Airport World, Issue 6, 2021

Theme: Economics & Finance Airport report: Seattle-Tacoma Special report: WAGA review Plus: Route development & Digital airports

In the spotlight: Economics & Finance Volume 26 – Issue 6, 2021 www.aci.aero

OPINION ;OL THNHaPUL VM [OL (PYWVY[Z *V\UJPS 0U[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 Directors Jonathan Lee +44 (0)208 707 2743 jonathan@airport-world.com Gary Allman +44 (0) 7854 239 426 gary@aviationmedia.aero 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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Meet and greet Editor, Joe Bates, reflects on the return of in-person industry events, the continued challenges of the global pandemic and the ‘Economics & Finance’ theme of this issue.

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lthough it might not exactly feel like it right now, the final four months of 2021 were better for aviation and the world’s airports, with most US gateways reporting busy Thanksgiving holidays and traffic across the globe showing a marked improvement on the same period a year ago.

The upturn – albeit largely applying to domestic travel and before the emergence of the Omicron variant of COVID which has once again sent global alarm bells ringing – ensured the return of a number of in-person industry events for the first time since 2019.

These included the Customer Experience Global Summit in Montréal, Canada; ACI Europe’s Annual Congress and General Assembly in Geneva, Switzerland; and most recently, the ACI-LAC/World Annual Assembly, Conference & Exhibition in Cancún, Mexico.

In Mexico, ACI World director general, Luis Felipe de Oliveira, could not hide his delight at being able to host his first in-person World Annual General Assembly (WAGA) since joining the organisation in the summer of 2020.

Indeed, he mentioned how good it felt to physically meet up with colleagues and hold face-to-face discussions with them again several times during the event.

These included during his opening address, when he noted: “The fact that we are gathered under one roof here in Cancún is testament to the sector’s upward trajectory.”

You can discover more about some of the highlights of this year’s WAGA on pages 10-14 of this ‘Economics & Finance’ themed December 2021/January 2022 issue of Airport World.

The battle with COVID, of course, continues to present huge economic and operational challenges for airports as well as preventing the revival of international travel we all took for granted just two years ago.

The situation not being helped by individual countries continuing to act alone in their respective responses to the ever changing dynamics of the pandemic instead of working on globally agreed ways forward.

From December 7, for example, everyone travelling to the UK is required to take a PCR or lateral flow COVID test no more than 48 hours before departure – even if they are fully vaccinated – and take a second PCR test, booked before travel, within two days of arriving, self isolating while waiting for the results.

Karen Dee, chief executive of the UK’s Airport Operators Association (AOA) called the move “a devastating blow for aviation and tourism”.

In the themed section of the issue, ACI World’s vice president for economics, Patrick Lucas, pulls no punches in outlining the hugely damaging impact COVID has had on airport revenues and argues that the global economy needs aviation to recover sooner rather than later.

The section also contains stories about Ferrovial Airports’ business strategy and expansion plans; the economic balancing act facing airports as the aviation industry recovers; and TAV Airports’ decision to invest in Almaty Airport in Kazakhstan.

Elsewhere in the issue, we have features about innovative ways of rebooting airport retail/F&B; the new route development challenges facing Europe’s airports; how digitial technology is transforming the passenger experience; and ACI Africa’s secretary general, Ali Tounsi, reviews the impact the global pandemic has had on the continent’s airports.

Luis Felipe de Oliveira uses his final ‘View from Top’ article of 2021 to reflect on some of ACI World’s key initiatives of the past year.

Our main airport interview is with Lance Lyttle, the managing director for aviation at the Port of Seattle, who tells us more about the multi-billion dollar development of Seattle-Tacoma International Airport and the gateway’s ambition to be the greenest airport in North America.

We round out the edition with our usual human resources focused, People matters, column.

And with that, another year bites the dust!

Happy holidays everyone. Stay safe and I look forward to seeing you in person at an ACI event AW somewhere around the world in 2022.

AIRPORT WORLD/ISSUE 6, 2021

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CONTENTS

Theme: Economics & Finance Airport report: Seattle-Tacoma Special report: WAGA review Plus: Route development & Digital airports

In the spotlight: Economics & Finance

ISSUE 6 Volume 26

In this issue 3

Opinion

Editor, Joe Bates, reflects on the return of in-person industry events, the continued challenges of the global pandemic and the ‘Economics & Finance’ theme of this issue.

Volume 26 – Issue 6, 2021 www.aci.aero

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View from the top Director general, Luis Felipe de Oliveira, reflects on some of ACI World’s key actions and initiatives over the past year.

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Show business!

Airport World reviews some of the highlights of the recent ACI-LAC/World Annual General Assembly, Conference & Exhibition in Cancún.

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Sound plan Managing director for aviation, Lance Lyttle, talks to Joe Bates about the multi-billion dollar development of Seattle-Tacoma International Airport and the gateway’s ambition to be the greenest airport in North America.

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Industry outlook – past, present and future ACI World’s vice president for economics, Patrick Lucas, considers the impact COVID has had on the finances of the world’s airports and the economic challenges ahead.

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Investing in Almaty Airport World discovers that the future for Kazakhstan’s Almaty Airport looks bright under the ownership of TAV Airports.

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All systems go!

CEO, Luke Bugeja, tells Joe Bates more about Ferrovial Airports’ business strategy and expansion plans that include developing a network of vertiports in the US and UK.

AIRPORT WORLD/ISSUE 6, 2021

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CONTENTS

Director General Luis Felipe de Oliveira (Montréal, Canada) Chair Martin Eurnekián (Buenos Aires, Argentina) Vice Chair Aimen Al-Hosni (Muscat, Oman) Immediate Past Chair Fredrick J Piccolo (Sarasota, USA) Treasurer Candace McGraw (Cincinnati, USA) ACI WORLD GOVERNING BOARD DIRECTORS Africa (3) Emanuel Chaves (Maputo, Mozambique) Dewananda Chellen (Plaine Magnien, Mauritius) Capt Rabiu Hamisu Yadudu (Lagos, Nigeria) Asia-Pacific (9) Aimen Al-Hosni (Muscat, Oman) Mohamed Yousif Al-Binfalah (Bahrain) Geoff Culbert (Sydney, Australia) SGK Kishore (Hyderabad, India) Fred Lam (Hong Kong) Seow Hiang Lee (Singapore) Xue Song Liu, (Beijing, China) Nitinai Sirismatthakarn (Bangkok, Thailand) Akihiko Tamura (Tokyo, Japan)

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Course corrections in murky weather Dan Elliott from Frontier Economics considers some of the immense challenges the global pandemic has created for those planning or regulating air transport infrastructure.

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Quick and easy Airport World reports on the opening of the world’s first digital duty free vending machine, the introduction of automated pizza kitchens at airports and the growth of food pick-up and delivery services.

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Learning curve ACI Africa’s secretary general, Ali Tounsi, reflects on the huge challenges posed

by COVID-19 but looks forward to the future with optimism.

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Restoring air connectivity We report on some of the route development challenges facing Europe’s airports as the industry continues to struggle from the impact of the global pandemic.

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The digital airport Templemere’s Clare Williams Fannin takes a look at how digital technology is transforming the passenger experience.

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People matters Terri Morrissey and Dr Richard Plenty look back at a tough year for airports and consider some of the human resources challenges that may lie ahead in 2022.

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Europe (7) Daniel Burkard (Moscow, Russia) David Ciceo (Cluj-Napoca, Romania) Elena Mayoral Corcuera (Madrid, Spain) Jost Lammers (Munich, Germany) Yiannis Paraschis (Athens, Greece) Stefan Schulte (Frankfurt, Germany) Nazareno Ventola (Bologna, Italy) Latin America & Caribbean (3) Ezequiel Barrenechea (Guayaquil, Ecuador) Martin Eurnekián (Buenos Aires, Argentina) Andrew O’Brian (Washington DC, USA) North America (6) Lew Bleiweis (Asheville, USA) Joyce Carter (Halifax, Canda) Deborah Flint (Toronto, Canada) Joseph Lopano (Tampa, USA) Candace McGraw (Cincinnati, USA) Sam Samaddar (Kelowna, Canada) Regional Advisers to the World Governing Board (10) Diego Arrosa (Montevideo, Uruguay) Chellie Cameron (Philadelphia, USA) Arnaud Feist (Brussels, Belgium) Pascal Komla (Lomé, Togo) Bashir Ahmad Abdul Majid (Delhi, India) Hector Navarrete Muñoz (Merida, Mexico) Augustin de Romanet (Paris, France) Brian Ryks (Minneapolis-St Paul, USA) 2 Vacancies WBP Advisory Board Thomas Duffy (ADB SAFEGATE) Tunde Oyekola (El-Mansur Atelier Group) Correct as of December 2021

ACI VIEWPOINT

View from the top Director general, Luis Felipe de Oliveira, reflects on some of ACI World’s key actions and initiatives over the past year.

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ollowing the recent ACI-LAC/World Annual General Assembly, Conference and Exhibition in Cancún, the airport community was more optimistic than ever regarding the recovery path and future of the industry. However, the Omicron variant has once again brought into focus the fragility of air transport’s recovery and the urgent need for governments to co-ordinate and implement evidence-based travel measures.

The current patchwork of travel restrictions around the globe continues to affect the global aviation system and the millions of livelihoods that depend on the trade, tourism, and investment that air transport provides.

Nonetheless, I remain positive and hopeful that these recent developments are a bump on the road to aviation and tourism’s sustained long-term recovery. If ACI and airports’ achievements over the past year have been telling of our resiliency, airports will undoubtedly continue to adapt and recover.

Thus, as the year comes to a close, I’d like to take a moment to reflect on just a few of the ways that ACI World has evolved and supported its members throughout the sector’s restart and recovery in 2021, particularly as it looks towards the new year.

One of the main areas of ACI World’s advocacy and development of its product and services has been sustainability, which includes social, environmental, and economic pillars. As the sector rebuilds, airports have an opportune chance to place sustainability at the core of their strategies.

A prominent example has been the global commitment to a Net Zero Carbon Goal by 2050 which came from the ACI Long-Term Carbon Goal Study. To reach this ambitious goal will require a joint commitment across the aviation ecosystem as well as from governments, but the momentum is stronger than ever.

ACI was active at ICAO’s High-level Conference on COVID-19 (HLCC) in October. ACI – along with industry partners – presented a joint industry statement welcoming the Declaration by ministerial participants to support the long-term resilience and sustainability of the aviation ecosystem, including their commitment to work on long-term climate goals.

Besides our advocacy, ACI released several sustainability guidance materials over the year, most recently the Sustainability Strategy for Airports Worldwide. It builds on the ACI Europe Sustainability Strategies and provided an overview of how airports can contribute to the UN Sustainable Development Goals (SDGs). It is the first overview of the most relevant and common sustainability issues for airports globally.

As we move into 2022, we will increasingly see the finance community call for more uniformity on the way stakeholders report on sustainability. For airports, identifying scope is the first step to developing a consistent approach, where their own achievements can

be measured and benchmarked against global frameworks. This publication supports airports and, in turn, ACI’s advocacy efforts with ICAO and other stakeholders.

ACI World has amped up its recovery guidance. In line with the updated ICAO Council Aviation Recovery Taskforce (CART) document (to which ACI contributed), ACI released the updated guidance on Airport Operations and COVID-19: Business Recovery. We intend to continue to update the document as the situation evolves.

We also recently released the new ASQ 2021 Global Traveller Survey, revealing that travellers have developed a more considered and informed perception of flying during the recovery.

The results highlighted the relevance of the ACI Airport Health Accreditation (AHA) programme, which helps airports align their health measures with global standards. The programme continued to grow in 2021 and now includes more than 500 airports of all sizes.

ACI also released a new Policy Brief on the need to modernise global policy frameworks on airport charges. Key to a sustainable future will be to ensure the efficient use and funding of airport infrastructure as the industry recovers and grows. Airports must be able to set airport charges with a commercial focus to attract the necessary investment, and to signal whether users were willing to pay for these investments.

While there are still many unknowns and challenges on the road to a sustained long-term recovery, ACI remains more committed than ever to its mission as the voice of the world’s airports. It is both an honour and privilege to serve our members.

As we ring in the new year, a crucial constant will be the importance of ACI’s collaboration with industry and other partners, as well as the support from regulators. We must all work towards building a sustainable global aviation ecosystem for the interest of the travelling public and the communities we serve around the world.

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ACI EVENTS: WAGA

Show business!

Airport World reviews some of the highlights of the recent ACI-LAC/World Annual General Assembly, Conference & Exhibition in Cancún.

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viation leaders from across the globe gathered in Cancún in November for the ACI-LAC/World Annual General Assembly, Conference & Exhibition, and for the more than 300 delegates lucky enough to be in Mexico, it provided the opportunity to expand their knowledge, learn about the latest industry initiatives and innovations, and catch up with friends and colleagues they perhaps hadn’t seen in-person for two years.

Guests were welcomed by Mexico’s Subsecretary of Transport, Carlos Alfonso Morán Moguel; the secretary general of ICAO, Juan Carlos Salazar Gómez; ACI World chair and CEO of Corporación América Airports and president of Aeropuertos Argentina 2000, Martin Eurnekian; and ACI-LAC president and CEO of Reach Airports, Andrew O’Brian.

Eurnekian told delegates: “During the past 20 months, ACI has worked tirelessly to be the voice of the world’s airports, representing our members’ interests both on the global stage and on the ground through our products and services during the entire crisis.

“And while airports continue to feel the repercussions of the pandemic, we have begun to rebuild – albeit it in a very different world, underlining the importance of events such as this one.

“We have a tremendous challenge: the airport industry must continue to anticipate and adjust to the impact of COVID-19 as it fulfils the demands of its customers and communities, safely, securely, and sustainably. But I am confident, that together through collaboration and with the support of governments, we can achieve a bigger and better sector.”

