ACI Europe Director General Olivier Jankovec talks exclusively with Doug Newhouse ahead of this month's Airport Trading Conference in Porto (April 20-22) about his best passenger traffic recovery prognosis; why LAGs' confiscations are not going

down; why Europe's airports will need more than E.1bn ($1.4bn) for new technology scanners to eradicate LAGs' confiscations; and how European airport retail offers and contracts are evolving. Jankovec also believes that airports may well be compelled to renegotiate their operating contracts with Ryanair and any other airline that insists on restricting carry on hand luggage to one piece which effectively discourages passengers from spending money at airport shops.

OBVIOUSLY THESE ARE TOUGH TIMES, BUT WHAT IS YOUR BEST GUESS WHEN THE PASSENGER ENVIRONMENT MIGHT IMPROVE AND WHAT NEEDS TO HAPPEN TO HELP THAT PROCESS IN YOUR VIEW?

Based on what the situation is today, I don't think we will see an improvement before next year and even next year it might just be spotty growth. Probably the real upturn across the board will be in 2011. But it is still worth what it is worth today, but trying to make traffic predictions is like trying to read a crystal ball.

What we are seeing is that the impact is massive at the moment in January and February. We just issued our February figures this morning and in both months of January and February we have 93% of our members losing traffic, so it is massive and I must say that on the passenger figures our fear is that there might be further room for them to decline – especially when we look at the gap in the decrease between the passenger and the freight figures.

This gap in terms of the decrease is very substantial and normally you don't have such a gap between passenger and freight figures. The freight figures have been down very substantially. In January they were at minus 23.6% at European airports and I think the figure for February is similar.

So freight is much more down than the passenger figures and this gap is a bit worrying because freight traffic is really the barometer for the economy and one way or the other freight figures tend to translate into passenger figures.

Now I am not saying that we will see a minus 20% to 25% drop in passenger figures, but I think the gap is still quite high between the freight and passenger figures and we may still see some downward trend for passenger figures and especially now with European airlines making massive capacity cuts for the summer. Then there is the proposal of the European Commission to suspend the usage rule for the airport slots that will just incentivise that.

If this measure goes through the European Parliament and the Council – because now we have a proposal from the Commission – it could be serious. There is some resistance in the European Parliament, but the member states are really backing the incumbent airlines, because not all airlines are in favour.

If that goes ahead then that will be an incentive for the airlines to cut capacity further and that means that passenger numbers are likely to suffer further during the summer.

SO AIRLINES WILL BE ABLE TO CUT CAPACITY AS MUCH AS THEY LIKE, KNOWING THAT THEIR AIRPORT SLOTS ARE SAFE AND NOONE ELSE CAN USE THEM?

Exactly. They can just sleep on the slots and not use them and basically the result is that we are paying the bills.
We are accepting less revenues just to make sure that these airlines can sleep on their slots – we are basically paying for these airlines not to fly.

WELL TALKING ABOUT OTHER REVENUES, AIRPORTS OBVIOUSLY NEED NON-AERONAUTICAL REVENUE MORE THAN EVER WITH AERONAUTICAL REVENUE UNDER INCREASING PRESSURE DUE TO LOW-COST AIRLINES, RISING OPERATIONAL COSTS, COMPETITION FROM OTHER FORMS OF TRANSPORT AND FALLING AIR TRAFFIC. DO YOU BELIEVE THAT YOUR MEMBERS ARE RISING TO THIS CHALLENGE?

I think they are and to be fair I think they have already in the past. Many have improved their retail offerings in recent years and I am not just talking about landmark projects like T5 in Heathrow, or S3 in Charles de Gaulle, or T4 in Barajas Madrid. It is also happening across the board in many medium-sized airports like Brussels and Athens.

But increasingly we are seeing regional airports going down that path as we did at our last SMART Conference in Linz in March. This is our small and medium-sized action group for regional airports.At this second annual conference last March it was quite interesting to see that one of the most topical issues that was discussed was how to raise commercial revenues and to be innovative.

Airports are fully aware that commercial revenues are playing an increasing role in their financing and I think that this crisis will only accelerate what has been a trend and clear strategy for them over the last years, because this crisis will just result in more pressure on aeronautical revenues – I mean we are seeing it every day.

The AEA (Association of European Airlines) has asked for a total freeze on airport charges across the board in Europe for 2009 and 2010 and these pressures won't go away and I think that the restructuring of the airline industry that this crisis will also facilitate in terms of consolidation will also just go in the same direction.

It will change the balance in the airport/airline relationship and I think the airlines will get more negotiating powers over the airports, because you will get fewer airlines, but more powerful and bigger airlines. That will incentivise airports to continue to increase their commercial revenues and look at ways on how they can grow the revenues there.

It is clear that airports are looking now on how to improve their own retail performance because of falling passengers.

SO WHAT YOU ARE REALLY SAYING IS THAT YOUR MEMBERS HAVE BEEN RISING TO THIS CHALLENGE FOR SOME TIME NOW?

