Theme: Economics & Finance In the spotlight: London Gatwick Airport design: Catering for the elderly Plus: Intelligent airports & Retail innovation
Healthy airports – driving the global economy February-March 2016 Volume 21 Issue 1 www.aci.aero
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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)208 230 7867 mark@airport-world.com Sales Director Jonathan Lee +44 (0)208 707 2743 jonathan@airport-world.com Sales Manager Ellis Owen +44 (0)208 274 1540 ellis@airport-world.com Advertising Manager Andrew Hazell +44 (0)20 8384 0206 andrewh@airport-world.com Subscriptions Beth Owen +44 (0)208 707 2743 subscriptions@airport-world.com Managing Director Jonathan Lee +44 (0)208 707 2743 jonathan@aviationmedia.aero Published by Aviation Media Ltd PO BOX 448, Feltham, TW13 9EA, UK
Website www.airport-world.com
Airport World is published six times a year for the members of ACI. The opinions and views expressed in Airport World are those of the authors and do not necessarily reflect an ACI policy or position. ISSN: 1360-4341 The content of this publication is copyright of Aviation Media Ltd and should not be copied or stored without the express permission of the publisher. Printed in the UK by The Magazine Printing Company using only paper from FSC/PEFC suppliers www.magprint.co.uk
Full steam ahead Editor, Joe Bates, reflects on a busy start to 2016 and looks forward to the Airport Economics & Finance Conference and Exhibition in London.
L
ife is certainly never dull in the aviation industry as the first few weeks of 2016 have shown with the announcement of record-breaking traffic figures, news of major expansion projects and investors vying for new concessions across the globe. Although the final figures are not yet in for all the world’s biggest airports, with a staggering 101.5 million passengers passing through its facilities in 2015, there is little doubt that Hartsfield-Jackson Atlanta International Airport will hold on to its crown as the busiest gateway on the planet. A 5.5% upturn in traffic led to HartsfieldJackson becoming the first airport to handle over 100 million passengers in a calendar year. Other major airports to report significant growth in 2015 have included Chicago O’Hare (9.8%), Miami (+8.3%), Hong Kong (+8.1%), Los Angeles (6.8%) and Dubai (DXB), which has jumped from being the sixth busiest airport in the world to third based on the 78 million passengers (+10.7%) welcomed last year. Infrastructure development news has come in the way of Mactan-Cebu starting work on its new Terminal 2; the opening of Dubai International’s impressive new Concourse D; and the unveiling of the designs of a striking new control tower for Istanbul’s new mega hub. When it comes to investing in airports, as ‘The buying game’ feature in this ‘Economics & Finance’ themed issue reveals, the appeal of owning, operating and developing airports continues to grow. Indeed, as Airport World went to press, bids were being made for London City Airport; SNC-Lavalin announced the intention to sell its stake in Malta International Airport to the Vienna Airport Group; and the Iranian President’s state visit to France led to the signing of Memorandum of Understandings (MoUs) for the award of potential concessions and development contracts for Isfahan, Mashhad and Imam Khomeini (Teheran) airports in Iran. VINCI Airports is the interested party in Mashhad and Isfahan airports, and Aéroports de Paris and Bouygues Bâtiment International are looking at Imam Khomeini.
Other economics/finance themed articles in our first issue of 2016 include features about the importance of retail/F&B revenues; retail innovation; Moscow Domodedovo’s aerotropolis; and new revenue streams, while ACI debates the often-thorny subject of airport charges. Elsewhere you can read about the latest environmental initiatives; designing airports for an aging population; and intelligent airports. The airport in the spotlight is London Gatwick and CEO, Stewart Wingate, tells us why he believes that a second runway at his gateway is the best solution for the UK’s capacity problems. I am sure that some of the topics we cover will be discussed at the upcoming Airport Economics & Finance Conference in London, whether during the conference sessions themselves, in the exhibition hall, round the dinner table or in private meetings between delegates. It is always one of my favourite events because it is usually the first big ACI event of the year, offers two days of interesting and lively debate, and provides the first opportunity to get some sense of how the industry is feeling about the year ahead. Finally, I would like to clarify a point I made in this column in the last issue of Airport World. My belief that ACI World is almost unrecognisable today from the organisation that existed 20 years ago does not imply any criticism of the founding fathers or their considerable achievements during ACI’s formative years. Indeed, during this time the late Dr Assad Kotaite, the former President of ICAO, recognised ACI as one of the three pillars of civil aviation, together with ICAO and IATA. And in its first five years, ACI doubled its membership in comparison to the previous constituent associations and recruited hundreds of new airports, effectively laying the foundations for the continued growth the organisation enjoys to this day. My comment was meant to underscore ACI’s growth over recent years, particularly since its move to Montréal, as it is now a much larger and stronger organisation, having been built on the good work done in the early years by the founding fathers. Enjoy the issue and I look forward to seeing AW you in London.
AIRPORT WORLD/FEBRUARY-MARCH 2016
3
CONTENTS
In this issue Issue 1 Volume 21
3 Opinion Editor, Joe Bates, reflects on a busy start to 2016 and looks forward to the Airport Economics & Finance Conference and Exhibition in London.
8 ACI news New economic data from ACI shows that amidst market uncertainties, the airport industry remains resilient with greater reliance on passenger-related revenues, writes Ryan White.
11 View from the top ACI World’s director general, Angela Gittens, reflects on the airport charges debate and welcomes a new colleague.
12 What next for Gatwick? CEO, Stewart Wingate, talks to Joe Bates about his airport’s ambitious expansion plans and belief that the UK will get it badly wrong if Gatwick doesn’t get a second runway.
20 Rhetoric, reality and reform Stephen Van Beek, ACI World’s interim head of economics, discusses new aviation legislation on both sides of the Atlantic and the thorny issue of airport charges.
22 The buying game Curtis Grad, president and CEO of Modalis, provides a rundown of the biggest airport deals of the past year and takes a glimpse of what’s on the horizon for 2016.
26 Setting the record straight Donagh Cagney, ACI Europe’s economics manager, counters the latest airline call for even more regulation of airport charges and renewed accusations that the continent’s gateways are monopolies.
28 Every little counts Airport World takes a closer look at a handful of new initiatives designed to either boost airport revenue streams or reduce unnecessary expenditure.
31 Raising revenues Tax Free World Association (TFWA) president, Erik Juul-Mortensen, tells Airport World how airports can keep retail tills ringing in tough times.
AIRPORT WORLD/FEBRUARY-MARCH 2016
5
CONTENTS
Director General Angela Gittens Chair Declan Collier (London, UK) Vice Chair Bongani Maseko (Johannesburg, South Africa) Immediate Past Chair Fredrick J Piccolo (Sarasota, USA) Treasurer Arnaud Feist (Brussels, Belgium) ACI WORLD GOVERNING BOARD DIRECTORS Africa (2) Pascal Komla (Lomé, Togo) Bongani Maseko (Johannesburg, South Africa)
35 Setting new boundaries Joe Bates discovers more about Moscow Domodedovo’s plans to create Russia’s first aerotropolis within a 25-kilometre radius of the airport.
38 The next big thing! Airport World turns the retail spotlight on Abu Dhabi’s new Midfield Terminal and a handful of other innovative retail/F&B projects across the globe.
40 Age concern With people living longer than ever before, catering to an aging population is now an essential part of the airport design process, writes Corgan’s Jonathan Massey.
43 Turning to technology Airports that embrace digital technology will be best placed to cope with traffic growth and rising passenger expectations, writes Fujitsu’s client managing director for the transport sector, Russell Goodenough.
45 Project watch: Salt Lake City International Airport New $1.8 billion terminal and concourse to transform Utah’s gateway to the world.
47 Going green Spotlight on Minneapolis-St Paul International Airport’s solar energy project and the introduction of biofuel at Oslo Airport.
49 ACI’s World Business Partners The latest news from ACI’s World Business Partners
50 People matters Terri Morrissey and Dr Richard Plenty provide their thoughts on: Entrepreneurial spirit and innovation.
Asia-Pacific (9) Kjeld Binger (Amman, Jordan) Dennis Chant (Gold Coast, Australia) Kenichi Fukaya (Tokyo, Japan) Seow Hiang Lee (Singapore) Xue Song Liu, (Beijing, China) Kerrie Mather (Sydney, Australia) Emmanuel Menanteau (Phnom Penh, Cambodia) PS Nair (Delhi, India) Ravindra K Srivastava (Delhi, India) Europe (7) Daniel Burkard (Moscow, Russia) Declan Collier (London, UK) Robert Deillon (Geneva, Switzerland) Arnaud Feist (Brussels, Belgium) Augustin de Romanet (Paris, France) Sani Şener (Istanbul, Turkey) José-Manuel Vargas (Madrid, Spain) Latin America & Caribbean (3) Fernando Bosque (Guadalajara, México) Martin Eurnekian (Buenos Aires, Argentina) Héctor Navarrete Muñoz (Merida, Mexico) North America (7) Thella Bowens (San Diego, USA) Howard Eng (Toronto, Canada) Deborah Flint (Los Angeles, USA) Maureen Riley (Salt Lake City, USA) Tom Ruth (Edmonton, Canada) Miguel Southwell (Atlanta, USA) William Vanecek (Buffalo, USA) Regional Advisers to the World Governing Board (8) Aaron Adderley (Hamilton, Bermuda) Lew Bleiweis (Ashville, NC, USA) Joyce Carter (Halifax, Canada) Zouhair Mohamed El Aoufir (Rabat, Morocco) Michael Kerkloh (Munich, Germany) Tan Sri Bashir Ahmad Abdul Majid (Kuala Lumpur, Malaysia) Robinson Misitala (Livingstone, Zambia) Andrew O’Brian (Quito, Ecuador) Stefan Schulte (Frankfurt, Germany) Observer World Business Partner Observer Greg Fordham (Airbiz) Correct as of February 25, 2016
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CELEBRATING 20 YEARS OF AIRPORT WORLD
ACI WORLDHEAD NEWS RUNNING
World in motion New economic data from ACI shows that amidst market uncertainties, the airport industry remains resilient with greater reliance on passenger-related revenues, writes Ryan White.
A
CI has released the 20th edition of its Airport Economics Report and new Key Performance Indicators reference guide for the financial year 2014. With comprehensive data coverage from a sample of over 800 commercial airports, in-depth analyses of air transport demand, airport revenues and costs continue to be the bedrock of the report. The main drivers of aeronautical and commercial revenues, and sources of airport costs, are analysed over time and across various dimensions. The link between airport size and financial performance is also examined within this context. “Airports are complex businesses that operate in specific physical, cultural and regulatory environments. As an integral part of the air transport value chain, it is essential to monitor the economic aspects of this dynamic industry for evidence-based decision making,” says ACI World’s director general, Angela Gittens. “ACI’s Key Performance Indicators continue to be the industry reference for a thorough understanding of the financial health of the airport industry.” There are two forces at play in the global economy, which have pushed the pendulum in opposite directions. As advanced economies get back on course, the emerging market slowdown has resulted in overall moderate growth levels in global output. Regardless, passenger traffic remained resilient in the face of the global uncertainties that beleaguered many of these economies over several years. International tourism, in particular, was irrepressible in 2014 and 2015, even considering the geopolitical risks that persisted in certain parts of the world, such as Eastern Europe and the Middle East. The Ebola outbreak also presented significant challenges to the aviation sector. Notwithstanding, by and large, the international traveller appears to have discounted these risks. Based on the 2014 financial year, airport revenues experienced strong growth compared to the previous year. Although there were regional variations in financial performance, the recovery in the Euro zone and the United States, combined with the continued
Key industry facts for the 2014 financial year •
Global industry revenue year-over-year growth: 8.2%
•
Global industry revenue: $142.5 billion
•
Distribution of global revenues: aeronautical (55.5%), non-aeronautical (40.4%) and non-operating (4.1%)
•
Distribution of non-aeronautical revenue by key source: retail concessions (28%), car parking (22%) and property and real estate income or rent (15%)
•
8
Industry net profit margin: 16%
CELEBRATING 20 YEARS OF AIRPORT WORLD
Passenger revenues for 2014 financial year •
Global airport revenue per passenger: $21.22
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Global aeronautical revenue per passenger: $11.78
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Global non-aeronautical revenue per passenger: $8.58
•
Total cost per passenger: $16.82
buoyancy of aviation in emerging markets, translated into gains in airport revenues. Industry revenues as a whole grew by 8.2% from 2013, reaching over $142 billion in 2014. Many airports across the globe have moved towards a business model that charges the travelling end user for their services through passenger-based revenue schemes. On the aeronautical side of the business, over 55% of every dollar was generated from passenger-related charges as compared to other aeronautical sources of income such as aircraft-related revenues. “The airport revenue model is becoming increasingly diversified and sophisticated,” notes Gittens. “Airport operators have moved beyond being mere infrastructure providers for aeronautical activities to varied and far-reaching enterprises. “Commercial or non-aeronautical sources of income such as retail concessions and car parking contribute to the diversification in an airport’s income portfolio and provide an additional cushion during adverse economic times. “The combined revenues from commercial and non-operating activities account for 45% of all revenue streams and grew by 7.2% in 2014. While European airports hold the highest proportion of these revenues relative to other regions, much of the revenue growth is originating from airports located in the emerging markets of Asia-Pacific, the Middle East and Latin America-Caribbean, where the highest growth in commercial revenues is being posted.” “Nevertheless, certain realities persist that are related to the economics of airports and economies of scale,” Gittens continues. “The challenge remains that most airports in the world are small, with high traffic volumes concentrated in only a handful of airports. Therefore, the airport industry faces a conundrum; although the airport industry as a whole appears to be profitable on the aggregate level, with returns on invested capital in the realm of 6.3%, the majority of airports are actually in the red on their financial statements. “Thus, developing the necessary strategy to enhance traffic growth is fundamental in generating a positive economic return. It is important for all stakeholders in the air transport value chain to work together to reap the benefits and the multiplier effect of increased trade and tourism.”
