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Executive summary Airports face multiple challenges, including meeting capacity demands, providing enhanced public service and increasing revenue all while battling rising costs, increasingly dissatisfied customers and rigid information infrastructures. These challenges and pressures are evidence that their current business processes need revitalization. Even with their challenges, airports have the potential to become multi-modal transportation hubs and centers of economic vitality. To do so requires greater collaboration between airport stakeholders and a more integrated approach to managing and sharing information. Society has presented airport executives with a mandate to create airports that are smarter, just as airport infrastructures, systems and processes are becoming digitally aware, interconnected and infused with intelligence. By embracing new and existing technologies to acquire, associate and analyze information in the airport infrastructure and using that information to become more efficient and effective, airport operators can create a more responsive and agile operating and commercial environment. In addition, they can be recognized as leaders who harness shared information to: Provide enhanced service to passengers, airlines and other customers. Achieve real-time operational awareness, adaptability and readiness. Decrease the cost of delivering services. Generate business insights that benefit the airport, airlines and business partners. The smarter airport is a dynamic hub that connects a multi-modal transport network with people, information and trade; it serves the needs of the larger community and generates economic value for the region. It is a new frame of reference with enormous potential for growth and progress and for opportunities to think and act in new ways.
Introduction
The demands being placed on all modes of transportation are growing, driven by expanding populations, rapid urbanization, business globalization and the rapid adoption of new technologies. These and other factors have created four imperatives for all operators in the transportation ecosystem: Predict demand and optimize capacity and assets accordingly. Improve the end-to-end customer experience. Improve operational efficiency while reducing environmental impact. Continue to assure safety and security, with less cost and impact on customers. Airports play an increasingly important role in addressing these imperatives because they are a nexus for multi-modal transportation. Airport operators are responsible for planning, designing, building and operating their capitalintensive infrastructure assets over long planning horizons to meet commitments to the local communities and metropolitan areas they serve. They have a long-term financial obligation to deliver sustainable return on these assets. Current airport business models are often not yielding the desired financial results, however. Based on the Global Airport Revenue statistics of the Airports Council International (ACI), aeronautical revenue does not cover all airport operations costs. Instead, net airport profit growth is now derived from non-aeronautical revenue because of higher margins and lower operating costs.1 Both airport revenue streams (aeronautical and non-aeronautical) are under pressure caused by reduced passenger numbers, cargo volumes and aircraft movements in the current economic environment.
The reason that current business models are no longer as effective as they once were is that the air travel environment is changing faster than organizations can adapt. Periods of economic growth and decline, airline traffic volatility, shortterm route network changes, evolving security rules and other governmental regulations all characterize the current air travel environment. In this changing environment, airports and their business partners are struggling. It is clear that a business model transformation is necessary. Airport-initiated stakeholder collaboration and information technology are key enablers in the transformation of the airport business model to one that uses airport infrastructures better and supports new commercially attractive offerings. This transformation requires big ideas from all participants in the global airport industry from small operators to large airport authorities in both high-growth and mature markets. Global multi-modal transportation needs more dynamic, economically viable airports that serve as central hubs in networks of passenger, cargo and information movements. Now that so many technology avenues are open, its time to make the change. This paper provides a brief overview of the challenges that have mandated a change in the airport business model and then explains how airports can use new strategies, current and emerging technology and paradigm shifts to become smarter airports.
For airport operators, the top industry challenges are: capacity shortfalls, dissatisfied passengers, declining revenue, increased regulations and increased competition.
Increased regulations New requirements from a large variety of regulatory bodies, including aviation authorities and national and local governments, put pressures on airport operations. For example, new security requirements for the passenger and cargo handling processes are causing disruptions and are increasing airport costs. Safety and security costs have risen to almost 60 to 70 percent of airport operating costs.7 In addition, environmental regulations affect all airports, regardless of size or location. Some new regulations are likely to cause significant changes to airport operations, such as those applicable to oil spill prevention planning and directives to monitor and control noise pollution, toxic air pollutants and carbon emissions. Increased competition Strong airline alliances dominate the market. As a result, airports compete with each other for airline and passenger traffic, while their local communities expect all attractive routes to be available. However, the larger share of competition is from other forms of transportation. High speed rail has had a significant impact on air travel in continental Europe.8 Airport operators and their infrastructure assets cannot easily move to a better market, so they must make their market more attractive to airlines, passengers and the larger air travel stakeholder community. These challenges have created an almost overwhelming mandate for change. Airports must transform themselves and their business models to overcome the current challenges they face and thrive in the 21st century. They must become smarter airports. To do so requires a different mindset and a new level of collaboration between all the major stakeholders in the air travel chain.
