The official publication of ACI Asia-Pacific www.aci-asiapac.aero
Concessions: Getting the right mix In the spotlight: Concessions
Issue 1, 2014
Airports: Auckland, Brisbane, Macau
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Special report: APEX in Safety Plus: Security and social media
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ASIA-PACIFIC AIRPORTS MAGAZINE
6 View from the top Regional director, Patti Chau, reflects on an aviation milestone, the industry’s commitment to enhancing safety and security, and a busy start to 2014 for ACI Asia-Pacific.
8 News
12 ACI Asia-Pacific news 14 Traffic trends 16 Breaking the mould With a new runway being built and planned upgrade of the International Terminal, Justin Burns discovers that these are exciting times for Brisbane Airport.
20 On a roll Peta Tomlinson finds out how Macau International Airport is fast becoming a headline act on the back of the world’s biggest gambling market.
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24 Higher & beyond Auckland Airport is reaping the rewards of a more commercially dynamic and customer service oriented business strategy, writes Peta Tomlinson.
28 Talking shop
Sarah McCay talks to some of the region’s duty free giants to find out more about the innovations that are encouraging travellers to spend more than ever before.
34 The buying game Justin Burns rounds up the latest retail and F&B news from around the region.
36 Smooth operator JuliĂĄn DĂaz, CEO of Dufry, discusses the company’s market presence and customer service commitments. www.aci-apa.com
CONTENTS
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Asia-Pacific Airports
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ASIA-PACIFIC AIRPORTS MAGAZINE
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CONTENTS
39 Spreading the word ACI Asia-Pacific president and managing director of MAHB, Tan Sri Bashir, reflects on the crucial role airports play in boosting tourism across the region.
42 Thinking big! Jeff Amiri and Steve Horner discuss how integrating security systems can help enhance security at the region’s smaller airports.
44 Safety first Beijing Capital takes the lead to host the first ACI APEX in Safety review in China, Asia-Pacific Airports reports.
46 High five SriLankan Airlines chief executive, Kapila Chandrasena, talks to Martin Rivers about his five-year plan for the carrier.
Asia-Pacific Airports (APA) www.aci-apa.com Editor Joe Bates +44 (0) 20 8831 7507 joe@aci-apa.com Reporter Justin Burns +44 (0) 20 8831 7508 justin@aci-apa.com
50 Points of view Asia-Pacific Airports meets Martin Craigs, CEO of the Pacific Asia Travel Association (PATA).
53 Enviro report Justin Burns takes a closer look at a pioneering solar power project at Kuala Lumpur International Airport.
54 Design & build Bahrain and Abu Dhabi.
56 World Business Partners 58 Being social Digital Jungle CEO, Dr Matthew McDougall, reflects on the importance of catering to Chinese travellers.
Design, Layout & Production Andrew Montgomery andy@aci-apa.com
Advertising Manager Kalpesh Vadher +44 (0) 20 8831 7510 kalpesh@aci-apa.com
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Website & Online José Cuenca Published by Aviation Business Media Ltd 26-30 London Road, Twickenham, TW1 3RW, UK Managing Director Jonathan Lee
Subscriptions Lauren Murtagh subscriptions@ aviationmedia.aero Printed in the UK Magazine Printing Co
Asia-Pacific Airports (APA) is published four times a year for the members of ACI Asia-Pacific. The opinions and views expressed in APA are those of the authors and do not necessarily reflect an ACI policy or position. The content of this publication is copyright of Aviation Business Media and should not be copied or stored without the express permission of the publisher.
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ASIA-PACIFIC AIRPORTS MAGAZINE
VIEWPOINT
VIEW FROM THE TOP
Regional director, Patti Chau, reflects on an aviation milestone, the industry’s commitment to enhancing safety and security, and a busy start to 2014 for ACI Asia-Pacific.
A
viation celebrated a major milestone on New Year’s Day 2014 – the 100th anniversary of commercial passenger flights. Few would have known it at the time, but that flight in Florida on January 1, 1914, was effectively the birth of an industry that has provided a global connectivity and changed our world significantly. Aviation’s evolution, particularly in the last 20 years, ensures that today’s airports have transformed from simple air transport infrastructure into multi-modal and multi-functional businesses that provide a platform for commercial activities and generate economic growth.
SAFETY AND SECURITY
Safety is, of course, vital to the success of industry and remains a top priority for the world’s airports, which continue to work closely with our partners to ensure the safety and security of the travelling public. APA Issue 1, 2014
These efforts were stepped up in October 2013 when ACI signed a Memorandum of Understanding (MoU) with IATA to collaborate on civil aviation projects of shared interests. Further to that, four annexes were signed in December 2013 on Smart Security, Security Access and Egress, Automated Border Control and Ground Handling Best Practices. All four projects are progressing well and I am pleased to say that Singapore Changi operator, Changi Airport Group (CAG), recently joined the Smart Security Management Group set up under the Smart Security annex. Together with existing members, Amsterdam Schiphol, London Heathrow and Doha International Airport, it will work with representatives from airlines and regulators to improve security processes at airports.
NEW MEMBERS
ACI Asia-Pacific is off to a very good start in 2014. We have welcomed three new airport
ASIA-PACIFIC AIRPORTS MAGAZINE
STRATEGIC PLANS AND SURVEYS
I have actually just come back from an ACI directors’ meeting in Panama, where ACI heads get together and plan for the year ahead. Our mission this year is to develop a Strategic Plan for the 2015–2017 period. I look forward to sharing more details about the plan with you in the future. I also took the opportunity in Panama to share the findings of a recent membership survey of our Asia-Pacific and Middle East airport members with my fellow directors. The survey is significant as it was designed to give us a better understanding of the needs of our members and will ensure that our future plans meet members’ expectations. I would therefore like to take this opportunity to thank our members for their much valued comments and feedback.
EU-ASEAN SUMMIT
I have also visited Singapore to attend the first ever EU-ASEAN Aviation Summit, the purpose of which was to enhance strategic dialogue between the European Union (EU) and the Association of South East Asian Nations (ASEAN), and to discuss the benefits of promoting and building closer aviation relations. It was a high-level discussion among government officials, airport operators and representatives from industry organisations across both territories. The Asian market, one of the fastest growing in the world, remains relatively segmented and regulated, thus undermining the competitiveness of the air transport industry and economy in the long term. In the face of globalisation and increasing competition, the opening of a dialogue
between EU and ASEAN on single aviation market is very much welcome. Better and more liberalised regulation, courtesy of an ASEAN Single Aviation Market by 2015, will drive long-term benefits, paving the way for faster traffic growth, better connectivity, increased airport service quality and fair competition. We are already seeing many airports in Asia building extra capacity in anticipation of the growth this agreement could potentially bring.
UPCOMING EVENTS
The ACI conference season started in earnest in February with the third Airport Environmental Seminar in Kuala Lumpur, while delegates will enjoy the annual Airport Economics and Finance Conference in London from March 12-14. It was the first time the Asia-Pacific region hosted ACI’s Airport Environmental Seminar, and I enjoyed seeing a strong representation of Asia-Pacific airports sharing experiences and best practices. Exploring best practice in airport investment, financial management and economic sustainability will once again be on the agenda at the Airport Economics and Finance Conference in London. By now you will know that events beyond our control have, regrettably, forced the postponement of The Trinity Forum 2014 until September. We are grateful for your support for the event and promise you an excellent networking opportunity and thought-provoking conference in September in Bangkok! Last but not least, I would like to invite you to join us in Seoul, South Korea, in May (26–28), for our Annual General Assembly, Conference & Exhibition. This year, our regional conference will be held in conjunction with ACI World Assembly, and is expected to attract over six hundred aviation professionals. Such numbers make it the ideal meeting place for fostering new contacts, arranging business get-togethers and the reunification of old friends. See you there! APA www.aci-apa.com
VIEWPOINT
members from the region’s emerging and developing territories. The new members are Manas International Airport in the Kyrgyz Republic; Maldives Airports Company Limited in the Maldives; and Pioneer Aerodrome Services Company Limited in Myanmar.
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ASIA-PACIFIC AIRPORTS MAGAZINE
NEWS
AIMING HIGH
THREE IS THE MAGIC NUMBER Three of the world’s biggest airport operators have renewed their co-operation agreement by signing a new strategic partnership. The big three – Incheon International Airport Corporation, Aéroports de Paris (ADP) and the Schiphol Group – originally signed an agreement in July 2011 to improve the quality of services offered to customers (passengers, airlines, cargo operators). It laid the groundwork for best practice exchanges in the areas of aeronautics, airport shops, cargo, and human resources. Discussions also focused on the Airport City concept and international development.
Now the three operators, satisfied with the outcome of this partnership, have decided to extend it and expand into new areas, including innovation and customer satisfaction. Multiple meetings were arranged in Paris, Amsterdam and Seoul over the last three years, allowing the teams involved to exchange ideas about the challenges and difficulties they face, as well as their best practices. The new agreement was signed for the next four years at ADP’s head office by the chairmen of the three groups: Jos Nijhuis, Augustin de Romanet and Jung Chang-Soo.
The Civil Aviation Authority of Nepal is to modernise Tribhuvan International Airport (TIA) in Kathmandu. Japanese firm, NEC Corporation, has been selected to carry out a one billion yen (€7 million) upgrade of the air traffic control and surveillance radar at the Asian country’s main airport. TIA plays an essential role for Nepal as it is the only international airport in the country and is also a major hub for domestic flights, which is key in the heavily mountainous region. In order to accommodate the rapidly rising number of passenger flights in Nepal, Official Development Assistance (ODA) from Japan is being used to update airport equipment, such as ageing surveillance radars and data processing systems. By March 2015, NEC is scheduled to provide an air traffic control radar system, a secondary surveillance radar to receive detailed operating information from aircraft, and a multi-sensor information processing system that utilises information received from radars. This is being installed to improve the reliability and efficiency of air traffic control services in Nepal, while helping to ensure smooth and secure airport operations. Tribhuvan International Airport is located at an altitude of 1,338 metres and in 2012, 4.5 million passengers passed through its facilities.
MYANMAR LOOKING TO PRIVATE INVESTORS Myanmar has invited a consortium spearheaded by Changi Airport Planners and Engineers Pte Ltd to start negotiations on a government tender to build and operate Hanthawaddy International Airport (HIA). In exchange for funding and building the gateway is a 30-year operating concession APA Issue 1, 2014
from Myanmar’s Department of Civil Aviation. The new 12mppa capacity airport will be built at a location 48 miles northeast of Yangon, Myanmar’s commercial centre and former capital, and open in 2018. Changi Airport Planners and Engineers is a subsidiary of the Changi Airport Group (CAG).
ASIA-PACIFIC AIRPORTS MAGAZINE
The region’s gateways have once again shone in ACI’s annual Airport Service Quality (ASQ) customer satisfaction survey, occupying the top spots in all the global by size categories. Changchun (China), Haikou (China), Seoul Gimpo (South Korea), Seoul Incheon (South Korea) and Singapore Changi (Singapore) respectively topped the 2-5mppa, 5-15mppa, 15-25mppa, 25-40mppa and Over 40mppa categories. ASQ champion, Incheon, was also named Best Airport in AsiaPacific – ahead of Singapore Changi, Beijing Capital, Shanghai Pudong and New Delhi – while Abu Dhabi was voted Best Airport in the Middle East. Kolkata (India) and Amman (Jordan) also won awards for being the most improved airports in Asia-Pacific and the Middle East, respectively. Read more reports and reaction to the 2013 ASQ results in the next issue of Asia-Pacific Airports magazine.
NEWS
ASQ WINNERS – 2013
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BIGGEST & BEST ON SHANGHAI AGENDA The world’s largest satellite concourse is set to be built at Shanghai Pudong Airport (PVG), as the gateway looks to enhance its facilities to allow it to accommodate up to 80mppa and 4.7 million tons of cargo by 2020. Designed by US architect, Corgan, in association with Chinese partner IPPR, the complex is expected to eventually boast 100 boarding gates when fully operational. Operator, Shanghai Airport Authority (SAA), says that the huge new complex is part of a plan to make Pudong “Asia’s premier international hub” and to keep pace with growth of China’s largest city and financial capital. The budget for what is expected to be a multi-million dollar project has yet to be announced.