ACI WORLD NEWS
ACI events
2016
2016
2016
2016
2016
September 25-28
November 8-10
June 20-22
October 19-21
April 18-20
ACI-NA Annual Conference & Exhibition
ACI Latin-America & Caribbean Conference & Exhibition Brasilia, Brazil
ACI Europe General Assembly, Congress & Exhibition Athens, Greece
ACI Africa General Assembly, Conference & Exhibition Maputo, Mozambique
ACI Asia-Pacific Regional Assembly, Conference & Exhibition Gold Coast, Australia
ACI World Annual General Assembly Montréal, Canada
ACI offices ACI World Angela Gittens Director General PO Box 302 800 Rue du Square Victoria Montréal, Quebec H4Z 1G8 Canada Tel: +1 514 373 1200 Fax: +1 514 373 1201 aci@aci.aero www.aci.aero
ACI Fund for Developing Nations’ Airports Angela Gittens Managing Director Tel: + 1 514 373 1200 Fax: +1 514 373 1201 acifund@aci.aero
ACI Africa Ali Tounsi Secretary General Casablanca, Morocco Tel: +212 660 156 916 atounsi@aci-africa.aero www.aci-africa.aero
ACI Latin America & Caribbean Javier Martinez Botacio Director General Panama City, Panama Tel: +507 830 5657/58 jmartinez@aci-lac.aero www.aci-lac.aero
ACI Asia-Pacific Patti Chau Regional Director Hong Kong SAR, China Tel: +852 2180 9449 Fax: +852 2180 9462 info@aci-asiapac.aero www.aci-asiapac.aero
ACI Europe Olivier Jankovec Director General Brussels, Belgium Tel: +32 (2) 552 0978 Fax: +32 (2) 502 5637 danielle.michel@aci-europe.org www.aci-europe.org
ACI North America Kevin Burke President & CEO Washington DC, USA Tel: +1 202 293 8500 Fax: +1 202 331 1362 postmaster@aci-na.org www.aci-na.org
As of January 2016, ACI accounts for 592 regular members operating 1,853 airports in 173 countries. In 2014, airports worldwide welcomed 6.7 billion passengers and handled 102 million metric tonnes of cargo and 83 million aircraft movements. ACI is a non-profit organisation whose prime purpose is to advance the interests of airports and to promote professional excellence in airport management and operations.
AIRPORT WORLD/FEBRUARY-MARCH 2016
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RUNNING HEAD
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AIRPORT WORLD/JUNE-JULY 2015
ACI VIEWPOINT
View from the top ACI World’s director general, Angela Gittens, reflects on the airport charges debate and welcomes a new colleague.
D
ear colleagues, in this edition of Airport World you’ll read two articles from different perspectives on the issue of charges, one from ACI Europe’s economics manager, Donagh Cagney, and the other from Stephen Van Beek, ACI World’s interim economics director. While we work very closely with airlines through the International Air Transport Association on a number of important initiatives, the topic of charges is perennial and one upon which we have agreed to disagree. ACI’s stance continues to be that the only way to educate regulators on the issue is by taking an evidence-based approach. The bottom line is that the issue of rates and charges is affecting airports’ sustainable development. Here are the facts: In many instances, airlines are not paying the cost of the airport infrastructure they use. Each year, the revenues collected from airport charges levied on both airlines and passengers frequently fall short of covering airports’ operating expenses and capital costs related to aeronautical activities. Some airlines are now asking airports to reduce fees, arguing that passengers would save money and employment opportunities would be created. This claim hinges on a key assumption that any reduction in airport charges would be directly passed on to passengers for their benefit solely, which, past practice tells us, is unlikely. Two clear trends in aeronautical charge structures can be identified that serve to benefit airlines. The first includes a movement away from the use of weight-based charges with a greater reliance on passengerbased revenues, and the second involves an increasing tendency to use a more granular approach to pricing for greater transparency. Although airports still generate aeronautical revenues through aircraft-related charges, the majority of airports have gradually put their emphasis on charging passengers. In 2014, the relative proportion of global passenger-based revenues to aircraft-related revenues was 56% and 34% respectively (terminal rentals represent 11%).
Fuel, staff costs and aircraft operating costs represent as much as 60% of airlines’ operating costs on international scheduled services. On the other hand, landing and associated airport charges represent only a small proportion of these costs at 3.7%, and this has remained stable. Indeed, charges as a proportion of airline operating costs for both domestic and international services have slightly declined as compared to two decades ago. The fact is that increased competition, especially among many of the world’s major airport hubs, has significantly reduced the need for restrictive regulation. With these market realities in mind, airports need to be allowed the freedom to charge their airline customers for the facilities they use to ensure that future demand can be managed safely, securely and efficiently. ACI strongly shares ICAO’s views that a light-handed oversight is preferable and the best place to start airport-airline negotiations is with airports and their users sitting down to collaboratively address service standards, airport charges and the best way to pay for services the airport renders to its users and passengers. Investors, too, are likely to prefer this approach given that it avoids the periodic risks associated with successive on-again and off-again regulatory processes. Of course, at this year’s ACI Airport Economics & Finance Conference and Exhibition, we’ll have occasion to discuss the above and much more as we plot a course for an economically sustainable airport industry. In closing, I would like to take the opportunity to welcome our new director of economics, Stefano Baronci, who comes to ACI World with a significant depth and breadth of aviation experience across a number of organisations. We look forward to working with him in the months and years ahead. I would also like to thank interim economics director, Stephen Van Beek, for his substantial contributions to ACI World over the last six months, and extend my gratitude to ICF for lending us his time and expertise. AW
AIRPORT WORLD/FEBRUARY-MARCH 2016
11 11
AIRPORT REPORT: GATWICK
What next for Gatwick? CEO, Stewart Wingate, talks to Joe Bates about his airport’s ambitious expansion plans and belief that the UK will get it badly wrong if Gatwick doesn’t get a second runway.
A
rguably Gatwick has been in the shadow of Heathrow ever since the latter replaced Croydon Airport as London’s main airport shortly after WWII, but could that be about to change? There is no denying that under the ownership of the British Airports Authority (BAA), Gatwick played second fiddle to its bigger brother for decades and some legacy carriers openly admitted that they only flew there because they couldn’t get slots at Heathrow. There has, however, been a significant change in the airport’s fortunes since Global Infrastructure Partners (GIP) bought it for £1.5 billion in October 2009 and the airlines appear to have sat up and taken notice. Suddenly things changed as Gatwick had an owner prepared to devote considerable resources on upgrading, modernising and developing it, and for the first time ever really it could truly square up to Heathrow and compete against it on an equal footing for new routes and services. And GIP has certainly put its money where its mouth is in terms of improving Gatwick’s infrastructure, to date investing £1.3 billion on enhancing its terminals, upgrading the airfield and improving surface access. And there is much more to come, especially if it gets its way and the government gives it the green light to build a second runway.
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CELEBRATING 20 YEARS OF AIRPORT WORLD
So do the airlines want to fly to Gatwick now? “Absolutely they do and you only have to look at our traffic mix and see that we handled over 40 million passengers a year for the time in 2015 to discover the answer,” enthuses CEO, Stewart Wingate. “Gatwick is, of course, a very different airport today to the one we inherited six years ago. Our facilities are better and still improving. Our service levels have reached new heights and our route network has improved and continues to get stronger. We are genuinely becoming the airport of choice for airlines.” Easy to say, right? Well, as examples of its new popularity with the airlines Wingate tells Airport World that Norwegian Air Shuttle specifically wanted to fly from Gatwick and not Heathrow because its fees fitted in with its low-cost model and it offered the carrier the capacity to grow in London as well as fast turnaround times. And he says that Emirates asked for Gatwick to be made A380compatible so that it could operate the super jumbo on its daily flights to Dubai, instead of B777s, as the smaller aircraft couldn’t keep up with soaring demand. As a result of the request the airport invested £40 million on six new large aircraft stands, airfield enhancements and equipment allowing it to accommodate the A380, and the airline now operates three into Gatwick.
AIRPORT REPORT: GATWICK “The business case was strong, so we did it and were rewarded with their first A380 in 2014,” says Wingate, noting that former owners BAA had decided to focus its A380 strategy on Heathrow.
Changing traffic mix The facts show that low-cost carrier services led by easyJet currently account for 55% of the traffic mix at Gatwick followed by full service airlines (34%) and charter flights (11%), which between them handled a record 40.3 million (+5.6%) in 2015. A host of new airlines in the last few years means that Gatwick’s list of legacy carriers is growing fast and now includes Aer Lingus, British Airways, Emirates, Garuda Indonesia, Iberia, Turkish Airlines, TAP Air Portugal and Virgin Atlantic. EasyJet remains the biggest carrier at Gatwick accounting for 45% of all passengers followed by British Airways (15%), Norwegian Air Shuttle (8%), Thomson Airways (6.5%) and Monarch (4.5%). Norwegian has seen the most significant growth at Gatwick since GIP arrived in 2010, developing from a small player handling around 300,000 passengers annually to the airport’s third largest airline handing in excess of three million passengers in 2015. It currently flies non-stop to five US destinations (New York, Los Angeles, Orlando, Fort Lauderdale and San Juan [Puerto Rico]) and will add Oakland and Boston in the next few months. Another major boost to Gatwick’s route network and subsequently its passenger appeal will happen this May with WestJet’s milestone launch of low cost, long-haul services to six Canadian cities (Toronto, Vancouver, Calgary, Edmonton, Winnipeg and St John’s) courtesy of four daily flights.
Air Canada rouge, the Canadian national flag carrier’s discount subsidiary, has also announced its intention to enter the market this year. Other airlines planning to launch new routes out of Gatwick in 2016 include Vueling (Paris); Ryanair (Belfast); Monarch (Lisbon, Almeira, Las Palmas); British Airways (New York and Lima); and Cathay Pacific, which in September is set to resume services between Gatwick and Hong Hong for the first time in 25 years. Between them its airlines operate direct flights to 40 long-haul destinations, which account for between 15% and 20% of its traffic. “We have worked really hard on developing and diversifying our route network, which I believe now offers a good mix of affordable services across the world,” says Wingate. “When we took over the airport around 12% of our passengers travelled on business. The figure today is 20% or one in every five passengers and that is testimony to our route network and how quick, easy and enjoyable we make travelling through Gatwick.” Indeed, Wingate is quick to point out that many people travelling on business use Gatwick because of easyJet’s “incredibly strong network” throughout Europe and the convenience of the airport’s super quick check-in and security screening facilities. “We are a good proposition for business travellers looking at things from a value for money perspective, there is no doubt about that,” he remarks. Gatwick is also breaking the mould in terms of its air traffic control services provider, replacing long-time partner NATS with Air Navigation Solutions (ANS), a UK-based subsidiary of Germany’s DFS (Deutsche Flugsicherung) in March 2016. Wingate says that the decision was based purely on economics as ANS provided the best deal for the airport.
Gatwick CEO, Stewart Wingate, with MP, Caroline Ansell, at February’s opening of the airport’s new £80 million Pier 5.
AIRPORT WORLD/FEBRUARY-MARCH 2016
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RUNNINGREPORT: AIRPORT HEAD GATWICK
Gatwick’s North Terminal is set to boast the world’s largest self-service check-in facility.
