As air travel increases, new infrastructure funding models proliferate
By Sarah Wesseler
November 14, 2013
Susan Baer, former aviation director for the Port Authority of New York and New Jersey, recently joined Arup to lead the firm’s global aviation planning practice. I spoke with her about the state of airport planning around the world.
Can you describe your impression of the state of the aviation business and the challenges facing it?
The aviation business includes airports, airlines, service companies, and food and retail providers, as well as federal, state, and local officials like Customs and Border Protection, the Transportation Security Adminstration (TSA), local police, the Federal Aviation Administration, and many others. Having been part of the airport world for many years, I know it only works as a system, with all the components cooperating in all the important aspects, like safety and security and first-class customer service.
Demand for air travel is growing in all parts of the world, for the simple reason that we live in a global economy. We need to get from here to there, and the only practical way to do it is to travel by air. Other modes of transport are important for moving goods or people for short distances, but only aviation gets them where they need to be quickly and relatively cheaply.
Airports fit into this picture as the place where people transfer from land vehicles to air vehicles and back again. And since we are moving people, not commodities, there are a whole set of things we need to think about when planning and building airports. Sometimes in this business we forget that airports are about people: people who are doing business or going home to parents or starting journeys to a new life. They are also setting out to see new parts of the planet. Despite the economic woes of the last few years, tourism is a very important to the economy in many parts of the world.
Demand for air travel is growing in all parts of the world, for the simple reason that we live in a global economy
Dealing with the unique expectations of all the travelers on this spectrum, keeping them safe, as well as planning and building aviation infrastructure to meet the growing demand, is what keeps airport directors up at night.
And the question of how we finance airports need for new and better capacity, how we make them viable in the future, is so critical. In the United States, the aviation sector accounts for about 5% of the GDP. It’s a huge economic generator, spins off lots and lots and lots of jobs in a region. Airports are also our face to the world and make a statement about a city or region.
Because the aviation industry grew large first in the US, the airports tend to be older and thus have more needs for renewing the infrastructure: everything from drainage systems to terminals to air traffic control towers to cargo handling facilities. All of these pieces tend to be older.
In the New York region, 110 million people will use the Port Authority airports this year. By 2050, that number is expected to be 170 million. The need for more infrastructure is enormous. There has to be bold thinking and innovation or we will be faced with a crisis that will hinder growth. We’ll be turning people away.
In the United States, we’re at a particularly difficult time in our ability to fund infrastructure. Airports in the United States are mostly publically owned, and many of them have not been able to invest in infrastructure to meet the needs. So, by and large, airports here don’t get high marks compared to the rest of the world.
Other governments have seen airports as very important to their image, to developing opportunities. Thus, the airports in Beijing, Hong Kong, Singapore have all been developed to meet the needs of the region and fulfill a business plan, but also because they are important to the image the country wants to project in the world.
Thinking of ways to finance airports smarter and better is critical to the US right now, in particular because some of the ways that infrastructure in the US has typically been financed have been constrained. Passenger facility charges have not been increased since 2000, and the trust fund does not receive tax from the airlines’ ancillary fees.
Airports around the world now are turning to private financing. What has worked is using private funds where infrastructure dollars are scarce. It’s a model that I think the United States has to think harder about. Only one US airport has been privatized, and there aren’t any candidates on the horizon. But the opportunities may very well come in individual terminal efforts, where private development dollars can be used to meet the funding challenges. The Port Authority has done that for many years with individual terminals and continues to seek private funds to finance terminal redevelopment.
In this as in so many things, we need to find a balance. Because aviation is critical to economic prosperity, the need for profit at privatized airports cannot become a barrier to individual mobility among emerging populations.
Have you seen any particularly interesting solutions to this set of challenges being proposed?
Since I’ve been at Arup I’ve been exploring opportunities at a couple of airports where there’s a chance to build from scratch. That’s every airport operator’s dream: start now with everything you’ve known about managing old airports and build a brand-new greenfield airport. That’s the ideal.
But how do you innovatively restore, rejuvenate the old airports as well? And what kinds of creative ways can you find to pay for it? One way is private financing, and another is earning better retail and ancillary fees.
