence is involved, sometimes there are surprises in store, and having a diverse portfolio of airports in different markets and regions gives you the opportunity to better balance the positives and negatives over time.”

Greece’s regional airports The latest chapter in its international adventures is scheduled to begin in Greece in March when subsidiary, Fraport Greece, assumes responsibility for operating, maintaining and developing 14 Greek regional airports for the next 40 years. The concession, which has been several years in the making, is for Aktio (PVK), Kavala (KVA) and Thessaloniki (SKG) airports on the mainland and the island gateways of Corfu/Kerkyra (CFU), Crete/Chania (CHQ), Kefalonia (EFL), Kos (KGS), Mitilini (MJT), Mykonos (JMK), Rhodes (RHO), Samos (KGS), Santorini (JTR), Skiathos (JSI) and Zakynthos (ZTH). Fraport Greece – a joint venture between Fraport AG and Greek partner, the Copelouzos Group – will pay an upfront fee of €1.2 billion to the Greek government for the concession plus a fixed annual payment, starting at €22.9 million, throughout the duration of the contract. All 14 airports, which handled 25.3 million passengers (+9%) between them in 2016, remain 100% owned by the Greek government. Talking about the attraction of Greece’s regional airports, Schulte says: “Greece has global appeal as it is a wonderful country with

Embracing the digital marketplace To meet the challenges it faces in travel retail, Frankfurt Airport, Germany’s biggest shopping mall, has been transforming itself into an omnichannel marketplace where visitors can buy goods and services online. Its decision to embrace a number of new digital initiatives means that any of the airport’s 160,000 daily passengers can use any device to have pre-ordered shopping brought to their gate, book a table at a restaurant, reserve parking in advance or arrange to have duty free items waiting at airport pick-up points or groceries delivered to their home. The digital transformation is powered by the Omnichannel Multi-Merchant Marketplace (OM³) platform developed by AOE to create a new line of business for Fraport to boost retail revenues and the passenger experience. OM³ is an Enterprise Open Source-based integrated commerce suite that enables airports to digitally provide the physical product range from all retailers as well as their entire service offering such as on-premise (lounge, gate, etc) delivery within one hour; “full earn and burn loyalty integration” across all services; and full integration of ancillary revenue (parking, VIP services, fast track, for instance). The solution helps to maximise non-aviation revenue and creates a powerful single-customer view with numerous personalised marketing features. “OM³ enables any global travel hub to provide a truly connected and integrated passenger experience, never possible before. The solution combines data from more than 30 systems and is scalable to millions of products, orders, retailers and customers,” enthuses AOE’s CEO, Kian Gould.

AIRPORT WORLD/FEBRUARY-MARCH 2017

21


AIRPORT REPORT: FRANKFURT

It is our responsibility to help our industry in terms of ensuring that we have the right framework conditions in place to support its competitiveness beautiful people, a beautiful lifestyle and a great tourism industry, which we believe we can help boost by improving the capabilities of its underdeveloped regional airports.” Schulte notes that Fraport Greece has created a brand new airport management organisation with the necessary IT, accounting and administrative systems and around 400 staff to ensure that the concession is a success. “We have actively engaged with the various stakeholders at the 14 airports spread throughout the Greek islands and mainland so we understand the local needs and issues,” he adds. “We have completed extensive technical site visits, studies and master planning; and implemented the necessary steps for an infrastructure modernisation programme at the airports.” From Fraport’s perspective, says Schulte, this means improving processes, procedures and, in some cases key infrastructure, to make them more efficient and user-friendly to actively encourage and support tourism development. Specifically this will involve investing more than €330 million on new terminal extensions and upgrades, which include revamping Thessaloniki Airport to allow it to open a remodelled commercial area, double the number of security lanes and add 50% more gates. And, as part of the anticipated upgrade at all the airports, Fraport has announced that it will equip the Greek gateways with SITA’s latest common-use terminal equipment (CUTE) technology to help them improve their operational efficiency. “We are confident that our management capabilities and investment in new systems, services and aviation infrastructure can encourage tremendous tourism growth. It really is a win-win situation for everyone,” he says.

22

AIRPORT WORLD/FEBRUARY-MARCH 2017

Balancing act Schulte is quick to praise his “willing and capable” management team for the job they do in making it possible for him to juggle the roles of overseeing the growth and development of Frankfurt Airport with managing a global group of airports. He says: “They make it possible for me to do my job as a strategist and also act as the figurehead of the company in looking for new business opportunities and representing it on the international stage.” By his own admission the job involves frequent travelling and he expects to do more than ever in 2017 following his decision to accept an invitation to become president of the BDL, an association representing the interests of Germany’s airports, airlines and service providers. “I go to Berlin and Brussels quite a lot now,” says Schulte, who, of course, also sits on ACI World’s World Governing Board as well as acting as head of its Audit Committee. “As the largest airport in the country and one of the biggest participants in the German aviation market it is our responsibility to help our industry in terms of ensuring that we have the right framework conditions in place to support its competitiveness. “It is not fair, for example, that German airports have to pay 100% of the security costs imposed by the government when in other countries it is just 20% or 30%.” He cites the recent success of reducing the bill for “non-typical” air navigation costs to German airports by €200 million as an example of what the BDL can accomplish. With results like this Fraport, BDL and ACI World are lucky to have Stefan Schulte on their side!

AW


SPECIAL REPORT: INVESTING IN AIRPORTS

Interesting times ACI World’s director of economics, Stefano Baronci, considers how today’s volatile geo-political landscape creates challenges and sometimes new opportunities for airports and investors.

A

CI forecasts a healthy year for airports in terms of passenger and traffic growth, yet it is cognisant that global economic growth remains in a fragile state, and as advanced economies slowly get back on course, the slowdown in key emerging markets is muting overall growth in global output. As a result we continue to expect an inexorable rise in demand for air service due to global demographic factors, while remaining mindful of worrying influences that could bring short to medium-term slowdowns. These include everything from terrorism attacks on aviation-related targets and the always-present threat of higher energy prices to signs of the growing popularity of protectionism in some Western countries that could hinder the trend of Open Skies and air service liberalisation. The latter risk recently motivated the heads of Hawaiian Airlines, New York-based JetBlue Airways and cargo carriers Atlas Air and FedEx to urge US Secretary of Transportation, Elaine Chao, and Secretary of State, Rex Tillerson, to reject appeals by American Airlines, Delta Air Lines and United Airlines to freeze Open Skies pacts with the United Arab Emirates and Qatar. Their call to Chao and Tillerson was made in a joint letter of protest penned under the banner of a group called US Airlines for Open Skies (USAOS). Meanwhile, the uncertainty of the scope of ‘Brexit’ could produce an array of negative consequences for the sector. In addition to a potentially weakened economic performance and a weaker GDP affecting trade and passenger traffic, it is not yet clear, for example, whether the UK will continue to benefit from current EU negotiated Open Skies agreements. The outcome, I suspect, will depend on whether the UK government implements a ‘hard’ or ‘soft’ Brexit. With a ‘hard’ Brexit, the UK might be in a legal position to formulate an aviation policy, independent from the EU aviation rules (at least within the UK), but could lose flying rights and other associated benefits of being an EU member State. Under ‘soft’ Brexit, this dynamic would be reversed. Similarly, EU or other non-UK airlines that operate in Great Britain might need to consider whether their air traffic rights will be retained following Brexit. Other EU legislation affecting aviation, such as the EU Emissions Trading Scheme; competition rules; and EASA safety regulation, could also be affected. Brexit will be just one of the hot topics covered at the 9th annual ACI Airport Economics & Finance Conference and Exhibition in London on March 20–22, 2017. Indeed, panellists from HSBC, Edinburgh Airport, ETRC and ICF will examine some of the many question marks thrown up by

