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Theme: The capacity crunch Airport report: AviAlliance Special report: Cyber security Plus: The buying game & retail/F&B news

In the spotlight: The capacity crunch February-March 2018 Volume 23 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 Advertising Manager Andrew Hazell +44 (0)208 384 0206 andrewh@airport-world.com Subscriptions subscriptions@aviationmedia.aero Managing Director Jonathan Lee +44 (0)208 707 2743 jonathan@aviationmedia.aero

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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.

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Demand driven Airport World editor, Joe Bates, reflects on the challenge of keeping pace with rising demand as global traffic figures hit an all-time high in 2017.

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lthough ACI World’s official traffic figures for 2017 are still to be calculated, there is little doubt that last year was another recording break one for the industry with passenger numbers significantly up across the globe. Indeed, ACI Europe has already announced that 2017 was “a very good year” for the continent’s airports based on an 8.5% increase in both passenger traffic and cargo volumes and a 3.8% rise in aircraft movements. The impressive upturns made 2017 the best year for Europe’s airports since 2004 in terms of traffic growth, a fact reflected by double digit increases in passenger numbers at airports such as Moscow Sheremetyevo (+17.8%), Antalya (+38%), Keflavik (+28%) and Naples (+26.6%). Heathrow with 78 million (+3%), Paris CDG with 69.5 million (+5.4%), Amsterdam Schiphol with 68.4 million (+7.7%), Frankfurt with 64.5 million (+6.1%) and Istanbul Atatürk with 63.9 million (+5.9%) retained their status as Europe’s busiest airports for passenger traffic. All, however, have quite a way to go before they get anywhere near the 103.9 million passengers handled by the world’s busiest gateway, Hartsfield-Jackson Atlanta (ATL) in 2017. For the record, the second busiest passenger airport on the planet, Beijing Capital (PEK) accommodated 95.8 million (+1.5%) last year to close the gap to 8.1 million passengers. The upward trend in global traffic is most welcome, of course, and with throughput expected to soar in the years ahead – ACI predicts that global passenger numbers will double to 14.6 billion by 2029 and treble to 22.3 billion per annum by 2040 – all looks good in terms of potential growth. The challenge for the aviation industry and nations across the world, however, is to make sure that the necessary infrastructure, technology, services, personnel and legislation are in place to allow aviation to keep pace with demand.

The need for new or improved facilities is certainly not lost on airport operators with hundreds of infrastructure development projects currently underway or planned across Africa, Asia-Pacific, Europe, North America and Latin-America and the Caribbean. They include the planned new airports of Beijing Daxing, Chengdu Tianfu, Dalian Jinzhouwan and Qingdao Jiaodong in China; Istanbul New Airport in Turkey; Mexico City New International Airport in Mexico; Mopa (Goa) and Navi Mumbai airports in India; the new Addis Ababa airport in Ethiopia; Western Sydney Airport in Australia; and Long Thanh International Airport in Vietnam. While airports in the midst of major capacity enhancing projects include Abu Dhabi (AUH), Chicago O’Hare (ORD), Dubai (DWC), Jeddah (JED), Los Angeles (LAX), Muscat (MCT), New YorkLaGuardia (LGA) and Salt Lake City (SLC). But as well all know, getting approval for new infrastructure let alone finding the funds to build it, is another story all together. In the UK, for example, talks continue about the best way to increase Heathrow’s airfield capacity nearly three years after the Airports Commission recommended the construction of a new third runway. And in the US, ACI-NA president and CEO, Kevin Burke, has called for the Trump Administration to identify a clear funding mechanism to address the significant infrastructure needs of America’s airports. We take a look at the US’s airport infrastructure needs as well as capacity enhancing IT; airport slots; the global pilot shortage; and airport concessions – which are often used as a strategy to enhance the infrastructure and performance of the world’s gateways – in this ‘capacity crunch’ themed issue. Also under the microscope in our first issue of 2018 is global airport investor, AviAlliance; cyber security; and retail/F&B innovation. Enjoy!

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CONTENTS

Issue 1 Volume 23

In this issue 3 Opinion Airport World editor, Joe Bates, reflects on the challenge of keeping pace with rising demand as global traffic figures hit an all-time high in 2017.

8 ACI News ACI World looks forward to the Airport Economics & Finance Conference & Exhibition in London and welcomes a new chair and director of communications.

11 View from the Top ACI director general, Angela Gittens, provides her thoughts on the allocation of slots at airports and considers how the system could be improved to ensure the most efficient use of a scarce resource.

14 Global investor AviAlliance managing directors, Holger Linkweiler and Gerhard Schroeder, talk to Joe Bates about the company’s investment strategy and plans to grow and expand its global airport portfolio.

20 The $100 billion question RS&H’s vice president for aviation architecture, Roddy Boggus, reflects on the investment needs of US airports and how to avoid the capacity crunch of older infrastructure meeting greater demand.

22 Making IT happen! Sebastien Fabre, SITA’s vice president for airport solutions, considers how IT can help tackle the capacity crunch at airports.

26 The buying game Modalis chief executive, Curtis Grad, takes a look at the prominent airport deals of 2017 and contemplates what could be in store this year as we face a growing capacity crunch and seismic shifts in the global geopolitical landscape.

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CONTENTS

Director General Angela Gittens Chair Bongani Maseko (Johannesburg, South Africa) Vice Chair Martin Eurnekián (Buenos Aires, Argentina) Immediate Past Chair Fredrick J Piccolo (Sarasota, USA) Treasurer Arnaud Feist (Brussels, Belgium) ACI WORLD GOVERNING BOARD DIRECTORS Africa (2) Saleh Dunoma (Lagos, Nigeria) Bongani Maseko (Johannesburg, South Africa)

29 Learning curve Kevin Caron, ACI World’s director for capacity building programmes, explains how ACI’s training and development programmes can help airports enhance their capacity.

32 Pilot study Alpha Aviation Group’s Bhanu Choudhrie warns of the global economic and social consequences of the impending pilot shortage.

34 From top to bottom Dominic Nessi suggests that the time is right for airports to take a new ‘top-down/bottom up’ approach to cyber security.

38 Hold the mayo! Airport World rounds-up some of the latest travel retail and duty free developments at gateways across the globe.

41 Turning to technology AOE’s CEO and founder, Kian Gould, considers how airports can counter travel retail disruption through digitalising their business models.

43 Project Watch: Louis Armstrong New Orleans International Airport The airport’s new $1 billion North Terminal is on target to open in February 2019.

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

46 People Matters Terri Morrissey and Richard Plenty provide their thoughts on the importance of succession planning and talent management.

Asia-Pacific (9) Aimen Al-Hosni (Muscat, Oman) Kjeld Binger (Amman, Jordan) Datuk Badlisham Bin Ghazali (Kuala Lumpur, Malaysia) Fred Lam (Hong Kong) Seow Hiang Lee (Singapore) Xue Song Liu, (Beijing, China) Emmanuel Menanteau (Osaka, Japan) PS Nair (Delhi, India) 1 Vacancy Europe (7) Daniel Burkard (Moscow, Russia) Elena Mayoral Corcuera (Madrid, Spain) Arnaud Feist (Brussels, Belgium) Michael Kerkloh (Munich, Germany) Jos Nijhuis (Amsterdam, The Netherlands) Stefan Schulte (Frankfurt, Germany) Sani Şener (Istanbul, Turkey) Latin America & Caribbean (3) Ezequiel Barrenechea (Lima, Peru) Martin Eurnekián (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) Joseph Lopano (Tampa, USA) Candace McGraw (Cincinnati, USA) Tom Ruth (Edmonton, Canada) Regional Advisers to the World Governing Board (9) Zouhair Mohamed El Aoufir (Rabat, Morocco) Pascal Komla (Lomé, Togo) Tan Sri Bashir Ahmad Abdul Majid (Kuala Lumpur, Malaysia) Candace McGraw (Cincinnati, USA) Joseph Napoli (Miami, USA) Hector Navarrete Muñoz (Merida, Mexico) Augustin de Romanet (Paris, France) Brian Ryks (Minneapolis-St Paul, USA) Stefan Schulte (Frankfurt, Germany) World Business Partner Observer Sarah Branquinho (Dufry Group) Correct as of March 2018

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ACI WORLDHEAD NEWS RUNNING

World in motion ACI World looks forward to the Airport Economics & Finance Conference & Exhibition in London and welcomes a new chair and director of communications.

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CI World will host its 10th Annual Airport Economics & Finance Conference & Exhibition in London on April 9-11 and, as has been the case in the past four years, the 2018 event has been organised in co-operation with the World Bank. The conference meets at a time of concerns over the rise of economic protectionism in advanced economies, but also a time of robust growth in global trade and air transport demand. Air transport demand continues to post annual growth rates in excess of 6% and, in particular, international travel and tourism remain buoyant in the face of the geopolitical risks in certain parts of the world. The growth of air traffic requires significant infrastructure development worldwide and this in turn poses economic and financial challenges for the sector. There is no doubt that the demand is there, and there is a willingness on the part of the airports industry to provide the necessary infrastructure. But, airports need to be able to secure sufficient funding to cover their aeronautical costs and finance their development in the long run. The conference will stimulate discussion on how this finance can be encouraged and supported. Much depends on the quality of the investment, but also on the guidance and tools for economic oversight, if needed, that should be proportionate to the market realities that airports face. Inward-looking policies and protectionist rhetoric have swept several countries and could potentially translate into trade wars and block advances in liberalisation of air transport. Airport operators worldwide are cognisant of this new reality as they work closely with aviation stakeholders and airline clients to mitigate these risks. Moreover, airport executives and investors are often placed in a position where they must engage in a balancing act.

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In many instances, airports face increased competition at the same time as they must comply with stringent regulations governing their aeronautical revenues. Yet, they must also finance and expand their infrastructure to meet a growing demand for air transport, that has already outpaced capacity in many regions. ACI will expand on the full range of current topics as it continues to promote a more economically sustainable airport industry, worldwide. ACI World looks forward to two very productive days of learning, sharing and networking. The ideas discussed and partnerships forged will help shape an economically sustainable future for the airport industry.

Welcome aboard Bongani Maseko began his tenure as chair of ACI World on January 1, 2018. He succeeds Declan Collier, who chaired the Board from January 2016. ACI World’s director general, Angela Gittens, warmly thanks Collier for the time, energy and wise advice that he so generously dedicated to steering the ACI World Governing Board. He ensured that the interests of airports were always well served and that ACI has been able to focus its energy on providing the best possible quality of service to its members. Maseko’s broad experience in the airport industry will help him carry out ACI World’s mandate.

New director of communications ACI World is pleased to announce the appointment of David Whitely as director of communications. Before joining ACI World, Whitely was head of communications at London Gatwick Airport in the United Kingdom. He brings more than 20 years of communications, media, corporate, and public relations experience to ACI and has worked in strategy development, crisis and reputation management in a diverse range of industries.


ACI WORLD NEWS

ACI events

2018

2018

2018

2018

2018

April 9-11

June 18-20

April 13-17

September 10-13

April 23-25

Airport Economics & Finance Conference and Exhibition London, UK

ACI Europe/ACI World Annual General Assembly, Conference & Exhibition Brussels, Belgium

ACI Africa Regional General Assembly, Conference and Exhibition Lagos, Nigeria

ACI World Customer Excellence Global Summit Halifax, Canada

ACI Asia-Pacific Regional Assembly, Conference & Exhibition Narita, Japan

ACI offices ACI World Angela Gittens Director General PO Box 302 800 Rue du Square Victoria Montreal, Quebec H4Z 1G8 Canada Tel: +1 514 373 1200 Fax: +1 514 373 1201 aci@aci.aero www.aci.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 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 Europe Olivier Jankovec Director General Brussels, Belgium Tel: +32 (2) 552 0978 Fax: +32 (2) 502 5637 danielle.michel@aci-europe.org www.aci-europe.org

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

As of January 2018, provisional figures show that ACI serves 641 members operating 1,953 airports in 176 countries. ACI is a non-profit organization whose prime purpose is to advance the interests of airports and to promote professional excellence in airport management and operations. According to preliminary statistics, in 2016 airports worldwide welcomed 7.7 billion arriving and departing passengers and handled 110 million metric tonnes of cargo and 92 million aircraft movements.