Infrastructure investment GIP’s £1.3 billion investment in Gatwick to date has amounted to around £200 million a year with key projects including the resurfacing of the world’s busiest runway; enhancing the check-in facilities in both terminals; and developing a security area in the South Terminal that Wingate describes as “world class”. In addition the airport has upgraded its pier facilities through renovations and the opening of new facilities such as its £80 million Pier 5 and the planned new £185 million Pier 1, which opens this summer. It has also added new car parking facilities; doubled the efficiency of security in the North Terminal; invested £7.5 million of its own money in a £53 million project to add a seventh platform and upgrade Gatwick’s railway station in collaboration with Network Rail; and opened new state-of-the-art immigration gates in the South Terminal. And work continues to go on with the airport planning to complete a brand-new North Terminal check-in area boasting the world’s largest self-service bag drop zone with over 60 kiosks this summer. It hopes that next thing on the agenda will be its £7.8 billion three-phase master plan that includes a new terminal, second runway and surface access improvements by 2025 should the government give it the green light for the new runway. With such infrastructure in place Wingate says that Gatwick could eventually handle up to 95 million passengers and 520,000 aircraft movements by 2050. And he says that the investment is there now to begin at least the first phase of the project – the new runway, first phase of the new terminal and a new Automated People Mover (APM) transit system that will link it to the existing terminals. “Our plans are flexible, so what I suppose I am saying is that if the government wants a big plan we can certainly deliver that and make Gatwick bigger than Heathrow, but alternatively we can go with just phase one or phase two of the project and show that
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CELEBRATING 20 YEARS OF AIRPORT WORLD
we can deliver it on time, within budget and provide the UK with the connections it needs,” enthuses Wingate. “What we mustn’t do is nothing at all or the decision goes Heathrow’s way and it all unravels because of environmental concerns, sending us back to the drawing board and building in years of delays.”
Airports Commission and second runway Gatwick handled a total of 267,767 aircraft movements in 2015 to enhance its status as the busiest single runway airport on the planet. It is no mean feat to get 55 aircraft movements an hour – take-off and landings – on a single runway for up to 17 hours a day on 365 days of the year, and with passenger traffic on the rise and an ever increasing number of airlines wishing to fly to Gatwick, there is simply no denying that a second runway is vital to ensure the gateway’s long-term future. Wingate won’t get drawn on whether failing to get a second runway now will effectively signal the start of the end for Gatwick, fending off the question by stating that the airport will get it eventually. He also genuinely believes that the battle for the runway is far from over despite the Airport Commission’s recommendation to the government that Heathrow should get it. In fact he takes the government’s decision to delay making any decisions until the summer as a positive that things are not done and dusted and that Gatwick is still very much in the frame. “We should get permission to build a second runway as we are in the best position to make it happen and it will offer the best solution for passengers, airlines and the UK in terms of the benefits, cost and impact on the environment,” says Wingate. “By the Airport Commission’s own economic analysis, Gatwick comes out on top as Heathrow’s $18.5 billion scheme is more than double ours. I also think that they have underestimated the dimensions of air quality and noise in this debate.
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AIRPORT WORLD/JUNE-JULY 2015
AIRPORT REPORT: RUNNING GATWICK HEAD
The shape of things to come? A computer graphic of Gatwick’s planned new terminal.
“Our environmental claims are not fanciful. We have measured our air quality for 10 years and can prove that we are well within the legal limits now and would be with a second runway. When it comes to noise we estimate that the new runway would only impact on 5% of the number that would be affected by a third runway at Heathrow. “Indeed, in today’s society we cannot possibly see how you can build a new runway at Heathrow because of its impact on the environment, particularly on air quality and noise.”
Customer service According to Wingate the ongoing investment in state-of-the-art infrastructure complements Gatwick’s new customer service focused business philosophy and corporate culture. This has led to significant investments in queue-busting technology, new service offerings and initiatives such as making it possible to walk straight into the check-in hall from any of the South Terminal’s three multi-storey car parks. Gatwick has upgraded all of its wayfinding in a move designed to make it easier for passengers to navigate their way through the terminals and cranked up its presence on social media to better communicate and interact with customers. The opening of dozens of new and innovative retail/F&B outlets across the airport over the last six years have certainly proved popular with passengers and boosted concession sales. The latest additions include Wagamama restaurants in both terminals that are open daily from 4am, The Nicholas Culpeper – a F&B outlet with its own gin distillery – in the North Terminal and a Grain Store Café and Bar in the South Terminal. “The new outlets are based on the insight of our passengers. We asked them what they wanted from their airport experience, translated their feedback into a series of brands and today we see the end results. I think we have delivered a powerful message,” notes Wingate.
Initiatives such as the recently opened interactive sound installation on Gatwick’s 180-metre long Skybridge have also helped create something unique and different at an airport. The soundscape serenades passengers with the sites and sounds of China’s Yangtze River courtesy of 128 kilometres of cables and 160 speakers across 80 channels that immerse visitors in 3D sound. Sounds include everything from rushing water, the crackling of rocks and stones on the riverbed, skylarks singing, seagulls squawking, frogs croaking and dogs barking to those of people playing mah-jong, clunky fishing boats, noisy street markets and a Cessna flying overhead. Another more practical customer service based initiative set to take place next winter is the move to consolidate easyJet’s operations in the North Terminal and 100% base British Airways in the South Terminal. “Having each of our major carriers in just one terminal will simplify passenger journeys by ending any confusion over where they need to go,” says Wingate. “EasyJet has been pushing for this for several years and now we and our airlines are in a position to do it.” The move will also allow both Virgin and British Airways to open brand new business class lounges.
Airport security Wingate also believes that Gatwick has one of the most customerfriendly airport security screening operations in the business based on the expansive layout of its checkpoints, performance and the assistance provided by staff. He produces some statistics that prove that 97% of passengers pass through Gatwick’s security checkpoints in under five minutes and notes that the airport offers different types of security product for different passengers. These include a premium lane for those travelling in the aircraft front cabins or frequent flyers prepared to pay for the
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RUNNINGREPORT: AIRPORT HEAD GATWICK
Light and bright: Gatwick’s revamped North Terminal forecourt.
privilege and dedicated lanes for families and people in need of assistance. At certain times of the year such as school holidays, the airport even goes as far as to make parts of the security area for families resemble fairy tale castles or other exciting places to make the security screening process fun and less stressful for kids. He believes that “the transformation” of Gatwick’s security operation is most obvious in the South Terminal where the airport has removed a large retail area to create a new, more open and intuitive screening process in a zone 100% dedicated to security. “Our emphasis is on helping people and getting passengers through in a comfortable manner. It is not all about speed, even though you get through all our lanes quickly,” says Wingate. “All our security staff and passenger facing employees have to pass NVQs [National Vocational Qualifications] in customer service training and go on in-house courses to learn how to work together to maximise service levels to the customer.” Such initiatives have led to the airport being awarded ‘Bronze’ and more recently ‘Gold’ status by Investors in People, an established, international framework that helps organisations to understand and improve how people contribute to the success of an organisation.
Airport report card Reflecting on the current financial year, Wingate says: “If I was to look at our scorecard for 2015/2016, I would say we enjoyed a record breaking year service wise, a record breaking year passenger volumes
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wise and by the time we’re done we would have invested a further £200 million, so it’s been very successful.” By his own admission though he prefers to judge the airport’s success by looking at the bigger picture and how GIP has transformed Gatwick by driving service levels, passenger volumes and investment since acquiring it six years ago. “In terms of customer service we have moved from being a medium performing airport to among the top quarter in Europe and our passenger feedback tells us that we are getting it right more often than not,” he sums up. “In 2010 we did around 31 million passengers and by the time this financial year ends in March we will have handled 41 million passengers. That’s a rise of 10 million passengers, which put into perspective is more than the entire yearly capacity of Edinburgh, Glasgow or Birmingham airports. “Finally, we have invested £1.3 billion on upgrading the airport since 2010, so overall, I think we have a good track record.” And he believes that the success story will continue in 2016/17 with the planned new services acting as the catalyst for up to two million more passengers using Gatwick, regardless of what decision the government comes to later this year regarding the building of a new runway. As you would expect, Wingate makes a compelling case for Gatwick’s expansion and his argument does seem like a sound one. Right, I am off to ask the government why it is limiting itself to one runway at either Gatwick or Heathrow when a new runway at each would be the best solution for UK plc. AW
SPECIAL REPORT: ECONOMICS & FINANCE
Rhetoric, reality and reform
Stephen Van Beek, ACI World’s interim head of economics, discusses new aviation legislation on both sides of the Atlantic and the thorny issue of airport charges.
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n the past few months, European and American policy leaders have introduced new proposed frameworks for the future of aviation, each of which would have considerable impact on airports and the greater aviation industry. In December, the European Commission (EC) released its Aviation Strategy for Europe and in February, the Chairman of the House Transportation and Infrastructure Subcommittee on Aviation introduced The Aviation Innovation, Reform and Reauthorization Act (AIRR) to revamp US aviation policy through 2022. Policymakers proposed new strategies on important industry issues that include air traffic control and modernisation, air service, and approaches for airport regulation (Europe) and airport funding (United States). These all deserve airports’ attention and, on some issues such as air traffic control, there is the possibility of co-operation between airport and airline interests. Unfortunately, in Europe, Airlines for Europe (A4E) commented that its member airlines would like the European Union to “bring down the cost of airports in the region,” claiming that ticket prices have declined since 2005, while airport charges have increased and outstripped inflation.
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The flaws in A4E’s arguments are immediately apparent. First, over the last decade airlines have changed their business model with a focus on unbundled fares and ancillary charges such as fees for checked baggage, ticket changes and credit cards. This makes any fare comparison between ticket prices in 2005 and today specious, and more of a screed than a sober analysis. Second, the argument ignores the airport cost side of the equation. Major European airports, similar to their American counterparts, are in metropolitan areas where the costs of land, materials and labour are high; meaning new capacity on an already constrained footprint comes at a high cost. As the EC recognised, this capacity is key to accommodating demand as well as promoting competition by enabling the new entry of carriers and routes (assuming slot rules are sensible and permissive). In its Aviation Strategy, the EC cited the Thessaloniki Forum on Airport Charges Regulators where they are exploring “the use of market power assessment as a means of determining the optimal regulatory approach”. They note that there is not a need for economic regulation where airports are subject to effective competition as airports increasingly are connecting hubs and within metropolitan regions (where alternative
SPECIAL REPORT: ECONOMICS & FINANCE airports compete on origin and destination traffic with other airports). In addition, over the past two decades, airports have put increasing focus on the generation of non-aeronautical revenues, which further incentivises airports to increase passenger traffic, not act like a monopolist and withhold or overprice access. Using data from the ICAO, ACI presents a more representative analysis of airport costs, by examining the trend of airport charges compared to overall airline operating expenses. The chart on the previous page presents 20 years of data, taking care * Terminal rentals are mainly limited to North America. Source: ACI Airport Economics Survey (2015) of the analytical problem already However, the limit of $4.50 has not been raised in 16 years, identified. The results show that the contributing to the inability of American airports to fund important long-term trend is marginally down – notwithstanding all of the other airside, terminal and landside projects. changes in the aviation industry and airline business models – meaning Also, airport operators are not provided any additional authority to that contrary to A4E’s assertions, airports are less of a burden today on engage in public-private partnerships (PPPs) on the ownership and airlines than they were two decades ago. management of the airport. In fact, only one large hub airport (an ACI’s data also shows that worldwide passenger-related revenues airport handling 15mppa or more) today is permitted to participate in constitute approximately two-thirds of total airport revenue, with the FAA’s Privatization Pilot Program and any applicant effectively aircraft-related revenues making up the remaining third. must receive approval from airlines serving the equivalent of In recent years this proportion of passenger-related revenues – from retail, two-thirds of the passengers (and other requirements). car parking, rental car concessions, food and beverage and other sources – For most deals this restriction is a deal-breaker, although a have continued to increase, meaning: (1) Airports are demonstrating somewhat smaller gateway – Luis Muñoz Marín International Airport in disciplined management of their costs; (2) Airlines will pay a lower share of San Juan, Puerto Rico – did successfully apply to the programme and is overall airport revenues than they did in the past; and (3) Airports will now under a 40-year lease managed by Aerostar Airport Holdings. continue to have every incentive to increase passenger throughput. When it comes to the historic cost for airfield assets/pre-funding The chart above presents the data by region. There is clearly little airport projects, under ICAO principles, in calculating charges, evidence that airports are unfairly increasing aircraft-related revenues airports are not limited to defined formulas but rather “maximum or airport charges at the expense of airlines. flexibility should be maintained in the application of all charging In the United States, airports arguably face a more challenging methods to permit the introduction of improved techniques” policy environment for airport charges, in part because of the FAA’s (See ICAO Doc 9082, Policies on Charges for Airports and Air Airport Improvement Program (AIP), which provides capital development funding for airports from the series of ticket taxes and Navigation Services, ll-2). fees passengers and shippers pay. In addition, under certain circumstances, ICAO principles are Indeed, airports must comply with a series of grant assurances permissive of pre-funding for large-scale capital investments, that constrain not only airport rate-setting but severely constrain something not permitted under FAA rules (see ICAO, l-4,5). With the what airports can do with the revenue they raise. limits on PFCs and PPPs, pre-funding otherwise would be an These restrictions apply even for passenger-related or nonalternative strategy for airport development. aeronautical revenues unrelated to airline costs (i.e. even at The AIRR would provide a marginal increase in AIP over the life airports with dual-till or compensatory financial structures). of the six-year legislation, providing important capital funding for Unfortunately, while the US’s AIRR will make important reforms especially smaller commercial service and general aviation airports. to the provision of air traffic control and to aircraft and other Airports in Europe, the US, North America and elsewhere will certification procedures, there are no significant regulatory reforms continue to advocate for sensible regulation and policies that in the key area of airport economics. provide them with the ability to meet demand. There is no recommended increase in the ceiling set on the Policymakers in the world’s two most mature regions have Passenger Facility Charge (PFC), for example. Commonly referred to offered important ideas that our colleagues at ACI Europe and as passenger service fees in other regions, and often five times (or ACI North America will work on fervently in 2016. above) the PFC limits, these charges can contribute a large share to We will watch these developments with promise given the airport infrastructure development (and consequently lower importance of these regions and the effects their policies will aircraft-related charges). have on global airports and aviation. AW
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The buying game Curtis Grad, president and CEO of Modalis, provides a rundown of the biggest airport deals of the past year and takes a glimpse of what’s on the horizon for 2016.
