Leading airports are now transforming into customer-led organizations, with real financial benefits and implications for their business models. L.E.K. experience has shown significant benefits from taking this kind of approach. This presentation looks at Australian and New Zealand airports in the context of this transformation - most have begun the journey, but there is further to go.

1. 23 November 2014
AAA National Conference 2014
Active Airport Management – Continuing the journey

2. © 2014 L.E.K. Consulting LLC. All rights reserved. 2AAA National Conference 2014. The Journey to Active Airport Management
Leading airports are now transforming into
customer-led organisations, with real
financial benefits and implications for their
business models

3. © 2014 L.E.K. Consulting LLC. All rights reserved. 3AAA National Conference 2014. The Journey to Active Airport Management
Map of
flights to
AU
Q logo
The active airport management journey
Gov’t owned
'Gateway'
‘Engineering led’
Operations Mgmt
‘Finance led’
Infrastructure Mgmt
‘Customer led' Active
Airport Management
…
…
CONFIDENTIAL
1
A high quality customer segmentation is essential to optimise the retail mix to
meet core passenger needs. Melbourne’s current understanding of its passengers
is limited. Developing a detailed segmentation will be an iterative process
Customer needs and perspective
Domestic vs International
2014
Route / Code
Defined customer segments
e.g. nationality,travel type &
route
Personal
segmentation
by individual
& trip
Commercial value
needs to be delivered
at each stage of the
segmentation
Melbourne Airport segmentation evolution
Local best
practices
CONFIDENTIAL
2
Passengers currently queue for c.30 minutes on average. Experience elsewhere
shows this is a lost opportunity for both the duration and quality of time
Analysis of Melbourne Airport data suggests that
higher airside dwell time can impact PSR
Lessons from other ports
Source: APAM data: F1rst Tax and Duty Free sales data from 06/03/2014 – 27/03/2014; APAM data: Dwell time from 06/03/2014 – 27/03/2014; L.E.K. experience and
analysis
C
6
7
7
9
1086420 973 51
Average wait time
(CY2011-13)
Minutes
Customs
Security
Bag check-in
Check-in
Priority
for queue
time
reduction
Average dwell time = 75
minutes, which represents
$1.6m of spend per dwell time
minute and c.$0.46 per dwell
time minute per passenger
CONFIDENTIAL
0
Airport design, operations and facilities should aim to maximise quality airside
dwell time, which can increase customers’ propensity to spend
Lessons from other ports
Customer journey
 Maximise airside ‘happy hour’
dwell time
“… If you can keep passengers in a
‘stress free state of mind’, they will
keep shopping until their plane
boards …”
Partner, Harrison:Fraser
 Create a relaxed and comfortable
customer mindset that maximises
passengers’ propensity to spend
“… Those managed well during the
check-in process will enter into the
perfect state of mind – happy
hour…Consumers with low levels
of stress, high levels of excitement
and an indescribable desire to
spend money …”
Partner, Harrison:Fraser
1
2
Boarding /
flight
Arrivals /
customs
Pickup
Research
& booking
Stress
Anticipation
/ excitement
Time
Arrival at
airport
Check-in
/ security
/ customs
‘Happy hour’
1
Source: L.E.K. research and interviews
2
Mindset
C

4. © 2014 L.E.K. Consulting LLC. All rights reserved. 4AAA National Conference 2014. The Journey to Active Airport Management
What do we mean by ‘Active Airport Management’?
Stakeholder Influence and Incentives
Strategic Partnerships
Information Collection and Sharing
Flexible
Contracts and Pricing
Active airport management requires a
new approach to managing old
businesses...
... and this approach can be applied
across the airport value chain
Retail
Parking
Property
Infrastructure
Operations
Aeronautical

5. © 2014 L.E.K. Consulting LLC. All rights reserved. 5AAA National Conference 2014. The Journey to Active Airport Management
Actively managing airport retail
Retail ‘Tenant'
Brand marketing
team
Airport ‘landlord’
Understanding of
passengers and passenger
journey
Airport
‘Centre
Manager’
Deep understanding of customer
segments and journey
Retail Partners
Deep understanding of
desired customers & sales
trends
Deep understanding of
desired customers
Digital
engagement
From… the ‘traditional’ retail landlord model
To … an active ‘Centre Manager’ retail model
Retail customers
Retail customers
Customer
interaction
Deep understand of
sales trends