In his state of the industry address, ACI World director general, Luis Felipe de Oliveira, delved into the symbolic importance of gathering in-person, the latest data concerning the impacts of COVID-19 on airports, and the socio-economic importance of a sustained recovery.

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“The fact that aviation stakeholders are gathered under one roof here in Cancún to exchange information on the most pressing issues of sustainable recovery is proof of the sector’s upward trajectory,” enthused de Oliveira.

“In just a few months it will be two years since the World Health Organization declared the COVID-19 outbreak a pandemic. Since then, daily life across the globe has changed with unprecedented impacts on the global economy, trade and mobility. Practically all aspects of economic and social activity were – and are still – disrupted.

“Air transport has remained one of the hardest-hit global industries in 2020, and its restart has been slow, uneven, and challenging. The economic, social and health implications for the aviation sector are far-reaching and the pandemic will affect aviation businesses, passengers, and airports for years to come.”

He noted that under the current projection, and taking into account the slower than expected fourth quarter of 2021, global domestic passenger traffic is still expected to reach 2019 levels in late 2023, but global international passenger traffic will require an additional year, reaching 2019 levels by the end of the third quarter of 2024.

ACI World’s de Oliveira also reiterated the organisation’s call for a harmonised global effort from governments and all industry stakeholders to take action to implement risk based, pragmatic approaches – such as the mutual recognition of vaccines and interoperable solutions for proof of health status – to help reboot air travel.

And he reminded everyone of the importance of factoring sustainability into aviation’s recovery efforts to ensure aviation’s long-term future.

ACI EVENTS: WAGA

Indeed, a key resolution approved at the 31st ACI World Annual General Assembly (WAGA) and which supported the conference’s theme of sustainability, outlined the next steps on the sustainable development of the aviation ecosystem.

It recognised the need to promote restorative development by reducing and proactively addressing risks and increasing airports’ social and economic benefits by properly balancing them with the environmental aspects of the business.

Noting the impact of COVID-19 on the entire aviation sector and the importance of collaboration among aviation and non-aviation stakeholders, ACI World reaffirmed the industry’s commitment to reach net zero carbon emissions by 2050; to embrace technology and innovation; to work to meet public expectations and societal values; and, to protect biodiversity and prevent wildlife trafficking.

As such, the resolution resolved to encourage airport operators to continue to develop their voluntary airport decarbonisation action plans and incorporate sustainability at the core of their business strategies.

Furthermore, it called on governments and stakeholders to support and work in collaboration with the airport industry to achieve its collective social, environmental and economic sustainable development goals.

“As we continue to navigate the pandemic, our quest to return the industry to its pathway of growth and reconnecting the world must be done with sustainability and targetting net zero carbon emissions,” urged de Oliveira.

“We must recognise that we need to do more to support the industry as it addresses the global threat of climate change, and wider environmental and social responsibility, at the same time as it is addressing the economic needs. Sustainable development is truly a balance of economic growth, environmental protection and social responsibility.

“The future of aviation depends on our commitment to the cause of sustainability, and ACI will continue to work with the global aviation sector so that we can be a strong part of the solution together.”

As usual, the first panel session of the conference involved airport CEOs giving their thoughts on a number of local, regional and global issues. This time around the ‘Aviation Leaders Panel’ was made up of Jost Lammers (Munich), Aimen Al Hosni (Oman Airports), Deborah Flint

(Greater Toronto Airports Authority), Juan José Salmon (Lima), Kelber Meira (Belo Horizointe) and Kadri Samsunlu (Istanbul), with CNN’s Gabriela Frias asking the questions.

‘The role of the private sector in airport development in the post-COVID era’; ‘Beyond the pandemic – pathways for a sustainable recovery’; and ‘Sustainable aviation – integration into the airport environment of aircraft powered by alternative fuel sources’ were other panel discussions on a busy first day for the conference, which had the theme of ‘Reconnecting Aviation for a Sustainable Future’.

ACI-LAC challenges and opportunities Speaking during a mid-morning press conference on Day 1, ACI-LAC president, Andrew O’Brian, said that the region’s airports were recovering “steadily, and relatively fast, compared to the rest of the world”, with traffic levels in September 2021 just 34% below the corresponding month in 2019, which was a record breaking year for aviation.

He did, however, admit that there were “marked differences” in the recovery process of LAC countries, not helped by “the dizzying array of different restrictions and requirements for travel” in place across the region. ACI-LAC, he noted, was working closely with members, governments and different industry stakeholders to try and harmonise these proccesses and procedures.

He revealed that the countries without any travel restrictions, such as Colombia, the Dominican Republic and Mexico – the only country in the world to never impose any COVID travel related restrictions – were leading the LAC region’s recovery, with some key Mexican airports reporting traffic rises of 20% compared to 2019.

O’Brian was also keen to point out that the current downturn in traffic was being felt particularly hard by the region’s many concessioned airports, where the private investors that had invested or agreed to spend significant sums on developing their assets were finding it “hard to reach economic equilibrium” due to the financial terms of contracts agreed in pre-COVID times.

“There are some exceptions, but in general it’s been very difficult for airport operators and investors in this region to achieve any kind of economic equilibrium, and there’s been quite a few difficult conversations around this,” said O’Brian.

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“Our position at ACI is to support our airport members to continue this dialogue and look for a way of finding this all important economic equilibrium in their contracts.”

Nevertheless, despite the tough operating environment, LAC was the only ACI region to witness the successful concession of airports during the pandemic, with Round 6 of the Brazilian privatisation programme leading to contracts being awarded to operate and develop regional airports in the state of São Paulo.

O’Brian concluded by saying: “Never in the history of aviation have we faced an industry wide emergency like this [COVID], and it has really incentivised us like never before to work shoulder to shoulder with the airlines and our World Business Partners to collaborate and develop new, creative and mutually beneficial solutions to the crisis.”

All change at the top for World Governing Board Members unanimously approved the appointment of Aimen bin Ahmed Al Hosni, CEO of Oman Airports Management Company, as the new chair of the World Governing Board during ACI World’s Annual Assembly.

Al Hosni, who will succeed current chair Martin Eurnekian on January 1, 2022, said: “I would like to express my sincere appreciation to the ACI General Assembly and the Board members for their trust. It is my honour and privilege to be representing the Council and the aviation sector on behalf of the Sultanate of Oman.”

The Annual General Assembly also approved Candace McGraw, CEO of Cincinnati/Northern Kentucky International Airport, as the new vice chair of the World Governing Board, succeeding Al Hosni.

She said: “As the aviation industry continues recovering from the pandemic, ACI’s role to be the global voice for airports has never been more important. I look forward to serving and working alongside the board and staff to assist airports in fulfilling their mission of facilitating safe and efficient travel.”

Each year the Assembly considers Resolutions on key subjects for airport operators that reflect the concerns and interests of

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ACI members. This year, the Assembly unanimously adopted Resolutions that: • Support airports for industry alignment on health and hygiene measures; and encourage airports to gather feedback from passengers to improve travellers’ confidence and experience • Promote the sustainable development of the aviation ecosystem • Seek to modernise global policy frameworks on airport charges – pricing for the benefit of the travelling public and the efficient use of infrastructure Collectively, the Resolutions put a robust focus on helping airports recover sustainably from the impact of the pandemic. They will also support ACI’s position at ICAO’s 41st triennial Assembly in September 2022 and contribute to its success in representing its members’ interests worldwide.

Technology innovation Another highlight of Day 1 was the announcement of the winners of the Amadeus and ACI World Technology Innovation Awards, showcasing industry-leading technology initiatives and leadership by airports.

The awards seek to recognise the many innovative solutions deployed by member airports as they keep up with a fast-changing environment and prioritise the changing needs of passengers – particularly as the sector rebuilds.

A panel of external industry experts evaluated submissions received from airports around the world and determined the winner in each category: – Best innovation in airport passenger related processes: Hong Kong International Airport – Single Token Journey – Best innovation in airport operations and installations management: Frankfurt Airport (Fraport) – Luggage Recognition Artificial Intelligence – Best airport innovation leader (individual): Dave Wilson, director of airport innovation at Seattle-Tacoma International Airport

ACI EVENTS: WAGA

“Crisis can bring about opportunity, and many airports responded to the unprecedented challenge of COVID-19 with incredible innovation and determination. These winners are a testament to this, and we thank all those who submitted excellent initiatives for these awards,” noted de Oliveira.

Elena Avila, executive vice president of airport IT and airline operations at Amadeus, said: “Our industry stands on the verge of a once-in-a-generation digital transformation as technologies like biometrics, cloud and artificial intelligence combine to revolutionise the passenger experience.”

ASQ Global Traveller Survey The 2021 findings of the ASQ Global Traveller Survey were unveiled during the second day of the conference.

It revealed that in the last year, travellers have developed a more considered and informed perception of the pandemic, and this will influence their future flying behaviour.

A new segment emerging from the research shows that 48% of respondents have travelled since the beginning of the pandemic. The survey suggests that respondents who have travelled during the pandemic are more likely to travel by air again sooner and more frequently. These observations highlight that, on returning to air travel, the journey feels safe and secure.

In contrast, those that have not yet flown since the beginning of the crisis tend to be less confident as they have not yet experienced the changes that airports have implemented across the passenger journey.

This issue is further intensified by the lack of harmonised measures across governments, particularly regarding international travel.

The second new segmentation of the research was based on travellers’ vaccination status, revealing polarised results. Even though all respondents are equally interested in travelling by air again, the

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vaccinated respondents, although protected by the vaccine, retain concerns about their safety when travelling and want clear reassurance that the airport environment is safe.

Such results highlight the importance and relevance of the ACI Airport Health Accreditation programme, which assists airports by assessing how aligned their health measures are with global standards and by building passenger confidence.

“COVID-19 has caused substantial changes in human behaviour and provoked a whole new set of expectations affecting how products and services should be delivered and experienced, and the airport sector is no exception,” noted Luis Felipe de Oliveira.

“While this dramatic shift presents a major challenge to airport customer experience teams who must meet and exceed a diverse range of new traveller expectations, it also opens new opportunities to improve overall levels of satisfaction.”

Completion of the report was supported by InterVISTAS – Platinum Advisory Partner – and KONE, ICF, and Plaza Premium Group as Premium sponsors.

See you in Morocco At the conference’s closing ceremony, ACI World announced that ACI Africa and the Moroccan Airports Authority (ONDA) will host next year’s joint ACI Africa/World Annual Assembly, Conference & Exhibition, with the event taking place in Marrakesh, Morocco, on October 24-26, 2022.

“We are delighted, once again, to host the next ACI Africa/World Annual General Assembly, Conference, and Exhibition in 2022,” enthused ONDA CEO, Habiba Laklalech.

“It is with great pleasure that I welcome you to Marrakech. I am convinced that this meeting will strengthen our optimism and our will for a safe and irreversible sustainable recovery.”

AW The dates are already marked in the diary. See you there!

AIRPORT REPORT: SEATTLE-TACOMA

Sound plan Managing director for aviation, Lance Lyttle, talks to Joe Bates about the multi-billion dollar development of Seattle-Tacoma International Airport and the gateway’s ambition to be the greenest airport in North America.

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eattle-Tacoma International Airport (SEA) will open its new International Arrivals Facility (IAF), one of the key projects of its ongoing $3.9 billion Capital Improvement Plan, in early 2022.

Described as the most complex capital development project in the 71 year history of the airport, the new facility is expected to significantly enhance the arrivals experience for the rising number of international passengers arriving at the Washington State gateway.

The complexity of the project is because it has involved the construction of a 450,000-square-foot Grand Hall for baggage claim and customs processing; a 780ft long aerial walkway 85ft above the taxiway connecting the IAF directly to the South Satellite; and the addition of a new international corridor connecting arriving international passengers on Concourse A. “The International Arrivals Facility is going to significantly change things for international passengers,” enthuses the Port of Seattle’s managing director for aviation, Lance Lyttle.

“The Arrivals facility it is replacing was built back in the 1970s, and it actually looks and feels like it was built then as not much has been done to it over the years. Credit to the people who designed and built it as it still works and has done a fantastic job, but it is operationally limiting and not what you should expect from the eighth busiest airports in the United States.

“The look and the feel of the new building and the space that it offers will be like night and day. It is a really beautiful facility. It’s not a Taj Mahal, but it’s really elegant and will get us to the levels of service we want to provide at the airport.”

Further explaining the difference the new IAF will make to SEA, Lyttle notes that it will be five times the size of the existing facility and capable of processing up to 2,600 passengers per hour as opposed to 1,200 today. The improved capacity is expected to play a significant

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role in helping SEA achieve its goal of establishing a minimum connecting time of 75 minutes for passengers transferring between international and domestic flights.

New North Satellite The much anticipated addition of the International Arrivals Facility will be the second major new piece of infrastructure unveiled at SEA in the last year following the summer 2021 opening of an expanded North Satellite building.

Lyttle says the $700 million revamp of the North Satellite has not ony made the facility bigger and better than before, but greener and more customer friendly.

In short, the new-look complex – opened by the Port of Seattle and home carrier Alaska Airlines in July 2021 – has allowed for the addition of eight more gates, more dining and retail options and more amenities than ever before for both passengers and staff.

Sustainability, most notably in the shape of energy efficiency and water conservation, was also high on the agenda of the airport when revamping the North Satellite building, which it now believes is equipped to serve SEA until at least 2070.

The use of LED lighting throughout the facility, for example, is expected to save nearly 1.7 million kilowatts of energy per annum, which Lyttle reveals is the equivalent of providing power to 170 homes.

SEA is also thought to be the first airport in North America to use renewable natural gas for heating the North Satellite and all other buildings on the airport site, an innovation Lyttle proudly notes means that they aren’t causing any carbon emissions.

