Rebranding and rebuilding – Birmingham’s CEO Paul Kehoe tells Tom Allett why his airport has a great opportunity.
On November 4 the UK’s Birmingham Airport unveiled the design for its new brand identity (see page 23). It marks the first stage of a phased rebranding programme that aims to reposition the airport in the market place and showcase its future potential.
Currently, Birmingham Airport is a public/private partnership. The shareholders include the seven West Midlands district councils (49%), Airport Group Investments Ltd (AGIL), a limited company owned by the Ontario Teachers’ Pension Plan and Australia’s Victorian Funds Management Corp (VFMC) (48.25%) and the Employee Share Trust (2.75%).
It is the UK’s second largest airport outside London and the country’s sixth largest overall. In 2009, 9,109,189 passengers used the facility, a fall of 5.5% on 2008. It currently serves 143 direct scheduled and charter routes, and offers an additional 279 possible connections worldwide, giving passengers a choice of 422 direct or one-stop flights.
Summarising the airport’s present status, Birmingham’s CEO, Paul Kehoe told Airports International: “I have been here just over two years and it has been the toughest two years of my career. Not only have we had a recession but we have had environmental issues, a volcano eruption [Iceland] and airline failures.
“Previously Birmingham Airport had put itself in the position of being a very high-cost operation. We have two terminals and all the inefficiencies and costs that come with that.
“We had to make people redundant and obviously nobody likes doing that, including me, but we needed to peg costs as in 2005 there was a disconnect between passenger throughput and company performance.
“When I joined in 2008 we were in a downward cycle. It looked as if everything was rosy – aircraft were still landing – but the reality was that our profits were declining and we had to arrest that and start to grow things again. However, we had to do this during a recession.
“Normally, after downturns we are used to seeing a revival after six months but today, after shocks like the banking crisis of two years ago, airports are still losing passengers. This year we will handle about 8.7 million passengers and we will probably bottom out at around this level sometime next year.
“When I look back and ask why Birmingham isn’t doing better than it currently is I think it is because of the ‘love affair’ we had with British Airways over 67 years – when BA left us, they left us bereft; we hadn’t got strategies in place to replace it. Now we have, but I must emphasise that we are working in the worst economic climate this country has experienced in 60 years. It is difficult to explain that to shareholders in Canada and Australia who haven’t been through a recession and who look at us and say: ‘what’s going on?’
“We are still vying for fifth position in the UK with Luton and Edinburgh; l think those two will probably be ahead of us next year but it is our intention to claw back the passenger traffic.
“We have 6,000 employees on site across 140 companies. Airport employees account for 530 of those, with half of that number working in security.
“We have all the ingredients currently to make ourselves a great ‘pie’ here. We spent £50 million [US$80m] on our new international pier; have invested in a state-of-the-art car park at £14 million (US$22.4m) and £13 million [US$20.8m] on our One Terminal project which will cut down our costs and upgrade our product.
“When you look at how many passengers airports have lost across the UK it is frightening because you know that a million passengers generates about 1,000 jobs and this year, up until this autumn, UK airports have lost up to 25 million passengers – the equivalent of on airport the size of Gatwick.
“Why aren’t those people flying? Well the overall economic impact and spending reviews that will bring job losses in the public sector have brought uncertainty into the market and even the volcano erupting seems to have had an affect. Prior to the volcano we were, what I would call, ‘tracking’ back to steady growth, the passengers were slowly coming back. After the volcano the confidence from the low-cost end of the market disappeared,
“So when you look at Birmingham today, despite that decline in the low-cost market, we have had tremendous growth in some areas. We have had 118 consecutive months of growth on Emirates, in September its passenger figures were up 26% year on year. Then we have Lufthansa; its network average growth was up 20% in September, Air France/KLM and Turkish have also grown. Mahan Air, flying passengers to Tehran and on to Amritsar, is recording passenger figures that are up by 170%. Turkmenistan Airlines, flying to [its country’s capital] Ashgabat and on to Amritsar is adding flights, while Pakistan [International Airlines], although slightly down probably due to the impact of the floods that hit the country, has been solid in its performance from here.