the prospect of Brexit, such as traffic rights, regulatory consistency, airline ownership and tax-free shopping. Some of the challenges that the airport industry faces in the short and long-term will remain a constant, of course, no matter what the state of the market. At the regional level, for example, airports and airlines globally are facing capacity challenges, and nowhere is this more pronounced than in Europe and Asia. If unaddressed, the situation will ultimately impact on levels of competitiveness, economic efficiency and passenger throughput. Hong Kong, Beijing, Manila, Jakarta and Mumbai already face significant capacity constraints, while across Asia it is estimated that on average less than 70% of flights depart on time today. Airports need to optimise their existing infrastructure and this can only be achieved via the co-ordinated efforts of airports, airlines and States. Additionally efforts must be to improve today’s ATM systems. Gaining the permission to grow, obtaining financing and securing suitable land are often the major challenges that airports must address in order to accommodate growth in demand. As summarised by a new ACI survey on airport ownership, economic regulation and financial performance that will be launched at the upcoming conference in London, private investors are showing a willingness to accept these challenges and public owners have increasingly accepted a privatised approach to meeting their needs. But sustainable success requires a balanced contract framework and a regulatory system capable of incentivising that success. It is against this challenging background that we reconvene in London. While there is no one size fits all approach it is important that regulation evolves in step with the industry. Economic regulation must better reflect and anticipate market dynamics, particularly paying attention to the intensity and scope of competition. This may imply a move toward less economic regulation, where regulators intervene only when necessary for competition sake and even then, where intervention might be proportionate to the problems identified. Such a scenario might, in turn, incentivise airports and airlines to engage in more commercial interaction, allowing them to jointly tackle the challenges ahead. AW

AIRPORT WORLD/FEBRUARY-MARCH 2017

25


SPECIAL REPORT: INVESTING IN AIRPORTS

The buying game Modalis chief executive, Curtis Grad, takes stock of the airport deals of 2016 and considers what might be in store for the year ahead.

G

lobal airport privatisation or ‘the buying game’ as we’ve come to call it, saw a strong uptick in secondary and directly negotiated deals last year, as well as a healthy stream of publicly competed transactions. Latin America and the Caribbean led the way with more than 15 transactions inked or well underway by year-end. On the other hand, deals in North America, Europe, Asia and Africa flowed at a more casual pace, recording a total of only 20 transactions, or so, across the four continents. France and Greece completed their planned deals, as did the Port Authority of New York and New Jersey (PANYNJ) on the long-awaited LaGuardia-Gateway project (See page 47). The year also offered a few surprises, with Japan’s first concessions moving much more swiftly than expected and Iran wasting no time in striking a deal to funnel much-needed private capital into their cash-starved airport system, following years of crippling economic sanctions. The stunning London City Airport re-sale, at £2.2 billion and 30+ times EBIDTA bucked the trend, as the bulk of new transactions hovered in the low-to-mid teens. At the same time, new private equity, sovereign wealth and pension fund investors continued gravitating to the sector, finding it an increasingly attractive asset class.

with 39% (79 airports) fully privatised and 61% (126 airports) structured as PPPs through a wide-range of public and private ownership structures. And the trend will undoubtedly continue as European governments with mounting fiscal pressures turn to the private sector to finance essential airport infrastructure. Primary European transactions in 2016 included the award of Nice Côte d’Azur and Lyon-Saint Expury in France while Fraport sealed the deal for the concession of 14 Greek regionals (Read more on page 21). A host of secondary deals were also executed including Tirana (Albania), Valetta (Malta), and Maastricht Aachen in the Netherlands, as well as London City in the UK. It also appears that Ciudad Real, Spain’s infamous ghost airport, may have found its saviour with a private investor group picking it up through a court-ordered sale for pennies on the Euro. Looking to the year ahead, Bulgaria’s Sofia and Plovdiv airports are due to be refloated, while Belgrade, Serbia, and Lithuania’s three main airports of Vilnius, Kaunas and Palanga are being queued up for concession later in the year. The new Kastelli greenfield project on the Greek island of Crete is also poised to advance, with the GEK-Terna/GMR consortium well-positioned as sole bidder on the project.

Africa Europe ACI’ Europe’s spring 2016 report The Ownership of Europe’s Airports highlighted the region’s dramatic evolution over the past six years, with private sector participation nearly doubling since 2010. ACI’s research also revealed that 41% of European airport operators (205 airports) have some form of private shareholding, up 19% from 2010,

26

AIRPORT WORLD/FEBRUARY-MARCH 2017

A relative latecomer to the scene, Africa has been showing an increased interest in airport privatisation as countries throughout the continent desperately seek airport infrastructure funding solutions to meet growing passenger and air cargo traffic demand. However, despite this piqued interest, deals are still rare throughout Africa and, over the past year, Kigali, Rwanda, was the only notable transaction.


SPECIAL REPORT: INVESTING IN AIRPORTS Portuguese construction firm, Mota Engil Engenharia e Construcao, was selected to finance, build and operate a new international airport just outside of Kigali. The first phase of works is scheduled to start mid-year. Other potential African PPP projects include an airport city development in Accra, Ghana, as well as airport PPPs in Nacala (Mozambique) and Dar es Salaam (Tanzania). Nigeria is also considering the concession of its four busiest airports; Abuja, Lagos, Port Harcourt and Kano, however, the move is provoking strong labour and political opposition.

Latin America & the Caribbean As mentioned earlier, Latin America was a hotspot for secondary, off-market transactions over the past year, with Brazil once again topping the list. Adding more fuel to the ‘lava jato’ firestorm, many prominent investors in the existing Brazilian airport concessions have been swept up in the scandal. As a result, the year saw a hasty off-loading of shares in several Brazilian airport concession companies. Latam and Caribbean secondary trading activity included Bogota (Colombia) and São Paulo-Guarulhos, Brasilia, Viracopos and Natal in Brazil as well as Quito (Ecuador) and Puerto Rico. Aeropuertos Dominicanos Siglo XXI (Aerodom), the operator of six airports in the Dominican Republic, including Santo Domingo and Puerto Plata, also traded hands with VINCI Airports acquiring Advent’s 100% stake in the first quarter of 2016. The region was also host to several directly negotiated deals during the year, including Bermuda’s LF Wade airport via an innovative governmentgovernment project delivery model with the Canadian Commercial Corporation (a government crown corporation) and contractor Aecon-Canada. Other notable tie-ups in the region included Groupe ADP’s Havana (Cuba) project and Munich’s 30-year concession for Tegucigalpa in Honduras. What else is on the horizon for 2017? First up is Brazil, which late last year finally launched the bidding process for its third round of concessions in the shape of Florianopolis, Fortaleza, Porto Alegre and Salvador. There has also been talk of a fourth round by the end of the year for Congonhas, Santos Dumont, Manaus and Curitiba, although this has yet to be officially confirmed. Elsewhere, Paraguay’s Asunción Silvio Pettirossi International Airport is poised to transact early in the year following close of the bidding process late in 2016. The Agunsa-Sacyr consortium has emerged as the top bidder, though the government has yet to ratify any deal. In the Caribbean, the newly elected Jamaican government is putting Kingston’s Norman Manley International Airport back on the market, only this time under more favourable terms for potential investors following a failed attempt by the previous government to concession the airport. Faced with an equally disappointing outcome last time out, St Lucia is also expected to launch a new bidding process for Hewanorra International Airport later this year. Back in 2014 it proposed a Public-Private Partnership (PPP) transaction for the gateway and, in return for a 30-year concession, required investors to inject $118 million on a new terminal and other key infrastructure and a further $90 million on the maintenance and repair of its existing facilities.

