Report by the Director General 25 Years of Serving Airports 26th ACI World Annual General Assembly, by Angela Gittens, Director General, ACI World
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|Report by the Director General|
|25 Years of Serving Airports|
|26th ACI World Annual General Assembly|
|27 September 2016|
|Angela Gittens, Director General, ACI World|
|Good morning. We have had an exceptional conference so far, one that has been filled with lively presentations and panel discussions from some of our industry’s most inspiring leaders. I would like to thank the moderators and speakers from around the world who have made this possible.|
This is a really special event this year. Not only because the conference is taking place in Montreal, the home of ACI World and the International Civil Aviation Organization (ICAO), and not just because hundreds of aviation government leaders are in town for the Civil Aviation Week and the ICAO General Assembly which started TODAY but also because ACI is celebrating a milestone: its 25th Anniversary. That is—25 years of serving airports.
What better way to celebrate than with our gracious host, Aéroports de Montréal and with all the exhibitors and sponsors that have contributed to the success of this significant event. Thank you.
The airport industry has changed much over the last quarter century, and ACI has changed in step. We owe a debt of gratitude to ACI’s past chairs and management at the World and Regional levels who led this progression and who positioned us for our current success.
And, while our accomplishments to date are significant, we know that the demand for our facilities will continue to increase and the nature of our services will continue to evolve in scope.
Let’s look at that demand. We’ve just released the 2015 ACI World Airport Traffic Report, which contains data from over 2,300 airports in 160 countries, that’s 183 more than last year. I’d like to thank the airports that contribute to the report and the World and Regional staff that follow up with airports to get the statistics. You are what makes the World Airport Traffic Report the authoritative source for airport traffic data and analysis.
We reached over 7 million passengers in 2015 and at the rate we’re going for the first six months, we’ll reach 7.6 million in 2016.
Persistence and resilience are two themes that best described passenger transport demand in 2015, except in Africa, and it largely continued into 2016, except the Latin-American/Caribbean region and, again, Africa. Overall global passenger traffic grew by 6.4% in 2015, the highest growth rate since 2010, the year passenger traffic rebounded from the Great Recession. In fact, despite weak economic growth estimated at 3.1% in 2015, passenger traffic growth last year approached the pre-recessionary growth levels seen from 2004 to 2007.
Looking at the first half of 2016 we see a bit less strong growth worldwide, due primarily to the drag of Africa which succumbed to a series of problems and the stagnation of Latin-America, brought down by the woes of its largest economy, Brazil.
I’m going to quickly run through the regional growth statistics. In order of 2015 growth rates, we start with the Middle East which experienced the highest passenger traffic growth rate of any region in 2015 at 9.6% and still strong in the first half of 2016 at 8.8% growth over the same period last year.
Asia-Pacific had a growth rate of 8.6% for 2015 and has tied with the Middle East at 8.8% growth this year driven by China (12.1%), India (17%) and South Korea (14.1%).
Latin American-Caribbean managed 3rd highest growth in 2015 despite the weakened state of the Brazilian economy but so far in 2016, the strong markets of Mexico (10.5%) and Colombia (6.9%) are barely overcoming the 8.4% DROP in passenger traffic in Brazil.
Europe held its own in 2015 with passenger traffic recovering from the Eurozone with especially strong growth in international traffic: 6.1%. Although the Region as a whole is somewhat diminished in 2016 due to problems in Turkey and Russia, the Eurozone recovery continues with Spain in particular showing nearly 12% growth.
Despite the mixed economic indicators in North America, passenger demand remained strong in 2015 and so far in 2016, driven by the U.S. It was quite amazing to see such large airports in such mature markets, like Atlanta, Los Angeles, Orlando and Seattle markets, achieve the kind of growth rates you see here.
Africa has had its challenges directly affecting passenger traffic in the last two years, with the Ebola crisis in West Africa, long episodes of unrest in North Africa, terrorism incidents in important tourist markets and the economic impact of oil price declines on Nigeria – one of the major economies in the Region. This is the only Region that is experiencing a Reduction in passenger traffic in 2016 although there are some bright spots, notably with South Africa rebounding strongly.
When it comes to cargo, volume seems to more closely reflect economic conditions than it does with the passenger market these days where the link has become looser and more complex. We see a modest 2.6% growth rate for 2015 and flatness for the first half of 2016. This was the result of subdued growth in emerging markets and developing economies, coupled with a more modest recovery in advanced economies.
I won’t go through the Regions except to point out that only the Middle East had strong gains in cargo in 2015 and even that is starting to slow down this year.