“However, the low-cost market isn’t growing. We’ve seen a downturn with Ryanair and bmibaby, and we believe that this is because the discretionary passenger is saying one of two things. One, ‘I haven’t got the money to go away so I will spend what I have in downtown Birmingham’, or two, ‘will I get back for work on Monday morning after a weekend break if that volcano goes off again?’
“So there is a certain nervousness in the market and you can see Ryanair recognising that by concentrating on the sunshine destinations and pulling back from some of those rather strange city pairs that really aren’t attracting passengers any more. It is seeking to offer more seats on the Spanish sun type of destinations in its portfolio and expand on its chances there. Of course, there are also other established carriers flying to these places and offering a more rounded product; companies like Thomson, Thomas Cook and Monarch.
“Looking forward we are putting a lot of emphasis on our route development. This is difficult in the current economic climate. The markets our shareholders and the community want to pursue are China, India and the Far East, but we are impeded by the fact that our runway isn’t long enough to allow us to offer direct services.
“This can be overcome because we have planning permission for a 400m [1,312ft] runway extension. I hope that the board will encourage us to put that in place by 2014. The shareholders want to build the extension, but there is always the cash issue. The government or region has to re-route the A45 [dual carriageway road that runs very close to the touch-down end of runway 33] so that we can expand into the space that would open up.
“The scrapping of proposals for future developments in the South East of the UK means that Birmingham can easily form part of the solution to the ‘Heathrow Problem’. It is currently just 70 minutes away by train from London Euston station and with High Speed Rail in place, this becomes 38 minutes.
“There are around 8 million people living within an hour’s drive of the airport but less than 40% of them use Birmingham; we are determined to increase this figure over the next few years. We want people to think about their journey in a new way, and not to be bound by old habits.
“Our strategy going forward is also to build relationships and knowledge about the airport through the travel industry; showing them that they have a very important part to play in the realisation of Birmingham’s potential.
“This work will be vital as the market recovers and the range of destinations and airlines, particularly for the long-haul market, increases from Birmingham.”
With regard to the rebranding – which has resulted in the airport dropping the word ‘international’ from its title – Mr Kehoe had this to say: “All the work that I have described was done against the background of what I call our ‘heritage brand’.
“People ask ‘why have you done that [re-brand] now’, ‘why have you spent all that money?’ “Well the answer is that we have to. From next April our two terminals will be merged into one, creating new shops and restaurants and increasing the size of its security search area. Potentially there will be a Zone A and a Zone B, plus a central search area and a common arrivals area, but the bottom line was that all the Terminal 1 and Terminal 2 signage we have today has to go, so we had to come up with a new identity.
“We went back to basics and asked the staff what should we call ourselves?
“Dropping the word ‘International’ from our name is about world connectivity and the future opportunities the airport can offer to passengers, business, the travel industry and those living in its extensive catchment area.
“I felt that the previous identity was a bit too ‘corporate’, a bit too ‘stiff’ and the new one is about being vibrant, outgoing, and the reason for the overlapping circles is that we’re not contained within any particular box.
“Our previous brand identity didn’t reflect what we’re about now and what we aspire to be in the future.
“The rebrand is far more than just a new logo. It’s a change of identity which aims to create positive awareness about our potential, foster a sense of pride and grow loyalty from people living within our catchment area.
“We want to embrace the fact that we can connect people to over 400 different places worldwide and want people to feel proud and excited about the opportunities that lie ahead.
“About a year ago we changed our web address to www.birminghamairport.co.uk because having the ‘international’ piece in the middle of it made it too long and the original bhx address we had before that [BHX is the airport’s three letter IATA identifier] didn’t mean anything to anyone outside the industry.