6. © 2014 L.E.K. Consulting LLC. All rights reserved. 6AAA National Conference 2014. The Journey to Active Airport Management
Actively managing aeronautical demand and capacity
Aero utilisation
Reputation
FinancialOTP
1
2 3
4
Aeronautical
Dashboard
Monitoring frameworkStrategic toolkit
 Investment
 Rules
 Pricing
 Off-peak incentives
 Lobbying
 Demand management /
flexibility

7. © 2014 L.E.K. Consulting LLC. All rights reserved. 7AAA National Conference 2014. The Journey to Active Airport Management
ANZ airports have begun the journey, but
there is further to go …

8. © 2014 L.E.K. Consulting LLC. All rights reserved. 8AAA National Conference 2014. The Journey to Active Airport Management
ANZ airports have begun to actively manage retail operations,
but opportunities exist to play a larger ‘centre management’ role
Most ANZ airports today
Global airports
best practice
Other industries
Retail
 Extensive use of concept stores,
pop-ups, vending
 Marketplace hosting events to
engage passengers
 Airport partners with retailers in
customer engagement
 Airport drives tailored vouchers /
mobile app offers
 Retail-based gate allocation
 Maximise value of gate dwell time
 Frequent dialogue with retailers
at product level
 Focus on market share and size,
not just airport spend
 Largely tender-based portfolio
– “the market decides”
 Limited use of pop-up retail
and seasonal events
 Retailers own the customer
 Ops and retail separate
 Monthly dialogue around store
level performance
 Consistent centre led branding
on all platforms
 Sense of Place
 Co-ordinated, centre wide
campaigns and marketing
 Push notifications and offers
to shoppers in store vicinity
 Shared “catchment view” with
retailers to drive category
share
Passive / facilitation Active / leader
EnvironmentManagementMonitoring

9. © 2014 L.E.K. Consulting LLC. All rights reserved. 9AAA National Conference 2014. The Journey to Active Airport Management
Aeronautical, Operations & Infrastructure
Most ANZ airports today Best Practice
Operational focus Whole of airport / partnership focused
Opportunities exist for stronger partnerships with key
stakeholders, actively managing capacity and demand and
delivering innovative infrastructure
 Dedicated strict LCC infrastructure (30-minute
turnarounds, no bag transfer, CUSS)
 Shaping regulations to allow retail at pinch points
 ‘Load shedding’ arrangements
 Promotional deals to airlines and partners e.g.
free advertising with increased route frequency
 Cross-airport trade-off management
 Passenger tracking from car park to departure
enabling flow management
 Process automation through e-gates and self-
service check-in
 Common-user lounges available to all
international passengers
 Demand management through LCC pricing with
off-peak incentives and allocated runway slots to
airlines
 Collaborative working with tourism bodies and
government to drive traffic
 Separation of reporting (utilisation, delays,
reputation)
 Infrastructure, not passenger based
EnvironmentManagementMonitoring

10. © 2014 L.E.K. Consulting LLC. All rights reserved. 10AAA National Conference 2014. The Journey to Active Airport Management
L.E.K. experience has shown significant
upside potential from continuing this
journey

11. © 2014 L.E.K. Consulting LLC. All rights reserved. 11AAA National Conference 2014. The Journey to Active Airport Management
L.E.K. has helped clients identify and deliver significant upside
from active management across the airport value chain
Recent L.E.K. Experience
Parking ~10-20% EBIT uplift
Retail ~10-20% EBIT uplift
Capacity
Management
Reduction in Ave peak hour delay by c.4 mins

12. © 2014 L.E.K. Consulting LLC. All rights reserved. 12AAA National Conference 2014. The Journey to Active Airport Management
Delivering the next wave of opportunity
requires a change in mindset and capability

13. © 2014 L.E.K. Consulting LLC. All rights reserved. 13AAA National Conference 2014. The Journey to Active Airport Management
What does it require?
Leadership Focus Capability Step-
change
Iterative ‘Trial and
Error’
Data & Analytics

14. © 2014 L.E.K. Consulting LLC. All rights reserved. 14AAA National Conference 2014. The Journey to Active Airport Management
Valuations and high acquisition prices point
to the need for continued innovation to meet
shareholder expectations
www.lek.com
George Woods g.woods@lek.com
Grant Wright g.wright@lek.com
Nick Holder n.holder@lek.com
Monica Ryu m.ryu@lek.com
David Ferrarin d.ferrarin@lek.com