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ACI VIEWPOINT

View from the top ACI director general, Angela Gittens, provides her thoughts on the allocation of slots at airports and considers how the system could be improved to ensure the most efficient use of a scarce resource.

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CI’s World Airport Traffic Forecasts 2017–2040 projects that global traffic will double by 2031. Traffic demand is growing (4.5% average annual growth rate 2016-2040), aircraft operations are forecast to double in about 20 years, and already many airports are congested with demand far exceeding the available capacity. As of November 2017, 189 Level 3 or slot co-ordinated airports were listed and 122 Level 2 airports (the lesser congested, schedule managed airports with some peak congestion). Indeed, all regions across the globe are concerned by this challenge. According to International Air Transport Association (IATA) forecasts, there could be 100 more co-ordinated airports in the next 10 years (2017-2030). Consequently, the management of airport capacity, which includes slots allocation, is essential to ensure efficient access to airports’ infrastructure and resources. Airport slots are specific points in time allotted for an aircraft to land or take off at an airport. Where the demand for slots at a particular airport exceeds the available supply, the airport can be considered ‘capacity-constrained’, at which time, a ‘slot allocation’ process is implemented. Airport congestion leads to delays and a deterioration of the quality of the service and passenger experience. It can also reduce competition since it is difficult for new carriers to enter an already full airport. This gives increased market power to incumbent airlines and, potentially, means higher fares for passengers. However, the premium enjoyed by incumbent airlines at congested airports is not reflected in aeronautical charges. Rather those same airlines fiercely ask for stricter airport charges regulation, and stronger control on investment, which are often the primary obstacle to reducing congestion by modernising the infrastructure. This could also explain the incumbents’ reluctance to meaningful reform of the slot allocation system, as enshrined in the IATA Worldwide Slot Guidelines (WSG) and, in some instances, incorporated into local regulations or national laws. In 2015, ACI created an Expert Group on Slots (EGS). The EGS develops worldwide airport policy on slots, acting with the ACI regions. EGS works to promote a paradigm change of the current allocation system whereby airport operators must play a leading role in the efficient allocation of slots to airlines as they are best placed to define airport capacity for runways (aircraft movements), terminals (passenger movements) and aprons (number of aircraft parking

stands), in consultation with air traffic controllers and other appropriate stakeholders as necessary. In order to ensure this paradigm change, however, there is a need to review the current WSG, starting by reviewing the objective of airport co-ordination. This would mean abandoning the view that co-ordination is meant to simply achieve the “maximisation of benefits for the greatest number of airport users” (Preface WSG Edition 8). Rather, a new model of global guidelines should aim at achieving the “maximisation of benefits for the stakeholders in airport co-ordination and the passengers they serve”. This crucial change in perspective would contribute to identify the most appropriate tools and procedures to ensure that slots are allocated to the airline that can better achieve the abovementioned objective. Indeed, the basic principles of airport co-ordination included in the WSG were developed in the mid-70s and still apply today, with timid changes over the years. At the time of the development of these guidelines, international air traffic was dominated by the so-called ‘flag carriers’ that were wholly or mostly government-owned. While most airports were government owned and regarded as public infrastructure. The interests were solely focused on the benefits of the national airline. Therefore, the principles for the allocation of scarce airport resources were developed by publicly owned airlines under the umbrella of IATA, while the public interest and influence was safeguarded by national governments’ participation in the ownership of the air carriers. However, the structure of the industry under which the principles of slot co-ordination were developed, has changed fundamentally

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ACI VIEWPOINT

over the last twenty-five years. This was mainly driven by the liberalisation of the sky with the resulting competitive pressures transforming both airlines and airports alike. The divesture to the private sector of governments’ stakes in the airline and airport sector has been a compelling solution to energise and diversify supply in order to meet the increasing demand for travel. Furthermore, the low-fare business model successfully emerged, with new airlines competing strongly with the established carriers. Airports also developed as businesses in their own right as public financing has run out to be replaced by significant amounts of private investment in airports. Airports make substantial investments to improve the service they offer to airlines and passengers, and they have a vested interest in making sure that slots are allocated in the most efficient way. Despite the important role played by the WSG to ensure consistency at global level in the slot allocation system, the increasing level of congestion of airports and the fundamental changes in the aviation industry, call for a wider discussion about alternative methods to allocate slots. With this objective in mind, the Strategic Review of the WSG engaging ACI with IATA and the Worldwide Airport Coordinators Group (WWACG) was started. This was an ACI initiative at the 39th ICAO Assembly in October 2016 and represents a first global test to improve the global slot allocation process in a fully inclusive manner. ACI supports any measure that can improve the efficient use of limited airport capacity to the benefit of the community, airlines and airports. Airport operators wish to promote the greatest possible efficiency in the use of their infrastructure, which implies the allocation of

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slots to the airlines that values them most, and will fully use them, according to the allocation outcome. Under the current WSG and national legislations, the nonutilisation or underutilisation of allocated slots has no or little consequence for airlines, which results in a negative economic impact for the community and the airport operator as well as potential adverse consequences to competition at the airport. Better defining an airport slot would require interpreting it as both a permission and as an obligation for the aircraft operator to use it at a certain time, with proportionate sanctions for misuse, which could include removal of slots as extreme remedy. There are several areas that, from an airport industry perspective, would deserve further analysis, including market mechanisms such as codified secondary trading, new charging mechanisms, or auctioning. Among others, a higher level of transparency should be achieved in understanding how slots are allocated, especially as long as secondary criteria are applied. Transparency implies that whenever a slot co-ordinator approves a request for a new slot by applying what IATA calls “additional criteria�, the co-ordinators should make transparent the criterion used. Ideally airports should be consulted by the co-ordinators about requests for slots before the initial co-ordination is started. If the airport operator is aware of the request, it could more effectively provide relevant information to the co-ordinator to facilitate the best allocation possible, thereby increasing the efficiency and effectiveness of the total infrastructure. This is a winning scenario for the travelling public and the AW community at large.


AIRPORT REPORT: AVIALLIANCE

Global investor AviAlliance managing directors, Holger Linkweiler and Gerhard Schroeder, talk to Joe Bates about the company’s investment strategy and plans to grow and expand its global airport portfolio.

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aving invested in airports for over 20 years, acquiring a string of assets across the globe, Düsseldorf-based AviAlliance (formerly HOCHTIEF AirPort) is a familiar name in the aviation market with a reputation for being in it for the long-haul. Today, it holds a controlling 55.44% stake in the consortium responsible for operating Hungary’s Budapest Franz Liszt Airport and significant shareholdings in Athens International Airport (40%), Düsseldorf Airport (30%), Hamburg Airport (49%) and San Juan’s Luis Muñoz Marín International Airport in Puerto Rico courtesy of it owning 40% of operator Aerostar Airport Holdings. Between them the airport’s handled 85.7 million passengers in 2017, and just as importantly, all are profitable.

Budapest Airport Budapest has certainly proved to be one of the company’s biggest success stories in terms of its growth and development, despite the February 2012 bankruptcy of Hungarian national flag carrier, Malév, which for a short time threatened to derail the gateway’s progress under the ownership of AviAlliance. There’s no denying that the demise of Malév initially had an adverse impact on the airport, where AviAlliance has been involved since 2007, but such has been its recovery since that it handled a record 13.1 million passengers (+14.5%) in 2017, and AviAlliance’s investment in improving its facilities hasn’t stopped. Arguably the jewel in the crown of its Budapest Airport investments to date has been BUD SkyCourt, the showpiece link between Terminals

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2A and 2B, which brought new levels of comfort, convenience and retail/F&B choice for passengers when it opened in 2011. The airport is currently in the midst of a five-year, €160 million development programme called BUD 2020 that to date has involved renovating Runway I, the installation of a new instrument landing system (ILS) and the opening of a new 145-room hotel. They will be followed by the unveiling of a new 10,000sqm pier for non-Schengen flights at Terminal 2B this summer. Other recent new additions under the umbrella of BUD 2020 include the 2017 opening of dedicated 16,000sqm facilities for DHL and TNT as part of a plan to develop the gateway as a cargo hub. Located next to Terminal 1, the new facilities provide centralised cargo operations and ensure that the airport is equipped to handle up to 250,000 tonnes of freight per year. AviAlliance managing director, Gerhard Schroeder, is in no doubt that Budapest’s Central European location ensures that it is perfectly placed to develop as a major shipment point for handling freight travelling between Europe and Asia. He reveals that the airport company will have invested €500 million on upgrading the gateway by the time BUD 2020 is completed, although is quick to note that the rapid rise in traffic over the last five years, soaring customer service ratings and growing route network more than justifies the faith it has placed in the gateway. “Have we been surprised by Budapest’s success? Not really, as we were fully aware of the airport’s potential, but the success it enjoys today is the result of a lot of sweat and hard work as the project was


AIRPORT REPORT: AVIALLIANCE

quite complex,” says Schroeder, noting that the airport has a great management team. “We had to transform the way the airport operated and replace aging infrastructure with new state-of-the-art facilities. We improved security, introduced a new customer service culture and had to redevelop the airport’s route network after Malév went bankrupt. “Our efforts have helped turn things around. The airport’s passenger ratings in ACI’s ASQ survey have consistently risen and are now at an all-time high. It has won Skytrax’s award for the Best Airport in Eastern Europe for four years in a row, traffic numbers are at record levels and the financials are good.”

Luis Muñoz Marín International Airport There are also big hopes for the company’s most recent investment, Puerto Rico’s Luis Muñoz Marín International Airport (SJU), which AviAlliance’s fellow managing director, Holger Linkweiler, believes will prove to be a very successful acquisition in the medium term. Linkweiler notes that he says this because the airport, and much of Puerto Rico, is still recovering from the impact of Hurricane Maria, which flattened homes and damaged much of the island’s infrastructure when it swept through last September. Talking about Hurricane Maria, Linkweiler says: “Thanks to the dedication and professionalism of the airport’s management team and staff, Luis Muñoz Marín International Airport was back in service after just 24 hours. This allowed it to immediately become the logistical platform for the US authorities to co-ordinate the urgently needed support for the region. “We are grateful for their efforts as Hurricane Maria had a heavy and frightening impact on Puerto Rico.” He goes on: “We are on a reconstruction mode at present, as is much of the island, so we don’t expect an increase in passengers this year. But, from 2019 and in the longer term, we expect much better things as we have invested in a good airport in unincorporated US territory. “The airport’s existing facilities allow for a lot of growth. Puerto Rico is already a popular destination for cruise ships and we believe that it has a lot of O&D potential.”

More than eight million passengers passed through the airport last year, which was a disappointing but understandable drop on 2016 considering the damage caused by Hurricane Maria.

Athens International Airport When SJU recovers from its current difficulties it is likely to join another AviAlliance airport that it is doing well today after suffering a few hardships of its own – Athens International Airport (ATH). ATH had to deal with the decline of national flag carrier, Olympic Airlines, and the Greek economic crisis, which reduced the country’s GDP by more than 25%. However, today the airport is doing well. It welcomed 21.7 million passengers (+8.6%) in 2017, its fourth successive year of traffic growth, and continues to benefit from what Linkweiler describes as “the difficult situation” in North Africa and Turkey. Indeed, AviAlliance is interested in increasing its investment in ATH by acquiring the Greek government’s 30% stake in the gateway. The tender, which is part of the Greek privatisation programme, is expected to start this year, based on the extension of the airport concession by another 20 years to 2046. ATH was the first major greenfield airport in the world to be built as a public-private partnership (PPP) project when it opened for business in early 2001.