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eflecting a recovering but unsettled global economy, last year’s ‘buying game’ can be best described as a mixed bag, characterised by both unbridled optimism and skittishness. For, although the upward trend on multiples continued for select assets, the industry showed an uncharacteristic cautiousness in certain emerging and stagnant markets. With an ever-increasing number of active and operating concessions, the volume of transactions in the secondary market has been picking up pace as initial investors look to cash-out and redeploy their capital into new projects. And we can surely expect more to come in the year ahead as private equity, sovereign wealth and pension funds step up and buy in to what has become an increasingly attractive asset class for strategic and institutional investors.
Hot and cold Santiago in Chile certainly falls into the exuberant category. The bid to expand Arturo Merino Benitez International Airport (pictured above), under a 20-year concession, yielded an astounding 77.56% fee. The winning Nuevo Pudahuel consortium, which includes Aéroports de Paris (ADP), VINCI Airports and Italian contractor Astaldi, is also committed to $950m in capital investment. New York–LaGuardia (LGA) drew an enthusiastic crowd of bidders as well, with the Skanska-Vantage consortium coming out on top. Given the nod as the preferred bidder back in May, financial close of the deal is expected in the first half of 2016. The finance-build-operate deal includes the $3.6 billion redevelopment of LGA’s old and overcrowded main terminal complex. Announced in late 2014, Fraport’s successful bid for 14 Greek regional airports has faced a series of delays in reaching a binding agreement. The 40-year, €1.2 billion upfront concession deal was finally announced in mid-December 2015. When in full effect, it will generate an annual fixed concession fee of €22.9 million for the cash-starved Greek state. Fraport is also obliged to invest at least €330 million into capital infrastructure by 2020. Vietnam’s IPO for a 25% share in Airports Corporation of Vietnam – operator of 22 airports in the country – also garnered intense interest. A total of 152 investors, including 16 institutional players, were in on the action, raising $49.6 million, which the government has earmarked
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for the development of Long Thanh International, a new greenfield airport that will eventually replace Ho Minh City’s existing Tan Son Nhat International Airport. In the skittish column we have Osaka’s Kansai and Itami (KIX/ITM) airports in Japan and Norman Manley International Airport in Kingston, Jamaica. Despite keen interest in the early stages, only the Orix/VINCI Airports consortium pre-qualified for KIX/ITM and was subsequently named preferred bidder. Elsewhere in Japan, Sendai enjoyed a slightly more robust response, attracting three qualified groups, with the consortium of general contractor Maeda Corporation and railway operator Tokyu Corporation getting the nod as preferred bidder. Binding agreements are anticipated for both Japanese airport deals early in 2016. Kingston, however, was not so fortunate with none of the five prequalified groups ending up making a bid. The outcome means that the Jamaican government will have to go back to the drawing board.
Failure to launch We had a few false starts last year, as well, the most notable being the Indian second-tier airports of Chennai, Jaipur, Kolkata and Ahmedabad. An RFQ for the airports was launched in late December 2014, however, the process remains stalled and I believe that establishing a stable, transparent regulatory framework will be key to getting this one back on track.
Vigour in the secondary market There is little doubt that Latin America and the Caribbean were the hotspots for secondary, off-market transactions last year, with Brazil leading the way. Fuelled by the Petrobras scandal, Brazil’s ongoing political and economic crisis has triggered the off-loading of shares in several airport concession companies and significant trade sales were initiated for São Paulo–Guarulhos, Brasilia, Viracopos and Natal. Quito, Ecuador, saw a major shareholder change, as well, with Canada’s Aecon Group coming to terms with Groupo Odinsa (Colombia) and CCR (Brazil) to sell its 45.5% stake in airport concessionaire, Corporación Quiport. Meanwhile in the Caribbean, Abertis Infrastructure disposed of its last major airport asset with the sale of its 74.5% stake in the Montego Bay concession company, MBJ Airports Limited, to Mexico’s Grupo Aeroportuario del Pacífico (GAP).
SPECIAL REPORT: ECONOMICS & FINANCE
Nearing the close of 2015, Advent International followed suit, coming to terms with VINCI Airports for sale of its 100% stake in Aerodom, the operator of six airports in the Dominican Republic, including Santo Domingo and Puerto Plata. The deal, which is expected to be ratified in the first quarter of 2016, will mean that VINCI Airports operates 33 gateways across the globe, including Osaka’s Kansai and Itami airports. Finally, in Canada, the terminal at Billy Bishop Toronto City Airport also changed hands early in 2015, with Porter Aviation selling to the Nieuport Aviation group made up of InstarAGF Asset Management, Kilmer Van Nostrand, Partners Group and other institutional investors.
In the works In the Philippines the bidding process for Bacolod-Silay, Iloilo, Laguindingan, Davao and New Bohol (Panglao) airports is well underway. The instruction to prospective bidders was issued to five pre-qualified consortiums in June, with bid submissions and awards expected in the first quarter of 2016. Meanwhile, in the UK, an announcement is expected soon on the future of London City Airport, with majority shareholder Global Infrastructure Partners (GIP) looking to sell its 75% stake in the gateway for upwards of £2 billion. Given the strong market interest shown in this premium asset, sources close to the transaction suggest that New York-based GIP should get a sale price in this region. Binding offers have been submitted and interest in the asset appeared to be growing as Airport World went to press. GIP is remaining tight lipped about the bids but they are thought to have come from three different consortiums – one comprising German insurer Allianz and Canadian pension fund Borealis Infrastructure; another made up of the Canada Pension Plan Investment Board (CPPIB) and Canadian pension fund PSP; and a third contender led by Wren House Infrastructure Management, a subsidiary of Kuwait Investment Authority, and the Ontario Teachers’ Pension Plan. Across the channel in France, the highly anticipated trade sales of the French regional airports of Nice Côte d’Azur and Lyon-Saint-Exupery have also been set in motion. On the heels of the recent ToulouseBlangnac deal in which Chinese state-owned group Shandong
Spain’s ghost airports Spain’s ‘ghost airport’ of Ciudad Real still remains very much closed despite a Chinese consortium’s winning bid of €10,000 to buy the gateway in a bankruptcy auction in July 2015. The winning and only bid for the airport that cost over €1 billion to build was made by Tzaneen International, which has tentatively suggested that it wants to make Ciudad Real a cargo entry point into Europe for Chinese companies. Its initial €10,000 outlay buys all the land and most of the buildings, including the runway and control tower and press reports suggest that Tzaneen now wants to acquire the terminal building and the car parks and is prepared to invest up to €100m in the project, although to date, little appears to have happened on the still deserted site. Opened in 2008 and located 235 kilometres south of Madrid, Ciudad Real was meant to be an alternative to Madrid–Barajas but never won over the airlines and closed in 2012 after going bankrupt. Faring slightly better is former ‘ghost airport’ Castellón–Costa Azahar, which handled its first commercial flights in September 2015, four and a half years after opening, and is now served by Ryanair (Bristol and London in the UK), with Blue Air set to launch flights to Bucharest this summer. Hi-Speed and Hong Kong’s Friedmann Pacific beat out various Franco-European interests, competition for Nice and Lyon is expected to be fierce. Sovereign wealth and pension funds, as well as the familiar cast of airport operators, are already lining up. The French government will be selling its 60% stakes in these regional gateways through two separate bidding processes. Nice Côte d’Azur has a reported indicative enterprise value of €1.5 billion, while Lyon is estimated at €900m. Elsewhere in Europe, Lithuania is poised to launch a competitive bidding process for Vilnius, Kaunas and Palanga airports, with selection of advisors early in the year and kick-off of pre-qualification and call for proposals in the second quarter. Located strategically within the Baltic region, Lithuania has the potential to play an important niche role in connecting Scandinavia, continental
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Europe and the near east. Key players are already actively pre-positioning to compete on this deal when it comes to market. Next up for Brazil is a third round of airport concessions and, similar to before, Florianopolis, Fortaleza, Porto Alegre and Salvador airports will be put to market through a live auction. However, unlike previous deals, cash-strapped state Infraero – the state operator of Brazil’s remaining government-held airports – will apparently not be taking equity stakes in the airport concession companies this time around. The situation is a little clearer in Asia where last June, following years of legal and political strife to secure the site, India pre-qualified four groups for the Navi Mumbai International Airport project of which only three now remain. They are the GMR Group, a Tata Reality-MIA Infrastructure consortium and GVK-led MIAL, which operates Mumbai’s existing Chhatrapati Shivaji International Airport. India’s government rejected the security clearance of the fourth shortlisted Zurich Airport-Hiranandani Developers consortium earlier this year, although it hopes that the decision can be reversed. GVK is considered the front-runner, as it holds a right-of-first-refusal for Navi Mumbai under the original terms of the MIAL deal, and if its bid is within 10% of the best offer, it simply has to match the highest bid to win. Unlike the 60-year concessions for Delhi–Indira Gandhi International Airport and Chhatrapati Shivaji, Navi Mumbai will be an initial 30-year term with options to extend for 10 and 20 years. In late December 2015, the Ministry of Civil Aviation gave its approvalin-principle on the financial bids, and final submissions are due in late April with award expected by mid-year in line with the government’s desire to open the first phase of the airport by 2020. Remaining on the Indian sub-continent, the long-awaited RFP for the new Goa-Mopa Airport greenfield project was finally issued in mid-January 2016. The four shortlisted bid groups of GMR, GVK, Essel Infra-Mumbai (partnering with Zurich Airports) and Airports Authority of India have 90 days to submit their offers. Deals that now arguably fall into the ‘maybe’ category for 2016 include Saint Lucia’s Hewanorra International Airport and LF Wade International Airport in Bermuda. The government of St Lucia and the Saint Lucia Air and Sea Ports Authority (SLASPA) are looking for a private investor to operate and develop the gateway under the umbrella of a Public Private Partnership (PPP), and in line with this an RFQ was issued in July 2015 for the expansion and operation of Hewanorra Airport. In late 2014, Keigan Cox, SLASPA’s general manager/CEO, told Airport World: “We are looking for private sector knowledge and know-how as well as financial investment. We believe the time is right to develop the airport to facilitate passenger growth and tourism development.”
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In Bermuda, back in May 2015 local media reports suggested that the Canadian Commercial Corporation and the government were in active discussions for the proposed development of LF Wade International Airport. However, as Airport World went to press there had been no further news on the status of award decisions for either project.
Crystal ball Looking to the latter half of 2016, based on the latest industry chatter, we could see some movement on privatisations in Saudi Arabia (Riyadh, Jeddah, Dammam and Ta’if), UAE, Iran and Jordan (Marka, Aqaba and a new greenfield site) in the Middle East; Serbia, Bulgaria and Ukraine in Europe; and Tanzania and Nigeria in Africa. Industry onlookers will also be keeping a curious eye on Italy’s ambitious Europe 1 project. Led by Sīxiăng Holding and a group of private investors, this €15 billion mega-project aims to develop a 100mppa super-hub in Northern Italy, near the Brescia-Verona high-speed rail corridor on a 55 square kilometre site. Also watch out for a trading of shares in nearby Malta International Airport. As Indonesia and Thailand continue to ponder their respective airport development strategies, the Philippines is expected to forge ahead with Clark Airport and may, quite possibly, take another run at Manila’s Ninoy Aquino International Airport. Elsewhere in Asia, Airports Corporation of Vietnam is said to be entertaining strategic investors to buy another 20% of its shares, Myanmar is moving forward with Hanthawaddy and Japan is likely to put a few more airports on the market over the year starting with Takamatsu and Fukuoka. Although far from embracing the privatisation of entire airports, the United States seems to be buoyed by the progress of the LaGuardia terminal deal. Most notably, Denver has been exploring the PPP model to upgrade its Great Hall facilities, Oakland is considering the same and LAX is looking at a similar approach for its new people-mover project, dubbed the ‘Landside Access Modernization Program’ by its planning team. So that’s a quick rundown of ‘The Buying Game’ for another year, and the only thing we know for certain, is there will be plenty of intriguing twists and turns in the year ahead! AW
About Modalis Modalis Infrastructure Partners is a strategic investment and professional services company specialising in international transport infrastructure privatisation, investment, development and operations.
