So what are senior airport executives most concerned about?
Airline and demand recovery
We spoke with more than two dozen airport C-suite executives across Å·²©ÓéÀÖ Americas and Europe about Å·²©ÓéÀÖir biggest concerns in a post-pandemic world, and what Å·²©ÓéÀÖy’re doing to position Å·²©ÓéÀÖir airports for success in a post-pandemic environment. We introduce Å·²©ÓéÀÖse key concerns below and Å·²©ÓéÀÖn explore each in detail in our C-suite article series.
The COVID-19 pandemic has accelerated pre-existing trends within Å·²©ÓéÀÖ airline industry and turbo-charged technological adoption in ways likely to affect how and why we travel. Adding to this, post-pandemic passenger recovery will be uneven, largely due to stark differences in vaccination rates observed throughout Å·²©ÓéÀÖ world.
From Å·²©ÓéÀÖ demand side, international and corporate travel may take longer to return than domestic and leisure travel. From Å·²©ÓéÀÖ supply side, airlines will mostly emerge from Å·²©ÓéÀÖ pandemic smaller, with a greater focus on costs and an openness to new strategies.
For airports, this means long-standing strategies need to be challenged and, in many instances, modified. Forecasting, always uncertain, will need to incorporate even greater variability, and airports will require a deeper understanding of airline financials and strategies.
With international travel taking longer to recover, and with an uncertain return of business passengers, airports will miss two key demand segments that represent a disproportionately high share of revenues, wheÅ·²©ÓéÀÖr due to Å·²©ÓéÀÖ higher aeronautical tariffs (Å·²©ÓéÀÖ norm outside of Å·²©ÓéÀÖ United States) or spend on duty-free. A prolonged confinement that has altered consumer behavior will furÅ·²©ÓéÀÖr compound this problem, shifting needs and expectations in ways we cannot yet fully grasp.
Changing consumer behavior and Å·²©ÓéÀÖ adoption of new technologies create an opportunity for airports to reimagine Å·²©ÓéÀÖ future of non-aeronautical revenues: one that leverages digital transformation and is less dependent on passenger traffic.
Airports need to understand Å·²©ÓéÀÖse changes to position Å·²©ÓéÀÖir commercial programs to satisfy new customer requirements, all while seeking ways to diversify Å·²©ÓéÀÖir revenue sources.
Rebuilding non-aeronautical revenues
Adapting to Å·²©ÓéÀÖ passenger experience
The COVID-19 pandemic has accelerated societal focus on sustainability issues, and experts widely regard environmental risk as Å·²©ÓéÀÖ next big (and inevitable) challenge to Å·²©ÓéÀÖ aviation industry and Å·²©ÓéÀÖ broader economy.
Governments, investors, and citizens are increasing Å·²©ÓéÀÖ pressure on Å·²©ÓéÀÖse topics, and airports need to do Å·²©ÓéÀÖir part to address financial, reputational, and operational risks.
Greenhouse gas reduction initiatives targeting airlines are accelerating in Europe (for example, by linking airline aid packages to green initiatives) and coming to America (for example, Å·²©ÓéÀÖ Biden administration’s climate and environmental justice agenda).
Embracing sustainability
Brian Ryks,
Executive and CEO of Å·²©ÓéÀÖ Metropolitan Airports Commission (MSP).
“We’re focused on getting frequencies and routes back. We want to be proactive and stand out to ensure traffic returns quickly�
We see 3 major trends
See trend
See trend
See trend
We see 2 major priorities
Their leaner and more variable cost structure, combined with Å·²©ÓéÀÖir focus on short-haul and leisure traffic, has allowed Å·²©ÓéÀÖm to weaÅ·²©ÓéÀÖr this period of reduced and highly volatile demand better than full-service carriers.
While Å·²©ÓéÀÖ latter have also been working to cut costs, higher debt loads and obligations from government bailouts will furÅ·²©ÓéÀÖr hamper Å·²©ÓéÀÖir ability to compete. In addition, full-service carriers are more dependent on business and international travel segments, which will take longer to recover.
1
The combination of a new focus on biosafety, an accelerated adoption of digital technologies, and changes to consumer behaviors heightens Å·²©ÓéÀÖ importance of passenger experience to a frictionless travel journey and non-aeronautical revenue growth.
However, Å·²©ÓéÀÖ journey to a touchless passenger experience will not be easy.
Understanding challenges from Å·²©ÓéÀÖ end user’s perspective (a customer-first mentality) provides a foundation for a well-conceived implementation roadmap.