DUBAI AFTER HEATHROW’S WORLD TITLE Dubai (DXB) is set to become the world’s busiest international airport in 2015, after handling a record 66.4 million passengers (+15.2%) in 2013. The honour has long-been held by Heathrow, and although the London gateway still handles more traffic, five million of the 72.3 million to pass through its doors last year travelled on domestic flights, whereas DXB only handles international services. The year certainly ended on a high for Dubai International Airport, which handled more than six million passengers in December – a new monthly record for the gateway. Operator, Dubai Airports, also reports that annual aircraft movements and cargo volumes
soared to new respective highs of 369,953 (+7.5%) and 2.43 million tonnes (+6.8%) in 2013. Paul Griffiths, CEO of Dubai Airports, enthuses: “It was truly a historic year for Dubai’s aviation sector, highlighted by the successful opening of Concourse A, the world’s largest and only facility purpose-built for the Airbus A380. “The launch of passenger services at Al Maktoum International Airport; and a record breaking airshow featuring aircraft orders which exceeded $200 billion – the bulk of which was placed by Dubai’s flag carriers – were other highs. “This year is also set to be another eventful one, featuring continued traffic growth, network expansion and the ongoing enlargement and upgrade of our facilities and runways.” www.aci-apa.com
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ASIA-PACIFIC AIRPORTS MAGAZINE
NEWS
TIME TO GROW?
ADELAIDE’S AIRFIELD EXPANSION Adelaide Airport has started work on the expansion of the apron to the south west of Terminal 1. Operator, Adelaide Airport Limited (AAL), says the addition of 20,000sqm of apron work will create more space for aircraft parking. AAL’s managing director, Mark Young, reveals that the expansion was in response to recent and forecast increases in the number of flights, particularly international services, landing at Adelaide Airport.
“The southern apron expansion will largely cater for aircraft that are ‘laying over’ for a longer period of time between arrivals and departures,” he says. “Moving these aircraft to the southern apron, once passengers have disembarked, then frees up more space at the terminal gates for other inbound aircraft. “We have longer term plans to expand Terminal 1 to meet continued growth, but for now this extra parking space will provide greater flexibility in managing arrivals and departures.”
Sharjah International Airport has selected Bechtel to work on a master plan for the next 20 years. Bechtel will provide master planning services for the phased expansion and conduct short-term and long-term analyses of the airport’s future needs. The study is expected to last around eight months, when a decision will be made on which projects are the priority. In 2013, the airport served 8.5 million passengers, and it predicts this will rise to more than 15 million passengers over the next 20 years. Ali Salim Al Mifda, chairman of the Sharjah Airport Authority, says: “Sharjah International Airport plays a pivotal role in the Emirate’s economy and has become a catalyst for its cultural, tourist, industrial, and commercial activities.
NEW MUMBAI GATEWAY TO OPEN IN 2018 Within days of the opening of the new Terminal 2 at Mumbai’s Chhatrapati Shivaji International Airport (CSIA), the global tender process was launched for a concessionaire to fund, build and operate the gateway’s eventual replacement. The long-awaited Request for Qualifications (RFQ) for Navi Mumbai International Airport has been issued by the City and Industrial Development Corporation of Maharashtra (CIDCO), which has set a four month deadline for the submission of bids. Mumbai International Airport Limited (MIAL) – the GVK-led operator of the newly enhanced CSIA – will have first refusal on the new greenfield gateway, which could open as early as 2018 and be used alongside CSIA before eventually replacing it. APA Issue 1, 2014
Located on a 1,060 hectare site, 35km from CSIA, the new gateway will initially be equipped to handle 10mppa, rising to 35mppa by 2030 and eventually 60mppa, following four development phases. The first two development phases of the new airport – building it and then raising its capacity to 35mppa – is expected to cost $1.9 billion. Bidders are required to have at least three years’ experience of operating an airport handling more than 10mppa. The airport must also have a top 100 ranking in either ACI’s Airport Service Quality (ASQ) programme or Skytrax. CIDCO, which will have a 26% stake in the new airport, is seeking requests for qualification by June 18, with qualified parties to be announced on August 5 and the winner announced in late 2014/early 2015.
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ASIA-PACIFIC AIRPORTS MAGAZINE
ACI ASIA-PACIFC NEWS
Regional update
Vivian Fung reports on the highlights of the third ACI Asia-Pacific WBP Airport Tour to Cambodia and Thailand.
I
n 2011, ACI Asia-Pacific decided to introduce a WBP Airport Tour for the region’s World Business Partners, in a bid to provide added value to our members – and three years on, the initiative goes from strength to strength. The objective is to provide a unique opportunity for our WBPs and airport members to learn more about each other and explore possible synergies. The most recent tour involved a three-day trip to Bangkok Suvarnabhumi International Airport in Thailand, and Phnom Penh and Siem Reap international airports in Cambodia, which, thanks to the support and hospitality of Airports of Thailand and Cambodia Airports, was an outstanding success. A group of WBP members from eight different companies took part, and were given the exclusive opportunity to learn about the latest airport development plans and business opportunities from airport executives. It also provided the WBPs with the chance to brief the host airports about their companies and talk about topics such as the latest technologies or business trends in their respective areas of expertise.
THAILAND
On the first day of the tour, the group visited Bangkok Suvarnabhumi International Airport where Vilaiwan Nadvilai, senior executive vice president of business development and marketing for Airports of Thailand (AoT), welcomed them and revealed more about AoT’s major airport development plans. These included AoT’s expansion projects of Suvarnabhumi and Phuket international APA Issue 1, 2014
airports and the modernisation programme of Don Mueang International Airport.
CAMBODIA
During the visit to the two airports in Cambodia, Patrine Tay, marketing and sales director, Cambodia Airports, talked through the airport’s terminal expansion plans with her visitors. She said: “We are thrilled to be in a region where so many dynamic airport projects are taking place to ensure that aviation is equipped to meet ever increasing demand as a result of Asia’s economic boom. I am equally excited to have you here with us today so that we may share a glimpse of it with you. “It is an opportune time as we expect to launch our terminal extension plans in early 2014. We are confident that we will be well placed to welcome the projected traffic growth.” All participants enjoyed the warm hospitality and thanked the three host airports for accommodating their visit. To learn more about the ACI Asia-Pacific WBP programme, please contact the ACI Asia-Pacific Regional Office at wbp@aci-asiapac.aero.
2014
September 17-19 The Trinity Forum Bangkok, Thailand
2014
March 12-14 ACI Airport Economics & Finance Conference & Exhibition London, UK
2014
November 3-5 Airport Exchange Paris, France
2014
May 26-28 ACI Asia-Pacific/ World Annual General Assembly Seoul, Korea
ACI ASIA-PACIFIC BOARD PRESIDENT Tan Sri Bashir Ahmad Abdul Majid* (Malaysia Airports Holdings Berhad, Malaysia)
FIRST VICE PRESIDENT Zhiyi Dong* (Beijing Capital International Airport Co Ltd, China)
SECOND VICE PRESIDENT Kerrie Mather* (Sydney Airport Corporation Limited, Australia)
SECRETARY-TREASURER Dennis Chant* (Queensland Airports Limited, Australia)
REGIONAL BOARD DIRECTORS Keiichi Ando (New Kansai International Airport Co, Ltd, Japan) Rodolfo Echeverria (Airport International Group, Jordan) Kenichi Fukaya (Narita International Airport Corporation, Japan) Paul Griffiths (Dubai Airports, UAE) Saud AR Hashem** (General Authority Of Civil Aviation, Saudi Arabia) Stanley Hui (Airport Authority Hong Kong, China)
Chang-Soo Jung (Incheon International Airport Corporation, Korea)
Emmanuel Menanteau (Cambodia Airports, Cambodia)
Seok Ki Kim (Korean Airports Coporation, Korea)
PS Nair (Delhi International Airport Limited, India)
Seow Hiang Lee* (Changi Airport Group Pte Ltd, Singapore)
Alok Sinha (Airports Authority of India, India)
Derun Li (Shanghai Airport Authority, China) Suning Liu (CAM-Macau Int’l Airport Co, Ltd, Macau, China) Laurensius Manurung (PT Angkasa Pura II, Indonesia)
Prasanna J Wickramasuriya (Airport & Aviation Services (Sri Lanka) Ltd, Sri Lanka)
REGIONAL BOARD DIRECTOR (WBP) Greg Fordham (Airbiz Aviation Strategies Pty Ltd, Australia)
Pedro Roy Martinez (AB Won Pat Int’l Airport Authority, Guam) * WGB member **Regional Advisor on WGB
The ACI Asia-Pacific region represents 97 members operating 526 airports in 43 countries and territories. www.aci-apa.com
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ACI ASIA-PACIFC NEWS
EVENTS
ASIA-PACIFIC AIRPORTS MAGAZINE
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ASIA-PACIFIC AIRPORTS MAGAZINE
TRAFFIC TRENDS
TRAFFIC TRENDS Year review Airports in Asia-Pacific and the Middle East enjoyed respective 7.2% and 10.1% increases in passenger traffic in 2013.
A
Chiang Mai (+21.7%), Siem Reap (+19.8%) and Kunming (+24%) recording the biggest increases. When it comes to cargo growth, Middle Eastern airports outperformed their Asia-Pacific counterparts in 2013, reporting year-on-year growth of 5.4% compared to just 0.9% upturn in Asia-Pacific. The top five cargo airports across ACI’s Asia-Pacific region – including the Gulf airports – in 2013 were Hong Kong (4.1 million tonnes), Shanghai Pudong (2.8 million tonnes), Dubai and Seoul Incheon (both around 2.4 million tonnes) and Tokyo Narita (1.9 million tonnes).
CI attributes the upturn in the Asia-Pacific region to “robust domestic economic growth” and “the rising propensity to travel”, factors which saw international and domestic traffic rise by 8.6% and 6.4%, respectively, over 2012. Beijing Capital retained its status as the second busiest in the world after Hartsfield-Jackson Atlanta, handing more than 83 million passengers, up 2.2% from 2012. Over 30% of the airports across the regions recorded double-digit growth in passenger traffic in 2013, with airports such as Xishuangbanna (+32.1%),
Summary of Asia-Pacific region traffic results (% change) Dec 2013 Over Dec 2012
Passengers
Asia-Pacific
Jan to Dec 2013 Over Jan to Dec 2012
Middle East
Asia-Pacific
Middle East
International passengers
7.7
10.9
8.6
10.4
Domestic passengers
5.6
-
6.4
-
Total passengers
6.4
10.5
7.2
10.1
Freight
Asia-Pacific
Middle East
Asia-Pacific
Middle East
International freight
3.0
5.6
0.2
5.4
Domestic freight
4.4
-
3.2
-
Total freight
3.4
5.6
0.9
5.4
APA Issue 1, 2014
ASIA-PACIFIC AIRPORTS MAGAZINE
TRAFFIC TRENDS
Looking ahead ACI projects a 6.9% increase in Asia-Pacific passenger traffic for the period 2014 to 2018.
S
trong growth will continue to be underpinned by a burgeoning middle class and carrier competition, leading to lower airfares. At the same time, upward revisions to economic forecasts for the region will drive marginal increases in medium-term passenger projections across most of
Asia-Pacific’s sub-regions. For example, China’s economic growth is not expected to slow down as much as previously anticipated, and this is also the expectation for India; consequently, we expect growth in traffic for these key countries in the region to be slightly stronger than previously anticipated.
Asia-Pacific traffic growth to peak in 2015
%
Medium-term passenger forecast for Asia-Pacific – 2012-2017 Estimates (millions)
Asia-Pacific
YOY
Forecasts
2013
2013
2014
2015
2016
2017 2018
20142018
1,830.3
7.1%
7.1%
7.2%
6.9%
6.7% 6.5%
6.9% 6.5%
South Asia
150.6
4.0%
6.6%
6.8%
6.4%
6.3% 6.2%
Southeast Asia
386.8
10.9%
10.6%
8.3%
7.9%
7.5% 7.3%
8.3%
Northeast Asia
1,123.4
6.6%
7.1%
7.3%
7.0%
6.8% 6.6%
7.0%
4.3%
4.2% 4.0%
4.2%
South Pacific
165.8
3.7%
4.3%
4.4%
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This forecast was prepared by TFAS (Traffic Forecast Advisory Services). A partnership between ACI and DKMA, TFAS provides airport-specific traffic forecasts for the purpose of infrastructure development, investments and business planning. Recent projects include traffic forecasts for airports in Australia and New Zealand. Visit www.dkma.com for more information.
APA
www.aci-apa.com
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ASIA-PACIFIC AIRPORTS MAGAZINE
AIRPORT REPORT: BRISBANE
Breaking the mould
With a new runway being built and planned upgrade of the International Terminal, Justin Burns discovers that these are exciting times for Brisbane Airport.
