Pockets of turbulence22 December 2017
According to a recent report from the ACI, most of Europe’s small airports are losing money. Patrick Kingsland asks Henri Hansson, senior vice-president, technical and environmental services at Finavia and chair of ACI Europe’s regional airport forum, and Deirdre Clune, member of the European Parliament committee on transport and tourism, what can be done.
Some have freshly painted runways with only a few aircraft, others have swanky concourses and terminals with just a few passengers walking through them. In Europe’s small, regional airports – some scattered far away from capital cities in remote towns and provinces – owners and operators are struggling.
According to the industry body Airports Council International (ACI), of the 80 airports in Europe that currently attract fewer than a million passengers a year, a staggering 77% are loss-making. The main problem? “They don’t have the traffic,” says Deirdre Clune, member of the European Parliament committee on transport and tourism.
The issue of profitability for secondary and regional airports came into sharp focus in the aftermath of the 2008 financial crisis, when a massive drop in footfall was reported across Europe. According to research from the European Parliament, almost 21 million fewer passengers used secondary and regional airports in 2009 than the previous year.
Since then, passenger numbers have been gradually climbing. Recent ACI figures show growth in traffic of 7.6% for ‘non-capital airports’, with fewer than five million passengers a year. But profitability – particularly for the smallest airports – remains an issue.
On top of low traffic, these airports face the challenge of managing extremely high operating and fixed costs including safety, security, staff, maintenance and air traffic control.
“It is the same as any other airport,” says Clune. “The only difference is that there aren’t take-offs and landings every minute, like you would find in a major hub.”
Rules and regulations
Then there are the regulations, some of which seem unnecessary to regional airport operators, given the relatively small volume of traffic they process.
“There are a lot of rules to implement,” says Henri Hansson, senior vice-president, technical and environmental services at Finavia, and chair of ACI Europe’s regional airport forum. “It causes challenges from capital expenditure and operating expenses perspectives.”
One of the biggest regulatory challenges is security. While few doubt the importance of safe air travel, many question whether the same processes and regulations used at primary airports should be applied to smaller ones. A recent report requested by the European Parliament’s committee on transport and tourism brought up the specific issue of reserved, secure areas. For security reasons, these spaces are supposed to be made available and staffed at all times, at every airport. But for regional facilities – where commercial activity is often not taking place – it just doesn’t make sense.
Fire safety is another widely cited grievance, with small airports required to invest in the same costly fire infrastructure as larger airports, regardless of how much traffic they process. A regional hub that handles a Boeing 737 once or twice a week during the summer months, for example, will need two fire trucks, one car, four firemen and a supervisor, all year round.
Regional airports are also bound by the same stringent European Aviation Safety Agency audits as their larger counterparts, which requires additional labour and sucks resources away from the daily management of the airport. Again, for smaller airports, it often doesn’t make sense.
“When adapting new policy and regulation our main principal is that one size doesn’t fit all,” says Hansson. “This is where industry bodies like the ACI can make a difference: through lobbying, we help Europe’s regional airports gain political leverage.”
In May, regional airports did receive a boost, when the EU announced it would slash red tape for airports receiving state aid. In the past, member states wanting to invest in the infrastructure of airports with fewer than three million passengers a year had to apply for EU permission. This has now been scrapped.
“Changing the law there was an important recognition that regional airports do need some support,” says Clune.
The new law also includes a provision that allows governments to cover the operating costs of airports – including complying with regulations – that handle up to 200,000 passengers a year.
“That is also important because there are lots of them,” Clune says. “They may account for only 1% of total traffic in the EU, but they represent 75% of airports.”
Attracting new traffic
What can regional airports do themselves to bring in more traffic? Over the past few years, many have focused on attracting low-cost carriers (LCCs). This strategy has proved problematic recently, however, with many LCCs moving to larger hubs in search of better yields.
Regional airports should also make sure they are not overly exposed to LCCs. In 2009, the German airport management operator, Fraport, sold its stake in Hahn Airport following a dispute over a $3.90 passenger tax that the airport wanted to introduce to help cut losses. Passenger numbers quickly plummeted at Hahn from 4.0 million in 2007 to 2.7 million in 2014.
Likewise, in 2013, the budget carrier Wizz Air announced it was leaving Glasgow Prestwick Airport in Scotland for the city’s main airport, in search of more passengers. That left Ryanair as the only carrier operating from Prestwick. Both cases show that the relationship between airports and LCCs can be fragile.
At the same time, LCCs do remain important for the growth of regional airports and new opportunities can still be found. The recent decision of Norwegian Airlines’ to open a transatlantic route between regional airports in the US, Ireland and the UK is a case in point, explains Clune.
“They are now flying to and originating from regional airports,” she says. “If you look at the growth in airport traffic in the regions, it has been supported by LCCs. The traditional carriers just haven’t gone into these areas to the same extent.”
Working closely with local and national partners, particularly tourism agencies, is another strategy regional airports would do well to consider. This could include joint marketing campaigns with the aim of boosting traffic and demand for local routes, or a more national effort to shift tourism away from capital cities.
With the rise of social media, regional airports now have new tools to help them achieve this, Clune says.
“There is huge opportunity in digital marketing, where airports can use social media to promote themselves,” she explains. “Very few people get their information these days from traditional media. Millennials – the ones who travel the most these days – are making all their decisions and purchases on iPhones.”
Using new digital services to turn regional airports into destinations in their own right is important too, adds Hansson.
“You can offer pre-ordered services like parking, shopping and car washing, and cooperate more with partners that provide car rental or taxi services,” he says.
Airports that still struggle to increase traffic should also look to cut operational costs. This could include ground handling staff performing several different tasks during aircraft turnaround – a common strategy used in Nordic countries, according to Hansson – or centralising back-end operations.
“If it is possible to consolidate your support-services – IT, procurement and risk handling, for example – that is very worthwhile,” Hansson says. “It means the airport can really concentrate on day-to- day operating issues.”
New technology, like the remote control tower, offers further opportunities to cut costs. Sweden, which has dozens of airports that process fewer than 200,000 people a year, is currently developing remote monitoring systems that will enable larger airports to perform air traffic control on behalf of their smaller counterparts. Further afield, the Airports Authority of India (AAI) also initiated a study this year to bring remote monitoring of flights to regional airports.
While technology provides room for optimism, political uncertainty around the UK’s impending exit from the EU is casting a shadow on regional European airports, many of which are dependent on connectivity with the UK.
“If you had a hard Brexit, and the UK fell out of the EU altogether without any transition period or any arrangement in place, it would cause big problems,” says Clune.
“Without an aviation agreement or access to the European skies, airports won’t be able to fly out of the UK. For regional airports in Ireland, where 60–80% of their traffic comes from the UK, this would be very damaging.”
Compared to the shifting, complex negotiations unfolding in Brussels, the value of Europe’s regional airports is relatively simple to understand, explains Clune. By providing accessibility to some of the most remote parts of the continent, they provide the physical infrastructure that makes European economic and social integration possible.
“From an investment, tourism and accessibility point of view, they are absolutely vital,” she says.