When airports invest in technology the passenger experience is often improved but the bit that's sometimes overlooked is that airlines benefit too. Therein lies a bit of a problem.
Airports, it seems, have not been good at articulating the value that lies in their technology and when sitting round the table to talk fees with carriers, they often lump all the services they provide into one sum.
This is the subject of a Frost & Sullivan report released earlier this week, which was commissioned by Amadeus.
It talks about:
- The need for airports to highlight the value of tech investment
- The importance of the chief information officer role at airports and how they bring experience from other industries of tech that can be employed, e.g. the cloud
- The revenue benefits in investing for both airports and airlines
- The need to think about the passenger as the common element so that everyone focuses on the same thing as opposed to their own metrics
No one can pretend that route economics aren't the most prominent factor that airlines consider but the study seeks to highlight that the IT infrastructure is part of the value airports provide and will be of increasing importance.
tnooz spoke to the report's author Alexander Michael as well as
Amadeus head of airport IT John Jarrell about technology sophistication, whether all parties are ready to address the passenger experience and who's getting it right.
Jarrell says:
"The problem sometimes with investment is the party that has to make the investment is sometimes not the party that gains the benefit from it."
He cites baggage reconciliation services as a good example with an airline flying from airport A to airport B saving on messaging costs, but it's the airport that has made the investment.
Michael says that while airport and airline discussions tend to centre on new routes but, turning the issue on its head, he adds that if an airport IT infrastructure is older and hasn't moved into the digital age, that airline is less likely to consider the move.
IT sophistication
SITA's 2017 Air Transport IT Trends report highlights some of the areas of investment as well as the plan for increased spend - after a slight dip in 2016, airport IT spending is expected to increase to $8.43 billion this year.
Jarrell says that while all major airports have investment in IT, they are "all over the map" when it comes to sophistication and the ability to take advantage of the technology.
"In other sectors, a serious benefit being taken advantage, that airport have not is in using the cloud. Even today, only a minority are willing to use the cloud. There's a comfort factor in having something to touch.
"One of the points in the paper is that the reason it is evolving is that the industry is bringing more CIOs into the airports that have worked in sectors where these technologies are more prolific."
Revenue benefits
Jarrell says systems such as the cloud-based Airport Common Use Service can mean airlines are up and running from an airport in a matter of weeks when usually it takes months.
"That means the airline increased its revenue streams through a new route which is new revenue."
A new route is also likely to attract passengers who have perhaps not considered that airport before.
One recent example of how Amadeus-powered ACUS is
improving the passenger experience is the work done with Off Airport Check-in Solutions which enables travellers to check in and drop off bags almost anywhere.
While the benefit to passengers is clear, it also means space freed up at airports and the ability for airlines to move check-in to other locations.
We need to talk
There is a need for these issues to be part of talks between airlines and airports and for costs to be broken down so carriers can see what benefits they are getting. Jarrell says:
"As a provider these issues are important for us to highlight. We might bring a higher cost or a lower cost or additional benefit with that higher cost."
He adds that airports do get the need to invest but adds that change is hard when it is not how they have traditionally operated and transparency has been lacking.
Michael adds:
"We discovered that performance metrics are misaligned between airports, airlines and ground handler so the recommendation is that they should focus on the passenger."
Easier said than done but Jarrell believes that it is becoming more realistic especially as the industry is seeing some good years.
Joining the dots
Every week there's news of an airports and airlines introducing new initiatives to speed up bag drop, check-in and security or improve passenger service via chatbots but when does it all get joined up?
Jarrell says:
"One of the challenges of the airport experience is that it is not a global industry, an airline is. Airports are local entities and there is not a common regulatory environment so when have passenger processing with things like biometrics, airports question what standards to use and they don't’ know the answer. They have to persuade local law enforcement."
Michael adds:
"The whole government angle is the one big problem. Airlines and airports will work it out but with government, it goes out the window. It's completely outside the airport-airline control."
That said, Jarrell points to Copenhagen as an example of an airport ahead of the game.
"Copenhagen is very close to airline customers and very close to government and it definitely focuses on the passenger with work to keep immigration lines short. In RFPs it considers the downstream benefits to customers."
Growth imperative
It's no secret that airports need to expand to keep up with passenger growth. Figures released by ACI show that Europe's airport alone saw an additional 100 million passengers in 2016.
The ACI numbers also show that 2017 will be another record year for passenger traffic with January to October already seeing an increase of about 8.6%.
With this sort of growth in mind, Michael says that it is surprising to see airlines reaction when airports try to justify their increase in fees to allow for capacity growth.
He adds that the argument from airlines that additional capacity means increased competition is surprising.
Jarrell adds:
"Technology can add 30 to 40% to capacity, it's much cheaper than concrete. Then it become incumbent on airlines to be competitive. The traffic is going to grow at that airport anyway."
Strengthening the Airport Value Proposition can be downloaded here.
Related reading:
How airports are working to keep up with dramatic growthThe airport revenue growth challenge - learnings from around the globe