As in most of the rest of the world, Europe’s airports face many operational, economic and social challenges in today’s uncertain climate.
Arguably the region’s airport CEOs are under pressure like never before, and inevitably there will be winners and losers in terms of traffic growth, route development and finding the funds to finance infrastructure development.
In an effort to better understand how different airports might fare, Exambela Consulting has conducted a survey of European airport CEOs.
It asked them to indicate which of 16 European airport companies they would place among the best performers (‘best in class’) in several different categories of management.
Exambela first developed this survey in 2006, updated it in 2009, and at the request of several European airports prepared another updated version this year.
Leading airports in the eyes of their peers
As the old adage goes, sometimes your competitors know more about you than you do, as in the eyes of CEOs themselves, the medium-sized hubs of Amsterdam, Munich and Copenhagen were clear winners.
What competitors and industry colleagues think of an airport’s competitiveness, quality, and management does matter; in fact, in some instances an external perspective can be more illuminating than the perspective that exists internally.
The airport industry is a relatively small and close-knit group, and Exambela expected that CEOs largely would agree on which airports are amongst the better managed. The perceptions of competitors and industry peers revealed in this survey, then, can provide useful insights for leaders of airports across Europe.
Exambela believes that this survey can provide airport leaders with valuable insight regarding the areas in which their airports are exemplars. Conversely, this survey can provide guidance on areas where they must refocus their efforts to gain ‘best in class’ ratings – not only from their peers, but also from their customers, their investors and even their management team.
Clear, pragmatic strategy
European airports have undergone a major business transformation over the last two decades. They no longer can afford to be mere infrastructure providers at the service of the national airline, and instead must expand their mix of businesses – and revenue sources – to become more competitive for traffic and services, and they now vie for a greater share of the passengers’ wallet in a liberalised market.
This evolution in the airport business model requires more sophisticated strategies that are tailored to the strengths and mission of each airport individually.
Having a clear, pragmatic strategy is key to success. The airports that scored the best overall in the survey are Europe’s medium-sized hub airports: Amsterdam, Munich, Copenhagen and Zurich.
These mid-sized hub airports – along with London Gatwick (a newcomer to this survey, following its spinoff from BAA in 2010) – rank relatively highly amongst their peers for strategy.
They appear to benefit from having a clearly defined, focused business model that is based on a commonly agreed-on set of success factors – perhaps an outcome of understanding how to focus on what you do well in the market you are pursuing.
Interestingly, all of these airports are in direct competition with Europe’s three largest airports: London Heathrow, Paris CDG and Frankfurt, none of which are ranked amongst the top for the strategy criterion.
Managing the complexities of an airport is no simple task and requires a strong, unified management team. The strategic vision for an airport can only fulfil its potential if it is shared with the management team.
A strategy alone is not enough; success requires a strong management team capable of implementation.
Two of the top three airports overall are recognised for their management capabilities as well. Amsterdam Schiphol is ranked in first place, followed by Munich. These two airports also tied for first in terms of management in Exambela’s earlier 2009 survey, suggesting that continuity plays a part.
Fraport and Athens rank in third and fourth place respectively, and both airports ranked among the top five in the earlier 2009 survey. In this category, Athens Airport achieves its highest ranking on any criterion in the survey; strong management is likely to be particularly important for Athens in the context of a difficult local environment. Turkish operator, TAV Airports, appears for the first time amongst the top five for this criterion.
Focus on customers
Losing focus on the end customer is a risk for airport managers, given the amount of time and energy needed to manage relationships with airlines, government authorities, local residents, shareholders, etc.
This danger is brought home forcefully by the fact that, in the current survey, the ‘customer’ category has the most airports with just a single mention or even none at all.
The exceptions here, as in other categories, can be found amongst the overall leaders in terms of peer recognition. Amsterdam and Munich are tied for first place, closely followed by Copenhagen and then Zurich.
All of these airports were also in the top four for this category in the 2009 survey, underscoring the importance of keeping the customer in sight consistently and continuously.
It is interesting to note that the highest-ranked airports for customer focus are also the highest-ranked airports for clear, pragmatic strategy, suggesting that these airports are putting customers at the core of their business strategy.
This attitude often starts at the top, with customer responsiveness woven into the management fabric of a successful airport.