The catalyst for development ATH was actually the start of everything for AviAlliance as the original plan was for predecessor, construction company HOCHTIEF, to cash out a few years after the airport’s opening to get the maximum value for its shares. However, the realisation of the potential of the airport and the wider aviation industry meant that this never happened and AviAlliance today still holds a 40% stake in the Athens International Airport SA consortium responsible for building and operating the airport under the terms of a Build-Operate-Transfer (BOT) contract. And the decision effectively proved the catalyst for a new business strategy that led to the creation of today’s global airport operator.

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AIRPORT REPORT: AVIALLIANCE

Hamburg Airport welcomed 17.6 million passengers in 2017 – a rise of 8.6% on the previous year.

“Shortly after construction began on Athens the question was raised whether it would be in the company’s best interests to sell up and get out of the airport business after its opening or migrate more into the operation of airports,” explains Linkweiler. “It was decided that although we had much to learn about the airport industry, it was a business that appealed to us as it provided plenty of expansion opportunities and would allow the company to diversify its interests away from construction. So, in 1997, HOCHTIEF AirPort was set up, and the rest is history.” It certainly didn’t waste much time in building up its airport portfolio, quickly adding Düsseldorf in 1998 and Hamburg in 2000 before acquiring a 10.5% stake in the Southern Cross Consortium, the then operator of Sydney Airport in Australia in 2002. Tirana’s Mother Teresa International Airport followed in 2004 followed by Budapest in 2007, and that was it for a quite a while until the recent acquisition of San Juan’s Luis Muñoz Marín International Airport. Schroeder notes: “We showed our clear intentions in 1998 as Düsseldorf was the first airport that we invested in where our investment wasn’t linked to a construction contract or it was a given that HOCHTIEF would automatically win any construction contract. They had to tender for the business like everyone else and the most competitive bid would win. “This business strategy, which still applies to all our acquisitions today, helped establish us as an airport operator and allowed us to bid for concessions where we’d previously been excluded from taking part in as we were viewed as just a construction company.”

Investment criteria and global expansion So, what criteria/investment potential does an airport need to demonstrate to interest AviAlliance? “Ideally, airports must be of a decent size, preferably handling at least five million passengers per annum, although this is not a hard and fast rule,” says Linkweiler.

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“The second most important factor is that of governance. Do we have aligned interests with the other shareholders and what kind of influence/control would we have? “We are also looking for assets that would benefit from the AviAlliance group, at least from a knowledge synergy perspective.” Schroeder admits that the company’s roots and business profile in Europe initially made it easier for the company to invest in airports closer to home than say in Africa or Asia, but notes that it previously had a stake in Sydney Airport, now has interests in Latin-America and is actively looking for expansion opportunities in other continents. To some extent this more expansive view has coincided with having a new, more global business partner and owner in the shape of PSP Investments – one of Canada’s largest pension investment managers with more than C$140 billion in net assets – which has provided AviAlliance with the financial clout to compete at the very top table. “Our obligation is to look worldwide for airport assets in countries with a stable political and legal environment,” says Linkweiler. “We have around 50 staff at our head office in Düsseldorf who are specialists in almost every field. They cover topics ranging from traffic forecasting and the commercial development of non-aviation related facilities to master planning and terminal design. “This give us the capability to properly asses and evaluate each and every project in-house, no matter how complex, and decide whether the opportunity on offer is something worth pursuing or not.” Linkweiler adds: “We are not hunting for everything. If we don’t see significant potential for an uplift in traffic or performance, then maybe the project would be better suited for another company that would be satisfied with a purely financial investment.”

Düsseldorf and Hamburg airports Having stated its global ambitions, AviAlliance is quick to point out that it is happy with the progress and performance of its ‘home’ based gateways, Düsseldorf and Hamburg in Germany.


AIRPORT REPORT: AVIALLIANCE

Düsseldorf Airport in Germany (top) and San Juan’s Luis Muñoz Marín International Airport in Puerto Rico (bottom) demonstrate the global presence of AviAlliance.

So much so, in fact, that €120 million will be invested on future proofing the facilities at Hamburg Airport between now and 2020 and Düsseldorf Airport is seeking planning permission to expand its capacity. Schroeder says that raising the capacity of Düsseldorf by allowing it to handle more take off and landings will give airport the flexibility it needs to operate in a more “demand-oriented way” to best meet the needs of the region’s 18 million inhabitants. “We consider this essential to ensure that Düsseldorf Airport can keep pace with international developments and fully meet the connectivity requirements of people and businesses,” he says.

Airport cities Schroeder states that AviAlliance supports the airport city phenomenon and believes that the best example of this in action at his airports can be seen in Düsseldorf, where the gateway has bought a 23-acre site formerly occupied by the British army and transformed into its own Airport City business park. Opened in 2007, Airport City is now home to Porsche, Siemens and countless other companies and boasts a number of retail outlets, restaurants and the 500-room Maritim Hotel, which is one of the biggest convention facilities in North Rhine-Westphalia. Indeed, the popularity of the development means that the original land is now fully occupied, and the airport is currently in the process of developing more land to expand it.

In it for the long-haul With over 20 years in the airport business and all of its long-held assets performing well operationally and financially, Linkweiler believes that AviAlliance has shown over the last few decades that it well and truly deserves its reputation for being a long-term investor. He says: “We always think in the long-term and invest in the long-term as we believe that this is the best way to create value and great airports where people like to fly from. “We know from experience that projects don’t deliver huge profits from day one, and we also don’t get too down about incidents outside of our control as we know that traffic will always return to a well-run airport. “I am happy to say that in PSP we have a shareholder that shares this philosophy.” He pauses for a second, then adds: “You know, there are funds out there in the infrastructure development world that say they are long-term investors and mean three to five years. This is definitely not the case with AviAlliance or PSP, which is a permanently growing fund with a very long-term horizon.” Ever ambitious, in it for the long-haul, financially backed by one of the world’s biggest pension funds and more than 20 years and counting of experience in the airport industry. AviAlliance makes the airport owner/operator game sound like a breeze!

AW

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SPECIAL REPORT: THE CAPACITY CRUNCH

The $100 billion question RS&H’s vice president for aviation architecture, Roddy Boggus, reflects on the investment needs of US airports and how to avoid the capacity crunch of older infrastructure meeting greater demand.

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ost passengers travelling through US airports today are passing through facilities that were originally built in the 1950s, 1960s and 1970s. While many of the terminal facilities have had facelifts along the way, peeling away the stainless steel, paint, tile, and carpeting will reveal an underlying infrastructure that is older than most of the passengers that use it, and was not designed to accommodate and support the realities of today’s aviation environment. While there are some major modifications currently underway at several large-hub US airports, there are many others waiting for their turn for infrastructure upgrades to keep pace with existing and future capacity requirements. We have heard the verbal battle many times over that US airports are in dire need of upgrades and are falling significantly behind their international competitors from one side, and from the other, that the rhetoric doesn’t match the reality. How do we know what is true? One thing is certain, trying to match our international competitors – airports like Singapore Changi, Incheon, Munich, Tokyo-Haneda and Hong Kong – is a lot like trying to call a pig a unicorn. You can wish for it, but it’s probably not going to happen. Our airports are where they are, and have been where they are for the past 45 to 65 years. During this time, most airports now find themselves landlocked out of significant new, greenfield developmental space.

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Secondly, the US aviation market is different in many ways – including dwell time – from the often cited overseas markets, and third, the appetite to fund projects such as this, doesn’t currently exist. For many, the conversation has shifted from competing ‘tit-for-tat’ with our international brethren, who leap-frogged us by developing their aviation network/facilities well after ours and have learned from us on what to do better, to finding better ways to use our existing facilities. Or, as I like to call it, ‘how do we move the cheese’, as illustrated in Dr Spencer Johnson’s book Who Moved My Cheese? In a special report by the ACC, Development at US Airports: A Summary Look at Future Trends and Opportunities, the authors state: “Airports cannot build their way out of congestion but must find ways to use existing infrastructure more efficiently.” Assuming this to be true, and that the way to success is through a much greater adoption and implementation of technology, not only do US airports need significant investment in technology, but also a significant investment in the rebuilding of the underlying infrastructure to support the technology and the anticipated doubling of passengers by 2030. Oh, and remember this, most of our airports were never designed for the baggage, security and passenger loads they are managing today. Remember the story about our nation’s bridges failing due to infrastructure neglect and the increased loads that they were never designed for? Same story here, just without cars falling into a ravine or a highway below.


SPECIAL REPORT: THE CAPACITY CRUNCH

So, what are we talking about? ACI-NA, in their Airport Infrastructure Needs 2017-2021 publication, state that the estimated cost of US airports’ infrastructure needs for this period, adjusted for inflation, is nearly $100 billion. Over the five years of this projection, that is around $20 billion a year, which is significantly more than current available funding through traditional aviation funding mechanisms. Statistics in the ACI-NA publication show that 54% of this funding need is for terminal projects, while another 25% is for landside projects. Quick arithmetic will inform us that 21% of the remaining funding need is for airside projects, the projects that typically benefit the most from State of Good Repair (SOGR) projects generally funded, in part, through grants from the AIP program. Is it ironic that most of the needed funding comes from capacity issues that are influenced, in part, by a robust economy and the continued increase in demand for air travel? Probably not if we look at the changes being driven, to our terminals, by a global economy and risk mitigation. While traditional ticketing and check-in facilities are quickly going the way of the dinosaurs, the space they once required is being gobbled up by baggage and security screening. Inline baggage systems and their associated screening components continue to require significant unobstructed real estate in our airports. For most airports, this is real estate that is difficult to configure, and therefore, significantly more expensive due to the adaptive reuse of space that is less than optimal for its intended use. Similarly, the continued and expanded space requirements and enhanced structural support systems to support new explosive detection systems for passengers and carry-on baggage at our passenger security screening checkpoints remain a stress-point for our older facilities designed without this requirement.

Transportation Network Companies (TNCs), which seemingly arrived out of nowhere, now create stress points on our landside kerb fronts where accommodating traditional commercial vehicles, as well as passenger vehicles, challenge our ability to keep pace with the often changing volume on our roadways and kerbs. This, accompanied by the anticipated development of autonomous and self-driving vehicles, creates a guessing game as to the real impact, over time, on landside needs, arrival curves, and the development of ‘one-seat’ rides that air carriers may offer by teaming with TNCs to provide a more complete and managed passenger expectation/experience from start to finish during travel. And back to technology for a minute. How do we know where this is going to take us? As I now believe we hold in our hands the technology to create a personalised experience for every passenger with a smart device. Will our airports become a holodeck – a Holographic Environment Simulator – that is managed through Augmented Reality (AR) and Virtual Reality (VR) through a handheld device that we carry? One thing is for certain, everything we do in an airport now requires data and it is a truth that our applications will hunger for more and more bandwidth as we continue to create the perfect passenger experience. Perhaps data or a data driven airport facility (terminal and concourse) will be our leapfrog event to the next world stage of the passenger experience and the key to tomorrow’s ACI’s Airport Service Quality (ASQ) and SKYTRAX awards. In order to get there, we will have to have a data pipe that can accommodate not only today, but also our best guess for tomorrow. Not only will we need to reinforce and rebuild our physical infrastructure to accommodate the loads that are coming – and they are coming – but also build the infrastructure necessary for truly smart terminals that will begin to rely more on data to solve our capacity problems than the physical relocation of building elements. So, where do we go from here? Airports and their related trade associations have been calling, for years, for more investment in aviation infrastructure. Investment, not in the form of unified taxes spread out to the general population, but rather user fees supported by those that use the services offered by airports. This user fee will give many airports the locally controlled self-help they need to move forward with infrastructure investment. This modernises existing airport funding methods by removing some of the restrictions on projects that can be funded from one method or another, and relieving costly land-use regulatory burdens on airports can also help airports with the pent-up demand of infrastructure investment. There are also things we can do today, if we have the courage, to instantly create a much more robust environment. An environment than can, and will deliver, the passenger experience we all talk about; the profits that the air carriers desire; and the world class experience that is expected from US airports and carriers alike, while staying current with the capacity requirements of a mature but still growing aviation industry. However, it will not happen if we all sit on our hands and do nothing more than nod in agreement. The game has changed. Just because something is measured no longer means it gets done. We, all of us, must make it important because as Ray LaHood said in 2014 – “Politicians in Washington don’t have the political courage to say, this is what we have to do.” Airports are political pawns in the US, we either play the game or get played. AW

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SPECIAL REPORT: THE CAPACITY CRUNCH

Making IT happen! Sebastien Fabre, SITA’s vice president for airport solutions, considers how IT can help tackle the capacity crunch at airports.

