The world’s airports will face many challenges in the future, even in cases when they are well-positioned. Notably, Asia is vastly expanding its airport infrastructure to ensure that business and leisure tourists can travel more easily.
Accordingly, growth seems to be the buzz word at conferences, such as the “2nd Annual South East Asia Airport Expansion Summit” in Jakarta, Indonesia, on August 28 - 29, 2013. No wonder, countries like Indonesia, Malaysia or Vietnam have seen double-digit expansion rates over many years. The increasing passenger numbers are bringing many airports to the edge of their capacity and sometimes beyond. The natural reaction to this dynamic development is to enlarge the capacity of existing airports and to build new ones. Ambitious plans to foster the expected growth are being pursued in many South East Asian countries and also in other fast developing regions of the world.
High demands on airports
However, can we really believe that a 25%+ annual increase in passenger numbers will continue for the next 20 years? Airlines investing in “steel”, namely aircraft, are relatively flexible. They can shift fleet bases quite easily and aircraft are typically exchanged after 10 to 30 years. Airports, on the other hand, invest in concrete. Mistakes are therefore irreversible for the next 30 to 99 years. Airport managers should be aware of their real customers – the airlines. Too many airports mix up cause and effect. Airlines bring in the passengers and have a very strong impact on the viability of airports. Only very few destinations or hubs are so attractive, that they are a “must” for airline network managers.
Most airports are selected by airline network managers on the basis of rational arguments. Their decision criteria do not always match what airport managers believe. Network managers look for catchment areas, connectivity, short turn-around time, effective ATC, leading to high punctuality and low fuel consumption. They are attracted by low landing and handling fees – especially the highly cost sensitive airlines.
Low-cost carriers (LCC) are severely changing the aviation industry. The impact of their business model is the consolidation of airlines resulting in groups with stronger bargaining power against airports. LCCs allow new customer groups to fly thus raising the number of passengers. Although this is good news for airport managers, the necessary investments cause new risks. The increasing pressure on airports results in strong competition among airports and decreasing aviation revenues. Especially in de-regulated economies privatized airports fight for customers via price and attractiveness.
Airport managers try to compensate declining aviation revenues by boosting their attractiveness to airlines as well as passengers. They focus on non-aviation revenues coming from retail and advertising, food and beverage zones, entertainment, airport city concepts with hotels and conference facilities, hospitals, cargo and logistics areas etc.
Well-prepared with the right strategies
All these airport challenges can be anticipated and overcome through targeted approaches. Inspired strategies for every life-cycle-step of an airport can make it competitive and attractive to airlines and other customers, from start-up through growth and optimization to privatization:
A Strategic Airport Development Plan forms the basis for a Master Plan tailored to the future demand.
Air Service Development means knowing the airlines’ decision parameters to enable effective airport marketing.
Infrastructure and Operational Planning is the platform where airport strategies go live.
An Airport City Concept provides in-depth analysis of the market as an accurate basis for investors.
Optimization of runway system capacity enhances the air traffic and ensures on-time performance.
Efficiency analysis and enhancement facilitate understanding of airport terminal capacity and define future terminal facility requirements.
Preparation for Privatization supports the alignment of stakeholders’ interests.
If you are interested in Lufthansa Consulting’s expert advice for airports in comprehensive projects all over the world, please contact Dr. Andreas Jahnke, Managing Director and Partner, Lufthansa Consulting, Mail@LHConsulting.com.