Connectivity: The value of aviation

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Written by Linda Hohnholz

Ahead of the official World Routes program, The HUB from routesonline.com spoke to Angela Gittens, director general, ACI World to discover her views on the aviation industry, how ACI is working to dev

Ahead of the official World Routes program, The HUB from routesonline.com spoke to Angela Gittens, director general, ACI World to discover her views on the aviation industry, how ACI is working to develop a sustainable future for the sector and the outlook for the world’s airport, whether small airports vital to regional connectivity or major global hubs.

Q) What have been the key changes at airports over the past 20 years?
A) “Probably the most striking change is the shift from airports as public infrastructure entities to airports as businesses in their own right. This has come about in response to several factors but two of these include the liberalization of international routes and the continued globalization of the world’s economic and social systems. Liberalization has generated competition among airports as airlines can increasingly enter and exit markets at will and globalization has made communities more dependent than ever on commercial aviation so that the balance of economic power has shifted from airports to airlines. Airport managers are tasked with bringing air service to their communities (countries, regions) and, with air carriers free to choose among markets, airport managers have had to compete for those choices. And of course, international hubs compete with one another – the rise of Dubai and Istanbul in contesting the major European hubs is testament to that phenomenon. Passengers and airlines have multiple connecting choices in travelling from one continent to another and airports compete for those choices.”

Q) How has this shift to a business proposition changed the airport philosophy?
A) “This shift to airports as businesses has generated a greater interest in nonaeronautical revenue. Airports can no longer depend on aeronautical revenue to fund the heavy capital investment airports need to accommodate growing demand, changes in aircraft dimensions and the dynamic nature of airline business models decision-making. As airlines are highly subject to the many vagaries of market forces, the airports that they serve have had to develop greater resiliency. Airports have to take risks to accommodate market demand – whether from the passenger segment directly or from airline business model dictates but do not control changes in that demand. Regardless of use, airports have to pay the debt incurred for making capital investment – they can’t give back terminals to lessors nor park runways in the desert. And because so much of an airport’s cost is fixed or semi-fixed, there tends to be limited options for substantially reducing operating costs in direct response to traffic decreases. So airport managers have to develop as much diversity of revenue as they can to weather the low points.”

Q) How is ACI working with airports to maximize economic growth and cultural and social benefits to the wider aviation industry?
A) “We have two basic missions: to represent the interests of airports and to promote the excellence of airports. Our efforts in both of these areas serve to maximize economic growth and the cultural and social benefits of aviation to the wider community. The commercial aviation system provides physical connectivity to communities, countries and regions, just as the internet provides virtual connectivity. These are the two forces of the 21 century. Our work with policy-makers is to keep the industry sustainable so it can produce these benefits and our work within the industry is to make the system safer, more secure, more environmentally compatible, more economically viable and provide a better customer experience. We do this by deploying our subject matter experts to conduct the research and produce the data to make the right policy decisions for ourselves and to persuade external policy-makers; by producing guidance material and offering training in the range of disciplines in which the airport sector needs to excel, by offering opportunities for members to share experiences and help each other continuously improve by collecting and analyzing statistics to help members better understand their business and by enabling members to measure and manage performance across a range of outcome categories.”

Q) Will collaborations with industry bodies take on a greater importance in the coming years?
A) “The industry is increasingly coming together to gain the benefit that collaboration brings which has been proven in the arena of safety. We are already seeing this in matters of environmental stewardship, security and efficiency. These are all issues of sustainability in which every component of the industry has a stake. And our communities all depend on aviation for their own economic vitality so they have an interest in the sustainability of this industry. All of us are squeezed for funds so we all have to learn to work together, to take advantage of the synergies we have, to bring progress. Commercial aviation is a system: all the parts have to work.”

Q) What role has World Routes played in enhancing air service connectivity between the world’s airports?
A) “Connectivity is the value of aviation. Putting together airports and airlines to explore connections with all the choices for the airlines and the stakes for the airport and its community, releases that value.”

Q) How does ACI work to support the differing interests of its airport membership – from large hubs to small regional facilities?
A) “The old expression is: “When you’ve seen one airport, you’ve seen one airport.” Each airport is a unique product of its location, weather and climate, history, cultural context and geophysical characteristics, not to mention its demography of airlines, passengers and destinations. As a result, ACI is a federated organization, with five regions and a world office that can respond to the needs in a regional context, provide representation to global institutions, and operate common services such as training and customer service quality measurement and monitoring. Airports have an inherent interest in other airports – although the system could exist with ONE airline, it could not exist with ONE airport! So each airport depends on the sound functioning of at least the airports to and from which their passengers and airlines travel. We have a philosophy at ACI: We leave no airport behind. Our members support training and networking to airport members in less developed countries and we have mentorship programs; indeed our conferences are designed to promote sharing of solutions and best practices for all airports. Large hubs depend on regional airports and vice-versa. So we have services, conferences and training modules designed for the range of segments in our business. And we look to the large ones to help the small ones, and they do.”

Q) How will the airport landscape change in the coming years and what areas will be the key drivers of development?
A) “As airport managers increasingly focus on the sustainability of their business, apart from that of a particular airline, they are more interested in managing the elements of the operation they once left to the airlines. This may be as an aggressive move, to gain control and enable a better, more efficient service level, or may be by default, as they see the airlines that serve their airport recede their service concerns to the on-board experience alone. To gain resiliency, to gain efficiencies, to cater to the passenger as a primary customer, we will see airports assume greater control of the passenger-focused activities in the terminal – what we used to call common-use will spread to more activities at more airports. We can already see this at a fairly mature stage in Europe where Airport Collaborative Decision Making (A-CDM) and Airport Community Recommended Information Services (ACRIS) have been piloted and adopted. Again, it’s a question of sustainability. More demand for air service cannot always result in laying down more concrete and asphalt or building more buildings: the system has got to produce more with what it has and this is what we are going to see. It’s another element of collaboration – we cannot afford to maintain the silos that this business has grown up with. It will not continue to work.”

Q) In many countries there are suggestions there are too many airports. Is consolidation through closures an option for the future?
A) “Well, you can’t really put two airports together, can you? They exist in a physical space not just a business space. We have already seen airports closing as their markets decline and/or the adverse economics of an airport in a small community become ultimately unsustainable. We see communities go to great lengths to keep their connection to the world that is the airport but the reality is, in some communities, like in the UK, the competition from other modes of transportation, often heavily subsidized by the government, render the airport too costly to maintain. Yet in other places, the airport sector is challenged to keep up with demand, to make the investments necessary to accommodate the burgeoning growth in air service demand that economic development and the rise of a middle class brings. Airports face market realities like other businesses – it’s their externalities, the benefit they bring to their communities that may keep them open. Some 70% of airports around the world lose money year after year. Some of them close but most are kept open because the cost to their catchment area of losing connectivity is considered greater than the cost of subsidizing their continued existence.”

ETN is a media partner with Routes. Routes is a member of the International Coalition of Tourism Partners (ICTP) .

About the author

Linda Hohnholz

Editor in chief for eTurboNews based in the eTN HQ.

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