Canada and the United States The United States and Canada haven’t historically been hotbeds of airport privatisation, however, there appears to be a growing appetite for private sector participation in the airport sector on both sides of the 49th parallel.

The LaGuardia (LGA) Terminal B deal with the Skanska-Vantage consortium, worth roughly $4 billion, was largely responsible for rekindling enthusiasm in US airport privatisation. Denver followed suit with a PPP project to expand the Jeppesen ‘Great Hall’ terminal. The Ferrovial-led consortium is in the driving seat as preferred bidder, with parties working to thrash out the final deal within the first quarter of 2017. Westchester, New York, also got in on the act, late last year structuring a directly negotiated deal with Oaktree Capital under the FAA’s Airport Privatization Pilot Program (APPP). However, in an unexpected twist and bowing to local political pressure, Westchester County elected to put the opportunity out to market for competitive offers, which is anticipated mid to late 2017. Oaktree was also active on the sell side, seeking a buyer for its 50% stake in Aerostar Airport Holdings, Puerto Rico’s Luis Muñoz Marín International Airport concession company. Structured under the APPP framework, the Puerto Rico project is one of the very few bright spots in an otherwise dismal 20-year programme history. Other US deals in the works or under development include a new private regional passenger terminal at Seattle’s Paine Field and private air cargo facilities in Baja, California. Oakland is also considering PPP options for expansion of its international terminal facilities and PANYNJ is looking to repeat its success at LGA with a $2.3 billion revitalisation for Newark’s Terminal A with private sector participation. Meanwhile, Canada’s new federal government has decided to revisit the country’s novel not-for-profit airport model. Former Canadian Minister of International Trade and Vancouver Airport Authority’s first CEO, David Emerson, was asked to spearhead a government sponsored national transportation review and its findings included recommending the privatisation of Canada’s busiest airports – Toronto Pearson, Vancouver, Montréal-Trudeau, Calgary and Edmonton. Credit Suisse has since been engaged by the government to assess options, which range from the outright sale of lands and assets to monetising rent revenue currently payable to the federal government. The move is being met with stiff resistance from the non-for-profit corporations that currently operate the airports under long-term lease.

Middle East Undoubtedly the region’s most intriguing transaction was VINCI Airport’s Memorandum of Understanding (MoU) with Iran to help it rehabilitate, expand and operate Mashhad and Isfahan airports. The agreement, made possible by the Iran nuclear deal and rapid thaw in international relations that followed, could open Iran up to even larger airports transactions going forward. Still reeling from depressed oil prices, many states across the Middle East have decided to take a fresh look at various PPP models to advance their global mega-hub ambitions in the face of shrinking petrol revenues. Undeterred by recent false starts, in 2016 the Saudi government announced plans for a comprehensive multi-modal PPP programme that includes the privatisation of all 27 Saudi airports by 2020, starting with Riyadh, Jeddah, Dammam and Ta’if. Surprising many, Dubai is also considering private investment for certain parts of Dubai World Central–Al Maktoum International Airport, although, details on exactly what they have in mind are still sketchy. Encouraged by the success of the Queen Alia airport expansion project, Jordan is also thought to be eyeing similar PPP schemes for Aqaba-King Hussein, Marka (Amman) and a proposed greenfield airport.

AIRPORT WORLD/FEBRUARY-MARCH 2017

27


SPECIAL REPORT: INVESTING IN AIRPORTS

India and South East Asia Doing business in India is a daunting prospect for many international investors, but for those with fortitude and patience, the risks may be well worth the rewards as an ever expanding middle class and growing discretional incomes have had a profound impact on domestic and international air travel over the past decade. And according to IATA there’s much more to come, with India projected to exceed 367 million passengers per annum by 2034, a staggering 266 million above current traffic levels. South East Asia, especially Indonesia and the Philippines, are also seeing a dramatic rise in the propensity to travel. The latest Boeing and Airbus forecasts on expected worldwide aircraft deliveries over the next decade point at truly impressive traffic growth in the region – assuming, of course, that development of additional airport capacity can keep pace. So private sector investors are eagerly queuing up, right? Well, not exactly, as until governments implement the essential regulatory frameworks to foster private infrastructure investment, progress will continue to be slow and piecemeal at best. The Philippines and its PPP Center, along with India’s recent regulatory reform, are encouraging steps in the right direction. But there is much more work to be done in the region to create the investment climate needed to attract the large-scale private infrastructure capital required to quench mounting consumer demand. Other signs of progress in South East Asia include Myanmar’s new Hanthawaddy greenfield project, which is forging ahead. Other noteworthy transactions over the past year or so include GVK’s pending sale of shares in Bangalore to Fairfax Financial, although this is not a done deal yet thanks of a tangle in bureaucratic red tape. However, the long-awaited Mopa-Goa greenfield project has finally been awarded, with GMR emerging the victor. Elsewhere, The equally ‘suspenseful’ Navi-Mumbai project was on track for award in early 2017, but the recent withdrawal of several bidders has put a wrench in local government plans. It also remains to be seen what will come of the abandoned Chennai, Kolkata, Ahmedabad and Jaipur concession processes, although word has it that a few of these projects may proceed, along with Nagpur and Andhra Pradesh, in the not-too-distant future. Indonesia is also contemplating private sector involvement in Yogyakarta, Sepinggan and Kualanamu. Likewise, Thailand is

28

AIRPORT WORLD/FEBRUARY-MARCH 2017

considering private investors for Krabi, Udon, Thani, Ubon and Ratchathan airports as is Vietnam for Ho Chi Minh and An Giang and Nepal for Nijgadh. The Philippines has been far and away the most active to date in terms of publicly disclosed, or at least publicly considered, airport privatisation projects. These have included a retendering and unbundling of Iloilo, Laguindingan, Davao, Bacolod-Silay and New Bohol (Panglao) as well as potential PPP projects for Manila and Clark airports.

Japan and China The swift and successful privatisation of Osaka’s airports (Kansai and Itami) and Sendai in Miyagi Prefecture – both deals were ratified in early 2016 after being approved in late 2015 – caught many in the industry flat footed, as most assumed it would be a characteristically slow and cautious approach by the Japanese government. As it turned out, and perhaps as we should have expected, the government did its homework in advance and stepped into the process well prepared to ensure a quick conclusion. The new Osaka concessionaire, Kansai Airports, is spearheaded by ORIX Corporation and VINCI Airports while a Tokyu Corporation-led consortium won Sendai. With these two transactions under its belt, Japan is now turning its attention to Fukuoka, Takamatsu and Hokkaido-Chitose airports as well as gateways in the cities of Wakkanai, Kushiro, Hakodate and Kobe. Finally, China offered up its own surprise with a statement in the latter half of the year that it was mulling over the idea of opening its airports up to private investment and operation.

Wrap-up So that’s what the Buying Game looked like in 2016. Not a banner year for primary transactions by any stretch, but plenty of secondary trading activity thanks to an ever-growing supply of existing private airport ventures. The sector has come a long way since its infancy in the 1990s and there can be no mistaking the fact that it has matured into own distinct asset class, and an increasingly sought after one, drawing interest from a broader spectrum of investors than ever before. It promises to be another exciting and unpredictable year ahead… happy hunting!

AW


SPECIAL REPORT: INVESTING IN AIRPORTS

Shopping, anyone? Joe Bates reports on the rise of the airport shopping mall and talks to Westfield and AIRMALL about the appeal of aviation and their future development plans.