Let me turn now to airport economics. Much of the information I’ll be discussing was released earlier this year in the 2015 ACI Airport Economics Report. The content of this report is based on an annual survey that generated responses from 818 airports for the 2014 financial year, representing some 71% of the world’s passenger traffic. Again, I thank the airports who provided their data, the Regional offices that assist in getting the data and our outstanding statistics team in the World office.
Overall, the industry had a net profit margin of 16%, but this average masks the fact that size is a major contributing factor to whether an airport is profitable or not.
As we know, an airport is an asset-intensive business which requires a critical mass of revenue-generating volume to start recovering its large operating costs and infrastructure investments. We can see the effect of that here, with the majority of smaller airports not able to achieve their cost of capital. Overall, the sector had a return on invested capital of 6.3%, about the same as for the airline sector.
Industry revenue as a whole grew by 8.2% in 2014 compared to the previous year, to US$142.5 billion. On a regional basis, European airports held the largest share of global airport revenues at US$51billion while Latin-America/Caribbean had the highest percentage increase from the previous year. Of course, this report lags a year so this is before the troubles in Brazil. Worldwide, non-aeronautical revenue constitutes 41% of airport revenue at US$59 billion, ranging from a high of 48% in the Middle East and Asia-Pacific to a low of 27% in Africa.
Worldwide, retail concessions remain the leading source of non-aeronautical revenue for airports, representing 28% of total non-aeronautical revenue. Car parking revenue is second at 22% but there are some key regional variations.
Here we see that the Middle East earns a whopping 55% of its non-aeronautical revenue from retail, with North America earning the least from this source, at 9%. On the other hand, North America continues to be the world leader in generating revenue from car parking, at 39% of the region’s non-aeronautical revenue, compared to the Middle East that only earns 8% of its non-aero revenue from this source. But, retail is the highest single source of non-aeronautical revenue in every region but North America.
This is only a glimpse from this year’s Economic Report. I invite you to use the airport statistics and analyses produced by ACI as you engage with regional and national legislators, regulators, financial institutions, airlines and the public to understand and explain our side of the aviation industry.
Explaining and communicating our side of the business is the reason ACI was formed in 1991, through the merger of the Airport Operators Council International, which had been around since 1946, and the International Civil Airports Association, which had been around since 1962.
Since its birth, ACI has sought to advance the collective interests of, and act as the voice of, the world’s airports and the communities they serve and to promote airport professional excellence in airport management and operations. Let me talk about what we are doing on both fronts.
From our beginnings at the World level, we slowly ratcheted up our engagement with ICAO, starting with a part-time consultant, Rod Heitmeyer, who alerted us when we needed to react to rising initiatives; to a full-time employee here in Montreal, the late Anne McGinley, the former ICAO Representative from Ireland, who gained us Observer status at ICAO, meaning we were now in the room as initiatives rose. To finally, the relocation of ACI World to Montreal, where now our subject matter experts were in the room, not only reacting to initiatives at the earliest point but putting forth initiatives for others to react to.
Then: we started the Airport Excellence (APEX) in Safety programme, an initiative under our OTHER mission objective, promoting excellence, where we directly contributed to airport safety, deploying the Community of Airports to conduct peer reviews in every Region of the World. This, among other efforts, catapulted ACI into the status of Solution Provider, and put us in alignment with the objectives of ICAO in promoting higher levels of compliance with Standards and Recommended Practices.
We do not take this alignment for granted: our subject matter experts on staff and in the membership continue to work hard on the ground level, on working groups, panels and the Air Navigation Commission; We participate in the Committee on Aviation Environmental Protection (CAEP) and have successfully championed attention on the critical issues of which airports uniquely understand – community engagement and local air quality along with ratcheting up the aircraft noise standards.
We cooperate and collaborate within ICAO and with other influencers.
We will ask you to pass a resolution to support the Air Transport Action Group joint industry position in favor of a Carbon Offsetting scheme for a Global Market Based Measure that the ICAO Assembly is going to vote on in the coming days. The resolution also showcases the priority airports give to aggressive environmental stewardship.
This aggressive environmental stewardship, best demonstrated by the ACI Europe-led Airport Carbon Accreditation Programme, which has not only been recognised by ICAO but by the United Nation Framework Convention for Climate Change—their endorsement and collaboration with our efforts is a further progression in our credibility
To top this off, we have just released ACERT 4.0. It is especially designed to calculate emissions for all Levels of Airport Carbon Accreditation.