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he demand for flying shows no sign of abating. In fact, between now and 2036, IATA predicts that demand will soar from around four billion to an astonishing 7.8 billion passengers. This scale of growth presents massive opportunities for the air transport industry, but also comes with real challenges. Principle among those will be the pressure it places on airport infrastructure, operations and passenger processing systems. Finite physical space and capital limit the potential of airport expansion in the form of new terminals and new runways. Growth in passenger numbers cannot be met with equivalent growth in airport size. Airports cannot build their way out of this challenge. They will have to be smarter with their existing real estate by processing passengers faster, minimising the impact of disruption, and reducing aircraft turnaround times. Fortunately, there are many technologies which are addressing airports’ capacity to meet unprecedented levels of demand. Some are here today, others are coming soon

potential disruptions and their impact before they occur, while more than half are looking to implement automated predictive alerts before flight disruption events. All of these initiatives depend on ready access to high quality data – and the tools to interpret and deliver relevant information which can be used to avoid disruption or to manage it so that there is minimal impact. Technology is critical to unlock the value of data but so, too, is the process used to provide optimal results.

– Self-service and single token travel What’s here now? – Disruption management As demand for air travel continues to grow exponentially, flight disruptions and the resulting operational inefficiencies have become one of the core challenges airlines and airports face on a regular basis. Current efforts are focused on disruption management initiatives to improve recovery, in particular resolving the impact of disruption on the efficiency of operations. Technology is the critical element here. To enhance their capabilities, airlines are turning to common or well-integrated systems to improve the quality of their data and their ability to share it internally. While these actions are an essential part of the response to any kind of disruption, they relate to managing disruption as and when it happens. What’s also needed is more time to allow airlines and airports to plan ahead. They need to be able to anticipate and predict disruption before it even happens. A small number of airports are already using predictive technology to minimise disruptions. However, by 2020, almost 60% of the world’s airports expect to be using integrated systems to predict

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From check-in to bag-drop, right through to security and boarding the plane, the self-service revolution has well and truly taken off at airports. But the most exciting technology making self-service a reality and driving efficiency along the entire airport journey is biometric-enabled single token travel. The arrival and acceptance of biometrics has huge potential for passenger processing, with common-use single token travel set to transform the way passengers move through the airport. SITA has worked with JetBlue and the US Customs and Border Protection (CBP) using biometrics to trial paperless and device less self-boarding at Boston Logan International Airport. The technology uses facial recognition to verify customers’ identity at the gate. It’s a very simple process. Passengers just look into the camera and wait for the signal to board. There’s no need to show passports or boarding passes. Behind the scenes, the camera station connects to the CBP to instantly match the image to the passport, visa or immigration photos held by the CBP, and verifies the flight details. Early results show that the majority of passengers opt into the new service. A senior CBP official also recently cited the success of the SITA/ JetBlue trial as the reason behind the decision to further explore


SPECIAL REPORT: THE CAPACITY CRUNCH

The shape of things to come? Munich Airport’s humanoid helper, Josie Pepper (left), and LEO, SITA’s fully autonomous, self-propelling baggage robot.

potential use of facial recognition in other areas of the airport. With confirmation of the passenger’s identity said to take between two and three seconds, it is clear why it’s being considered for every ID checkpoint at the airport. This option is being explored in other parts of the world, too. Our end-to-end single token travel solution, Smart Path, is being trialled at several major airports around the world, including Brisbane Airport, where adding biometrics into existing check-in and boarding processes has created a secure and seamless passenger journey, based on a single facial scan. Air New Zealand passengers at the airport can now board their flights with a single glance at a camera – no more tickets to scan, no more passports to show. All that’s required is a simple enrolment process that takes less than a minute to complete.

– Internet of things, big data, and business intelligence In airports, the Internet of things (IoT) can be used to track assets, resources and queue status. Using that data, and ideally sharing it, airport managers can streamline all sorts of processes including passenger processing, resource allocation, boarding, baggage handling and aircraft turnaround times. And this is just the beginning. IoT can be used to track baggage to know where bags are at all times. Intelligent machines, which are a cross-over of IoT and artificial intelligence, can do basic tasks that make the passenger journey better, such as the use of personal locator beacons so the relevant teams and equipment are ready at the gate the second an aircraft arrives at it, reducing the potential of delays. A better awareness of real-time flight information thanks to Airport Collaborative Decision Making (A-CDM) can also cut minutes off

aircraft turnaround times. It might not sound like much in isolation, but multiplied out, it makes a huge difference to airport capacity.

– Airport connectivity Airports are the centre of the air transport industry’s communications and are becoming ever more connected. By 2030, whopping 18,000 airline communication connections will be needed at the world’s airports. The challenge the industry faces is to have reliable, secure, high performance communications – consistently across the world’s airports – for airlines, ground handlers, maintenance companies, other airport tenants and the airports themselves. SITA AirportHub, now available at more than 400 airports around the world, enables this at all airport destinations ranging from remote and regional destinations serving less than a million passengers, to the largest international hubs of the world, which together manage hundreds of millions of passengers every year.

What can we expect in the future? – Artificial intelligence Airlines and airports are looking to Artificial Intelligence (AI) to help minimise the impact of disruption on the passenger experience and their business. Using cognitive computing, predictive analytics and other progressive technical capabilities, airlines and airports can predict and, therefore, mitigate the impact of any disruptions. That’s good for business and good for passengers. They are also investigating AI-driven chatbots, to give passengers access to more information in a very simple way. Chatbots already exist but AI will take them to a new level, pre-empting passengers’ questions. Flight Information Displays will be able to recognise the passenger, based on their biometric data, and provide the exact

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SPECIAL REPORT: THE CAPACITY CRUNCH

Biometric trials in the US have proved that paperless and device less self-boarding is possible.

information you need at that exact moment, for example your gate number and how long it will take to walk there

– Robots SITA has been trialling the potential of robotics, exploring various use cases to see what area can be most improved by our robot friends. KATE is our intelligent check-in kiosk – a robot – that takes itself to congested areas in the airport, using data that already exists to solve the problem of long check-in queues. It improves the passenger experience by reducing check-in times. It also removes staff from being part of the check-in process, so they can focus more on customer relationship management. A trial which recently started at Kansai International Airport in Japan should give us some concrete data on KATE’s performance and the impact a check-in robot can have on dealing with everincreasing capacity. KATE follows in the footsteps of LEO, our fully autonomous, self-propelling baggage robot. LEO is currently touring airports around the world showcasing the potential of robots in air transport.

To begin the process of figuring that out, we worked with British Airways, Heathrow, Geneva Airport and Miami International Airport to investigate how blockchain technology can make the air transport industry more efficient and secure. The subject of the trial was flight data because it is an obvious use case. When there is a delay, there are often differences between the information provided by passenger apps, airport flight information displays and airline agents. If everyone has access to the same data, passengers can be given accurate and consistent information, and operations can be streamlined. And the beauty of blockchain is that the data is accessible for all parties involved while each party retains control over their own data. While we are several years away from blockchain/distributed ledger technology becoming a mainstream enterprise technology, it’s becoming very clear that it will have an opportunity to make a significant difference to data sharing. And the more data is shared across the industry, the better the decision-making and therefore the more efficient the operations.

Which technology delivers the best results? – Blockchain It’s no secret blockchain has the potential to drive efficiencies in almost every industry in the world. Air transport is certainly no exception. Like all emerging technologies, it’s a matter of figuring out which areas of the industry benefit most acutely.

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Each technology contributes in its own right, but the true power of these technologies is when they work together. And the collaborative power of technologies can only be truly realised if they’re integrated into the airport’s existing infrastructure. No technology is an island. At least, it shouldn’t be.

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SPECIAL REPORT: THE CAPACITY CRUNCH

The buying game Modalis chief executive, Curtis Grad, takes a look at the prominent airport deals of 2017 and contemplates what could be in store this year as we face a growing capacity crunch and seismic shifts in the global geopolitical landscape.

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he buying game can be likened to chess, with the various global players deploying their strategies and resources to take advantage of opportunities through gambits, breaks, liquidation, etc. In 2017, we saw all of these moves and more with aggressive players expanding their holdings and influence, while others cashed out and recapitalised.

extension of the ATH concession, however, the deal is not yet inked as the EU’s competition bureau has weighed in on the matter. Perhaps lost in the din of the Brexit debate, the perennial quest for solutions to the London-Heathrow (LHR) expansion paradox clamour on. At the same time, a growing chorus of voices are calling for investment in underutilised regional UK airports, including Manchester, Birmingham and Bristol, to relieve the ever-building LHR capacity crunch.

Europe The shifting political tides in Europe, led by Brexit and the rise of right-wing nationalist movements, had industry and commerce on edge throughout 2017, although the region played host to several primary transactions despite the jitters. These included the award of the Belgrade Airport concession in Serbia to VINCI Airports; China’s HNA Group (parent of Hainan Airlines) acquiring a controlling 82.5% stake in Frankfurt-Hahn (HNN) in Germany; and the GMR/GEK-Terna consortium securing ‘preferred bidder status’ for the Crete-Kasteli greenfield project and is reportedly close to signing a concession agreement. On the other hand, the delay-plagued Sofia Airport (Bulgaria) process will apparently be relaunched in Q1 2018, while concessions for Lithuania’s three main airports of Vilnius, Kaunas and Palanga are seemingly dead in the water following a change of government in late 2016. As for the secondary market, shares in Birmingham and Bristol airports in the UK traded and Edinburgh was pulled off the market due, ostensibly, to Brexit fears, while Belfast City’s (BHD) ownership, multi-national private equity and venture capital firm 3i Group, initiated a consolidation of assets including BHD. Athens International Airport’s ownership group, which includes AviAlliance, also did some consolidating of sorts, securing a 20-year

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Asia and Oceania Despite a huge demand for additional airport capacity and a large volume of favourable press on private airport investment initiatives/ambitions, this region has very little to show in the way of actual deals. What once served as an architype for the region, the highly successful Philippine PPP framework seems to be all but abandoned as the Duterte government has opted to entertain unsolicited offers instead. However, in the case of Clark International Airport, after receiving several unsolicited bids, they opted to build the infrastructure themselves and tender operations and maintenance, which was awarded to GMR-Megawide. Indonesia and Thailand have made their desires known vis-à-vis attracting private capital, however, until they have credible PPP policy frameworks in place (as India came to realise), we are unlikely to see much action on either front. A notable bright spot, Japan continues to forge ahead with their systematic programme to concession the country’s vast network of airports. Also, after years of political wrangling, India has advanced the long-anticipated Navi-Mumbai and Mopa-Goa greenfield projects with awards to GVK and GMR respectively.


