Nagging Dilemmas in Airport Expansion (and how to deal with them)

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Nagging Dilemmas in Airport Expansion (and how to deal with them)

  1. 1. T: +65 6722 9388 F: +65 6720 3804 - David Wilson, COO of Edinburgh Airport and a speaker at the Airfield Engineering and Asset Maintenance 2013 E: enquiry@iqpc.com.sg W: www.airfieldengineering.com Recent reports from the aviation industry put Asia Pacific as the top region to conquer world traffic by 2030. According to Airbus’ Global Market Forecast 2011-2030, “North America, which still dominates world traffic today, will be overtaken by the AsiaPacific region by 2030, making this dynamic region the world’s largest air travel market. For instance, traffic within the AsiaPacific region will represent 25% of total traffic in twenty years, up from 19% in 2010. On a global scale, the trend shows an upward swing in passenger traffic propelled mainly by the high degree of urbanisation happening at a rapid pace. Global Market Forecast 2011-2030 by Airbus explains: “For the first time in history, more than half of world’s population, 3.5 billion people, lives in urban centers. By 2030, 59%, ~5 billion
  2. 2. T: +65 6722 9388 F: +65 6720 3804 E: enquiry@iqpc.com.sg W: www.airfieldengineering.com people will live in cities. During the next two decades, developing countries will absorb nearly a billion additional urban dwellers with China (900 million city dwellers) and India (600 million) leading the way. Rates of urban growth in developing countries have been higher than that of developed countries. “Cities have become the main driver of globalization and the engine of economic growth. They have quickly transformed their economies through international trade, attracting large multinational corporations, international media and foreign tourism. Importantly, a rise in urban population has historically led to an increase in per capita GDP, a key driver for aviation. “According to a Mc Kinsey Global Institute study, cities on average, account for more than 50% of gross domestic product in almost all countries. In fact, urbanization provides crucial opportunities for people in search of higher income and a better standard of living. World GDP is becoming less unequally distributed as globalization and urbanization proceed.” The report further continues: “As globalization blurs national borders and intensifies competition, cities from the developing world, such as Shanghai, Beijing, Seoul, Mumbai, Delhi, Dubai are also quickly becoming economic giants, in turn attracting a high number of air traffic passengers. The emergence of global cities and global companies will increase the demand and connectivity between cities and will drive the shape and development of the air transport.” This in turn, will necessitate the need for airport expansion that must be planned and studied, today. Nagging Dilemmas But while airport expansion seems logical, execution of plans could be a totally different thing as important, and sometimes conflicting issues, emerge. Among the top dilemmas faced by airport operators include: Cost of capital vis-à-vis improved ROI Cost of capital is always an issue, no doubt about that. The conflict sometimes arise when justifying
  3. 3. T: +65 6722 9388 F: +65 6720 3804 return on investment (ROI) as this will always be the first question that will be asked. In dealing with this issue, industry experts opine that it is important to understand your airport and region. This may sound straightforward, but to truly develop the economic growth of emerging airport, it is important to understand your airport inside out. This means not only its internal challenges, operations and staff, but also how the airport fits with other external factors and overall regional development. According to David Wilson, Chief Operating Officer of Edinburgh Airport, “return on investment can be quite challenging in the current economic climate, certainly in the European economic sector at present. We have to balance the cost of capital projects with likely income and growth that we anticipate and forecast. Airport expansion vis-à-vis airline expansion When deciding airport expansion, it is necessary to keep it aligned with the airline expansion plans. Working with the airline to anticipate in advance, what type of fleet replacement plans they have and if they are going to upsize the type of aircraft that they operate, for example, 737 up to 757 or a E: enquiry@iqpc.com.sg W: www.airfieldengineering.com Boeing 777. Edinburgh Airport’s Mr. Wilson also added: “Ensuring that the infrastructure meets airline growth plans and anticipating both the passenger numbers and the aircraft size ensures our taxiways and stand meet the needs of specific aircraft size and dimensions. “Therefore, we have to be very focused on the future plans of our airline customers to ensure that we have the appropriate infrastructure in place,” he concludes. Airport security vis-à-vis passenger experience With the recent high profile security lapses that happened in some of the biggest airports in the world, the focus on security couldn’t be overemphasized. In the US, implementation of full body scanners at its busiest airports has caused much furor among its air traffic passengers. The issue of security is not only confined in the US as different regions in the world also have to deal with the same nagging dilemma. According to Andrew Mc Clumpha, Director of Leigh Fisher, a noted airport consulting firm, in a recent interview, “With tremendous increase in traffic at the region’s airports, it is vitally important that security staffs handling various security screening procedures are able to do so in an error tolerant and threat mitigating manner. Awareness of the importance of ensuring foolproof security while at the same time providing passengers with efficient service is continually, and even more so, of the utmost importance,” Economic benefits vis-à-vis environmental concerns In the next five years, China will invest over 1.5 trillion yuan (US$235 billion) to transform its civil aviation industry. Of this amount, 425 billion yuan (US$ 66.6) is estimated to be spent in airport construction. This staggering amount is expected to boost China’s economy as well as improve its strategic importance within the region, if not, globally. And this is just one example. Similar examples can be found across the different regions of the world as an airport can be a significant economic driver for regional growth, and vice versa. However, this is not as straightforward as it seems. Concerns about the residual impact of such developments abound. Some quarters point out that it is a quality of life issue, mainly due to noise and pollution, which has a wider environmental impact. The negative effects of exposure to excessively-loud noise and pollution, which tend to affect the residents nearby, have been well documented. The work to reduce the environmental impact must be done therefore, consistently and treated as top priority within the airport management.
  4. 4. Learn more about the Best Practices and Technological Innovations in Airfield Expansions and Maintenance to Ensure Operational Efficiency and Safety at the Airfield Engineering and Asset Maintenance 2013 on 18-19 June in Hong Kong. Book now! www.airfieldengineering.com Disclaimer: Please note that we do all we can to ensure accuracy and timeliness of the information presented herein but errors may still understandably occur in some cases. If you believe that a serious inaccuracy has been made, please email darwin.mariano@iqpc.com.sg. This article is provided for information purposes only. IQPC accepts no responsibility whatsoever for any direct or indirect losses arising from the use of this report or its contents.

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