S

uch is the popularity of shopping and dining at airports that gateways such as London Heathrow and Amsterdam Schiphol have been referred to as ‘shopping malls with runways” for over a quarter of a century. Dubai International Airport has long been known for its duty free offerings and, in recent years, airports across the globe have become increasingly innovative in terms of their retail and F&B offerings in a bid to boost their passenger appeal and revenues. One of these, Frankfurt, lays claim to operating the biggest shopping mall in Germany while Minneapolis-St Paul International Airport (MSP) has a direct light rail link to the Mall of America, which continues to be a huge attraction for visitors. MSP incidentally has its own highly successful concessions offering, which regularly wins ACI-NA’s award for the best concessions programme in North America and brings in revenues of around $175 million per annum. In some cases airports have actually turned to shopping mall operators like Westfield to manage and operate their concessions programmes. Indeed, Westfield has retail/F&B concessions at Boston Logan (Terminals A and C), Chicago O’Hare (Terminal 5), Los Angeles International Airport (Terminals 1,2,3,6 and Tom Bradley International Terminal), Miami, Orlando (Main terminal), New York JFK (Terminal 8) and Newark Liberty (Terminals A and B) airports in the US and is currently investing hundreds of millions of dollars on revamping its offerings at LAX. At the last count all of this added up to more than 480 retailers encompassing 450,000 square feet of retail and F&B services that generates around $750 million in annual sales.

30

AIRPORT WORLD/FEBRUARY-MARCH 2017

Meanwhile, Fraport-owned retail specialist AIRMALL operates the concessions offerings at four US airports – Baltimore/Washington, Boston Logan (Terminals B and E), Cleveland and Pittsburgh. It also signed a contract with JetBlue last summer to manage the concessions programme in Terminal 5 at New York’s JFK International Airport. So what is the appeal of airports to Westfield and AIRMALL? “Westfield has been in the airport business for more than two decades, and it’s exciting to see the transformation that’s taking place,” says Dominic Lowe, executive vice president of Westfield Airports. “According to recent data, US airports have over $100 billion in infrastructure needs over the next decade, so there’s an opportunity right now to completely transform the travel experience. “We’re working with great partners across the country who share a vision to enhance the experience and provide a more holistic journey. A great experience means greater customer satisfaction, improved competition and higher revenue for our partners.” While AIRMALL’s new president and CEO, Ben Zandi, says: “Airports have tremendous appeal to AIRMALL. It’s all we do! “As a division of Fraport, one of the largest airport operators worldwide, we understand passenger and airline needs and are committed to continuously improving the customer experience at airports. “Airports are the first and last vision of the region. We take great pride in delivering an authentic ‘sense of place’ through our innovative offerings that deliver on our promise to travellers and our airport partners. “We are incredibly excited for the future of air travel and the innovations that are transforming the industry.”


SPECIAL REPORT: INVESTING IN AIRPORTS

For its part AIRMALL continues to add new concepts to its airport concessions programmes and recently appointed Zandi with the remit to grow the business and enhance the customer experience. Zandi feels that he has been given a unique opportunity to help create better airports and better communities in terms of AIRMALL’s relationship with local business partners. “I am passionately committed to positioning the Airmall brand for the 21st Century as best in class by creating breakthrough services, products and experiences to serve the shifting customer base. It’s an exciting time,” he enthuses. Some of the new concepts and innovations introduced by AIRMALL across its airport portfolio in the last few months have included Steak ‘n Shake by Biglari, Popsations Gourmet Popcorn, a ROAM fitness gym and Be Relax Spa at Baltimore/Washington International Thurgood Marshall Airport (BWI) and the unveiling of a second Martini bar/restaurant at Pittsburgh International Airport. Something a little different is its Random Acts of Kindness Week, the latest of which was held in February this year, where it encourages restaurant/shop staff to surprise customers with special treats and kindness tips to “bring a smile to their faces”. How important is sense of place and the “wow” factor in terms of appealing to airports/passengers? “The days of cookie-cutter airport design and cramped spaces are over,” says Westfield’s Lowe. “Every airport is its own adventure, and travellers want to see and explore something new every time they head to the airport. “We strive to create distinct physical districts with commercial and experiential hubs that encourage exploration and connect travellers to the city. For example, we’re working with Los Angeles World Airports to bring LA into LAX. “As a result, the new Terminal 6, which was unveiled in October, mirrors the journey along Sunset Boulevard. That sense of place helps connect travellers to Los Angeles and brings the airport to life.” As we reported last year, Westfield is investing millions of dollars on upgrading its retail/F&B offering across Los Angeles International

Airport, Terminal 6 being the latest passenger complex to open modernised and enhanced shopping and dining facilities. More than 22,000 square feet has been transformed in Terminal 6, delivering what operator Los Angeles World Airports (LAWA) believes is a unique traveller journey. The redevelopment includes the new retail and dining collection and nearly 5,300 square feet of improvements to common areas, including the new terrazzo floor and ribbon ceiling, three sets of bathrooms, new electrical and IT infrastructure as well as tenant office spaces. “We’re raising the bar for what’s possible at an airport,” enthuses Deborah Flint, LAWA’s chief executive officer. “LAWA and Westfield are providing passengers with a special experience that allows them to sample the best of LA, food and drink, unique shops and modern amenities. Now they can find all that and more in Terminal 6.” Talking about the importance of sense of place and the wow factor, AIRMALL’s Zandi says: “The resurgence of air travel over the last few years has seen a marked increase in passenger spending and demand. “Passengers expect more from their airports, ranging from the latest technology and elevated dining options to a greater sense of place. “AIRMALL strives to enhance the travel experience through our ‘best in class’ retail and dining options and ‘high touch’ services that add to the ‘wow’ factor for passengers. “We will continue to advance breakthrough opportunities to meet the demands of travellers in the 21st century.” What’s next for Westfield in terms of developing its existing airport concessions or expanding its US portfolio? “We are always looking for long-term partners who share our vision to transform the travel experience,” admits Lowe. “The retail and dining programme has a role in that transformation just as design, customer service, technology and so many other parts of the overall experience do. “Together with our partners, we can help create the best experience and raise customer satisfaction with a holistic approach that addresses AW every part of the journey.”

AIRPORT WORLD/FEBRUARY-MARCH 2017

31


SPECIAL REPORT: INVESTING IN AIRPORTS

Vision of the future What next for airport terminals? Joe Bates reviews a handful of ongoing expansion projects and talks to some of the industry’s most influential architects about possible design changes in the future.

W

hat will new airport terminals look like in 20 years? Will they be some of the biggest buildings on the planet or are we going the other way and the next generation of passenger facilities will be smaller, more compact and accessible? Nobody really knows, of course, and what individual airports end up building will ultimately depend on demand, the type of traffic handled, the amount of land available to develop, planning permission and, of course, budget. However, one thing that we can take for granted is that technology will continue to evolve and arguably the adoption of new IT systems over the next few decades will change the face of airport terminals forever as many of the facilities we take for granted at airports today may no longer be necessary by 2030 or earlier. Perhaps the most obvious one is the traditional airport Departures Hall. Will they still be necessary in their current format in a decade’s time let alone in 20 or 30 years? The relatively new ability to check-in and print bag tags at home, of course, means that things are already beginning to change and traditional check-in desks are slowly starting to disappear. Singapore Changi’s planned new Terminal 4, for example, is essentially being designed to be a 100% self-service facility, while easyJet recently completed the installation of the world’s biggest bag-drop area at London’s Gatwick Airport. The new technology at Gatwick allows passengers who have checked in online to take their bags straight to a machine upon arrival, where they can print their eezeetags supplied luggage labels, apply it to their bag and load it straight onto Gatwick’s newly modernised baggage sorting system. “The new self-service kiosks provide a glimpse into the future of airport design and enable our customers flying from London Gatwick to have unique use of the most innovative state of the art facilities,” enthuses easyJet’s head of Gatwick, Chris Hope. The creation of a self-service terminal in Singapore just shows how quickly things can change in the aviation industry as only five years ago operator, Changi Airport Group (CAG), removed 24 self-service kiosks from its terminals as it believed that they weren’t getting enough use.

