Despite lower middle class growth, Europe is expected to add the most passengers of any region, other than Asia-Pacific to 2036. Indeed, just four years later could mark a doubling from 2017’s figures as 4.5 billion in total fly into and around the continent[i]. The nature of such growth is not without challenges for airports however. Since it is low cost carriers (LCCs) that are primarily driving European passenger growth, growth models will need to be carefully considered – even on an airport by airport basis. Low cost carrier growth implies, as ACI Europe notes, ‘…significant pressure on aeronautical revenues, [ii]’ since 90 percent of European airports offer discounts to attract, retain and grow air traffic. The shift towards LCC’s also provides airports opportunities for the provision of services not met by airlines – whether in terms of food, lounges or other ancillary services. Within Europe alone, not to mention other faster growing markets, there is likely to be significant bifurcation of airport models, airline-airport relations and perhaps even financing. All of these factors have significant implications for the environment in which aviation players will be able to make future decisions.
Underlying this is a need for a new infrastructure paradigm: on a global scale, air traffic could grow at 4.4 percent annually to 2037, requiring some 37,400 new passenger and freighter aircraft totaling $4.8 trillion in value[iii]. Since every region is likely to see a doubling or more of passenger aircraft between 2018 and 2037, the implications for the need for new infrastructure is clear.
Between $1.2 and 1.5 trillion is expected to be spent on global airport infrastructure development up to 2030, according to IATA[iv]. China alone, plans to build 136 new airports by 2025[v]. Additionally, all of London’s major airports are forecast to be at capacity by 2030, India’s to exceed capacity by 2022 while the United States needs $75 billion invested by the early 2020’s[vi]. Despite the significant increase in capital spending this would represent, there are reasons to suggest it may still prove insufficient if middle class livelihoods enjoyed in the West go global.
Putting aside physical space, apron capacity, runway development and other ‘hard’ infrastructure issues for a moment, a report from the World Economic Forum states that the entire underlying travel system will need an overhaul. The rationale is simple enough; the current network of passports, border control points and customs checks is not able to be both highly secure as well as efficient enough to cope with a 50 percent increase in worldwide travel[vii]. Technology could undoubtedly help mitigate this, but it is not clear whether infrastructure projections include root and branch reform of airport operations in addition to the necessary hard infrastructure needs.
Technological progress, in the wider sense, could also present direct challenges to current business models. The diffusion of sharing economy practices and eventually autonomous vehicles could create a financial issue for many airports – parking revenue typically represents a quarter of annual airport budgets[viii]. Such revenue typically averages 40 percent in North America and 20 percent in Europe. Similar challenges and opportunities abound in the wider smart city environment – indeed it has been noted that airports will increasingly resemble smart cities in microcosm[ix] and share many of the issues relating to data flows and consumer centrism.
With future growth likely significant but the extent unknowable, future proofing airports is a significant challenge – especially given long lead times for construction[x]. Agility, in design, business model and even use of space will be central to this, since the future remains fundamentally unknowable. If, for example recent trends evident in the United States and elsewhere, such as trade protectionism or forms of travel restrictions, proliferate, up to 1.1 billion fewer passenger journeys could occur annually in 2036. Conversely, an increased push for liberalisation of trade and travel could result in a tripling of passengers by this date[xi]. Making calls now, for a future where these margins have vastly different outcomes, will require a new sense of business agility, the use of futures methods such as scenario planning and an increasingly multi-sided business model.
Airports in key strategic locations are already placing their bets. Future megahubs like Istanbul New Airport, Dubai World Central and Beijing Daxing International, ‘…have each been designed to accommodate upward of 150 million travelers a year[xii].’ All are built on a relatively traditional hard infrastructure however and future possibilities may force the current mental models on which they are built to undergo reassessment. For example, it has been suggested that ‘…by 2050, runways could become circular, double-decker or be built remotely in the sea. Circular runways will tackle weather restrictions such as wind and allow planes to take off from any direction. Remote runways in the sea are also expected to exist as well as double-deck runways so no added space is used[xiii].’ Whether this becomes standard, proves a point of competitive differentiation or even appears at all, it is unlikely that huge current investments or existing infrastructure will be able to adopt to such practices seamlessly. The question then becomes ‘…what role do we see (current) airports fulfilling in the future?’
[i] Source: Independent (Ireland), 2018 https://www.independent.ie/business/world/airport-traffic-in-europe-tipped-to-double-by-2040-37029090.html
[ii] Source: Independent (Ireland), 2018 https://www.independent.ie/business/world/airport-traffic-in-europe-tipped-to-double-by-2040-37029090.html
[iii]Source: Airbus, 2018 https://www.airbus.com/aircraft/market/global-market-forecast.html
[iv] Source: IATA, retrieved 2018 https://www.iata.org/whatwedo/ops-infra/airport-infrastructure/Pages/index.aspx
[v] Source: CNN, 2018 https://www.cnn.com/travel/article/asia-airports-worlds-best/index.html
[vi] Source: Virgin Hyperloop One, 2018 https://hyperloop-one.com/blog/five-realities-shaping-future-airports
[vii] Source: WEF, via CSO Online, 2018 https://www.csoonline.com/article/3259889/biometrics/self-sovereign-biometrics-and-the-future-of-digital-identity.html
[viii] Source: Bloomberg, 2017 https://www.bloomberg.com/news/articles/2017-07-21/the-airports-of-the-future-are-here
[ix] Source: Apex, 2018 https://apex.aero/2018/1/25/smart-connected-airports
[x] Source: International Organization for Standardization, 2017 https://www.iso.org/news/2017/01/Ref2154.html
[xi] Source: IATA, 2017 https://www.iata.org/pressroom/pr/Pages/2017-10-24-01.aspx
[xii] Source: Apex, 2018 https://apex.aero/2018/1/25/smart-connected-airports
[xiii] Source: Vero Solutions, retrieved 2018 https://vero.solutions/future-airports-can-expect/