top10 fastest growing airports in 2018
TRANSCRIPT
Source: Routesonline
GAD World 2019 | Realizing the full investment potential of regional airports in emerging markets 2
Top10 fastest growing airports in 2018
Regional airports are seeing steady growth; of the 10 fastest growing airports worldwide, nine are in emergingmarkets and all but two are regional airports
Phnom Penh (PNH)38.4%
Bangalore (BLR)28.7%
Jinjiang (JJN)31.9%
Semarang (SRG)29.6%
Lucknow (LKO)28.1%
Yantai (YNT)27.4%Sevilla (SVQ)
25.9%
Novosibirsk (OVB)25.6%
Da Nang (DAD)24.4%
Hyderabad (HYD)23.6%
AirportGrowth rate, 2017-18
10M passengers
Other (>15M passengers)
Regional (5-15M passengers)
GAD World 2019 | Realizing the full investment potential of regional airports in emerging markets 3
Socio-economic development drives the travel propensity and is a general underlying reason for a growing aviation industry
Several factors drive this growth, the most influential of which are typically demand generation by capacityand inbound tourism as well as spill-over
Socio-economic growth
Industrial developmentSpill-over effects/
constraints at hubs
Base airline and/ or LCCcapacity
Promotion of inboundtourism
Source: ACI 2019; *Including Australia and New Zealand
GAD World 2019 | Realizing the full investment potential of regional airports in emerging markets 4
Return on capital employed by region and airport size 2017
Regional airports appear to be an attractive investment proposition, particularly in emerging markets
15
5
20
0
25
40
10
45
11%
6%
Latin America-Caribbean
Africa
8%
44%
13%
ROCE (%)
North AmericaAsia-Pacific*
8%
World
6%
12%
39%
29%
12%
9%
16%14%
19%18%
12%13%
20%
9%7%
11%12%
Europe
13%
9%
11%9%
1–5m 5–15m 15–25m >40m25–40m
1) ATM = Air Traffic Movements in 2017Sources: ACI Airport Economics Report 2019, Lufthansa Consulting
GAD World 2019 | Realizing the full investment potential of regional airports in emerging markets 5
Comparison of total airport cost and aeronautical revenues per aircraft movement and airport size in 2017 (in US$)
However, airports worldwide operate under severe cost pressure and aeronautical revenues do notsufficiently cover costs
342
538
1,042
1,3431,418
1,913
146
376
755
1,032 1,012
1,389
<1m 15–25m1–5m 5–15m 25–40m >40m
-57%
-30%
-28%
-23%-29%
-27%Total cost (operating + capital costs) per ATM
Operating aeronautical revenue per ATM
In order to fully realize the potential of investments in regional airports, investors should focus on four key areas
GAD World 2019 | Realizing the full investment potential of regional airports in emerging markets 6
Holistic approach to drive financial viability and sustainable returns
SCALE/ CONNECTIVITY
Grow current and attract new airlines
REVENUE/ COOPERATION
Boost your non-aeronautical revenuesalso by partnerships
SCOPE/ CEX
Improve the airport experience andconvenience for your passengers
COSTS/ EFFICIENCY
Strive for operational excellence and managerisks for high quality and cost effectiveness
GAD World 2019 | Realizing the full investment potential of regional airports in emerging markets 7
Bridge the gap between traditional airport and airline positions
A comprehensive Air Service Development strategy and related capabilities are critical to growvolumes in a targeted manner, and sustain them over the mid to long term
Cu
rre
nt
situ
atio
n
Ne
ed
for
actio
n
Stagnating traffic and flat or declining revenue Sustainable traffic growth to remain competitive
Upgrade air service offer by number of airlines(especially LCCs) and business segments
Raise number of served destinations and totalflight movements
Augment passenger and cargo throughput
Scale &Connectivity
Airports
Business development opportunities dependent on airlinenetwork decision making
Lack airline network management skills and data
Airlines
Reluctant to invest in new markets with uncertain potential
Require local market insights and support to optimizeexisting air services and to establish new routes
*Embarkation portSource: Lufthansa Consulting research; Cruise Baltic report, 2015
GAD World 2019 | Realizing the full investment potential of regional airports in emerging markets 8
Self-connect opportunities (Milan, London Gatwick)
In addition to growing direct services, operators should seek non-traditional sourcesto encourage passenger flows
XXX
Scale &Connectivity
Cruise tourism connectivity (Rostock)
24%
13%
15%
23%
13%
26%11%
32%
10%
8%
6%
13%
Stockholm
Copenhagen
4%
Share of stops (calls)
4%
Kiel
Share of turnaround*
Rostock
Helsinki
Tallinn
Oslo
St Petersburg
Others
2018 Baltic cruise traffic share
GAD World 2019 | Realizing the full investment potential of regional airports in emerging markets 9
Delivering an excellent customer experience
Smaller airports should play to their strengths, i.e. shorter distances, more convenience,local touch and ease of implementation of innovations
Scope &CEX
Nagoya, Japan
Tampa, USA
Quito, Ecuador
GAD World 2019 | Realizing the full investment potential of regional airports in emerging markets 10
Regional airports often reflect untapped opportunity for non-aeronautical revenues
