On the march

Businesses need convenient, frequent air travel links in order to thrive. And as a result, so do national economies. Extracting and producing Australia’s cultural and knowledge capital will be to the next century what extracting natural resources has been for the last. Teaching, learning and knowledge industries are becoming increasingly mobile, with the pool of – and options for – workers and learners already global. And with modern manufacturing facilities relying on just-in-time supply chains, preferred air cargo hubs will be within striking distance of airports with extensive international passenger services.

Even with improved connectivity, global businesses (and their regional, national and local suppliers, competitors and partners) must situate their people and facilities somewhere. More than ever, airport facilities are a part of that consideration.

Yet Australia’s airports arguably lag behind their global competitors.

US academic John Kasarda first introduced the concept of the aerotropolis in 2000, defining it as “a new urban form placing airports in the centre with cities growing around them, connecting workers, suppliers, executives, and goods to the global marketplace. ” No Australian city or airport ranks among the 51 developing or operational aerotropolises Kasarda identifies.

Australia’s domestic-international inefficiencies are set to continue for decades

Today, the segregation of international and domestic traffic into physically separate terminals that preclude airside connections at Sydney, Brisbane and Perth is remarkably unusual among world airports.

It’s even more unusual among those offering international-todomestic connections. (Continental Europe’s single-visa Schengen area would count as “domestic” here. ) And the need for passengers to often pay for inconvenient landside connections adds insult to injury and is an unpleasant welcome for international passengers. No comparable airports penalise connecting passengers in this way.

While Qantas and Virgin Australia both offer bus transfers at Sydney

More than ever, airport facilities are a part of that consideration.

and stump up the cash for throughticketed connections through Brisbane, it’s still a poor passenger experience. That’s especially true for passengers connecting to regional Australia without interlined tickets, who are relegated to paid transfers and connection anxiety.

But worse, the situation makes for inefficient airline operations.

Multiple terminals of frontend and backend staff must be maintained.

Long minimum connection times frustrate passengers, reduce sameday connection options and lose airlines business.

More than ever, flyers can avoid airports offering a poor passenger experience

Inefficient domestic-international connections are a lose-lose for everyone. Passengers who might have booked a connecting flight may drive to the airport to save time, and the focus on total travel time among airline metasearch engines may lead to passengers choosing to connect through other cities – Melbourne, for example, with colocated domestic and international operations, or Auckland on an international-tointernational connection.

While westbound flights might be the obvious example here, even a slightly indirect routing via East or South-East Asia may be more convenient for passengers heading east.

Cathay Pacific’s Perth-New York flights, for example, are over six hours shorter than Qantas’s fastest option through Sydney, even though the one-stop great circle distance via Hong Kong is only 321km less than the double-stop via SYD and LAX.

And it’s decidedly more convenient in terms of the connection.

From the Australian east coast, Air New Zealand offers both simple same-terminal internationalto- international connections in Auckland and services to San Francisco. With Melbourne passengers losing Virgin Australia trans-Pacific services, and Qantas or United the only nonstops, Virgin Australia’s Melburnian passengers face an inter-terminal connection at Sydney or Brisbane. Yet Air New Zealand offers internationalto- international connections at Auckland’s comparatively more pleasant international terminal, without the need to pass through customs, immigration or quarantine.

Moreover, in the context of international airlines with significantly lower cost bases and fares than Australia’s carriers, pricesensitive trans-Pacific passengers are frequently faced with the choice of a longer trip via Asia or a more expensive connection via Sydney or Brisbane. Saving hundreds of dollars in economy or thousands in business, while enjoying an internationalstandard passenger experience on widebody aircraft with sameterminal connections, is an attractive proposition for passengers.

Both Sydney and Brisbane have long-term plans to make changes to improve connections, yet these are firmly in the long term and decades away.

Sydney is going for separated operations…

Sydney’s master plan promises “a 65 per cent reduction in the total number of inter-precinct transfer passengers by 2033, providing a single terminal experience for 97 per cent of passengers. ” The plan is to consolidate operations in two “precincts”: the north-east, where the current domestic operations and Qantas jet base sit, and the north-west, where the current international terminal is located. This is not, notably, the plan to separate operations by airline alliance, an option mooted in late 2011 from which the airport had to walk back after disagreements among airlines over who would move where.

Further complicating matters is that Sydney’s longest runway – 34L/16R – bisects the two terminal precincts, complicating any aboveground connections despite their being under 500m apart.

And the development of the northeast precinct will also depend on the disposition of the Qantas jet base.

…while Brisbane has plans for a peoplemover and joint operation gates

Brisbane has no runway in the way, although its domestic and international terminals are slightly further apart – 1. 5km.

