There are five "secrets" for airport success in a rapidly changing global aviation industry. Although they are of course not secrets, it often seems that they might as well be; the guidelines for airport efficiency are often either overlooked or not heeded by airport authorities or their government owners.

This oversight occurs even though an airport can be a nation's single largest infrastructure investment and represents the cornerstone of its aviation sector, with all the associated economic and social factors.

The five secrets to successful hub airport planning are:

It is critical to understand that the airport hub does not exist in a vacuum, but competes with other facilities for both passengers and service.

Asia's Competing Hubs - it's a competitive world out there (Source CAPA)

In Asia, this competition is particularly intense and features three distinct geographic arenas inside of which several airports are vying for increased airline service. The areas include Southeast Asia (with Singapore, Bangkok's the new Airport and Kuala Lumpur), the Pearl River Delta (with Hong Kong and Guangzhou) and North Asia (including Beijing, Shanghai, Seoul's Incheon Airport and Tokyo).

Secret #1: Understand that you are part of a system

In order for your airport to succeed against the competition within its zone, it is likely that it will have to undergo a modification of how it perceives itself. Specifically, hubs must stop viewing themselves as strictly airports, but rather as a complex integrated system, a system that incorporates - and needs the support of - diverse stakeholders of the national economy.

One of the biggest factors in remaining an important part of a city's transportation system is to ensure that the facility is used by origin and destination passengers. Transfer traffic will be greatly outstripped by point-to-point growth in coming years, as liberalisation continues to remove artificial support to airports and airlines.

In order to remain relevant, an airport should work with all the region's economic stakeholders to promote the city as a destination and a place for doing business. This means coordinated efforts at cooperation with tourism bodies, users of airfreight services and local chambers of commerce, as well as the carriers who serve the airport.

These efforts must not be single tasks to be conducted and then checked off a list, never to be repeated. Rather, in order to achieve the tremendous mutually beneficial effects of a vibrant airport-community relationship, these actions must become an integrated part of the airport's long-term growth plans. Financial viability may depend on it.

In the past, airports could rely on a fairly predictable level of usage and growth. Regulation determined which facilities airlines could serve. Regulation still exists, especially in the international arena, but the trend is moving daily towards market driven services, with airlines deciding where to operate and at what frequency.

Airports must therefore recognise that their viability depends upon genuine attractiveness, not to a regulation that may last another five years. It is worth noting that having lost its government mandate for exclusive use, Montreal's former international gateway, Mirabel Airport, is being developed into an amusement park.

Secret #2: Set realistic goals

Another vital step for success - both financial and marketing - is in wise planning for the future, especially as regards infrastructure investment.
Although it is not possible for airports to mirror their (airline) clients' short-term planning horizon, they should build as much flexibility as possible into the planning process.

The airport planning body must recognise that traffic levels in future can drop or rise dramatically in the space of a few years and must prepare to be able to react in the case either transpires. The successful airport will be able to accommodate the latter, and not get stuck with expensive but superfluous facilities if growth deteriorates.

The design process at Japan's new Kitakyushu Airport is a good example. This facility's "start small, think big" approach saw it place air-conditioning and other utility infrastructure outside the terminal modules, allowing additional capacity to be easily added. Such design makes future expansion simple and efficient. These innovative techniques can be applied to both greenfield and after-the-fact projects (such as terminal upgrades).

As far as long-term infrastructure planning goes, it is crucial to understand that a new era has been entered, governing what airlines want and are willing to pay for. National prestige infrastructure is a luxury airlines can no longer afford to support - and will aggressively attack.

It is worth nothing that the most recent infrastructure additions in the wealthy communities of Geneva and Singapore have been austere, bare-bones terminals to attract and retain LCC service. LCC terminals are also being considered at hub airports such as Dubai and Bangkok.

Secret #3: Understand the airline industry

Understanding of the industry has traditionally been a weak point in airport management, and as the airport sector becomes more competitive, that weakness becomes more glaring. It is simply vital that airport managers understand the motivations of their principal clients. As much as anything, this will entail understanding what competitor airports are doing and knowing how to ensure that the proposition to the carrier community is more compelling. In order to do this, airports have to understand the airline's needs and its industry. The biggest change to the airline sector is liberalisation, which has occurred more slowly in Asia than in Europe and North America, but which is gaining momentum and will be a major factor in the coming period. This trend will impact all types of service.		Liberalisation: an agent of aviation change New carriers: As government involvement wanes, new carriers are entering the market and older ones are beginning to look like questionable long-term bets for survival; Short-haul: Most new entrants will compete in the short-haul - both domestic and regional - arena. The growth of this sector will mean more point-to-point operations (including new connectivity needs); Long-haul: This market, largely contested by the incumbents, is also in evolution. Liberalised agreements - such as the one allowing Virgin Atlantic to operate from Hong Kong to Sydney and Qantas from Hong Kong to London - are changing the competitive landscape, as is the introduction of new advanced aircraft (see below)

