24 Mar Airport expansion
Global Opportunity 2015 | British Aviation Group
The demand for global airport infrastructure is rapidly expanding and requires consistent upgrading to correlate to the speed of current technological progress. So there have never been more opportunities for UK expansion of capabilities and services, says Chris Chalk, Chairman at the British Aviation Group (BAG)
With a predicted 10 billion passenger movements per annum by 2025 and the global retail market marked to rise by over 72% since 2013 to US$59.2bn by 2019, the potential for UK companies is huge.
In the UK we truly appreciate a challenge and this has been evident in the airport sector. To ensure the UK operates effectively, weʼve had to continuously solve difficult problems while working within existing entrenched infrastructure.
As such the UK is home to innovators who tend to think laterally, utilising knowledge from across all sectors of industry to facilitate solutions to contemporary problems.
A recent example is Heathrow Airport. Whilst the airport has not had any new runways built to ease the pressure on its services, it has had to deal with an exponential growth in traffic, radical developments in technologies as well as significant changes in the way protocols and new rules are followed e.g. the evolution of airport security after September 11th.
Further afield, Istanbul and Dubai are both trading centres with Istanbul traditionally the largest in the region, acting as a crossroads between key markets of Europe, the Middle East and Asia.
The challenge here is to ensure movement around Istanbul with improved infrastructure that accompanies the expected rise in the number of passengers passing through the airport and the city in general.
Again, UK expertise in working around existing infrastructure positions us to take advantage of commercial opportunities such as these.
Additionally one of the most visible advantages of aviation is the reduced infrastructure thatʼs required en route between destinations.
Compared to other modes of mass transport such as rail, to build a route from A to B in aviation, all that is required would perhaps be a new control system.
The aviation industryʼs focus remains instead on developing upon the existing infrastructure at point A and B, with collaborative relationships with airlines proving pivotal to success at either port.
Moreover, there is a whole supply chain that works together to ensure optimum success at these points of transit. As such, airports are keen to engage positively with every level of the UK supply chain, giving them a competitive advantage whilst ensuring optimum operational efficiencies.
Environmental and commercial challenges
Whether we like it or not, the salient fact is the aviation industry currently has to burn fossil fuels, with the question of sustainability naturally entering the conversation. Whilst the industry understands the importance of their emission contributions, it remains fairly small, hovering around 2%.
This is in part aided by the progression of fuel-efficient technology or modern day aircraft, with new generations using roughly 20% less fuel. Due to our industryʼs heavy dependence on the price of fuel and its power to guide the profitability of airlines, legislation such as the Climate Change Act 2008 imposes carbon caps on industries like aviation.
Whilst important, these are only part of the reason why weʼre striving to make fuel efficiencies a top priority.
To ensure success in the industry generally, fuel efficiency is a commercial necessity as well a moral imperative, with next generation aircraft like the Boeing 787 Dreamliner and the Airbus A350 significantly more fuel efficient than their predecessors.
Moreover, we must consider the positive contribution of air travel to the fabric of modern day society. The argument that you should stop people flying completely to solve our problems from an environmental standpoint is not a reality.
Aviation is part of our social cohesion. Whilst the Anglo- Saxon mentality of doing business has evolved to a more virtual system of conference calls and emails, in our major markets the face-to-face business manner of doing business remains.
With more being achieved from these types of dealings, the industry is bringing people closer together in more tangible ways than previously. If one were to compare the aviation sector to the rail sector, a 4,000 metre runway can connect to virtually every location in the world whilst a 4,000 metre railway goes 4,000 metres.
This highlights the power of interconnectivity of the airline industry in both the commercial and social spheres.
A recent study in South East Asia found an increased presence of low cost carriers operating out of Singapore which actually brought down pricing to a level where Indonesians and Malaysians were able to visit Singapore, where the offer of retail remains extremely attractive.
Whilst these economic benefits are advantageous for the region, the net benefit of socialisation between the younger generation holds equal promise for societal cohesion.
As this age group travels the region with increased ease they can learn from each other, understand and appreciate the similarities they share and increase the social capital present between members of the next generation of decision makers and politicians. This has the power to benefit all members of our global society.
Role of BAG and the UK
Although there are further risks when operating outside of the UK, it is extremely important for us to utilise our international skill set and seek opportunities in the airport sector globally.
BAG has successfully run outward missions to U.A.E and China among other key markets, as well as hosting inward missions where we present ourselves to clients in the international market. Perhaps surprisingly, UK companies tend to be more cautious and less aggressive in the manner in which they sell their services internationally.
This trait may be to our disadvantage if we chose not to pursue international opportunities to the same degree and intensity as our competitors at all levels of the supply chain.
The members’ directory at BAG as well as our contacts at UKTI offer knowledge that can illuminate where these lucrative opportunities for UK companies lie; a knowledge most effectively shared from meeting and networking with crucial members of our industryʼs supply chain.
Groups like the BAG increasingly bring together companies that have historically competed, to work together and work together well.
In Hong Kong for instance, Mott MacDonald, Arup and Atkins have teamed up together to take on the demands of building a contemporary airport.
Although these three multinational companies would have been able to perform independently, they chose to build a consortium that ensures they have a compelling product that fulfills all that the customers wants.
By no means does this eliminate the natural element of competition in the airport sector, but instead ensures that the rich diversity of quality that is present within all UK industrial sectors is pooled through this meeting of minds, resulting in an optimum product for the client.
As a rule, the British tend to think internationally, are skilled at travelling and operating at this level and appreciate cultural sensitivities when conducting business overseas. As such there are BAG members providing their services or products in the top 60 international airports of the world.
Explanation for this success is simple. The UK is at the forefront of pioneering the most effective practices, with security a UK sector showing immense promise for international development, with new security technologies and practices being far more advanced and thorough in the UK than anywhere else in the world.
The future growth opportunities
Thereʼs a very strong relationship between GDP per capita and the rate at which people fly. With this strong correlation, there are developing countries whose strong growth rates are affording their citizenry a means to fly. Take India as an example.
With a national GDP growth rate of 7.3% in 2014, their accompanying aviation industry is widely regarded as the fastest-growing aviation market on the planet with an array of low cost carriers emerging to fill the demands from an increasingly fiscally able population.
This has enabled workers to go home more frequently and directly increased the social mobility of a huge swathe of the Indian workforce. In neighbouring China, the governmentʼs 12th Five- year plan has set an increase in the total number of airports in the country from 175 in 2010 to 230 in 2015.
Therefore UK companiesʼ international mindset and expertise in the airport sector generally offers exciting opportunity for an aggressive expansion to correlate to market opportunities such as these.
With the help of the BAG members and our commercial partners overseas, we can build upon our present success internationally, bring our lateral thinking skill set more deeply into the global airport sector as we continue to punch well above our weight.