32

AIRPORT WORLD/FEBRUARY-MARCH 2017

So what has caused the change of heart in moving more towards 100% self-service technology and does this mean that today’s travellers don’t want to speak to people anymore? CAG’s executive vice president for airport management, Tan Lye Teck, says: “The adoption of self-service options is in line with the wider global push towards such initiatives to improve productivity and efficiency at the same time as providing passengers with more choices, greater flexibility and increased convenience. “Introducing self-service options doesn’t mean we are abandoning the human touch. Far from it, in fact, because the technology frees up even more time for staff to continue to deliver a first-class Changi Experience by being there to assist passengers who may need help, with a warm and friendly human touch.” Costing around S$1.3 billion, Changi’s new 195,000sqm Terminal 4 will raise Changi’s passenger handling capacity by around 25% from the current 66mppa to an impressive 85 million passengers per annum when it opens in late 2017. In response to how big a role IT will play in shaping the design and operation of the airport terminals of tomorrow, Unisys’ vice president and global head of travel and transportation, Dheeraj Kohli, says: “We see it playing a pivotal role, particularly in the ever-increasing application of mobility, beacons, biometrics and other technologies for seamless passenger flow, freeing-up precious floor space and optimising operations and security. “New airport designs will be radically different to the US airports of the 1960s as they will be green, convey a sense of space and offer calm and tranquility. “This will involve unobtrusive security, spacious reception lobbies, a variety of shops, retail offerings and quality dining. The


SPECIAL REPORT: INVESTING IN AIRPORTS

The most successful terminals in the future will be hyperspaces designed to create a unique sense of place for each location

building itself will be terrorist and cyber secure and, above all, fully support the mobile passenger experience with seamless Wi-Fi and wayfinding.” He goes on: “We expect them to be more passenger-friendly. Today’s airport is gate-centric: passengers go straight to their gate for fear of missing a flight and, once there, they are lucky to find a power outlet, let alone food and entertainment. “Disney learned long ago about the value of providing entertainment for customers waiting for a ride, so too will the next generation of passenger-centric airports. “As a result, airports will be even more focused on the passenger experience and ensuring a constant flow of information to them throughout their journey through the terminal. Mobile devices will become not only the tool that keeps you up to date, but it will also allow you to find your way around the airport.”

Grand designs So what do some of the world’s leading airport architects think the future holds for airports in terms of terminal design? Curtis Fentress, principal-in-charge of design at Fentress Architects which has designed some of the world’s most iconic terminals, says: “The most successful terminals in the future will be hyperspaces designed to create a unique sense of place for each location. “Total flexibility will be key as there will be continuous changes in technology and airline operations. Airport terminals of the future must be designed in a way that the passenger process is functional, safe, memorable, and uplifting to the human spirit.”

Stantec’s executive vice president, Stanis Smith, believes that airports of the future will contain very different facilities than they do today with more airside space needed for facilitating and entertaining passengers and less landside for processing travellers. “Technology is enabling the processing functions within an airport terminal to be completed more efficiently using less space. This is arguably the single biggest paradigm shift in airport design to have happened in decades and means that the era of the grand check-in hall is over,” he says. He adds that technology will also decrease the space needs for customs and immigration processes, as automated passport readers become commonplace. However, he doesn’t necessarily think that terminals will become smaller, instead believing that airside areas will become bigger as gateways concentrate on enhancing the “airport experience” post security. “Over the past few years many airlines have increased the number of seats on their aircraft, and have increased their load factors. Low-cost carriers in particular have reduced on-board services. All of this has put pressure on terminals to provide more space for passengers who are waiting for their flights, and has increased the need for airports to provide better and more comprehensive service offerings, particularly food, beverage and retail,” adds Smith. “The terminal of the future will therefore celebrate the ‘passenger experience’ functions first, and while it will also provide appropriate accommodation for the passenger processing functions, those will be treated as transient spaces rather than ceremonial ones.” He points to the recent relocation of the entire pre-security retail/food and beverage programme in Toronto Pearson’s Terminal 3 to post security as an example of what he believes is the shape of things to come. The introduction of virtual reality and gaming technologies are just two of the things Smith says Stantec are currently discussing with airports that want to create new airport experiences. Meanwhile independent consultant, Ben Lao of BenL Consulting International, suggests that the airports of tomorrow will have new-look Departure halls, double-deck concourses and greatly enlarged holdrooms.

AIRPORT WORLD/FEBRUARY-MARCH 2017

33


SPECIAL REPORT: INVESTING IN AIRPORTS

At full build-out, Dubai World Central–Al Maktoum International Airport will be equipped to handle over 240 million passengers yearly.

He also believes that many space intensive procedures and processes such as baggage handling might be moved to separate buildings for security reasons and to free up huge areas for other activities. “Resizing the terminal lobby footprint for the outbound function and relocating the baggage sorting areas will reduce the overall passenger terminal building by as much as 20%, if not more,” states Lao. “Furthermore, scanning luggage away from the terminal will heighten the safety index of those who at one point or another occupy the building.” American Airlines agrees that times are changing and that the design of the airport of the future will have to be more flexible, sustainable and more experience-focused for passengers than ever before with greater attention paid to often overlooked airside facilities such as holdrooms which today, for the most part, it claims are bland and dull. The carrier’s managing director for government and airport affairs, Rhett Workman, is also adamant that they must be designed in collaboration with the world’s airlines to avoid creating facilities than are impractical, overly expensive and not sustainable. He says: “We just want facilities that are practical, functional, efficient and work for us from an employee and customer perspective – Taj Mahal type buildings with waterfalls aren’t the number one priority as they are expensive to build and maintain. “The design of the airport of the future also needs to be flexible so that facilities can easily be reconfigured to adapt to change, for as we all know, the aviation industry is not static and change is constant. For these reasons it is very important for us to have a seat at the table from Day One when new facilities are being planned, designed and constructed.”

34

AIRPORT WORLD/FEBRUARY-MARCH 2017

Shape of things to come? Arguably, the airport of the future is already being built today at Dubai World Central–Al Maktoum International Airport (DWC) as, according to operator Dubai Airports, it will be developed as 12 medium-size airports on one site rather than as one giant hub ultimately capable of accommodating 200 million passengers. Under its blueprint, DWC will comprise 12-nodes built across the airport’s vast 140 square kilometre site, each of which will be equipped to handle 20 million passenger per annum and act as identical, selfcontained, independent facilities, effectively creating 12 different airports. Dubai Airports CEO, Paul Griffiths, says that this format will make DWC one of the most “customer centric” airports on the planet where nobody has to walk more that 400-metres to their connecting flight. “In my view we are heading in the wrong direction by building ever bigger airports because bigger is not necessarily better,” says Griffiths. “It inevitably means longer walking distances, less intimate experiences and greater difficulties in customers making connections. And let’s face it, there’s hardly any statistic that’s more important at a connecting hub than the ability for passengers to conveniently and easily connect between flights. “We will be creating something that is manageable, navigable and easy to use at Dubai World Central and it is all being enabled by technology.” With a huge eight kilometre distance between the nearest and farthest hubs, Griffith says the onus will be on Dubai Airports and the airlines to ensure that inbound passengers enjoy swift and hassle free journeys through DWC by assessing operations on a daily basis and directing flights to the best connecting nodes for the bulk of its passengers. He adds that airports have to learn to treat every customer as an individual and every individual differently as nobody is the same and all travellers have different needs. AW


SPECIAL REPORT: INVESTING IN AIRPORTS

Cool runnings! A new study reveals that car parking, so important to the bottom line of most airports, is becoming increasingly innovative and dynamic, writes Ivo Favotto.