The advent of new aircraft and engine technologies are also allowing route pairings that years ago would have been dismissed as fantasy. Singapore and Thai Airwyas connect their home hubs with New York. What does this mean for the airports that have traditionally served as connecting points along the way? This Boeing slide projects a massive increase in non-hub long haul services over the next 20 years.

China-North America Non-stop services & City Pairs: 2004 and 2024 (Source Boeing)

A capable airport management team will have anticipated and reacted to the likely changes before they are presented to the facility by the airline clients. Without sophisticated industry knowledge and understanding, airports will find themselves reacting, and missing out on new passenger and revenue growth.

North Asia is a key area of potential growth. Through excessively restrictive regulation, air travel between China, South Korea and Japan remains at levels well below natural levels.

LCC Potential Growth in North Asia (Source CAPA)

But the tide of liberalisation cannot be kept out forever. There are already real signs - including the construction of new airport facilities, which remove the long-standing Japanese constraints to competition - of change emerging. When the 500 million people who are likely travellers within this zone are finally exposed to the benefits - in frequencies and lower fares - of liberalisation, it will generate a traffic windfall.

Have the airports in the region planned and prepared for this change?

Secret #4: Constantly review your airport against the competition

For airport managers and operators, it is vital to understand not only the intricacies of its airport's operation, but that of the facilities within the competitive region. To grasp what the next-door airport is doing, managers and operators must know more than who its home carrier is and how long its runways are. Key benchmarking measures are summarized in the adjacent table. When these figures, as well as some of the more material market distinctions - such as percentage of premium seats on offer as well as the average aircraft size - are benchmarked, airports will be better equipped to compare a facility's competitive position with rivals.		Rival airports' performance indices Schedules Frequencies, destinations; Airline "quality" Home carrier(s)' financial and operational metrics and trends, cabin configurations; Efficiency of operations On-airport services, including handling, terminals, parking, quick turnaround, ATM Revenue performance Retail spend; Cargo throughput, both O&D and transshipment; Facility charge levels. Innovations Client relations The nature of relations with carriers and sourrounding communities; Level of joint marketing and support activity. Regional infrastructure Surface links to airport for passengers and freight, road and rail

Secret #5: Support your airlines

Airport authorities have historically created negative sentiments their most important customers by aggressively pursuing carriers that will compete with them. Chasing new "tails" at the airport is a great temptation, but is no more valuable than getting enhanced destinations and frequencies from a longstanding tenant.

That is not to say that airport marketing departments should be disbanded, merely that the satisfaction of incumbent tenants be placed at the top of the priority list - marketing targeted at incumbents may often be more effective.

An important component of this process is understanding how the home airlines is faring in the market - this will be one of the biggest determinants as to how successful the airport is. If the flagship airline is headed for tough times, there is a better than average chance the airport will follow. To keep on top of your key customers, it is critical that you understand their operations at a sophisticated level. The well-managed airport authority will understand the components of its key airlines.		The home carrier: what to look for Operating viability Operating results; Traffic trends;· Yield profile (eg business vs leisure, class of service); Traffic composition (connecting vs transfer). Network plans Growth; Focus on international vs domestic, long-haul vs short-haul, etc. Corporate strategy Fleet acquisition/divestment; Global alliance movement; New bilateral codeshare agreements, especially with existing airport tenant

The value of home-based airlines is graphically illustrated by the role of new LCC Tiger Airways at Singapore Airport. Operating initially with a couple of highly utilized single-aisle aircraft, Tiger quickly became Changi's tenth largest operator in terms of passenger throughput!

Conclusion - warning against complacency

The aviation industry as a whole is undergoing unprecedented change. The best-managed airports will be monitoring those changes - at every level - and modifying themselves to adapt. Although the future shape of the air transport is unclear, for the airport sector there is one certainty: complacency and the old paradigms are high risk options.

A Centre for Asia Pacific Aviation Guest Article
by Peter Harbison, Executive Chairman,

 

Article Copyright: Centre for Asia Pacific Aviation
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