When airport efficiency can potentially cause airports to LOSE revenue
Let’s start by getting all the disclosures out of the way. My employer, (presently) known as OT-Morpho, is very active in providing technological solutions for airports, and a former sister company (now independent) presently known as Smiths Detection is very active in this area also. These companies, their competitors, and others are actively seeking ways to make the airport experience less painless.
But this can have negative ramifications.
I like to get to airports early – two hours before my flight at a minimum. This allows me plenty of time to check in, walk to security, partially disrobe (just the shoes and the belt), go through security, put my clothes back on, and then wait for my flight. And if everything goes well, I’ll be waiting for a while.
But what if the airport experience becomes more seamless? What if I could walk into the airport, drop off my suitcase without stopping, and walk through security without stopping? It’s conceivable that present technologies could allow us to do away with all of the lines at airports without sacrificing security.
Well, one ramification is that rather than getting to the airport two hours before my flight, I might be able to get to the airport a half hour before my flight.
This set off the alarm bells for the Roland Berger consultancy:
New entrants and innovative offerings coming into the market could put airports at risk of losing significant revenues – potentially between USD 2.5 and 5 billion over the next five years unless airport operators take action to counter the threat. That translates into a 3 to 6 percent hit on their operating margin….
How would this happen? Well, there are two ways.
I don’t do it much any more, but I used to park my car at the airport for a few days when I went on a trip. But as mass transit routes link to airports and ridesharing services get permission to drop off and pick up at airports, fewer and fewer people are going to bother parking at the airport – and paying the airport those parking fees.
And it gets better. If you breeze through security so quickly that you delay your arrival at the airport, then you won’t be spending as much time there – and at the airport’s restaurants and shops. While I’ve ended my parking routine, I’ve retained some of my other airport routines. More often than not, I grab a bite to eat. (It’s included in the per diem, so why not?) And then I might get a fifteen-pack of gum and a Mounds bar before setting off on my most important airport task – finding a power outlet and decent wi-fi.
And if you’re spending less time in the airport, the airport takes a financial hit:
Passengers spent an average of $3.52 on news, gift and specialty retail and $6.32 on food and beverage per enplanement in 2015, compared to $3.45 and $6.30 respectively in 2014….
Airport data reported to the FAA showed that total revenue from terminal concessions (food, beverage, retail and services) was $1.9 billion in 2015. Revenue from food and beverage programs at U.S. airports represented 35 percent of the total 2015 terminal concessions revenue; retail represented 40 percent.
And if airports lose this revenue, they’re in a world of hurt.
tymshft 