SPECIAL REPORT: THE CAPACITY CRUNCH Cambodia has also awarded rights for development and operation of the new Siem Reap airport to Chinese stated-owned Yunnan Investment Holdings. The South Pacific island nation of Palau meanwhile reached a deal with Japan’s Sojitz, Japan Airport Terminal Co Ltd and Haneda Airport to invest in and operate the country’s main airport. Finally, what seemed impossible up until a few years ago, Myanmar opened the Hanthawaddy greenfield project up to private investment, awarding rights to Incheon and its Japanese partners – subject to financing – to develop and operate the new airport.

Latin America and the Caribbean Primary transactions were few and far between in Latin America last year, other than the long-awaited third round of Brazilian concessions – Fraport secured Fortaleza and Porto Alegre, while VINCI picked up Salvador and Zurich took Florianopolis. Market interest was muted – only Fraport, VINCI and Zurich responded – due largely to the ‘lavo jato’ scandal. Many potential bidders were also turned-off by what was viewed as unrealistic concession terms set by the government. We shall see what the fourth round has in store, with 10+ regional airports potentially up for grabs including Goiânia, Recife, Vitória and Campina Grande. The Caribbean enjoyed some success with the sealing of a deal for the redevelopment of Bermuda’s LF Wade International Airport – the Canadian Commercial Corporation (CCC) and the Aecon Group will deliver a new terminal after signing a contract with the Bermudan government – while Jamaica’s second attempt at a concession of Kingston is still in process, with award anticipated by mid-2018. The region saw fairly brisk trade in the secondary market, including San Juan, Puerto Rico, where Oaktree Capital sold its 50% stake in the venture to fellow shareholders ASUR and PSPAviAlliance. Around the same time, ASUR also negotiated the purchase of a majority shareholding in Colombian private airport operators Aeropuertos Oriente and Airplan. Meanwhile, embattled Odebrecht moved to offload its 60% stake in Brazil’s Rio de Janeiro-Galeão International Airport. The Viracopos (VCP) investors also decided to throw in the towel, citing a sluggish growth in the wake of Brazil’s protracted political and economic crisis. According to VCP’s traffic forecast, the airport was expected to be handling close to 18 million passengers per year by now but has been struggling to achieve half this volume.

Canada and the United States Some would say it’s been “much ado about nothing” in Canada, however, the informed word has it that this one still has some spark. The Trudeau government floated a trial balloon back in 2016 to gauge industry/public reaction and, predictably, airlines and labour voiced opposition to any form of airport privatisation. Many of the not-for-profit authorities, the quasi-commercial entities running Canada’s main airports, weighed in against the plan as well. Toronto was the notable exception, perhaps seeing privatisation as the best chance to realise its global mega-hub ambitions and most viable route for financing its regional multi-modal transport objectives.

By contrast, the United States finally seems to be coming out of the woods to embrace the PPP model as a viable means to fund airport terminal and ground transportation infrastructure. Full airport privatisation in the US, however, is still a long way off. That said, the highly touted Trump infrastructure plan relies heavily on OPM (Other Peoples’ Money), so could we see some warming to a more UK-style approach? Anyway, with the LaGuardia PPP project for the new Central Terminal B well underway; Denver following in its footsteps for its Jeppesen Terminal revamp; and the LAX People Mover project forging ahead; others including St Louis, Kansas City, San Antonio and Nashville are starting to put their toes in the water. As for the hotly debated Westchester project, it remains to be seen whether this deal will make it across the finish line, given the polarised local politics at play. At the same time, smaller projects such as Austin-Bergstrom, Seattle’s Paine Field and the San Diego–Tijuana Cross Border Xpress have quietly plotted separate paths to success with varied models of private sector participation.

Commonwealth of Independent State (CIS) and the Middle East Saudi Arabia has been the hotspot for airport privatisation in the region driven by the Kingdom’s ‘Vision 2030’ strategy. In the first wave, concession rights for Jeddah were awarded to Changi Airports International (subsequently terminated in February 2018 for reasons yet unknown) with Ta’if going to the Munich-Airport led CCC consortium, while TAV secured Qassem, Hail and Yanbu. Ultimately, Saudi Arabia aims to concession all of its 27 airports by end of 2018. Iran also announced its ambitious plans for concession of Mehrabad, Imam Khomeini, Tabriz, Mashhad, Isfahan, Kerman and Shiraz airports. VINCI Airports is leading the charge, having already signed MOUs for Mashhad and Isfahan, back in 2016. Changi – through subsidiary Changi Airports International – and a group of local Russian investors reached a deal in late 2016 to buy a controlling stake in Vladivostok Airport from Sheremetyevo Airport. Upon clearing regulatory hurdles in February 2017, the group acquired control of 100% of the terminal operating company and 52.16% of the airport operating company.

Africa The African continent show some encouraging signs with Rwanda signing a concession agreement for the development and operation of the new Kigali airport, while Liberia moved forward with a plan to concession for Roberts International Airport. Nigeria, on the other hand, remains mired in a heated debate with labour unions and other fierce opponents to the government’s planned concession of Lagos, Abuja, Port Harcourt and Kano airports.

The final word So, to sum it up, the buying game saw many players making moves across the board in 2017 – however, much like the year before, it was by no means a record-breaker for primary or secondary transactions. That said, there is ample cash and ambition in the market, so the year ahead promises to be an exciting one despite – or as some may argue, thanks to – a highly dynamic and unpredictable milieu of geopolitics and social change.

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SPECIAL REPORT: THE CAPACITY CRUNCH

Learning curve Kevin Caron, ACI World’s director for capacity building programmes, explains how ACI’s training and development programmes can help airports enhance their capacity.

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e often talk about the incredible value of training: when it is done right, it results in motivated employees who contribute to the success of our business, be it an airport, airline, air navigation service provider or civil aviation authority. I would propose we consider a more holistic approach to training and contemplate the term ‘capacity building’. Ensuring we are on the same page, I would refer to the United Nations Development Programme (UNDP) definition and then adapt their approach to how ACI provides capacity building to our members. The UNDP defines capacity building as a “long-term continual process of development that involves all stakeholders; including ministries, local authorities, non-governmental organisations, professionals, community members, academics and more”. It goes on: “Capacity building uses a country’s human, scientific, technological, organisational, and institutional and resource capabilities. The goal of capacity building is to tackle problems related to policy and methods of development, while considering the potential, limits and needs of the people of the country concerned.” They further refine this definition into three levels that we have adapted at ACI to make this relevant to our role in serving our members.

Employee level This requires the encouragement of conditions that allow individual participants (at all levels) to build and enhance knowledge and skills. This is defined by the various tools that learning and development professionals have at their disposal, such as training, staff exchanges and mentoring. To meet this need, ACI provides classroom and online airport education and the training programmes. Under the auspices of capacity building, we have two other programmes: – The Airport Excellence (APEX) Programme conducts peer reviews based on ICAO Standards and Recommended Practices (SARPs) in safety and security, by sending airport experts from around the world to conduct a one-week on-site review. – The Executive Leadership Exchanges Programme (ELEP). This new programme is being led by ACI’s five regional HR and Leadership

Committees and is targeted at executive-level staff. ELEP, which will be launched this year, will aim to have airports exchange executive staff to allow for peer-to-peer learning over a fixed period.

Airport organisation level This involves supporting airport members, via committees and programmes in the process of enhancing their specific activities such as customer experience, safety and security. The organisational capacity building approach is used by airports to develop internally so they can better fulfil their defined mission. Standing committees – These committees are mandated by the ACI Governing Board to provide guidance and council and help shape current policy issues for Governing Board endorsement in their areas of expertise. Programmes – ACI has several programmes at benefit this organisational level such as the previously mentioned Airport Excellence (APEX) and Global Training.

Airport customer level This supports the establishment of a more interactive public administration that learns equally from its actions and from the feedback it receives from the travelling public (i.e. the customers they serve). ACI’s Airport Service Quality (ASQ) customer experience programme is the world-renowned and established global benchmarking programme that measures passengers’ satisfaction whilst they are travelling through an airport. There are yearly ASQ forums which enable airport experts to exchange ideas with other industry experts on new and emerging trends in customer experience. Our approach to capacity building has led us to take different approaches to provide as many learning opportunities as possible for both the individual and the airport member. With this approach, ACI has embarked on a voyage that will set a course for increased success in achieving airport excellence for the foreseeable future.

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Pilot study Alpha Aviation Group’s Bhanu Choudhrie warns of the global economic and social consequences of the impending pilot shortage.

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ne Thursday last September, Davide Casa di Bari was preparing for the biggest flight of his life. In three days’ time he was due to marry his sweetheart, Sandra, in a picturesque Italian coastal city. Along with ten other wedding guests, the bride and groom were scheduled to fly from Germany to Italy that evening. Just hours before the party was due to depart, disaster struck, the Ryanair flight was cancelled. Having been informed of the cancellation by his sister, Davide was convinced it was a prank and hung up. It soon became clear this wasn’t a joke. Sandra broke down into tears. There weren’t enough seats on alternative flights to get everyone to the wedding in time. The only alternative was an epic 1,000 mile, cross-border two-day drive in a hired van, carrying the bride, groom, best man, bridesmaids, mother of the bride and the wedding dress. The trip ended up costing a further €2,000. And whilst the couple were happily married on schedule, they vowed to never fly with Ryanair again. Over 400,000 other travellers were also affected when Ryanair cancelled tens of thousands of flights last Autumn. The reason behind the cancellations? Various pilot scheduling and holiday rota issues, coupled with an underlying belief – from Ryanair employees themselves – that the airline simply doesn’t have enough pilots. The increasingly urgent need for more commercial pilots isn’t breaking news. Driven by years of growing developing economies and middle classes, and the rise of low-cost carriers that make flying more affordable, fleets have been expanding and more pilots are required.

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According to the latest Boeing predictions, 637,00 more over the next eighteen years to be exact. Geographically, the greatest demand derives from Asia-Pacific, which will require 253,000 more pilots by 2036 (equating to 40% of the global demand). In no other region is the burgeoning middle class and the expansion of budget carriers, such as AirAsia and Cebu Pacific, placing such a strain on pilots: last year demand to fly across APAC grew nearly 10%. At the same time, alarmingly, the aviation workforce continues to contract. The financial barriers to entry to becoming a pilot remain high; obtaining an Airline Transport Pilot Licence (ATPL) can cost upwards of £100,000, with the burden of costs increasingly falling on the pilots themselves – often with no assurance of a job at the end of the training process. As the Secretary General of the International Civil Aviation Organisation (ICAO) also recently noted, aviation faces increased competition from other growing sectors for ‘up-and-coming’ talent. Increasing numbers of baby boomer pilots will also be retiring in the coming years. The potential outcome of all these factors is a perfect storm of growing demand and falling supply, the consequences of which could be catastrophic. Not just for the aviation industry itself, but for wider global economies. For the industry itself, the effects of the shortage are already being felt. In early 2016, regional US airline, Republic Airways, filed for


SPECIAL REPORT: THE CAPACITY CRUNCH

bankruptcy protection, citing “loss of revenue…associated with grounding aircraft due to a lack of pilot resources”. SeaPort Airlines in the US was then next to fold, before Horizon Air was forced to cancel hundreds of flights last autumn due to a lack of pilots. In Norway last summer, thousands of passengers were left stranded when Norwegian cancelled flights due to understaffing. Air Do, a Japanese regional carrier, and both Qantas and Airnorth in Australia have also recently cancelled regional flights due to pilot shortages. The list goes on. For consumers, the shortage may well result in both increased cancellations and a higher cost to fly. To help counter the shortage in the immediate term, some Middle Eastern commercial airlines started offering far more attractive salaries than their European and American counterparts in the past ten years. The money has now flowed to Asia, with some Chinese airlines offering up to £354,000 per year tax free to entice senior pilots. The consequence, however, is that these increased costs to the airlines are likely to be passed on in the form of higher ticket prices. But it is across burgeoning and growing economies – such as those in South-East Asia – that the impact of the pilot shortage will be most extensively felt. With the rise of globalisation in recent decades, travel and tourism – underpinned by aviation – have become catalysts for economic growth.

