Firm Foundations

Christchurch Airport is prepared for the future

Talking to Malcolm Johns, the CEO of Christchurch Airport, it’s clear that this is a man 20 months into his position and raring to go for the future – much like the airport itself.

We now have an integrated regional, domestic and international terminal. MALCOLM JOHNS

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Fresh from a significant investment into a new terminal that is the envy of the region, and with the fifth anniversary of the devastating earthquake about to provide a natural turning point towards the revitalisation of Christchurch, Australian Aviation sat down with Johns to talk about what’s next for the South Island’s largest airport, which is also the key to unlocking much of New Zealand’s future tourism potential.

In terms of strategic scope for the next 10 years, Johns noted, “there arethree parts to the airport: the airfield, our terminal and our commercial property development business. ” “In terms of the airfield, we’re actually in good shape. We have two runways, the north-south runway and the east-west runway, and there is no aircraft in the world either flying now or planned to be flying in the next decade that we can’t handle.

So in terms of the airfield we’re in good shape.

“We’re redoing the shoulders of the main runway at the moment, just to ensure that future aircraft types can service here quite comfortably,” Johns explained.

“It’s really important. Last year we did a square metre by square metre survey of all our taxiways, aprons and runways. That’s allowed us todo a very detailed look-out over the next decade in terms of what we need. That part of our business is in really good shape at the moment. The only other thing that could potentially be on the horizon is extending the crosswind runway, particularly as the likes of 787s and A350s come into airlines’ fleets. ” The runway situation is a particular boon when compared with Wellington, the other candidate for the title of New Zealand’s second airport, which has geographical length restrictions for its runway (see July 2015 Australian Aviation). Christchurch’s new terminal, meanwhile, is not only a significant improvement over the older facilities, it’s also a very attractive facility in its own right.

“In terms of the terminal, we’ve recently spent NZ$260m (A$247m) building a new one. We now have an integrated regional, domestic and international terminal. 8. 5 million passengers a year will fit just nicely into it. In an independent survey taken for the last three years, Christchurch Airport has ranked number one for customer experience. That’s the main benchmark we use. We also use several other independent companies to research our customer experience, and for retail our retailers all sit at about 85 per cent satisfaction level. Our ground transport is sitting at about the same as well. ” “In terms of our property development business,” Johns said, “we’re targetting about NZ$600m (A$570m) worth of commercial property development over the next decade. We’re on about NZ$180m (A$171m) of commercial property at the moment. We have about 900 hectares of land here. We’re adding a 300-room hotel to the airport. It will be our third property on the airport campus. We have a 230-room four-star property at the moment, we have under construction a 220. room backpacker that’s focusing on short-stay pod-style accommodation right through to dormitory-style accommodation, and we’ve just announced that we’re looking at a 300-room, probably five-star property that will be close to the terminal. That will give us an enormous amount of capacity to handle that growth over the next five years or so, and we’ll make sure we have an option to add another wing onto that new property if that demand required it. ”

Passenger numbers are growing and expected to meet targets

So, Australian Aviation asked Johns, what does that future demand look like? “It looks pretty good, actually!” Johns laughed. “Last financial year to 30 June 2015 we did 5. 9 million passengers. That was 100,000 down on where we were just before the earthquake, at six million passengers. This year in FY16 we’ll probably do about 6. 3 million, so you can see that the growth this year has been quite strong. Essentially, we’ve changed our focus in terms of aviation growth from broad and shallow to narrow and deep. ” This essentially means developing key markets and expanding existing airlines rather than reaching out to new carriers to start service.

“We’re more interested in going deeper with our existing partners than necessarily going broader. That’s not to say that there aren’t airlines that will be of interest and have interest in us. One of the things that’s really important to remember is that 86 per cent of international visitors who come to Christchurch Airport are visiting the rest of the South Island – they’re not visiting Christchurch, they’re international tourists to New Zealand,” Johns noted.

“New Zealand hit three million visitors a year earlier this year. It took us 13 years to go from two million to three million. At our forecast growth rates, we’ll go from three million to four million in the next five years,” Johns predicted. “So our growth rates in terms of visitor arrivals will double in the next five years. That’s a very strong proposition. The majority of those visitors are going to come from either Australia, Asia or North America. ” Or, potentially, from Antarctica.