Yes, this is not something new and I think the airport industry generally is well aware that the potential to raise revenues is not coming from the aeronautical sector, but from the commercial activities and you see that year after year the share of commercial revenues is increasing.

We have airports in Europe that achieve up to 73% of their total revenues from commercial activities and I think we are going to see more and more of that.

With the crisis, the focus on commercial revenues will be reinforced, although of course it will be a focus in a different environment because you can't just rely on ever-growing passenger numbers to grow your commercial revenue.

You really have to improve your own retail performance and that means that I think that we are going to see more airports become more directly and more deeply involved on short term and long-term retail strategies.

Hopefully, we are also going to see more cooperation and closer links between airports and retailers, including new working arrangements, new contracts possibly and the challenge will be to jointly maximise the potential of the market in this very difficult time.

ON THE SUBJECT OF TRYING TO BUILD SALES, ONE OF THE BARRIERS TO THAT HAS OBVIOUSLY BEEN THE LIQUIDS AND GELS…

Oh, yes, we are very, very active on that and we are constantly liaising with the European Commission and our members. I guess your question is about what the level of confiscation is at the moment?

WELL IF YOU CAN GIVE SOME INDICATION?

Well I can't give you exact figures, but what we are seeing is that it is stagnating overall. We see that the levels are going down during the off-peak periods, but as soon as we come into high or peak season they are going up again, so we are not really seeing significant decreases across the year.

Now it is true that a lot of the liquids that are seized are coffee, water, beverages and things like that, but we still get a lot of personal items, including purchased items from passengers coming from other destinations and transiting at European airports.

So the problem remains and of course, we continue to push the member states and the European Commission to find a solution to that.

WHAT DIFFERENCE DO YOU THINK THE NEW EUROPEAN COMMISSION INITIATIVE TO RECOGNISE TRANSFERRING US-ORIGINATING PASSENGERS AND THEIR LIQUIDS/GELS IN THE EU WILL MAKE WHEN IT IS FULLY UP AND RUNNING?

Well I certainly think it is a good move after Singapore and Croatia in terms of operations and passengers being less impacted by this issue. In terms of facilitation it is a very good move in terms of the importance of the US. It is the biggest non-EU aviation market for European airports.

But having said that, I think we pushed initially for this approach for the EU to recognise individual countries and give them an exemption regime, but I think we see this as a transitional method for a transitional regime.

We need one solution that is applicable across the board to all passengers flying from wherever they fly, because operationally it is going to become much more complicated if the number of countries that get recognition grows.

For the screeners it is going to be a nightmare if they have a list of 20 to 25 countries that they have to check each time. That will involve delays and it will involve potentially more margins of error at screening points, so it is not sustainable in the medium to low term.

This is a transitional system that is working well and that is helping, but we need the complete solution to the problem and the complete solution is new detection technology.

I UNDERSTAND THAT THERE IS TALK NOW OF THAT TECHNOLOGY BEING MADE AVAILABLE IN THE NEXT YEAR TO TWO YEARS?

Yes, we are working on it and I think we are close. We have made some good progress, but the problem will be the deployment of this technology and the finance. The final development, certification and deployment will take quite some time and it will come at a very high cost for the airports.

We haven't done a detailed assessment, but our very preliminary assessment is that we are going to be in for in excess of Euro 1bn ($1.4bn) in additional costs for European airports and this is massive additional money and costs.

This is in terms of buying and deploying new detection technology, training the staff and then making the necessary changes to the infrastructure where necessary.

We also need to make sure that the technology that will be developed and approved is really efficient operationally and it does not involve more delays ultimately than we have today, such as asking the passengers to get their liquids out of their bags and screening them separately.

There are still a lot of technological and operational issues that need to be resolved before we move forward. It is very complex, with very wide ranging implications, both financially and operationally.

ANOTHER ISSUE WITH BIG IMPLICATIONS SEEMS TO BE RYANAIR'S NEW POLICY ON ONE PIECE OF CABIN LUGGAGE OR ALTERNATIVELY A 30 EURO FINE FOR ITS PASSENGERS. YOU'VE OBVIOUSLY BEEN VERY BRAVE IN MAKING ACI EUROPE'S POSITION VERY CLEAR ON THIS, WHILE THEY WERE VERY RUDE IN THEIR RESPONSE. NOW WHILE I'M SURE YOU DIDN'T LOSE ANY SLEEP OVER THAT, DO YOU THINK THIS SORT OF ACTION BY AIRLINES MIGHT LEAD TO AIRPORTS CHANGING THEIR TERMS AND CONDITIONS FOR AIRLINES USING THEIR FACILITIES?

Oh I think it might well lead to this. Airports can be very, very brave and very astute, but ultimately nobody has a magic stick. Ultimately, somebody still has to pay for the infrastructure they are using.

So if airports are being constrained in their abilities to generate commercial revenues – and at such a time as now where such revenues are key for financing the infrastructure – then it means we are going to have to find money elsewhere.

