The final session of the 2023 Summit of the Americas conference programme, which took place this afternoon (Tuesday 18 April), presented a detailed look at the recovery trajectory of the international aviation ecosystem and how it has bounced back rapidly over the past year.
However, the panellists stressed that, in some respects, business is not yet back to normal.
Titled ‘Building a Resilient, Sustainable Future’, the session looked at how the pandemic has given rise to many short- and long-term changes.
The group of industry experts discussed how these challenges are being managed ‘carefully and collaboratively’ to shape the future of the sector.
Co-organised by the Airport Restaurant & Retail Association and The Moodie Davitt Report, the session explored ways to evolve the airport concessionaire business framework to support a sustainable, resilient and equitable future for the industry.
Andrew Weddig, Executive Director, Airport Restaurant & Retail Association set the scene by sharing the statistics on passenger volumes one year ago compared to today, highlighting how volumes are not yet recovered.
“Passenger volumes have increased a little bit but it’s still not there,” said Weddig. “The US is still hovering around 2019 levels and worldwide capacity is still down.”
The shortfall is equivalent, he said, to 1.3 billion aeroplane passengers and the revenue they would have generated, compared to previous projections.
“Some accumulated debt has been reduced, but it is still hanging around,” he added. “Labour challenges are moderating a bit, but that doesn’t mean things are good. Were still 5-10% below where we think we should be to operate most efficiently and labour is more expensive. Plus, there are pilot shortages, airplane shortages and ATC shortages. High inflation has dissipated a bit. But that doesn’t mean prices are going down – they are just increasing more slowly.”
He spoke of the ‘new normal’, and how it was envisioned compared to the reality, covering issues such as new rent structures, capital structures and new consumer expectations.
“Airports are generally hurtling forward issuing RFPs with few changes in the overriding structure, just as if the pandemic hadn’t happened,” he said.
Fellow panellist Erasmo Orillac, CEO, Motta Internacional, SA brought the audience up to date on company activities, including how business should be back at 2019 levels by the end of 2023. He also gave an insight into the evolving passenger profile.
“Overall, I see a recovery and I see that the demographics of our passengers have changed, with fewer business travellers and more families. However, the spend per passenger has gone up a bit, by about 5%, which is good. But operating costs keep biting either side so we are getting squeezed. How we manage that squeeze is what will make us sustainable in the future. We try to be as resilient as we can.
“I see a light at the end of the tunnel – and it’s not a train coming toward me,” he joked. “The airlines are working to be more efficient and get more passengers on board, although tickets have gone up tremendously in price. We have to be resilient and very cost conscious over the next few years.”
He emphasised the need to keep [what happened during the pandemic] in mind as the industry looks toward the future.
Matthew Greenbaum, Director of International Shoppes described 2022 as a reset year and how, in 2023, “everything has recovered except for the passenger mix”.
“However, we are in a much better place than we were 12 months ago,” he said. “The [Summit of the Americas] show is much livelier and more optimistic and we also feel that in our company.
“We went from a situation of no demand to extreme demand, so our two biggest pain points are on supply and personnel.
“We made a lot of great changes during Covid that put our company in a much stronger position, so I am feeling really good about where we are at.”
Jim DeCock of J DeCock Consulting described how Covid forced the industry to take a look at what is working, and what’s not.
“The pandemic brought to life that there are issues and by everyone coming together it really helped to reinforce that there are problems and that we need to sit down and talk about these.
“Like rent structures, pricing structures and capital investments – all these issues that were kind of underlying the whole time have become much more serious.”
Circling back the passenger mix, the absence of the business traveller, compared to pre-pandemic, was also highlighted by Orillac.
“We have lost the corporate traveller, who previously came with a list and a credit card, as companies are using Zoom and Teams [instead of meeting in person],” he said. “We are getting more families and vacation-makers and they are more conscious of what they buy, so it’s a little bit of a different mechanic.
“Also, we have seen the liquor category becoming more premium, especially with regards to Scotch whisky and also sub-categories with premium products like tequila and rum.
“These consumers are spending about 4-5% more than the business traveller so we are happy with this. It has forced us to carry some items for children too.”
Motta Internacional has also adapted its stores where needed, to be more child friendly and has enlisted the help of specialist staff to help distract and entertain kids while their parents shop.
A change that International Shoppes has noticed is the desire for greater interaction in the store.
“We invested a lot in digital transactions at the start of the pandemic, but what we have observed is that passengers want more interaction now,” said Greenbaum. “That has been a bit of a surprise that we see customers really engage with our sales staff more so than they were.”
The panellists went on to discuss the preferred model of working between operators and airports.
Jim DeCock highlighted the importance of working in partnership with operators to be more flexible and to keep pace with evolving passenger demographics.
Both Greenbaum and Orillac championed the percentage of sales model/percentage-based deals.
“It’s not rocket science to do that,” said Orillac. “It requires an outside party to audit the books, perhaps, and a very open relationship with the airport. Progressive airports are looking to that. So far, this is a work in progress.”
“They’re a lot of activity that’s happening now and a lot of RFPs that are imminent or ongoing,” added Greenbaum. “More progressive airports will be open to more percentage-based deals. It might be wishful thinking, but I guess we’ll have to wait and see.”
Weddig summarised the sentiment of the session succinctly by saying: “There a great recognition now and a heightened recognition, that this is an overarching partnership, that airports, concessionaires and brands have the same goal: to serve the travelling public and provide great customer service and enhance the passenger journey. And the only way we can do that is to work together to achieve that goal.”