SPECIAL REPORT: ECONOMICS & FINANCE
Setting the record straight Donagh Cagney, ACI Europe’s economics manager, counters the latest airline call for even more regulation of airport charges and renewed accusations that the continent’s gateways are monopolies.
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o those who follow the topic closely, it may at first seem surprising that airport charges should be back on the agenda at all. After all, the implementation of the current EU legislation – the Airport Charges Directive – was the subject of a detailed report and communication by the Commission, published as recently as May 2014. In that report, the Commission concluded that it was “too early to draw definitive conclusions on the impact of the Directive due to its recent entry into force” (The Directive had to be implemented by 2011). In addition a forum on national airport regulators, known as the Thessaloniki Forum, was set up at the same time to help strengthen the application of the current Directive across the Union. Since June of last year however, some major European airlines have been very active at a political level, most prominently the CEOs of ‘the big five’ – Air France-KLM, British Airways, easyJet, Lufthansa and Ryanair – when they unequivocally announced their intention to lobby for additional regulation of airport charges, as part of their ideas for the EU Aviation Strategy in development at that time. Even though the EU Strategy was finalised in early December, with specific provisions concerning airport charges, these five carriers subsequently called for a return to an older approach towards the subject at the launch of their new airline association (Airlines 4 Europe or A4E) on January 20.
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This demand was accompanied by an A4E-commissioned supportive report (to which ACI Europe will respond shortly). The subject of airport charges has always been a divisive one. In recent years, ACI Europe has tried to take a progressive position, focusing on moving the debate forward and finding more sustainable and co-operative ways of working between airports and airlines. Much of this work has focused on the role of airport competition and how regulation could best operate in this evolving environment.
Market power tests A core ACI Europe position is that market power tests of individual airports should be performed, to better understand the relative negotiating power of an airport vis-à-vis its airline clients. Regulation should only be imposed where it is found that competition is not effective. And regulation should be proportionate to the degree of the market power of the airport. This is a balanced, reasonable approach. And it is common sense. Why prescribe a medicine before diagnosing the illness, or before even establishing that there is an illness in the first place? Of course this approach won’t resolve all the differences between airports and airlines – not least airlines with the kind of power and visibility enjoyed by the big five – but it will offer an objective and neutral means of driving the debate forward, instead of the endless cycle of recrimination and subsequent uneasy peace that seems to engulf the sector periodically.
SPECIAL REPORT: ECONOMICS & FINANCE
Airport competition is almost everywhere to see. Just look at the aggressive marketing and route development efforts that are now a must for every airport across Europe This perspective gently skips over the question as to whether it really is sound policy to take profits from successful (and often publically-owned) companies to prop up failing (and often privately-owned) companies. It instead proposes a never-ending bailout of loss making companies without ever fixing the underlying problem. It also nicely sidesteps the awkward question as to whether this is really fair on the travelling public.
Some airlines operate profitably
And recent history has shown that when such tests demonstrate that an airport is subject to sufficient competitive pressures, airlines have proven themselves to be very quick to adapt to the new reality, putting aside politics and signing up to commercial contracts with the airport, which itself offers additional benefits to passengers and the industry. Sadly, despite some initial lip service in favour of this approach in principle, airlines have since strongly retrenched. There may still be a stated support of airport market power tests, but if so it is coupled with a carefully honed absence of curiosity as to what those tests might actually reveal. When A4E launched their attack in January, there were no references to airport competition, nor indeed market power tests in the accompanying press release (in spite of several of them having acknowledged airport competition in the past). Instead ‘airport monopoly’ was the sound bite of choice. The phrase is being parroted ad nauseam, and it is being deliberately used to smother any chance of an informed debate.
Twenty five years and counting The latest broadside joins existing and long-standing airline protests about the losses incurred by some amongst their ranks. Best encapsulated in ‘value chain’ treatise, this philosophical approach suggests that airline losses be compensated with airport profits.
Thankfully, this philosophy is increasingly being confronted by the unavoidable reality that some airlines are consistently able to make significant profits. These airlines have become the darlings of the stock market, despite having come from nothing and all while having faced the exact same policy and commercial environment as their well-established loss-making counterparts. It demonstrates quite unambiguously that airport charges have nothing to do with the chronic unprofitability of some airline companies. Luckily, those portraying airports as monopolies are increasingly becoming a minority – albeit a very vocal minority. Airport competition is almost everywhere to see. Just look at the aggressive marketing and route development efforts that are now a must for every airport across Europe. When it comes to airport charges, the facts are also blunt and unequivocal: charges paid by airlines and passengers only make up for 47% total airport revenues. This means that airlines are widely subsidised by airports – leaving us with more than €3 billion in unrecovered operating costs each year. However, given the media megaphones enjoyed by the CEOs of the big five airlines, you can expect 2016 to be a year in which attacks on airport remain a regular feature. On top of all our recent work on this issue, ACI Europe will continue to produce fresh data and analyses all aimed at helping decision makers get past the seductive but empty ‘airport monopoly’ and ‘value chain’ sound bites, and instead to actively think about the substance of the arguments being made. AW
AIRPORT WORLD/FEBRUARY-MARCH 2016
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Every little counts Airport World takes a closer look at a handful of new initiatives designed to either boost airport revenue streams or reduce unnecessary expenditure.
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n a move that could potentially transform how passengers and staff travel by road from the world’s major airports, Los Angeles International Airport has started allowing travellers to use the ride-share companies Lyft and UberX for pick-ups. The pioneering move, which has been vehemently resisted elsewhere in the world by taxi drivers fearing that they will take their business, was rubber stamped earlier this year by the Mayor of Los Angeles, Eric Garcetti. Airport operator, Los Angeles World Airports (LAWA) claims that the decision gives travellers “expanded transportation options” and could earn it $600,000 in revenue this year. The figure is based on receiving $300,000 each from Uber and Lyft in 2016 as LAWA receives a fee of $4 for every arriving and departing trip to/from LAX made by the transportation network companies (TNCs). However, such has been the usage of both Lyft and Uber in the first few weeks of operations that LAWA staff now believe that the initial estimates may be conservative. Under its scheme, kerbside drop offs and pick ups are possible by the Ride Share signs located on the kerbside Upper/Departures Level of its terminals. “We are bringing LAX passengers what they have been asking for — better access to reliable, convenient transportation from the airport,” says Garcetti. “As we invest billions to make LAX one of the world’s great airports — and welcome more travellers than ever before — my administration is ensuring the best experience possible for all our visitors.”
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LAWA held several public comment periods and considered input from dozens of stakeholders, including passengers, neighbourhood groups, transportation network companies, taxicab firms, limo companies, disability advocates, and environmental advocates before giving the green light. “Uber has changed the way Angelenos and visitors to Los Angeles move around our city. Over the last year we have worked to bring Uber to LAX in a way that is regulated, monitored, and above all, safe,” explains Bob Blumenfield, chair of the Los Angeles City Council’s Innovation, Grants, Technology, Commerce and Trade Committee, which oversees the airport. LAWA executive director, Deborah Flint, enthuses: “LAX passengers can now make use of the same transportation options at the airport that they already have throughout Los Angeles. “The license agreement governing TNCs was designed to benefit travellers, help decrease traffic congestion at the airport, promote fair competition among transportation companies in both regulations and fees, and generate revenue from commercial users of airport property that can be invested to further improve the guest experience at LAX.” Los Angeles World Airports admits that it will probably be a few more months before it is able to get an accurate picture of the financial success of the initiative and it is possible that more TNCs may join Uber and Lyft.
SPECIAL REPORT: ECONOMICS & FINANCE Another new arrival is assistant general manager of planning, Frank Rucker, who comes with a reputation for getting things done on time and on budget and is expected to oversee capital projects. “We’re really pressing to find ways to diversify revenue, and we’re looking to the future,” confirms Southwell. Southwell recognises that selling the land now would lead to an immediate cash infusion, but points out that the airport will gain far more financially by wisely leasing out its precious land assets in an effort to generate revenue for the next 20 to 30 years. It is believed that Carter’s responsibilities will include looking at “non-traditional real estate development” and considering how to take dormant assets and turn them into revenue-producing assets.
Collaborative Decision Making
Nightfall at LAX’s busy kerbside. Image courtesy of Jay Berkowitz/LAWA.
It is also quick to point out that it doesn’t yet know how much of the income being generated by the TNCs is new revenue as it might be offsetting the loss of monies from other more established ground transportation services such as door-to-door shuttles and taxicabs that also pay similar fees to the airport.
New business division Hartsfield-Jackson Atlanta International Airport is so committed to diversifying its revenue streams that it has set up a new ATL Business Ventures division to actively find new sources of income. According to general manager, Miguel Southwell, the new unit will focus on how best to use the large chunks of land the airport owns beyond the perimeter fence. About sixty miles north of the airport, in Dawson County, is a 10,000-acre tract of airport-owned land that may be used for real estate development. The gateway also owns some 500 acres of land just beyond the airport fence. The land, which has been sitting dormant for years, is ideally located to foster the development of an aerotropolis. Hartsfield-Jackson (ATL) also owns an additional 9,400 acres of land in Paulding County, some forty miles away from the airport. However, the tract of land is likely to be left alone for now as it sits within a wildlife management area run by the Georgia Forestry Commission. The newly established ATL Business Ventures team is spearheaded by former Chicago Department of Aviation managing deputy commissioner, Cortez Carter, and is also tasked with boosting non-aeronautical revenues on the airport site.
Helsinki Airport has been hailed for the success of its Collaborative Decision Making (CDM) initiatives by Eurocontrol, which claims that its introduction has saved the gateway and its airlines up to €4 million per annum in operating costs. The glowing assesment is based on a Eurocontrol commissioned study of airport operator Finavia’s approach to CDM since introducing it at Finland’s capital city gateway in 2012. In addition to the savings, the study says that CDM or AirportCollaborative Decision Making (A-CDM) as it is often referred to within the industry, has also been good for the environment. “The evaluation confirmed the observations that we have compiled in regard to CDM use. The benefits mostly align with what we anticipated when introducing the new operating method in 2012,” says Heini Noronen-Juhola, Helsinki Airport’s deputy director. The study evaluated the benefits from January 2014 to January 2015, during which period aircraft taxiing times decreased by 60,000 minutes or almost 42 days. Also the time spent on delays decreased by 86,000 minutes or nearly 60 days. As a result of the A-CDM operating method, the study reveals that the airlines saved more than 800 tonnes of fuel due to the shorter taxiing times and having more detailed information about the best time for aircraft to push back from gates. Burning less fuel meant that carbon dioxide emissions at the airport decreased by 2,600 tonnes and sulphur dioxide emissions by 0.7 tonnes. The benefits achieved translate into costs savings of €650,000 in fuel and €3.5 million in shorter delays. “Thanks to CDM, airlines will save money,” enthuses NoronenJuhola. “The main benefits of CDM to Finavia are based on operations being easier to predict and that we will be capable of using our infrastructure more effectively than before.” The study adds that A-CDM has ensured more effective winter operations at Helsinki Airport based on the fact that the ice removal process is now integrated better with production control, ultimately allowing for improved utilisation of the airfield. As part of the new operating methods, Helsinki Airport’s ice removal areas have also introduced electronic message boards with the goal of ensuring a high level of safety and taking traffic into account. The message boards are part of the same information flow as the A-CDM system. Finavia became the first airport operator in northern Europe to introduce A-CDM in 2012. It is currently being used by 35 airports across the continent. AW
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SPECIAL REPORT: ECONOMICS & FINANCE
Raising revenues Tax Free World Association (TFWA) president, Erik Juul-Mortensen, tells Airport World how airports can keep retail tills ringing in tough times.
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on-aeronautical revenue is an essential element of airport commerce – often accounting for a very substantial percentage of airport income. And with many airports operating at a loss, this revenue stream can have dramatic implications for service standards, as well as the break-even points for passenger or flight fees. Airports, therefore, need to take retail very seriously if they are to make the most of this vital flow of cash.
When the going gets tough However, gone are the days when bargain-hungry duty free buyers guaranteed airports a steady supply of dollars, yuan or rubles, and the times when airport retail strategy could be ‘pile it high and sell it cheap’ are very much behind us. Growth has slowed. The latest figures from specialist travel retail research organisation, Generation, show that total duty free and travel retail sales in 2014 amounted to a still substantial $63.5 billion. However, the increase in spend has fallen over the past year from +7.5% in 2013 vs 2012 to +5.8% in 2014 vs 2013. Asia-Pacific remained the fastest growing region at +9.9% in 2014, but even this (on the face of it a healthy figure), is down from 12.1% in 2013. Among the product groups, fashion and accessories performed best with an increase of 3.5% but fragrances and cosmetics – duty free and travel retail’s biggest category – was flat and three major categories were in decline.
More worryingly still, the current growth rates don’t match the growth in the number of passengers, which must be a concern for both airports and retailers. Therefore, in today’s harsh economic environment, considerable commercial dexterity and a much more sophisticated approach is required to maximise revenues.
