The Five Minute Feature: Andrew Charlton
I have been attending the ACI EUROPE Annual Congress for several years. In fact, I live in fear that delegates will be sick of the sight of me. But I attend willingly, gladly, and enjoy moderating sessions when asked to do so, because I am determined to work out what makes a modern airport tick, and how it makes money for its investors.
I use the term ‘modern airport’ deliberately. Around the world, the state of airport development varies. That is a product of the regulatory environment in which each airport operates and the ability of the industry to seize opportunities at a given moment in time. Whilst it is true that every airport is a local airport, the regional differences between, for example, the airports of Europe, of Australia, of Latin America and of the USA are stark, and fascinating. That is one of the areas that I like to probe.
How should we regulate airports? This has a number of elements. The most obvious one, of course, is to do with charges. Should they be regulated at all? How powerful is the airline association claim that airports (and indeed ANSPs) are ‘monopoly service providers’? Even if true geographically, how relevant is it? I do not believe that airports are ‘natural monopolies’. In fact, they are completely unnatural monopolies, creatures of government regulation. If charges are to be regulated, when should regulators and users have a right to intervene?
The second, connected, issue on airport regulation is slots. The current, antediluvian, system is an accident of history. IATA’s slot guidelines came in, cementing in incumbent legacy airline privileges, just as the industry itself was deregulating. The slot regime under which we operate somehow appeared, unnoticed, like the sudden swinging plank in a slap-stick comedy. Only this one is not all that funny. There can be no justification for a slot regime that ignores the airports’ wishes. Indeed, there is a strong argument that there is no place for slot regime that does not prioritise airports’ understanding of their market.
In fact, I have argued in the Aviation Intelligence Reporter – if you do not subscribe, I can only suggest that you consider doing so – that we should link slots and charges. Slots are about capacity and much of the charges are spent maintaining and increasing that capacity, with runway improvements like high-speed runoffs, new gates and better passenger management systems. Airlines too demand more capacity. Here is my proposal: agree a benchmark capacity movement number that stretches the airport. If, for complex local reasons that is too high, let an independent umpire decide the appropriate local number.
Under my proposal, airports not providing that capacity would be subject to strict airport charges regulation, but at the same time, the slot regime could not apply, encouraging new entrants. When that number is met, the airport would be free of airport charge regulation. And only then could an airport be declared slot constrained. Now, those slots are valuable. Airlines and airports both get rewarded for insisting on good use of the available capacity.
If the airlines want to have valuable slots, they will have to push the airport to get its capacity up. That will include helping to fund developments. The airline has to be exposed to competition and have no right to assert incumbency grandfather rights, or indeed demand that at the first whiff of a crisis that their rights be protected. In return, the airport has to play by strict regulatory rules on how it charges, with whom it consults and so on. That would include on increases of capacity. If the airline thinks that slots in that airport will be valuable, it will approve the investment, because now, it is invested. Once that airport reaches the capacity threshold, the airlines can then treat their slots as they would like to, giving them tradable and securitisable value. Against that, the airport is no longer subject to the charges directive, so can start to behave like the clearly competitively attractive and commercial entity it is.
The next big issue that we need to work on, still, is the relationship between airports and airlines. Whilst airlines continue to consider the entire aviation industry as a ‘value chain’ airports are going to be considered as a life support system for the airlines. Airports that use that phrase are merely enabling the airline thinking. The correct term, in my opinion, is that of an ecosystem, where all parts are as vital to success as each other. A healthy aviation industry needs healthy airlines, healthy airports and healthy ANSPs.
I mention the ANSPs for a reason, because I think that airports are much better placed to deliver airport operation-centric and thus airline operation-centric services than the ANSP is. Airports should be able to offer preferred airlines services that fit into the airline’s operational needs. Yes, that should also include preferred pricing. Preferred pricing and volume discounts do not breach competition law, or the ICAO guidelines, provided they are available to all airlines that meet the criteria. Airports need to be thinking commercially.
Finally, of course, we need to talk about sustainability. It is no longer enough to look to the airport operations exclusively. We can no longer ignore those big silver things outside. There are many views on bio-SAFs, including concerns of availability and so on, but into the longer term, airports may be able to play a role in providing the renewable energy needed to convert sea water into hydrogen. What is called for is imagination and courage.
It is that I am sure that ACI EUROPE has both these things that I come back, year after year. Keen to ask, keen to learn and keen to meet old friends. And for panellists on the panels I am moderating, keep your weight on the balls of your feet and enjoy yourself. Be creative!