Now I don't think that national governments are willing to give money to airports and airports are not willing to ask for public money from their States.

The European Commission is clear that aviation infrastructure in general should be financed based on the user-pay principles. So I think that ultimately the airlines that are doing this risk it back firing on them in the sense that it will force airports to come to them and say 'hey look, I'm sorry but if you constrain me on my ability to raise commercial revenues then I need to review the charges that I levy and which you have to pay to me'.

IT WOULD BE AN INTERESTING SCENARIO IF AN AIRPORT FELT OBLIGED TO ASK A LOW-COST AIRLINE TO USE ANOTHER AIRPORT IF THEY CARRY ON RESTRICTING PASSENGERS' CARRY-ON LUGGAGE THOUGH, WOULDN'T IT – I MEAN IT COULD HAPPEN COULDN'T IT?

Well it could, but that also depends on the situation that the airport is in and how many other airlines are operating from the airport. It all depends on the extreme dependence that can occur. If that particular airline represents 90% of your traffic, then somehow you are stuck.

WELL ON A HAPPIER SUBJECT, THE ACI EUROPE CONFERENCE IS NOW RECOGNISED AS THE MAJOR EUROPEAN COMMERCIAL EVENT FOR AIRPORTS AND IT HAS CERTAINLY IMPROVED GREATLY IN RECENT YEARS. WHAT DO YOU THINK CAN BE DONE TO IMPROVE IT EVEN FURTHER IN FUTURE?

Well potentially in the coming years I would like to see more brands at the conference and I think we miss that. I think we will need to make sure that the conference continues to reflect the evolution of the market and the evolution of the relationship between the airports and the retailers.

So I think that will involve a lot of innovation, but I think the programme already reflects that. I think we also need to keep being ahead of the curve and keep thinking out of the box and looking for contributions from other sectors.

That's why in the present programme we have this keynote speech from B.J.Cunningham. I think this kind of high opening and getting different perspectives from different people and businesses is always interesting.

But again, I would like to see more brands participating at the conference and I know it is always a challenge to attract them at these events, but I think we need to secure that in the future. I think we also need to reflect on how we can use this event basically to give a bigger voice and generate a bigger recognition of the importance of commercial activities with policy makers and regulators and also potentially look at this event as a way of getting more of a partnership approach between the associations.

I mean we are already working with ETRC, but I think there is probably more we can do there through this event in future.

Obviously the programme is set for this year, but we will be following suggestions from the participants at this year's event as we usually do. This conference has been very good in getting the industry players together and allowing them to network and exchange, but I'd like this event used more for policy and advocacy purposes.

WHAT ARE THE THREE MAIN ISSUES THAT ACI EUROPE IS PRIORITISING OVER THE NEXT YEAR AND WHY ARE THEY IMPORTANT?

The first one is really helping out our members through the crisis and that is why we came forward with this crisis strategy paper with five crises' measures which see as crucial to give airports the right policy and the right framework to empower them to play an active role in economic recovery – I really think that there is a lot of potential there.

Airports are magnets for economic activity, both at and around their premises. They usually are job creation machines, so I think it is crucial that we get the right regulatory and policy framework in place. From our side, that involves us in continuing to develop measures and actions to change the perception of airports.

As I mentioned earlier, airports are still perceived as mere infrastructure providers which are publicly financed and this is no longer the case, because airports have really become businesses in their own right. We will also continue to work along the lines of our crisis strategy.

The second thing, of course, is the environment and with it airport capacity. We are in the final stage of the development of an airport carbon accreditation scheme, which is aimed at providing our members with a common tool to map and report their carbon emissions and to engage into the development of their own carbon management programmes. That is a follow up to our resolution that we passed at our General Assembly in June of last year.

That resolution commits ACI Europe and its airports to reduce their carbon emissions, with the ultimate goal of becoming carbon neutral and this is really an essential goal for us because it is directly linked to our ability to get our licence to continue to grow and linked with it is the issue of airport capacity.

I mean, despite the present crisis, Eurocontrol has confirmed that within the next 20 to 25 years Europe is facing an airport capacity crunch.Clearly, the planning procedures in Europe are far too long and costly to allow airports to be in a position to follow demand as an evolution and I think it is very worrying where you see countries like the UK following such a nonsensical policy on getting a third runway at Heathrow, for instance. They are basically shooting themselves in the foot.

Then finally of course there is the issue of security. Of course, we are going to work very hard on this EU road map on liquids and gels, which is about getting the right framework to allow us to get rid of the existing restrictions.

Our objective is to get rid of all liquid restrictions and to go back to where we were on August 9 2006 and I think we owe it not only to ourselves, but also to our passengers.

(INTERVIEW ENDS)

Many of the issues discussed here will be on the agenda at the forthcoming ACI Europe Trading Conference in Porto. With eight days left to register for this event, any newcomers should contact Andrea Bevan – Conference Executive on 
Tel: +44 (0) 1293 783 851. Or email: [email protected]

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