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he construction of a new A$1.3 billion parallel runway is at the heart of the biggest expansion programme in Brisbane Airport’s history, and one of more than 50 capital projects in the pipeline. Preparatory and land reclamation work necessary for the new runway started in September 2012, and such is its significance to the airport, that CEO and managing director, Julieanne Alroe, openly admits it is a “game changer” for the Queensland gateway. When you learn that it will effectively double the number of flights the airport is capable of handling, it is easy to see why she is so enthusiastic, and the claim that it will change the airport for generations to come is no exaggeration.
APA Issue 1, 2014
And the 3.3km-long runway cannot come quickly enough, as Australia’s third biggest airport handled a record-breaking 21.8 million passengers in 2013. True, the rise of 1.4% on 2012 might have been modest, but with forecasts predicting that annual traffic throughput could more than double to 48.7mppa over the next 20 years, the need to enhance Brisbane Airport’s capacity restrained airfield is obvious.
PERFECT TIMING
The excitement and passion the development is creating was evident in Alroe when she talked to Asia-Pacific Airports in early February. Indeed, the ever enthusiastic boss of Brisbane Airport Corporation (BAC) says
ASIA-PACIFIC AIRPORTS MAGAZINE
RUNWAY CHALLENGES
she feels privileged to be at the helm for the project and arguably the biggest period of change in the airport’s history. “The runway is massive for us and is about as exciting as it gets for an airport CEO, unless you build a whole new airport,” enthuses Alroe. “It is really exciting, and is a game-changing project, as doubling the capacity is a big deal and the most important project this airport will ever do.” Other projects include upgrading the International Terminal; more than 12km of taxiways; revamping the airport’s retail offering; and the introduction of more digital technology. And Alroe says the developments come at the perfect time, as Brisbane is hosting the G20 World Leaders Summit in November and the Asian World Cup of football in 2015, while the Commonwealth Games in 2018 takes place in nearby Gold Coast City.
It is estimated that it takes an average of 10 years for an airport to get a new runway, and Brisbane Airport (BNE) is no exception, as it had to overcome a number of hurdles before work could finally start on its all important new strip of concrete earlier this year. The environmental framework and planning approval was completed back in 2008, but the global economic recession knocked BNE’s passenger numbers, so the project was put on hold. “Last year we decided we just had to get on with it and ramp up the interest and also make sure we got the right design,” says Alroe, noting that the new runway will be located on the site of an old river bed. Certainly the biggest challenges to date have been environmental, as dredging and reclamation of a sensitive spot of land is necessary before the runway can be built. Alroe says: “We have to stabilise the land and consolidate it before we can build the pavements and other infrastructure. The process will involve dredging 13 million cubic metres out to the bay and this alone could take around 10 months.” How the airport ultimately funds the new runway also remains a bone of contention, with some airlines yet to agree to the imposition of new landing fees. “We are not quite there yet, but we’ve got all but two of the airlines on board and hopefully this will get sorted out in the not-too-distant future,” admits Alroe. Once built, the 3.3km-long, 60m-wide runway will be located two kilometres west of, and parallel to, the existing main runway – effectively allowing BNE to go from handling around 50 to up to 100 aircraft movements per hour. Alroe says it will open by 2020, although she is keen to see if the opening can be brought forward. www.aci-apa.com
AIRPORT REPORT: BRISBANE
“We want our airport to really be able to hold its own and showcase our city and reflect well, so there are a lot of incentives to get on and develop,” says Alroe.
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AIRPORT REPORT: BRISBANE
INTERNATIONAL TERMINAL REVAMP
The flagship project of the upgrade of passenger facilities is the redevelopment of the International Terminal, which BNE says will set the tone for future schemes and infrastructure improvements. Construction started on the A$45 million project last month and it is scheduled for completion sometime in mid-2015. Alroe says once the project is completed, it will reflect “modern Brisbane”, a city she says is renowned for its digital technology, relaxed society and easygoing lifestyle. “Most airport terminals are alike, no matter where you are in the world. Few have a real sense of the destination and community they serve. Brisbane is about to break that mould and set a new world-best standard for terminal design,” she enthuses. “Queensland and our cosmopolitan capital city are among the most liveable places on the planet, and this project gave us the opportunity to reflect our enviable lifestyle and natural assets in the vibrant redevelopment of the International Terminal. “We’ve been planning this project for the past two and a half years – it is the most ambitious redevelopment we’ve embarked on since the terminal was first opened in 1995. “When we’ve finished, our International Terminal will be the most impressive and unique in Australia and completely different from anywhere else in the world. It will be something locals will be proud of and visitors will fondly remember.” She reveals that BAC had harnessed a raft of “Queensland talent” for the project and chosen local architects Richards & Spence and Arkhefield, for the project. Arkhefield will redesign the terminal’s interior and Richards & Spence the commercial side, while creative agency, Winkreative, is developing a new brand identity. “They are young, enthusiastic, and brave in how they interpret things, and in Brisbane they have designed the most popular and trendy areas,” says Alroe. APA Issue 1, 2014
“We are reinterpreting our brand and our ambition is to build a very liveable terminal. We want it to interpret comfort and liveability.” In January 2014, Lonely Planet voted Brisbane the “hippest city in Australia”, and Alroe wants the terminal to “fit into that mould too”. Art will also play a key part in the new-look terminal, and Queensland artists, Sally Gabori and Sebastian Moody, have been commissioned to be part of the creative process. Alroe says the design will be focused on local products: waiting areas and quiet zones will reflect what you see in a Brisbane park, while the entire design and layout will represent the city as a whole.
MAXIMISING NON-AVIATION REVENUE
BAC currently enjoys a 52/48 split between aeronautical and non-aeronautical revenues, the latter principally comprising income from retail/F&B activity, property and parking. Increased retail sales in particular have helped narrow the gap in the last few years, and Alroe makes no apologies for admitting that she would like to see the airport make the lion’s share of its revenue from non-aviation related activities in the future, as it will mean it is less dependent on the airlines for income. Revenue, she is quick to point out, that can be invested on enhancing facilities and
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services at Brisbane Airport for both its passenger and airline customers. With this in mind, it should come as no surprise to learn that BNE plans to develop a new shopping area over the next five years in a bid to boost retail/F&B revenues. “We want to create a shopping precinct that appeals to passengers from both the traditional and emerging markets,” reveals Alroe.
DIGITAL FUTURE
Alroe is a great believer in the operational and customer service enhancing benefits of IT and, as such, likes BNE to be a pioneer when it comes to the introduction of new technology. Later this year, the airport will play host to a trial of digital self-service immigration and customs counters for outbound passengers. Alroe says: “We are going to be ramping up our digital offering in terms of increased self-service technology for both outbound and inbound passengers. “Today’s digital-savvy traveller wants more control of their own environment and we aim to give it to them. Whether it is Wi-Fi services or interactive screens, we are going to take it up a notch.” Alroe says that the new-look International Terminal will boast more digital signs and multi-lingual forms of communication.
EVOLVING AIRLINE MARKET
BNE is the State of Queensland’s undisputed gateway to the world, although Alroe accepts that her airport does face “friendly competition” from Gold Coast Airport, about an hour away by road, for some of the Asia-Pacific region’s biggest low-cost carriers. “We compete in the low-cost carrier market, but we also have the premium product, which they cannot match as we are a full-service airport, whereas they are very much specialised in low-cost,” she says. Alroe also firmly believes that BNE’s 2,700 hectare site puts it in the box seat in terms of future expansion, when compared to most other Australian gateways. Indeed, she is confident that Brisbane Airport is in the perfect position to take advantage of future growth in the Australian aviation market. “Unlike other airports, we are free of growth caps and have our expansion programme planned and under construction. We are in good shape,” muses Alroe. “I am sure there are more challenges ahead, but having got the runway project and terminal under way, I think the biggest obstacles to BNE’s growth are now behind us and the next few years will be a whole lot easier.” Here’s hoping, Julieanne, here’s hoping! APA www.aci-apa.com
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AIRPORT REPORT: MACAU
ON A ROLL Peta Tomlinson finds out how Macau International Airport is fast becoming a headline act on the back of a rapidly evolving tourism industry and the island’s status as the world’s biggest gambling market.
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here are a hundred and one things to do in Macau that don’t involve gambling, yet casinos still dominate the tourism sector. That’s because it is a profitable business: as the only place in China where gambling (other than on horse racing) is permitted, the Special Administrative Region of Macau pulled in $45.2 billion in gaming revenue in 2013, according to figures provided by the Gaming Inspection and Co-ordination Bureau. That number far outstrips not only Las Vegas’s tally (around $6 billion), but the entire US market ($37.3 billion). This, from a tiny peninsula between Hong Kong and the Chinese mainland, which has just 35 casinos, compared with some 12,000 casinos across America. But although visitor numbers exceeded 29 million in 2013 – most of those from the mainland – the majority stayed just for one day. So tourism authorities and individual operators are on a mission to change the perception of Macau to be more of a family APA Issue 1, 2014
destination – a move Macau International Airport is right behind. Eric Fong, director of marketing at the airport, points out that Macau, with its Portuguese and Chinese roots, is Asia’s historic meeting point between East and West. “Possessing World Heritage sites, mega tourism and entertainment complexes, top-level convention and exhibition centres, luxury shopping and resorts, the city is an ideal destination to relax and recharge,” he says. At the heart of it all is Macau International Airport, the region’s “airport in the city”, situated 10 minutes’ drive from major attractions, and which is notching up growing numbers of passengers.
AVIATION TRANSFORMATION
Twenty years ago, Macau didn’t even have an airport. Passengers would arrive either by sea (the ferry from Hong Kong takes about one hour), or by land, from across the mainland border.
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EASING ACCESS
With its economy growing, Macau needed air services to enhance its position in the world, which saw it being an important link between two ideologically separate parts of Asia. Fong explains: “During that period, there was no direct aviation service between China and Taiwan, so building Macau International Airport served as an air bridge between the two places.” Operator, Macau International Airport Co Ltd (CAM), was established and registered in January 1989, and construction began the following November. “This was probably the most magnificent construction project in Macau history, because it involved building an artificial island in the sea, to be used as an airport. This was the first project of its kind in China, and one of only very few similar projects anywhere in the world at that time,” says Fong. The project, comprised of three parts – terminal zone, artificial island
Today, the gateway is an international port gaining in both strength and numbers. Traffic statistics show passenger volumes grew 10% and 12% respectively in 2012 and 2013. As an emerging hub of South East Asia, Macau is now connected to 35 destinations around the world. One reason for this growth is its convenience, Fong explains. “The airport is within a 10-minute drive of Cotai Center, where many beautiful leisure resorts are located. With a 20-minute drive, you can reach the Central Business District. “We are a fully-functional, 24-hour airport. Our ILS CAT II equipped runway, constructed in accordance with ICAO standards, is capable of handling long-haul flights. Phase one of the airport is equipped with a full range of passenger and cargo facilities designed to handle six million passengers, and 165,000 tonnes of freight, per year.” Another advantage is the ‘Two Customs, One Checkpoint’ service introduced in 2005, offering extensive land and sea cross-border connections to cities in the Pearl River Delta regions and Hong Kong. Passengers using this time-saving service are exempt from normal immigration procedures, instead transferred by express link bus directly to the departure hall.
LOW-COST EVOLUTION
Like every airport around the world, Macau’s journey has not been without its challenges. Passenger numbers dropped in 2008, when direct flights were launched between Taiwan and mainland China, and again in 2009, after the tightening of mainland Free Independent Traveller (FIT) permits. www.aci-apa.com
AIRPORT REPORT: MACAU
and two taxiway bridges – took more than five years to build. Commercial flights commenced on November 9, 1995, and every year since, a designated Aviation Day marks the date that the people of Macau ‘fulfilled their aviation dream’.