While two underground 215,000-gallon tanks are used to collect rainwater from the roof of the North Satellite so that it can be reused to flush the facility’s toilets, saving around 2.8 million gallons of potable water yearly.

AIRPORT REPORT: SEATTLE-TACOMA

Lyttle adds that 76% or 20,000 tons of construction waste for the project was recycled and thereby diverted from landfills, and nearly $21 million worth of recycled materials were utilised.

More work to be done And there is so much more to come in terms of new infrastructure, as SEA is planning to expand Concourse C and is currently midway through a major renovation of the Central Terminal and multi-phase Baggage Optimization programme as part of the current $3.9 billion capital development programme.

Set to be carried out in three phases, with the first already completed, the Baggage Optimization programme will integrate six entirely separate BHS across SEA into one system, effectively meaning that passengers can check-in and drop baggage at any ticket counter.

In early 2021, SEA hired The Miller Hull Partnership and Woods Bagot as joint project design leaders for the 110,000 square foot expansion on Concourse C, with the project slated for completion in 2027.

Located between Concourses C and D, the $340 million expansion will add four additional floors, each covering 27,000 square feet, that will bring more natural daylight into the building as well as allowing for the introduction of multi-level dining and retail offerings that will feature a mix of popular local brands and more national and internationally known options.

Lyttle says that Concourse C’s planned retail market will draw inspiration from Seattle’s beloved Pike Place Market and that live music performances will celebrate the city’s musical culture, ensuring that visitors are left in no doubt that they are in Seattle and Washington State.

“Diversity, performance, sense of place and sustainability are the driving design principles behind the Concourse C expansion project,”

comments Lyttle, noting that the beauty of the Pacific Northwest will also be reflected in the design references to nature and some of the materials used in its construction.

And SEA’s expansion programme is not going to stop there as its Sustainable Airport Master Plan (SAMP) has identified between $6 billion and $8 billion worth of projects that the gateway is likely to need to undertake over the next five, ten to 20 years to ensure that it is able to sustainably grow and meet rising demand.

They include widening roadways, a new 19-gate terminal, an automated people mover (APM) system to connect it to the main passenger terminal and rental car facility, airfield taxiway enhacements and new cargo facilities.

If or when they happen will, of course, depend on numerous factors ranging from traffic demand and finding the funds to finance them to gaining environmental approval to proceed with the projects.

But with SEA remaining on target to handle a predicted 56 million passengers per annum by 2027, Lyttle is in no doubt that the airport will need to continue to enhance its facilities over the coming decades to meet demand and secure its long-term future.

Pulling power of the Puget Sound region In many ways, SEA is breaking from the norm by choosing to continue with its Capital Improvement Plan (CIP) and openly talking about huge, longer-term projects during arguably the worst crisis the aviation industry has ever faced.

Lyttle, however, believes that the choice of continuing with the current CIP – with the exception of delays to a few of the smaller projects – and planning further into the future was simple, as he feels that SEA will need the extra capacity sooner rather than later.

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AIRPORT REPORT: SEATTLE-TACOMA

And he is quick to point out that SEA’s airlines were fully behind the IAF and North Satellite projects as they also believe in the airport’s growth path.

“We estimate that we will end 2021 with passenger numbers about 30% down on 2019, and such is our recovery that we only expect to be about 5% down on pre-COVID levels in 2022 and then get back to where we were before in 2023/2024,” states Lyttle.

“Nothing is certain, of course, and new COVID variants could put a kink in things, but if our domestic numbers continue to rise and international traffic returns, there is no reason to doubt the growth trajectory.”

SEA was one of the fastest growing airports in the US over the five years prior to the COVID pandemic, and a strong traffic recovery in the second half of 2021 indicates that it is on track to bounce back to 2019’s trafffic levels a lot faster than most big US gateways.

Fleshing that out a little, SEA handled a record 51.8 million passengers in 2019, and although that fell to 20.1 million in 2020 due to the global pandemic, it expects to welcome 38.3 million in 2021 and eventually pass 2019’s traffic levels by 2024 based on a near 30% upturn in passenger in 2022 followed by annual increases of between 2% and 4%.

North Satellite showcases best of Pacific Northwest An art and culture-filled festival formed part of official opening of SEA’s new-look North Satellite building in November 2021.

The newly renovated complex – designed by Fentress Architects and architect of record, AECOM, with construction company Hensel Phelps – features modern amenities, seismic upgrades, sustainable features and improved building function.

Curtis Fentress, principal in charge of design at Fentress Architects, said: “The North Satellite concourse is now emblematic of the Pacific Northwest, its majestic sights and sounds.

“Every element of the design works in concert to orient travellers as it greets visitors and welcomes home residents.

“This bigger, brighter and bolder space betters travellers’ experiences with more dining and retail options, a diverse art collection that reflects the culture, spirit and history of the region, nature inspired design and a brand-new performance stage.”

Workers logged more than 2.1 million labour hours to build the facility over four years, which includes eight new passenger gates, a spectacular

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“The airport’s success in terms of traffic growth is very much down to its location in the Puget Sound region, which was booming before the pandemic and continues to boom today,” explains Lyttle, noting that Boeing’s main manufacturing plant is in nearby Everett and that firms like Microsoft and Amazon are two of a host of Fortune 500 companies to have their global headquarters in Washington State.

“Businesses like these continue to grow and offer high paid jobs that attract people to the region from elsewhere in the US and across the world,” he adds. “This has led to the development of a strong economy in the Puget Sound region with a population with a significantly higher disposal income than the national average, and all of this combined has driven the demand to travel.”

Another contributing factor to SEA’s pre-COVID traffic growth, says Lyttle, was Delta’s 2014 decision to make the airport its West Coast hub, initially in partnership with home based Alaska Airlines, before deciding that the market was strong enough to compete against it on domestic routes.

Alaska Airlines Lounge, the airport’s first system to collect and reuse rainwater and many built-in amenities to make travel effortless for all.

“Hensel Phelps and our trade partners often come together to build complex projects, but the North Satellite Modernization Project was a unique opportunity to not only work through challenging logistics and safety, but to truly change the impression and experience of so many travelling to our area,” said Hensel Phelps’ vice president, Shannon Gustine.

“This is a unique experience, and we are honoured to have been a part of such an amazing team effort.”

According to Fentress, the iconic building design evokes movement of a naturally meandering river, while ten new installations of museum-quality art feature local and nationally-acclaimed artists reflecting the Pacific Northwest’s diverse environment, culture, spirit, people and history.

The expanded facility has allowed SEA to triple the number of retail and F&B outlets in the North Satellite, with new additions including Tundra Taqueria, SEA Roast Coffee House, Pike & Pine, Filson and Wendy’s. More will follow in 2022.

AIRPORT REPORT: SEATTLE-TACOMA

The decision means that the airport has two strong airlines in Alaska and Delta that between them serve 87 destinations in the US from SEA and, prior to COVID, 14 international routes.

Airlines and traffic growth As previously mentioned, SEA has been one of the fastest growing airports in the US for while, setting new traffic records for eight successive years prior to the pandemic.

The upturn resulted in an impressive 43% rise in passengers in the five years before COVID and meant that 14 million more passengers passed through SEA in 2019 than six years earlier, during which time its international route network increased by 50%, a substantial amount of which was due to new services launched by Delta.

According to Lyttle, the addition of routes to China (Shanghai and Beijing) and South Korea (Incheon) were among “the most significant” of the new international routes launched by Delta as they opened up new long-haul markets for the region.

Today, around 18 of the 23 airlines that operated international services to a total of 42 destinations from SEA pre-COVID have returned, including Air France (Paris), Singapore Airlines (Singapore) and All Nippon (Tokyo) in Q4 2021. Aer Lingus (Dublin) and Virgin Atlantic (London) are expected to join them in early 2022.

Two of the more recent new arrivals have included Qatar Airways, which launched services to Doha from SEA in early 2021 and WestJet, which inaugurated a service to Calgary on November 4.

Despite the new routes, international services currently only account for around 10% of the overall traffic at SEA, and although Lyttle would like to see this figure grow in the future, he is more than aware that the current dominance of domestic O&D services is a major reason why the airport didn’t suffer the massive traffic declines of other airports more dependent on international traffic.

Interestingly, SEA’s domestic transfer traffic increased during the pandemic as a number of airlines actively increased services to the airport to meet demand from leisure travellers and avoid losing market share in the highly competitive region.

Unsurprisingly, Alaska (49%) and Delta (24%) are the biggest airlines at SEA in terms of market share followed by United (5.7%), American (5%) and Southwest (5.6%) with the most popular routes for passenger traffic being to Vancouver, Phoenix, Anchorage, Las Vegas and Denver.

What, perhaps, is a surprise is the fact that the low-cost carriers (LCCs) – represented by JetBlue, Frontier, Southwest, Spirit, Sun Country and Volaris at SEA pre-COVID – have struggled to make a major impact at the airport, between accounting for just 8.8% of the annual traffic.

Lyttle feels that this is down to their relatively late entrance to the market, and the dominance of Alaska Airlines, which he says has a fiercely loyal customer base.

Sustainability goals As you can probably gather from the raft of sustainability measures incorporated into its ongoing capital improvement programme, the sustainable development of SEA is hugely important to the Port of Seattle and shapes almost everything it does.

Indeed, striving to be the greenest and most energy efficient port in the US is a stated goal of SEA, which has announced that the planned expansion of Concourse C will be the first project to be implemented under the Port of Seattle’s new Sustainable Project Framework.

Targetting LEED Silver certification, the framework supports the early integration of sustainability in capital projects with a view to meeting the Century Agenda goals.

Talking about SEA’s sustainability strategy, Lyttle says: “Our objective is to become the greenest airport in the US, and this pretty much means that every large and medium sized project at the airport goes through a sustainability project framework from the planning stage onwards, despite the extra costs involved.

“We look at each project in terms of how can we reduce carbon emissions, save energy and embrace the use renewable energy as we don’t believe in just purchasing carbon offsets to reach our goals. In this regards, we view the signing of a 10-year contract with an energy company to provide us with renewable natural gas as being a major accomplishment.

“I cannot overstate how important the sustainable development of the airport is to the Port of Seattle. It is a huge, huge thing for us and we believe the sustainability elements built in to the North Satellite provide a perfect example of our philosophy.”

Digital and touchless technology The quest for seamless travel and ensuring the wellbeing of both passengers and staff, of course, remain top priorities for the airport, with SEA, like many other gateways, increasingly turning to digital solutions and touchless technology for answers.

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Lyttle is particularly proud of the success of the SEA Spot Saver initiative, which allows passengers to digitally reserve a time to go through the TSA’s security checkpoints. The solution reduces wait times and during the pandemic helped maintain social distancing at one of the most tightly constrained and consistently crowded areas of the airport.

“We were the first airport in the US, and possibly the world, to give passengers the chance to actually reserve a place in the security line before coming to the airport or upon arrival at the airport,” he enthuses.

“All those that do are given a time slot in a separate security line, which is verified by staff with iPads, meaning that it is no longer necessary to join long queues at the security checkpoint. And the best thing about it is that it is free for all all passengers as you don’t need to be in a trusted traveller programme to use it.”

Touchless check-in at SEA is also now possible courtesy of the adoption of a solution that uses infrared technology to detect finger movements as they hover above kiosk screens, making it possible to complete the process without touching any buttons.

The system is in use at the common-use check-in kiosks available for jetBlue, Spirit Airlines, Korean Air, Volaris, Air Canada, and Frontier.

Lyttle admits that the pandemic has also sped up the planned introduction of biometric enabled passenger processing technologies at SEA as well as the opening of smart restrooms and the introduction of Terahertz imaging cameras for the secondary screening of staff to reduce the need for physical searches.

Other digital solutions to have been introduced at the airport include food delivery services; QR codes replacing menus in the airport’s restaurants; and pre-paid parking to avoid the need to use payment kiosks.

In addition, the airport’s downloadable flySEA App allows users to check everything from security wait times, the status of flights and where to get a cup of coffee to step-by-step directions how to navigate their way the airport using an interactive map.

Economic impact of SEA Despite losing $350 million in 2020 and expected losses of over $100 million in 2021 due to the downturn in traffic, the Port of

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Seattle and SEA remains one of the Pacific Northwest’s leading economic engines.

Indeed, pre-COVID, SEA was directly responsible for 87,300 jobs; $7.1 billion in total personal income; $22.5 billion in economic activity; and $415 million in state taxes reflecting direct and secondary activities.

Lyttle proudly tells me that the Port of Seattle didn’t furlough or make any staff redundant during the pandemic, although he openly admits that a near $400 million Coronavirus Aid, Relief and Economic Security (CARES) grant and others from the US government certainly helped make this possible.

In 2019, at the SMART Airports Conference & Exhibition in El Paso, Lyttle stated that one of aims of the Port of Seattle was to create 100,000 new jobs over the next 25 years.

Does he think that the figure is still realistic as it is now generally accepted that it is going to take several years for the global travel and tourism industry to recover from COVID and business travel may never be the same again?

“It’s an aspirational goal, but I think that it is still very much achievable as it is for the entire Port of Seattle, so that includes the airport, seaport and all maritime operations. We will grow, and growth brings jobs,” Lyttle replies.

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Industry outlook – past, present and future ACI World’s vice president for economics, Patrick Lucas, considers the impact COVID has had on the finances of the world’s airports and the economic challenges ahead.

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very couple of years ACI World, and its industry partners under the umbrella of the Air Transport Action Group (ATAG), release the Aviation: Benefits Beyond Borders report, a publication that quantifies aviation’s socio-economic impact.

Typically, the team of economists tasked with analysing aviation’s multiplier divide this ecosystem into four interrelated parts that measure the direct, indirect, induced and catalytic impacts on economies.

