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  Official magazine of ACI
Tuesday, 11 January 2011 11:36

Man with a plan Featured

Written by  joe bates

pierre-graff
CEO, Pierre Graff, talks to Joe Bates about an eventful 2010 and even busier times ahead for Aéroports de Paris.

 

Aéroports de Paris (ADP) CEO, Pierre Graff, has no hesitation in stating that 2010 will go down in the history books as a year when the French airport operator demonstrated its “robustness and resilience”.


He says this because despite a difficult operating environment – made worse by the disruption caused by the volcanic ash cloud which cost ADP an estimated €23 million in lost revenue – the airport operator expects to achieve most of its key business objectives.


Traffic throughput at its Paris gateways, Charles de Gaulle (CDG) and Orly (ORY), is set to match or slightly better last year’s performance when the airports handled around 83 million passengers between them.


ADP’s revenues and EBITDA (earnings before interest, taxes, depreciation and amortisation), boosted by soaring retail/concession income, are on target to beat last year’s totals.


It signed a new Economic Regulation Agreement (ERA) with the French government outlining its ambitious new expansion plans for the period 2011-2015 following the 2010 completion of its old five-year plan.


ADP developed an environmentally friendly new energy source by opening a geothermal plant at the Paris Orly site (Read more about it in the next issue of Airport World).


It stepped up its bid to raise customer service levels by investing in the renovation of its oldest terminals.


And ADP’s international airport assets – it has interests in six foreign airports/airport operators in Mexico, Belgium, Guinea, Saudi Arabia, Jordan and Mauritius through wholly owned subsidiary Aéroports de Paris Management (ADPM) – and overseas management and consultancy contracts continued to make it money.


Enthuses Graff: “I think this year has best illustrated the robustness and resilience of Aéroports de Paris.


“We announced a growth in turnover, EBITDA and net income during the first half of 2010 despite a 2.1% drop in traffic. The situation, of course, was not helped by the exceptional impact of the Icelandic volcano eruption, which closed French air space for five days and had a negative impact on revenues.


“Nevertheless, we have witnessed a strong recovery in the second half of 2010, so much so in fact that we expect to report stable traffic figures for 2010 and, on that basis, a slightly improved turnover and EBITDA.


“However, 2010 was a particularly important year for us as it was the last year of our five-year Economic Regulation Agreement for 2006/2010, and the overall results for the time period have been extremely positive. 


“We have complied with all the commitments made in 2006. 


The company has undergone a radical transformation to become a service-provision group and the strategy of investing €3 billion on enhancing our key aviation infrastructure has allowed us to increase our handling capacities by 25 million passengers per annum.


“In the meantime, our retail and real estate businesses have grown and helped diversify our revenue streams. I believe that our expected solid financial results of 2010 and the previous four years vindicate the business strategy we have pursued.”
Paris CDG remains the busier of the French capital’s two international gateways, handling around 58mppa, while Orly accommodates around 25mppa. 


Built on a 3,257-hectare site around 25 kilometres north of Paris, CDG is the world’s sixth busiest passenger airport and the jewel in the crown of ADP.


Boasting three passenger terminals capable of accommodating up to 71.8mppa and six cargo terminals, CDG handles the bulk of long-haul and intercontinental routes served from Paris.


Transfer traffic typically accounts for 32% of all passengers handled at the gateway.


Located 16 kilometres south of Paris, Paris-Orly is specialised in point-to-point traffic to and from destinations within France, Europe, North Africa and the French overseas territories. 


Around 25.1 million passengers used Orly in 2009, cementing its status as France’s second busiest airport and the eleventh busiest gateway in Europe. 


Located seven kilometres north of Paris, Le Bourget is Europe’s largest business airport and, with over 100 aircraft maintenance, equipment and development companies based on the 553-hectare site, is a major centre for the aeronautical industry.