What’s the problem? Issues both inside and outside the sector have played a part in putting growth on this downward slope. Of course in uncertain times, fewer passengers buy a plane ticket, and conflict, particularly in regions such as Ukraine, Iraq, Syria as well as terrorism scares in Paris, Belgium, Sharm el Sheikh and other areas will all take their toll. Health issues such as the Ebola epidemic in West Africa and the outbreak of the Middle East Respiratory Syndrome (MERS) virus in Korea will also add to people’s reluctance to fly. Economic instability in Europe has created currency pressures and reduced consumer confidence. Double-digit growth in China is probably over – at least for the time being anyway – leading to a downturn in purchases by traditionally big spending Chinese passengers. Economic turbulence in Brazil and political as well as financial troubles in Russia mean fewer passengers. Passengers from these countries are the source of a big percentage of duty free and travel retail spending, and when they keep their cash in their wallets, it hits the sector hard. Changes within the travel sector itself have also contributed to the difficulties. These include the increased prevalence of certain low-cost carriers and the associated restrictions on baggage alongside
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SPECIAL REPORT: ECONOMICS IT INNOVATION & FINANCE
Erik Juul-Mortensen.
increased or confusing regulations about what passengers can and can’t take on planes.
Looking on the up side But the industry is far from powerless to fight back. Conversion is key, and the sector shouldn’t worry about passenger growth when it is currently letting millions of those who are already flying slip through its fingers. So how do we rectify this situation? One area that we need to consider carefully is how to harness the power of new technology to communicate effectively with passengers. Around 2.8 billion people (two fifths of the world’s population) are now connected in some way. Mobile devices are fast becoming the dominant digital gateway for passengers to preview their plans, manage their time and then navigate their way through an airport. In addition 20% of online bookings are now made via a mobile phone. This represents a massive opportunity and the industry needs to do more to capitalise on it. Passengers can get advice from friends, family or retail experts wherever they are. Mobile is not just a technology, it’s an essential element of consumer behaviour. We need to be creative about how we use it – it’s not about ‘likes’, it is about delivering messages that are personal and relevant at a time when they are useful. The quality of the airport experience should also be a priority. Travelling can be stressful, and passengers who arrive in the retail area fraught after a struggle to get from the car park to the terminal, an anger-inducing queue at check-in or a battle at security will have every reason to be grumpy. But happy passengers are spending passengers, and airports need to consider how they keep their passengers in good spirits as they pass through the airport as well as how to relax the anxious and put them in a spending mood.
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Airport retail images courtesy of Dubai Duty Free.
Exclusivity also matters. By giving passengers something they can’t get on the high street – whether that’s an experience, a product or a promotion – we can add a sense of exclusivity, which will encourage more passengers to stop and spend. Airports are unique environments in which exciting and engaging retail experiences can be created. And there are many positive stories to tell. Much investment has gone into enhancing the retail environment at airports across the world, and many of the retail operations we see in airports today are equal to, if not ahead of, what is happening on the high street. By careful planning at an early stage of airport development, and working together as a true trinity between the airport, the retailers that operate within it and the brands they sell, we can drive an even better business.
The future is bright Although passenger numbers fluctuate, there is no doubt that while the nineteenth century was the era of rail and the twentieth was that of the car, this century belongs to the aircraft. More and more people are taking to the skies every year, and the increase in international travel from newer markets such as India and Africa will continue to drive growth at a phenomenal rate. And many of these new travellers are keen to experience the luxury and glamour of airport shopping and the brands that can be found at our stores. The duty free industry has a reputation for resilience and that reputation is deserved. The mood at the TFWA among our own members is upbeat. Much business was being done on the floor of our own events during 2015, including at our World Exhibition and Conference in Cannes in October last year and we expect no change in this positivity in 2016. We’ve weathered some challenging times in the past, and we will come through them again in the future. We have much to look AW forward to.
SPECIAL REPORT: ECONOMICS & FINANCE
Setting new boundaries Joe Bates discovers more about Moscow Domodedovo’s plans to create Russia’s first aerotropolis within a 25-kilometre radius of the airport.
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ith its annual traffic figures soaring from 3.8 million passengers in 1998 to over 30 million today, clearly Moscow Domodedovo Airport (DME) is one of Europe’s fastest growing gateways and a significant revenue generator. Indeed, the airport operator is a Russian success story and has been as good as its word in investing billions of dollars on upgrading the airport’s key aeronautical infrastructure. Now, after more than a decade of concentrating on enhancing the terminal, airfield and support infrastructure, the airport is ready to start the next phase of its development through the creation of its own aerotropolis. Appropriately called Domodedovo Aerotropolis, the plan is to build a cluster of developments on a 7,000-hectare site around the airport that will include hotels, exhibition and conference halls, offices, storage and logistics facilities, industrial sites, residential areas, parks, shopping malls, factory outlets and car parking facilities. A multi-product, time-critical logistics and distribution zone has been talked about as have an aviation industry zone, flex-tech and bonded warehouse areas and an Innovation Special Economic Zone containing clusters of research and technology parks and microelectronics and pharmaceutical complexes. In addition, a health port offering medical tourism and wellness centres and an education port offering executive education and aviation-industries/logistics training are proposed.
Hotels and service apartments would support short-term visitors and workers at these clusters, while high quality mixed-use residential developments would house many of their full-time employees. Daniel Burkard, Domodedovo’s senior vice president for non-aeronautical development, notes: “We plan to create a series of interlinked commercial and industrial facilities at a distance of up to 25 kilometres from the airport whose economic impact will be felt as far away as 90 kilometres. “We have reserved more than 16,000 hectares in Domodedovo City District for the airport, 9,000 hectares of which have been set aside for key aviation infrastructure, leaving 7,000 hectares for the development of Domodedovo Aerotropolis. “No other airport in Europe has so much land available to develop. Paris CDG has 3,238 hectares, for example, and Amsterdam Schiphol – which has pioneered the airport city concept – and Frankfurt Airport around 2,678 and 1,900 hectares respectively.” So what is the appeal of an aerotropolis? “Experience has shown that an urban structure in the vicinity of the airport is very helpful when it comes to growing the airport beyond a certain size. Frankfurt, Amsterdam Schiphol and LondonHeathrow area are fine examples of this,” says an airport spokesman.
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SPECIAL REPORT: ECONOMICS IT INNOVATION & FINANCE
In little more than a decade Domodedovo has grown to become Moscow’s biggest airport and is now set to expand beyond its boundaries by developing Russia’s first aerotropolis.
“Domodedovo’s location far from Moscow’s city limits gives us the unique opportunity to design, develop and build urban structures near DME, which will be attractive for businesses as well as passengers and people living in the area, especially if their work is airport-related. “The key developments cover everything that you would expect to find in an urban environment. However, our focus is on businesses, education, entertainment or infotainment, medical issues, transport and hospitality. It is a long-term vision and its development will depend on many factors.” The airport has revealed that it wants to add at least 190,000sqm of shopping facilities, 350,000sqm of industrial space, 160,000sqm of offices and an extra 1.8 million square metres of hotels by 2023 under the umbrella of the Domodedovo Aerotropolis project. The facilities and their timescale for development are based on analysis of the existing market south of Moscow and market research carried out by DME and international firms Ernst & Young and Cushman & Wakefield into the potential future needs of customers. The aerotropolis project has already begun, of course, as a host of new aviation and non-aviation related facilities have already been
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built either at or close to the gateway in recent years to ensure that it has been able to cope with the rise in demand. These have included the opening of LSG Sky Chef’s Flight Catering Factory and a new four-star, 350-room hotel. DME admits that it has taken inspiration from a number of existing airport city/aerotropolis developments across the globe. “We have carefully reviewed similar developments in Europe, the USA, Asia and the United Arab Emirates in order to learn from best practice as well as from any mistakes they may have made,” says a DME spokesman. “We believe that there are many promising projects across the world and have gone out of our way to learn about them, often speaking directly to our airport colleagues behind the schemes because we are not in direct competition with them and jointly share an aerotropolis vision.” Cushman & Wakefield estimates that Domodedovo Aerotropolis will create up to 94,000 new jobs and numerous for-profit companies, and believes that the unique town-planning entity can generate significant tax revenues for the regional budget. AW
SPECIAL REPORT: ECONOMICS IT INNOVATION & FINANCE
The next big thing! Airport World turns the retail spotlight on Abu Dhabi’s new Midfield Terminal and a handful of other innovative retail/ F&B projects across the globe.
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bu Dhabi Airports claims to have awarded the duty free concession for its new Midfield Terminal Building to two of the world’s “most innovative duty free operators” – Aer Rianta International (ARI) and Lagardère Capital. DAA’s international retailing subsidiary, ARI, has been chosen to provide the perfume, cosmetics, skincare, sunglasses and fashion jewellery categories at Abu Dhabi International Airport’s new Midfield Terminal for a period of ten years commencing in December 2017. While Lagardère Capital has won the contract to oversee the tobacco, confectionery, and fine foods categories, in partnership with Abu Dhabi Capital Group. The tender process started in February 2014 when retail operators were asked to submit concepts which would capture the essence of Arabian hospitality, combined with retail execution that would offer “sensational shopping experiences” to the 30 million passengers who are expected to use the Midfield Terminal Building (MTB) when it opens. It will boast 28,000sqm of duty free space, comprising 18,000sqm of retail and 10,000sqm of F&B outlets. “Offering an unrivalled, sensational travel experience to passengers sits at the heart of everything we aim to deliver at the Midfield Terminal Building, the future gateway to the capital city,” reveals His Excellency, Ali Majed Al Mansoori, chairman of Abu Dhabi Airports. “Aer Rianta International and Lagardère Capital have came up with ideas that will set new benchmarks in airport retail.” He adds that their technologically-advanced, unique concepts were perfectly aligned with the airport’s ambitions. “With them both onboard, we are confident that the MTB retail offering will impress travellers, creating a distinctive sense of purpose and sense of place that they will want to experience again and again,” says Mansoori. Commenting on the win, ARI’s CEO, Jack MacGowan, says: “Delivering sensational experiences was at the heart of our proposal and it will be especially rewarding to see our innovative designs, retail concepts and customer services brought to life at the new terminal. “From the moment we started work on the bid submission we were energised by Abu Dhabi Airports’ commercial vision to create the world’s best, consumer and leisure experience at an airport. It’s an ambition that is very much in tune with our own company purpose to create outstanding shopping experiences every time.”
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Dag Rasmussen, chairman and CEO of Lagardère Travel Retail, promises: “We have created an innovative concept with the ambition to create a multi-sensory shopping experience that is an extraordinary fusion of iconic brands entertainment, technology and culture, with a unique Abu Dhabi touch. “We are confident that the Abu Dhabi Midfield Terminal stores will set new benchmarks for the industry.”
Multi-lingual menus Meanwhile, Down Under in Australia, Brisbane Airport has introduced multi-lingual digital menus in its International Terminal to make ordering food at its F&B outlets easier for its Asian visitors. Delivered in partnership with Brisbane digital agency Klyp, the multi-lingual digital menus are located at the front of 13 partner restaurants and are available in English, Chinese, Japanese and Korean. Toby Innes, Brisbane Airport Corporation’s head of retail and commercial, says the initiative is the first of its kind at an Australian airport. “Last year we welcomed more than five million passengers through the International Terminal and this is aimed at breaking down language barriers with passengers who might have difficulty with English menus,” he says. “The design of the software is dynamic in that it allows us to roll out further languages easily as other source markets increase, while also having scope to be rolled out across the Domestic Terminal.” The initiative forms part of Brisbane Airport Corporation’s strategy to make the gateway more appealing to Chinese travellers.
Miles better In what is believed to be an industry first, OTG has launched an exclusive Miles Shop at United’s Newark Liberty International Airport hub enabling MileagePlus members to use their miles for a range of gifts and amenities, while members using traditional methods of payment will earn five miles for each dollar they spend.
SPECIAL REPORT: ECONOMICS & FINANCE
Products on offer range from gifts and electronics, including limited edition headphones, suitcases and signed cookbooks from Alain Ducasse & Elizabeth Falkner to everyday essentials such as travel kits, power adapters, and travel guides. Not to overlook the youngest jet-setters, the Miles Shop also offers a range of children’s toys and clothing. Offerings range from as few as 600 miles to 50,000 miles, keeping with United’s focus on providing MileagePlus members varied options for using their miles during the travel experience. “The MileagePlus team works each day with a singular mission: to make the world’s best travel loyalty programme more rewarding for our members,” says Praveen Sharma, United’s vice president of loyalty. “The Miles Shop at Newark Terminal C is a terrific extension of that mission as it offers United customers expanded opportunities to earn and use their miles.” In November 2014, Newark’s Terminal C became the first airport to accept MileagePlus award miles for food and beverage purchases at select concepts throughout the terminal. “United has been an instrumental partner in developing innovative ways to expand its MileagePlus program at Terminal C,” says OTG CEO, Rick Blatstein. “We’ve received tremendous positive feedback since we introduced the ability for customers to use their MileagePlus miles for meals, and the development of the Miles Shop is a direct result of that unique experience.” OTG is also now testing the spending of miles at the Cibo Express Gourmet Market in the terminal based on customer interest and is evaluating whether it should further expand to more miles shops and/ or within more news and gifts stores.