L

et’s be honest, airport car parking has never been considered on the cool side of airport management and probably never will be despite its obvious importance as a key revenue generator. Indeed, it is probably fair to say that it is viewed as less exotic than other sources of revenues such as airport advertising, duty free shopping and F&B outlets, and maybe for this reason car parking remains to this day a relatively understudied area of airport management. And yet, never has car parking been so interesting or crucial to the commercial success of an airport business. Not only is car parking an increasingly important source of revenue for most airports, it is also an area undergoing massive, technologically-driven upheaval in the form of online booking tools and advanced management technologies that are: – Driving revenue growth through the adoption of airline-like yield management practices improving efficient asset utilisation; – Allowing for greater product segmentation (some airports have up to 10 different car parking ‘products’ again improving both revenue and the customer experience; – Reducing the often highly politicised nature of car parking charges by increasing pricing opacity as airports move away from standard drive-up rates to prices driven by factors such as; season, day of the week and time of the day; – Creating new methods for airports to interact with their local communities through database and social media interaction with car park users; and – Providing tools for airports to compete more effectively with off-airport car parking providers, taxis and ground transport disrupters such as Uber and Lyft. For these reasons, a comprehensive new report, The Airport Car Parking Study (the ACP Study) has been released by The Mercurius Group – an international consultancy specialising in maximising commercial activities – and The Moodie Davitt Report.

About the ACP Study The ACP Study covers 336 airports in three mega regions (Europe, Asia-Pacific and the Americas) and 23 sub-regions across 70 countries and examined four main car park types: • Short Term term parking (typically for less than 24 hours and nearest to terminal buildings) – provided by 100% of airports in the study; • Long Term parking (typically for more than 24 hours and further away from terminal buildings) – provided by 95% of airports; • Premium parking (typically providing additional benefits including terminal proximity, fast-track access, wider space etc) – provided by 31% of airports; and • Valet parking (the most convenient of all parking types) – provided by 28% of airports. In addition to benchmarking the level of prices at each type of car parking, the ACP Study also examined the structure of prices. These included ‘free parking periods’, ‘daily rates’ and ‘additional services’ such as facilities available for passengers with reduced mobility, electric vehicle charging and even a service to dig out your snow covered car! Figure 1 - Number of airports with an online booking tool

Source: The Airport Car Parking Study, 2016.

Online booking tools Critically, the ACP Study devotes an entire chapter to the phenomenon of online booking tools. More than any other technology, online booking

AIRPORT WORLD/FEBRUARY-MARCH 2017

37


SPECIAL REPORT: INVESTING IN AIRPORTS Figure 2- Index of 24-hour Short Term Parking Prices by Sub-Region

Source: The Airport Car Parking Study, 2016.

tools are revolutionising airport car parking (that is until driverless cars come along!). In fact online booking tools were utilised by 43% of airports in the study. The take-up rate by region and by airport size is highlighted in Figure 1 on the previous page. The take-up rate of online booking tools is highest in Europe at 65%. Within Europe, one sub-region, Britain & Ireland, had a 100% utilisation rate, with other sub-regions such as the Nordics and the Iberian Peninsula not far behind with 93% and 90% respectively. In the Americas, the take-up rate for online booking tools was low, driven largely by US and Central and South American sub-regions. Canadian airports were the exception with a take-up rate of 88%. Asia-Pacific had the lowest take-up rate of all the regions at 20%, with some sub-regions having a zero take-up rate (Greater China, for example) and others, such as Australia and New Zealand, having a high take-up rate at 65%. The ACP Study also found that online booking tools are not solely the preserve of large airports. In fact, mid-sized airports had the highest take-up rates, with 55% of airports within the 5-10mppa band implementing online booking tools. The largest airports (30mppa+) and the smallest airports (0-2mppa) had the lowest and below average take-up rates. Neither are online booking tools just for show. Recently, Sydney Airport, reported that in 2016, more than 50% of its entire car parking revenue was generated through its online booking tool. Online booking tools offer many advantages for airports including greater customer service; better inventory and capacity management; better demand management during peaks; operational efficiencies; cash flow benefits; cancellation policy and over-booking benefits; up-selling and cross-selling opportunities; customer relationship management; and competition management. The uptake of online car park booking also suggests that it offers benefits for the consumer as well, including peace-of-mind, convenience and lower prices (under certain conditions). The ACP Study also included five case studies of online car parking prices up to six months in advance at Sydney, Auckland, Manchester, Zurich and Munich airports.

Short Term parking price benchmarks The headline indicator in any discussion on airport parking is the 24-hour Short Term parking rate. This is the most common measure

38

AIRPORT WORLD/FEBRUARY-MARCH 2017

Sub-regions The Americas: USA South, Central & South America, Canada, USA West, USA Mid-West, USA Northeast Asia-Pacific: India & Other Asia, Greater China, Japan & Korea, Australia & New Zealand, South East Asia, Middle East Europe: Turkey & The Balkans, Iberian Peninsula, Central Europe, Russia & The Baltics, France, Italy, Germany, Benelux, Nordics, Alpine and Britain & Ireland

by which consumers (and politicians) have historically measured the reasonableness of airport car parking prices. Indeed, Short Term parking prices also set the consumerâ&#x20AC;&#x2122;s value perception for the entire airport, particularly retail. It is such a touchy subject that in many countries, regulatory authorities and competition commissions carefully monitor car parking prices. Notwithstanding the opacity brought about by online booking tools and yield management practices, setting the 24-hour Short Term parking rate is a key consideration for airports. The Mercurius Groupâ&#x20AC;&#x2122;s 24 hour Car Parking Pricing Tool (CPPT) takes into consideration factors such as demand vs supply; downtown parking prices; average taxi/Uber prices; other ground transport prices; and off-airport competition to determine maximum 24 hour Short Term price levels. The level of Short Term parking prices by each of the 23 subregions in the ACP Study is shown in Figure 2 (above). The highest average Short Term parking prices were found in the Middle East (Index 189 relative to the average of all airports), Britain and Ireland (Index 178) and the Alpine region (Index 142). Worthy of note is that while the average prices are higher in the Middle East, the Britain and Ireland sub-region contained the airports with the highest (Index 322) and second highest (Index 315) prices in the study. The lowest average Short Term parking prices were found in India and Other Asia category (Index 37), Turkey and The Balkans (Index 57) and Greater China (Index 59). Although prices in The Americas were on average lower overall, there were six sub-regions with lower prices than the lowest sub-region in The Americas. Interestingly, airports in The Americas had both the lowest average prices and the lowest variability of prices by sub-region. Only 32 index points separate the highest and lowest sub-regions in The Americas, compared to 152 index points in Asia-Pacific and 121 index points in Europe.

About the author Ivo Favotto is managing director of The Mercurius Group. For any inquiries or to purchase the Airport Car Parking Study, contact him at Ifavotto@themercuriusgroup.com

AW


CARGO

Speaks volumes

Airport World takes a closer look at Dallas/Fort Worth International Airport’s plans to grow its cargo business in 2017.