Non-aeronautical revenues, mainly driven by retail, F&B, car parking and real estateare key to achieve profitability
Source: Airports Council International, 2019
0
10
20
30
40
50
60
Europe
26%
Latin AmericaAfrica
25%
Asia Pacific North America
31%
36%
31%
35% 34%
44%42%
40%
50%
43%
38% 38%
5–15m 15–25m 25–40m
Non aeronautical revenues as share of total revenues, 2018
Number of passengers:
Revenue &Cooperation
GAD World 2019 | Realizing the full investment potential of regional airports in emerging markets 11
Developing the ecosystem for transport and tourism
Working closely with local government or business entities drives joint planning of connectivityand airport/ destination marketing
Nagoya, Japan
Kilimanjaro, Tanzania
Multiple airports, Finland
Revenue &Cooperation
GAD World 2019 | Realizing the full investment potential of regional airports in emerging markets
Selection of data-driven decision use cases
A rigorous focus on process efficiency with a modern data-driven approach helps to manageinfrastructure and costs, improving the quality and viability of the airport
0 1 2 4 5 6 8 91
01
21
31
41
61
71
82
02
12
2
ScheduledActual
12
Passenger Flow ModellingRolling hour forecasts
Schedule change probability estimation
Costs &Efficiency
Aircraft Movement Modelling Predictive Maintenance
Real time dashboards
GAD World 2019 | Realizing the full investment potential of regional airports in emerging markets 13
Regional airports are in contrast to major ones more endangered – especially due to dependency on one or few base carriers
Regular ‘stress tests’ identify and mitigate potential risk, business contingency planshelp to reduce the effects
Identify Risk Assess Risk
Collapse of base carrier
Risk 1
Partial shift of operations to different airport
Risk 2
Economic downturn
Risk 3
ExternalRisks
Internalrisks
Labor relations/ disputes
Risk 1
Debt payments
Risk 2
+
Risk management strategies, mitigation and business contingency plans
Market attractiveness
Ca
rrie
rh
ea
lth
Low High
Low
HighAirline A /
Market A
Airline B /
Market B
Airline B /
Market A
Airline A /
Market B
-15
-4
-20
-10
0
9
2
Likelihoodof risk
Financialimpact
ILLUSTRATIVE
ILLUSTRATIVE
Loss ofbase carrier
Gain fromnew LCC
Infrastructureoptimization
Netimpact
ILLUSTRATIVE
Costs &Efficiency
GAD World 2019 | Realizing the full investment potential of regional airports in emerging markets 14GAD World 2019 | Realizing the full investment potential of regional airports in emerging markets 14
0
100.000
20.000
80.000
40.000
60.000
Oct 2017Apr 2017 Aug 2018May 2018 Oct 2018May 2017 Jun 2017 Jul 2017 Jun 2018Aug 2017 Sep 2017 Apr 2018 Jul 2018 Sep 2018
Air Berlin ceasesoperations
Air BerlineasyJet
Eurowings Others
Summer 2017 Summer 2018
Costs &Efficiency
Airport risk case – Berlin: after Air Berlin ceased operations, the capacity gap was quickly filledby EasyJet and other airlines
Berlin (TXL): Scheduled seat capacity, Summer schedule 2017-2018
Note: Eurowings includes operations by Germanwings; Air Berlin includes operations by all group airlines in Germany and AustriaSource: IATA AirportIS
GAD World 2019 | Realizing the full investment potential of regional airports in emerging markets 15GAD World 2019 | Realizing the full investment potential of regional airports in emerging markets 15
While larger airports such as Berlin may recover quicker from a key airline’s bankruptcy due tothe inherent demand of the market, it may take longer for smaller regional airports
0
10,000
20,000
30,000
40,000
Sep2017
Aug2018
Jun2017
Apr2017
May2017
Jul2017
Oct2017
Aug2017
Apr2018
May2018
Jun2018
Aug2019
Jul2018
Sep2018
Oct2018
Apr2019
May2019
Jun2019
Sep2019
Jul2019
Oct2019
Air Berlin
Ryanair
Germania Others
EurowingsAir Berlin ceasesoperations
Germania ceasesoperations
Summer 2017 Summer 2018 Summer 2019
Costs &Efficiency
Nuremberg (NUE): Scheduled seat capacity, Summer schedule 2017-2019
Note: Eurowings includes operations by Germanwings; Air Berlin includes operations by all group airlines in Germany and AustriaSource: IATA AirportIS
GAD World 2019 | Realizing the full investment potential of regional airports in emerging markets 16
Regional airports, especially in emerging markets, can be attractive investments if the investors acknowledgeand work on what is required
Thorough analysis of the Market Potential and its drivers
A strong marketing strategy to retain/ grow existing airlines and attract new airline customers via Air Service Development
Innovation management and service design to improve customer experience and to strengthen passenger airport loyalty
Strong focus on growing non-aeronautical revenue channels using also the community at/ around an airport
Continuous process improvement to increase efficiency and operational performance while reducing operating costs
Careful assessment of infrastructure utilization and future needs to optimize investments and capital expenditure
Constant “Stress Tests”, risk management and development of mitigation measures as well as business contingency plans
Growth drivers for regional airports: realizing the full investment potential of emerging markets