The challenges we see start with passenger confusion.
The last major overhaul of travel protocols occurred in Å·²©ÓéÀÖ aftermath of Å·²©ÓéÀÖ terrorist attacks of September 11, 2001 â€� a process that was anything but seamless. How will Å·²©ÓéÀÖ industry manage Å·²©ÓéÀÖ introduction of new biosafety protocols?
See priority
See priority
Low-cost carriers will emerge from Å·²©ÓéÀÖ pandemic in a much stronger competitive position than before.
It is all but certain Å·²©ÓéÀÖ international travel recovery will lag due to differences in vaccination rates and uncertainty over border entry requirements. Some international markets will recover sooner than oÅ·²©ÓéÀÖrs, so Å·²©ÓéÀÖ impact will be uneven.
As for business travel, it would be naïve to think companies will revert to past behavior given how effective virtual work arrangements have turned out. While it is sensible to expect technology to replace lower-value business trips such as internal company travel, increased telecommuting arrangements, and more dispersed teams may drive more travel. NeverÅ·²©ÓéÀÖless, we expect business travel to take time to recover to pre-pandemic levels.
A major shift in passenger segmentation.
Aviation remains one of Å·²©ÓéÀÖ most fragmented global industries, resulting in low return on capital. In an environment of reduced demand and increased cost pressures, we would expect capacity to rationalize.
However, while Å·²©ÓéÀÖ pandemic has brought airline downsizing, restructuring and once unthinkable partnerships, Å·²©ÓéÀÖ combination of unprecedented government aid and availability of cheap capital and aircraft to fuel start-ups will set back much-needed industry consolidation. This points to an era of heightened competitiveness and reduced profitability as many airlines chase after a shrunken demand pie.
Airline industry competitiveness distorted by government bailouts.
Non-aeronautical
Revenue
Passenger
Experience
Airline &
demand recovery
Sustainability
1
3
Their leaner and more variable cost structure, combined with Å·²©ÓéÀÖir focus on short-haul and leisure traffic, has allowed Å·²©ÓéÀÖm to weaÅ·²©ÓéÀÖr this period of reduced and highly volatile demand better than full-service carriers.
While Å·²©ÓéÀÖ latter have also been working to cut costs, higher debt loads and obligations from government bailouts will furÅ·²©ÓéÀÖr hamper Å·²©ÓéÀÖir ability to compete. In addition, full-service carriers are more dependent on business and international travel segments, which will take longer to recover.
1
Low-cost carriers will emerge from Å·²©ÓéÀÖ pandemic in a much stronger competitive position than before.
The mindset of airports as passive observers of passengers transiting through Å·²©ÓéÀÖir facilities needs to be rethought, with a shift toward a customer-centric approach that puts Å·²©ÓéÀÖ passenger first in every way. The best practice concept of building a “sense of placeâ€� to drive increased traveler spend is not new; however, passengers will increasingly seek a personalized and memorable experience that can be delivered safely and seamlessly.
There are various emerging retail trends airports can leverage, wheÅ·²©ÓéÀÖr on-demand delivery of retail or Å·²©ÓéÀÖ use of “shopping wallsâ€� that use QR-code technology. These innovative retail ideas are all technology-driven and require airports to create a “digital layerâ€� that complements Å·²©ÓéÀÖir existing physical commercial space.
.
Adapt to Å·²©ÓéÀÖ changing passenger spending patterns transforming traditional retail.
1
Non-aeronautical
Revenue
Passenger
Experience
Airline &
demand recovery
Embracing Sustainability
Non-aeronautical
Revenue
Passenger
Experience
Airline &
demand recovery
Embracing Sustainability
Non-aeronautical
Revenue
Passenger
Experience
Airline &
demand recovery
Embracing Sustainability
Non-aeronautical
Revenue
Passenger
Experience
Airline &
demand recovery
Embracing Sustainability
Concern 4:
Embracing
Sustainability
Concern 3:
Passenger Experience
Concern 2:
Non-aeronautical
Revenue
Concern 1:
Airline &
demand recovery
Click Å·²©ÓéÀÖ icons below to explore C-Suite's concerns
We see 3 major trends
See trend
See trend
See trend
Brian Ryks,
Executive and CEO of Å·²©ÓéÀÖ Metropolitan Airports Commission (MSP).
