Speaking to airport executives attending the ACI Latin America and Caribbean (LAC) annual conference on November 18, ACI World chairman James C Cherry delivered a strong cautionary message about the need for flexibility. “Airports have become businesses just like any other,” he said, “with private companies building, operating and owning airports in various parts of the world. In ACI’s latest economic survey, there are more than 200 companies doing this to varying degrees.
“Today, around half of LAC airports are operated under some kind of private agreement, for the most part a concession-type agreement. This rapid move towards privatization is very much in keeping with global trends. At the same time, airport ownership has been a subject of growing debate in this region, as it is throughout the world, and the ownership issue will be critical to the future growth and success of airports here.
“I endorse the ACI-LAC recomm-endations regarding concession agreements which include clarifying the government’s role and responsibilities and ensuring government regulations are flexible so they do not unduly hinder airport operators from adapting to changing market conditions. It is important to ensure a better sharing of risks between the concession-holder and government, and establishing a neutral and independent regulatory body to enforce the concession contract on a transparent basis.”
Mr Cherry also addressed the importance of airport and airline relations, saying: “In today’s economic climate, airlines and airports need to co-operate more than ever to weather the turbulence. In fact, I believe that we are entering a new era of co-operation in aviation, to the mutual benefit of all parties involved. And I do mean co-operation, not capitulation!
“While we are working more harmoniously with aviation bodies and airline organizations, we have not shied away from defending our position on such issues as airport charges and the privatisation and commercialisation of airports – fending off suggestions that governments should increase regulations regarding the allocation of our costs, the levels of our charges, or our profits. This would be a step backwards in view of the changing airport ownership models.”
ACI World Director General Angela Gittens spoke of the challenges that airports face in terms of growth and capacity. “Despite the economic recession of the past year, strong signs of domestic traffic growth are emerging in China, India and Brazil ‑ driven by lower fares and economic growth supported by government stimulus programmes. With the exception of Mexico, which has been hit harder by the recession in the United States in terms of trade and tourism and the H1N1 virus, other Latin America-Caribbean countries are reporting robust domestic growth as well. “According to the IMF, the Latin America region is expected to return to economic growth after a fairly mild and short recession compared to other regions in the world. As per capita income increases, flying becomes more affordable, and route networks expand to less connected communities. The momentum of domestic traffic growth spills over to international traffic as consumer and business confidence rises. So the strength seen in Brazil’s domestic market will be a driver of growth across the region. And we must be ready with adequate facilities.”
Commenting on the impact of traffic expansion, Angela Gittens observed: “Brazil will host both the World Cup and the Olympic Games within only two years ‑ in 2014 and 2016 respectively ‑ resulting in ever more strain on ground infrastructure. The investment in Brazilian airports alone within the next five years is forecast to reach US$ 5 billion, and there will obviously be a knock-on effect on neighbouring countries due to the increase in tourism arrivals throughout Latin America over the next five to ten years as a result of these two major events.
“The focus of airport management has shifted from hosting airlines to accommodating passengers. In the Latin America Caribbean region, passenger numbers have doubled since 2001, while the number of low-cost seats in the same period has increased almost eight-fold, leading to a regional market share of low-cost carriers (LCC) close to 30%: in Brazil it is now 50%. We have seen similar developments in other regions. In North America, LCC growth has been spearheaded by Southwest and JetBlue, in Europe by Ryanair and easyJet, and in Asia Pacific driven by Air Asia. It is now definitely this region’s turn with GOL leading the pack. Such a shift portends fundamental changes and challenges for airport operators.”
She went on to highlight several challenges ahead: airport competitiveness, airport revenue generation, the capital-intensive nature of the airport business, and the evolving relations with airlines.
“Airports are caught between rapidly occurring capacity crunches and the need to invest,” she said. “On the other hand, they come under tremendous cost pressures to remain competitive and compatible with the new airline business model and passenger expectations. But it is not only about capacity. The change affects operations, terminal equipment and passenger processing, and it increases pressure to introduce new technologies to improve cost efficiencies and expedite processes.”
Her closing advice to airport operators was: “Let safety be your guiding principle and security your constant challenge; let economics be your foundation; let technology be an enabler and let sustainability be your future.”