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AIRPORT REPORT: MACAU “We had another tough year in 2010 with the economic downturn, and oil price hikes, resulting in less demand for travel,” recalls Fong. Despite these challenges, Macau prioritised wooing low-cost carriers in a bid to diversify its tourism base. That saw AirAsia adding a Macau route in 2004, followed by Tiger in March 2005. Other LCCs that now serve Macau include Cebu Pacific Airlines, JIN Air, Air Busan, Eaststar Jet, Zest Air, Thai Smile, and Spring Airlines. These carriers helped arrivals from South East Asia increase from 7% of total passenger throughput in 2004, to 39% in 2013. The airport has also worked actively with existing airline partners and related tourism entities to increase flight frequencies, and is actively co-operating with travel agencies to develop charter services. Promotion and marketing efforts across China led to the launch of services to the mainland cities of Wenzhou, Shenyang, Zhengzhou, Tianjin, and Kunming in 2013. This year, that work continues, with the airport keen to see new direct flights from Jakarta or Indian cities. Jetstar Pacific Airlines also plans to launch services from Macau to Danang and Hanoi in March, while Qingdao and Dalian routes are being targeted to further strengthen its China network. APA Issue 1, 2014
LOOKING AHEAD
At the same time, CAM is investing in infrastructure, and planned or completed 161 projects in 2013. This included construction of a new jet hangar, and the planning of a major passenger terminal expansion. Focusing on the customer experience, a Kid’s Zone was recently launched to entertain young passengers and a wide variety of items from international brands to local products were introduced at the duty free shops located at the airside departure hall. “The airport has completed several F&B renovation projects lately, offering a wider selection of dining choices,” Fong continues. “We have set up our own social networking accounts, such as the WeChat smartphone app and Facebook fan page, enabling passengers to be updated with real-time flight information. “Lastly, so passengers may enjoy Macau hospitality during seasonal events – such as the Grand Prix and Dragon Boat Festival – the airport holds periodic exhibitions, along with displays promoting local cultural and creative work.” Resort operators, for their part, are demonstrating that their venues offer far more than gambling. Headline acts draw large crowds to some of the biggest shows on the world stage, while sporting events such as boxing and mixed martial arts, and high-profile basketball games, are proving family favourites. As Macau evolves, one thing is a sure bet: modern Macau has arrived as a destination in APA its own right.
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AIRPORT REPORT: AUCKLAND
Higher & beyond Auckland Airport is reaping the rewards of a more commercially dynamic and customer service oriented business strategy, writes Peta Tomlinson.
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ew Zealand’s national gateway, located – in the words of CEO Adrian Littlewood – “at the bottom of the world”, is not only expanding in various strategic directions – it is also growing profits. Expansion of income-producing hotel and commercial properties, amenity improvements, a new terminal, and even a second runway, are on the table under Auckland’s lofty goal to grow faster, higher and stronger. Auckland International Airport Limited (Auckland Airport) was formed in 1988, when the New Zealand Government corporatised the management of the North Island’s national gateway, operational since November 1965. In 1998, the government sold down its shareholding, and Auckland Airport, now listed on both the New Zealand and Australian stock exchanges, became the fifth airport company in the world to be publicly listed.
KEY FIGURES
Today, Auckland is the fourth busiest gateway in Australasia – after Sydney, Melbourne and Brisbane – and the second busiest for international passengers, welcoming a record 7.5 million overseas visitors in 2013. It also has a revenue story to shout about: after growing steadily since 2009, APA Issue 1, 2014
THE CORE METRICS OF AUCKLAND AIRPORT’S 30-YEAR PLAN: • • • • •
40 million passengers (from 14.5 million today) 240,000 aircraft movements (from 150,000 today) An integrated terminal under one roof, and second runway Affordable growth via the land holding Annual 6% growth in tourism value through to 2025
total after-tax profit increased 25% to NZ$178 million last fiscal year. Dividends exceed expectations, and as the airport board prepares to return NZ$454 million of capital to shareholders, it is also moving forward with major infrastructure projects, including the development of a new, integrated terminal building – part of a 30-year vision to accommodate a targeted 40 million domestic and international passengers by 2040. Littlewood, a former corporate lawyer who joined Auckland Airport in 2009 as head of the retail and commercial division, was appointed chief executive in November 2013. And he is honest enough to admit that the airport’s current strong position
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is a consequence “of a whole lot of hard work and some good fortune”. “Our country has come through the global financial crisis relatively well compared to some, and we have an amazing tourism product which is very attractive to travel markets overseas,” says Littlewood. “But in the past five years, we have changed our approach to growing our business and that has really left us in a strong position. We are proud of what we’ve achieved, but are optimistic about the future as well.” And the shift to a more dynamic, sales-driven model appears to have sharpened the focus on growing travel markets as the fundamental driver of performance. Explains Littlewood: “As well as investing in our retail business, we have gone further to the customer experience – because if you have happy customers, they are more open to engage in your retail product or other things happening around the airport.”
LAND DEVELOPMENT
The “good fortune” is attributable, in no small part, to the airport’s significant hand holding. Unlike many land-constrained airports around the world, Auckland Airport has 1,500 hectares of freehold title in its “bank”. “This has benefitted us in many ways,” Littlewood explains. “It has allowed us to grow in a sensible way, including a significant property development business. On top of that core land holding, we have an airport which operates 24/7, with no curfew 365 days a year – and that is incredibly important. “We are at the bottom of the world, and so we can’t dictate when planes want to fly here. For New Zealand, it is important that we are able to welcome and accept any tourists when airlines need to fly, and when it fits in with their network.” With 308 hectares still available for commercial property development, the company believes it has more than enough land for the next 30-plus years. www.aci-apa.com
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AIRPORT REPORT: AUCKLAND And this on a site only 21 kilometres from Auckland’s Central Business District (CBD). “As the city grows, this [location] becomes more and more relevant to tenants. It is a strong proposition for the future,” says Littlewood. There is a growing realisation of the benefit of locating a business beside an airport, the modern version of the traditional transport mode, he explains. “We are confident that what’s being seen overseas – the [model of] developing an economic hub centred around an airport – is already happening here, and is something we are focused on for the future,” he notes. Auckland’s aeronautical and non-aeronautical business split is roughly 50/50. Key developments in property, which account for 9% of the total business, include the construction of high-quality retail and commercial projects. They include Quad 5 – a five-star green-rated commercial office precinct, which recently (November 2013) won a New Zealand Institute of Architects award for sustainable architecture – and two hotels, a Novotel joint venture, and an Ibis budget APA Issue 1, 2014
brand. As a result, the airport has been successful in attracting high-profile tenants. With a view to create New Zealand’s best business location, the company has also invested in amenity, via a public art trail, mountain bike track, football fields and walking tracks for staff to use. “This has been a hallmark of our business – creating an environment which is not just a nice place to work, but a nice place to relax outside of work,” comments Littlewood.
INVESTMENTS
External investments have “gone very well” too, he continues. Auckland Airport owns a 24.99% share in Queenstown Airport on New Zealand’s South Island, and has a 24.55% stake in North Queensland Airports group’s Cairns and Mackay airports in Australia. According to Littlewood, the latter investment has been “particularly strong”, delivering a 57% increase in operating profit, with “plenty of room for continued growth”. Profits are achieved not by cutting back on customer services, but by focusing on
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ROUTE DEVELOPMENT
A sophisticated approach to connectivity and route development, in co-operation with Tourism New Zealand, is also bearing fruit. “Our philosophy is about creating sustainable and profitable routes for our airline partners, facilitating their growth,” adds Littlewood.
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AIRPORT REPORT: AUCKLAND
increasing productivity, working with airlines to develop greater throughput, and utilising technology such as mobile platforms to maximise customer efficiency. Significant growth in Chinese passengers has also spawned new ways to support them, such as multi-lingual ambassadors in international terminals, and multi-lingual signage and flight information. With infrastructure, it’s a case of constant improvement, says Littlewood. “We’ve gone through a series of investments,” he explains. “They include extending our international gates to create extra capacity for A380 services, improving our retail environment [NZ$42m] and outdoor amenity.”
China Southern, for example, entered Auckland with the aim to offer four services a week. It launched with daily services, now increased to 10, and has up-gauged its aircraft to a B787. Air New Zealand has expanded with new routes to Australia. “We’ve worked with Malaysia Airlines to understand their route from Kuala Lumpur, resulting in a recent expansion of their service,” says Littlewood. “Emirates has also been an important partner, opening up routes to Dubai, and increasing their services so that so we now have three of their A380s on the ground at one time – the only airport outside of Dubai to do so. That is pretty exceptional.” All this is part of the bigger picture – taking a principled and long-term view of development by a high-quality master plan. The driver is “the growth occurring on our doorstep”, says Littlewood. “By 2030, over two-thirds of the world’s middle class will be in Asia, and within one flight of Auckland Airport. We are in an incredible position to capitalise on that, and to make sure we can service that demand, we have to ensure we have the infrastructure to support it,” he states. “This takes us back to our 30-year plan to be an airport for the future. We understand our place in New Zealand; we want to be demand-led, customer-focused, and to make sure our plan is woven into the city [via connection to the transport network], and that fundamentally the plan is efficient, resilient, and affordable. “The strategy is to build on what we’ve done. The way I describe it is growing faster, aiming higher, and becoming stronger. In 2009, we took more direct control of our destiny by setting out our new strategy, ‘Flight path for growth’. Now we’re saying we’ve taken off; we need to go higher and beyond. “We’ve got a simple, focused strategy for what we need to do over the next five years, and some ambitious targets for the future. We are a focused bunch of people, APA and excited about what lies ahead.”
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SPECIAL REPORT: CONCESSIONS
Talking shop Sarah McCay talks to some of the region’s duty free giants to find out more about the innovations that are encouraging travellers to spend more than ever before.
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t seems there were more good buys than goodbyes at airports in 2012, as global duty free and travel retail sales hit almost $55.8 billion. Travellers through Incheon International Airport in Seoul proved the biggest spenders worldwide, with a 15% increase in spending, sending retail sales over $1.7 billion. Dubai International Airport continued to prove its duty free prowess, with an increase of 10% on annual sales, with 57.6 million passengers spending $1.6 billion in 2012. London Heathrow, which welcomed 70 million passengers in 2012, placed third with retail sales account of $1.34 billion, according to the annual Top 10 Airports Report published by Generation Research. APA Issue 1, 2014
Hong Kong, Singapore Changi and Bangkok Suvarnabhumi from the Asia-Pacific region also make the top 10, alongside Paris CDG, Frankfurt, Amsterdam Schiphol and São Paulo–Guarulhos. While 2012 saw record figures for the travel retail industry, further growth is expected, with the Tax Free World Association (TFWA) predicting annual sales will hit almost $65 million by 2015. And, according to the association, Asia-Pacific remains top of the retail game, with sales of $18.6 billion in 2012. Here, we look at three of the region’s biggest duty free airports – Incheon, Dubai and Abu Dhabi – to find out more about their winning sales tactics.
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INCHEON INTERNATIONAL AIRPORT
2012 ANNUAL REVENUE: $1.73 billion SHOPS: 73 BRANDS: 500 RETAIL SPACE: 15,652sqm AVERAGE SPEND: $44.32 MAIN DUTY FREE CONCESSIONAIRES: Lotte, Shilla, Duty Free Korea
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ncheon is home to the world’s largest duty free complex, the 15,652sqm Airstar Avenue, which opened in June 2008. It is an integrated complex including three duty free brands: Lotte Duty Free, Shilla Duty Free and Duty Free Korea. As well as impressing on size, Incheon has also set high standards in terms of its retail offering. In 2011, Airstar Avenue opened the first Louis Vuitton airport store, the huge 550sqm store alone raking in more than $100 million in sales in 2012. The French luxury brand is joined by a fine array of high-end names, including Hermes, Fendi, Bulgari and Prada. While the airport is home to some of retail’s leading lights, 2012 saw it take a decidedly local turn with its retail offering, focusing instead on the growing trend for all things Korean.
