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Infrastructure Protecting the future of air connectivity

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Airlines require access to sufficient, high-quality, and cost-effective infrastructure to meet the rising demand for air transport. This is essential if air transport, the “business of freedom,” is to continue to deliver its many social and economic benefits globally.

Infrastructure development, though, is not keeping pace with an expected doubling of demand by 2037, and a crisis is looming. The industry’s collaboration with infrastructure partners is critical to maximize customer service and to boost air connectivity. 

In 2018, IATA campaigned to ensure that infrastructure investments are aligned to market demand projections. IATA made clear that the air transport industry requires infrastructure that

  • accommodates growth in demand;
  • drives cost-efficiency and lower charges at airports;
  • promotes sustainable airport governance;
  • aligns airport investment with airline capacity needs;
  • secures a reliable supply of jet fuel at competitive and transparent prices;
  • shapes a common vision of the airport of the future; and
  • underpins modernized, efficient air traffic management (ATM) systems.

Too often, airport and ATM infrastructure investment is determined without the necessary input from airlines. Also problematic is political decision-making that slows down and increases the cost of developing much-needed infrastructure for airlines and consumers.

A recognition of the risks of privatization involving aviation infrastructure monopolies is gaining traction

Developments in 2018

Airport privatization or corporatization is being pushed by many governments. The driver for this is often a focus on short-term cash gains for government coffers rather than improved efficiency, better customer service, and financing for infrastructure investment. Fortunately, a recognition of the risks of privatization involving aviation infrastructure monopolies is gaining traction, and an increasing number of proposed airport transfers to the private sector are being questioned.

  • In Canada, concerns raised by airlines and consumer groups compelled the government not to pursue the privatization of airports.
  • In France, the objectives and benefits of the proposed further privatization of Group ADP for Paris airports is being questioned.
  • In India, the government continues to be challenged on selecting bids for privatization based on the best deal for the government and without balanced consideration of the impact on airlines and passengers.

A number of countries are responding to IATA and airline concerns to ensure that economic regulatory processes are in place to safeguard the interests of airlines and passengers. These include Bahrain, Brazil, Kuwait, Nigeria, and Saudi Arabia. Conversely, progress remains slow in ensuring fit-for-purpose regulations for airport privatizations in Australia and Portugal. This has resulted in increased costs for all airport users, including customers.

Political decisions

There are around 200 capacity-constrained airports worldwide. The lack of runway and terminal capacity is a major concern that urgently needs to be addressed. Airlines need functional facilities that balance capacity with demand to facilitate growth and that deliver adequate levels of service to improve operational efficiency, now and in the future.

And capacity expansion must move faster. In Europe, for example, Eurocontrol estimates a shortfall in capacity for up to one million flights a year by 2035. Any infrastructure investment, however, in Europe and elsewhere, must follow an airline-agreed airport master plan that guides infrastructure design and construction and triggers appropriately timed investments based on demand.

In 2018, two contrasting political decisions stood out in this respect. The UK parliament voted for a national airports strategy that paves the way for the long-overdue expansion of Heathrow Airport, although significant opposition remains and cost concerns have not been resolved. But in Mexico, disappointingly, the newly installed government decided to cancel the building of a new hub airport in Mexico City. This will prevent Mexico from becoming a competitive regional and international gateway.

A common vision of the airport of the future

The lack of major airport expansion in 2018 highlights the importance of maximizing the efficiency of existing infrastructure. New Experience Travel Technologies (NEXTT) is a joint initiative of IATA, Airports Council International (ACI), and other airport service providers to define how technology and additional advanced processes can expand capacity and raise the efficiency of ground operations at an airport. A NEXTT-related cost-benefit analysis was undertaken to understand the impact of technology on aviation. The implementation of technology in airport infrastructure was compared with a scenario where airports respond to soaring demand on infrastructure with physical rather than technological change. The results were clear. Technology, delivered in a coordinated, holistic way in accordance with NEXTT, can deliver significant, long-term benefits. The leading drivers of cost savings include improved data sharing, analytics and processing, and automation. NEXTT is planned as a three-year program. Its success will be defined by the provision of a forward-looking, aligned approach to investment in ground infrastructure that promotes seamless interoperability, operational improvements, and capacity growth. In 2018, airports and a wide array of stakeholders showed strong interest in NEXTT. The initiative’s partners generated awareness and buy-in through a webinar series, social media campaigns, and other communications. NEXTT implementation will help align airport investment to suit the needs and expectations of airlines and passengers.

IATA activities in 2018

Sustainable airport governance 

The provision of functional and efficient aviation infrastructure should be considered a fundamental public service and an essential economic generator for any country. Airports do not naturally or usually have competition. When they are privatized or corporatized, the pressure to maximize shareholder returns too often outweighs the core objective of delivering user and consumer benefits. Effective regulation must prevent a privatized or corporatized airport from becoming an out-of-control monopoly.