A good example of this is Vietnam, which in recent years has experienced some of the fastest GDP per capita growth in the world, hand-in-hand with a booming tourism and travel industry. In 2007, 4.1 million international tourists visited Vietnam; last year it was 13 million, a hike of two-thirds in just a decade, with 29% year-on-year growth between 2016 and 2017. Vietnam’s middle class is similarly flourishing and predicted to double between 2014 and 2020. The nation’s budget airline, VietJet, is also booming and recently announced plans to serve 45 domestic and 36 international routes by 2019. It’s a remarkable growth story considering the airline only started operations at the end of 2011. With international trade, foreign direct investment, tourism and indeed wider globalisation largely facilitated by aviation, a pilot shortage directly threatens the socio-economic growth of developing nations across the globe. Indeed, this issue isn’t limited to just Vietnam or ASEAN; the Middle East, Asia, Africa and South America also face the threat of an increasingly insurmountable shortage of pilots. And satisfying this demand will require a concerted industry effort – from airlines, regulators and pilot training providers alike. One route would be to formalise the courses that aviation authority approved training organisations offer into airline-specific cadetship programmes, so that cadets are trained to meet both the standard and specific airlines’ requirements. Doing so will accelerate the supply of qualified pilots, and critically lower one of the critical barriers to entry: the high cost of pilot training. Through cadetship programmes, financing options – provided by partner banks and other financial institutions – ensure better access to loans and study now pay later programmes, opening opportunities for a wider range of cadets. Furthermore, the shortage can also be addressed by ensuring more women are encouraged to enter the cockpit. Currently, just 3% of commercial pilots worldwide are women, and it is vital that both airlines and private training schools do much more to utilise the untapped potential of budding female pilots. Thirdly, more streamlined training qualifications such as the MPL (Multi-Crew Pilot Licence) can help accelerate the training process. As cadets are trained according to the requirements of specific airlines, they are fully equipped for the job when they graduate. The whole transition from cadet to pilot is more seamless. By taking advantage of technological advancements to train fully capable pilots in less time, the MPL offers a path for continued adaptation and optimisation of pilot training processes – whilst still ensuring pilots are fully equipped with the specific skills they need. Growth in emerging market and developing economies is projected to strengthen to 4.5% in 2018. Moving into the 2020s and beyond, it will be imperative that airlines are furnished with the pilots they need to ensure that the high levels of development across emerging economies can be sustained. AW

About the author Bhanu Choudhrie is the founder of Alpha Aviation Group (www. aag.aero), a global provider of aviation training solutions for the airline industry. The company trains hundreds of new pilots for its airline partners each year.

AIRPORT WORLD/FEBRUARY-MARCH 2018

33


CYBER SECURITY

From top to bottom Dominic Nessi suggests that the time is right for airports to take a new ‘top-down/ bottom up’ approach to cyber security.

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f you are an airport executive, you may be wondering what it takes for your organisation to become completely cyber secure. Well, the first thing to understand is that you can never be completely cyber secure. And, even if you could figure out how to do it, it would be short-lived as your airport’s technology environment changes daily at the same time that new vulnerabilities occur, and new threats emerge. So now you may be wondering how you can effectively manage the continual investment your technology department is requesting and/ or making in new cyber security tools. Fortunately, there is an approach that you can take to give yourself at least some level of confidence that you are taking the steps necessary to address this formidable issue that has become an important part of your management challenge.

Two key concepts To begin, there are two quick concepts to understand. First, cyber security includes a number of concerns not always considered. Think of the acronym CIA, which stands for confidentiality, availability and integrity. When protecting your organisation, you need to consider all three. Confidentiality is the most straightforward and is the protection of your most sensitive, private and critical data. Availability is ensuring that your systems are running whenever you need them, especially your mission-critical systems. Integrity is assurance that your data has not been tampered with, altered and is complete and accurate. All three are necessary to have a cyber secure environment. The second concept is that your technology environment follows the second law of thermodynamics, which basically states that everything, without exception, will deteriorate unless additional energy is provided. Your cyber security environment will deteriorate in the face of inaction. As said above, new threats emerge, your environment changes exposing new vulnerabilities and your risk picture degrades. You must actively continue to manage the environment, take the needed actions, and assure yourself (and your Board and the public and everyone else who has a stake in your airport) that you have taken due care in managing this difficult question. So, what do you do? The most common reaction is to give your IT department a pot of money with the direction to ‘fix’ the issue.

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I call that ‘attacking the middle’, and the result is that you have made an investment and you really don’t know if it was effective or not. And, more than likely, the IT department will be back the next year asking for another investment and, if provided and the dollars spent, you still won’t know how your investment has changed your risk position.

Clear and present danger Before we go any farther, let me dispel the idea that a cyber security attack cannot happen to an airport. It can. It has happened to airports all over the world and the attacks have taken the form of malware, data breaches, denial of service attacks, advanced persistent threats, and disruption of critical operations. Furthermore, there are bad actors out there who don’t even care that you are an airport. They are simply looking for unguarded IT environments to steal your processing resources for their own purposes, including your computer power, to launch attacks against other organisations. Back to the solution. As already stated, the traditional approach has been to attack the middle, which may cost a lot of money and time, with no measuring stick as to how effective the expenditure may have been. Here’s an alternative, which I call the ‘top-down’ or ‘bottom-up’ approach. In this approach, you should take nine steps ‘top-down’ and nine steps ‘bottom-up’ which are either free or low in cost, with one exception. Most of them are IT best practices for any environment, even if cyber security was not an issue and should be practiced by every modern organisation using technology in the operation of its business.

Top-down The ‘top-down’ approach starts at the top. Not the head of the IT department, but the airport director or chief executive level.


CYBER SECURITY 4.

5.

Reponsibility for cyber security is shared by every airport department and all have a stake in ensuring that cyber security priorities are achieved. 1.

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Governance – every single department from human resources, risk management, accounting and security are at risk from cyber crime, so the heads of each have something to gain if cyber security is carried out well, and to lose, if it is not. The creation of a cyber security governance committee is a simple, free way to get all of your key managers on the same page regarding cyber security. Maybe the first year you meet quarterly and, after that, semi-annually is usually sufficient unless something unusual has occurred which needs addressing. Education – The governance group is not going to become cyber security experts, but they need to understand the threats that their own organisation is facing and some of the general trends occurring in the cyber security world. Some party, typically the IT department, should be charged with providing regular updates on organisational cyber security activities as well as a periodic update on what is happing in the technology world. Another free step. Framework – This sounds ‘exotic, but it is not. There are numerous cyber security frameworks in existence, most commonly the ISO 27000:27013 series. In the simplest terms, it is a target which your organisation can use to measure its own cyber security activities, practices and status. The value of a framework is that you can use the entire framework, just the elements that apply to your organisation, or a more limited sub-set when you begin. It has best practices that will help you take the necessary steps to improve your cyber security environment. Choosing a framework and applying it to your own IT practices has no cost.

6.

7.

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Risk Management – This is the only one of the 18 steps being provided that may have more than a nominal cost. A risk assessment can be done internally and be very effective, if you have personnel with the required expertise. However, an internal assessment may also suffer a ‘blindspot’ where certain internal practices are just considered acceptable when, in reality, they are not. One of the most important decisions the cyber security governance committee should consider is how to best conduct an objective, comprehensive risk assessment of all airport systems, its network environment, its organisational policies and procedures, and every other aspect of its operation that has a bearing on its cyber-safety. The typical risk assessment ranks potential threats and vulnerabilities to provide a clear, easy-to-understand risk picture. Reasonable Response – Once the risk assessment is completed and submitted to the cyber security governance committee, decisions need to be made on the highest rated risks. It is not necessary or even possible to address all vulnerabilities at once. A well-planned approach identifies the necessary personnel to address the vulnerability, determines a time frame to complete the mitigating work and allocates the necessary funding. The actions taken by the committee usually amount to one of the following. Mitigate the risk by taking the necessary actions to reduce the impact. Avoid the risk by changing business practices which result in the risk no longer being present. Accept the risk when the cost outweighs the impact. Transfer the risk by giving it to a third party who then becomes fully responsible for the process. Business Continuity and Disaster Recovery – This is a simple one for cyber security governance committee. Executive management’s role in these two critical functions is support. The IT department must do the heavy lifting to ensure that, in the face of a cyber-attack, the business has a plan to quickly recover and continue to operate. Of course, the cyber security committee must also ensure that these plans exist and are routinely practiced. Data Governance Policy – This is another easy step. All data is not equal. The cyber security governance committee needs to ensure that all of the data in the organisation is classified in a manner that prioritises security on data which has a sensitive or personal nature. It needs to specify how the data is stored, when it may be disposed and the manner in which it is destroyed. It should also detail all of the proper uses of the information, internal and external to the organisation. Forensics Response – Another fairly simple step. Every organisation needs a policy which states what happens when a cyber security incident is suspected or verified. There are specific steps that must be taken based on the nature of the incident. Internal administrative violations may involve human resources and public safety. Anything of a serious nature, especially incidents which may be a crime, must immediately be referred to law enforcement. In either case, the most critical step is a detailed step-by-step approach on how to gather and preserve crucial forensic evidence.

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CYBER SECURITY

5.

6.

9.

Cyber Insurance – Simply put, consider whether or not you need cyber security insurance to protect your organisation and to protect third-parties that may have been impacted by your cyber security incident.

7.

Bottom-up The ‘bottom-up’ approach focuses on the lower echelons of the organisation and the day-to-day functions and best technology practices that everyone should carry-out. However, even though they are ‘bottom-up’, these activities still need to have visibility with airport management. 1.

2.

3.

4.

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Cyber security Awareness Training – this is perhaps the easiest recommendation. Every employee in the organisation needs annual cyber security training, which stresses the importance of basic cyber security safeguards and reminds personnel of the dangers associated with social engineering – a common threat vector of the bad guys. IT Employee Training – While the above step recommends basic cyber security awareness training for the entire organisation, this step stresses the need for training of the IT department itself. The concept that you only need one expert in cyber security is antiquated and ineffective. Every technology employee must understand how to practice cyber security in the execution of their normal daily duties. Empower Cyber Security Team – If your organisation is large enough to have a dedicated cyber security team, don’t waste them. Instead, empower them and give them the freedom to be objective in evaluating every aspect of your airport’s cyber security practices – even outside the IT department. Lock Down Exercise – I recommend that you set aside one day every year, usually during National Cyber Security

AIRPORT WORLD/FEBRUARY-MARCH 2018

8.

9.

Awareness Month in October, where one day of the IT department’s time is dedicated to reviewing all of their internal practices, policies, procedures and activities to ensure that they meet the standards of the cyber security framework which the organisation has adopted. Each IT employee should provide a report of their findings, activities, and promised actions to address any deficiencies that were found. Asset Inventory – This is an easy one in concept, but often proves to be a challenge in reality. You must have an asset inventory of all of your hardware, software and firmware. You cannot possibly ensure yourself that you have addressed every potential vulnerability unless you know everything that makes up your IT environment. Formal Patch Programme – With the inventory in hand, you must beware of any published vulnerabilities as soon as they occur and implement patches, practices, or, in the case of zero-day threats, take you systems off-line until they can be operated safely. A successful patch programme requires proper testing, timing the patch at a time when the operating environment can best accept the change into the environment, and, finally, test the result of the applied patch to be sure it doesn’t have any unintended consequences. Review Data Sets – You have already created a data governance policy. Now check that they are being followed. Review all databases and systems against the data governance policy to ensure that all data is being handled in accordance with the policy. Change Management – Remember the Second Law of Thermodynamics? You must have a system that records every change made in your IT environment. The simplest changes can have the most disastrous impacts if not properly conceived or executed. The only way to correct unexpected errors is to have a complete record of everything that has been changed to determine the root cause of the issue. Secure Physical Space and Systems – The availability of your data systems is based on them being maintained in secure, environmentally safe settings with redundant power and protection against any natural or man-made threat. In this final step, cyber security and physical security are blended to ensure your IT environment is always available when it is needed.