“We are focusing on local small and medium enterprises [SME],” confirms Bum-Ho Kim, executive director of Incheon International Airport’s Concession Business Group. “This is because there is an increase in demand for Korean local brands due to K-POP and the Korean Wave. So, we opened exclusive Korean SME shops offering high quality local brands in 2012 and we plan to increase the number of them, as these shops are gaining popularity from our customers.” The focus on local offerings is not new to the airport. In 2009, Incheon introduced a Korean traditional cultural experience centre, which provides passengers with the chance to make folding fans and enjoy local crafts. “Every person taking advantage of duty free in an airport considers this as a place where they only purchase duty free goods, but we want to break this bias and go beyond duty free,” enthuses Kim. “So, we started to run a Korean traditional cultural experience centre at moving routes where passengers are often passing through. “We think this kind of effort is also a good example of raising the bar on customer service. It is because this centre offers not only a unique experience but also a good impression to international travellers waiting for long hours for the flights.” www.aci-apa.com
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2013 ANNUAL REVENUE: $1.8 billion SHOPS: 120 RETAIL SPACE: 26,000sqm at Dubai International Airport (DXB) and 2,500sqm at Dubai World Central–Al Maktoum International Airport (DWC). AVERAGE SPEND: $50 at DXB and $60 at DWC
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ince it opened in 1983, Dubai Duty Free (DDF) has led the world in travel retail innovations. It is, for example, famed for its grandiose retail lobbies and extravagant raffles that give away luxury cars, motorbikes and large cash prizes. “We have grown dramatically in recent years, especially with the opening of Terminal 3 in October 2008, and with Concourse B and Concourse A which opened in January 2013. As a result of such growth, our staffing levels have increased to 6,000 and our retail footprint at Dubai International is currently 26,000sqm,” explains Colm McLoughlin, DDF’s long-serving executive vice chairman. The retailer is now entering a new phase in operations as passenger services get underway at Dubai’s second gateway, Dubai World Central–Al Maktoum International Airport. “The opening of the passenger terminal at Al Maktoum International last October is a very exciting development, and with the UAE winning the Expo 2020, Dubai World Central will be a major focus for development in the years ahead,” McLoughlin adds. The new passenger terminal at DWC added 2,500sqm of retail space to DDF’s operations, with departures boasting a 1,150sqm central retail outlet that incorporates perfumes and
cosmetics, luxury goods, fashion, confectionery and electronics. On either side of this central area are two 300sqm retail areas for liquor and tobacco, and food and confectionery. “The coming on line of Al Maktoum International Airport is obviously a great opportunity for Dubai Duty Free. In the long-term, the airport has capacity for over 160 million passengers and, ultimately, the retail operation will cover some 64,000sqm,” says McLoughlin. In the more immediate term, Concourse D will open at Dubai International Airport in 2015, which will provide a further 7,000sqm of retail space. Additional innovations from DDF will see the retailer offering online sales from March 2014. The service will offer DDF customers the chance to browse items and plan their purchase ahead of travel. “We will initially offer 3,000 products for online ordering, which the passenger can then pick up when travelling. We believe that this will result in incremental sales,” says McLoughlin. DDF is also tapping into the growing number of Chinese travellers. “With the recent rise in travel by Chinese passengers, we ensured that we recruited Chinese staff and we currently have over 570 employed in the operation,” notes McLoughlin. “We have also ensured that we have dual signage in the retail area as well as accepting Chinese currency and the main Chinese credit card, Union Pay.” DDF employs 6,000 staff of 51 different nationalities, and can serve customers in 32 languages. www.aci-apa.com
SPECIAL REPORT: CONCESSIONS
DUBAI DUTY FREE
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SPECIAL REPORT: CONCESSIONS ABU DHABI DUTY FREE
2013 ANNUAL REVENUE: $248 million SHOPS: 124 RETAIL SPACE: 6,000sqm AVERAGE SPEND: $15 PARTNER: DFS
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bu Dhabi Duty Free (ADDF) was launched in 1984 with five retail outlets. Today, ADDF offers 27 standalone boutiques in terminals 1 and 3, totalling 124 stores. Last year, ADDF extended its duty free concession contract with DFS for another five years, as a result of the latter’s success. ADDF has seen record sales revenues in recent years, with figures for the first half of 2013 showing 17.4% growth, to reach $120 million. In 2012, retail sales grew by 24% to $220 million, setting a new record for the company. Spurring this growth was the addition of a number of luxury brands such as Emporio Armani and Lamborghini, while other high-end brands expanded and re-energised their look. Chief commercial officer, Mohammed Al Bulooki, tells APA: “In terms of retail offer, within Terminal 3 an Emporio Armani store has opened and the Burberry store has also revamped its breadth of offer and expanded its space. “A new and first-of-its-kind Lamborghini store also joined the retail offer last year as APA Issue 1, 2014
well as WHSmith and Illy Coffee, who recently opened outlets in the new Arrivals Hall as well as within the terminals.” Last year also witnessed the roll-out of several innovative services at ADDF, according to Al Bulooki. “Passengers and shoppers at Abu Dhabi International Airport can now enjoy the ‘shop now, collect later’ service at Abu Dhabi Duty Free, with the new ‘travel lighter’ initiative that allows passengers to leave their shopping secured at the airport and collect it upon their return,” he says. Bigger retail plans and innovations are now on the drawing board as Al Bulooki and his team begin work on the ADDF commercial offering at Abu Dhabi’s new Midfield Terminal Building (MTB). However, Al Bulooki remains tight-lipped on what this could mean for shoppers. “The MTB will be a spectacular terminal that will provide a sensational experience through exceptional partnerships. However, details on how this will be delivered will be announced later this year, so stay tuned,” he teases. Set to open in 2017, the MTB will cater to more than 30 million passengers a year. “The retail space will be increased by 30,000sqm to offer a travel retail product that will set new standards for the duty free industry,” Al Bulooki promises. A big claim, no doubt, but it is one that Al Bulooki is confident of making good on. APA
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THE BUYING GAME
Justin Burns rounds up the latest retail and F&B news from around the region.
HEINEMANN OUTLINES ASIA-PACIFIC EXPANSION PLANS Duty free operator, Gebr Heinemann, has revealed that Asia-Pacific and US will be the focus of its growth in the future. Co-owner, Gunnar Heinemann, says as part of its strategy, it might look to make acquisitions in the regions, possibly from organic growth. Heinemann says it has set aside €100 million for expansion plans in 2014, and also confirmed it will participate in the Sydney Airport duty free tender, as well as tendering for three contracts in Egypt. Gunnar added: “If we see we can do better, then we will look to go, but if it is a well-run business then we will not tender.” He also explained it has opened a sales office in Abu Dhabi, to help it understand business in the region, as it looks to secure business at Abu Dhabi
International Airport’s new Midfield Terminal Building. Heinemann’s goals by 2020 are to grow in retail surface area from the 70,000sqm it has today, to 100,000sqm. By 2020, it wants to expand its airport concessions portfolio from the current 61 concessions in 27 countries, to 90 concessions. The fast developing Asia-Pacific region is seen as a key part of its growth strategy moving forward. Heinemann recently won the concession for a duty free contract at Juanda International Airport in Surabaya, Indonesia. It will also open up at Kuala Lumpur International Airport’s new low-cost carrier terminal, KLIA2, set to open in May. Globally, the operator enjoyed a turnover of €3.2 billion in 2013, a growth of 2%, but forecasts this to rise to 6% in 2014.
FANCY A BREW? Freshly roasted coffee delivered daily is the latest offering for passengers at Brisbane Airport (BNE). Operator, Brisbane Airport Corporation (BAC), has partnered with Airport Retail Enterprises (ARE) to bring the permanent Merlo outlet to BNE’s Domestic Terminal. The coffee house brand is one of the most recognisable in Australia and will APA Issue 1, 2014
be located on Level One of the terminal’s central area. Andrew Brodie, general manager airline and retail management for BAC, says: “Our city is one of the most liveable places in the world and it is important we incorporate this into our terminal, and Merlo, with over 20 years’ experience, will offer the perfect shot of Brisbane to the travelling public.”
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T1 at Sydney Airport consists of 150 shops selling a range of items, while T2 has a further 50. “We see quality of retail space as a key driver of our retail business and we plan to further invest in development of our retail space in T1 to enhance our duty free sales potential,” Gardiner adds. In 2013, Sydney experienced its busiest year-to-date, with 37.9 million passengers passing through its terminals, up 4.1% on 2012.
NEW OPENINGS AT SHENZHEN BAO’AN AND CHANGI Italian accessory retailer, Furla, has opened a new 75sqm store with LS travel retail at Shenzhen Bao’an International’s new Terminal 3. Gerry Munday, global travel retail director, comments: “We are expanding Furla’s presence in travel retail through selective boutiques and shop-in shops. “Asia is a particularly important market for us; we recently opened a new location at Changi T2 with LS travel retail – and within the region, China is most definitely a shining light.” Munday continues: “This new outlet at Shenzhen is a great location for Furla to increase its exposure in the correct way for the brand.”
In 2012, Furla reported a turnover of €212 million, up 18% year-on-year, while its travel retail business increased by 93% in the same period. It has been a busy few months for LS travel retail, whose Singapore branch has won the contract to operate a Salvatore Ferragamo store at Changi Airport’s Terminal 1. The 110sqm clothing and accessories outlet will become fully operational in July 2014. The new outlet complements the existing luxury fashion stores at Changi run by LS travel retail, such as Dunhill, Longchamp, and Hugo Boss. CC Lee, general manager, LS travel retail Singapore
and Malaysia, says: “We are pleased to represent Salvatore Ferragamo for this tender. “This award signifies our confidence in delivering exceptional service to a brand that is already well known. We would like to take this opportunity to thank CAG for their continuous belief and support.” He continues: “We are always keen to expand the luxury fashion portfolio within Changi and have been participating actively in several new tenders. “LS travel retail Singapore will continue to secure every possible opportunity to broaden our luxury fashion portfolio.” www.aci-apa.com
SPECIAL REPORT: CONCESSIONS
GOING TO ANOTHER LEVEL Sydney Airport is calling for expressions of interest from duty free retail providers to enter a tender process for a new duty free relationship, commencing in February 2015. The airport’s current duty free retail contract with Nuance Australia expires next year. It comprises six duty free outlets at the International Terminal (T1), occupying approximately 7,600sqm of retail space, as well as one domestic tax-paid travel retail offering at the Domestic Terminal (T2). Sydney Airport retail general manager, Andrew Gardiner, says: “As a leading airport located in one of the world’s most vibrant cities, our retail partners are an integral component of maintaining Sydney Airport as a world-class shopping destination. “We are seeking the best operator to take the duty free offering and passenger experience at Sydney Airport to another level, as well as foster the growth of the airport for the benefit of Sydney, New South Wales and Australia.”
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SPECIAL REPORT: CONCESSIONS
SMOOTH OPERATOR
Julián Díaz, CEO of Dufry, discusses the company’s market presence and customer service commitments. When and where did Dufry open its first airport outlet and how many gateways are you present at today? The first duty free shop in an airport was opened in 1952 in Paris le Bourget. Today, we operate in 184 airports.
What are your biggest airport locations in terms of the number of outlets, floor space and revenue generation?
Our largest duty free store is in Terminal 2 at Guarulhos International Airport in Brazil, which, following a 1,600sqm extension, offers more than 3,142sqm of retail space. APA Issue 1, 2014
Our next biggest airport locations are the 1,400sqm walk-through Dufry Boulevard at Mexico City International Airport and our new flagship store in Bali, which combines modernity with traditional local Indonesian motives. At 1,150sqm, it is Dufry’s largest store in Asia.
How important is it to have a strong duty free brand, and is this more important for your airport customers than passengers? It is very important to have a strong duty free brand for all stakeholders. For the airports, it is the confidence that
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What is your growth strategy?
Our growth strategy is exactly what you have witnessed over the past 18 months – namely to focus on tourist destinations and emerging markets in Asia, Latin America and the Mediterranean, through new concessions and acquisitions. We have been pursuing this strategy since the beginning.
What do you consider to be the key to good customer service?
It may sound obvious, but the key to good customer service is to understand the needs of the customer. Dufry does a lot of customer research and, we believe, offers unique levels of customer service within the industry. We have, for example, created a worldwide customer service department to guarantee customer satisfaction. Initiatives, such as our online pre-ordering system, sales training, mystery shopping programmes, and an after sales call centre that is open 24/7, are all designed to raise the bar on customer service.
What would you say to those that believe it is almost impossible to fail as an airport retailer as you have a captive audience year-round?
Indeed, the possibilities that airports offer are excellent for retailers, but if the operator lacks the know-how about its customers, is selling the wrong product or has neglected to offer a good shopping experience, then an outlet could easily fail, even under these excellent conditions.
What are the biggest challenges facing the duty free industry today? Challenges are changes to legislation, which may affect the sale or consumption of
products traditionally sold by the duty free industry. I am specifically talking about the threat to tobacco sales and alcohol restrictions, the one bag rule, new security measures that impact on the travel retail environment, and political unrest.
Are traditionally big spending Chinese, Japanese, American and Russian passengers your biggest customers?
Dufry serves many customer nationalities and profiles. Dependent on the shop location, you will find the leading customer base. For example, the majority of customers in our Arrivals shops in Brazil are Brazilians and Argentinians and not Chinese or Russians. It is true that the latter are known to spend more money on luxury goods.
Is it possible to name the highlights of your 10 years in the hot-seat at Dufry?