Looking to the future Oslo Airport has released a sneak preview of the new food, beverage and convenience store offerings that will open at the gateway in April 2017!
A total of five operators have been selected to serve food and beverages to the passengers at Norway’s main gateway to the world. “A long, meticulous selection process has resulted in our decision to enter into a partnership with five operators,” says Øyvind Hasaas, managing director of Oslo Airport. “These operators submitted the overall best tenders and we feel certain that the Norwegian people will be pleased with our choices.” The five winners are SSP, HMSHost-UMOE F&B Company, Reitan Convenience Norway, Joe & The Juice and BIT. The number of F&B establishments will increase from the current 20 to 37, while the number of convenience stores (kiosks) will increase from six to ten. “Our ambition has always been to bring in more operators, and now we have a good mix of companies that will provide better and more extensive food, beverage and kiosk offerings than what we have today,” says Hasaas. “We want to provide the best possible services for our passengers. While our current food, beverage and kiosk offerings are good, we believe that this will be enhanced when we open an airport nearly double its present size in April 2017.” Among the existing food and beverage establishments, Peppes Pizza, O`Learys, La Baguette, WB Samson, Caffè Ritazza, Starbucks and Aquavit Bar will continue, while Franks Deli and Upper Crust will be phased out. “We wanted a broad selection where passengers can choose among both international and Norwegian menus. Several of the stablishments have Norwegian food and beverages on the menu, while others have a more international flavour. “It is this combination that makes us certain that our passengers can look forward to excellent culinary experiences, at acceptable prices,” Hasaas concludes. AW
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RUNNINGDESIGN: AIRPORT HEAD CORGAN
Age concern With people living longer than ever before, catering to an aging population is now an essential part of the airport design process, writes Corgan’s Jonathan Massey.
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s airport terminals move beyond being buildings that are simply a necessary part of the mode of transportation to an accommodating and thoughtful experience, we must look closely at the needs of the diverse populations using these facilities. And a significant and growing segment of the population that needs carefully considered solutions are the elderly and those with limited mobility. Indeed, as airports concentrate their focus on passenger experience, key aspects of this demographic’s journey have moved to the foreground of terminal design. These include targeted wayfinding improvements, fatigue mitigation, innovative technologies to assist their movement through the facilities, and amenities to meet their needs. While following local laws and regulations are a prerequisite, airport owners, operators and designers should continually strive to reduce stress and anxiety by crafting space that enhances the passenger experience for aging and mobility-limited users. Corgan, an international architecture firm specialising in terminal planning and design, is one such entity working to improve the passenger experience for this growing population by applying the credible evidence gained through recent research to influence terminal design. Two tools that Corgan’s aviation designers and planners are employing are an Aging Simulation Suit and Eye-Tracking Glasses.
The Aging Simulation Suit The Aging Simulation Suit helps today’s young designers understand the needs of the aging passenger by simulating the physical characteristics of the elderly – actually putting designers in the shoes of an older person so they can experience the sensation of limited mobility, unsteady gait, vision disintegration and hand tremors. This experience is possible through the suit’s various accessories including gloves that contain an oscillator to mimic hand tremors, goggles that blur vision, and knee and elbow braces that restrict movement and simulate joint stiffness. In recent experiments conducted with Corgan staff, participants were asked to make their way through a typical pathway at an airport while wearing the suit. The results were documented with an eye toward potential improvements. One important lesson from the simulations was an appreciation for the anxiety these limitations created. Many participants commented on the difficulty and resulting stress they experienced performing the basic tasks asked of them.
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Landon Moore, an architect with Corgan’s aviation studio, stated: “As I walked through the terminal, I couldn’t believe how anxious I felt because I could not get to where I wanted to go quickly.” It can be easily understood then that with 20% of the travelling population experiencing these stress factors, airports need to find ways to improve the basic level of passenger experience. “The suit really made me think twice about how I design for the aging population on a daily basis,” says Moore. Ultimately, the goal of simulation is to not only allow designers, in particular younger designers, the opportunity to experience the limitations first-hand, but to explore innovative solutions that could help mitigate those limitations. “Having equally spaced rest areas along the passenger’s path would have really helped me out and been beneficial,” notes Moore. So, a terminal accommodation could include ‘fatigue mitigation’ stations at key decision points along the passenger’s path where they can regroup and confirm the correct direction. In addition, minimal or no changes in level along primary pathways with easily seen and accessed elevator and escalator cores would be beneficial.
Eye-Tracking wayfinding analysis Another research programme underway at Corgan takes a detailed look at what passengers actually experience visually as they pass through a terminal. Designers are prone to believe they intuitively understand how the public will react in the spaces they create, but terminal interiors can be complex environments with multiple sources of visual stimulus all vying for the same attention. Many times, components such as advertising, wayfinding signage, concessions, art, light, and dynamic displays are not displayed in a co-ordinated fashion. The eye-tracking wayfinding research uses technology to gather real data on the passenger’s visual focus at different points along their journey through the terminal. Wearable eye-tracking devices are a powerful new technology that can benefit the passenger population as a whole. These devices have an
AIRPORT DESIGN: CORGAN
The Aging Simulation Suit helps today’s young designers understand the needs of the aging passenger by simulating the physical characteristics of the elderly embedded camera and tracking sensors that define and record fixation elements within the field of vision. By having participants wear this technology while walking through the terminal, designers can better understand how passengers experience their space. This is beneficial to design teams because it helps predict passenger behaviour, such as passenger flows, buying behaviours and amenity utilisation within a terminal. These glasses can also be a diagnostic tool to determine which signage, concessions, and advertising programmes are working and which are not. Recent experiments at one of the top 10 airports in the world have yielded fascinating results, especially when broken out by passenger type, including older travellers. After analysing the senior population group findings in this particular experiment, it was determined the participants tended to look down and fixate on patterning in the floor. This held true even in high volume spaces. In one of the studies, the space had terrazzo flooring with decorative metal insets. The fixation points for many of the senior demographic jumped from metal inset to metal inset as they travelled through the space. Many times key signage points, concession opportunities and important architectural wayfinding cues were missed because they were looking at the detailing in the floor patterning.
These results highlight the importance of design decisions as they relate to the spatial quality of a terminal and its finish-out. For example, if a large portion of passengers aren’t looking up, then signage opportunities at eye-level or above are not effective for them. How passengers perceive their experiences in an airport is as diverse as the passenger population itself. In order for an airport to be successful, it must be aware of the trends of the passenger population it serves and adjust to meet them. With the travelling public maturing, airports need to evolve to meet this growing demographic. Retrofit ramping systems and accessible toilet facilities are a start, but for an airport to truly be successful, it must be innovative in its interior environment. This starts with developing new ideas through experiential and qualitative research. Ultimately, the result is a seamless airport experience for everyone, unencumbered by obstacles and without excess stress and anxiety. AW
About the author Jonathan Massey is a principal in the aviation practice at Corgan. Visit www.corgan.com/our-work/aviation/ for more information about Corgan’s work in the aviation sector.
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INTELLIGENT AIRPORTS
Turning to technology Airports that embrace digital technology will be best placed to cope with traffic growth and rising passenger expectations, writes Fujitsu’s client managing director for the transport sector, Russell Goodenough.
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quick glance at the top 10 list of the world’s busiest airports in 2015 shows that demand for air travel is at an all-time high, with Hartsfield-Jackson Atlanta International Airport continuing to lead the way by becoming the first gateway to handle over 100 million passengers in a calendar year. Coping with growth is, of course, a good problem to face and with new infrastructure sometimes not possible or maybe years away in terms of its development, airports are increasingly turning to technology to help them cope with rising demand while still providing the best services possible. Indeed, we are living in a world where everything is now connected and, as a result, is changing the way we live, travel and do business. The growing number of devices also makes it even easier to connect and collaborate with each other. According to a survey by international internet-based market research firm, YouGov, the average household now owns 7.4 internet-enabled devices. Technology has never been more sophisticated and airports have a fantastic opportunity to take advantage of this huge array of devices and become truly intelligent.
Benefits of intelligent airports Without doubt digital technology is revolutionising the transportation experience, but in my opinion, there is huge scope for improvement in both usage and satisfaction as intelligent mobility can help transform the airport industry in five key areas: • Passenger centricity – the use of technology to help improve the passenger experience. • Increasing capacity – an issue that many are talking about it, but taking advantage of digital services can help us understand and deal with the growing number of passengers year-on-year. • Increasing efficiency – the use of technology can help reduce costs across the airport, for example, developing the optimum staff rota depending on busy times at the airport. • Increasing safety/security – technology can allow airports to analyse the perimeter and improve border security. • Improving sustainability – this is more than just C02 emissions, but also refers to the sustainability of jobs. As the transport network continues to change, digital can help progress services in a more effective way.
Intelligence is the future With intelligent mobility – the move from a series of separate journeys to an integrated, intelligent system, driven by a more user-centred travel experience – airports can harness the digital age to enhance the industry. By taking advantage of Wi-Fi analytics and beacon technology in mobile devices, for example, airports can find out where a passenger is located within a terminal and this can be used to monitor and improve their airport experience. Identifying crowded areas, for instance, can allow airports to increase staff levels to meet demand or even change passenger flows to avoid bottlenecks. This information can also be fed into digital screens that show advertising that is relevant to the passenger based on recent movements – helping to guide them around the airport and spend money. Once an airport has built up a profile of passengers, it can then upsell advertising to retailers with stores inside the airport to ensure the relevant content is going to the right people, creating a win-win for both airports and retailers. There are, of course, already many great examples of where digital services are playing a big part in an airport experience. EasyJet, for example, launched Mobile Host with Gatwick Airport, which combines live data from the airport, Google indoor maps and passenger booking details to provide up to date personalised instructions for passengers on their mobile phones.
What’s next? In the medium to long-term, we can expect the physical airport environment to shift more towards an airsidedominated, retail centric landscape, as technology will remove the need for a large portion of the current landside infrastructure. It also won’t be many more years before air travel for most of us will involve our baggage being routinely collected from our homes by courier and dropped off at our end destination hotels meaning that the check-in halls and baggage arrivals areas of tomorrow will look very different to today. Such changes will open new opportunities for airports to reclaim real estate that is presently designated for operational systems and repurpose it into revenue-generating retail space where the passenger experience is improved by technology such as location-based services. As we all know technology can truly make a difference, although it is important to remember that whether it is noise sensors, minimising noise for residents or implementing technology to increase revenue streams, enhancing the customer experience must be a top priority.
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PROJECT WATCH
Salt Lake City International Airport New $1.8 billion terminal and concourse to transform Utah’s gateway to the world. project details Location: Salt Lake City, Utah, USA Important developments: New terminal and South Concourse Scheduled completion: 2020
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alt Lake City International Airport (SLC) has unveiled the designs of its new showpiece terminal and South Concourse, the two key projects of its $1.8 billion development programme. Scheduled to open in 2020 and located west of the existing terminals, the three-storey, 1.7 million square foot terminal will be equipped to handle up to 23 million passengers per annum. According to project architect HOK, the terminal will provide a new “uplifting travel experience” for passengers and a more flexible and operationally efficient facility for hub carrier Delta Air Lines to support the region’s growth. It says that the design of the terminal will celebrate Utah’s natural beauty and reputation as an outdoor recreation hub as well as being built to last and withstand earthquakes. Floor-to-ceiling glass is expected to provide expansive views of the airfield and iconic mountains in a move designed to create “an uplifting, cheerful ambiance”. “One of the best things about coming into Salt Lake City is flying through the valley between the mountain ranges as you approach the airport,” says Robert Chicas, director of HOK’s Aviation + Transportation practice. “By bringing the beauty of the environment into the facility and incorporating sustainable design strategies that create a healthy, pleasant atmosphere, the terminal becomes an extension of that experience.” A soaring interior space called the Canyon will form the heart of the building and house the facility’s security screening, shopping and dining areas. This open space, says HOK, will be a visual anchor that organises the terminal. It will certainly be unique as a large-scale sculpture by
award-winning artist, Gordon Huether, is expected to run along the Canyon walls and reflect natural Utah elements such as red rock canyons, alpine peaks, moving water and cottony white clouds. The terminal will also have a large, separate meet-and-greet space for accommodating the groups that often welcome returning Latter-day Saints missionaries and feature a sizeable selection of artworks from local artists. As you would expect from a project seeking LEED Gold certification, it will have highperformance glazing systems designed to draw in daylight while preventing heat gain and a series of energy-efficient mechanical and lighting systems. The airport is certainly confident that the impressive new showpiece terminal and 4,000ft long concourse, which will equip SLC with 74 gates, will help make the Utah gateway more “convenient, inspiring and sustainable”. “We are supporting the city’s goal of creating one of the world’s premier airports with an inspirational design that celebrates our region and provides an immediate sense of place,” says SLC’s executive director, Maureen Riley. “At the same time, developing a completely new terminal allows us to support the needs of our airport’s guests and the airlines as efficiently as possible.” Former Salt Lake City Mayor, Ralph Becker, claims that the long awaited upgrade will make “huge improvements” to the gateway, and Riley agrees, stating that the airport needs the new terminal to help meet regional demand and raise customer service levels. She says: “We need more space as the existing facilities, some of which opened 50 years ago, were built for 10 million passengers
Principal companies involved: HOK, HDJV Construction (Holder Construction/Big-D Construction) Total investment: $1.8 billion per annum but are now handling over 20 million, so everything is constrained. “Our concession programme, for example, is half the size it should be for an airport handling 20 million passengers, and this is definitely something we plan addressing in the new terminal.” How would she describe the design of the terminal? “Contemporary,” is the reply. “We want it to incorporate the future and we want the terminal to be customer friendly and easy to use for passengers. We also want it to include cutting edge environmental technology.” Remarkably, when completed, Salt Lake City International Airport will have 12 fewer gates than the 86 it has today. Crucially though, each will have an airbridge and be bigger and more flexible in terms of accommodating different types of aircraft. This, admits Riley, will make a significant difference for operational efficiency and passenger comfort, as summer temperatures in Salt Lake City can hit 90oF and plummet to below freezing in winter when the airport gets an annual average of 65 inches of snow. HOK notes that the terminal’s “future-proof” design provides flexibility that will enable specific areas to be easily modified and reconfigured as the airport’s needs change over time. Airport officials estimate that the construction will create more 2,000 jobs – including an estimated 1,500 on-site – and AW generate about $1 billion in wages.
