Does the traditional airport terminal meet 21st century needs?

For air carriers, the response to increased demand has been to progressively re-equip with larger capacity and more environmentally efficient equipment using less fuel and producing fewer per passenger emissions.

For airport operators, the challenges are more acute. The trick for an airport is to balance demand with capacity in line with expected financial returns in an increasingly privatised industry. The recent strong demand in airport assets from pension funds, private equity and other specialist investors has seen airport valuations soar. Investors have been attracted to airports as a growth market with stable returns and relatively high barriers to entry.

The airport business should be relatively simple:

• Aircraft land and depart from one or more runways.
• Parking stands are accessed via taxiways.
• Arriving and departing passengers are processed through terminal facilities.

Airport income can be broadly split into aeronautical and non aeronautical streams.

Aeronautical income includes charges levied on airlines using the runway, taxiway and parking stand infrastructure. In addition charges are levied for the use of terminal facilities including check-in desks, baggage handling equipment, airport security, airport systems and the rental of accommodation space.

Non aeronautical income broadly includes the various income streams from concessionaires providing retail, food and beverage offers as well as car parking and car hire.

From a business perspective, most airports do not make much money from the aeronautical related activities. The operating and investment costs of providing the runway, taxiway and parking stand infrastructure is usually, at best, recovered with a relatively low return on investment. Frequently, at smaller airports a negative return is made on this infrastructure depending on the competitive market pressures. The rationale being that this is a loss leader to get the more lucrative terminal related income derived from processing and serving passengers.

In recent years the commercial aspects of airport revenue streams have become more important than charges to airlines, and even surpassing airline related charges in more commercially developed airports.

This has had a number of structural repercussions for airport operators, particularly with the emergence of cost conscious low cost carriers (LCCs) in Europe and other markets around the world. The thoroughbred LCCs relentlessly seek to reduce costs, with airport charges one of the few aspects of their variable cost base they see continued opportunity to exploit.

This provides a dilemma for airport operators. Firstly, airports generally should enjoy lower unit operating costs as passenger volume increases. Secondly, the attractiveness of the airport for retailers and other concessionaires increases with higher passenger throughput leading to more income generation for the airport operator.

The flip side of these benefits is that increased throughput requires significant capital investment, particularly to add terminal capacity. Over the years, terminal design has become more complex, through the accommodation of individual requirements from airport operational staff, airlines, control authorities, retailers and other concessionaires. This has led to:

• Convoluted check-in procedures
• Complex baggage handling systems.
• Inefficient passenger flows.
• Sub-optimal commercial offers.

For airlines, expensive airport capacity expansion inevitably results in higher charges. This has led to a high profile by IATA against high charges and well publicised stand offs between airport operators and airlines. The current London Stansted impasse is a good example where airport operator BAA has investment plans in excess of £2 bn to increase capacity at an airport where the majority of passengers are carried by LCCs. In response to a recent increase in airport charges at Stansted, Ryanair, Europe’s largest LCC, has grounded 6 of their 40 Stansted based aircraft for the winter. The airline cites higher airport charges making it more profitable to ground these aircraft during the winter rather than fly them.

Whilst this is an extreme example, it would appear that the time is right for airport operators to review their business model to meet the needs of their customers. One real opportunity is a radical rethink on how terminal facilities are designed and developed.

A new approach?

We believe passengers’ needs are relatively simple to provide:

• Spacious facilities, particularly for the main process areas.
• Clear way finding without confusing changes in levels.
• Reasonable walking distances.
• Comfortable waiting areas with reasonably priced retail, food and beverage offers.

The ideal marriage is a terminal facility aligned with the LCC business model by levering operational efficiencies and removing unnecessary costs.

AviaSolutions and GECAS have created a terminal development package to provide a Modular Flexible Terminal that is economic, quick to develop and allows rapid growth through phased expansion. This is achieved through:

• Optimised Design - Facilities designed for efficient processing of passengers and baggage enabling optimum airline handling operations and fast turnarounds.
• Class Leading Cost - Focus on function delivers cost effective design solution.
  
• Speed of Delivery - 12-18 months from approval to operation.
  
• Enhanced Business and Economic Returns
  – Maximises commercial revenues, minimises unit capital investment and operating cost.
  – Competitive terminal fees and charges to encourage LCC growth.
  – Promotes traffic growth – business model aligned with LCC’s.
  – Drives wider economic benefits.
• Customisation
  – Additional features can be easily integrated as required.
• Environmentally Friendly
  – The design integrates leading edge environmental design and technologies.

The results

The result of this radical approach contributes to:

• Capital costs up to 50% less than comparable “bespoke” airport terminals.
• Delivery in half the time required for conventional facilities.
  
• Rapid response to growth through modular expansion.
• Functional design optimising space, operational efficiency and cost through simplified processes and systems:
  – Single level with short walking distances and simplified segregation, which minimises space requirements and eliminates vertical circulation.
  – Simplified equipment and systems (simple baggage handling equipment and IT, no lifts, escalators or moving walkways).
• Clear specification of requirements simplifying the design / procurement / construction interfaces to deliver a fast-track development programme.
• Sustainable development principles incorporated throughout each element of the design to reduce consumption and maximise re-use leading to savings in energy, water and waste costs.
• Maximised retail opportunities by concentrating on retail space provision and passenger flows.