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Management and technology consultants Management and technology consultants

Steve Leighton

16 April 2014

Reducing costs in small airport

ATC through shared services

2

Many small airports are facing a

tough time economically

3

ACI continue to show that small airports are vulnerable

On average 42.5% of Europe's airports are loss making…

• …but 75% at EU airports with less than 1M pax

Net profit margin at these small airports is minus 6%

Return on capital invested is on average minus 1.8%

• +3.5% average for all airports

• increases to +13% for 1-5M pax

93% of total airports worldwide are sub 1M pax Source: ACI Economics Report 2013

4

Some places obviously struggle more than others…

Passenger traffic versus profitability for Spanish Airports (2010)

Source: AENA

5

Operating costs per passenger are significantly higher at

lower levels of demand

6

This is, as we would expect, an industry with clear

economies of scale

Passengers

Revenue

Costs

Breakeven

Large fixed or

‘inelastic’ costs

Economies of scale achieved here

Airport making loss Airport making profit

7

ANS costs can be a significant element of an airports costs

9% 20% 8% 16% 21% 10% 17%

International flight

Typical load factors

Day time flight

Dash 8 Q-400 landing, passenger and ANS costs

8

Whether the costs of ATC fall directly on the airport

depends upon the institutional model where you are…

ATC costs Airport costs User charges

ATC costs

Airport costs

User charges

ATC costs

Airport costs

User charges

Aeronautical

charges

Aeronautical

charges

Landing or terminal

navigation charges

Cross subsidisation from en-

route or terminal fees

Aeronautical

charges

TWR

… increased liberalisation (together with regulation)

in the UK market has led to a move towards the first model

Risk

Demand impact

Risk impact

9

Even a small tower at a small airport might require

upwards of 30 staff depending upon opening hours

Tower controllers

– up to 10

Assistants, engineers, managers and admin – up to 10

Approach controllers

– up to 10

Informal estimates suggest ATC can

sometimes represent 50% of small airport

operating costs

Number of open positions

Shift patterns

Synergies between approach and tower

Training

Vacation

Sickness

Photo

: M

ike P

ennin

gto

n

Factors influencing head count

10

So what are the opportunities to reduce costs?

Compete your ANS provision

Reduce staffing costs

• Reduced opening hours?

• Reduction in service?

• Reduction in training?

Reduced capital investment

• Risk of outages

• Rising maintenance costs

• Outdated technology

• Lack of regulatory compliance

Perceived

credibility of

airport to airlines

Staff morale and

retention

Attracting new

recruits

Impact

11

Relatively small steps toward sharing services and costs

could lead us towards a more cost effective future

Shared services – a concept to save money and improve quality

Two innovations are required:

• A (minor) technical innovation

• A business innovation

12

Some small airports already share their approach control

services

In the South of France, the Montpellier operational unit provides

approach control service to four commercial airports

• 24 hour service

• Montpellier, Nîmes, Béziers and Perpignan

• Within a controlled airspace of 150 Nm x 100 Nm

• In place since October 2013

Controllers at Cardiff airport in Wales provide approach radar

services to MOD St Athan nearby

Also bigger scale examples such as London Terminal Control and

US TRACONs

13

A shared approach control has been in

place at Liverpool (UK) since 2006

Robin Hood Airport - 110 miles away

Looking for cost reductions

Challenges included:

• Rostering and holding validations for

three positions

• Data and communications system

design

Decision not to use cutting edge

technology in order to simplify

regulatory approval

Took 6 months to implement and gain

regulatory approval

14

The benefits are being obtained on

an on-going basis

Combined facility works well

• Controllers appreciate the variety offered by an additional position

Existing 24H aerodrome and radar operation required needs

• 15 radar controller

• 5 Aerodrome controllers

• 10 assistants

Remoted operation needs

• 10 Aerodrome controllers (+5)

• 7 radar controllers (-8)

• 6 assistants (-4)

Additional costs negligible

Combined approach control

15

Remote Tower services are also starting to appear on the

market

Remote Tower centre

Video images of airport

A technological innovation to allow entire Tower Control to be conducted remotely

16

Sundsvall Remote Tower Centre in Sweden is due to

become fully operational soon

17

“The champagne is on ice…”

18

Remote towers are perhaps the most innovative

development in airport ATC in 30 years

Ideal for low complexity and traffic

environments

Other enhancements include object

tracking and labelling

More complex sensor suite

available, but maybe not economic

at smaller airports

Clearly requires a range of safety, operational & commercial

issues to be addressed

19

There are many ways in which an airport could transition

to shared services

An example 2-step transition

could be appropriate

Step 1: Move the approach

controllers to a shared ATC

facility

Step 2: Move the tower controllers

into the facility using remote towers

20

Assuming a sizeable cost saving is required for each

airport to justify the transition, could it work?

Measured over the lifetime of the project

21

There are potentially many benefits of a shared ATC

facility for smaller airports

Addressing staffing issues

• Overcoming recruitment, retention problems

• More staff development options

• Easier rostering

Improvements in service

• Centres of excellence for APP & TWR

• Critical mass for implementing new developments

• Reduced reliance on individuals

22

Understandably there are many considerations to be

addressed with both remote approach and towers, e.g.

How to transition existing service provision arrangements into the new organisation?

• Existing ANS provider?

• Establish a new provider?

How to maintain control over the ANS provider once centralised?

• Ensure not creating a new monopoly

• Ensure not disadvantaged by future airspace and service provision decisions

• Ensuring the provider focuses on cost control

How to mitigate transition costs as far as possible?

• Timing of transfer

• Existing facility (whose?) or new facility

23

Fortunately, there are some relevant examples in the

aviation domain such as CUTE CLUBs

Buying

Club

Airport #1 Airport #2 Airport #n

CLUB makes single procurement

With common specification/SLA

Fairly long duration contract

Members contract to the club

Monthly fees in proportion to usage

Capital costs paid by supplier

CLUB are not-for-profit. Benefits are shared with members.

A CUTE Local User Board (CLUB) is an arrangement in which the airlines make

the decisions on how the CUTE system will be paid for, operated, and

maintained, for the benefit of all the CLUB members.

24

How could small airports (and ANS providers) move

forwards with this idea?

1 • To identify suitable airports to participate in the buying club

2 • To develop the specifics of the concept for the airports concerned

3 • To prepare a business case to evaluate the concept

4 • To develop an outline agreement for the buying club

5 • To identify key risks and prepare risk management plans

6 • To engage early with the national Civil Aviation Authority (CAA)

Potential next steps

25

The passenger experience has changed dramatically in

recent years and continues to evolve

26

An unmanned aircraft lands at a small public airport with

an unmanned tower

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Management and technology consultants

Steve Leighton

Director

Tel: +44 1252 451 651

steve.leighton@askhelios.com