“Another reason why we dropped the word from our title is because we feel that we have ‘grown up’. We fly to 140 destinations and a further 400 through connections, so it’s obvious that we are an international airport.
“The ‘globe’, the circular graphic design we are using, is made up of four circles and they can represent almost anything you want; the four markets we serve, the four ‘corners’ of the world, or the four countries of the UK. But the most important thing is that the globe icon matches the city of Birmingham’s vision which is ‘Global City; Local Heart’. We are promoting that, and doing it in our own style. The ‘Hello World’ strap line that goes with the logo comes from the fact that we want our staff to get behind the idea of improving our customer service.
“The staff will wear that logo with pride because they had an input in designing it.
“We have some very friendly staff, but airport employees account for less than 10% of the total workforce on site, so we need to make a greater effort to show our desire to serve the passenger in order to be noticed. The whole ‘Hello World’ project and the brand values that came out of that are about exciting, customer-service driven development and we had started on this before the government came out with its ‘Better not Bigger’ statement [in the May 2010 Queen’s Speech].
“We have recognised that the processes, procedures and systems that we have in place are not that passenger friendly. The joy of flying has gone and the question is, how can we recreate that passenger experience?
“Hopefully the security area in the new single-terminal building, with better technology, will improve the passenger flow and therefore their overall experience. It will show the passengers we are there to serve them, rather than being self-serving, which I think we had become. I think we had done a lot of ‘navel gazing’, we hadn’t looked out and we had forgotten the reason we are in business. We have frozen our salaries because our costs were out of control and we still have some major hurdles to overcome with regards to terms and conditions and pensions; we are not out of the woods yet. Despite the fact that this is a tough business, I believe that we have a very bright future. How do we move forward? We will just have to market the hell out of the place and beat those equally desperate airports out there that want to take our market away from us.
“When I was [MD] at Luton my job was to beat Birmingham and we did, but now I’m here I want Birmingham to win. I think we have a role to play as part of the national aviation infrastructure of the country but we’re not very popular [with passengers] at the moment and we need to be.
“If that’s ‘pie in the sky’; if that’s the wrong approach, well you can’t accuse me of not trying because we are going to try, and the staff are going to try, and I think most people are coming round to the idea that we need a real hunger to make this work and that’s a real cultural change.”
Asked how far the airport serving the country’s second largest city can go, Mr Kehoe replied: “Currently we are only using about 40% of our capacity and when you look at most UK regional airports they were built for what they have already. Thanks to our far-sighted shareholders we have inherited the large capacity of our two terminal buildings and are therefore under-serving our market. The facilities we have here are not world-class but they are pretty darn good and most regional airports would love to have them. We have a people-mover system, we have our new international pier, when people see it they will think it’s fantastic; we have a new control tower in the pipeline and we need to exploit all that.
“We sit alongside the centre of the UK’s motorway network, within the so-called ‘Birmingham box’ and we have 8 million people living within one hour of the airport. Around 2.7 million of those live within our shareholder’s [seven local council’s] boundaries and within those are high ethnicity levels that are looking for flights to the Indian sub-continent. Therefore our focus will continue to be eastwards and we are talking to a number of airlines with this in mind. Bear in mind that the city of Birmingham’s trade links with the Far East and India are growing day by day. You have Tata [Motors] investing in Land Rover and Jaguar here, there is also the Chinese [Nanjing] Automotive Company at the Longbridge [car production] site. Another investment in the area comes from Germany’s Deutsche Bank and when you put the whole lot together you have this growing economic activity.
“Our job isn’t to be a London airport, we just need to convince those that live within an hour of us to fly from here. If you look at the success of Emirates that is exactly what that airline has done. Emirates has driven our local market and at the same time created space in its London market by saying to passengers ‘have you thought about flying from Birmingham?’. As a result we have 1,000 passengers a day travelling in each direction to and from Dubai. If the airline continues that profile, by the end of 2011 it will make Dubai Birmingham’s busiest route, eclipsing Dublin and Amsterdam.
