Expert opinions, FORECASTS

Are small airports the way to go?

Utair CEO Andrei Martirosov suggested going back from mega airports to smaller “doors to the runway.” But would that be possible?

In terms of profitability, the transfer from hub airports to “doors” is quite controversial. One should first determine the airport industry revenue structure: an average of 56% of an airport’s income comes from aeronautical activities, and less than 50% from non-aeronautical activities. The latter include car parking and rentals, hotels, lounge areas, cafes and retail. Non-aeronautical income directly depends on departing passengers. The third, smaller component of a typical airport’s income stream is non-operating income such as advertising, events, etc. It would be reasonable to assume that all these kinds of activity require relevant infrastructure. After studying the development strategy of some airports we can assume that the airports of the future will not be going to opt out of the hub model.

Let’s take Heathrow, a major international airport. According to its strategy, the airport will be expanding through 2030 in order to meet the growing expectations of passengers. The development will focus on personalized customer service allowing passengers to create their own trips and impressions. Singapore’s Changi Airport is a good example. It has a butterfly garden that includes a five-tier area with air conditioning, walking pathways, slopes, a labyrinth and the world’s tallest indoor waterfall, as well as restaurants, shops, business centers and even glamping.

The airports of the future will develop in accordance with two global trends: digital transformation and environment protection. Among digital solutions that allow for saving time for passengers are real-time travel update notifications, solutions that help passengers navigate the airport and improve self-service to avoid long lines.

Artificial intelligence and algorithms will improve personalization by transferring data to each passenger depending on their location, departure time, personality, profile and preferences. Each passenger has their own unique demands and interests.

By Khanifa Tyrkba, Ph.D. in Economics, Assistant Professor at the Economic Department, Peoples’ Friendship University of Russia

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