I have certainly enjoyed seeing Dufry become one of the world’s leading travel retailers since being publicly listed in 2005, and the last decade has been one of huge growth for the company. When I became the CEO of Dufry, the company had 227 shops in 25 countries. Today, we have 1,388 shops in 47 countries. Our annual turnover has also more than quadrupled from CHF656 million (€556 million) to more than CHF3 billion (€2.43 billion) in 2012. We have witnessed many milestones as we have pursued our strategy of growth and acquisitions very determinedly over the last decade. Among the most important deals was the 2006 acquisition of the leading travel retailer in Brazil; the 2008 acquisition of Hudson Group in the US; the 2011 deals for travel retailers in Argentina, Uruguay, Ecuador, Armenia and Martinique; the 2012 acquisition of a 51% stake in Regstaer in Russia; and finally, in 2013, purchase of Hellenic Duty APA Free shops in Greece. www.aci-apa.com
SPECIAL REPORT: CONCESSIONS
they have a strong and reliable partner. For the passenger, it is the message that they will have an exciting shopping experience and will find the products they are looking for.
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SPOTLIGHT ON KUCHING
SPREADING
THE WORD
ACI Asia-Pacific president and managing director of MAHB, Tan Sri Bashir, reflects on the crucial role airports play in boosting tourism across the region.
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n the Hollywood movie, The Terminal, starring Tom Hanks, the comfort and beauty of New York’s JFK International Airport is not enough to satisfy the Krakozhian traveller, Viktor Navorski, who needs to get into New York City to fulfil his mission. Airports play an important role in bringing in the crowds. In addition to providing superior infrastructure, competitive rates and extensive connections, many now actively promote and market their home destinations to both the airline (primary target) and travellers (secondary target). Indeed, in a playing field where destinations have to compete for any airline’s business, the way an airport markets the destination can be a strong decider for the airline.
KUALA LUMPUR
This is clearly evident in the case of Kuala Lumpur, which has had to grapple with two very strong competitors – Bangkok and Singapore – both of which are tourist getaways and business hubs. Fortunately, KL International Airport (KLIA) has managed to hold its own, largely due to the joint efforts of the airport, tourism authority and the airlines.
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This can arguably be seen in the fact that passenger volumes have leapt from 27.5mppa in 2008 to 47.5 million last year, ensuring that today, KLIA is the 12th busiest gateway in the world for international passengers. The ranking places it higher than Tokyo Narita, Madrid-Barajas and New York-JFK – quite an achievement.
KUCHING
It would, however, be totally wrong to assume that our marketing efforts are only focused on Kuala Lumpur, as I hope Kuching’s hosting of Routes Asia 2014 demonstrates. For although Kuching is now the third largest airport in Malaysia after KLIA and Kota Kinabalu – it welcomed 4.85 million passengers in 2013 – we need to do a better job of promoting it and increasing its connectivity to the world. Airlines currently offer 52,000 seats weekly between Kuching and Kuala Lumpur, making it the second busiest domestic route in Malaysia after KLIA–Kota Kinabalu. And the number of international flights into Kuching increased last year with the addition of Xpress Air services to Pontianak (Indonesia). It means that Brunei, Singapore and Indonesia are now served by direct scheduled www.aci-apa.com
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SPOTLIGHT ON KUCHING flights from Kuching, operated by a combination of Malaysia Airlines, Silk Air, AirAsia, Singapore Airlines and Xpress. There are also charter flights to China. However, Kuching has seen services to Perth, Macau and Bali ceased in recent years.
AIRLINE INCENTIVES
We need to recognise that Kuching requires more promotion with the international airlines, and their knowledge of Kuching and its strategic location needs to be further emphasised. For one, it is in the centre of the Brunei Darussalam-Indonesia-Malaysia-Philippines East ASEAN Growth Area (BIMP-EAGA) triangle. It is also within a five-hour flight of all the major cities in Southern China, Japan, Korea, Hong Kong and South East Asia – a market size of more than a billion people. Few also know that Kuching Airport is probably the most advanced in Borneo in terms of its facilities. The city of Kuching’s infrastructure is modern and boasts convention centres, hotels and a good road network. So, just like in the good old days when we had to tell people that there was actually something between Thailand and Singapore – Malaysia – we now have to do the same with Kuching. We already provide incentives such as waiving landing fees, free office rental and funding for marketing and APA Issue 1, 2014
promotional activities in a bid to attract new airlines or encourage existing airlines to launch new routes.
PASSENGERS
When it comes to the secondary target, the traveller, we are surprised that many don’t know that Kuching has mountains, rivers, beaches, national parks, caves and wildlife sanctuaries – all within an hour from the city. It is also culturally very diverse and colourful in terms of cuisine, history, architecture, music and the arts. The recently concluded ASEAN Tourism Forum 2014, which was held in Kuching, points to the city acting as a springboard to nature and adventure in other parts of Sarawak. However, we believe that there is no need to hop onto another plane and go elsewhere as there is enough to do in Kuching to keep even the most intrepid traveller occupied, and we need to do a better job of communicating this message. It is only after testing and experimenting and working together with our partners that we feel we have hit on the correct formula, the focus of which is very much on adventure with elements of nature and culture. Today, we are working closely with the Ministry of Tourism Sarawak and other bodies to spread the word, and I believe it just needs time and patience on our part working with these various agencies before Kuching gets APA the attention it rightfully deserves.
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SMALL AIRPORTS: SECURITY
Thinking BIG!
Jeff Amiri and Steve Horner discuss how integrating security systems can help enhance security at the region’s smaller airports.
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n recent years, security has evolved into a highly critical and increasingly complex function for organisations responsible for moving people and goods within an airport and transporting them around the world. This issue is further compounded by the potential ‘insider threat’ with employees, visitors, contractors and the general public constantly on the move to and from, or around the airport site. Airport managers responsible for security and safety need to be constantly trained to be alerted to these scenarios. It all sounds quite straightforward, but the reality is rather different for smaller airports that simply don’t have the resources to invest huge sums on security. As a result, issues such as the lack of perimeter fencing, security personnel and technology are some of the problems that plague small airports. And putting these things right or making other improvements is often seen as costly for budget-strapped airports. It goes without saying that failing to address such issues makes an airport more susceptible to security breaches, which in the worst possible case scenario, can also cause logistical turmoil, economic mayhem and possibly damage the gateway’s credibility.
INTEGRATION INTO A SINGLE SOLUTION
What is the answer for smaller airports? Well, combining all technologies and processes through the integration of individual security sub-systems can be a more cost-effective and manageable solution. APA Issue 1, 2014
Individual security systems used by airports typically include automatic gates and barriers, vehicle and pedestrian turnstiles, access control, CCTV and video recorders. When security staff are required to continuously monitor and manage each separate system over many hours, there is inevitably a risk of human error and someone “slipping through the net”. However, it is possible for only a handful of people to simultaneously manage all security systems from one location, with the adoption of a centralised ‘open platform’ security integration software solution or Physical Security Information Management System (PSIMS). This integration provides the operator with one cohesive management solution that creates ‘inter-operability’ between all systems, maximises operational efficiency and provides intuitive operator instruction to an incident, which in turn, keeps the operator compliant with airport policies. Such a solution can be operated from a single or multiple control centres, providing airport operators with complete situational awareness of one or more sites.
EVENT-DRIVEN ACTIVATION
Many of today’s detection technology sensors incorporate event-driven activation. This means that, rather than trying to monitor what’s going on, the operator of the integrated security system is simply alerted by an alarm when something untoward takes place. This one-to-many approach to security means one event or activation can now activate a single or many systems. The
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SMALL AIRPORTS: SECURITY
central integration software provides the operator with improved focus, greater attention, and the ultimate in automated and effective response. Arguably, such a system would solve the problem that small airports have of not being able to afford large security teams. Conveniently, these multiple alerts can be made by a number of communication paths to a centralised platform, according to what is required – hard wire and wireless networks, SMS, radio or personal electronic devices. The whole process is operationally efficient and highly effective, giving first-line responders the relevant data in real-time for front-line decision-making, automatically.
MULTI-LAYERED APPROACH
Over the past few decades, the focus on prevention has led to the adoption of a multilayered approach, designed to combine physical and logical security measures to provide an enhanced overview of any given situation and minimise risks. Measures typically adopted by airports today to prevent unauthorised access to secure or restricted areas include the adoption of biometric technology, cargo and body scanners, closed-circuit television (CCTV) and physical checks at access points.
Further preventative security measures might include fence-mounted or groundbased perimeter intruder detection systems (a first line of detection and defence, or an early warning system). All electronic and mechanical integrated security systems are augmented with intelligence gathering which can be ‘off the street’, through intelligence agencies and even from social networking sites. In this regard, the internet is a very powerful tool that is used to great effect by many and ill effect by few. In a best practice approach towards security integration, it is important to engage the services of a true product agnostic systems integrator that can guide the airport operator through the myriad of systems and technologies available, and advise on what can be integrated in terms of old and new technologies (analogue and IP) and the benefits that integrated security solutions APA provide airport operations.
ABOUT THE AUTHORS Jeff Amiri is general manager for aviation, security and transportation, system solutions at Rockwell Collins in Asia Pacific. Colleague, Steve Horner, is international business development manager for integrated security systems and solutions, Rockwell Collins in EMEA.
www.aci-apa.com
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SAFETY
SAFETY FIRST
Beijing Capital takes the lead to host the first ACI APEX in Safety review in China, Asia-Pacific Airports reports.
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CI’s Airport Excellence (APEX) in Safety programme came to China when Beijing Capital International Airport (BCIA) successfully hosted a safety review. Beijing Capital, the world’s second busiest airport, handling more than 80 million passengers per annum, welcomed a team of safety experts from ICAO, ACI World, ACI Asia-Pacific, and safety partners from a number of fellow ACI member airports. The list of global airport operators participating in the historic event included Aéroports de Montréal, Dublin Airport Authority, Greater Toronto Airports Authority and Miami-Dade Aviation Department. During the two-week review, which took place between October 22 and November APA Issue 1, 2014
1 last year, the safety experts helped BCIA identify aerodrome safety issues and recommended improvement measures, based on ICAO standards and recommended practices and ACI best practices. The Airport Excellence (APEX) in Safety Programme provides assistance for ACI members to improve their level of safety and compliance with ICAO Standards and Recommended Practices. Through a Safety Review performed on-site, the ACI Safety Review Team identifies safety gaps and drafts an action/ implementation plan for the Host Airport to address these vulnerabilities. ACI assists the Host Airport throughout the implementation phase by providing support, training and access to a global network of expertise.
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SAFETY
Runway Safety, Markings, Signs and Lighting, Winter Operations, Movement Area Maintenance, Apron Safety Management and Safety Management System, Wildlife Hazard Management and Rescue and Fire Fighting are just some of the areas reviewed under APEX. Craig Bradbrook (pictured above), ACI World’s deputy director general, attended the opening ceremony in Beijing and signed a Declaration of Commitment and Collaboration in APEX in Safety with BCIA’s vice president, Liu Zeng Yu. He said: “Achieving excellence in safety is a challenge faced by every airport, with each airport at a different point on the journey. Through the APEX in Safety Programme, ACI aims to help all airports achieve continuous improvement in safety.” The Safety Review Team worked with the airport management personnel of BCIA to critically review the aerodrome safety and operations of the airport. A draft report will be compiled by the Safety Review Team and submitted to BCIA highlighting the important observations
with relevant recommended measures for improvement. During the closing ceremony, Dr Dong Zhi Yi, first vice president of ACI AsiaPacific’s Regional Board and chairman of BCIA, declared: “Participation in the APEX in Safety Programme is very important for BCIA and our mission to become an safe and excellent international airport. “Setting an example to continuously improve safety management and standards in operational safety will hopefully encourage more subsidiary airports of Capital Airports Holding Company to join the APEX for Safety programme in the future.” ACI Asia-Pacific’s regional director, Patti Chau, is urging other airports in the region to join ACI’s pioneering safety programme. “Safety is the true vocation for all of us in the aviation industry. We have a number of similar reviews in the pipeline and would encourage other airports to contact us if they are interested,” she enthuses. For more information about APEX in Safety, please visit the ACI website at APA www.aci.aero. www.aci-apa.com
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AIRLINES
High five
SriLankan Airlines chief executive, Kapila Chandrasena, talks to Martin Rivers about his five-year plan for the carrier.
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hen Sri Lanka’s 25-year-long civil war ended in May 2009, the government placed tourism at the heart of its economic recovery. This has paid dividends, with visitor numbers almost tripling since the guns fell silent; last year 1.27 million tourists re-discovered the island’s pristine beaches and wildlife resorts. Much of the growth has been driven by SriLankan Airlines, which increased its traffic by 55% between 2009 and 2013. The loss-making flag carrier is not, however, solely focused on the top line as chief executive, Kapila Chandrasena, explained when outlining his five-year turnaround plan to Asia-Pacific Airports. And he is honest enough to admit that he sees SriLanka’s upcoming oneworld alliance membership as the best vehicle for growing sustainably. “Our task right now is to consolidate and make the routes we serve profitable,” says Chandrasena. “On the one hand we have to expand our network and, on the other, we need to keep very close control of our cost base if we are going to at least recover costs and reach break-even.”