We look outside of aviation as well including the Organisation for Economic Cooperation and Development, the OECD, comprised of governments in North America and Europe. We have started a collaboration with its International Transport Forum to highlight the importance of airport infrastructure development to the economic vitality of a country or region. We have set our sights on gaining greater financial flexibility for airports countering some long-held traditions to move towards rational economic regulation.
We have organized our second Investing in Airports conference this December, in cooperation with ICAO and the International Transport Forum to focus on the right environment for airport investment and ensuring that regulatory oversight evolves in step with the realities of the industry. We want to gain recognition at the global level of airports as businesses in their own right.
And, despite our divergences over certain issues, our biggest collaboration is with our airline sister organization, IATA. We have talked before about the Memorandum of Understanding and the projects on which we are working—we are making progress on these and intend to go further, to achieve our common objectives of safety, security, efficiency and customer service.
Our collaboration on security is ever more important as we seek to achieve a rational response to the landside security threats that have manifested themselves in recent months. Efficiency and security are linked – we must avoid crowding and queueing in the landside areas to keep our customers and employees from being targets of these evil actors that just want to kill as many people as they can. We need to keep our airport, airline and government processes moving so that passengers can get to the secure areas as fast as possible. IATA and ACI share this commitment.
ACI’s strategy in security not only focuses on collaboration among airport, airline and government stakeholders but on the delivery of best practices and capacity building tools, bringing me to our second mission: promoting excellence in airport management and operations.
In addition to The World Bank which fully financed an APEX review and follow-up, we now have a partnership agreement with the European safety regulator, for them to provide funding assistance in Central and West Africa so that more airports can benefit from the APEX in Safety Programme.
As well, ICAO has decided to partner with ACI APEX in Safety as a baseline to initiate the process that will lead to certification for West and Central Africa. The African Development Bank is funding 31 missions over the next 4 years. We thank our many Safety Partners for proving that The Community of Airports is a powerful tool for good.
And let me thank our forebears who forged another powerful tool. In 2003, ACI leadership presented the concept of the ACI Global Training Hub, GTH as it was originally termed. Its first course was Security training in the Latin-America/Caribbean Region.
In 2006, ACI partnered with ICAO to develop the Airport Management Professional Accreditation Programme, the new graduates of which we will celebrate today.
By the end of 2016 ACI Global Training have 15 Training Centers; 151 classroom courses; 2,675 classroom students; 18,793 online course hours; and 4,080 online students. Additionally, we have partnerships with five Universities, in which one of them, ENAC, is for credit course work.
The success of this effort led to the creation in 2012 of the ACI Developing Nations Airports Assistance Programme (ACI-DNA) to supplement the activities of the ACI Fund established in 1993.
Initially funded from the proceeds of paid Training courses, the DNA programme delivers standalone free training courses, seminars, scholarships to paid ACI Training courses and supplements APEX in Safety follow-up training.
Again, what started with the objective of promoting excellence in airport management and operations, also led to engagement, credibility and influence with ICAO and national civil aviation authorities. We now have two courses that we run jointly with ICAO with more on the way.
Our founders had the wisdom to establish ACI as a federated organisation, with Regions to better serve the wide diversity of airports in the wide diversity of countries and methods of owning, governing, managing and regulating airports. This system has worked well for accomplishing both missions and all Regions are financially healthy and actively serving their Members, teaming effectively with each other and with the World staff. The Community of ACI offices is also a powerful tool.
Our founders also had the wisdom to establish committees, to convene the subject matter experts around the world to tackle current problems and to anticipate new ones. They could not have guessed how dependent our facilities, systems and processes would become on the almighty Internet and how urgent the discipline of cybersecurity would become. In 2009 the World Governing Board established Information Technology as its 6th Standing Committee.
As one of its outputs, I am pleased to announce the launch of the new IT Security Benchmarking tool. Once an assessment is completed by an airport, the IT benchmark will provide a summary score for each of the following control areas as well as an over-all score for the airport. The airport can then prioritize an action plan to mitigate the vulnerabilities identified in the results. The Committee has also created a Cybersecurity Taskforce whose mandate is to engage and educate airports on the issues of cybersecurity; define a strategy to help protect airports against cyber-attacks; and, in such an event, assist in mitigation efforts to protect airports.
I told you last year that you would hear more from us about Beacons. Well, the World Board just approved a new Recommended Practice developed jointly by ACI and IATA, working with our World Business Partners which will help airports harness the power of beacons to increase efficiency, boost non-aeronautical revenues and generally better serve today’s connected traveler.