In better times, the direct impact from airlines, airports, air navigation service providers and civil aerospace was comparable to the GDP of Indonesia or the Netherlands. Thus, with as much as 57% of tourist arrivals coming by air in pre-pandemic times, it is not surprising to observe aviation’s positive impact and its interconnection to a vast array of industries and the broader economy in terms of wealth and job creation. After all, at its core, aviation connects people, commerce and cultures.

In terms of job creation that is ‘directly’ related to the aviation sector, jobs with airport operators and on the actual airport site make up the largest share. Historically speaking, this has always been in the realm of 55%-60%. Beyond the employees working for airport operators or airlines, many of these jobs are in duty free, retail, car rental, maintenance and other government related services.

Of all the sectors within this ecosystem, the largest impact was felt by those working on the airport site during the COVID-19 crisis.

With travel coming to a halt in 2020 due to government-imposed lockdowns and travel restrictions aimed at curbing the spread of the virus, the ecosystem experienced the multiplier effect in complete reverse, devastating not only the direct aviation operators but also booking agents, hotels, museums, cultural events and so on.

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After considering the interconnections across multiple sectors, this ripple effect and resultant catalytic impact from the collapse in passenger traffic saw employment drop by 50% in 2021 as compared to 2019. A loss of $1.7 trillion aviation supported economic activity is also estimated in 2021 relative to the pre-pandemic scenario.

As engines of socio-economic growth, airports are indispensable to the markets and communities they serve in support of a global recovery.

infrastructure

Fig.1 – The socio-economic multiplier of aviation and airport ! (pre COVID-19) & ( ( '# )*- "

))- !

Source: Aviation: Benefits beyond Borders (2020), Air Transport Action Group (ATAG); 2018 data.

The impact of the pandemic on airport traffic The crisis removed almost six billion passengers by the end of 2020 compared to the projected baseline (pre-COVID-19 forecast for 2020), representing a decline of 62% of global passenger traffic.

Despite the resumption of air travel in 2021, many international markets remained suppressed with declines of 60% compared to the months of September and October in 2019.

SPECIAL REPORT: ECONOMICS & FINANCE Yet, there is an appetite for travel. Domestic markets experienced an ongoing recovery with a decrease of 30% compared to 2019 over the same period. In some markets a form of vaccine optimism is present and what has been coined as vacation deprivation in the media and other spheres.

As final numbers come in for 2021, the industry is expecting to be in the realm of 45% of 2019 passenger numbers. There is no doubt that the current restrictions in many Asian markets pose a major challenge for international connectivity and a speedy recovery.

On the other hand, there are some important regional differences across different route corridors. While intra-Asia traffic remains flat in terms of traffic numbers, the North America–Latin American route corridor has shown great strength surpassing pre-COVID levels. This a testament to the willingness to travel and the pent-up demand that exists for air transport which has been artificially suppressed due to restrictions.

The Intra-European market strengthened in the second half of 2021 thanks to some harmonised health protocols that helped kickstart aviation. The North Atlantic corridor has also seen a surge with the easing of travel restrictions.

Other key determinants, from a recovery standpoint, relate to the containment of variant viruses as well as a continued easing of travel restrictions. All of these factors also influence consumer confidence and propensity to travel in the near-term.

There is no denying the fact that the Omicron variant of COVID-19 and the additional restrictive measures imposed on international travel will diminish the prospects of a speedy recovery in the near-term. While the safety of populations and the travelling public is paramount, there is no conclusive evidence that shows that border closures to international travel reduces COVID-19 cases.

Indeed, the World Health Organization (WHO) advice for international traffic in relation to the SARS-CoV-2 Omicron variant states that: “Blanket travel bans will not prevent the international spread, and they place a heavy burden on lives and livelihoods”.

If anything, risk mitigating measures that relate to vaccine protocols for travel and testing have the greatest impact without having to shut down international travel or impose quarantine requirements.

Based on the epidemiological situation, the ongoing spread of variants has more to do with heterogeneous populations (i.e. unvaccinated populations within jurisdictions and across jurisdictions).

In particular, a wedge between rich and poor countries exists in both " and %& ) !& '# ! the mutation and vaccine deployment uptake, which exacerbates spread of variants. !$ traffic (domestic and In a more subdued scenario, overall passenger international) is expected to get back to 2019 levels by the end of 2024, with international traffic potentially lagging to 2025.

The uncertainty range for 2022 shows that passenger traffic could be in the realm of 60% of 2019 levels. Again, because there is pent-up demand, the recovery curve could steepen the slope bringing us back to 2019 levels sooner.

This follows an assumption of eased travel restrictions in the first half of 2022 on some key international markets with significant

traffic weighting.

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Fig.2 – A tale of two markets – domestic versus international markets

!& $! & "! ) ' $ !& ! % ! $ %&$ & "!%

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Fig.3 % – Outlook for passenger traffic recovery

Source: ACI World.

Source: ACI World.

The Omicron variant and outlook for recovery ACI World’s forecasts over the short-term, which feed into the medium term (five years), continue to hinge on the uptake and effectiveness of vaccines to a significant proportion of populations in many of the world’s major aviation markets.

The airport business – challenging the conventional wisdom Like other businesses in the aviation ecosystem, airports are businesses in their own right. However, even with significant costcutting exercises throughout the pandemic, the financial stress endured by airport operators due to sustained passenger traffic losses could have longer-term consequences in terms of slowing down future infrastructure development.

Fundamentally, airports will remain infrastructure-intensive businesses for the foreseeable future – this translates into unavoidable high fixed costs that must be financed.

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SPECIAL REPORT: ECONOMICS & FINANCE

( $"#* On top of this challenge, there is also no denying the fact that financial support from governments to airports due to COVID-19 has been relatively limited across multiple jurisdictions compared to air carriers.

The current crisis represents an unprecedented challenge for the industry’s financial viability as airports have had to refinance and negotiate terms with creditors. Debt levels continue to balloon. As airports remain an immovable asset with limited or no alternative uses, the heightened debt levels and the changing risk profiles of the industry has meant that financing costs are increasing.

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Fig. 6 – Global airport revenues by source (2019)

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# & "%&%

$ % & &

$

"%& " # &

# " " " " !

Source: ACI World; *Based on industry sources subject to variance across jurisdictions and historical elasticities between operating expenditures (OPEX) and airport traffic levels.

Airport charges – turning the page on the regulatory relics of the past The industry is also at an important crossroads in how we think about the economic regulation of airports and airport charges. That is, if airports had price flexibility based on the competitive landscape many of them face, charges that are levied on airlines would adjust to certain realities and market conditions.

Yet, it is important to remind critics that regulated airport charges across many jurisdictions in their current state are inversely linked to traffic levels. In other words, this means that when traffic rises, charges fall (and vice versa).

Even though airport charges represent a small proportion of airline costs and have a minimal impact on passengers (see Fig. 5), the revenue generated from aeronautical charges represent as much as 55% of all airport revenues (including passenger and aircraft related charges). And 24% of all airport revenues come from charges that are levied on airlines.

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Fig.4 – The airport business amidst the pandemic ( !' %

!

Source: ACI World Airport Economics Survey.

There is full recognition that both airlines and airports have suffered greatly from this crisis and the resulting financial shortfall. Both need each other to thrive along with many other actors in the ecosystem. Thus, developing models of airport charges that allow better risk sharing between airports and airlines will be an important consideration going forward.

Such transactions and commercial agreements are more apt at dealing with market realities and ensuring that infrastructure is used efficiently for the benefit of the travelling public.

Exceeding expectations – non-aeronautical revenues in the new normal The travelling public’s expectations have changed as a result of the pandemic. ACI World’s latest Airport Service Quality (ASQ) 2021 Global Traveller Survey – COVID-19: Evolution of Sentiment and Behaviors, summarises some of the key managerial implications.

It states: “The redesign of the passenger journey due to new behaviours and expectations may actually also open new opportunities to improve overall levels of satisfaction, and even possibilities to increase non-aeronautical revenues. For example, the need for social distancing measures and creation of touchless and frictionless experiences have increased passenger interest in personalised, decentralised, and premium experiences throughout the journey.”

Earlier quantitative studies have shown that an increase of 1% in global passenger satisfaction, as defined in the global ASQ survey, generates on average a growth of non-aeronautical revenue of 1.5%.

Put differently, for a given unit increase in passenger satisfaction there is a more than proportional increase in revenues. In essence, happier passengers tend to spend more.

)

' - Fig. 5 – Airport charges are small % of total air fare (2019 USD)

Fig. 7 – The link between passenger satisfaction and revenue generation

Source: ACI World Policy Brief – Modernizing Global Policy Frameworks on Airport

$ & + ' % ! " !) !# " " !

Charges: Ensuring the & Efficient Use of Infrastructure for the Benefit of the Traveling !" # "# " " " $ # ! " # " # Public with InterVISTAS Analysis of Sabre MIDT Airfare Data, Ancillary Revenue Data %

from IdeaWorks, and ACI Economics Data.

Source: ACI World Report – Does passenger satisfaction increase airport non-

Even though airline-related revenues rank third after non-aeronautical aeronautical revenue? revenues and passenger related charges in terms of airport revenues # ) " + ! !! ! " ! " source, they are still vital for the financial viability of airports. Revenues business models $ # ( ! Altered " * #" from airport charges are the lifeblood of airports needed to recover costs Even before the pandemic, conventional business models that have and to finance infrastructure for the benefit of the travelling public. relied on brick-and-mortar shops faced fierce competition from the digital

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SPECIAL REPORT: ECONOMICS & FINANCE

disruptors – airport non-aeronautical revenues on a per passenger basis were showing an incremental decline in some mature markets.

The pervasive access to online retail and e-commerce platforms, and increased retail competition outside the purview of the airport, has limited the growth prospects for airports’ non-aeronautical revenues.

The rise of the ‘sharing economy’ and transportation network providers has also meant that airport managers had to rethink their conventional non-aeronautical revenue streams. Optimal use of real estate around the airport has also made managers rethink how they could diversify revenue streams amidst the pandemic.

Airports continue to innovate based on both competitive pressure but also the need to adapt to the new normal. Many of them focus on leveraging a unique and seamless passenger journey by embracing digital technologies to their advantage.

They have adopted their own ecommerce platforms to allow for customised experiences – since 70% of non-aeronautical revenues come from passengers, a huge focus has been on creating an unmatched customer experience for passengers both physically at the airport and digitally customisable throughout the journey.

Charting a path for a sustainable future Looking beyond the short and medium-term, and past the noise and fury, it is important to remind the detractors that the longer-term fundamentals still apply.

We need to be cognisant of the demography of aviation – many markets have seen aviation open up over the last decades and the propensity to travel has risen quickly with rises in income. And as we get back to 2019 levels, there will be airport capacity constraints in many major markets.

Airport infrastructure is key to the continued development of air transport, which supports millions of jobs and provides social and economic development for the global communities that airports serve.

More broadly, aviation plays an important role in supporting the United Nations’ Sustainable Development Goals (SDGs).

Established in 2015, the SDGs call on the international community to pledge a plan of action based on 17 global targets that aim to ensure prosperity, peace and eradicate poverty by 2030. Airports, more specifically, are important contributors to Goals 8, 9, and 13 that concern work and economic growth, industry, innovation and infrastructure.

Climate change is a global challenge requiring an urgent global response given the Intergovernmental Panel on Climate Change’s (IPCC) recent call to reach net zero carbon emissions by 2050.

The airport industry has also charted its own path to decarbonise by 2050 as stated in the ACI Long Term Carbon Goal study. ACI’s long-term carbon goal relates to the carbon emissions under the direct control of airport operators and will be a crucial component of the aviation industry’s contribution towards this global effort.

Airports will be important partners in the sustainable transition of aviation as a whole and have also joined a sector-wide 2050 goal of net zero emissions along with airlines, aircraft and engine manufacturers as well as the air traffic management industry.

Achieving this will take collaboration across the aviation ecosystem and support from governments.

Overall, the recovery of air transport is indispensable to the recovery of the global economy, to the reconnecting of the world and the return of many jobs lost because of the COVID-19 crisis.

Airports are an integral part of the aviation ecosystem, and therefore require timely and appropriate policy tools that will facilitate the sustainable recovery of the entire industry.

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Investing in Almaty Airport World discovers that the future for Kazakhstan’s Almaty Airport looks bright under the ownership of TAV Airports.

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lmaty Airport is under new ownership after global airport operator, TAV Airports, completed its acquisition of an 85% stake in the Kazakhstan gateway earlier this year.

The deal is expected to take the gateway to the next level in terms of its facilities, growth potential and ambition to become the undisputed leading hub for Central Asia.

A record 6.4 million passengers (+13%) passed through Almaty in 2019 to cement its status as Kazakhstan’s busiest airport, the upward trajectory being helped in no small way by the growth of home-based flag carrier, Air Astana.

Indeed, Air Astana’s expanding route network and the addition of new international routes have made Almaty Airport (ALA) one of the region’s fastest growing gateways for the last decade.

The global pandemic has, of course, had an impact on traffic at Almaty Airport, which saw its passenger numbers drop to 3.6 million in 2020 due to a significant reduction in flights and travel restrictions as a result of COVID-19.

However, with traffic levels beginning to rise again, the need for new infrastructure to ensure that the airport is capable of meeting anticipated future demand remains very much front and central for ALA’s new owners, who have pledged to invest around $200 million on a new terminal.

Air Astana’s president and CEO, Peter Foster, certainly believes that TAV’s ownership of Almaty Airport and promise of future

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investment in new facilities can only be a good thing for the gateway, his airline and Kazakhstan.

“Air Astana welcomes the entry of TAV with whom we work with at several airports around our network, and we look forward to building a solid business relationship with them,” enthuses Foster.