“Given that separation,” a Brisbane Airport spokesperson told Australian Aviation, “the terminals will not physically join, but will continue to be connected by efficient passenger transfer facilitation, initially bussing – either landside or airside, and in the medium term by an elevated mass transit system. ” The Draft Brisbane Airport Master Plan proposed for consultation earlier this year puts the “airside mass transit system” – ie a monorail – in the 2024‑2034 time window.

“The terminal area development strategy presented in the Draft 2014 Brisbane Airport Master Plan also provides options for futureflexible terminal facilities capable of joint domestic and international processing,” the Brisbane spokesperson said.

That would be in the form of what the draft plan describes as “a satellite swing pier between the International T1 and Domestic T2. This pier could serve either terminal zone and be bus-connected for the initial development and connected by either bus or airside mass transit system in subsequent development. ” But the problem for both Sydney and Brisbane and their 20-year future ambitions is that the rest of the world is not standing still.

The composite twinjet revolution driven by the Boeing 787 and Airbus A350 will only build on existing widebody international services on network carriers that allow passengers to avoid transiting these airports.

And the advent of the longer range Boeing 757 replacement Airbus A321neoLR may well mean that narrowbody services from Australia to Asia, or beyond the traditional trans-Tasman gateways, do the same.

Airports’ retail revenue focus has led to a poor passenger experience

Sydney Airport’s June 2014 halfyear results showed a growth in retail revenue of 7. 4 per cent to $125 million. Compare that with the 5. 7 per cent growth in aeronautical revenues to $236. 3 million. Is this the right balance for a key piece of infrastructure? The most visible problem from a passenger experience viewpoint is the inescapable duty free retail labyrinth that follows international security, by no means unique to Sydney but no less frustrating for its increasing ubiquity – much like the generic luxury brand consumables it offers.

Dodging milling shoppers

The rest of the world is not standing still.

reeking of oversampled perfume while being delayed from reaching the gate is not a pleasant way to experience an airport, particularly for the premium travellers who it is vital to attract. It’s not unreasonable to lay this experience at the feet of the shopping-mall-with-gatesattached trend. Clearly, there is some retail psychology research that shows this is an effective way to increase purchases.

But a brief analysis of the numbers seem to suggest otherwise.

Compare Kingsford Smith with Munich Airport, which is practically identical in terms of total passenger numbers. MUC terminal 2, operated 60/40 by the airport and Lufthansa, is the very model of efficiency, designed as a hub terminal for Lufthansa and its Star Alliance partners, with a focus of intercontinental-to-Europe connections – much like the de facto role played by Sydney.

Where Sydney has a duty free labyrinth, Munich has a 60 second walk from kerb to the gate frontage – less than 150m. That’s not to say that there aren’t shops, but they are located for the traveller’s convenience, not annoyance.

And in its most recently published annual figures, roughly one quarter of Munich Airport’s €1. 184 billion revenue comes from retail. Converted and adjusting to a half-year rate to match Sydney’s most recent results, that’s over $211 million.

And all this from an airport with a significantly less frustrating retail offering – and with an astonishing 30 minute minimum connection time that encourages less enforced waiting time by the shops – which made 69 per cent more retail revenue than Sydney.

Australia’s monopoly airports operate in exceptional circumstances

Australia’s lack of competing airports is exceptional when compared with similar world-class cities.

Referring to the Globalisation and World Cities Network’s Global Cities rankings released in 2014, Sydney is classed as an Alpha+ city alongside Hong Kong, Paris, Singapore, Shanghai, Tokyo, Beijing, and Dubai. All except Sydney have multiple commercial airport options within 120 minutes, taking into account crossjurisdiction options like Shenzhen, Macau and Johor Bahru. All except Sydney are classified as fully operational aerotropolises.

As a metropolis of its global scale and importance, and particularly given its national and regional role, Sydney Airport’s monopoly position is especially concerning in the legislative context of ever-changing plans for a second airport.

Compare the current situation in Sydney – or even a future where one operator has a monopoly in a twoairport market should Sydney Airport exercise its right to develop Sydney West Airport at Badgerys Creek – with Tokyo’s two airports. Tokyo, of course, also has 320km/h highspeed rail lines for domestic travel, and a 505km/h maglev line under construction, which will link Tokyo and Nagoya in 40 minutes in 2027.

Melbourne (an Alpha- category city) is effectively in the same boat: Jetstar’s Sydney servicefrom Avalon is not sufficient to provide adequate competition to Tullamarine.

Only the Brisbane/Gold Coast region (a Beta category city) has two airports with international services.

“Brisbane Airport’s market power is significantly less than almost all of the major airports in Australia due to competition from Gold Coast Airport and, to a lesser extent, Sunshine Coast Airport,” the airport said in its submission to the Productivity Commission’s 2011-12 Economic Regulation of Airport Services public inquiry.