“If you look at Christchurch’s relationship with Antarctica,” Johns said, “it’s a hundred years old. The original explorers used Christchurch as a stepping-off point. Obviously we have the US and Korean and New Zealand Antarctic programs based out of the airport here, and they also use the seaport here as well. I don’t see any great changes to that occurring in the future. There’s a very strong scientific collaboration: the University of Canterbury has its Gateway Antarctica program, and it’s the only university in the world to allow postgraduate study to include time on the ice, and it’s ranked in the top ten of the world for those types of sciences.

“For us we see our connection as very strong and very relevant. The US has been here for a long time, and they bring about five thousand scientists through here every summer, and they kindly drop about NZ$100-120m (A$95-114m) into the local economy. That’s very important to New Zealand, it’s very important to Christchurch, so we do everything possible to assist them.

“New Zealand has two advantages: one is our airfield can take any type of aircraft that they fly, and one is that they have a secondary airport in Invercargill where, if for any reason they need to divert, we have an airport that is able to handle them. ” Outside the Antarctic season, though, “we’re very focused on Australia, Asia and Europe as our primary international passenger feeds,” Johns said, “so we’ll go from 5. 9 million passengers last year to6. 3 million passengers this year, and our target for 2025 is 8. 5 million passengers a year.

Handily, the terminal’s capacity is “somewhere between 8. 5 million and 9 million a year,” Johns told us. “That will depend on seasonality and on the time during the day. The terminal has some relatively easy extension options for gates, but in terms of the core terminal itself, that’s designed to be in that 8. 5-9 million range. We’re not expecting large capital investments in the next decade into the terminal, but there may be requirements for minor adjustments around gate extensions to allow more aircraft on the terminal at once. The way the terminal’s designed is that it can swing between domestic and international. We can make a number of our gates either domesticor international, and that helps improve the productivity of the terminal as well. It’s dynamic – we use them now. Jetstar is a good example: they bring a domestic aircraft into here and they depart as an international flight, and don’t have to change gates to do it. ”

Passenger profiles and needs are evolving as well

“The current passenger profile, as an airport, is around two-thirds domestic and one-third international,” Johns explained. “International is the fastest growing part of the business at the moment: it’s had double digit growth over the last two years. Our focus is very much on Australia, on Asia, and beyond to Europe. At the moment we’re the fastest growing airport in New Zealand for Chinese arrivals, and we have China Southern starting a service in December this year. We have China Airlines that ran a trial service last summer, and have quadrupled their capacity into here this summer. And we have Singapore Airlines who have been here for 29 years and they’ll fly 28 double-dailies this summer. They’ve lifted their capacity into Christchurch by 38 per cent over the last five years. We will see going forward an increasing percentage of Asian countries supplying our passenger profile, and one of the things we’re doing at the moment is how we evolve as an airport and as a terminal to have an increasing number of people who don’t speak English as their first spoken or read language. ” To address the complex and unique needs of these passengers, “wayfinding is the first critical thing,” Johns asserted. “Second is multilingual staff. And third is retail, food and beverage offerings that suit their palate and their profile. We’ve worked quite closely with JR Duty Free in terms of ensuring that our airside retail profile meets the needs of those passengers. They’ve obviously got a lot of experience in this area. To be honest, JR’s the expert in that, and what we’ve doneis effectively given them the rundown of what we think the passenger profile will look like.

“Obviously they’ve had experience in Auckland, they’ve got experience elsewhere in the world, and they’ve set about ensuring that their products in the duty free store, their promotions and their positioning will meet the needs of the outbound passenger. It’s particularly in the outbound space, more than the inbound space, and things like Rolex watches and high value goods are the type of things we see them purchasing. New Zealand honey, lanolin, milk powder – those sort of things also go very well for that market,” Johns said.