Doing things differently in Almaty A member of Groupe ADP, TAV now owns 85% of Almaty Airport and its associated fuel and catering businesses, with the Kazakhstan Infrastructure Fund – managed by VPE Capital and backed by Kazyna Capital Management – holding the remaining 15% stake.

Almaty is the first airport in TAV’s portfolio where the company owns the airport instead of holding a time limited concession.

So why has it decided to do things differently in Kazakhstan and break from the concession model that has proved hugely successful for it across the globe over the last 20 years?

TAV Airports president and CEO Sani ùener, says: “Our strategy is to invest in projects that are in line with our financial capabilities and operational abilities.

“Traditionally, airports are strategic and long-term investments developed and managed by the public sector. In the last 30 years, the concession or public-private-partnership (PPP) model has proved to be an effective solution when the states wanted to direct resources elsewhere. Simultaneously, with the advent of

SPECIAL REPORT: ECONOMICS & FINANCE

globalisation, airport business evolved to provide a unique and complete experience.

“TAV was among the first in the world to undertake concessions, and with great success, creating value for the public, shareholders, lenders and other stakeholders. Yet, we have the capabilities to execute other investment models. The only condition is that it must be the right project for our financial and operational capabilities, and Almaty fulfilled these criteria. We are very much used to crisis, and never stop looking for new opportunities.

“So, Almaty has become the first fully-owned airport in our portfolio. It enlarges our footprint to Central Asia, where we want to continue to grow. Our airport network will allow us develop Almaty’s route network by adding new destinations and bringing in new airlines to Almaty.”

The main gateway to Kazakhstan is an important junction in the modern ‘Silk Road’ and becomes the 15th airport in TAV’s global network.

Economics and finance TAV Airports notes that the previously agreed purchase price of $415 million was reduced to $365 million to take into account the traffic decrease of the last year due to the pandemic.

Depending on the recovery of the traffic to pre-pandemic levels, the consortium will pay the additional $50 million in the coming years.

As part of the deal, Turkey-headquartered TAV has pledged to invest around $200 million on building a new international terminal, which will double the airport’s capacity to more than 14 million passengers annually.

The investment is planned to be completed in less than three years.

TAV’s deal for ALA was supported by the International Finance Corporation (IFC) and the European Bank of Reconstruction and Development (EBRD), which financed 50% the acquisition and have agreed to fund 100% of the new terminal investment with a loan.

The appeal of Almaty and Kazakhstan Located in the south-east of the country, in addition to its importance to the Silk Road, Almaty is a strategical point along China’s ‘One Belt One Road’ project, connecting Central China to West Asia, Europe and Africa.

TAV notes that Kazakhstan leads Central Asia in economic growth and generates roughly 60% of the region’s GDP. Almaty itself and the surrounding region is home to 3.5 million inhabitants – 20% of the country’s population. And Almaty city’s GDP per capita is the second highest among Kazakhstan’s regions, with only the resource rich Atyrau region achieving higher levels. ùener enthuses: “Our strategy is focused on emerging markets, because this is where growth happens. Central Asia has great geostrategic importance in today’s global trade and Kazakhstan leads the region in economic growth and Foreign Direct Investment.

“Almaty is the financial and cultural capital of the country and therefore we believe there’s significant potential for growth for the airport, and drawing upon our extensive know-how, we’ll work towards realising this potential to the fullest.

“As part of the largest airport management group globally, we’ll be promoting Almaty and Kazakhstan as the business capital of the region, as a country with a rich cultural heritage and diverse tourism opportunities.

“Our expertise in route development will help to increase the connectivity of Almaty to the world. As an example, in Georgia, we doubled the number of destinations and increased passenger traffic seven-fold in a decade.”

He notes that TAV’s aim is to contribute to the economic and social development of Almaty region, creating employment and facilitating a global reach for local businesses.

“I would like to underline the supporting approach towards foreign investors in Kazakhstan and thank government officials, our partner, our lenders and employees who made this process as smooth as possible,” adds ùener.

Existing facilities and timeframe for development ALA, which arguably counts Manas International Airport in Bishkek, Kyrgyzstan, as its biggest rival, currently boasts a single terminal and two runways that are capable of handling around seven million passengers per annum.

Although the terminal is fairly modern having only opened in 2004, its location, layout and design doesn’t allow much scope for any capacity enhancing development, so plans for a potential second terminal have been on the table for years.

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In this regards, ALA has looked on enviously as Nursultan Nazarbayev International Airport (formerly Astana International Airport) in Kazakhstan capital, Nur-Sultan, opened a new $200 million terminal in 2017 that has allowed it to operate with separate international and domestic terminals. It is a model that is likely to repeated in Almaty in the next few years. ùener promises that the planned new terminal will not only double ALA’s capacity to 14mppa but bring enhancements such as the latest, touchless self-service technology, new retail/F&B concepts and even an airport hotel.

In terms of the introduction of new technology, ùener says: “The pandemic has increased the pace of digitalisation at airports and I believe that this trend will continue. The aim is to provide a seamless, safe and comfortable travel experience to our passengers.

“Our subsidiary, TAV Technologies, is already providing IT solutions in all areas of airport operations. Through the use of biometrics, AI and others, TAV Tech has developed self-service, queue management and touchless applications. We’ll be employing this know-how in Almaty in due course.”

Airlines and route network Kazakhstani national flag carrier, Air Astana, is the dominant airline in Almaty, traditionally accounting for around 55% of all passengers handled at the airport.

In 2019, the airline and low-cost carrier (LCC) subsidiary, FlyArystan, handled more than five million passengers across a route network that covered more than 60 domestic and international routes that included Bangkok, Beijing, Frankfurt, Moscow, Paris, St Petersburg and Seoul.

Air Astana is widely recognised for having one of the youngest fleets in the world, comprising 34 Airbus, Boeing and Embraer aircraft, the bulk of which are less than four years old.

Foster notes that Air Astana took the strategically significant step of launching FlyArystan as Central Asia’s first LCC in May 2019 and it has rapidly developed an extensive network of domestic services, together with international services to Georgia and Turkey.

Indeed, FlyArystan has carried three million passengers over the past two years and recorded an average load factors of more than 87%, and an average on-time performance of 89%, despite the pandemic.

In addition to Air Astana, Bek Air, Qazak Air and SCAT Airlines also use Almaty as their base, enjoying a market share of 6%, 3% and 14% respectively.

The other big players are Aeroflot (4%) and Turkish Airlines (3%) – the former being the biggest beneficiary of Transaero’s demise as it is now the second biggest international airline serving Kazakhstan due to its expansion on Russia-Kazakhstan routes in collaboration with low-cost subsidiary Pobeda Airlines.

Pre-pandemic, Almaty was a major regional transportation hub for 26 passenger carriers and 12 cargo airlines. They included China Southern Airlines, flydubai, Hainan Airlines, Lufthansa, Qatar Airways, Turkish Airlines and Wizz Air. The market leading cargo airlines in Almaty are Air Astana (22%), Turkish Airlines (17%), Hong Kong Air (14%), Silk Way (10%), Cargolux (8%) and Lufthansa (8%).

In 2019, international passengers accounted for around 47% of traffic mix in Almaty, and this is something ùener would like to see increase in the future.

He says: “Almaty is the financial and business hub of the region.

It is also has a rich cultural history and is the gateway to some areas of outstanding natural beauty that are little known outside of Kazakhstan.

“We know and understand its appeal and are actively working to promote Almaty as a leisure destination, which I’m confident will AW appeal to international travellers from around the world.”

New terminal baggage system awarded to Alstef Group Alstef Group has been awarded a contract to install the baggage handling system (BHS) for the new international terminal at Almaty International Airport.

The new BHS will be capable of handling 2,400 bags per hour and include an outbound baggage system consisting of 40 check-in conveyors and a screening and sortation system feeding four make-up carousels and an inbound system boasting three large reclaim carousels.

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“We chose Alstef because they had the most co-operative and technically qualified bid during the tender,” states Emin Sonmez, TAV Airports’ procurement manager.

“The Alstef Group bid fulfilled the entire requirements of the project, and they took time to understand the scope of work, and to develop the existing design to make the system more practical and economical.”

SPECIAL REPORT: ECONOMICS & FINANCE

All systems go!

CEO, Luke Bugeja, tells Joe Bates more about Ferrovial Airports’ business strategy and expansion plans that include developing a network of vertiports in the US and UK. What is the appeal of airports to Ferrovial and do the company’s global ambitions burn as brightly today as when it first entered the market in 1998?

Our desire to be a key player in the aviation industry remains as strong as it has ever been, although we operate a slightly different business model today and are not primarily focused on operating airports or acquiring equity investments interested in new ones.

We are, for example, also increasingly looking at opportunities beyond the airport perimeter fence.

Perhaps the best way to sum things up today is to say that Ferrovial Airports integrates all airport management activities in addition to being a world-leading private investor in airports and airport operators.

We’ve been part of the aviation ecosystem for more than 20 years, during which time we have invested, developed and operated 33 airports around the world. Our deep understanding of the industry and record of building strong and productive relationships with partners and stakeholders continues to drive our ambitions to expand.

Has the global pandemic forced you to re-evaluate the company’s business strategy and ambitions for the next few years?

Not really. There is no denying that the airport industry has faced, and continues to face, one of the most significant challenges in its history. COVID-19 has changed the way we currently travel and is likely to shape the airport, travel and tourism markets for the forseeable future. These are unprecendented times, and the

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circumstances we face are exceptional and will be long lasting, but I remain confident in the recovery powers of aviation. This makes me confident that future opportunities will come along and will far outweigh the challenges that lie ahead.

In any case, we have to be flexible and ready to adapt to all future scenarios. So, we need to become even more agile and efficient. As I said before, I am optimistic about the future and potential new business opportunties. Aviation will continue to grow and will remain fundamental for economic development. To keep growing, of course, we have to overcome the difficult challenge of being more sustainable. And that has to be a co-ordinated effort by all stakeholders.

What airport assets does Ferrovial Airports own, operate or have equity stakes in today?

Ferrovial Airports concentrates its assets in the United Kingdom where we are the largest shareholder in Heathrow, Glasgow, Aberdeen and Southampton airports.

At Heathrow, we own 25% of Heathrow Airport Holdings (HAH).

In this consortium, we also work with Qatar Holding LLC, Caisse de dépôt et placement du Québec, GIC Private Limited, Alinda Capital Partners, China Investment Corporation and Universities Superannuation Scheme (USS).

We are also part of AGS Airports Limited, which operates Aberdeen, Glasgow and Southampton airports. As Ferrovial Airports, we own a 50% stake in the company, along with Macquarie European Infrastructure Fund 4.

Although it is not an airport operator as such, we also have a 49% stake in Facilities Management & Maintenance Company, FMM,

SPECIAL REPORT: ECONOMICS & FINANCE by a private actor, which through their experience, can innovate and offer practical solutions to increase air traffic and commercial activity.

Thanks to our experience and financial capacity, our participation in P3 projects allows the administration to maintain control and ownership of the infrastructure while increasing the profitability of the assets, improving the passenger experience, and developing and optimising specific infrastructure.

Can you tell us more about your plans to develop the US side of the business?

which is one of the leading multi-service providers in the State of Qatar and active at Doha’s Hamad International Airport. FMM is a joint venture with Qatar Airways, which holds the remaining 51% stake in the company.

The US is a strategic and priority country for Ferrovial for a whole host of reasons and our determination to grow our footprint in the States ensures that we have established all of our business divisions in the country.

Most of our P3 projects are executed in the USA. In fact, in the past 17 years, Ferrovial has built and managed 14 P3 projects in North America, where we designed, financed, built, operate and maintain infrastructure. The number of projects ensure that Ferrovial is among the top P3 developers in the US, and that Ferrovial Construction is among the top P3 builders in the country.

It is worth noting that we are certainly not done in terms of P3 projects in the US and maintain a keen interest in the any future opportunities that might arise in the aviation sector.

Arguably, the most revolutionary deal Ferrovial has signed in recent years is our partnership with Lilium to develop a network of more than 10 vertiports in South Florida.

Do you have any plans to expand or reduce your airport portfolio in the next 18 months?

What are vertiports and why is Ferrovial so interested in their development?

We are constantly analysing the global market and searching for investment opportunities where we feel we can add value in terms of what we can bring to the table and achieve with an asset.

Our extensive knowledge of the aviation industry and expertise in areas such as construction, finance, operations, boosting revenues and improving efficiency are the main areas where we can add value. The US is a key focus area for Ferrovial Airports as it is currently the world’s largest economy and aviation market.

Vertiports will be the bases for the electric, vertical take-off and landing (eVTOL) aircraft currently under development by companies such as Lilium and Vertical Aerospace. The media, I believe, has called them flying taxis. Vertiports will basically provide infrastructure for landing, recharging, and taking-off.

We believe that these intermodal centres, which are set to be integrated into the city and adapted to the surrounding environment, will reduce noise impact, allow zero operating emissions and improve energy efficiency through innovative design.

We have already announced that we will develop a network of more than ten vertiports across state of Florida, in the US, and a network of twenty-five vertiports across the United Kingdom. We are also looking for more markets in the United States and around the globe which will likely benefit from a more sustainable and efficient mode of urban transportation.

Are PPP/P3 projects for new terminals and other facilities more appealing to Ferrovial today than actually owning an airport?

It depends on the PPP project and the airport! With our expertise we can contribute in both full airport concessions and those with a narrower perimeter, such as the design, construction, development and operation of a terminal. How these opportunities are shaped and whether we choose to pursue them depends more on the specific market dynamics rather than a change of philosophy from our part over the years.

At the moment, we have a strong focus on the North American market and the opportunities that are unfolding there are for the development, investment, construction and operation of terminals. This is something we are very qualified to deliver. However, in other parts of the world, we are also actively pursuing opportunities for leases/ concessions that would involve investing in and operating full airports.