Airport competition is good for airlines, good for the travelling public and good for the wider economy.

Whither the prospect of airport competition?

It was not the airports themselves which provided the monopolies, proving correct the most laissez of laissez-faire economists, Milton Friedman: “A monopoly can seldombe established within a country without overt and covert government assistance in the form of a tariff or some other device. ” Qantas summed the problem up neatly in a submission to the same Productivity Commission inquiry: “Airports in Australia display characteristics of natural monopolies, regardless of size.

Given the size and geographic distribution of the Australian population there is little or no real competition between domestic airports. ” Government privatisation – not an inherently bad thing – created the monopolies, and government missteps have magnified the problem.

The problem from a passenger and wider benefits perspective is that the focus on airport behaviour has been on one group of airport customers – the airlines – and whether airports are using their market power to charge more than is economically efficient.

The problem is that this focus has excluded other airport stakeholders – the flying public and the wider economy.

In economic terms, the general welfare of the flying public is improved as a result of the economic utility gained through acquisition of goods and services: in this case, the complete economic benefit of passengers being able to fly.

Without wishing to oversimplify what is a complex realm of microeconomics, the benefits of being able to procure reasonably priced, convenient and pleasant commercial flights extend more widely than airports, airlines and governments.

It is beneficial to a leisure passenger to be able to fly, but there is wider benefit to the economy too.

The problem is that these widerbenefits are rarely quantifiable.

Calculating the net economic benefit of travel is difficult to achieve.

Using regulation of airport operator businesses to create real markets is even harder.

Airports in Australia aren’t a competitive market, and arguably not even a market

Part of the economic problem is that, as the Productivity Commission acknowledges, “a number of the traditional features that would normally characterise a ‘competitive market’ may not be present in relation to airports. ” Essentially, airports are a very solid investment for investors (often superannuation funds) thanks to the regulatory landscape, non-compete guarantees made by successive governments, and the lack of competing airports.

Without suggesting the obvious “build more airports” solution, the Productivity Commission highlights the “significant barriers for new entrants to provide airport services in a location if an existing airport inefficiently delays investment,” that “the absence of new entrants means that an airport may not have the incentive to provide differentiated products to different airlines,” and that “airports may over-invest, either in excess capacity or excessive quality. ” Yet the Commission came to the conclusion that “negotiation between airports and airlines over new investment proposals is likely to represent a form of ‘iterative costbenefit analysis’. ”Except the problem is that airlines don’t have an option to walk away from the table, and new market entrants face significant barriers.

The Productivity Commission kicked a conclusion on investment into the long grass, saying “as is often a feature in inquiries such as this, the complaints put to the Commission by airport users are refuted by airport operators, with much of the evidence before the Commission consisting of ‘claims and counterclaims’. ”

Without world-class airports, Australia risks losing out on the aerotropolis future

Global airport connections are a musthave for the future, and are already a consideration for existing businesses.

Remote operators for BHP Billiton’s Pilbara mines are located in a facility less than 20 minutes away from Perth Airport.

Competitor Rio Tinto’s Pilbara remote operations are actually located within the airport precinct.

John Kasarda identifies 25 existing operational aerotropolis locations, seven of which are in Asia Pacific: Bangkok Suvarnabhumi, Beijing Capital, Hong Kong, Seoul Incheon, Kuala Lumpur, Shanghai Pudong and Singapore.

No Australian airport is categorised as even a developing aerotropolis. Brisbane is the only airport even on the radar in the less developed Airport City category.

If Australia’s future cities are to collaborate, complement and compete with these economic powerhouses, they will require both airport facilities and airline flights to connect them. Australia’s airports aren’t well connected to most of the region’s aerotropolises, with the exception of Singapore and Hong Kong thanks to the airline operations based in those cities.

Australia’s politicians at all levels of government, industry leaders, academics and the aviation industry need to work together as allies, not antagonists, to ensure that the groundwork is laid for the future.

Visa efficiency must be improved and costs reduced, with visa-free travel for key regional nationalities.

Local concerns – while often registering the most vocal objections to airport development – must not monopolise the conversation in an era when aircraft are quieter and more environmentally friendly than they’ve ever been.

Airports need to serve cities, just as cities need to serve airports. Yet airports’ impact and user base almost always transcends current political and geographic boundaries, while cities are often given the veto over airport developments. The benefit and cost tension between local and wider interests must be resolved.

New mechanisms for funding may be required. Brave leadership in the face of local objection will almost certainly be necessary.

“Airports will shape business location and urban development in the 21st century as much as highways did in the 20th century, railroads in the 19th and seaports in the 18th,” Kasarda says.