CHARM OFFENSIVE - Orient Aviation

s p e c i a l r e p o r tthe latest Airport Retail Study published byconsultants Arthur Anderson. Analysis ofthe retail performance of 31 internationalairports that handle 968 million passengersannually, 30% of the world total, showedtheir gross retail sales through 4,965 outletswere US$11.9 billion.Airlines believe since passengers arepassing through airports to catch their flights,all revenue should be taken into accountwhen their fees are calculated.At the heart of the airline versus airportcharging debate is a disagreement overwhether fees for airlines should be workedout on the basis of the so-called “single till”or “dual till” system.Airlines argue money from non-aeronauticalactivities – retail, parking and otherrevenue – should be lumped together withaeronautical income into a single total andtheir fees determined on that basis. Airportswant the two kept separate and the fees paidby airlines worked out solely on the return oninvestment based on aeronautical charges.“The airline argument is if you consolidatedall of those revenues then they wouldpay less. What it completely ignores is thatthe airport has got to provide some way ofattracting investment capital so it can expandand do what it needs to do,” said Howe.The ACI has seen dramatic evidence of thisin work done on airport privatisations. “Whatthe bond rating companies, the investmentbankers and others are looking for in theinvestment appeal of an airport is if it has anattractive, stable non-aeronautical revenuebase,” said the director general.“People understand an airline can comein today and go tomorrow and if an airlineall of a sudden pulls out that obviously hasa dramatic affect on the revenue base of anairport. Diversification of the revenue base iswhat really makes the airport viable in a commercialsense from a long-term standpoint.The airlines must understand that this revenuebase is in their best interests just as it is in theairports’ best interests.”But how does he feel when an airport announcesit is proposing to double its chargesas was the case with Sydney Airport? “I amfamiliar with what happened in Sydneybecause we did some statistical analysis forthem. For an enormously long period of timeSydney’s fees were way, way, way belowthose charged at the average comparableairport, particularly in Europe. So the airlineswere getting a heck of a good deal. The airlineswere in effect being subsidised by otherforms of revenue,” said Howe.He argued new airports on greenfieldHowe, a manof many partsJonathan Howe has not always been anairport man. He began his aviationcareer nearly 40 years ago when hereceived his first pilot’s licence in Santiago,Chile. Since then, he has been involved inalmost every aspect of the business as apilot, lawyer and administrator.During his many years with the U.S.Federal Aviation Administration (FAA) heoversaw the certification of new aircraft,directed the FAA’s legal and regulatoryactivities and was administrator of theauthority’s largest region.During this time he played a pivotalrole in the first widespread use of satellitesand implemented an airspace system planfor the Caribbean and Central America.After leaving the FAA in 1986, Howebecame president and chief executiveofficer of the National Business AircraftAssociation (NBAA), headquartered inWashington DC.Before joining ACI in 1997, Howe wasa partner in the Washington DC law firmof Zuckert, Scoutt & Rasenberger wherehe was involved in the firm’s extensiveinternational aviation practice.sites also represent risk for airport investorsand airlines can hardly complain aboutincreased fees when there is enormouscapital investment involved, such as at HongKong’s Chek Lap Kok and Japan’s New Kansaiairports.The new airport at Denver, Colorado,is an example. “When they set out to buildit the two principal users were United andContinental Airlines and both said: yes, we’llagree to what this entails. Yet when theyfinally got it built and charged fees high byU.S. standards, Continental said goodbye andpulled out.“That’s the problem an airport has. Theydo it with the knowledge and commitmentof the airlines and then all of a sudden theairline decides to go somewhere else. They’releft holding the bag and in Denver’s case thatwas a big blow.“When airlines start talking about airportsbeing monopolies and that they don’treally have any control, the airlines have anenormous amount of control because airportscannot move their assets around whereas theairlines can move them around.”Howe believed it would be extremelydifficult to come up with a common standardfor airport charging. “The first problem is youare dealing with different currencies and costbases. I don’t know if it would be possible tocome up with a uniform system. At least inthe near term it is going to be between anairport, or at least a group of airports, and agroup of airlines.”Airports have a host of issues to confrontin their efforts to meet the rising demand formore capacity, including air traffic control(ATC) congestion, the environment andcapacity constraints.Older airports around the world – suchas London Heathrow, Amsterdam’s Schiphol,Los Angeles and Sydney – are under severepressure, but have little space available to addcapacity. “You have to look at other alternatives.You face such issues as how long it takesto build a new airport and raising the money.All over the world you have to jump throughhoops to satisfy all kinds of federal, state andlocal requirements,” said Howe.There is no doubt that without environmentalconstraints – curfews, noise limitations,movement caps – there could be anenormous increase in the capacity of a numberof airports around the world, he added.An airport was unlikely to want toinvest a large amount of capital expandingin infrastructure if it is going to have an environmentalcap or ATC limitations, said Howe.“Airports will do their utmost to try to expandtheir infrastructure, but there is no point inthem trying to do it alone. We have to havethe ability to squeeze more real time capacityout of the ATC system and out of relaxingenvironmental restrictions.”He is not advocating wholesale relaxingof limits. “Airports want to be responsibleneighbours. They understand noiseproblems.“For instance, the airports of Korea havea wonderful programme of working withtheir neighbours as has Japan’s Narita airport.Most major airports have such programmes.In many parts of the world the neighboursin closest proximity are on the side of theairport.“They are no longer the complainers. It’sthe people who live 30 miles from the airportwho end up protesting.”The problems of airport capacity aresolvable, but those involved must be realistic,he urged.“There are some things that are easier todo than others. The environmental side of italways has been about compromise. We arenot likely to ever find a perfect solution toevery place in the world in that area.”38 | Orient Aviation | September 2001