Privatization or corporatization in various industry sectors, if structured appropriately and carefully monitored, can deliver benefits, including improved customer service and increased efficiency, investment, and innovation. However, no airport privatization to date has met long-term expectations, primarily for lack of regulatory controls and balances. Too often, the driver for privatization or corporatization is raising quick cash for governments.

In June 2018, IATA member airlines unanimously passed a resolution at the 74th IATA AGM calling on governments to exercise caution in their airport privatization planning. A campaign was subsequently launched drawing attention to the increase of costs and the lack of investment stemming from poorly regulated privatized or corporatized airports. IATA’s campaign focused on the positive aspects of governments retaining control of principal infrastructure and setting out the terms for privatized airports to adhere to, including

  • ensuring airlines, as major stakeholders, are consulted on privatization or corporatization plans;
  • confirming that the rationale for any privatization or corporatization is in the interests of the industry and users and customers;
  • exploring alternative business models that do not necessarily involve the transfer of assets to private owners;
  • following best practice public-private partnership models focused on efficiency and service levels should there be no alternative to privatization or corporatization; and
  • ensuring governments put regulatory safeguards in place that protect the interests of airlines, passengers, and other airport users.

Cost-efficiency and fair charges

Infrastructure charges must be set at levels that are fair, justified, and reflective of a value service proposition for airlines and passengers. Economic regulation that promotes transparency, consultation, and productivity in establishing an equitable charges structure is the key to improving airport cost-efficiency. Yet, despite ongoing work by IATA to ensure that transparent consultation processes are in place for the establishment of fair infrastructure charges, many challenges remain.

Infrastructure providers often enjoy monopoly or quasi-monopoly status. So governments and regulators must maintain vigorous oversight of charges and development activities. (See map below).

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1. Africa and the Middle East

Following a recent campaign in Tanzania, security charges there were lowered, resulting in a $16 million saving. In South Africa, IATA and local association involvement in the airport charges setting process resulted in a significantly lower charges increase than proposed by the airport operator. This will lead to a cost avoidance of around $150 million by 2023.
 

2. The Americas

In Chile, the long-standing issue of high airport fees has been partly addressed, generating reductions of $418 million over four years.

3. Asia-Pacific

Following a year-long consultation process in Japan, airlines concluded a new, five-year pricing agreement for Narita Airport. At India’s Chennai Airport, meanwhile, reductions in landing and parking charges and in the user development fee yielded reductions of $135 million for 2018–19.
 

4. Europe

At a pan-European level, IATA continues to advocate for the replacement of the Airport Charges Directive with stronger regulation that ensures that effective pricing control is applied to airports with significant market power. IATA and Airlines for Europe (A4E) commissioned a study to develop a simple yet robust methodology to identify airports with significant market power and is advocating this methodology with European regulators.

IATA also continued to engage in various national airport charges consultations in Europe. A reduction of $48 million in charges was secured at Denmark’s Copenhagen Airport in 2018. But attempts to reduce significant increases in charges at the Netherland’s Amsterdam Airport Schiphol and at Sweden’s airports were unsuccessful.

Aligning airport investment with airline needs

Building more infrastructure is essential. Any major investment in airport facilities, however, must be underpinned by a robust business case and thorough consultation with the airlines that fund the development of infrastructure.

It is critical to ensure that infrastructure development matches airline growth projections and operational requirements. Unnecessary infrastructure development results in additional costs and inefficiencies that can reduce demand for air travel and weaken the case for investment. Consultation with airlines from an early stage of infrastructure development is essential and should be mandated by regulators to ensure that capital investments are cost-effective and that airport facilities are aligned with airlines’ needs.

In 2018, the ICAO Council unanimously adopted amendments to the Annex 14 Aerodromes, Design and Operations Manual to reduce runway and taxiway widths and to remove long-standing restrictions on large aircraft, enabling them to operate at many airfields and thereby reducing the expense of new facilities. The impact of these changes will save the industry billions of dollars in construction costs. (See map above).

Jet fuel supplied reliably at competitive and transparent prices

Jet fuel costs accounted for about 24% of airlines’ operating costs in 2018. The precise cost to airlines varies because of a lack of competition in fuel supply and unjustified duties, fees, and taxes on jet fuel in some parts of the world.

It is important that airlines have access to a reliable supply of jet fuel priced transparently and competitively. In 2018, jet fuel prices in some countries in Africa, the Americas, and Central Asia were still significantly higher than the global average.

IATA, together with airlines and industry partners, has continued its efforts to help improve the efficiency of fueling operations for airlines and their service providers. One such endeavor is the digitization of the fuel management process. All messaging standards required for fully paperless operation have been developed, and the industry is focused on widespread implementation.