SLOTTING INTO ONEWORLD
SriLankan Airlines is scheduled to join oneworld in early 2014, having delayed its entry to allow time for IT integration. The airline already codeshares with three oneworld members – Malaysia Airlines, Royal Jordanian Airlines and Russia’s S7 Airlines – but, Chandrasena sees scope for APA Issue 1, 2014
deeper ties, particularly with some of the alliance’s larger members. “What oneworld brings is the network reach,” he explains. “Right now, we are servicing 62 destinations. Overnight it will be close to 800 destinations. There will be more codeshares with our alliance partners.”
NETWORK PUZZLE
SriLankan Airlines’ network focuses heavily on South Asia, with more than 80 weekly flights to eight cities in India, and more than 30 to the Maldives. About 150 weekly flights between eight domestic destinations are also operated by the mainline Airbus fleet and subsidiary, SriLankan Air Taxi’s Cessnas. The flag carrier’s strong regional foothold is its main offering to oneworld, which Chandrasena says has a “bit of a vacuum” in South Asia. As well as providing 60% of all flights to Sri Lanka, he describes the airline as the “de facto main carrier for the Maldives”. He believes that in order to strengthen SriLankan’s hub-and-spoke model, long-haul traffic flows must now be optimised alongside the carrier’s new partners. The carrier currently serves five cities in Europe (London, Paris, Frankfurt, Rome and Moscow), and eight in the Far East (Tokyo, Beijing, Shanghai, Guangzhou, Hong Kong, Bangkok, Kuala Lumpur and Singapore). It also has a sizeable presence in the Middle East, and operates daily flights to Karachi in Pakistan. Oneworld members, British Airways, Air Berlin and S7 Airlines, will give the carrier a “broader footprint in Europe”, Chandrasena says, enticing more holidaymakers to Sri Lanka. Synchronising
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AIRLINES
schedules to ease the transfer of traffic between affiliates will be the first step. With the immediate focus on non-organic growth, new routes in Europe are largely off the agenda. “We decided to take capacity expansion up-front in year one and year two of the business plan,” the chief executive notes, referring to the airline’s post-war network growth. “Now is the time for stabilising those routes. What you will see is tweaking of the network, increasing frequencies, and working towards daily flights on all the destinations we serve. “Any new destinations are decided on a standalone commercial basis,” he reiterates. “In that sense, I don’t see much of a change. I think we have the right coverage to feed the rest of Europe.” Despite the cautious approach, however, Europe remains a critical market for SriLankan Airlines, as some 137,000 British tourists visited Sri Lanka last year, making it the second highest source of tourism behind India. The airline’s 12 weekly flights to London Heathrow account for more than a quarter of its capacity when measured by available seat kilometres (ASKs).
WESTERN CONNECTIONS
Further afield, SriLankan Airlines is reviewing its US connections, ahead of possible codeshares with oneworld’s American Airlines. Given that the US is located on the opposite side of the globe, “both Atlantic and Pacific” routings are viable for flights. The flag carrier currently swaps codes with Etihad Airways westwards and Malaysia Airlines eastwards. It also serves two other oneworld hubs in Asia – Cathay Pacific’s Hong Kong, and Japan Airlines’ Tokyo, which raises the prospect of codeshare revisions or even new fifth-freedom services. “We are looking at all 13 members to really leverage the partnerships,” Chandrasena emphasises. “Some networks offer greater opportunity than others.”
THE CHINESE DILEMMA
While its network planners hammer out the most prudent oneworld arrangements, SriLankan Airlines is also grappling over how best to expand in China. The flag carrier already flies to Beijing, Shanghai, Guangzhou and Hong Kong, and is keen to tap into more emerging markets. www.aci-apa.com
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SRILANKAN AIRLINES
However, modest origin-and-destination traffic from China to Sri Lanka has until recently necessitated stopovers in Bangkok on all four routes, with Beijing and Shanghai being upgraded to nonstop services in March. Only one in 10 passengers flying with the carrier from China actually sets foot in Colombo, with most either disembarking in Thailand or continuing on to the Maldives. “Right now, we offer Colombo and Malé [the Maldivian capital] for the Chinese. I think this can be scaled up,” Chandrasena says. “China is an enabling market for us. It’s a growing market, and we have a clean sheet approach.” Attracting more Chinese passengers will again require SriLankan Airlines to develop its hub model. But unlike the regional proposition that benefits oneworld, Chinese travellers are likely to continue their journeys further west to Africa. Chinese enterprises provide more than $30 billion of capital inflows to the continent each year, with annual trade between the two sides ballooning from $10 billion at the turn of the century to about $200 billion in 2012. “We see major high-volume traffic flows between Asia and Africa, and especially China and Africa, given the Chinese investment in the continent,” Chandrasena explains. For now, efforts to capitalise on this geographical advantage are largely at the “market evaluation and modelling stage”.
GOVERNMENT FUNDING
Talking about SriLankan’s network in general, Chandrasena notes: “The markets we serve are very competitive, so we have to be very smart in what we do, but we are making the right decisions, and the signs so far are encouraging.” APA Issue 1, 2014
His optimism appears to be matched by shareholder, the Sri Lankan government. Colombo has already injected $225 million into the flag carrier over the past two years, and bridging facilities for a further $275 million are now being arranged. Much of the financing is going towards an upcoming fleet renewal. The flag carrier will receive six A330-300s between October 2014 and the end of 2015, allowing it to replace its existing A340s. Seven A350s will then start arriving in 2017, paving the way for the eventual replacement of its existing A330-200s. On the narrowbody front, two of the airline’s eight A320s will be replaced with leased A321s in 2014. “The next replacements will be the A321neos,” Chandrasena says, alluding to subsequent long-term orders. Mihin Lanka also operates two A321s and one A320, and will receive two B737-800s in 2015. Despite deepening its losses to $171 million in 2012/13, SriLankan Airlines’ net margin has improved. The country’s target of attracting 2.5 million tourists by 2016 is ambitious, but will be buoyed by an improving global economy. With oneworld also delivering synergies, the flag carrier is hopeful of entering the black around 2017. That would mark the first time it has been profitable since 2007, when the global financial crisis struck and Sri Lanka’s civil war intensified. “I’m really optimistic about the future of Sri Lanka. I think it’s going in the right direction,” Chandrasena concludes. “As a national carrier we have to provide the leadership and drive the growth. We are very challenged and encouraged with APA this opportunity.”
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FINAL WORD POINTS OF VIEW
Points of view Asia-Pacific Airports meets Martin Craigs, CEO of the Pacific Asia Travel Association (PATA). Does aviation face a losing battle in its bid to prove to the public that it can be environmentally friendly? Expansion of our membership is key. We aim to better leverage our strategic partners, such as Routes, Mytravelresearch.com, PhoCusWright, Visa, and Amadeus, to name a few. When we do that, our members and the industry at large can build better businesses. We are looking forward to a successful Pacific Asia Indigenous Tourism Symposium in New Zealand and a robust PATA Travel Mart in Cambodia in September, along with six Hub City Forums and two more PATAcademies.
What is your view on the ASEAN Open Skies initiative?
PATA has done a case study on air liberalisation in ASEAN with mytravelresearch.com. Asia has shown stellar growth over the past 10 to 15 years. The very size of this growth tends to obscure two important questions – could this growth have been even higher? And could the benefits have been more widely dispersed? The answer to both is ‘yes’. ASEAN aspires to full deregulation by 2015 but most observers expect this target to be missed. It is critically important to provide a revised timetable for the full integration that is both ambitious and realistic, with clear intermediate milestones.
What impact have low-cost airlines had on travel in the Asia-Pacific region?
I was going to write a thesis on this in 2002/03, when I was working for Tony Fernandes, for whom I still have the greatest APA Issue 3 1 2013
respect. LCCs have had a massive impact but we shouldn’t forget that the so-called legacy carriers still provide an essential service, because they lift so much of the freight, as well as 75% of the passengers. Low-cost carriers are not a panacea. We are not going to get to the point where they are 100% of the market, because legacy carriers provide interconnectivity and plenty of belly space. Low-cost doesn’t work long-haul, either. Even Tony Fernandes is accepting this. You can just about make medium-haul work, with some innovative offerings in the cabin. It is a huge phenomena but low-cost is not an automatic success. If it is well executed, as evidenced by AirAsia, then it works.
How important is it for the industry to become greener and more environmentally sustainable?
“The industry is very responsible and proactive on this issue. It is now the turn of governments to be more balanced on the issue, when it comes to taxation. Governments trust the industry to self-regulate on the issue of safety and we do that very well. It is in the industry’s interests to burn less fuel. You are going to do that for commercial reasons. It is blindingly obvious.
What does the future hold for the aviation industry in Pacific Asia?
It is a massive opportunity but also a massive challenge. We can’t just drool over the hardware and the sales. Airshows tend to be that kind of event.
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MARTIN CRAIGS
AGE: JOB TITLE:
57 CEO of Pacific Asia Travel Association (PATA)
NATIONALITY: British/Irish.
T FACX BO
BEST KNOWN FOR: LITTLE KNOWN FACT:
Leadership of Saab Aircraft’s Asia-Pacific office from 19851997.
He co-anchored CNBC’s Square Box aviation special in Singapore in February 2011.
But aside from the sales, the message at Farnborough was that the world needs more than a million new pilots and certified engineers to be able to operate the capacity that is currently being built. Some deliveries have already been delayed – it is already a big issue.
Have any regions outperformed your forecasts with their growth?
Our forecasts, done together with PATA’s Strategic Intelligence Centre and the Hong Kong Polytechnic University School of Hotel and Tourism Management, tend to be accurate, so we don’t get surprised often. That said, the ASEAN countries of South East Asia have consistently hit double-digit growth for quite a few years. Outbound growth from Russia is staggering. Australia’s economy stayed resilient throughout the global downturn, as did China. India as an outbound force has always commanded respect but inbound growth has been marginal at best recently. India needs to reform aspects of its aviation and hotel industries to free up investment and make prices more competitive.
What is your strategic partnership with Routes aimed at achieving? Routes is one of the most important partnerships that PATA has, and the event is one of the most impressive that I have
attended in 30 years in aviation and travel. It attracts the key people that PATA is interested to have as members. A key opportunity that I have already identified and discussed with numerous parties is to work with Routes to develop the air connectivity between Latin America and Asia. The partnership allows us to explore ways of using both organisations’ strengths to support, influence and broaden our networks by sharing research and other information. PATAmPower, our online data research tool, enables users to gain an immediate snapshot of past and future trends in aviation and tourism and provides our members with constantly updated data on their mobile devices or desktops.
How is PATA involved in the recovery efforts in the Philippines?
PATA Foundation chair, Mario Hardy, and executive board member, Andrew Jones, went to Cebu within days of the typhoon to work with local charities, distribute aid and send reports back to PATA HQ. Immediately after Haiyan, the PATA Foundation launched an appeal to its members and the tourism community worldwide. Support came from all sectors and regions and many PATA Chapters got together and organised fundraising activities, some of which are still ongoing. The PATA Foundation has APA raised more than $33,000. www.aci-apa.com
FINAL WORD POINTS OF VIEW
NAME:
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Justin Burns takes a closer look at a pioneering solar power project at Kuala Lumpur International Airport.
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solar power system has been installed at Kuala Lumpur International Airport, which is expected to save it around $627,000 annually in energy costs. Airport operator, Malaysia Airports Holdings Berhad (MAHB), enlisted solar power technology manufacturer, SunEdison, for the project. The 19MW direct current installation is the largest in Malaysia and aims to maximise electricity savings and return on investment, while minimising the use of space. Tan Sri Bashir Ahmad Abdul Majid, MAHB managing director, says: “Malaysia has an ideal climate for solar power and therefore we are taking steps to generate clean energy, which will be beneficial to everyone in Malaysia. “We are working with SunEdison to ensure our efforts produce the results we expect.” SunEdison faced a significant challenge generating the maximum return on investment for Malaysia Airports, while working with the limited space available in the airport. Their solution was to install ground-mount, parking canopy and roof-top systems on airport land that was not suitable for other revenuegenerating activity. Parking canopies combine the advantages of covered parking with the financial benefit of generating electricity at an economical and predictable price.
