Airports are not only about getting from Point A to Point B: they generate 12.4 million jobs in Europe and add €675 billion in value, around 4.1 per cent of GDP. This is why Airports Council International director general Olivier Jankovec told Vanessa Macdonald that something needs to be done to add capacity.
The top 20 airports in Europe will be fully congested by 2035 – which will mean €97 billion in lost GDP and two million jobs not created. But there is so much objection to noise pollution, expansion and so on…
The world has changed considerably since 10 or 15 years ago. There has been a global – irreversible – shift and the main drivers of future growth will not be the US or Europe but emerging economies. They now account for more than 50 per cent of world trade and this will continue to grow.
In order for us to have a rosy prospect for our economies and our citizens, we will need to tap into these new future external sources of growth. This is where aviation becomes strategically relevant for economic policy. If you want to sell your products and engage in trade with those countries, you cannot go by car or boat; you will fly.
The EU has already embarked on a new and comprehensive aviation strategic proposed a year ago, which is precisely about this. The EU is clear that we need aviation to grow as it will be instrumental in ensuring economic well-being.
In this context, of course you need more airport capacity. If you want to access those external markets and improve connectivity you need the airport capacity.
Major airport hubs have developed. Should the strategy be for them to grow larger or should it focus on using more regional airports?
It is not black and white. I think the future will be much more diverse and multipolar – in political and economic terms, but also flowing into every sector of the economy, including aviation.
The future of aviation will be very different tomorrow to what it was yesterday. You used to have big hubs and small regional airports but I think things are more hybrid in terms of development and there will be a need for all the segments to grow.
The hub and spoke strategy has proven itself in terms of boosting connectivity and efficiency. It will continue to be a very relevant model. But in terms of long-haul connectivity and access to external markets, it will no longer be the only model.
This will provide a lot of opportunities for secondary hubs or other large airports. This will be facilitated by new aircraft technology like the 787 and A350 which allow 20 per cent fuel efficiency gain and help airlines rethink their network strategy, opening up new markets that were not viable before.
We see low-cost airlines entering the long-haul market too. For example, the development of Norwegian ones has been phenomenal.
And the different airline models are now cascading down to airport level. Today if you ask any airport, it would say it is competing not just with the neighbouring airports but at a pan-European level – and at a global level with hubs.
You mentioned objections to growth. The aviation industry is taking its responsibility very seriously, particularly airports, which are at the vanguard in mitigating their environmental impact through an airport carbon accreditation scheme. It is an ACI initiative but administered independently, providing a common framework for airports to reduce their carbon emissions and a pathway towards carbon neutrality. We started the programme in 2009 and last June we had 154 airports across the world that were certified, most of them in Europe.
There are now 22 carbon neutral airports in Europe and we have a commitment to reach 50 by 2030.
The UN Framework Convention on Climate Change has singled this scheme out as one of the best examples of what an industry can do.
According to a 2014 report, revenue from airport charges covers only two-thirds of overall costs, leaving €10 billion to be raised from other means…
We do not make money from aviation. We make money on non-aviation and commercial activities. We would not be able to run an airport without these extra sources of income – and they allow us to respond to the competitive pressure from airlines. Clearly the reality is that the users of airports – the airlines and the passengers – are not paying the full cost of the infrastructure that they use.
The future of aviation will be very different tomorrow...
Under the present trading conditions, the airlines that are going to give you growth are the low-cost airlines, and that applies not just to small regional airports or medium-sized airports but to airports of any size. After them, growth will come from non-European carriers and only then from EU full-service carriers.
This was not the situation 20 years ago – but this is the new reality. This is why Frankfurt Airport has made a deal with Ryanair. Who would have thought five or six years ago that Frankfurt would want to attract Ryanair!
It shows you the speed at which our industry has grown.
Trying to boost non-airline revenue has resulted in higher parking fees and airports which resemble shopping malls.
(Laughs) Well money does not fall from the sky – and someone ultimately has to pay. Twenty years ago there was still a willingness from public authorities and governments to subsidise airports and to finance their development. But that is no longer the case.
But there are private investors who are ready to foot the bill. There are corporate and institutional investors who are desperate to find somewhere to put their money. The airport industry is an opportunity – and all we need to do is to ensure that there is the right regulatory and policy framework to give them legal certainty. They do not want the goalposts to be changed every time there is a new government, for example.
ACI has been pushing for is ‘open sky’ regimes. How would they help?
Clearly the fewer restrictions you have on air traffic rights, the better. Airlines will come to a location if traffic rights are available and unhindered. Old bilateral agreements restricted the number of airlines on a route, the capacity they could have and even the fares… That was meant to protect national flag carriers. It does not make any sense today, not in the least because of pure airport interest, the connectivity of the region or city, and the support for the economy.
If you look at policy today, you need to ask: who are you regulating for? Governments have realised that they have to put consumers and communities – not the national airline – at the forefront of aviation policy.
Every 10 per cent increase in a country’s air connectivity, GDP per person increases by an additional 0.5 per cent…
This is particularly relevant for a country like Malta, which is isolated within the EU context as it has no alternative to air or sea. Normally across Europe, aviation accounts for about 4.1 per cent of GDP but in Malta it is more than nine per cent – twice the European average.
You say investors are interested in airports but only half of all airports in Europe are profitable. Doesn’t sound like a very interesting proposition! And yet in 2010, 80 per cent of airports were fully public – now only 59 per cent are.
There is a financial performance imbalance within the sector, and difficulties mostly with smaller airports. Size matters. The odds are that an airport with less than one million passengers is structurally unprofitable.
And you cannot only look at operating profit but also long-term investment.
Airports need to anticipate future growth by investing in expansion and modernising. But capital expenditure goes in waves and during periods of investment, the airport will often go into a negative financial position. Of course, after the investment, then traffic will grow as a result of the expansion but investors have to have a long-term view and not be in for a quick win. Profits would not be constant and regular.
This is why investors tend to be pension funds, and very conservative institutional investors.
Between 2006 and 2015, overall passenger satisfaction with the 21 largest airports in EU & EFTA increased by +12.4 per cent. Seriously?
Passenger satisfaction is very important to airports as to any consumer-facing sector. But we have limited control over much of the experience, because of regulatory intervention.
The security agenda is a nightmare for us, operationally because of the passenger experience and because it is very unstable, reacting to terrorist attacks somewhere else…