And good things are not just going on at the World level. As I’ve said before, World and Regions work together for our Members, filling in gaps and avoiding duplication. Let me take a few minutes just to touch on a few highlights:
ACI Africa has since inception been challenged by a lack of resources but has nonetheless been a driving force behind the region’s development. They now have the additional support of 5 staff members and have 62 members from 250 airports in 50 countries. Thanks to APEX in Safety, this year will mark the inauguration of the region’s safety awards, a unique ACI Africa initiative.
In 2015, ACI Asia-Pacific celebrated the 10th anniversary of the unification of the Asia and Pacific regions of ACI. The region has grown tremendously in terms of recognition, membership and the variety of services they offer. They now have a growing team consisted of 15 staff members, and represent 103 members from 578 airports in 47 countries. In order to strengthen the region’s support to members and to establish a key position for ACI Asia-Pacific on airport economics matters, the inaugural Economics Review 2015 was published this year. The report aims to share with Asia-Pacific members, high-level regional insights and summaries on airport economics matters by analyzing data obtained from ACI surveys and public sources, and to provide pointers in specific areas for further studies.
Over the past 25 years, ACI EUROPE has developed its membership and activities, asserting the voice of Europe’s airports in a diverse range of topics such as economic regulation, air passenger rights, facilitation and customer service, aviation security, connectivity, privatization, the Single European Sky and much more, all while the air transport sector in the region was in a period of enormous change. In that time, the membership has increased to now include over 500 airports across geographical Europe, including Iceland, Turkey, Russia and Israel while the full time staff of the organization is just 20 people.
Even Michael O’Leary, the combative CEO of Ryanair, one of the Europe’s biggest airlines, hasn’t been able to hide his opinion that ACI EUROPE is ‘too good at its job’. Such a problem!
For 25 years, ACI Latin America-Caribbean has increased the relevancy of our voice throughout the region. They have a small but hard-working and efficient staff and represent 60 members from 263 airports in 33 countries. ACI LAC has particularly excelled in regards to its participation in the Airport Carbon Accreditation programme with Galapagos (the world’s first 100% environmentally sustainable airport) and Quito in Ecuador, as well as Tijuana and Puerto Vallarta in Mexico.
And what of our co-hosts this year, ACI North America. They have continually improved their efforts in the last quarter century to provide forward-thinking advocacy and valuable intelligence to bring about solutions to the airport community. NA represents 231 Regular Member airport operators who operate 358 airports in 2 countries and 1 territory.
And I’ll close with another anniversary and another milestone. 2016 marks the tenth anniversary of the Airport Service Quality programme (ASQ), the world’s leading airport customer service measurement and benchmarking tool.
ASQ research is in place in airports that serve more than half the world’s 7.1 billion annual passengers. From its beginnings in 2006 with 71 airports to 2015, our first year under new management, the programme had the highest number of airports ever at 318 airports. Participation in the programme now stretches across some 80 countries and the ASQ questionnaire is currently available in 40 languages, demonstrating the airport sector’s commitment to the quality of the customer experience. And 2016 also marks the end of the litigation with our former contractor so that we are free to make the programme what it needs to be to serve our Members without the heavy financial cloud that has hung over our head for the past three years.
The first of three yearly ASQ forums, has already successfully taken place in Brisbane, Australia in April 2016. The other two ASQ forums will take place Guayaquil, Ecuador and Naples, Italy, both in November 2016. I invite all of our members to join us as we share best practices in customer experience initiatives.
I wish I had the time to cover all of the activities your staff at World and Regions and your staff from airports are doing to achieve the twin missions that our founders laid down for us 25 years ago. I hope we are realizing their vision and making them proud. ACI has been blessed by farsighted and committed Boards. Our leaders today are guiding us to be strong and relevant for today and positioning us to help airports meet the challenges for the next 25 years.
I thank our World Governing Board, ably led by Declan Collier and Bongani Maseko who give us their time, their wisdom, their strategic insight and their tactical acumen to get us through the difficult times and seize the opportunities to take us to higher heights.
I thank my Regional Colleagues and their staffs that share the heartbeat of their Members so that ACI can truly represent and serve.
I thank my own staff that continues to strive to make us a better organization – they are never satisfied with what we achieved last year, next year we must do more is their credo.
And I am grateful to work for a Membership that cares about each other and about the communities of this World. It makes my job so much easier to know that I can count on YOU.
It is an honor and a pleasure to work for you.