“In terms of our landside retail we will evolve that over the next five years as we need to. We’ve engaged an independent survey firm to survey non-English speaking visitors into the terminal so that we can get a deeper insight into what’s good and what’s not so good as that profile changes. ” Serving independent Chinese travellers is becoming increasingly important to the economy of both Christchurch and the wider South Island. In terms of Chinese tourists, “what we’re seeing is that about 80 per cent of them are arriving on independent visas and 20 per cent of them are arriving on group visas,” Johns calculated. “That’s the only official statistics that we can get our hands on, but we think that it’s about a 50-50 split between those who are on some form of organised tour around the South Island – that may be groups as small as six in a minivan with a guide, for example, through to groups that might have 40 or 50 in them – and those who are navigating around the South Island by themselves.

To date, the Chinese have mainly concentrated themselves in Christchurch and Queenstown, and [a wider tourism program called Project South] is focused on moving those people out into the other regions of the South Island. ”

Five years on from the earthquake, Christchurch is looking to the future

As Christchurch regenerates, its airport is concentrating on serving both the city and the majority of its visitors, who are travelling to or from elsewhere in the South Island, which was generally unaffected by the earthquake.

“What you’ve got to remember is that 86 per cent of international visitors into Christchurch Airport are heading into the South Island.

The number one focus has been around setting the course for the next ten years for the airport,” Johns noted. “Clearly the last five years commenced with the earthquake sequence that happened here in Christchurch, but we are coming up on five years. We felt very strongly that it’s time to rule a line under that, and to look forward. So it’s been very much around what does 2025 look like around Christchurch International Airport. ” “There’s no question that the airport suffered a commercial hit after the earthquake. We lost 500,000 passengers a year out of this airport, and 96 per cent of that traffic transferred to Queenstown, so that’s obviously a huge benefit to them. None of our modelling or strategies looking forward are focused on trying to get that back,” Johns admitted. “We’ve accepted that largely as a structural change in the market. What we’re focused on as an airport is claiming a greater share of New Zealand’s growth, and we’ll go from three million to four million visitors a year in the next five years. We want our share of that. Australia and Asia are our key focuses in that. ” “So there are a couple of things we’re doing as an airport,” Johns outlined. “First of all, we have an aeronautical business development team that has two parts to it: one of them is working with our airline partners, and the second is working with all the regions of the South Island in terms of international

We’re the fastest growing airport in New Zealand for Chinese arrivals. MALCOLM JOHNS

promotion. We call that Project South, and that is about the South Island flying in formation on the international stage in Australia and also in Asia, and focusing very heavily on filling those planes into and out of Christchurch for all those people who are heading into and out of the South Island. ” “In terms of the city, what you have to remember is that there are effectively three ingredients to it: the people, the place and the bit that connects the two together,” Johns said. “The people weren’t the part that was affected during the earthquakes, it was the place – the physical aspects of the city. We’ve just hit an inflection point. When I arrived here 20 months ago, the majority of the cranes in the CBD were still pulling buildings down. Right now something like 95 per cent of the cranes are putting something up. By this time next year the majority of the retail, entertainment and hospitality precincts will be complete, so the CBD experience will be transformed. The convention centre project is underway at the moment, and along with that you’ll find quite a lot of accommodation projects that will kick off as well. We think that the visitor experience in the city of Christchurch will be two thirds of its way to completion by this time next year, and then within three years of that it will be almost fully complete. ”

Getting into the city “will be road-based: buses, private cars, taxis, etc,” Johns explained. “There’s no plan for rail between the CBD and the airport. There’s no need for it. The reality of Christchurch is that we have three very good arterials between the CBD and the airport. It’s 15 minutes between the two, and the proximity is very close. Land-based transport will serve very adequately for probably the next 20-30 years. If we did end up with driverless cars or private transport as a service, that could potentially extend the ability for land-based transport to service the airport out to 60 or 70 years. ”

Passenger experience is a key focus in serving the next 2. 5 million passengers

“The really big things for us,” Johns said, “are that we’ve built the new terminal, the new hotel will be coming in the next two years, and that will alter the traffic flows inand out of here. We draw from quite a geographically dispersed area, and we have a high percentage of people who meet and greet people from aircraft driving to and from the airport, and transport’s a really big thing for us. We continue to see those volumes rise, on a level where for every one passenger we add, we add a member of the public to the airport as well. They generally tend to drive themselves, so that’s a really big area for us.