“About 75% of those Dubai passengers are connecting to other flights, leaving only 25% that stay on within the UAE. We need to replicate that and bring passengers back into Birmingham, and the government, having said that there will be no third runway at Heathrow, has given us a window of opportunity to do that.
“We also realise that with the M4 and M1 [motorways] often clogged, passengers that would normally take those routes might be persuaded to fly from here.
“Also, the airport is located on the fastest domestic rail route in the country – the west coast main line – which has received a £9bn (US$14.4bn) upgrade and has started bringing passengers to us. We already have 20 trains an hour going from here, three of which are fast expresses that don’t stop at every station and complete the journey in one hour and ten minutes while the trains that stop at the stations take two hours to reach London’s Euston Station.
“The great news is that the Secretary of State for Transport confirmed on November 4 that construction work on HS2 – the high-speed railway line that will link London to Scotland – will begin in 2015. The new line’s station at Birmingham will be east of the existing main line link on a site that was previously put forward as a potential location for a national sports stadium. From there, passengers will be whisked down to London Euston in just 38 minutes. That’s about the same length of time that a passenger would take to reach London by train from Gatwick, Stansted or Luton; and Euston is one of the better stations to arrive at because unlike Paddington, you don’t have to fight your way across London to get anywhere else.
“The government is also talking about a connection to HS1 at some point, though that will be very expensive. However, if you include our runway extension with the other positives then it all points towards opportunity for this airport and if our figures are correct, we could have an ultimate capacity of around 30-35 million, similar to that of Gatwick.
“If we are integrated into the high-speed rail link, and then later we start to run out of slots, at that point we can export passengers to the trains, and near-European cities like Brussels, Amsterdam, Frankfurt and Paris could become train journeys with through ticketing. The reason why we are keen on high-speed rail is that if you are travelling down from the north you could just as easily get off and fly from Birmingham as you could at Heathrow, but if the train went past at high-speed without stopping here it would be a disaster for us.
“The fact that there is significant opportunity at Birmingham is what excites me about the whole thing. We need to get the message out of the airlines that there is a fantastic population here that wants to travel, there are a lot of business travellers and, yet, we [the UK] still have this focus on the south east which has effectively caused that area to ‘overheat’.
“Birmingham’s time is yet to come. I said that two years ago and it’s still true. We sit with some of the finest brand names on our doorstep here. William Shakespeare, for example. Though he was born 25 miles from here in Stratford, if you look on a Mercator map of the world, Stratford is part of Birmingham. Then we have Jaguar and Land Rover, both internationally renowned names which have great products that project a top-class image; and the world-famous Cadbury brand. In fact, within 20 miles of this airport we have a list of ‘Cs’, culture – Shakespeare as mentioned earlier; curries – the city is the ‘Balti capital’ of the country; canals – our canal network is bigger than that of Venice, castles, [several lie dotted around the outskirts of the city]; cricket [Birmingham’s Edgbaston ground has international status] concerts and conventions [the National Exhibition Centre is adjacent to the airport and the National Indoor Area is in the heart of the city itself] and we have never really sold these as part of our unique proposition.
“It is a local airport for local people but it is also a global hub of culture, sport and activity that allows people who live in Idaho to search the web by entering: ‘I like cars, I like chocolate. I like Shakespeare’ and you should get a response that says, ‘come to Birmingham’.
“With high-speed rail you can use Birmingham as your base for a wider tour. You can add a day trip to London with minimum time on the train, come back, and travel to York the next day and so on. It enables you to concentrate your UK experience here, with Birmingham rather than London prices as your cost base.
“If that all sounds idealistic then fine, but even if we only get half way towards that vision we will have done a lot more than has been done before, and it is all about aspiring to do better.