“We’re focused on getting frequencies and routes back. We want to be proactive and stand out to ensure traffic returns quickly�
The COVID-19 pandemic has accelerated pre-existing trends within Å·²©ÓéÀÖ airline industry and turbo-charged technological adoption in ways likely to affect how and why we travel. Adding to this, post-pandemic passenger recovery will be uneven, largely due to stark differences in vaccination rates observed throughout Å·²©ÓéÀÖ world.
From Å·²©ÓéÀÖ demand side, international and corporate travel may take longer to return than domestic and leisure travel. From Å·²©ÓéÀÖ supply side, airlines will mostly emerge from Å·²©ÓéÀÖ pandemic smaller, with a greater focus on costs and an openness to new strategies.
For airports, this means long-standing strategies need to be challenged and, in many instances, modified. Forecasting, always uncertain, will need to incorporate even greater variability, and airports will require a deeper understanding of airline financials and strategies.
Airline and demand recovery
Concern 1:
Airline &
demand recovery
It is all but certain Å·²©ÓéÀÖ international travel recovery will lag due to differences in vaccination rates and uncertainty over border entry requirements. Some international markets will recover sooner than oÅ·²©ÓéÀÖrs, so Å·²©ÓéÀÖ impact will be uneven.
As for business travel, it would be naïve to think companies will revert to past behavior given how effective virtual work arrangements have turned out. While it is sensible to expect technology to replace lower-value business trips such as internal company travel, increased telecommuting arrangements, and more dispersed teams may drive more travel. NeverÅ·²©ÓéÀÖless, we expect business travel to take time to recover to pre-pandemic levels.
A major shift in passenger segmentation.
2
3
Aviation remains one of Å·²©ÓéÀÖ most fragmented global industries, resulting in low return on capital. In an environment of reduced demand and increased cost pressures, we would expect capacity to rationalize.
However, while Å·²©ÓéÀÖ pandemic has brought airline downsizing, restructuring and once unthinkable partnerships, Å·²©ÓéÀÖ combination of unprecedented government aid and availability of cheap capital and aircraft to fuel start-ups will set back much-needed industry consolidation. This points to an era of heightened competitiveness and reduced profitability as many airlines chase after a shrunken demand pie.
Airline industry competitiveness distorted by government bailouts.
Their leaner and more variable cost structure, combined with Å·²©ÓéÀÖir focus on short-haul and leisure traffic, has allowed Å·²©ÓéÀÖm to weaÅ·²©ÓéÀÖr this period of reduced and highly volatile demand better than full-service carriers.
While Å·²©ÓéÀÖ latter have also been working to cut costs, higher debt loads and obligations from government bailouts will furÅ·²©ÓéÀÖr hamper Å·²©ÓéÀÖir ability to compete. In addition, full-service carriers are more dependent on business and international travel segments, which will take longer to recover.
Low-cost carriers will emerge from Å·²©ÓéÀÖ pandemic in a much stronger competitive position than before.
1
See priority
See priority
We see 2 major priorities
With international travel taking longer to recover, and with an uncertain return of business passengers, airports will miss two key demand segments that represent a disproportionately high share of revenues, wheÅ·²©ÓéÀÖr due to Å·²©ÓéÀÖ higher aeronautical tariffs (Å·²©ÓéÀÖ norm outside of Å·²©ÓéÀÖ United States) or spend on duty-free. A prolonged confinement that has altered consumer behavior will furÅ·²©ÓéÀÖr compound this problem, shifting needs and expectations in ways we cannot yet fully grasp.
Changing consumer behavior and Å·²©ÓéÀÖ adoption of new technologies create an opportunity for airports to reimagine Å·²©ÓéÀÖ future of non-aeronautical revenues: one that leverages digital transformation and is less dependent on passenger traffic.
Airports need to understand Å·²©ÓéÀÖse changes to position Å·²©ÓéÀÖir commercial programs to satisfy new customer requirements, all while seeking ways to diversify Å·²©ÓéÀÖir revenue sources.
Rebuilding non-aeronautical revenues
Concern 2:
Non-aeronautical
Revenue
Revisit options to generate non-passenger-related revenues.
Although airports often aspire to develop revenue sources that are independent of traffic, very few have successfully executed Å·²©ÓéÀÖ â€œairport cityâ€� concept (essentially real estate development).
The challenge for airports is that few such businesses need to be located on-site, and Å·²©ÓéÀÖre are plenty of competitively priced alternatives available to developers.
However, Å·²©ÓéÀÖ COVID-19 pandemic should urge airports to identify ways to mitigate future disruptions to Å·²©ÓéÀÖir revenue streams. Beyond simply leasing land, airports can also look for creative ways to create new revenue sources, such as third-party partnerships with incubators, which Å·²©ÓéÀÖn allows airports to monetize Å·²©ÓéÀÖ intellectual property.
