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Airport traffic collapse—crisis or opportunity? Rethinking the business of airports June 1, 2022
COVID-19 has provided a moment of truth for airports and airport service businesses. Here’s why they should use the opportunity to focus on diversification and innovation.
It’s been a difficult time for airports and airport service businesses, with now the re-opening is creating airport ground transportation driver opportunity . The COVID-19 pandemic and social distancing measures have severely affected the airport business, with daily traffic down to record low levels. Recent modelling from Airports Council International (ACI) World estimates a reduction of more than 4.6 billion passengers for 2020, with an estimated decline in total airport revenues of $97 billion US for the year.
Airports and airport service businesses need revenue to operate. But how can they continue to operate when all their revenue is typically dependent on a single offering—flying? The impact of COVID-19 on the business of flying has laid bare this vulnerability. I believe that airports and airport service businesses should think about diversifying their business and create a more resilient business model, if they are not already doing so.
Aviation enhances the quality of our lives, and airports are vital connectors. But to understand how airports and airport service businesses could respond to this crisis and prepare for a post-COVID-19 world, they might benefit from asking themselves: What business are we in? We have airport ground transportation driver opportunity.
What business are airports in?
Let’s consider something: Should airports and airport service businesses be enablers of traditional air travel only? Can they become less dependent on passengers traveling by aircraft?
Even if the COVID-19 pandemic didn’t happen, airports and airport service businesses would still likely need to ask themselves these questions to adapt to near-future technologies, including the possibility of vertical take-off and landing aircraft—which can take off and land from nearly any location and don’t require an airport runway—autonomous control systems, new quiet airplane engines, and modern ground transport technologies like high-speed rail, magnetic-levitation trains, and hyperloops (where passengers travel in floating pods inside low-pressure tubes). In the long term, these technologies could divert short- and medium-distance travel away from classical airports, dispersing it throughout cities and regions.
There are many examples of companies—such as Kodak, Blackberry, Segway, and Blockbuster—that failed to diversify and innovate. If the current crisis has demonstrated anything, it is that airports are more vulnerable to supply shocks than we previously thought. The current crisis may give airports the opportunity they need to make necessary course corrections. We definitely have airport ground transportation driver opportunity.
While the Internet connects the world virtually, airports connect the world physically. Therefore, we need airports, but they are not just about the air.
Reframing the fundamentals
Let’s follow the advice of leadership expert Simon Sinek, whose famous TED Talk inspired business leaders to “start with why” to find the core beliefs that underpinned their businesses. For airports, if the response to “Why” is, “because we have the infrastructure set up and we have built a business on it,” the answers may put them at risk of severe disruption, as the current crisis is proving. It might be time to reframe the fundamentals.
So, why do airports exist? To my mind, they exist to connect people, places, and things—primarily, but not exclusively, by air. They are the highest order of connectors, both locally and globally. For instance: tourism connects people to places—but also places to places—through airports. Cargo operations connect things either to things (in supply chains) or people (online order logistics). There are many other examples. While the Internet connects the world virtually, airports connect the world physically. Therefore, we need airports, but they are not just about the air.
The important thing is that, when looking at airports in this way, it is possible to look beyond the fact that there are aircraft and runways. This is the only way of viewing the airport business that can help airports be more resilient in the face of natural and man-made global disruptions. We are looking for airport ground transportation driver opportunity.
It is a framework that also opens significant opportunities for airports. Should they omit the word “air” from their names and rebrand themselves only as “ports”? Perhaps it might be more accurate to say they’re in the “port” business. Once they see themselves in this light, they can rethink their dependence on a single mode of transport and their locations on the peripheries of major cities. It can lead to a new generation of (air)ports managing a diversified range of connection-related investments that create a counter-balancing portfolio of income streams, while delivering their core “why” of connecting people, places, and things.
How could airports go about this?
If airports are in the connecting business—they are ports in the broadest sense of the word—how could they do that? Here are a few ideas:
- Connecting as many modes of transport as possible through their facilities, including different modes of air transport, cars, buses, rapid-bus systems, hyperloops, light and heavy rail, ferries, bicycles, and pedestrians. Specifically, airports should integrate heavily into local and regional transport systems, so that flying only caters for long hauls, not distances that could more effectively be serviced by land-based or low-altitude modes of transport. For example, Hong Kong Airport has done a good job of integrating multiple modes of transport— light rail, heavy rail, bus, vehicle, and marine—into its terminals.
- Creating efficient interchange infrastructure for people, baggage, and cargo between all these transport systems. I believe this is the very heart of what airports are about. It’s interesting to note how airports naturally pivoted to cargo operations during the COVID-19 downturn. It is part of the same business.
- Investing in supporting facilities that enhance people’s lives as they transition or work at the airport—facilities like conference and business centers, retail, tourism, entertainment, housing, and nature (trails, conservancies, etc.).
- Upgrading their facilities into destinations that will attract people regardless of whether there is traffic or not. A good example of this is the outlet mall at Vancouver International Airport in British Columbia.
Becoming more of a “port”
If that is how airports could be delivering on their “why,” what should they be doing right now?
- Develop a strategic plan for a greater airport environment that is more of an ecosystem than a stand-alone facility. Many airports have been developing “airport cities” (Denver, Hong Kong, Frankfurt, etc.), but I believe the rethink could go much deeper and wider than just creating a focused economic hub. Since airports are in the connecting business, their focus could be more regional, since their international/interstate focus is generally well developed. We need to find airport ground transportation driver opportunity.
- Plan and protect for future disruptions in aviation and transportation. How can the airport not only survive major disruptions but use them to adapt their business to a changing world, while remaining true to their raison d’être of being connectors?
- Make their facilities people-focused environments that attract people and instill confidence and trust with regards to security, hygiene, and infection control.
- Acquire adjacent land, develop it, and enter mutually beneficial arrangements with adjacent landowners and other regional entities to increase the airport’s integration into the community it serves.
- Invest in aligned industries and facilities in other locations that support this new business model. Then, the airport will have more control of its supply chains and the contingencies that affect its business.
This COVID-19 pandemic is not only an unprecedented crisis for airports but also a powerful opportunity for innovation and making midcourse corrections. The airport industry has been based primarily on aviation as a service. The hidden message here is that airports could use this as an opportunity to innovate and diversify. Perhaps their core business isn’t just about flying—it’s about connecting people, places, and things.