Utilising airport roof-top space and the land surrounding the airport allows electricity to be generated at the point of consumption, removing the need for costly transmission lines. Tan Sri Bashir adds: “Rooftops, parking lots and ‘buffer’ areas at airports are traditionally not multi-purpose facilities, but we’ve turned them into a clean energy generation facility. “This initiative also demonstrates our support towards the government’s initiative in introducing renewable energy and also to further reduce carbon footprint.” The SunEdison Renewable Operation Center (ROC) will provide 24/7 solar system management and monitoring services to ensure the installation continues to perform as expected over the system’s lifetime. Pashupathy Gopalan, SunEdison president for Asia, the Middle East, South Africa, and Australia, says: “In working with Malaysia Airports, we were able to help them make money from an under-utilised asset they already had - these spaces can now be harnessed to generate clean energy. “The energy savings, combined with the positive environmental contributions from a solar installation of this size, make this a great step forward for the airport industry and a huge APA benefit for the local community.” www.aci-apa.com
ENVIRONMENT NEWS
ENVIRO REPORT
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CONSTRUCTION NEWS
DESIGN & BUILD
Bahrain International Airport
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ahrain International Airport is to be modernised and expanded and Aéroports de Paris Ingénierie (ADPi) has won the contract to map out its future. The Bahrain transport ministry and the airport operator, Bahrain Airport Company (BAC), have selected ADPi, a wholly-owned subsidiary of Aéroports de Paris, to fulfil two missions. These include conducting all studies on the development of the airport over the next 20 years, determining airport functional zones, performing related financial assessments, and evaluating traffic and environmental impact. As part of this, ADPi will provide preliminary specifications for work on associated infrastructure, roads, and utility connections. The design studies must allow the development and adaptation of the airport site to future growth, as well as possible relocation of activities to a new airport with greater capacity in 20 years. ADPi will also design and supervise construction of a new passenger terminal of more than 150,000sqm, based on the initial findings of studies in the master plan. “The building’s shape is inspired by the aerodynamic design of race cars, a subtle reference to the Bahrain Formula 1 Grand Prix, a major attraction in the region,” states ADPi.
APA Issue 1, 2014
KEY FACTS Project: New passenger terminal and facilities revamp Delivery date: 2018 Contractor: Aéroports de Paris Ingénierie (ADPi)
The missions will be carried out over a five-year period and they are expected to generate around €25 million in revenue for ADPi. Construction of the new terminal should begin in late 2014 and is scheduled to be completed in late 2018. Guillaume Sauvé, CEO of ADPi, says: “The international airport is of fundamental importance to the Kingdom of Bahrain. “Over the last few decades, the kingdom, whose history ties it to the great Mesopotamian civilizations, has become a major centre for finance and trading. “Valued at over €500 million, this initial phase of airport modernisation is considered to be the largest Bahraini project now under way. “Therefore, this is a major contract for ADPi, whose expertise in architecture and engineering is well recognised in this part of the world because of the many achievements we have worked on.” Bahrain International handles nine million passengers a year, but after an initial expansion phase, will be able to receive 13 million passengers.
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CONSTRUCTION NEWS
Abu Dhabi International Airport
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he February 5 completion of the assembly of its first steel arch means that Abu Dhabi International Airport’s $2.9 billion Midfield Terminal Building (MTB) is a step closer to reality. Abu Dhabi Airports Company (ADAC) claims that the milestone event demonstrates that the project remains on schedule, and that the ‘gateway-transforming’ facility will open as planned in 2017. The iconic design of the 30mppa capacity MTB is directly connected to the engineering concept behind these steel arches. Each arch rises above its base in an incline format, rather than the vertical design that is commonly used, and spans over a considerable length, with the largest arch reaching 180 metres in length. Speaking on February 5, ADAC’s CEO, Tony Douglas, enthused: “This is a proud moment for Abu Dhabi Airports as it allows the whole world now to witness the hard work we have committed ourselves to, and the masterpiece we are striving to deliver for Abu Dhabi and the UAE.
KEY FACTS Project: New Midfield Terminal Building Delivery date: 2017 Key players: TAV, Greek Consolidated Contractors Company and Arabtec
“The achievement today, in spite of its architectural complexity, is being delivered 20 days ahead of schedule which again confirms that the MTB will be delivered on time and on budget.” The first arch that has been erected is one of 18 to make up the steel primary structure for the MTB roof. This specific arch spans over 120 metres and weighs around 200 tonnes, whereas the biggest arch is to be 180m in length and will weigh around 300 tonnes. By the end of 2014, all 18 arches will be completed and assembled. The 700,000sqm site is being built by a joint venture between Turkish construction company, TAV; Greek Consolidated Contractors Company; and Arabtec. The MTB is destined to become the gateway to Abu Dhabi and the future home of Etihad Airways, and is expected to handle close to 30 million passengers in its first year of operations. www.aci-apa.com
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WBP NEWS
WORLD BUSINESS PARTNERS
IN THE SPOTLIGHT FOURTH CHINA PROJECT FOR INTERSYSTEMS Yichang Sanxia Airport’s Flight Information Display System (FIDS) is to be upgraded by Intersystems. The gateway, operated by the HNA Group, is to enhance its existing system with Intersystems’ RapidFIDS solution. Intersystems, which designs and installs airport information management systems, successfully implemented RapidFIDS at Haikou Meilan International Airport in early 2013. Like Yichang Sanxia, Haikou Meilan is also operated by the HNA Group, which is now the third largest airport investment management group in China, operating 16 airports across the country. “Our vision is to be the partner of choice for airports worldwide, and HNA Group selecting us for a second time represents that vision in action,” commented Bruce Allen, CEO of Intersystems. The Yichang Sanxia Airport project is being delivered in conjunction with NCS China and is on schedule to be delivered in 2014, with works still to be completed on-site including display installations and site commissioning. “Works able to be done remotely are progressing; we’ve set up the FIDS servers and applications and completed our factory testing,” comments Simon Fu, Intersystems Asia operations manager. “Once we have the greenlight to perform our on-site works, we will be able to finalise the project.” APA Issue 1, 2014
CIRCUS CIRCUS A recent promotion by DFS Singapore at Changi’s Terminal 2 offered passengers the chance to go to a travelling circus with a difference – the star performer was the ringmaster who poured visitors a bespoke Hendrick’s Gin cocktail. The fun was had at the world’s first ever Hendrick’s Marvellous Miniature Circus, which was the brainchild of DFS Singapore and William Grant & Sons (WGS). Speaking in jest, WGS Asia-Pacific’s travel retail director, Scott Hamilton, says: “Our ringmaster interviewed 399 sword swallowers and tested 201 knife throwers personally before forming a troupe of great eccentricity and individuality.” “ Parker Gundersen, general manager of DFS Singapore, says: “To remain relevant to travellers, we need to constantly elevate the experience and surprise them with something they’ve never seen before. “The circus is an excellent example of the creativity we like to showcase at Changi, and we truly appreciate the energy and passion the team from William Grant & Sons has put into making this promotion a reality.”
ASIA-PACIFIC AIRPORTS MAGAZINE
NEW SHAREHOLDER FOR GLIDEPATH’S US SUBSIDIARY BEUMER Corporation has announced the acquisition of a 60% interest in Glidepath LLC, a designer, manufacturer and integrator of airport baggage handling systems. Glidepath LLC is based in Dallas, Texas, and was previously a wholly-owned subsidiary of Glidepath Limited, based in New Zealand. It will become part of BEUMER Corporation’s Airports Segment in the United States, Mexico and the Bahamas, and adds a diverse range of baggage handling components and systems to BEUMER’s baggage handling solutions portfolio. Sir Ken Stevens, chairman of Glidepath
Group, says: “I believe this a truly significant event for not only Glidepath and its US staff, but also for the baggage handling industry. “The combined expertise and technology to be offered by BEUMER Glidepath will ensure that it is at the forefront of the industry and will enable the company to offer our clients turnkey and integrated baggage handling solutions for small, medium and large projects.”
WBP PROFILES Golcon Limited Contact: Tony Gollin, director Address: PO Box 259234, Botany Auckland 2163, New Zealand Tel: +64 21 474 678 Email: tony.gollin@golcon.co.nz Website: www.golcon.co.nz Golcon can provide support in a number of ways such as strategic planning, facilitation and security services, executive mentoring and airport business optimising in areas such as outsourcing and airport concession development, corporatisation and privatisation, which can be provided at either government or airport level as appropriate. Principal, Tony Gollin, has a long association with the ACI family, both in Asia-Pacific and in Europe, and prior to that with the Airport Operators Council International (AOCI). ISS Facility Services Contact: Greg Gately, executive general manager Address: Unit 13/58 Metroplex Avenue, Brisbane 4172, Australia Tel: +64 21 474 678 Email: greg.gately@au.issworld.com Website: +61 419 213 664 With a team of almost 15,000 people operating throughout Australia, ISS is one of the country’s largest facility service providers with annual revenue approaching A$1 billion. Our employees are often the first point of contact for passengers and you can depend on us to protect their security and provide a safe, clean environment. Our point of difference is our proven ability to deliver a people solution: staff who are well presented, well trained, and who “go the extra mile” to deliver an outstanding service. www.aci-apa.com
WBP NEWS
LATIN RHYTHM Arup has revealed that it assisted the Airports of the Future consortium – formed by the Brazilian construction firm, Odebrecht, and the Singaporean operator, Changi Airport Group (CAG) – to win the recent auction of the Rio de Janeiro International Airport, known as Galeão. Held in São Paulo, the consortium successfully bid $8 billion for the 25-year concession. Working alongside the consortium for more than a year, Arup developed the master plan of the airport; detailed the project phases; gathered information about air traffic forecasts; calculated the amount of material required for the execution of the project; and assisted in the evaluation of the existing airport conditions for the bid preparation. “Increasingly, airport development is being implemented by the private sector,” says Regine Weston, Arup’s project director and principal aviation consultant. “We are privileged to work around the globe with airports, airlines and private groups, such as Airports of the Future, who are committed to developing world class airports to serve their local communities.”
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SOCIAL MEDIA
Being social Digital Jungle CEO, Dr Matthew McDougall, reflects on the importance of catering to Chinese travellers.
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ast year, Chinese tourists overtook their peers from the US and Germany as the world’s biggest spending international travellers, paying out more than $103 billion on their travels. Indeed, as an ever-increasing number of Chinese tourists travel abroad, marketers from airlines, hotels, restaurants and transportation (rental cars) are all scrambling to accommodate these new international travellers, causing a massive shift in the way the hospitality and travel industries think, operate and spend. But in this mad dash, many appear to have overlooked the initial point of contact – airports.
FIRST IMPRESSIONS
Airports, after all, are usually the first experience Chinese tourists have of a foreign destination. They may also represent the first opportunity for domestic marketers to interact with Chinese tourists and for airports to create loyal customers. It is a well-documented practice for airports to use social media marketing, but less than 1% of airports worldwide are active on Chinese social media sites. Airlines, hotels and other players in the hospitality industry are actively engaging these international travellers on Chinese social media sites – some, such as Qatar Airways, with great success – so, what’s stopping airports? Airports should be engaging with and providing valuable information to Chinese tourists on a regular basis. Creating Chinese language apps that help tourists navigate the airport with ease or linking with tourists through WeChat – effectively allowing them to send welcome messages directly to new arrivals or direct them to the nearest duty free APA Issue 1, 2014
shop before departure – are just a few ways airports could engage in social media marketing with the Chinese tourist.
CUSTOMER ENGAGEMENT
According to TripAdvisor, 91% of travellers post pictures of vacations, 57% post status updates and 34% check-in while travelling. Additionally, it says, 75% of business travellers log on to airport Wi-Fi when it is free. However, in the world of the connected traveller, it’s not just about making guests happy with free Wi-Fi or Chinese language information in shopping centres. It is about actively engaging in social media to help airports win and retain customers. Singapore Changi, Hong Kong and Melbourne are among the more high profile airports to embrace interaction on social media and as a result already has over 100,000 followers on Sina Weibo.
LISTEN AND LEARN
In essence, these airports are listening to what connected passengers are saying about travel, and specifically what they are saying about the airports they travel though. Social media marketing is about communicating and actively participating in conversations. The new push is to attract international Chinese tourists, but how can companies communicate and converse with them if they are not on the same platforms? Social media marketing will give airports that are willing to engage with Chinese tourists an advantage. Chinese tourists are some of the most connected travellers in the world and airports that are willing to listen and connect with them will become the new transit hubs for APA the international Chinese jetsetter.