So, you now have nine ‘top-down’ and nine ‘bottom-up’ practices that are the foundation of your cyber security programme. Once implemented, you will have a far better idea of how cyber secure your environment is and where to make future investments. Then, you can ‘attack the middle’.

About the author Dominic Nessi is the senior technology advisor to Burns Engineering’s aviation consulting practice and founder of AeroTech Partners. He can be contacted at dnessi@aerotechpartners.com

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RETAIL/F&B NEWS

Hold the mayo! Airport World rounds-up some of the latest travel retail and duty free developments at gateways across the globe.

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slo Airport has come up with a novel way of feeding and entertaining passengers waiting for fights in the Schengen Area of the terminal – five food trucks serving up a variety of dishes from different corners of the globe! Introduced under the banner of a ‘Food Truck Festival’, the five trucks serve everything from Neapolitan pizza and soft rolls with egg and bacon to mini burgers and authentic Mexican food, in addition to a host of different drinks. “The Food Truck Festival is a concept inspired by global and Norwegian food trends,” explains the airport’s commercial manager, Per Rune Lunderby. “The festival is designed to inject an urban, vibrant atmosphere inspired by the streets of Oslo, into the airport. We’re hoping it will deliver a great experience for travellers.” Per Christensen, managing director of concessionaire, HMSHostUmoe F&B Company, enthuses: “We are pleased that we can offer international street food with menus that vary both in size and in price, featuring food that can be served directly from the truck. “You can either eat in the large restaurant area on the second floor or take your food with you to the gate or onto the aircraft. The food is served in a way that makes it easy to take with you on board.” The trucks comprise Pizza Wheel (Neapolitan pizza); Number Juan (Mexican street food); Joyride (Smoothies, salads, sandwiches and fruit); Egghead and Roasted (Rolls filled with egg, bacon, pulled pork and other meats); and Tailgate (A variety of light bites and drinks).

Turning to technology Texas-based retail development company, CBI Retail Ventures, claims to have opened one of largest and most technologically advanced duty-free store in the Western Hemisphere in Terminal D at Dallas/Fort Worth International Airport (DFW).

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Indeed, it claims that the new 19,000-square-foot TRG Duty Free outlet offers DFW’s visitors an “unparalleled experiential shopping environment that masterfully integrates world-class retail, exclusive high-end local brands, VIP concierge services, cutting-edge technology, and world-renowned art all in one location”. The store comprises ‘shopping’ on the ground floor and a mezzanine level featuring an area to relax and unwind complete with comfy seating, iPads with interactive apps, and elevated work stations. More than $2 million has been invested on dynamic digital displays, state-of-the-art control rooms and interactive technology with multi-lingual content. While semi-circular “immersive promotional pods” are filled with floor-to-ceiling digital monitors for seamless videos, advertisements, and brand launches. Retail offerings include the first Armani Exchange store located inside the secure space of an airport; the first Ulysse Nardin watch boutique located within a duty-free environment in a North American airport; and brands aplenty ranging from Estee Lauder, Dior, Lancôme and Prada to Paco Robanne, Gucci, Bvlgari and D&G. “We are proud to not only have developed the largest duty free store in the western hemisphere, but also have designed a first-of-its-kind immersive store experience at DFW Airport,” said Steve Flory, chief executive officer at CBI Retail Ventures. “The end result reflects the convergence of entertainment and retail, as well as the coming together of digital and physical experiences. “This truly marks the pinnacle of DFW’s goal of being a worldclass global super hub. It is a blend of international couture, state-of-the-art technology, and luxurious services — all while capturing the spirit and beauty of modern Texas.”


RETAIL/F&B NEWS From Russia with gifts

Latin rhythm

Travel Retail Domodedovo (TRD) has won the tender to become the exclusive duty free operator in the new International Terminal at Moscow’s Domodedovo Airport. The concession, which starts in June 2018, will result in it operating, managing and developing around 7,000 square metres of duty free outlets in the terminal for the next seven years. TRD, a joint venture between Gebr Heinemann and its local partner Greenway, already operates two duty free shops and three duty paid outlets at Moscow’s second biggest airport. “Over the years, TRD has established itself as a reliable and competent duty free operator, and we will continue to expand this competence in the coming years and present a comprehensive and varied range of duty free products to passengers at Domodedovo,” explains Oleg Zhytomyrsky, director of sales for Russia/CIS at Gebr Heinemann. “We are delighted at winning this tender, which is a great confirmation of our entrepreneurial commitment in Russia.” When it opens, the new terminal will handle all international flights to Domodedovo allowing the existing passenger complex to operate as a domestic facility. The contract win means that TRD plans to “gradually and significantly” increase its number of staff at the gateway. The future duty free area will comprise a large main area of approximately 4,000sqm in the form of a walk-through shop directly behind the security checkpoint and two large areas for various fashion and accessories boutiques.

HMSHost has responded to the growing demand for Latin cuisine and high-end tequila dining across North America by introducing its own concept, La Familia, at Los Angeles and Fort Lauderdale airports in the US, with additional locations in the works. It describes La Familia as “a vibrant cocktail bar and restaurant where travellers can sample delicious flavours from across Latin America, enjoy contemporary craft cocktails, and treat themselves to an impressive assortment of select tequilas”. La Familia means “the family” and, as the name suggests, the restaurant invites guests in to eat in a lively environment as part of the family. Its menu offers staples such as Baja beer battered fish and fire roasted chicken tacos to dishes such as arepas de carne asada, pork belly tamal, and arroz con pollo. “Latin America is a wonderfully diverse region with a varied and rich culinary landscape,” says HMSHost’s executive vice president of restaurant development, Stephanie Havard. “We created La Familia to give travellers a true taste of this diversity with a variety of flavours and on-trend regional specialities, coupled with an expansive menu of select tequilas and an edgy, art-forward design. The sights, sounds, and aromas of La Familia create a truly unique dining experience and we look forward to delighting our guests – and their senses – with this latest creation.”

Popping up in Hamburg Swedish watch manufacturer, Daniel Wellington, is the new tenant of the pop-up store at Hamburg Airport. The brand has become famous around the world for its minimalistic and elegant designs of men’s and women’s watches and will rent the 23sqm pop-store by Gate A17 for around six months. “The collaboration allows us to present our entire range, making direct contact with our customers,” says Daniel Wellington’s retail operations manager for Germany, Felix Hilger. “We are looking forward to positive collaboration at Hamburg Airport.”

Retail revamp for Montego Bay gateway Jamaica’s Sangster International Airport is planning a major revamp of its retail offerings as part of the planned upgrade of its terminal. Operator, MBJ Airports, has chosen The Design Solution to come up with a new look for the airport and is confident that its creative designs will appeal to passengers and boost the Montego Bay gateway’s commercial revenues. Airport CEO, Rafael Echevarne, says: “Like most airports, we are constantly seeking the optimal commercial return on our investment in our terminals, particularly through driving retail footfall and penetration.  “We are committed to creating an amazing experience for our passengers and are delighted that The Design Solution has created an adaptable new layout that not only drives our commercial imperatives but also delivers a unique and authentic expression of our island.” The new 6,500sqm development is expected to be undertaken in 2018-19 and deliver an “engaging environment that is AW unmistakably Jamaican in spirit”.

AIRPORT WORLD/FEBRUARY-MARCH 2018

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INDUSTRY RUNNINGNEWS HEAD

Turning to technology AOE’s CEO and founder, Kian Gould, considers how airports can counter travel retail disruption through digitalising their business models.

T

he way we travel, and shop at airports, continues to evolve, and increasingly technology holds the key to boosting retail sales in this ever-changing environment. Travel retail is down across the board, with the Asia Pacific region being the only exception – an exception caused only by an increase in downtown duty free sales of nearly 18%. At the same time, the shopping habits of passengers have changed dramatically, with ‘planned’ purchases now accounting for more than 70% of all sales, while ‘impulse’ purchases have dipped to below 30% – the complete opposite of the traditional buying model. Add the omni-presence of smartphones and tablets into the mix – there are more mobile devices worldwide (nearly five billion) than toothbrushes (4.2 billion) – and it is obvious that the traditional retailing model of focusing on in-store shopping at airports can no longer deliver the profit margins that airports require to make them less dependent on landing charges.

3.

Low traffic acquisition costs: The costs for acquiring new customers is also lower at airports than in traditional e-commerce or retail environments; major hubs literally have tens of millions of potential, freely convertible, customers.

Of the major stakeholders in non-aviation revenue, something we call the new ‘quaternity’ of travel retail (airports, airlines, duty free retailers and brands), airports are the logical choice as the digital marketplace provider. Why? Because if an airport’s duty free retailer such as Heinemann or Dufry loses the concession, then the airport no longer has a marketplace if that retailer provided it. Similarly, if the airline changes or no longer flies to a given airport, then the marketplace is also gone. Brands come and go as well; the airports are the only constant. Thus, airports are the logical option as a marketplace provider for generating new non-aviation revenue streams. In this role, they can collaborate with all the other stakeholders under one umbrella to create an omni-channel customer experience.

Airports as digital marketplaces One key solution to these challenges is for airports to adapt to the changing consumer environment, evolve into digital ecosystems and collaborate with service providers that think outside the box. These ecosystems combine both the physical and digital worlds to provide customers with omni-channel marketplaces for digital shopping, procuring convenient services and flexible payment options. Airports that are digitalising their businesses and creating new customer touchpoints, such as Frankfurt, Heathrow and Singapore Changi, are already beginning to see positive effects on both revenues and customer satisfaction. Airports have three main advantages when digitalising and using e-commerce as a centrepiece of their new business model for generating and growing non-aviation revenue: 1.

2.

Immediate product availability: Many customers still prefer to hold products in their hands, especially pricier ones, before purchasing. A digital marketplace can provide the option for a customer to search and choose an item and then see it in-store before buying. Low cost of returns: Once a customer completes the purchase, the likelihood of goods being returned in an airport environment is very low, thus decreasing overall costs for retailers.