Airport investments

IATA’s work to align major infrastructure investments with airline needs resulted in some substantial benefits in 2018:

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1. Johannesburg Airport

The Airports Company South Africa (ACSA)’s investment plan was prioritized based on airline requirements. This will speed up the addition of much-needed capacity and defer unwarranted investments in a $3 billion capital program.

2. Brasilia Airport

Revisions to the design plans of the terminal expansion were secured, improving capacity utilization and connection times and simplifying passenger flows through the flexible and efficient introduction of “swing gates” for international and domestic operations.

3. Buenos Aires Airport

Operational capacity improvements at Aeroparque Jorge Newbery Airport (AEP) resulted in passenger experience and level of service improvements without the need for infrastructure investment. A detailed review of airside, landside, and air traffic control operations resulted in 66 recommendations to improve operations, capacity, and passenger experience. It is projected that implementing all of the recommendations, targeted for 2020, could increase operational capacity at AEP as much as 35%.

4. Munich Airport

The Munich Airport investment plan was improved to increase capacity utilization, simplify passenger flows, and optimize design. This will ensure that the $400 million investment program is aligned to meet the needs of airlines.

5. Stockholm Arlanda

Airport Airport operator Swedavia removed US preclearance from its investment plan. This achieved a $50 million reduction in the airport capital program and resolved airlines’ concerns on minimum connection times and capacity utilization.

6. Manchester Airport

IATA’s involvement in and implementation of a consultation governance structure as part of Manchester Airport’s £1 billion investment plan resulted in substantial improvements in the design and phasing of terminal piers, parking stands, and passenger amenities—without raising capital costs.

Fuel campaigns

Joint IATA and industry efforts to open up the jet fuel market for competition continue in many countries, including Australia, China, Cuba, Kazakhstan, and Mexico. Those efforts also continue to ensure the reliability of supply in such jurisdictions as Australia, New Zealand, Nigeria, and the United Kingdom. South Africa, meanwhile, decided in 2018 to implement a crisis management plan and to conduct a consultative process on storage capacity enhancement.

Industry campaigns to remove or prevent unjustified fees and taxes on international jet fuel are ongoing. In India, the regulating authority announced a reduction in the fuel throughput charge at Chennai Airport, saving airlines an estimated $30 million for 2018–19. The Indian government further announced a reduction in the excise duty on jet fuel for 2018, granting domestic operations savings of around $75 million.

ATM Developments

In 2018, IATA, ICAO, and other partners continued to drive operational improvements. Among them was a change to the requirements related to reductions in the separation between aircraft over oceans. The change involved transitioning to a performance-based standard requiring new equipment, authorizations from regulators, and additional training for pilots.

There was also ongoing work on safety mitigation related to unmanned aircraft systems (UAS). IATA collaborated with international organizations, regulators, member airlines, and other partners on the efficient integration of UAS into airspace. This includes IATA’s continuing work with ICAO and more partners on UAS traffic management, which, in turn, involves engaging the UAS industry to develop new concepts for UAS operations.

Space operations, meanwhile, are anticipated only to increase. And the goal here, too, is to integrate these operations, which traditionally occur in segregated airspace, with civil aviation operations. IATA and others are working to reduce the impact the launch and recovery of space vehicles has on civil airspace.

Regional ATM activities

In Asia-Pacific and North Asia, IATA continues to advocate at every opportunity for the timely and widespread implementation of the Asia-Pacific Seamless Air Traffic Management (ATM) Plan. Failure to do so will significantly increase delays and fuel burn and emissions in the region. IATA is working especially hard on expanding its cooperation with the Civil Aviation Administration of China (CAAC). An example of IATA’s success in this regard is the move of the IATA China Air Traffic Flow Management liaison desk into the Air Traffic Management Bureau headquarters in early 2019 to start work with the Operation Management Center.

In Europe, en route delays doubled in 2018 compared with 2017, to more than 19 million minutes. The principal causes for the increase were a lack of controllers at strategic times and places; an increase in controller strike action, primarily in France; and systemic delays from a lack of capacity. IATA responded by pushing a four-point plan for mitigating the impact of delays.

Longer term, the solution is to engage air navigation service providers (ANSPs) and governments in National Airspace Strategies (NAS). In 2018, two ANSPs in Poland and Italy, respectively, published strategy documents to this end. The governments of Bulgaria and Spain committed in 2018 to developing NAS, and the French government will publish its NAS strategy in the second quarter of 2019.

In the Middle East, geopolitical issues and a lack of capacity to meet the increase in traffic remain the key challenges. IATA continues its work with ICAO, airlines, and stakeholders in the region to ensure seamless operations in all situations. In Africa, IATA is continuing its work and advocacy for a Seamless African Sky that drives enhancements in the safety and efficiency of flight operations using collaborative decision-making.

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