The airport, located on the doorstep of the Le Bourget Exhibition Centre which hosts the Paris Air Show every two years, handles around 58,000 aircraft movements and 100,000 passengers each year.


In addition to CDG, Orly and Le Bourget, ADP also operates 10 general aviation airfields and the Issy-les-Moulineaux heliport in the Île-de-France region.


Although refusing to predict final 2010 year-end figures for its two leading airports, Graff does admit that the traffic figures at CDG and Orly “would have been even better without April’s volcanic eruption”.


He is, however, not so reticent to talk about the future, as the newly signed ERA projects a 2% increase in passengers in 2011 followed by a 2.4% upturn in 2012 and then three successive years of near 4% per annum rises.


And the future also looks bright for cargo, according to Graff, who notes that Paris CDG has the facilities and equipment to process more than 3.5 million tonnes of freight per year.


It is, of course, already Europe’s busiest cargo airport handling in excess of two million tonnes yearly.


“Charles de Gaulle has maintained its position as Europe’s leading cargo airport throughout the financial crisis, even managing to move up one place in the global rankings to fifth, and I see no reason why this cannot continue for the foreseeable future,” comments Graff.


“The results for the first half of 2010 clearly confirm the recovery of the cargo business. At Paris CDG the upturn translated into a 14.3% increase in throughput.”


Graff insists that the airport’s expansive route network, which according to Air France, can provide freight companies “with 23,600 connection opportunities in less than a two-hour time frame each week”, ensures that CDG is Europe’s “essential air-cargo centre”.
Over 220 freight companies are currently based at the airport, with ADP estimating that cargo activity at Paris CDG is ultimately responsible for 17,000 jobs. Tenants with major facilities at CDG include FedEx.


ADP’s anticipated 2010 rise in revenues and EBITDA is in no small way due to its decision to revamp and expand the commercial offering at CDG over the last few years.


Indeed, ADP has added 32% more retail space at CDG since 2004, allowing it to introduce a number of new outlets and brands that have led to retail revenues soaring in the first half of 2010, despite a decline in traffic.


CDG’s showpiece Terminal 2E has been a particular beneficiary of the strategy, gaining new outlets such as Dior, Prada, Hermès,
Exki, Paul, La Maison du Chocolat and Armani that have acted as the catalyst for a 11.4% rise in airside sales during the first six months of the year. 


And with Paris CDG currently enjoying an average passenger spend of €13.9 and ‘retail and services’ now accounting for a third of ADP’s annual turnover and nearly 50% of its EBITDA, it is a business policy that has clearly paid off.


“The strategy has allowed us to provide an expanded product range and brand offering and tailor it to the type of traffic and customers travelling through our airports,” says Graff.


“We intend to pursue these efforts in the coming years. We want to increase the overall area available for retail activities by 21% between 2009 and 2015, and by 35% in the case of shops in our restricted areas. We will also implement a new design model for our retail areas, with a more uniform layout in terms of being in the customer’s path, shop density and integration of relaxation and communal areas.


“The department-store concept is also making its entrance into the airport environment. In addition we aim to capitalise on our unique and legitimate positioning: Paris, the ‘creation capital’, and exploit our national anchor for all key products such as cosmetics, fashion and accessories and above all the French ‘art de vivre’ (gastronomy and restaurants). 


“Last, but not least, we will pursue our policy of attracting the major brands that our customers enjoy, such as Starbucks, Illy, Exki, Paul, Fauchon, McDonald’s, Brioche Dorée.”


Although not a recent winner of an ACI Airport Service Quality (ASQ) customer satisfaction award, Graff assures passengers that ADP does take customer service very seriously.


Its newly introduced ‘Dites-nous’ (You tell us) campaign, which invites passengers to blog about their experience at CDG and suggest where improvements can be made, at www.ditenous.fr certainly provides proof of this commitment.


Among the passenger suggestions that are currently being considered by ADP, according to Graff, are calls for the installation of water fountains, extending free Wi-Fi access beyond the current 10-minute time limit and adding another on-site hotel.


