GAD365
Airports are having to get creative when it comes to maintaining high levels of customer satisfaction in an environment where traffic growth is routinely outstripping capacity. This includes finding new ways to raise funds, working with other airports to share ideas and using technology to increase operational efficiency.
Achieving all of this while keeping passengers, airlines and shareholders happy is a delicate balancing act for airports, as outlined during a GAD World panel discussion on sustainable business models and safeguarding the future.
“Our challenge is to provide infrastructure which suits passenger needs and airline needs but gets fees that are viable for shareholders and also for airlines”, said Hamburg Airport CEO Michael Eggenschwiler. “We've got to be creative and adjust our structures. We're at a certain crossroads at the moment.”
Jean-Franҫois Guitard, International Development Director at Cote D'Azur Airports, agrees that airports face the challenge of trying to please everybody: “Shareholders are expecting a lot, airlines and passengers also.”
One idea the French airport group implemented to keep all parties happy was to lower charges in the winter period in order to stimulate off-peak traffic to the French Riviera. Airlines responded well to the reduced fees and shareholders were pleased that out-of-season traffic was up.
Expanding facilities takes time so airports are constantly looking for other avenues that enable them to improve performance so they can accommodate traffic growth. CEO Kim Day said Denver International Airport has been working hard to get the costs down for airlines while simultaneously improving performance in terms of customer experience and sustainability.
That is not to say, however, that finding funds is easy.
“US airports have been trying for years to get the passenger facility fee increased but that hasn't happened. So airports are having to rethink their entire financial plan and think about how to get money from outside."
In Denver's case, this involved entering into an agreement with Spain's Ferrovial Airports last year to upgrade and manage its Jeppesen terminal.
“We did not need the private funding on this project but we wanted to transfer the risk onto someone else, so we brought in Ferrovial”, explained Day. “They're putting money in, we're putting money in and we're going to share the revenues.”
Airports are also increasingly realising the benefits of working together to resolve some of the common challenges they face. For instance, Denver is a “sister airport” to Munich Airport and Tokyo Narita.
“There is a lot of benefit in collaborating with other airports and it's worth exploring what's working”, said Day, adding that Denver has also spoken with Panama Airport about the possibility of becoming another sister airport. However, not all ideas work across airports. While Denver recreated a Munich-style plaza in Colorado, it decided not to pursue Narita's robotic approach to customer service.
“We think our brand is person-to-person contact. Narita is using robots to interact with passengers, but we don't really think that's Denver. We're a friendly community and we want to show that”, explained Day.
Hamburg Airport has also been working alongside other AviAlliance airports in Athens and Budapest, although Eggenschwiler admits that “we could be doing more than we've actually been doing”. He said airports are being “forced to do some kind of piggyback riding” because they are finding it increasingly difficult to “do it alone”, a point backed up by Kjell Kloosterziel, Director of Netherlands Airport Consultants (NACO).
“Collaboration is based on trust so you need to establish a trust base between airports. It's impossible for every airport to do it alone so you need to work together”, said Kloosterziel. This is especially true for smaller airports, for which collaboration is “the way forward”.
This is especially true for smaller airports, for which collaboration is “the way forward”.
Airports are also having to come up with creative ways of keeping up with changes in their customers' habits. For instance, when Denver found that passengers were abandoning its car parks in favour of travelling to the airport using services such as Uber and Lyft it was “forced to rethink parking”, recalls Day.
The airport opened a “low-cost parking option in a remote lot” that offered passengers the chance to offload their bags in the parking lot.
On the investor side, the key to safeguarding the future and deciding which airports to inject money into is to perform stress tests against incumbent airlines and consider all outcomes in the event that those airlines go out of business.
This was neatly summed up by Stanislav Solomko, Head of Market for Russia, CIS and the Baltic states at Lufthansa Consulting. Charged with performing a due diligence assessment of Belgrade Airport, whose main carrier Air Serbia faced uncertainty earlier this year as shareholder Etihad Airways decided what to do with its stake, Lufthansa Consulting took a three-step approach.
This involved identifying the risk, assessing the risk and defining measures to address the risk. As Solomko pointed out, the death of an incumbent airline is not always bad for an airport because low-cost carriers often swoop in and fill the gap.
For example, when Malev went bankrupt, Ryanair moved into Budapest and when Spanair went bust low-cost carriers also moved quickly on Barcelona.
However, not all airports are favourable bases for low-cost carriers, so investors are advised to perform due diligence on all possible scenarios before parting with any funds.