C

argo, the often overlooked “gold in the hold” for many airlines and airports, is important to Dallas/Fort Worth International Airport (DFW), which now handles close to 800,000 tons of freight yearly. Indeed, around 66% of all airfreight shipments handled in Texas pass through DFW and annual tonnage figures continue to soar – rising 8% in 2016 and showing a healthy year-on-year upturn of 18% in the opening months of 2017. And with cargo believed to account for 50% of DFW’s annual economic impact of $37 billion to the North Texas region, the gateway is more than aware of the potential for future development. Today, 14 dedicated freighters serve 22 major cargo hubs throughout Asia, Europe and North America from DFW. Airlines launching new all-cargo services at DFW in 2016 included Qatar Cargo (Liége-DFW-Liége-Doha); Qantas Freight (Sydney-Chongqing-BeijingDFW); and Air Canada Cargo (Hamilton-Mexico City-DFW-Hamilton). Over the last two years DFW has experienced the biggest increase in truck-to-air volumes at a US airport, it attributes the rise in tonnage to the airport’s close proximity of Mexico. The airport is quick to note that it also offers valuable bellyhold cargo space to more than 200 destinations across the globe courtesy of the 26 passenger airlines serving DFW. All add up to a wide range of shipments being handled at the airport, although to date it is not really equipped to handle significant amounts of perishables. However, all this is about to change as DFW will shortly begin the installation of a cold chain facility that will be operated by AirLogistix USA. Expected to be operational this summer, the state-of-the-art transfer facility will give DFW the ability to precisely control warehousing temperatures for shipments of pharmaceuticals, flowers and fresh foods.

Open 24 hours a day, the new 37,000 square feet complex will boast 15,000 square feet of refrigeration space that includes three separate temperature zones, a refrigerated dock with truck doors and a dedicated Pharma cooler. “There are tremendous growth opportunities for domestic and international cargo customers to ship perishables through DFW to 180 markets,” enthuses John Ackerman, executive vice president of global strategy and development at DFW. “We are very excited to partner with AirLogistix USA on a cold chain facility at the airport. This new facility will increase our handling capabilities and open new doors for all our cargo and logistics partners to ship high-value, temperature and time sensitive products through DFW.” Ray Brimble, president and CEO of Lynxs Group, owner of AirLogistix USA, has no doubt that the new complex will prove a shrewd investment. “Dallas/Fort Worth is a natural choice for us to further develop AirLogistix USA ‘middle mile’ on-airport perishables handling services,” he says. “DFW has the advantage of being located in the central US, which helped drive our expansion into North Texas. We look forward to working with all airlines that serve the airport. “Our facility will be available to distributors and forwarders who need to keep their perishable and temperature sensitive goods cool during shipping, with particular emphasis on transit through the airport. We are ready to get started at DFW.” AirLogistix DFW works as a sub-contractor for airlines, handlers, freight forwarders and shippers to seamlessly connect the airport portion of the cold chain to the rest of the supply chain.

AIRPORT WORLD/FEBRUARY-MARCH 2017

AW

41


PROJECT WATCH

LaGuardia Airport New York gateway is to be transformed by the construction of a new central terminal that will pave the way for the creation of one single passenger facility. project details Location: New York City, USA Important developments: New Terminal B Scheduled completion: 2022

A

s loved as it is by locals, passenger comments on the airport’s official website describing its current facilities as “dirty”, “cramped” and “hot” arguably tell you all you need to know about why New York’s LaGuardia Airport requires a facelift. Indeed, the Port Authority of New York and New Jersey (PANYNJ) readily acknowledges that its once-state-of-the-art terminal is decades out of date and requires a makeover, stating: “Imagine squeezing 13 million people [per annum] into one terminal that is meant to hold eight million passengers.” The good news, of course, is that there is a plan in place to address the situation, and phase one of its blueprint for the future centres around a $4 billion public-private partnership (PPP) project to redevelop LaGuardia’s central terminal area by building a new Terminal B. In what is the largest PPP project ever undertaken for new transportation infrastructure in the US, LaGuardia Gateway Partners will design, build, manage and maintain LaGuardia’s new Terminal B under a 35-year lease agreement with PANYNJ. The consortium comprises Canada’s Vantage Airport Group, Skanska USA and Meridiam. The plan is for LaGuardia Gateway Partners to build a new, game-changing 35-gate Terminal B at the same time as Delta Air Lines transforms its facilities (Terminal C and Terminal D) in a separate $4 billion project to the east of the gateway. New facilities are expected to start opening from 2018 and when both projects are fully completed, Terminal B will become

the western half of a new, architecturally unified terminal that includes Delta’s facilities on its eastern side. Located 600ft closer to the Grand Central Parkway – a 14.6 mile road system that stretches from the Robert F Kennedy Bridge in New York to Nassau County on Long Island – the new Terminal B set for completion in 2022 will be 1,300 million square feet bigger than the old PANYNJ-operated Terminal B building it is replacing. It will boast spacious central Arrivals and Departures halls, utilise the most advanced technology and feature “top of the line” shopping and dining outlets. There are also plans on the drawing board for Terminal B to have its own 200-room hotel on-site, parking garages and an internal tram system to quickly transport passengers across the entire complex. In what is believed to be a world first, dual pedestrian bridges across live taxiways will link the terminal with Concourses A and B as part of an island-gate system. Together, the relocated terminals and island-gate system will create nearly two miles of new taxiway space, which PANYNJ says it will use to ease congestion on the ground and reduce gate delays, something LaGuardia unfortunately has gained a bad reputation for in recent years. Faster and more efficient aircraft taxiing times will also mean less carbon emissions, which will help reduce LaGuardia’s carbon footprint. Unveiling the plan last year, New York governor, Andrew Cuomo, said: “Our plan will fundamentally transform LaGuardia –

Principal companies involved: LaGuardia Gateway Partners (Vantage Airport Group, Skanska USA and Meridiam); Skanska-Walsh; HOK; WSP Parsons Brinckerhoff; and the Port Authority of New York and New Jersey (PANYNJ) Total investment:$4 billion replacing what is now an outdated and poorly designed complex with the world-class airport New York has always deserved.” LaGuardia Gateway Partners’ members have worked on more than 350 aviation and transportation projects globally, including international airports in New York (JFK), Boston, Chicago, Los Angeles, Chile, and The Bahamas. Terminal B project will be financed by a combination of equity, debt and revenues and is expected to directly and indirectly create 8,000 new jobs. Summing up its importance to New York, US Senator, Charles Schumer, said: “LaGuardia is one of New York’s greatest assets, and it’s time that we make the big investments needed to bring it up to speed for the 21st century. “By redesigning the airport from top to bottom, this plan gives New Yorkers the facilities that our city and our state deserve. I’m glad Governor Cuomo and the Port Authority are stepping up on this huge infrastructure project, and look forward to seeing it move ahead.” The totally separate Delta Air Lines project to replace LaGuardia’s existing Terminals C and D with new facilities will also cost $4 billion, $600 million of which will be contributed by PANYNJ. A record 29.8 million passengers passed through LaGuardia in 2016 as New York’s airports handled over 130 million people AW between them annually for the first time.

AIRPORT WORLD/FEBRUARY-MARCH 2017

43


RUNNING WBP NEWS HEAD

The latest news from ACI’s World Business Partners

Krankikom Location: Duisburg, Germany Contact: Frank Reisewitz, Head of Business Development E: frank.reisewitz@krankikom.de W: www.krankikom.de Krankikom brings 20 years of experience in marketing services and digital transformation within the aviation industry. Our expertise lies in the development of strategies and the application of web and mobile technologies to digitalise business processes for marketing and commercial purposes, passenger engagement and loyalty, PR, communication and knowledge transfer.

