Changing role of airports and impact on the economy
File picture of a Chinese engineer taking a picture of an aircraft take-off during the re-laying of the BIA runway earlier this year.
As business markets become national and international in scale, airports are increasingly being viewed as catalysts for local economic development. Their ability to generate jobs and attract new business is being used in many locations as a justification for public investments in new airport construction and expansion.
The role of today’s airport operators have changed. Taking airport role to the next level from roadway to runway, from full terminal design to retail terminal, airport operations drive to create airport destinations that are more efficient, more memorable and safer than ever before resulting in happy passengers and increased traffic in successful airports. The right airport can complement a great travel experience by making it easy for passengers to find their way through check-in, bag drop and security, and to get to their gate. It also provides opportunities to eat, shop and relax along the way. This is what today’s passengers expect.
Retail markets
An effective and attractive retail programme is an important part of any modern commercial airport terminal. Today’s passengers want more control over their journey. They want to self-manage key processes such as check-in, bag-drop and boarding. They want to spend less time waiting in queues and more time relaxing and enjoying the amenities of your airport .
Airports are now key nodes in the global economy – serving as engines of local economy development. These institutions should be managed professionally and developed into business hubs. Marketing the airport should be a top priority. If an airport wants to attract more passengers, additional concessions, or new carriers, it needs to commit to making marketing a top priority, even in a depressed economy.
Marketing strategies can vary for each airport, depending on its geographical location, relative size, brand strength as well as its executive leadership. Strategies must also adjust accordingly to the economic realities of today, including airline industry performance and overall demand for travel. Airports should have a professional marketing team in promoting airports; agree to bilateral agreements in bringing new airlines to fly into the country. Hundreds of airlines may pass through or fly over Sri Lanka but that doesn’t mean the airlines will call over or land here. We need to create markets and make it attractive to airlines to operate here.
In the absence of a strong national carrier, we must open and make it attractive to other airlines to come into the country. An airline is the best marketing arm a country can buy. Tourism is central and key to make airline operations viable.
We need to develop domestic/regional airports into business hubs. These airports will strengthen its competitiveness in attracting both local and tourism to support small and medium size businesses. Connect railway lines to international and domestic airports; add more luxury compartments. Nowadays travellers prefer the train. Sri Lanka has more potential to grow – it’s just that we need to fix it. We need a new way of thinking!
The airport in addition to its core aeronautical infrastructure and services must develop significant non-aeronautical facilities, services and revenue streams. At the same time, it should extending the commercial reach and economic impact well beyond airport boundaries.
Many airports in the world are now receiving a greater percentage of their revenues from non-aeronautical services than from – landing fees, parking fees and passenger services. Non-aeronautical revenues contributes to 2/3rds of total airport revenues in many modern airports.
Open high end duty free stores
The global travel retail market is estimated to grow to US$85 billion by 2020. Duty free shops have become global trading centres with airport duty free areas transforming into modern shopping malls 24/7. Airports are now a powerful engine of the local economic development, attracting aviation related businesses of all types. This includes manufacturing and distribution, hotels, entertainment, retail, free zones, trade and exhibition complexes and office buildings. Take Singapore and Dubai airports for instance; two airports that have become thriving airport hubs in addition to large contributors to the economy. These airports never sleep. All food and beverage, retail outlets, services and facilities are open 24/7.
Airports are also businesses and business needs to grow. Sri Lanka needs to promote domestic/regional airports at required destinations to land smaller and medium size aircrafts – example A320, a low cost short-haul aircraft which is the most popular aircraft for regional operations.
Domestic airports will strengthen its competitiveness in attracting tourism, business and leisure travellere. Local airports will support small and medium size businesses. Airports offer increased accessibility, which in turn fuels the tourism and leisure sector. With an increase in the number of visitors and airport users, more money flows into the local economy. With increased economic activity and employment, consumer behaviour changes, raising the standard of living of the people in the area. Thus, the availability of airports provides a thrust to the GDP of the local region, having a positive impact on the national economy.
Operators approach airport design with a “one size fits all” mentality. They fail to understand that not every hotel is the Hilton and not every car is a Rolls-Royce. There’s room for brands built on a volume proposition, such as Wal-Mart, Carrefour, and indeed LCCs (low cost carriers). Designing for volume not only lowers cost but can also stimulate growth, increasing throughput for airports and allowing them to secure higher returns on capital.
Many airports are monopolies, which lead to higher charges and taxes that burden airlines with undue costs, pushing up the price of tickets. This lack of competition creates an environment where the airport operator can dictate charges for airlines and influence how much airport tax travelers must pay.
Governments have two options: dismantle monopolies and promote competition among airport operators or pursue policies that incentivise airport monopolies to operate more efficiently according to the needs of their clients, the airlines.
Monopolistic airlines do not work, neither do monopolistic airports. It’s time we stopped pretending that a lack of competition delivers anything but monopoly profit, let alone any sort of real cost reduction. Only competition has the power to reduce inefficiencies and deliver what the market needs at the right price. If governments and other aviation stakeholders are serious about safeguarding mobility, it’s time we kill monopolies – before monopolies kill us. (The writer is an aviation, airline, logistics and free zone professional. He can be reached at shennal.acr@gmail.com)