It used to be that airport retail was kind of an afterthought to terminal planning, and it now increasingly is the centerpiece. Smart airport operators are telling the planners that they need lots more retail space. Retail, as well as food and beverage sales, is increasingly a way to pay for substantial amounts of the airport operations.
It used to be that airport retail was kind of an afterthought to terminal planning, and it now increasingly is the centerpiece
And a good range of food and services has become an expected passenger amenity. Retail is also a way to create a sense of place, so that traveler knows he or she is in a particular city with a vibrant local feel, with local restaurants, specialty goods, gourmet items.
I’m always surprised at the amount of luxury stores at a lot of airports.
There’s a store at Kennedy that sells a couple of Rolexes most days. On a certain flight, passengers expect to be able to purchase a Rolex watch.
Clearly the retail needs to be targeted to the customer mix using the airport so you aren’t selling cashmere sweaters to customers off to the islands for sun and surf.
So those kinds of stores are actually important to the airport’s overall finances?
Yes, because the income they generate offsets other costs. Advertising and parking also help raise some funds. But retail and food are very important to the finances of most airports.
And it’s now being incorporated into the physical infrastructure in a more substantial way?
It’s part of the planning process, increasingly. It’s not the planners saying “This is the amount of retail space we think this number of passengers will support”; now airports will say to us, “This is our experience with our customers and this is the space we need.” And we plan the terminal around that.
You said that the ideal case is for airports to be able to build from scratch. But I’m assuming that in North America most of them can’t?
Most of them can’t, usually because the busiest airports are serving congested urban centers where no large tracts of land are available.
The saying in my business is that if you’ve seen one airport, you’ve seen one airport
What are some of the best practices now for adding infrastructure to older airports?
Well, the saying in my business is that if you’ve seen one airport, you’ve seen one airport. Examples come up all the time to prove that. Knowing best practices is helpful, but we find that most need to be modified to fit the particulars of each airport — space, passenger mix, aircraft type, etc.
This is certainly good for firms like ours that have broad knowledge of airports around the world and can help an airport decide on the best way to add the capacity they need, and even help them to creatively finance it.
Arup took the lead in planning the new JetBlue Terminal at JFK, which had to fit in a site constrained by a historically significant building and scarce airside space. We are now working on the expansion of this terminal to accommodate international passengers and incorporate a state-of-the-art federal inspection facility.
That terminal consistently gets the very highest marks in the customer satisfaction surveys that are done annually. It did when it opened, which you would expect, because it was brand new, but it still does five years later. It exceeds the next terminal by at least 15 points.
And that’s because it is a very customer-centric design. The focus was on the customer, so that scarce construction dollars were spent on the things that make the passenger comfortable. Today, if you were to ask the customers what what they like, they wouldn’t say, “Oh, I like that sweeping roof.” They’d say, “I’m comfortable in here. I like the way this is laid out.”
In the JetBlue terminal, the dollars were spent on good finishes: terrazzo floors; nice, bright colors; well-laid-out restrooms with plenty of space; oversized gate hold areas so that people feel very comfortable and not crammed together; lots of natural light. That was one of the things that cost a little more, but the decision was made: “Yes, we need skylights.” More check-in, more security lines than the TSA ever staffs, centralized security processing.
And a big open area after you get through screening which has the feel of a European piazza. There are chairs and tables around it; there are food offerings and shops around it. The space is sort of a big mixing bowl center area with the feeling of spaciousness. And when you are there, you have a clear line of sight to the gates.
These clever designs that make the terminal work so well are all learned from customers. You ask the customers what terminals they like, you analyze the data — they tell you what they want. The JetBlue terminal includes all the things that all the airport’s satisfaction surveys showed that people cared about and put them into play. It works.
I think that’s where we’re heading: spend the money that’s available, the scarce resources, on the stuff that the customer has told us that he or she wants. I am a big believer in metrics — measure what people like, track it, and build to it. And then ask them again to make sure you have it right.
That project is also an example of a great collaboration between the airport operator — which was me back in that day! — who financed it; Arup, who did a great job on planning the terminal; the architect, Gensler; and the airline, who made all the right decisions.