“Inside the terminal, we have recently added a 54-seat theatre that’s available for hire for events, lectures, corporate meetings and the like, called the Flying South Events Centre. It has a number of small meeting rooms around it, and a shop that sells South Island-manufactured products,” Johns explained. “That’s an addition that has occurred within the last six months to the terminal and the customer experience. We’ve added into that a South Island film experience, which people waiting for flights can avail themselves of. “Our focus in terms of the terminal and the terminal experience is that those who want to move through really efficiently can do so, and that the large number of people who drive here (some of them can drive up to 150km to get here) who arrive and need to have food, beverages and so on [can get them]. We try to do in a way that allows a relaxed atmosphere.

“The other thing that we’ve worked very hard on is that all our airbridges are themed, based on the regions of the South Island. They’re not just look – they’re four dimensional with smell to them as well as sound. We have one airbridge that is themed as the Tekapo night sky, so when you walk into it your way is lit by the Milky Way. We have other airbridges themed like Marlborough vineyards, so that when you walk into it it’s summertime and smells like a vineyard. If you walk into the Antarctic airbridge, it’s chilly and you have the sound of penguins as you walk through it, and it smells like Antarctica would as well.

Eighty-six per cent of international visitors are heading into the South Island. MALCOLM JOHNS

We’ve got a farmyard one, which smells like lanolin – you’ve got dogs barking, sheep moving and things like that.

“We get a lot of positive feedback from both our domestic and international visitors around the way that they arrive and depart here at the airport based on those themed airbridges. ”

New twinjets and regional competition will change the airport’s dynamics

The Boeing 787 Dreamliner and the Airbus A350 XWB would seem to be made for an airport like Christchurch, serving a market like the wider South Island.

“They’re going to open up a lot of opportunity for us,” Johns agreed. “What those aircraft will do is increase the economic viability of coming direct here. If you look at Singapore, for example, Christchurch is closer to Singapore than Auckland is, because it sits at an angle. As you go up into Asia, what those jets do is decrease the differential between the North and the South Islands in terms of operating costs. The closer that differential is, the more that airlines are able to service where passengers actually want to go.

“So if you look at Singapore, the current research suggests around 80 per cent of our arrivals from Singapore are wanting to go to the South Island for their holiday. That’s what’s attracting them here, so the ability to get directly here is a lot more convenient than having to go indirectly. Looking to north Asia and east Asia, you have exactly the same thing. What attracts them to New Zealand is the scenery of the South Island. ” The addition of Jetstar to regional turboprop flights – assuming that initial routes around the North Island and Nelson at the far north tip of the South Island are successful – willeventually take Christchurch’s hub status into account.

“If you look at New Zealand, two-thirds of our population is not in Auckland,” Johns noted. “What the increase in regional competition does is that it increases the feed into the secondary airports, Wellington and Christchurch in particular. What we expect to see is continued regional connectivity into those airports, and with that a greater spread of visitors coming in, and a greater connection of the two-thirds of New Zealand’s population who don’t live in Auckland to an airport that’s close to them. ” Does Christchurch Airport want to be a future hub for Jetstar’s regional flights? “Absolutely,” Johns said without hesitation. “If you look at Christchurch and domestic passengers in New Zealand, 27 per cent of the market is hubbed around Christchurch, so if you’re establishing a network in New Zealand you’re not going to leave Christchurch out long-term.

Obviously Auckland is the honeypot, because that has the biggest single source of population, but in terms of tourist flow Christchurch is still the gateway to the South Island, it still has the largest number of international visitors outside of Auckland, and in terms of Australia and Asia it’s the fastest point of entry. So, we would expect at some point to see Jetstar here, but at what point that is I don’t know. ” Whether it’s Jetstar, China Southern, Antarctica or wider retail opportunities, it’s clear that Johns and his executive team have a clear vision for the airport’s future, and the relaxed confidence with which Johns cited statistics and delved into detail suggests a CEO with both the smarts and the personability to see that vision executed. For a region that has been doing it tough for the last five years, it’s great to see such excitement for what comes next.