GE Aviation

Going digital in Hawaii

Clear Channel Airports (CCA) has signed a new 10-year partnership with Honolulu International Airport (HNL) to provide a comprehensive digital advertising network throughout the airport. It promises that its airport advertising programme will feature highly integrated, custom fixtures that complement the architecture and passenger flow at the airport. In addition, the advertising concession will integrate a sense of place theming that incorporates visuals to reflect the island’s unique beauty. CCA’s media technologies are expected to attract local, regional and global advertisers as passenger traffic at HNL continues to rise, ensuring that at least 10,000 people are always on the airport campus. “The new advertising contract at Honolulu International Airport will generate additional revenue, which will help improve our airport facility,” says Ross Higashi, deputy director of the Airports Division of the Hawaii Department of Transportation (HDOT).

Up to speed in Bologna Bologna Guglielmo Marconi Airport is to speed up immigration processing for passengers from the European Union who hold a biometric passport with the introduction of new self-service immigration control technology from SITA. Using facial recognition technology to confirm that the passenger is the passport holder, SITA’s iBorders BorderAutomation ABCGates will provide passengers with a smooth ‘walk-through’ experience. The automated border control gates (ABCGates) confirm that the passenger has an authentic, valid passport and is authorised to enter the country while fingerprint verification is also provided to further enhance security when required.

Location: Austin, Texas, USA Contact: Jerry Fagerhaug, senior technical sales director E: jerry.fagerhaug@ge.com W: www.ge.com GE Aviation, an operating unit of GE, is a leading provider of jet and turboprop engines, components and integrated systems for commercial, military, business and general aviation aircraft and has a global service network to support these offerings. Headquartered in Cincinnati, Ohio, GE Aviation employs about 40,000 people and operates manufacturing, overhaul and repair facilities worldwide. It is estimated that an an aircraft powered by GE or CFM engines takes flight every two seconds.

Safe Bag SpA With an average processing time of under 20 seconds, this process enables eligible passengers to use self-service facilities to reduce wait times and optimize passenger flow through the airport. According to SITA, the ABCGates allows more than 10,000 passengers a day to clear immigration at the airport using this latest technology. Nazareno Ventola, CEO of Bologna Airport, says: “Today, passengers increasingly demand more self-service options across their journey that help provide a quick and seamless journey through the airport. “SITA’s ABCGates help us meet this demand while ensuring we can accommodate an increasing number of travellers, particularly during peak arrival periods.”

Location: Gallarate, Italy Contact: David Debach, business development director E: david.debach@safe-bag.com W: www.safe-bag.com Safe Bag is the European leader and the most innovative provider of baggage protection services. Safe Bag is also the only company in the industry listed on the Stock Exchange. Safe Bag operates in 22 airports and 80 shops worldwide, and offers the widest value proposition in the industry (baggage protection, tracking, money-back guarantee, baggage storage and delivery, sales of travel goods, calling cards, travel assistance and more).

AIRPORT WORLD/FEBRUARY-MARCH 2017

AW

45


HUMAN RESOURCES

PEOPLE

matters Expect the unexpected Dr Richard Plenty and Terri Morrissey reflect on: Uncertainty.

W

e do our very best to predict the future. In the airport industry, for example, decisions to invest in major new infrastructure are not taken lightly. A thorough business case must be prepared before money is committed. Passenger growth projections are reviewed, business scenarios developed and cash flow forecasts examined. Environmental and social impact studies are commissioned. Yet in reality, these plans, forecasts and projections rarely turn out as expected. Who, for instance, could have foreseen that an exploding Icelandic volcano in 2010 would result in the largest air traffic shut down since the Second World War? And who really knows what the impact of technological innovation, environmental considerations, security concerns or social and political change will be on future demand for air travel? The fact is that we live in a ‘VUCA’ world – a world characterised by Volatility, Uncertainty, Complexity and Ambiguity – which makes the unexpected the real predictability. We need to be prepared not only to expect the unexpected but also to have strategies for dealing with it. Yet most people find dealing with uncertainty difficult. Rather than face up to VUCA realities, our tendency is to look for facts and evidence that support our preconceptions or to follow people who claim confidently that they alone have the answer. Are there other approaches that might be better?

46

Have the courage to experiment Old mindsets and mental models don’t always work when times are changing. As Peter Drucker says: “The greatest danger in times of turbulence is not the turbulence – it is to act with yesterday’s logic.” Innovative approaches may be required. Learn from others who have had similar experiences and be ready to try out new approaches.

Prepare for the worst People have an inbuilt ‘optimism bias’, which means we don’t like to think through worst case scenarios or indeed any potential outcomes we don’t like. This positive tendency serves us well and keeps us healthy in everyday situations, but is unhelpful in times of crisis or uncertainty. ‘Thinking the unthinkable’ saves us time and helps us be prepared when things don’t turn out as we’d hoped.

Build resilience and mental toughness Why do some people and organisations persevere through difficulties and others give up? Research carried out to identify the characteristics which allow some people to thrive under pressure shows the importance of confidence, a sense of being in control and seeing unexpected change as an opportunity rather than a threat. These qualities can all be developed and learned. Making plans for the future is sensible but we must be prepared for a wide range of possible outcomes and develop the capabilities to adjust and adapt speedily when the unexpected happens. In a VUCA world, the only thing we should ever doubt is certainty.

AIRPORT WORLD/FEBRUARY-MARCH 2017

The aviation industry will lose another leading light on March 31 when Thella Bowens retires after 15 years as president and CEO of San Diego County Regional Airport Authority. Bowens, who plans returning “home” to Texas where she once worked and many members of her family reside, said: “I have passionately enjoyed my time here, and I am so very proud of our exemplary organisation and high-performing team.” Huntley Lawrence is the new director of aviation at the Port Authority of New York and New Jersey, succeeding the retiring Thomas Bosco as the head of the US’s largest airport system. Atlanta City Council has confirmed Roosevelt Council as the new general manager of Hartsfield-Jackson Atlanta International Airport. “Roosevelt Council is the right person to lead our administration’s efforts to ensure Hartsfield-Jackson retains its position as the world’s leading passenger airport,” said Atlanta Mayor, Kasim Reed. Joseph Nardone is the new boss of Detroit Metropolitan Wayne County Airport, succeeding Thomas Naughton who retired last year. Nardone will also be responsible for Willow Run Airport (YIP) in his capacity as CEO of Wayne County Airport Authority. Airport Authority Hong Kong (AAHK) has appointed Alex Kwan King-fai as its new executive director for engineering and technology, succeeding the retiring John Chai Sung-veng. Kwan will report to AAHK CEO, Fred Lam. San Antonio Airport System has named Russell Handy as its new aviation director. Retired US Air Force general, Handy, will be responsible for overseeing the future success of San Antonio International Airport (SAT) and Stinson Municipal Airport. Former fighter pilot and diplomat Gratien Maire is the new CEO of Groupe ADP subsidiary, ADP Ingénierie (ADPI). He succeeds Olivier Berger who will develop engineering and innovation for Groupe ADP after successfully turning around ADPI’s performance and devising its new business plan. Indianapolis Airport Authority’s governing board has elected Barbara Glass as president and Steve Dillinger as vice president.

About the authors Dr Richard Plenty is managing director of This Is… and delivers ACI’s ‘Airport Human Resources’ training. Terri Morrissey is chairperson of This Is… and CEO of the Psychological Society of Ireland. Contact them through info@thisis.eu

AW


Airport World, Issue 1, 2017  
Airport World, Issue 1, 2017  

• On the agenda: Investing in airports • Airport profile: Frankfurt and global operator Fraport • Special report: The buying game • Plus: Sh...

Advertisement