Airport Infrastructure Development

With both airlines and airports increasingly in private ownership, airports can no longer “build and charge” with little regard to airlines. Now, you must work with airline partners in developing new projects for your shared customer — the passenger.

This is particularly true in recent years as airline business models have diverged considerably. The radically different planning horizons of airlines and airports add further challenges. As an airport manager, you look to invest in the right infrastructure for the passenger and airline segments you serve, and innovate in ways that serve both you and the customer. For example, you can develop infrastructure that minimizes turnaround times for short-haul LCCs and improves yield for premium carriers (such as airport-owned premium lounges). These projects can lead to greater passenger (and airline) flow or generate new revenue through pay-for-use arrangements. Smoother facilitation solutions also improve passenger mindset and retail spend.

L.E.K. has helped many of our airport clients with their most critical infrastructure decisions. We bring the financial rigor and the strategic and communication skills to help you convince your boards and airline stakeholders of the right course of action in a wide range of areas, including:

• Terminal expansion
• New runways
• Demand management strategies in high-growth environments
• Terminal buybacks
• Capital/operational trade-off situations

These decisions are among the most complex an airport can make. They have huge financial, operational and reputational/relationship implications.

Airport infrastructure development successes

Terminal expansion business case: Our client, a leading national gateway, was not meeting customer needs and had lagging retail performance. We helped them develop a business case for a major terminal overhaul. This involved a deep financial analysis of retail and airline economics, and a plan to communicate the proposals to management and airlines. The airport went on to grow its commercial incomes ahead of passenger growth, and deliver significant shareholder value.

New runway investment: Facing a particularly difficult and long construction timeline, this airport needed to decide when and how to commit to its next runway in a way that maximized commercial leverage with the airlines while minimizing the risk of lost traffic. We helped the airport evaluate alternative development and negotiation approaches and then adopt a commercial posture that led to a valuable commercial agreement and a decision to proceed with the new runway.

Investment in new terminal infrastructure: A major international airport engaged L.E.K. to assess the feasibility of building a ground transport interchange to improve the relative attractiveness of public transport to the airport from surrounding districts. We examined the degree of over- or underperformance of public transport share for all districts surrounding the airport, regressing distance from the airport, and relative road and rail journey times. Our work helped the airport identify potential districts for improved services, concluding that the airport should invest in a Ground Transport Interchange.

Runway demand management: Our client faced significant challenges meeting demand while constructing a new runway. On-time performance was poor, and the media was lambasting the airport. Leveraging our understanding of airline economics and degrees of freedom with schedules, we developed pricing strategies and operational rules to meet customer needs until the new infrastructure was complete. Then we built a proprietary tool enabling season-by-season evaluation of revenue, delays, capex and reputation/media. In just one year, on-time performance lifted by 4 percentage points to reach the top 10 in the world for its size.

Passenger capacity expansion: A municipal agency sought an evaluation of a New York-area airport to understand whether capacity was being utilized as efficiently as possible, to assess the opportunity for expanded passenger capacity and improved air-service efficiency. L.E.K. found that the airport’s key asset utilization levels were low relative to other major international airports, and identified several avenues for improving airport capacity and efficiency, including better runway utilization and optimizing fleet mix to increase the average seat count per aircraft.

Customer-centric “smart” airport strategy: For a leading international airport, L.E.K. developed a “smart” airport approach to its operations, so our client could tailor the airport experience to specific segments. Through extensive customer segmentation, we helped the airport identify the optimal set of offerings for each segment to improve passenger facilitation and drive increased commercial revenues.