We’re creating a more connected travel industry, underpinned by sustainability and long-term investor relations.
Intense competition for growth between travel industry players is blurring traditional competitive boundaries. The consequences of this for airport business models and their partners in the airport ecosystem have become apparent at multiple levels.
Airports serving in excess of 25 million passengers a year with at least 25% connecting traffic, face increasing competition from domestic airports, regional hubs and global ‘mega hubs’. At the other end of the spectrum, smaller airports are often entrenched in intense regional battles to attract and retain airlines.
Digital technology presents airports with a wealth of new opportunities and ways to differentiate from competitors. For instance new revenue streams derived from premium services, optimized operational performance and better passenger experience will result in a more attractive value proposition for airline customers.
Pressure to optimize airport infrastructure and finances
The evolving nature of inter-airlines competition and changing business models exerts further stress on established airport models. Expectations from both passengers and airlines, enabled by rapid advancements in mobile and digital technologies, present airports with a fundamentally different set of physical and now digital needs relative to 10-15 years ago. At the same time, airports remain inherently capital-intensive businesses. Although airport ownership structure may influence commercial outlook, all airports are under pressure to do more with their current facilities while optimizing the total cost of their operations.
The tipping point for airports to embrace digital technology
There are signs of growing attempts to define a coordinated approach to digitalization. A good example is the NEXTT (New Experience in Travel and Technologies) initiative. Developed in cooperation between IATA and ACI (Airports Council International), the goal of NEXTT is finding potential ways to integrate systems and improve operations in the most secure, effective and sustainable manner for the benefit of passengers and the industry. However, for the most part, airports have been left to define their own digital roadmaps, leaving leading practice to still be defined. Existing airport business models and related physical and IT infrastructures face a tipping point, since they were simply not designed to handle the volume of passengers or diversity of customer needs that airports are experiencing today.
Cultural changes should not be underestimated
In attempting to realize their digital transformation plans, airports face a number of barriers to digital investment. Although implementation cost is inevitably an important factor, inhibitors to digital transformation are by no means limited to ‘hard’ factors. ‘Soft’ issues related to integrating digital concepts into an analog workforce should not be underestimated and in many cases will require different ways of working that may be at odds with the age, skills and capabilities of the existing human workforce.
In the context of this varied landscape, Arthur D. Little’s digital airport maturity model provides a framework through which to assess the different levels of digital airport maturity. It can also be used to outline key considerations for airports, as they prepare for inevitable business transformation, while maintaining the safety and continuity of existing operations.
It is with this background in mind that the report Airport digital transformation: From operational performance to strategic opportunity highlights the role that Airport 4.0 technologies can play. Not only in helping airports optimize their total cost of airport operations, but also in enabling the enhancement of airport value propositions.