Smarter airports are connected networks that make it easy for passengers, cargo, information and services to get where they need to be. Such connectivity creates a new, positive experience for travelers from pre-flight to postflight. The seamless integration of information from various processesfrom check-in, to security, to flight information displays, to baggage, to boardingstreamlines airport operations. A single instrumented, interconnected and intelligent information architecture provides the flexibility to adapt to the changing needs of airlines, airports and their customers. The result is a positive effect on airport revenue and growth. For example: Technology connects the objects, people, processes and systems in the air travel process and helps operators and service providers track their movements. With this information, airport operators and other aviation service providers can allocate support resources just when theyre needed throughout the process. Air and multi-modal network alignment enables efficiencies, incentives and multi-branding opportunities. Competitive pricing and schedules enhance door to door connectivity for passengers and cargo. New travel services can create consumer revenue growth because passengers can move through the airport with few hassles and enjoy their experiences at the airport. Regional logistics and trade based on related business activities in the airports region or country stimulate growth of the air travel network and land side connectivity.
Technology can enable airports to transform the entire air travel process. However, technology is only an enabler. For airports to truly make the leap to new, sustainable and profitable business models, airport operators, airlines, ground handlers, security operators, customs, retailers, concession owners and public transport operators all must alter their mindsets from proprietary to collaborative. Collaboration is the key to planning and managing multi-modal operations and commercial services effectively in every aspect of the airport ecosystem.
Smarter airports are connected networks that make it easy for passengers, cargo, information and services to get where they need to be. A single instrumented, interconnected and intelligent information architecture adapts to the changing needs of airlines, airports and their customers.
Now, however, there is an opportunity for airports to think and act in new ways. The world is becoming:
Instrumented
RFID tags, mobile phones and other connected devices are creating the ability to sense, measure and track locations and conditions of objects, people and processes over door to-door multi-modal transport networks.
Interconnected
Technology has evolved to the point that there are now large networks that connect all types of objects, creating multitudes of interactions between people, places and things.
Intelligent
Instrumented and interconnected information infrastructures and other assets can now communicate with sophisticated business systems so that we can mine more data, analyze relationships, identify new patterns and make informed decisions in real time.
Instrumented
Interconnected
Intelligent
Instrumented
Consider these predictions for 2010: 1 billion transistors per human on the planet 4 billion subscriptions to mobile telephones and personal digital assistants 2 billion people with Web access 1 trillion connected objects such as cars, appliances, cameras, roadways, pipelines Using these technologies and others, such as wireless airport sensors, RFID tags and personalized cards based on biometrics, you can track objects, people and airport processes throughout the airport infrastructure and broader air travel chain. In fact, instrumented objects, people and processes are already providing masses of new transportation data around the world. For example, instrumented devices aid passenger navigation at self-service check-in kiosks, immigration, retail areas, security and gates in combination with wireless sensors in the airport area. Expect the presence of commonuse self-service technologies to become more widespread as airports recognize their potential for further empowering passengers.
Instrumentation also supports obtaining more airport operations information, such as utilization of terminal processes, passenger flows and maintenance of critical airport assets such as runways, terminals and equipment. Existing airport hubs in Europe, Asia and North America and new airports in emerging markets are applying increased levels of instrumentation to the travel process. With information about passenger flows from mobile devices with GPS and RFID tags, airport operators can locate passengers, cargo and bags while interacting with individual passengers at each step in their travel process, reducing costs and helping meet new security mandates. Airport staff can also be better deployed in the airport to accommodate these flows, which in turn improves capacity.