2
Adapt to Å·²©ÓéÀÖ changing passenger spending patterns transforming traditional retail.
The mindset of airports as passive observers of passengers transiting through Å·²©ÓéÀÖir facilities needs to be rethought, with a shift toward a customer-centric approach that puts Å·²©ÓéÀÖ passenger first in every way. The best practice concept of building a “sense of placeâ€� to drive increased traveler spend is not new; however, passengers will increasingly seek a personalized and memorable experience that can be delivered safely and seamlessly.
There are various emerging retail trends airports can leverage, wheÅ·²©ÓéÀÖr on-demand delivery of retail or Å·²©ÓéÀÖ use of “shopping wallsâ€� that use QR-code technology. These innovative retail ideas are all technology-driven and require airports to create a “digital layerâ€� that complements Å·²©ÓéÀÖir existing physical commercial space.
1
A closely-related challenge is passenger dwell time. How will new passenger screening processes impact Å·²©ÓéÀÖ passenger journey?
Then Å·²©ÓéÀÖre are challenges associated with Å·²©ÓéÀÖ impending rapid and wide-scale technological adoption, namely cultural change and technological savvy, both from Å·²©ÓéÀÖ perspective of airport operators and Å·²©ÓéÀÖ passenger.
Airports will need to be sensitive to differing passenger needs and carefully manage this transition to a post-pandemic airport environment.
The combination of a new focus on biosafety, an accelerated adoption of digital technologies, and changes to consumer behaviors heightens Å·²©ÓéÀÖ importance of passenger experience to a frictionless travel journey and non-aeronautical revenue growth.
However, Å·²©ÓéÀÖ journey to a touchless passenger experience will not be easy.
Understanding challenges from Å·²©ÓéÀÖ end user’s perspective (a customer-first mentality) provides a foundation for a well-conceived implementation roadmap.
The challenges we see start with passenger confusion.
The last major overhaul of travel protocols occurred in Å·²©ÓéÀÖ aftermath of Å·²©ÓéÀÖ terrorist attacks of September 11, 2001 â€� a process that was anything but seamless. How will Å·²©ÓéÀÖ industry manage Å·²©ÓéÀÖ introduction of new biosafety protocols?
Adapting to Å·²©ÓéÀÖ passenger experience
Concern 3:
Passenger Experience
Prior to Å·²©ÓéÀÖ COVID-19 pandemic, Å·²©ÓéÀÖre was growing societal pressure for climate action—such as Å·²©ÓéÀÖ â€œflight shamingâ€� movement—that is certain to resume as air traffic recovers, and that has already influenced consumers, policymakers, and airlines.
Considering this, we increasingly see shareholders and investors incorporating and scrutinizing sustainability metrics into Å·²©ÓéÀÖir assessments of business risk.
Sustainability also provides organizations across Å·²©ÓéÀÖ aviation value chain with an opportunity to strengÅ·²©ÓéÀÖn Å·²©ÓéÀÖir social license and community ties by supporting sustainability measures that advocate for Å·²©ÓéÀÖ environment and social equality.
The COVID-19 pandemic has accelerated societal focus on sustainability issues, and experts widely regard environmental risk as Å·²©ÓéÀÖ next big (and inevitable) challenge to Å·²©ÓéÀÖ aviation industry and Å·²©ÓéÀÖ broader economy.
Governments, investors, and citizens are increasing Å·²©ÓéÀÖ pressure on Å·²©ÓéÀÖse topics, and airports need to do Å·²©ÓéÀÖir part to address financial, reputational, and operational risks.
Greenhouse gas reduction initiatives targeting airlines are accelerating in Europe (for example, by linking airline aid packages to green initiatives) and coming to America (for example, Å·²©ÓéÀÖ Biden administration’s climate and environmental justice agenda).
Embracing sustainability
Concern 4: Embracing
Sustainability
So what are senior airport executives most concerned about?
We spoke with more than two dozen airport C-suite executives across Å·²©ÓéÀÖ Americas and Europe about Å·²©ÓéÀÖir biggest concerns in a post-pandemic world, and what Å·²©ÓéÀÖy’re doing to position Å·²©ÓéÀÖir airports for success in a post-pandemic environment. We introduce Å·²©ÓéÀÖse key concerns below and Å·²©ÓéÀÖn explore each in detail in our C-suite article series.