As a leading infrastructure construction and management company we participate in different public-private alliances, particularly in the airport sector. In the case of airports, we believe that infrastructure owned by a local administration is strengthened under management

When will your vertiports open for business and who do you envisage will use them?

With the support of the various stakeholders, we are progressing at pace to bring the Florida project to life by 2025.

In terms of who will use them, according to the studies that we’ve undertaken, people will use eVTOLs for short journeys that typically take around one to three hours to complete today based on the current modes of transport. In addition to saving travel time, they will take traffic off the road, subsequently reducing CO2 emissions. So, in effect, we believe that eVTOL aircraft will provide a quicker, easier and greener alternative to ground transportation for distances of up to 250 kilometres.

In Florida, nearly 20 million Floridians will live within 30 minutes of our vertiports. They will also provide a new high-speed travel option for AW the 140 million people that visit the Sunshine State every year.

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Course corrections in murky weather Dan Elliott from Frontier Economics considers some of the immense challenges the global pandemic has created for those planning or regulating air transport infrastructure.

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he aviation industry had grown used to short-term shocks. After both 9/11 and the global financial crisis of 2008, air travel came back, more or less on track, relatively quickly.

But the industry had never seen anything like COVID-19, which in 2020 led to an almost hard-stop on aviation in April and a two-thirds reduction in worldwide air passengers numbers year-on-year. And since then, one hopeful forecast of recovery after another has been confounded.

That’s not surprising, perhaps, given the difficulty in forecasting the course of the pandemic. All business planning is beset by this still open question. But for the airport industry, it is particularly challenging.

Airport capacity cannot be created overnight. It takes decades to make plans, gain government and public approval, and construct runways and terminals. And while capacity needs to be there to meet demand, putting it there too far in advance is a road to financial ruin.

Add to that the workings of price regulation regimes (or concession agreements that limit movements in charges), and it’s clear why long-term visibility on volumes and costs is critical to the management of airport businesses.

This creates its own feedback loop to the financing of airports: there is a narrow path to viability, exceptionally dependent on reliable forecasting.

It’s still unclear whether vaccines and drug treatments have definitively changed the threat posed by COVID. And even if (or, hopefully, when) it becomes clear the pandemic has simply become another endemic disease, it will not be easy to judge how much this virus has changed the world.

Making future traffic forecasts is always difficult, and in these most difficult of days, arguably fortune tellers rather than economists would be

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better placed to see through the current murk. But economics can still help bring some discipline to this struggle with uncertainty.

Traditional forecasting models have been based on the remarkably durable relationship between economic growth, demand for air travel and air fares. Now the forecasting challenge has changed, so should the economic framework.

Signs of four Four factors, caused by or concurrent with COVID, can be expected to have moved the goalposts. First, lockdown has pushed us further into the virtual world. How far, is still not clear: ever since the development of the internet and mobiles, strategists and sociologists have been predicting a steep reduction in business travel.

But before the pandemic, the numbers had been defying the most severe predictions, even suggesting that online and physical interactions in business were complementary rather than alternative activities.

However, the quality of online meeting software, and business experience with it, have developed radically since the beginning of 2020.

Bill Gates’ famous prediction last year that business travel would fall by 50% has been challenged by many, but some substitution of video calls for physical journeys seems likely to have become embedded.

This, in turn, is likely to push up prices for holiday travellers, who are cross-subsidised by those who turn left on boarding, putting further downward pressure on demand.

Second, aviation, like any other sector responsible for substantial CO2 emissions, is facing a future of higher abatement costs. These will be imposed by government actions such as the European Union’s Emissions Trading

SPECIAL REPORT: ECONOMICS & FINANCE

System, and by embracing new fuels such as biofuels, SAFs and hydrogen, perhaps even electric power eventually, again leading to higher fares.

However, while basic economics suggests these first two factors will cause a downward shift in the demand for air travel, they will not necessarily disconnect its relationship with economic growth.

Third, environmental concerns may have ‘non-price’ effects on customers, governments and businesses, curtailing air travel. So far, travellers have both proved pretty resistant to ‘shaming’ pressures.

However, requirements to report company plans for progress towards net zero, may now begin to alter business behaviour.

Fourth, underlying economic growth is itself much more open to question. Supply-side constraints have helped fuel inflation, creating a dilemma for monetary authorities. Economic management in the post-COVID world is presenting unfamiliar challenges, perhaps particularly, but by no means only, in post-Brexit Britain.

Plans B, C, D and …

So here are some things we do at Frontier Economics to make planning more fit for present purpose: • Rather than pretend we can forecast air traffic precisely, plans have to be based on multiple demand scenarios, and the appropriate responses, enabling development to be ramped up or down as events unfold.

• Flexible approaches are needed, shifting the balance of short-term plans from capacity investment to operating solutions.

• Projects should be valued using ‘real options’ methodologies, for example, ascribing appropriate value to opportunities to halt or accelerate them, similar to the way in which values are ascribed to financial options.

To do this kind of planning well, airports need to get better at understanding the long-run relationship between (operating and capital) costs and get better at measuring the ‘elasticities’ or extent to which each moves in response to changes in the other.

Short (one-to-two-year) and long-run (five-to-ten-year) elasticities are typically very different. Only a thorough analysis of both will enable scenario planning to be truly ‘evidence-based’.

The nature of the disruption has made the airport industry much riskier, both operationally and financially. With the onset of the

pandemic, the asset beta of airports – a measure of market risk without the impact of debt – jumped sharply, in some cases even doubling. And with no sign of this returning to pre-pandemic levels, airports will be experiencing higher costs for financing for the foreseeable future.

Unless the regulators do something to counter-balance/ mitigate this increased risk, the cost of financing airports will rise substantially. So then, inevitably, would airline costs and subsequently the price of tickets.

Some regulators have recognised the need to be much more explicit about the appropriate level of risk, as the UK’s Civil Aviation Authority (CAA) has done with respect to London Heathrow.

Pricing mechanisms are needed to share this risk, if it moves outside an acceptable range. The CAA is proposing to use Heathrow’s regulatory asset base as a buffer for future demand shocks. But such adjustments need to be long-term: regulatory mechanisms that push up charges just as demand falls are exactly the opposite of what is required.

When the crunch comes Before the pandemic, EUROCONTROL projections indicated a major capacity crunch for European airports in the 2030s. In fact, pre-COVID, it projected that up to 1.5 million flights – the equivalent of 160 million passengers – would be unable to fly by 2040.

This prospect may have been deferred, but it is hard to say for how long. So, it is essential to get on, not only with developing planning tools that allow for greater short-term flexibility, but also to embed well-working market mechanisms in regulatory structures.

These should be directed towards efficient rationing of scarce capacity – necessarily requiring reform of the slots system – and underpinning the financing of additional capacity.

If we wait until the fog has cleared for the take-off of reform, that will be months, if not years, too late.

AW

About the author Dan Elliott is a founder and director of Frontier Economics and has worked as a consulting economist for more than 30 years.

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Quick and easy Airport World reports on the opening of the world’s first digital duty free vending machine, the introduction of automated pizza kitchens at airports and the growth of food pick-up and delivery services.

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he duty free industry recently celebrated a new first at Geneva Airport – the launch of the world’s first digital duty free vending machine.

Lagardère Travel Retail Switzerland has partnered with Inflyter to introduce the new, innovative automated retail solution, which offers a fully digital airport duty free shopping experience for arriving passengers.

And the travel retail giant is confident that the new custom-designed, digital outlet will generate incremental revenue and transform a high traffic airport zone into a self-service commercial space.

Its introduction effectively means that passengers flying into Geneva Airport can order, pay and collect duty free items in under 60 seconds, offering them a fast and convenient way to shop when the Aelia Duty Free store might be closed.

It also potentially provides an alternative shopping method for travellers who prefer a fully digital and contactless purchase experience.

The automated retail solution allows travellers to buy directly from an interactive touch-screen menu of the bestselling duty free products, initially starting with tobacco.

This digital unit can also cater for the sales of other duty free goods like fragrances, skincare, cosmetics and other duty paid goods (while the selling of alcohol is prohibited in Switzerland).

Travel and age verification checks are made using an integrated scanner for boarding passports and identity cards, and once payment is made, the relevant compartment doors automatically open and the customer can retrieve their items, and the associated customs documentation and receipts are issued.

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The vending unit has been positioned in the arrivals lounge outside the Aelia Duty Free store in Geneva Airport to complement the opening hours of the shop and maximise the opportunity of final impulse purchases at this final shopping touchpoint in the passenger journey.

In addition to the large touchscreen on the front of the automated retail unit, there are two large sides screens providing the ability to showcase the bestselling products and digital media opportunities for brands to further extend their visibility, reach and deliver fully integrated, marketing campaigns across all available channels in the airport and in-store.

“This new digital installation sees us launch our first fully automated, self-service sales channel which will optimise our operational costs while generating incremental revenue from what would be a non-viable commercial space at the airport,” enthused Lagardère Travel Retail Switzerland’s CEO, Pascal Le Droff.

“With international passenger numbers starting to pick up, we want to be at the forefront of digital transformation and actively explore how we can offer innovation that better services our existing duty free shoppers and reach new ones.”

Vending machine pizzas Piping hot pizzas are now available from vending machines at airports courtesy of a three-element non-microwave speed oven inside the innovative new kiosks.

Fully certified by the National Sanitation Foundation (NSF) and Underwriters Laboratories (UL and EPA-approved) in the US for meeting all regulatory requirements, Basil Street’s automated pizza kitchen

RETAIL/F&B INNOVATION

kiosks (APKs) have been in use at university and business campuses across the US for a while.

They were joined by San Antonio International Airport (SAT) in December 2021, as a result of a new partnership between Basil Street and Prepango, a specialist in securing contracts for automated retail and F&B solutions in airports.

And, if all goes to plan, the Texas gateway could be joined by Chicago O’Hare, Cincinnati/North Kentucky and Indianapolis international airports in the new year if current discussions prove successful.

Indeed, through Prepango, Basil Street is potentially looking to install over 200 APKs across the nation’s airports over the next 12-18 months.

Basil Street CEO, Deglin Kenealy, believes the concept will prove popular at airports as they will help address demand for hot food, particularly for passengers waiting to board flights, between connections or on late night layovers when more traditional food offerings may be closed, limited or inconvenient due to long queues.

Food delivery apps The desire to make it easier for travellers to access their F&B offerings, enhance customer satisfaction levels and boost concession sales – particularly since COVID sent passenger numbers tumbling – are just some of the reasons why the world’s gateways have embraced the launch of food service delivery apps over the past 18 months.

As San Diego Regional Airport Authority’s president and CEO, Kimberly Becker, told us earlier this year, one of the most successful F&B apps has been AtYourGate, which was developed in its Airport Innovation Lab and is now used at close to 20 US airports.

They include all three New York gateways (EWR, JFK and LGA), Boston Logan (BOS), Dallas/Fort Worth (DFW), Los Angeles (LAX) and both Cleveland Hopkins (CLE) and Baltimore/Washington (BWI).

The service at LAX is an expansion of the airport’s popular LAXOrderNow.com mobile ordering platform, which enables contactless ordering, payment and pick-up from restaurants throughout the LAX terminals.

Speaking at the launch of the AtYourGate service at LAX, Los Angeles World Airports (LAWA) CEO, Justin Erbacci, said: “Our guests have told us they want greater access to airport information and services through their mobile devices so they can have more control of their travel journey.

“Offering food and beverage delivery to the gate areas is yet another game-changing feature that sets the new LAX experience apart for its convenience and range of options.”

In LAX’s case, AtYourGate delivery is managed by LAX in partnership with Unibail-Rodamco-Westfield (URW) and mobile ordering provider Servy.

“This is about always putting the customer first and creating a seamless commercial experience,” said Mike Salzman, URW’s executive vice president and group director of airports. “Delivery is a really exciting step toward giving guests greater convenience and freedom as they travel.”

A similar AtYourGate system is in operation at CLE and BWI through retail/F&B concessionaire Fraport USA’s GateWaiter Mobile Meal Delivery Service. As a result, hungry passengers can now use their smart phones or digital devices to order their favourite food for pick-up or delivery.

“Our fully integrated mobile platform offers travellers an easy way to satisfy their cravings before they take off and during their visit at the airport,” says Tina LaForte, vice president of Fraport Cleveland.

“GateWaiter not only saves time and effort, with this self-service option, we’re delivering for customers who want a convenient solution for meal-times and excellent food options when they travel.”

Commenting on the launch of food delivery services at Baltimore/ Washington International Thurgood Marshall Airport, offered via BWIGaitWaiter.com, BWI’s executive director, Ricky Smith, said: “We are focused on delivering high customer satisfaction and new amenities that will benefit our passengers.

“This innovation offers a simple, touchless way to deliver excellent food options right to travellers throughout the airport.”

Like at CLE, the BWI’s GaitWaiter platform is powered by Servy’s Grab Airport Marketplace technology, with delivery by AtYourGate.

Servy’s chief experience officer, Jeff Livney, said: “The new service provides real proof of BWI’s commitment to improving the guest experience for travellers. This new service will offer a convenient, contactless self-service option, reducing touchpoints for passengers and enabling them to easily order and purchase meals while maintaining social distancing.”

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Servy has also played its part in the development of the mobile food ordering service introduced by Connecticut Airport Authority at Bradley International Airport (BDL).

The new service, BDL Market powered by Servy’s Grab Airport Marketplace technology, allows passengers to quickly and conveniently pre-order and pick up their meal from a growing list of airport restaurants.

“We are very excited to join a growing list of airports in introducing contactless food pick-up at Bradley International Airport,” noted Connecticut Airport Authority executive director, Kevin Dillon.