Using transistors, mobile phones, personal digital assistants, GPS. wireless airport sensors, RFID tags and personalized cards based on biometrics, it is possible to track objects, people and airport processes throughout an airport.
The airports in Las Vegas, Amsterdam and Hong Kong use RFID to sort and track baggage. Better read rates over the bar coded tags have improved baggage sorting and reduced mishandled baggage, while increasing the capacity of the existing baggage system. The airports then can defer costly and disruptive expansion work.
Interconnected
An airport operation has, on average, at least 30 disparate systems running concurrently. For many years, airport operators focused their technology purchases on separate solutions that responded to a single or unique operational need. For example, they invested in one solution for baggage handling, another for flight information display systems and yet another for check-in. The result is an infrastructure with original and older applications that are highly inflexible, complex and difficult to integrate. Each system holds information that could improve airport service if shared with other systems; however, most are simply silos that provide information only to a select group or enterprise. Connecting the different airport systems, without replacing the original infrastructure, makes it possible for airport operators and their business partners to share important information, such as that provided by instrumentation. They can develop business models for a consistent travel experience and optimal airport processes. Interconnectivity can be accomplished in a number of ways, such as with: Standardized, global airport connectivity Industry associations such as ICAO, IATA, ACI and the American Association of Airport Executives (AAAE) have begun working on a framework that promotes global airport interconnectivity with global information standards. The goal is a more transparent air travel chain, one that can better match supply and demand for terminal capacity and other airport process bottlenecks. The framework would support the technologies that can transform processes in areas such as aircraft handling, security, baggage and check-in. Examples include new tools such as airport-wide performance dashboards that make it easy to view real-time information to improve travel flows.
Shared services Shared services can include reusing data, networks, software and computing resources to create interconnected information processes between departments and partners. Using information technology, airports and airlines can work together to develop a shared services model that meets the increasing demand for streamlined operations. A shared services model supports growth and organizational collaboration to meet evolving challenges while reducing the effect of information silos that result in redundant costs and inefficiency. Airport Operations Control Centers The purpose of an Airport Operations Control Center (AOCC) is to oversee and align all airport processes from a single, trusted source, creating a common focus on punctuality, process quality and continuous improvement. AOCCs feature modular, flexible airport operating systems and an information architecture that can receive information from anywhere in the airport and route it to where it needs to be to support all airport operations processes. For example, airport staff and enterprise resource planning systems can receive predicted passenger departure traffic volume so they can match resource levels with demand. Such alignment can help reduce the high cost of overstaffing and correct poor service levels. The AOCC can also use communication channels such as secure Web portals to share information that can help integrate financial processes by creating a unified situational and analytical view for airport management.
Airports can accomplish interconnectivity with global information and connectivity standards, shared services, airport operations control centers, shared services and IT optimization.
Optimization of IT infrastructure The cost and complexity of IT systems can be reduced using a technique known as virtualization. Shared servers and storage, which can be in-house or offsite, can run multiple applications so that a server for each application is no longer necessary. The result is the flexibility to adapt system capacity to changing needs and streamline IT operations. Virtualization also yields lower costs for energy and space, while helping convert capital expense to operational expense.
Frankfurt Airport Fraport and Hong Kong Chek Lap Kok International Airport have achieved improved safety, security and operations efficiency by integrating the real-time management of multiple airport systems and operations into a new AOCC. These systems automate and remotely capture performance measurement, which in turn facilitates improvements in operational planning for the airports.
Intelligent
When the systems of airports, airlines and service providers are instrumented and interconnected, operators acquire a wealth of new passenger-based information. Intelligent business applications help airport operators decipher this information to answer questions such as: Are we managing our airport operations efficiently based on actual traffic patterns? Also, with such intelligence, airport operators, airlines and service providers can develop new areas of air travel process integration that change the dynamics of passenger flows and facilitate better airport and aircraft capacity utilization. For example, intelligent systems can monitor gate usage to determine the availability of space for aircraft. Boarding and baggage procedures that use technology to help locate travelers and their baggage for quicker boarding can also improve turnaround time.
Intelligent business applications help airport operators answer questions such as: Are we managing our airport operations efficiently based on actual traffic patterns?