Graff is also quick to point out that ADP formed its own Customer Satisfaction Division at the start of 2009 in a bid to “quickly and sustainably achieve a significant improvement in customer satisfaction levels at its Paris airports”.


“Its mission is to develop a customer-oriented culture throughout the company,” he says.  “We want to improve the passenger experience whether they are in transit, in our car parks, bars and restaurants or at the passenger security checkpoints.”


So what of the future?  ADP’s newly signed Economic Regulation Agreement with the French government for the period 2011-2015, is based on the assumption that traffic should rise by an average of 3.2% per annum for the next five years.


The forecast means that enhancing its existing facilities is not an option but a priority, so between now and 2015 ADP will invest €2.4 billion primarily on modernising and renovating its oldest terminals.


On the agenda at Paris CDG is the revamp of Terminal 1 and its satellite buildings while Terminal 2’s sub-terminals are all due for a major facelift.


As part of the upgrade, Terminals 2A and 2C are to be joined by the creation of a new central area with one security checkpoint that will house numerous retail and F&B outlets and allow the existing facilities to be transformed into boarding areas by mid-2012.
Terminal 2B will also be completely refurbished and its handling capacity increased from 5.4 million to 6.5mppa. The new-look facility, offering 3,000sqm of retail space, bars and restaurants, is expected to open at the end of 2015. 

t2at-pariscdg


The planned renovation of Terminal 2D is expected to be completed sometime after 2015. 


Satellite 4, currently under construction on the eastern side of the airport, is scheduled for completion in Q3 of 2012 and when open, according to Graff, “will significantly improve passenger comfort levels”.


The new 100,000sqm boarding area for Terminal 2E – one of the largest construction projects currently underway in France – will effectively allow the SkyTeam hub to handle international traffic. 


When complete the facility will be equipped to handle 7.8mppa and be capable of simultaneously accommodating 16 aircraft, including seven new-generation widebody aircraft such as the A380.


At its centre, encased by a nine-metre high glass roof, will be a retail area designed to resemble a Parisian street with shops, restaurants and entertainment and ‘relaxation areas’. 


Terminal 2F is be to transformed into CDG’s dedicated Schengen facility by early  2012. 


Orly’s South and West terminals are also due to be modernised and improved and its baggage reclaim areas and security and border checkpoints consolidated by 2015 year-end to improve convenience and passenger flow. 


“We are about to enter a period of major construction and renovation that will ensure that our customers are provided with some of the most modern, comfortable and convenient facilities in the world,” says Graff.


The new facilities will raise CDG’s capacity to 81mppa, which ADP believes will be sufficient until at least 2020. 


Although an impressive figure, the total is actually only around 10 million more than today because the facilities ADP has added over the last five years have boosted CDG’s capacity by 25 million passengers to 71.8 million per annum.


It is a different matter at Orly, however, where a night curfew and regulation limiting it to 250,000 aircraft movements realistically mean that it will never be able to handle much more than 30mppa.


So is Graff worried about the lack of future capacity and does this mean that the construction of a new international airport for Paris is inevitable?


Graff muses: “A third airport in the greater Paris region (Ile-de-France) is not on the cards. Why not, you ask? Quite simply because at Paris-Charles de Gaulle we have practically unlimited runway capacity and enough terminal capacity to absorb the increase in traffic through to 2020 and beyond.”


And after 2020? “In the event of the terminals being saturated, we have enough available land to build a new fourth terminal capable of handling up to 30 million passengers per annum,” adds Graff. 


“It is always easier to build a new terminal than to build a new airport with all the environmental constraints associated with the choice of the site, the availability of land, and so on. Our airports are here to stay and therefore we must continually strive to make them better.”


The need to always look to make improvements will strike a chord with many airport bosses out there who know that no matter how big or small their gateway, managing it is a never-ending story.


Airport World 2010 - Issue 6

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