Doing things a little differently is the Greater Toronto Airports Authority (GTAA), which has opted for a pick-up service from Uber Eats, offering dishes from a variety of HMSHost-operated restaurants across Terminals 1 and 3 at Toronto Pearson International Airport.

As a result, anyone at the airport can download the Uber Eats app for iOS or Android, order a meal ahead of time, and pick it up at the restaurant when it is ready.

According to GTAA, the “innovative partnership” offers convenience and contactless ordering for consumers, while also providing additional revenue for on-site restaurants.

HMSHost’s vice president of digital, Neil Thompson, enthused: “Bringing new technology into the airport that makes food and beverage transactions easier, safer and quicker is a top priority for HMSHost.

“Our partnership with Uber Eats is a testament to our safe dining commitment while providing a contactless order and pickup solution that elevates the overall passenger experience at Pearson.”

New food and retail delivery service introduced at DXB Dubai International Airport (DXB) has arguably taken the new trend for on-site food delivery services to the next level by also embracing duty free items in its DXB&More offering.

According to the airport, DXB&more is a regional first mobile food, beverage and retail ordering service that provides a “smooth,

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convenient alternative to shopping, dining in or waiting for an order to go, without the need to download an app”.

Airport guests travelling from DXB’s Terminal 3, B and C gates, can access the new proposition via the WOW-fi landing page, QR codes around the airport or DXBmore.com.

It believes that once online, the process is simple and menus from DXB’s favourite restaurants and a variety of duty free shopping – including perfumes, beauty and technology – is available to browse and order.

Guests then have two options when finalising their purchase, to have it delivered directly to their gate or lounge, or to collect it themselves from the outlet.

Dubai Airports’ executive vice president for commercial, Eugene Barry, says: “We are always looking at ways to positively improve the experience our guests have at DXB, whether through the introduction of new retail and restaurant offerings, or through services and experiences like DXB&more.

“Over the past year we have spent time thinking about the future of travel, the type of journey our guests will want going forward, and how the travel retail environment needs to adapt to cater for these changes.

“By introducing DXB&more to Dubai International Airport, we are presenting our guests with a convenient and almost contactless way of enjoying their time in the airport.

“For busy travellers short on time, families who prefer to stay in one place or guests of the many airport lounges, DXB&more means they can shop in duty free or have something to eat from their favourite restaurant, without having to go too far.”

According to Dubai Airports, its ambition for the growth of DXB&more will see the platform develop into “an all-encompassing digital DXB experience, bringing together digital entertainment partners, more shopping and live experiences to guests already in the AW airport and those who are due to travel”.

LEADERSHIP

Learning curve ACI Africa’s secretary general, Ali Tounsi, reflects on the huge challenges posed by COVID-19 but looks forward to the future with optimism.

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he impact of the COVID-19 pandemic on the aviation industry in Africa has been, and will continue to be, unprecedented in magnitude and scope.

Indeed, we expect that the impact of the pandemic will be felt across the region for years to come, destabilising economies and affecting livelihoods.

As the ‘Evolution of Pandemic in Africa’ graphic on page 39 clearly shows, to date, Africa has witnessed three waves of the pandemic in the last 18 months.

The crisis has challenged the core foundation of the aviation industry and tested the sheer resilience of the different stakeholders composing it.

It has proved particularly tough for the continent’s airlines, for example, with the carriers currently fighting for survival including South African Airways and Air Mauritius, which recently emerged from bankruptcy and voluntary administration respectively, and Air Seychelles, which entered administration in early October.

Effectively no aviation related business has survived unscathed from the massive downturn in traffic experienced by Africa’s airports since the start of the pandemic, which led to an estimated $2.7 billion shortfall in revenues in 2020 compared to the pre-COVID forecast.

And this year is not expected to be much better with expected losses of around $2.5 billion on our pre-pandemic projections.

Like elsewhere in the world, Africa’s recovery from COVID will very much be linked to a successful vaccination programme. Unfortunately, Africa continues to lag behind the rest of the world when it comes to vaccinating its population.

To put this in context, the stated goal of the World Health Organization (WHO) was to vaccinate at least 10% of the population of every country by September 2021, at least 40% by the end of the year, and 70% globally by the middle of next year.

However, as of November 8, 2021, Africa accounted for just 2.8% of the 7.2 billion doses administered worldwide meaning that only 6.2% of the continent’s population had been fully vaccinated.

Other major challenges Nobody is in any doubt that successfully navigating our way through the pandemic is the biggest challenge currently facing Africa’s airports, but it is, of course, far from the only one. And there are no easy answers to many of them as they are systemic in nature and generally outside the control of airports.

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One of the biggest challenges facing our airports is the fact that despite moves to liberalise air transport and have more Open Skies agreements in place across the continent, air access remains an issue.

In fact, the lack of consistency in air access policies and national carrier protectionism practiced by many African States have resulted in persistent poor connectivity across the continent.

Another major challenge to growth are the high taxes levied by governments on aviation as they represent a huge burden and have increased the cost of travel in an arbitrary manner. Continuing in this way will pose a risk to the development of a sustainable air transport industry in Africa.

The financial stability of our airports also remains a constant challenge. Inadequate traffic levels ensures that there are many loss-making airport businesses, which ultimately results in the inability to invest in much required infrastructure and equipment. This can compromise safety and security, the basic pillars of aviation. The pandemic has simply exacerbated the situation.

We need a change of mindset from the very top in Africa to offer hope that the aviation industry can thrive again once these most testing of times are over. If governments and all industry stakeholders work together better, we can reach new heights of economic prosperity and sustainability post-pandemic.

Above all, there is need for a genuine political will to bring a paradigm shift that will allow for the liberalisation of the air transport sector, the opening of the skies and the reduction of the air travel costs in Africa.

African solutions Africa needs African solutions which must respect its diversity, its specificities and its culture. Initiatives must be based on equity and the sharing of risks and benefits for all.

LEADERSHIP

In this context, African-led initiatives by the African Union, such as the Single African Air Transport Market (SAATM), the African Continental Free Trade Area (AfCFTA) and the Free Movement of Persons Protocol (FMPP), are without doubt the way forward and will certainly bring much needed hope for economic stability and prosperity on the continent.

This is not the first time that the aviation industry in Africa has been profoundly impacted by ground-breaking events. You don’t have to go too far back, for example, to remember the Arab Spring, the Ebola outbreak in West Africa and the security crisis in North Africa.

And history tells us that the COVID-19 pandemic will certainly not be the last crisis to affect aviation.

What we do know is that COVID, damaging as it has been and continues to be on the industry, is bound to leave Africa with an aviation landscape potentially different from the one it was in 2019. Our airports have to learn from this experience and try to anticipate and prepare for the new future as best they can.

Bouncing back Airports are vital gears in the aviation ecosystem and are important engines of economic growth, wealth creation and employment for Africa, which with so much potential growth ahead of it, is arguably the continent of the future.

However, as key as airports are to aviation’s recovery and future development, they cannot drive change on their own. It is therefore vital that the industry and all aviation’s stakeholders – including governments – work together to build a better future.

If everyone works together and looks in one direction, the industry can lay the foundations of the recovery and address the hurdles which existed prior to COVID-19, to ensure that the air transport industry can deliver the economic and social benefits to the communities that it serves in a durable and sustainable manner.

Since the start of the pandemic, ACI Africa’s focus has been on the restart of the industry and what operating in ‘the new normal’ means for airports. This led to the creation and promotion of the first restart and recovery procedures back in May 2020 to assist African airports and make sure that they had appropriate health and safety protocols in place to welcome back passengers and staff.

ACI Africa has also supported African airports during the restart through the Airport Health Accreditation programme, which is designed to help them comply with the new health measures and restore the public’s confidence in the safety of air travel. More than 70 African airports have been accredited to date and some are now embarking on the re-accreditation phase.

I am also pleased to say that one of our flagship initiatives, the African Airports Development Program, has ultimately proven to be of tremendous support to airport members during the pandemic, assisting them with free training courses in a virtual format and helping them with their airport certification process.

Over the past year, the quest for the democratisation of learning and development on the African continent, which is one of the most important pillars of the African Airports Development Program, has paved the way for accessible and highly affordable training courses to the airport community. And, most importantly, these courses have been delivered by high calibre African trainers and experts.

ACI Africa is determined to leave no stone unturned in that journey.

We will continue to develop African expertise so that the aviation industry on the continent can stand on its own feet and become autonomous.

Our mission is to help African airports achieve their goals and overcome their challenges by giving them our unconditional support and assistance now, during this time of crisis, and in the future.

These are without doubt the toughest of times for Africa’s airport industry, but we are ready for the challenges ahead, and look forward AW with optimism.

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ROUTE DEVELOPMENT

Restoring air connectivity We report on some of the route development challenges facing Europe’s airports as the industry continues to struggle from the impact of the global pandemic.

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ust when you began to think that things were getting better, rising infection levels across Europe in November led a number of countries to impose new COVID restrictions and, in some cases, full and partial lockdowns.

At the time of writing, the impact of these measures on international travel for the fully vaccinated was unknown, but they provided another reminder of just how difficult it is going to be for airports to rebuild their international route networks over the next year to 18 months.

It is generally accepted that domestic and short-haul travel will recover more quickly than long-haul international routes, but what timescale are we realistically looking at before the airlines really begin to ramp up their services again?

What incentives can airports offer the airlines to encourage them to resume services, increase existing frequencies and launch new routes?

And has COVID changed our travel habits forever, particularly for business travel, where many companies appear to have pulled the plug on overseas trips for now due to economic difficulties and the hassle and uncertainty of planning often expensive business trips abroad?

The hugely challenging situation facing Europe’s airports when it comes to their route networks was touched upon in the ‘Restoring air connectivity and reimagining route and network development’ session at ACI Europe’s recent Annual Congress & General Assembly in Geneva.

Moderator, KPI Aviation and Marketing Solutions’ managing director, George Karamanos, opened the session by suggesting that airports might have to completely change their airline marketing strategies to adapt to today’s more challenging environment.

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“People are deciding where to travel based on COVID. In fact, the main driver of travel at this point is anything that relates to COVID, so a new approach is necessary,” said Karamanos.

Indeed, he believes that COVID has changed the attitudes and behaviour of travellers to such an extent that it is time to re-prioritise the needs and desires of passengers in what he called “the new travel normal”.

Aviation, he argues, now has to appeal to a new set of passenger personas, the bulk of which will need some convincing to travel again, as KPI research indicates that the ‘Optimistic Traveller’, the kind of passenger the industry wants, only account for around 18% of the total.

In fact the new market, he argues, is now dominated by ‘The Common-Sense Traveller’ (35%) and ‘The Cautious Traveller’ (29%), with ‘The Non-Traveller’ (6%); and ‘The Risk Averse Traveller’ (12%) accounting for the rest.

Going into more specifics about the new passenger personas identified by new KPI research, Karamanos said a statement that best summed up The Common Sense Traveller, would be: “I have returned to air travel but will take necessary precautions during my journey. The number of COVID cases and restrictions at my destination will impact my flight choice.”

For The Cautious Traveller, he said the comment would be: “I will only take a flight, if it is absolutely necessary, taking all precautions required. I will await the easing of restrictions and reduction in cases before I fly more regularly.”

ROUTE DEVELOPMENT

The Optimistic Traveller he defined as: “I have returned to air travel and will travel at similar levels to the pre-COVID era if flights are available regardless of the restrictions in the airport or at the destination.”

He said The Non Traveller would typically say: “I will not return to flying before the pandemic is over, and even then I will be cautious in my travel plans and will be unlikely to travel at the same levels that I did previously.”

And he noted that a statement that would best characterise The Risk Averse Traveller, would be: “I am not willing to return to travel until the air travel restrictions are eased and the number of cases has dropped significantly. Once the medical professionals indicate it is safe to fly, I will return, but at reduced levels to previously.”

None of the panellists – Bordeaux Airport’s senior vice president for business development, Jean-Luc Poiroux; Riga Airport board member Arturs Saveljevs; Vienna International Airport’s vice president for aviation marketing and business development, Belina Neumann; Egis’ development director for airport operations and maintenance, Anthony Martin; and Hermes Airports CEO, Eleni Kaloyirou – doubted Karamanos’ assumption that COVID had changed the future for route development in Europe.

Bordeaux’s Poiroux noted that the airport was sending commercial teams to visit travel agents and companies across the region to promote the airport’s route network and educate and inform people about the latest travel requirements in order to motivate companies and groups of travellers to fly again.

“It is not always obvious to people living in the border region or south western France as to where you can fly to easily and without too many constraints from Bordeaux Airport today,” said Poiroux.

“We feel the desire from the airlines to come back and get aircraft in the air, and this has perhaps led to us becoming a bit more opportunistic in our approach to the airlines in recent weeks and let them know that Bordeaux could be on their map again very quickly.”

He believes that one of the most successful strategic decisions the airport has made with regards to incentivising the airlines to resume

services from Bordeaux has been to scrap its higher fee for international flights and charge just a single non-Schengen fee for all services.

Hermes Airports’ Kaloyirou stated that ‘good communication’ with the airlines, often virtually and at least once a week, was arguably the best strategic marketing decision the Cypriot airport operator made during the pandemic, as it ensured that it maintained a constant dialogue with its 70 carriers and was kept up to date on their recovery plans.

The second most important decision, she said, was to establish a government backed incentive scheme that shared the risk of route resumptions with the airlines to encourage them to restart services to either Paphos or Larnaca airports.

“The sheme is based on load factors and us providing marketing and other support to the airlines if they are initially below the level they require to operate the route,” explained Kaloyirou.

Largely as a result of these initiatives, Kaloyirou noted that passenger numbers at Paphos and Larnaca airports are now back to 70% of their pre-COVID levels.

Vienna’s Neumann admitted that since long-haul services have only traditionally accounted for 8% of the traffic at the Austrian gateway, its passenger figures haven’t been hit as hard or for so long as other hubs more depedent on international travel.