The Manchester and Copenhagen airports are capturing real-time passenger flow data by passively tracking the Bluetooth phones carried by passengers. This information ultimately helps the airports eliminate bottlenecks, improve operations and optimize staffing levels.
In addition to more efficient airport operations and better utilization of the airport facilities, intelligent information infrastructures make it possible to introduce new services for passengers. Such services include virtualized passenger procedures that provide service beyond the boundaries of the physical airport, spreading peak congestion over locations and broader time intervals. For example, smart phone applications and kiosks located outside of the airport can enable remote check-in and deliver personalized information about schedule changes to travelers, streamlining the time and resources needed to support passenger peak demand periods while improving customer service. Instrumented, interconnected and intelligent airport systems are the backbones of a smarter airport and are key enablers of smarter airport strategies.
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The strategies for a smarter airport include connecting transportation networks to improve competitive position, innovating for a consistent travel experience and promoting sustainable development of the larger logistics and trade area community.
To realize their full potential as multi-modal hubs, airports must lead the creation of a transportation system of systems. They must move beyond physical infrastructure to help integrate operational processes and supporting technologies between transportation operators, the community and their customers. The reason for this is that smarter airports do not recognize traditional boundaries between air and other forms of transportation. Instead of competing with rail, road and water, a smarter airport is a multi-modal hub with a large catchment area that offers regional and global air route connections and helps reduce overall transportation times and costs. At these hubs, more passengers and cargo can move more efficiently, serving more destinations, with increased on-time performance. To improve the traveler and customer experience, airports can start by aligning air route networks and schedules with those of other kinds of land transportation. Passengers and cargo shippers can then make informed planning and purchasing decisions about each type of transportation they use. Airports should also adopt the actions of current world-class airports by expanding land and sea travel networks to offer new destinations. Frankfurt and Paris are examples of airports that are connected with high speed train networks. Amsterdam and Hong Kong benefit from the existence of large seaports that strengthen the airports and vice versa with additional traffic volumes and development of logistics and trade areas.
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Creating strategic clarity, collaborating responsively and mitigating risks are part of the route to a smarter airport.
Promoting sustainable development of the larger trade community, improving competitive position with multi-modal transport networks and innovating to upgrade operations and commercial services all represent the process of creating a smarter airport from a strategic perspective. There are also tactical considerations these form the route to a smarter airport.
How and where to position new entrants in the airport market such as banking and investment groups and large engineering and construction corporations The role of the airport in the economic regionas a public runway and terminal utility service onlyor an engine for growing multimodal transport, travel and trade interactions
Collaborate responsively
If they are to thrive, airports and their business partners must collaborate to plan, manage and operate the movement of passengers and cargo in the entire travel process. They need to develop a shared vision to resolve congestion, customer dissatisfaction and other pressures such as national security and the environment. The key enablers of airport collaboration are: The willingness of airport operators, their business partners and service providers, motivated by a better economic model, to achieve process integration for improved air travel services and lower overall airport costs The alignment of modern airport procurement, contracting and management procedures to recognize the value of a new outsourcing business model with external providers handling non-core processes. The implementation of technology that promotes information-sharing between all airport entities
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In the financial arena, there should be an emphasis on transforming fixed capital expenditures into variable operating expenditures. Variable operating expenditures are created by focusing on core aviation activities and outsourcing non-core activities to specialty services providers, such as handling, information, facility management, security and so forth, based on pay-for-use models. At the same time, airport operators must continue to maintain strong relationships with the local community as part of their corporate social responsibility policies, which should include noise and CO2 emission reductions.
Do you have a map of your enterprise information infrastructure and applications that shows which systems are integrated with those of the airlines, ground handlers, security operators, customs, retailers, concession owners, public transportation operators and so on to take advantage of your combined assets, capacity and services? Is effective governance in place? Which airport processes do you consider core competencies performed by airport personnel versus business functions that could be executed by specialist service providers? What are you currently doing to measure and sense the health of your airport operations? What are your plans for incorporating such information into near real-time collaborative decision making to answer these questions: How are we doing? Why? How can we improve? What are you currently using your best talent for? What could be accomplished if they were focused on helping the airport ecosystem become instrumented, interconnected and intelligent? How did your organization score in the preceding checklist? How many of those + signs are your airport acting on right now? Would the person in the office next to yours score the airport the same way? There might be an opportunity to transform travel and trade further. Let this checklist be your impetus to get started.