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ENVIRONMENT NEWS
Going green
MSP powers up Minnesota’s largest solar energy project A three-megawatt solar installation on the top deck of two parking structures at Minneapolis-St Paul International Airport’s Terminal 1 is the largest solar generation site in the state of Minnesota. The first-of-its-kind airport project also involved converting more than 7,700 metal halide light fixtures in all four parking ramps to energy-saving LED technology. While four additional electric vehicle charging stations were installed in the ramps, bringing the total number of MSP charging stations to 18. It is estimated that the installation will generate close to 20% of the airport’s total peak power capacity. “The Metropolitan Airports Commission has worked for decades to operate Minneapolis-St Paul International Airport as sustainably as possible, investing millions in infrastructure to reduce impacts to soil, water and air quality, and spending nearly a half-billion dollars on noise mitigation around MSP,” says executive director and CEO, Jeff Hamiel.
Biofuel on sale at Oslo Airport
Oslo Airport has became the first airport in the world to start offering biofuel to its airline customers, the pioneering initiative being described by Norway’s Minister of Transport and Communications, Ketil Solvik-Olsen, as a “red letter day for international aviation”. Air BP is the supplier of the jet biofuel and Lufthansa Group, SAS and KLM have already signed agreements to purchase the fuel. Avinor and Air BP are convinced that this represents the start of a trend toward making jet biofuel an interesting commercial option worldwide. “Norway is committed to the transition to a low-emission society. I am pleased that the aviation sector wants to participate in this adjustment, as evidenced by this initiative,” enthuses the country’s Minister of Climate and Environment, Vidar Helgesen. “Biofuel is one of the few alternatives we have at our disposal today that can help achieve significant reductions in greenhouse gas
“This solar project is a major step forward in the use of renewable energy at MSP International Airport.” Ameresco, a leading energy efficiency and renewable energy company, developed the solar infrastructure and LED lighting upgrade. It will also maintain and operate the system on behalf of the Metropolitan Airports Commission. Enthuses Ameresco’s president and chief executive, George Sakellaris: “We commend MSP and applaud its leadership team for its stewardship both in pursuing renewable energy solutions for the airport as well as obtaining public-private financing to support the construction. “Ameresco is honoured to be a sustainability partner in this innovative project, and we take pride in contributing to local job creation as part of achieving energy savings and sustainability.” It is predicted that the solar array will reduce greenhouse gas emissions by 6,813 metric tons annually – the equivalent of taking 1,434 passengers off the road in one year.
emissions from aviation, provided that the biofuel is produced in a sustainable manner.” David Gilmour, CEO for Air BP, noted: “This is the first time jet biofuel is being delivered through the normal supply mechanism, thus reducing logistics costs significantly. “We want to demonstrate that airports can readily access biofuel with relative ease, utilising existing physical infrastructure.” The Lufthansa Group was first to confirm its participation in the project. SAS and KLM were also quick to indicate their willingness to pay extra to ensure that jet biofuel could be offered at Oslo Airport. According to Avinor, the hope is that more airlines will join them in the not too distant future. As an incentive to sign up, all airlines taking part in the initiative are rewarded with lower CO2 taxes on domestic flights in Norway. Biofuel is AW also exempted from the EU quota system.
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RUNNING WBP NEWS HEAD
The latest news from ACI’s World Business Partners
Building bridges
Huntsville International Airport has unveiled the first of the 12 new glass jet bridges that will be installed at the gateway between now and 2020. Phase one will involve the installation of seven bridges by May 2016, with the remainder being added by Thyssenkrupp Airport Systems over the next five years in a $11.8 million project. The current jet bridges were installed in 1989 and are standard narrow hallways without windows or doors. And although the airport describes the new additions as “functional”, it says that they will ensure a much more passenger-friendly first or final experience of the Alabama gateway. “We have purchased Thyssenkrupp’s Apron Drive Crystal Bridges to provide passengers with natural light, and a more appealing, less restrictive and confined experience,” says Richard Tucker, executive director for the Port of Huntsville. “We believe the addition of these bridges is very positive and increases comfort for passengers and aesthetics at our facility.” Mark Jones, president of Thyssenkrupp Airport Systems, says: “The cutting-edge design offers a visually appealing look while continuing to simultaneously deliver a strategic security element.” The total cost of this project is being funded by an entitlement grant. Johnson Contractors, of Huntsville, is the general contractor for the project.
Ultra good
JFK International Air Terminal (JFKIAT), operator of the New York gateway’s Terminal 4, is renewing and strengthening its relationship with Ultra Electronics Airport Systems to incorporate recent technological enhancements. The company has worked with JFKIAT for over a decade providing it with its Airport Operations Suite (AOS) to operate the privately run terminal at New York-JFK. “Ultra’s systems are critical for our operation, and with a record number of passengers passing through our terminal this year, we felt it was important to make the investment. We continue to be committed to providing the passenger with a first-rate experience,” says JFKIAT’s CEO and president, Gert-Jan de Graaff. Ultra’s enhancements provide optimised access to airport-data; supported by precision filtering-routines and intuitive graphical displays, which ensure users’ heightened awareness of all aspects of airport-operational status. Flights, codes, messages, ground-movements, and passenger-dispositions are made instantly recognisable; allowing processes to be streamlined and problems corrected with the greatest speed.
Fast and the glorious
Tokyo Narita has expanded the deployment of ARINC’s common use passenger processing and self-service kiosks throughout the airport. The airport recently renewed its existing contract for Rockwell Collins’ ARINC vMUSE and SelfServ Kiosks in Terminal 2, and expanded its agreement to include the deployment of ARINC vMUSE and digital signage solutions at the airport’s new Low Cost Carrier (LCC) Terminal 3, which opened earlier this year. In addition, NRT has expanded the use of its Managed Services (AMS) to include IT support for the airport’s passenger processing systems and related technologies. With this expansion, Rockwell Collins now provides IT managed services for the airport’s three main terminals. “Passengers using these critical systems will have an easier travel experience and airports will have more efficient operations,” says Paul Hickox, head of airport systems sales for Rockwell Collins. Japan’s second busiest gateway handles around 35.5 million passengers yearly and is a pioneer in the deployment of common use technologies in the Asia-Pacific region.
eezeetags Location: Harmelen, Netherlands Contact: Barry Vrieling, founder and managing director E: info@eezeetags.com W: www.eezeetags.com eezeetags is a Dutch based company that develops and produces bag tag solutions as part of the self-service bag-drop process. Its tags utilise a magic adhesive that only sticks to itself and not to bags, clothes or floors making self-tagging easy. With eezeetags there is no backing to remove and therefore no waste at the tagging point, ensuring fast and efficient processing that in turn leads to shorter queues, improving the passenger experience and increasing the capacity of the terminal.
Longest Change Limited Location: Hong Kong Contact: Sergey Tsybouk, CEO E: s.tsybouk@longestchance.com W: www.longestchance.com Longest Chance is the strategic partner of IATA in RFID-based baggage operations. We are focused on global implementation of RFID infrastructure in the air transport industry in connection with IATA Resolution 753. Our ‘hand to hand’ RFID system allows for improved quality of baggage operations for airports and a reduction in financial loss for airlines while providing high-level passenger satisfaction.
RW Block Consulting Location: Orlando, FL, USA Contact: Roy Block, president E: roy.block@rwblockconsulting.com W: www.rwblockconsulting.com RW Block Consulting is a management consulting firm advising public and private sector clients implementing capital programmes. Our capital improvement expertise helps clients evaluate and overcome challenges, manage change, achieve process improvements and meet project objectives.
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HUMAN RESOURCES
PEOPLE
matters Nurturing talent Terri Morrissey and Dr Richard Plenty provide their thoughts on: Entrepreneurial spirit and innovation.
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ictor Kiam once said: “Entrepreneurs are simply those who understand there is little difference between obstacle and opportunity and are able to turn both to their advantage.” The American entrepreneur succinctly sums up the positive mindset and ‘can do’ attitude often associated with the entrepreneurial spirit. At a time when financial pressures on airports are so intense, the creativity, resilience, enthusiasm and innovation shown by entrepreneurs are qualities which are essential and ideally should be available ‘in-house’. So what can we learn from them? Firstly, entrepreneurs are skilled in both identifying opportunities and in capitalising on them. Consider the case of Canadian, Kyle MacDonald. Starting with one red paper clip, MacDonald wondered whether it would be possible to make enough trades to eventually buy a house. One year and one day after he started his adventure, he made his fourteenth incremental online trade for a three bedroom house in Kipling, Saskatchewan. His learning from the experience was, “Start small, think big, have fun and get started! If you really want it, you can get it.” Secondly, entrepreneurs share a number of personal characteristics including; a high desire to be self-reliant; an openness to new experiences; a ‘passion for action’, to experiment and try things out; high levels of self-efficacy; and a preparedness to work hard. Those who are successful in growing sustainable businesses also manage to
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balance their aspirations for independence with a willingness to build collaborative networks and partnerships with a wide and diverse set of stakeholders. So how well do established organisations – including airports – encourage people who have this kind of creative approach to join their ranks and make a difference? Unfortunately, many traditional organisations are better at killing ideas off at birth than encouraging independent thinking and innovation. Bureaucracy, concern for hierarchy and status, the “not invented here” syndrome, protection of the status quo and demarcation lines mitigate against new ideas and change. Many ‘lifers’ can become stuck in their ways. Such organisations lack the experience, skills and calibre of staff needed to foster creativity. So what can be done to encourage an entrepreneurial spirit if you need to find creative ways of generating revenue, delighting customers or improving effectiveness? • Conduct a ‘positive review’. Take stock: what’s worked well so far? What’s stopping you from being more entrepreneurial? • Identify, develop and, if necessary, recruit people with an entrepreneurial mindset, skills and experience and support and reward them for trying out new approaches • Encourage people to continually look outside for new ideas and best practice See obstacles not just as problems but as challenges and opportunities for growth.
CELEBRATING 20 YEARS OF AIRPORT WORLD
It has been a case of all change at Queensland Airports Limited (QAL) over the past few months with the appointment of a new CEO and COO. Chris Mills has succeeded the retiring Dennis Chant and long-time friend of both ACI and Airport World in the top job. And Marion Charlton, who has been with Gold Coast Airport for 11 years, has been promoted to chief operations officer. Mills says it is an honour to follow in the footsteps of Chant. “Since joining the company, I have been impressed by the many talented people we have in the business, and the exciting opportunities we are pursuing,” he notes. Former airline man, Mariusz Szpikowski, is the new general director of Polish airport operator, PPL, and director of the country’s capital city gateway, Warsaw Chopin Airport. He replaces Michał Kaczmarzyk who resigned from the position. Szpikowski began his professional career at international auditing companies, KPMG and Ernst & Young. David Malek is new chief financial officer of Brisbane Airport Corporation (BAC). He formerly served as the company’s treasurer. BAC CEO and managing director, Julieanne Alroe, said: “David is a highly experienced senior financial executive whose career has spanned the infrastructure, energy, financial services and property sectors.” Sergey Furs is the new CEO of Northern Capital Gateway, the operator of St Petersburg’s Pulkovo Airport, following the departure of predecessor, Sergey Emdin. Furs has held the position of procurement and warehousing director with the group since 2010.
About the authors Terri Morrissey is CEO of The Psychological Society of Ireland and chairperson of This Is…, an organisation and leadership development practice. Richard Plenty is managing director of This Is… They can be contacted at info@thisis.eu
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