A future of unobtrusive e-commerce In this model, the airport becomes a true digital marketplace, providing more than just a retail platform for customers. It becomes the centrepiece of what we call ‘Unobtrusive E-commerce’. Unobtrusive e-commerce is third generation E-commerce (the first being retailers such as Macy’s and the second being platforms such as Amazon). The idea behind this form of e-commerce is that customers don’t even notice that they’ve just spent money on something. For example, say you are running late and are in danger of missing your flight. Your phone asks you if you want to buy a Fast Track service. You confirm with a click – and you’re done. The service is paid for automatically, as people are used to from Uber and similar services. This is what interacting with the airport should look like. It’s convenient, it’s simple and it offers added value to the airport, all other stakeholders and customers alike. All of this truly puts the airport into the driver’s seat again. By building a digital marketplace, airports can establish themselves as hubs for customer engagement. In doing so, they can generate significant non-aviation revenue streams, decrease costs and create long-term customer loyalty. AW

AIRPORT WORLD/FEBRUARY-MARCH 2018

41


PROJECT WATCH

Louis Armstrong New Orleans International Airport The airport’s new $1 billion North Terminal is on target to open in February 2019. project details Location: New Orleans, USA Important developments: New North Terminal Scheduled completion: February 2019

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ith construction milestones being set on a regular basis, Louis Armstrong New Orleans International Airport’s eagerly awaited new North Terminal is now 60% complete and on target for a February 2019 opening. Conceived as a major economic driver for post-Katrina New Orleans, the new North Terminal has been called “the most transformative project for New Orleans since the Superdome” by Mayor, Mitch Landrieu. The approximately 800,000sqft terminal will replace the airport’s outdated, operationally inefficient terminal with a modern, 35-gate international complex with a projected economic impact of $6.4 billion in local spending. Being built on the north side of the airport site, the new terminal will boast nearly 80,000sqft of concessions space providing plenty of shopping and dining opportunities for passengers and much needed revenue for the Louisiana gateway. Indeed, Louis Armstrong New Orleans International Airport (MSY) believes that the retail/F&B outlets with café like spaces at the heart of each concourse will be integral to ensuring that the ‘spirit of the New Orleans’ is represented throughout the terminal through “sights, sounds and smells that reverberate all the best in our city”. Other facilities designed to enhance the passenger experience include a consolidated checkpoint offering greater ease and efficiency for passengers going through security and an inline baggage system where passengers will just drop off their checked baggage at the ticket counters.

LEO A DALY worked with joint venture partner Atkins, design consultants Pelli Clarke Pelli and local firms Manning Architects and HewittWashington & Associates to design an iconic terminal for the city of New Orleans. According to the design team, the new terminal’s architectural form evokes the geography of the Delta region and the soft curves of the Mississippi with a symmetrical plan formed from gentle arcs on three sides. “A monumental roof rises toward the building’s centreline, where it crests over a large central skylight,” says LEO A DALY. “The terminal facades are primarily glass, with trellis-like shading used to evoke New Orleans’ distinctive architecture, while providing an optimal balance of daylight and thermal comfort.” The need for resiliency drove many technical innovations in executing the city’s first major public project since Katrina. For example, marshy soil two feet below sea level required 4,000 piles to be driven into bedrock, essentially creating an airport on stilts. The spherical roof shape was designed to allow long spans while accommodating heavy rainfall. While extensive wind-tunnel modelling and on-site trials were conducted to test the blast-resistant curtain walls’ ability to withstand category-4 hurricane winds. In addition to the new terminal, the $1 billion capital development programme includes the construction of a new storm water pump station, new airport road system and the relocation of airfield lighting and navigational aids. Other new facilities added in the development programme, but funded by third

Principal companies involved: LEO A DALY, Atkins, Pelli Clarke Pelli, Manning Architects, HewittWashington & Associates, HuntGibbs-Boh-Metrio, WSP, RS&H Total investment: Around $1 billion parties, include an aircraft fuel hydrant system and a new flyover interchange providing improved road access from the I-10. “The new airport terminal will be truly transformative for New Orleans and the Gulf South region,” enthuses MSY’s aviation director Kevin Dolliole. “Armstrong International is the gateway to the region, and the new facility will deliver a better arrival and departure experience than our current terminal. “The design is much more conducive to air travel with modern passenger amenities like an inline baggage system that will allow for more efficient processing and a consolidated checkpoint that will allow passengers to travel freely between concourses after going through security. “In addition to opening a new facility, this project also offers us the opportunity to redevelop the current facility on the south side of the airport’s property. “We are now conducting a study to determine the best use of the developable land, and we are engaging regional stakeholders in conversations about their plans, so our decisions are well informed.” MSY enjoyed a seventh successive year of traffic growth in 2017 when a record 12million passengers (+7.8%) passed through its facilities – 46% more than back in 2010.

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RUNNING WBP NEWS HEAD

The latest news from ACI’s World Business Partners

GRUPO BRITT Location: Heredia, Costa Rica Contact: James Carey E: info@morphotr.com W: www.brittshop.com Britt Shop specialises in developing and operating travel retail shops, with more than 130 stores in 11 countries. The company develops and manufactures its main coffee brands, gourmet chocolates and specialised items. In addition, Britt Shop also purchases art directly from local artisans, and custom designs the vast majority of products – incorporating them into its stores.

CONFIDEX LTD

HOK to design Toronto Pearson International Airport’s new regional transit centre The Greater Toronto Airports Authority (GTAA) has awarded the design contract for the new regional transit centre and passenger processing facility at Toronto Pearson International Airport to HOK, formerly known as Hellmuth, Obata + Kassabaum. The complex, which is expected to have a first phase opening in the mid-2020s, is part of GTAA’s master plan to upgrade its facilities to ensure that it is equipped to handle up to 85mppa by 2037. It is also expected to reduce road congestion in the region and provide greater access to jobs

and customers for businesses in the Greater Golden Horseshoe. HOK will lead a design team that includes WSP Engineers and Weston Williamson + Partners, with the design work beginning immediately. “This project will be transformational for Toronto Pearson by redefining the ‘front door’ of the airport, optimising terminal real estate, positioning the airport for the future, and improving the passenger experience for millions of travellers,” enthuses HOK’s director of aviation and transportation, Robert Chicas.

LaGuardia contract win for ADB SAFEGATE ADB SAFEGATE is to deploy its state-of-the-art Advanced Visual Docking Guidance System (A-VDGS) and SafeControl Apron Management (SAM) solution to ramp up gate operations at LaGuardia Airport’s new Central Terminal B. Skanska Walsh Joint Venture (SWJV), a key player in the largest PPP project ever undertaken for new transportation infrastructure in the US, awarded ADB SAFEGATE the contract. LaGuardia Gateway Partners (LGP) will design, build, manage and maintain the new $4 billion Terminal B under a 35-year lease agreement with LaGuardia operator, the Port Authority of New York and New Jersey (PANYNJ). “ADB SAFEGATE has immense credibility in the delivery of turnkey projects, and their expertise in the gate area was a deciding factor to bring them on

board for this project,” says Bob Cranston, SWJV’s project manager. To help the airport ensure consistent performance during normal or adverse conditions, ADB SAFEGATE will automate aircraft docking at the new 35-gate terminal by deploying 38 Safedock T1 A-VDGS and SAM. SAM uses the A-VDGS as intelligent sensors at each gate and will be integrated with the Airport Operational Database (AODB) and Building Management System (BMS) to provide the airport and other stakeholders with updated flight information, gate status and turn progress in real-time. “This is our fourth gate solution project at a PANYNJ airport and we are committed to making it as successful as the others,” notes Tim Duffy of ADB SAFEGATE Americas.

Location: Tampere, Finland Contact: Paul Broekhuizen, vice president for sales and marketing E: paul.broekhuizen@confidex. com W: www.confidex.com Confidex is a leading locationbased platform provider that enhances the passenger experience and increases operational efficiency at airports. As a passenger flow data aggregator, Confidex increases an airport operator’s insight with its in-depth understanding of passenger metadata.

USI INSURANCE SERVICES Location: Coral Gables, FL, USA Contact: Bruce Baker, president E: bruce.baker@usi.com W: www.usi.com Top ten largest insurance brokerage operation in the United States with an aviation specialty, which includes airports of various sizes. USI developed a proprietary claim management and predictive analytics platform, which is available to its clients. This programme provides some key required components in qualifying for FAA part 139 claims Safety Management System (SMS).

AIRPORT WORLD/FEBRUARY-MARCH 2018

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HUMAN RESOURCES

PEOPLE

matters The people crunch Terri Morrissey and Richard Plenty provide their thoughts on the importance of succession planning and talent management.

I

magine you are finding it difficult to get around. After careful thought you decide the best solution is to buy a new car. You spend weeks researching various options before choosing the model, find out the best way of financing the deal, investigate the cheapest suppliers, and after tough negotiation, agree a delivery date. The great day arrives, and you look proudly at the shining vehicle in the driveway. Now for driving lessons! It’s only then you discover there are very few instructors available and there is a very long waiting to take a driving test. You have invested in new capacity, but it can’t be used. A relevant example? Well, the theme of this edition of Airport World is the ‘Capacity Crunch’. This refers to pressure on space and operations and consequently the potential inability to meet the demand for travel. It typically means lack of physical infrastructure: terminals, runways, slots, planes. Long lead times for planning and construction compound the problem. Yet, there is another ‘crunch’ that is sometimes overlooked: having the people in place to manage and run the airport. Even if brand new infrastructure is designed and built, the parallel process of ensuring the right people, capabilities and talent are in place can often stall the operation, thus limiting its usefulness and the return on investment. In the fast-growing airport sector there is massive competition with other sectors for the best and brightest talent. Leadership succession is also a major challenge. There are increasing demands on the skills needed to run the complex,

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regulated, commercial and technical organisations that airports have become. Shortages in expert skill sets in technology and engineering run alongside gluts in areas where needs are declining, such as manual operations and administration. Even with the best intentions, it is not always possible to upskill or retrain existing staff – and it can be difficult to find people in the external market with the specialised knowledge and experience needed. What can be done about it? • Better workforce planning is part of the answer, even though this is not an exact science. Developments in technology, the economic environment, societal expectations and competition can make ‘supply and demand’ hard to predict. • Retaining and engaging people through creating ‘great places to work’, where contributions are recognised and valued, helps to ensure a viable talent pool. High attrition rates erode the capacity of the operation and place further pressures on the organisation to meet demand. • Succession planning and talent management, particularly for leadership positions and those roles critical for the operational performance of an airport, are essential. This means identifying key positions and then building a talent pipeline though individual development and training plans which provide opportunities for mobility, skills development, and increasing responsibility. Avoid the ‘People Crunch’ by investing time and resources in talent management alongside putting into place the future infrastructure. Or you may have to invest in a driverless car!

AIRPORT WORLD/FEBRUARY-MARCH 2018

Lester Sola is the new boss of Miami International Airport, succeeding Emilio González, who quit as the director and CEO of Miami-Dade Aviation Department in November after four-and-a-half years in the hot seat. Groupe ADP has made a number of key appointments in Q1 2018, they include Henri-Michel Comet being named as deputy chief executive officer and member of the executive committee; Régis Lacote as director of Paris-Orly Airport; and Christophe Laurent as deputy director of Paris CDG. Brisbane Airport Corporation (BAC) has announced that former executive and current president and CEO of New York-JFK’s Terminal 4 operator, JFKIAT, Gert-Jan De Graaff, will lead the company from June 2018. De Graaff will replace the long serving Julieanne Alroe who will retire from the company at the end of the financial year. Genelle Allen has been appointed interim CEO of Detroit’s Wayne County Airport Authority, replacing the outgoing Joseph Nardone who has taken up a new role as boss of Columbus Regional Airport Authority. In her new role, Allen will lead the airport authority, the independent governmental entity tasked with management and operation of Detroit Metropolitan (DTW) and Willow Run (YIP) airports, until the Board selects a longer-term replacement for Nardone. Dan Mann is Louisville Regional Airport Authority’s new executive director, succeeding CT ‘Skip’ Miller who retired in March after 15 years in the hot-seat. Mann joins from South Carolina’s Columbia Metropolitan Airport where he was executive director. In the UK, Liverpool John Lennon Airport’s new CEO is John Irving; AGS Airports Ltd has announced that Derek Provan will succeed Amanda McMillan as its new CEO and managing director of Glasgow Airport; and Dave Lees will quit the post of managing director at Southampton Airport this summer to become the new CEO of Bristol Airport.

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

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Airport World, Issue 1, 2018  

• Theme: The capacity crunch • Airport report: AviAlliance • Special report: Cyber security • Plus: The buying game & retail/F&B news

Airport World, Issue 1, 2018  

• Theme: The capacity crunch • Airport report: AviAlliance • Special report: Cyber security • Plus: The buying game & retail/F&B news