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The time for airports around the world to change is now. To thrive in the years to come, airport operators must transform their business processes to create smarter airports.
Conclusion
The time for airports around the world to change is now. Current business models are not yielding the desired results. Today, airport authorities, owners and their major business partners are facing rising costs, declines in revenue, growth constraints and an increasingly dissatisfied customer base. To prevent these problems from worsening, airport operators must move away from business as usual models and transform their business processes. They must become smarter airports. Smarter airports are connected networks that make it easy for passengers, cargo, information and services to get where they need to be. The seamless integration of information from all airport processes streamlines airline operations. A single instrumented, interconnected and intelligent information architecture helps the airport adapt to the changing needs of airlines, aviation service providers and customers. The result is a positive effect on airport revenue and growth. Technology can help transform the entire air travel process, but it is only an enabler. For airports to truly make the leap to new, sustainable and profitable business models, all stakeholders involved must become collaborators rather than competitors. With collaboration comes the effective planning and management of multimodal operations and commercial services in every aspect of the airport ecosystem.
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Brian E. ORourke is the Global Airline Offering Leader and Business Development Executive in the IBM Global Travel and Transportation unit and has been actively involved in numerous consulting engagements and value added initiatives for airlines and other clients. Using his professional training and 23 years of airline industry experience, he helps airlines and airports use process optimization and technology to become more efficient. He has worked directly with the IATA to drive industry-leading solutions and he has co-authored and published several aviation industry articles, including The Innovative Airline, Creating sustainable advantages in competitive times, Service Oriented Architecture for the Airline Industry and more. His e-mail address is beorourk@us.ibm.com. Charles Vincent is a Partner who leads the Distribution and Travel and Transportation practice in IBM Global Business Services in Southwest Europe. His e-mail address is charles.vincent@ nl.ibm.com.
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References
1
IATA Economic Briefing, July 2009. http://www.iata.org/NR/rdonlyres/4929507D-5B4B-430BA52C-A201BBE1A434/0/Infrastructure_Costs_Jul09.pdf ACI Passenger and Freight Forecasts, 2005-2020: Flag shortage of airport capacity, Airports Council International, 23 August 2005, http://www.docstoc.com/docs/9887809/ACI-Passengerand-Freight-Forecasts-2005-2020-Flag-Shortage-of-Airport RITA, Bureau of Transportation Statistics, 2009. http://www.transtats.bts.gov/HomeDrillChart.asp
Press releases from Transportation Industry Association, May 29 and June 26, 2008: http://www. ustravel.org/pressmedia/pressrec.asp?Item=900; http://www.ustravel.org/pressmedia/pressrec. asp?Item=905
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Statements made by CEO Giovanni Bisignani at the 65th IATA Annual General Meeting in Kuala Lumpur June 2009 and updated at press briefing in Washington September 15th 2009, http:// www.iata.org/pressroom/speeches/2009-09-15-01.htm Angela Gittens, Airport Strategies and Stakeholder Partnerships in Challenging Times, ACI 3rd World Civil Aviation Chief Executives Forum, 2009. http://www.airports.org/aci/aci/file/Speeches/ AGI/2009/WCAEF_060809_website.pdf Airports Council International speeches, http://www.aci.aero/cda/aci_common/display/main/ aci_content07_c.jsp?zn=aci&cp=1-7-3475^31035_666_2__ Angela Gittens, Director General ACI, Airport Strategies. Peter Jorritsma, Substitution Opportunities of High Speed Train for Air Transport, Aerlines e-zine, 2009. http://www.aerlines.nl/index.php/2009/substitution-opportunities-of-high-speed-train-for-airtransport/ Dr. Stephen Appold and Dr John Kasarda, Governing the aerotropolis, Global Airport Cities. Spring 2009. http://www.aerotropolis.com/files/2009_04_GoverningTheAerotropolis.pdf
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