“It’s not about being the best though, just getting better, because I don’t know what ‘best’ is. “Changi might be best, but when you are the best you can only go down.
“There are some great people here and I’ve been really heartened [by how they have coped] despite the things I have had to put them through in order to guarantee the survival of the company. I’m not asking the staff to work harder – they work hard already – just smarter and deliver with clever technology. Think differently, do outrageous things that deliver value rather than think ‘don’t do that’. Be risk-ready rather than risk-averse.”
Asked about the difficulties created by airport and airline competition Mr Kehoe responded: “I was in the Gulf during the recent cargo bomb scare at East Midlands Airport and watched the news unfold on CNN and Al Jazerra. They both referred to the East Midlands as being north of London. That’s an example of the market that we fight within. On a global Mercator map of the world you will see London and probably Birmingham and Manchester and at the moment they are really the only UK reference points for the international traveller.
“Notwithstanding all the dark days of the past two years – and some of those were very dark – we have to climb our way out of trouble. We are still losing the odd carrier or two. Air Malta and Cyprus Airways will pull out next summer as they go through the process of restructuring in the face of competition from low-cost carriers.
“Currently, three carriers, flybe, Ryanair and Thomson all vie for the position of being Birmingham’s top passenger carrier but the ‘league table’ varies on an almost daily basis. All carry between 1.1 and 1.3 million passengers a year but as an example, while flybe’s traffic maintains a fairly steady level all year round, Ryanair and Thomson are expected to drop back in line with their reduced winter schedules and carry higher numbers again during the summer.
“We also have to realise that we’re not just in competition with East Midlands, Luton, Bristol, Liverpool, Manchester, etc, we are also in competition with city pairs. If an airline can make more money flying its jet between Barcelona and Berlin rather than perhaps Birmingham and Brussels then it will do it.
“For example, in the past Brussels was once the airport’s most profitable and high-value route. It was served by British Airways, British Midland/bmi and Sabena, but today just SN Brussels flies there.
“On a bigger scale, if you imagine a line marking the shift of economic activity across the world it is definitely moving eastwards. It would have been drawn over the mid-Atlantic 25 years ago, but now it is over the Gulf and moving towards India and the Far East.
“The 400m of runway extension I mentioned earlier will deliver 2,000 miles of range from Birmingham and all the eastern markets within that distance. If you want to look in the opposite direction towards the west coast of the United States and Brazil, yes the aircraft can reach them but is there a market for them? I don’t know.
“Then, if you look at China building 94 new airports, they can’t all access Heathrow, Gatwick or Stansted, that gives us an opportunity for Birmingham.
“If you can get that first new service landing in this country you provide an economic benefit. I’d like to add to that what David Laws [CEO] at Newcastle told me and that is that prior to Emirates starting the direct [Newcastle] service into the north east of England they had £100 million (US$160m) worth of business a year with Oceania and Australasia. A year later that figure had risen to £320 million (US$513m). That’s a three-fold increase by bringing just one aircraft.
“What a great investment that was for Emirates, Newcastle Airport and the north east of England to make that work and there’s got to be the opportunity for us here in the Midlands to do exactly the same. We’ve got this gift [from the government] called no runway three – because that could have taken ‘our’ business – and high-speed railway on its way to us.
“I might have read the big picture scenario all wrong – completely wrong – but, you know, we’re actually going to give it a try.
“It looks exciting and if enough people come on board it may be possible. The economic output of this airport can improve the lives of the people in this city, but it depends on us having the runway extension. The idea of a runway extension has been put forward before and never come to anything but if we don’t get it this time there won’t be another opportunity. This really is the last chance saloon; we’ve got to make this work.
“I hope that whoever follows me thinks: those guys tried hard, they had great stewardship of the business and they have left us with a legacy that we can deliver and improve upon.”
Rebranding and rebuilding – Birmingham’s CEO Paul Kehoe tells Tom Allett why his airport has a great opportunity.