Costs well managed
Given the intense pressure on airports by airlines to keep landing charges competitive and attract more airlines to new destinations, active cost management has become much more of a priority. Especially with the prospect of continuing increases in fuel prices and the anticipated expense of complying with Emission Trading Schemes, cost management may be an important differentiator for European airports.
Despite this, in the current survey, cost management receives the fewest number of mentions of any management category for ‘best practices’, perhaps reflecting that cost management is not a strength among European airports.
Copenhagen is solely the clear leader in this category. European airports managers view Copenhagen as leading its competitors in managing costs by a significant margin, as they also did in the 2009 survey. The recent opening of CPH Go, the successful low-cost terminal at the airport, may have reinforced this perception.
In general, this is one category in which the smaller airports in the Exambela survey appear to excel over their larger and more complex competitors. Dublin is in second place, followed by Manchester and TAV Airports.
Dublin’s second place ranking is particularly telling, in that it has the largest percentage of its traffic coming from Ryanair of any of the airports surveyed and so must keep its operating structure as lean as possible.
Amsterdam Schiphol and Munich, which otherwise are recognised quite highly in this survey, do not appear amongst the top five in this category. Interestingly, these are the two leading airports recognised by their peers for having a clear, pragmatic strategy.
The challenge for other European airports, then, may lie in understanding how to move beyond the narrow focus on cost control that was necessitated by the economic downturn so that they may start to prepare for longer-term growth strategies, even in a volatile market.
Innovation has become an essential element of a successful airport’s business model. A culture of innovation allows an airport both to anticipate future trends and to adapt to changing circumstances.
Today’s airports must be able to shift focus in tune with shifting markets and customer needs.
In this category, once again, the top three airports overall are also recognized by their peers by a wide margin. Schiphol is perceived as the European leader in innovation, followed by Copenhagen and Munich.
The gap between third place Munich and the rest of the airports in the survey is fairly large, suggesting the importance that airport managers place on the ability to adapt in an extraordinarily dynamic and uncertain marketplace.
Successful innovation requires ‘out of the box’ thinking. The top three airports above have been on the leading edge of new technology, along with developing innovative new customer products and services.
For example, Amsterdam Schiphol has created theGROUNDS, a collective sustainability initiative to improve the airport’s overall environmental track record. Within Munich Airport there is a cross-departmental programme focused on innovation, which has been behind the many successes at the airport, particularly in the management of hub operations with Lufthansa.
Key elements for this category include effectively managing relationships, influencing direction with all airport stakeholders (shareholders, employees, government agencies, local residents and the media, for instance), and creating a common platform for civic pride.
Schiphol is recognised in first place for its pragmatic strategy in dealing with all of its stakeholders, while Munich comes in third. However, in this category Copenhagen loses its top-three standing to Swedavia. This new airport management company (which was formed last year to own and operate 11 Swedish airports), at second place achieves its highest ranking in the survey. This is also the only criterion in which Aéroports de Paris (ADP) appears and is ranked amongst the top five.
Especially in the constantly shifting market environment of today, new challenges require new ways of doing business, and airport leaders must ensure they are focused on value and the set of management skills required for success.
In order to be among the winners, airport CEOs must make sure that their strategic priorities are well defined and focused on creating value for the multi-faceted businesses of the modern airport. They must manage the risks inherent in a complex global air transport business that, often, is dependent on a complex grouping of stakeholders.
Most importantly, today’s successful airport managers must look beyond the near-term crises and hold to a coherent but flexible strategy for long-term, sustainable success.
In working closely with different airports around the world, Exambela have observed that the most successful strategies go beyond simply managing costs or managing stakeholders and direct themselves to delivering a sufficient return by meeting the needs of customers and instilling a culture of innovation. This year’s survey participants appear to recognise the importance of these characteristics in their peers.
The airport world continues to evolve, and airports – and their leadership teams – must also evolve to survive and to thrive.
The global financial crisis has affected all types of airports in all regions around the world, whether they are hubs, regional airports or low-cost airline bases.
In order to ensure its place among the winners as markets move forward in an uncertain recovery, an airport must be able define and effectively implement a unique, compelling business model that reflects the requirements of customers and other stakeholders at the airport.