However, like everywhere else, Vienna International Airport (VIE) saw its passenger numbers plummet during the worst days of COVID, and in a bid to kick start services it has waived all landing fees since March 2020 as part of its ‘restart programme’.

“This has proved very successful, but I think the most important work we have done over the last 18 months or so has been communicating with our airlines, business partners and travel companies in our catchment area to address passenger concerns and the constantly changing challenges we all faced,” said Neumann.

“What we have found really difficult was the fact that all the tools we normally used for forcasting or calculating business cases for route development didn’t work anymore as everything has changed.

We are still adjusting to this, and I think, for us, this means listening

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ROUTE DEVELOPMENT

a little bit more closely to what the airlines need and the problems they are facing.”

Riga Airport’s Saveljevs admitted that working closely with the Latvian government has been pivotal to easing travel restrictions and rebooting aviation in his country and meant that the airport hadn’t found it necessary to offer any incentives to the airlines to resume services.

While Egis’ Martin said the pandemic had been particularly hard on its smaller airports in France and Belgium, some of which had no traffic at all for several months, meaning that restoring their connectivity wasn’t only important, but vital to ensure their survival.

Its route network efforts at these airports very much revolves around getting local communities and companies on side, although he accepted that COVID had badly hit business travel, conceding that “business traffic had not come back” to 2019 levels, and may take several years to fully recover.

He noted that the downturn in business traffic had been particularly tough on Pau-Pyrénées Airport in the south-west of France, which lost a significant number of its commercial services, including some of the daily routes operated by Air France service to Paris (CDG and ORY).

Fearing that a continuation of the situation could have an adverse long-term impact on demand, Egis decided to take control of the situation and together with the local authorities launched a campaign to win the support of the local business community to support the resumption of Air France flights to the French capital.

It proved successful, in part due to the location in Pau of the global research and development centre of energy giant Total Energies, which Martin says means that thousands of its staff live in the area and frequently need to travel to Paris and beyond.

“We had to be proactive as airlines will not wait for years to secure satisfactory load factors to fill an aircraft and business people won’t wait for years to have a service that meets their needs,” said Martin.

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Air France currently operates six daily flights from Pau to Paris (CDG and Orly) and Lyon, and is considering resuming operations to Marseilles in March 2021.

Return of US traffic triggers Heathrow recruitment drive Anyone in any doubt about the economic and social importance of air travel returning to its pre-COVID levels as soon as possible need look no further than London Heathrow for evidence, as the UK hub is looking to recruit 600 new frontline staff as a direct consequence of the restart of transatlantic travel and easing of international restrictions.

While passenger numbers at Heathrow remain 56% down on pre-pandemic levels, the end the US travel ban is a huge boost for the gateway as the market accounts for 20% of its passenger traffic and 31% of the airport’s cargo tonnage.

Security and engineering jobs will be among the first new frontline roles to be created at Heathrow since the start of the pandemic.

Heathrow’s chief people officer, Paula Stannett, said: “This is an incredible time to start a career in aviation and to be at the forefront of a world-class organisation determined to build back better as we recover from the impacts of the pandemic.

“Many of Heathrow’s security officers have gone on to have long and fulfilling careers in various parts of our airport and the wider aviation sector, so this really is a rewarding opportunity at a pivotal time for our industry.

“We look forward to welcoming our new joiners before the summer, at the beginning of what we are sure will be an enriching time at the UK’s only hub airport.”

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CUSTOMER SERVICE

The digital airport Templemere’s Clare Williams Fannin takes a look at how digital technology is transforming the passenger experience.

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rom facial recognition at passport control to high-tech baggage handling, airports have often been at the cutting-edge when it comes to the adoption of technology, and these solutions are being effectively utilised at busy travel hubs to improve efficiency for the passenger and the airport.

But beyond the practicalities of moving from A to B through a terminal, is there a place for technology when it comes to other aspects of elevating the passenger experience?

The answer is yes, according to Mignon Buckingham, CEO of travel experience and airport lounge expert Airport Dimensions. “Whether it’s using tech to book services such as parking in advance of the journey or for ordering and paying for food or retail at the terminal, the use of technology is no longer a luxury – it is fast becoming an essential part of every journey.”

Much of this shift has been prompted by dramatic changes in the needs and behaviours of travellers. In the past two years, we’ve seen significant acceleration in the use of digital technology and we’ve all become increasingly reliant on digital apps and online sites for everything from social interaction to ordering retail goods.

This trend is no less prevalent in travel, where passengers have now come to expect similar digital services as standard.

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Airport Dimensions’ Airport Experience 2021 survey of 6,000 global travellers found growing demand among passengers for a spectrum of digital services they expect would improve their airport experience.

For example, 60% of passengers said they would consider ordering and collecting food and beverages using their personal digital devices. A similar 60% of respondents said they are looking for new in-app features when using an airport lounge.

At airports across the world, more and more passengers are already enjoying new digital services that enhance the guest experience. For instance, in partnership with Servy, the enterprise self-service platform for hospitality, Collinson has launched a service called Ready 2 Order, which allows lounge visitors to place contactless orders for complimentary food and drinks using their mobile phones and other digital devices.

The service provides an extra level of convenience and personalsation, as well as safety for guests and staff.

Technology is also transforming the airport retail experience, and services such as Inflyter, which allows for pre-purchase of duty free products with fast collection from airport lockers, are allowing airport shoppers to enjoy the same convenience they have become used to at home.

CUSTOMER SERVICE One-stop shop

When the going gets tough Digital innovations aren’t just about making the more pleasant aspects of travelling through a terminal even better, they can also be used to lessen the stress when things don’t go as planned.

Digital technology, for example, can be used to replace paper-based voucher systems to compensate passengers in the event of delays, speeding up and simplifying the process to benefit both passengers and the airport.

Indeed, a digital vouchering system from award-winning tech company iCoupon already enables airlines and ground handlers to issue digital vouchers directly to passenger boarding passes to be spent at the airport with iCoupon integrated retailers, in the event of flight delay.

In fact iCoupon can also be used in promotions, loyalty and rewards programmes, transportation and crew and retail staff meal entitlement solutions.

As well as speeding up passenger flows and simplifying airline billing, digital vouchering enables airports to improve their sustainable credentials by eliminating the need for paper vouchers.

To date, iCoupon has issued 800 million vouchers, with the company exceeding its pre-pandemic levels since July this year. CEO and chairman, Richard Bye, believes that many factors have influenced the shift towards digitalisation.

“With flight schedules impacted by the ongoing disruption of the COVID-19 pandemic, e-vouchering has become an essential tool for ensuring passengers receive immediate compensation in line with regulations such as EU261, yet in a COVID-safe way,” he says.

“In addition, passenger attitudes evolved due to the effects of the pandemic. Consumers are demanding tangible sustainability measures, and the ability to use automated services is now assumed.”

Consumers are clearly keen to embrace these new offers, but there is strong demand for an online experience that is as simple and as streamlined as possible. A total of 71% of respondents to the recent Airport Dimensions study said a single mobile app for all airport services would greatly improve their overall experience.

These demands are particularly strong among younger travellers, with nearly three quarters (74%) of Millennials calling for a single app to access a full range of digital services during their journey.

This means that airports that want to get ahead in the digital game should look to introducing a single digital ecosystem that supports a broad spectrum of operational and commercial functions.

Airport Dimensions’ e-commerce and traveller relationship management platform Connecta has been designed to bridge the digital divide between the traveller and the airport, providing a single resource to access services across the entire airport space.

Connecta enables travellers to shop, order food, book lounges and arrange car parking quickly and easily from their own smartphone. It can also interface with third party programmes such as frequent flyer programmes, ensuring those members can also seamlessly access services, retail and other benefits across the airport.

Stephen Hay, global strategy director of Airport Dimensions, says: “Travellers have been conditioned to expect frictionless access to a full range of digital services and they expect it to be seamlessly integrated – having to use five or six apps to navigate their airport journey across the airport is frustrating and leads to lower levels of engagement and spend.”

Also crucial to this digital evolution are updated systems that meet the expectations of today’s digitally-savvy traveller. This includes providing universal, unlimited and hassle-free WiFi access across the entire airport space.

As Hay puts it: “Gone are the days when airports could offer just 30 minutes of Wi-Fi access, and we know that a disconnected traveller will just close their wallets.”

What’s in it for us?

The commercial advantages that the intelligent use of technology can bring to airports are numerous. It can lead to more formal relationships being formed with passengers based on the value exchange of personal data that bring much to the airport as well as the passenger.

Travellers, for example, may be happy to provide considerable amounts of personal data in exchange for an enhanced travel experience, such as quicker processing through check-in and security for a more bespoke and stress-free journey.

Careful collection and analysis of data from which meaningful insight can be drawn not only points the way to more convenient, more tailored customer experience, it also carves a virtuous circle that enables the airport to make better commercial decisions, and so boosts revenue and profitability.

One key element to success here is scale, whether that’s drawn from the 45 million travellers in the Priority Pass network, the 10,000 orders Servy has just completed, or the 800 million vouchers issued by iCoupon. Data needs to be of sufficient quality as well as quantity for significant conclusions to be reached when it’s analysed.

But whether airports already have developed systems in place or are just taking their first digital steps, there is no doubt that digital advance is only going one way and airports need to be ready now. As Stephen AW Hay would attest: “The digital airport experience is already here.”

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HUMAN RESOURCES

PEOPLE

matters Reflections and predictions Terri Morrissey and Dr Richard Plenty look back at a tough year for airports and consider some of the human resources challenges that may lie ahead in 2022.

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t is December 2021 and we have been living and working with this pandemic for almost two years. It is timely to reflect and take stock of the impact this has had on us all, on our working environments and lives – and on our physical and psychological wellbeing and health.

It is also a good time, at the beginning of a New Year, to try and make predictions about how the future may pan out.

That won’t be easy. The only certainty seems to be that we have lived, and will continue to live, in a world of increasing uncertainty. This has made it difficult to plan, to strategise, and to make decisions around organisational and people issues such as resourcing, capacity building and people development. Many people have been made redundant.

At the individual level, the adverse impact of the pandemic on some people’s mental health and psychological wellbeing has been obvious. Yet even this isn’t a simple picture.

Take employee engagement for example.

According to OrgVitality, a US-based consulting firm, employee engagement scores in the States held up remarkably well in 2020 due, in part, to the ‘rally around’ that can take place in a crisis. But now we are further into the pandemic, can this enthusiasm be maintained?

We have seen wave after wave of the pandemic, with another one hitting as we write this column. This has led to major changes in employment practices, which airports have been absorbing, especially in relation to where people work. Those that can work from home have been encouraged to do so, then exhorted back to the workplace and now, once again, encouraged to stay at home if possible.

This drive towards home working has been greatly facilitated by the rapid take-up of video meeting technologies such as Zoom and Teams.

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But this revolution in our ability to connect people virtually – instantaneously, easily, low cost – also hits directly at the value proposition aviation provides for business travellers.

In this changing environment, it is very difficult to make longer-term forecasts with any degree of accuracy as we don’t know exactly how and when the pandemic will end.

However, there have been attempts made to look to the immediate future and to try and paint a picture of the kinds of trends to expect.

According to Olivier Jankovec, director general of ACI Europe, in a talk he gave to the 31st Annual Assembly in Geneva in October 2021, there is a huge pent up demand for leisure and personal travel that is likely to put immediate pressure on airports as the pandemic subsides and they have to ramp up to meet this demand.

And they will need to do this in the context of some major external challenges such as environmental concerns and health issues.

With regards to the environment, the need to move more rapidly towards sustainable green aviation will drive technological innovation in fuel and airplane design as well as air traffic management. In this respect, ACI’s Airport Carbon Accreditation programme will become ever more important.

In terms of the health challenges, there is a need to remove the anxiety surrounding travel.

This will require even more collaborative working between and across disciplines to ensure a more co-ordinated and effective approach to international travel measures, thus enhancing the customer experience.

Collaboration, co-operation and partnership will be needed to address both environmental and health matters. The paradox is that while travel facilitates connection between people, geopolitics can sometimes make it more difficult.

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Dato’ Iskandar Mizal Mahmood is the new managing director of Malaysia Airports Holdings Berhad (MAHB).

He had previously served MAHB as general manager (1999-2003) where he had led the Initial Public Offering (IPO) and listing of the company on Bursa Malaysia.

The Metropolitan Washington Airports Authority has named Tanisha Lewis as its new vice president of diversity, inclusion and social impact. The move follows the creation of a new Office of Diversity, Inclusion and Social to further the organisation’s long history of focusing on diversity, equity, inclusion (DEI), environmental and social impact in the communities it serves.

Munich Airport has two new members of its management board, Nathalie Leroy and Jan-Henrik Andersson. Leroy, who was born in France, has been the chief financial officer and director of infrastructure at the airport company since October 1, 2021. Jan-Henrik Andersson, who succeeds Andrea Gebbeken, has assumed responsibility for commercial and security activities.

Ryan Both is the new executive general manager for aviation at Brisbane Airport Corporation (BAC). He will commence at BAC on February 1, 2022, replacing Jim Parashos, who is leaving after five years with Brisbane Airport.

Aena’s managing director for airports and executive board member, Javier Marín, is the new president of ACI Europe, succeeding Munich Airport’s Jost Lammers upon the completion of his time in the hot-seat. Marín said: “The role of our association has never been more central – giving us voice on the international stage, defending and promoting our license to operate, and making us even greater than the sum of our parts as we digitalise and decarbonise our industry.”

About the authors Terri Morrissey and Dr Richard Plenty are directors of This Is…, authors of the book Uncertainty Rules?

Making Uncertainty Work for You, and deliver ACI World’s Airport Human Resources training.

You can contact them at info@thisis.eu

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