| by Dr. Ruwantissa Abeyratne
( March 6, 2013, Montreal, Sri Lanka Guardian) The International Airport at Mattala is all ready to go, and will open its doors, or rather runway, on 18 March to air carriers who wish to operate there. The Daily News, in its article of 6 March 2013 cites only Air Arabia and Sri Lankan Airlines as carriers who have agreed to operate to Mattala. It is hoped that this was an inclusive reference and there are many others in the pipeline. Of course this does not bode ill for Mattala for the present as a potential failure as a hub. Not many airports have had queues of airlines waiting to operate from day one.
Mattala, in its Stage One (which is starting now) is reported to have a capacity to serve 1 million passengers per annum, 45000 Million tons of cargo capacity per annum, 30000 Aircraft Movements per annum. It would have ten Parking bays for aircraft and two aero bridges. In Stage Two, it will have the capacity to serve 5 million passengers per annum and 150,000 Million tons of cargo per annum. The airport will have 45000 aircraft movements per annum, 20 parking bays for Aircrafts, 15 Aero bridges, 2000 hectares of land allocated for the project, 800 of which will be used in the first stage and 400 hectares set aside for main airport infrastructure.
With the steady influx of new aircraft, the movements of these aircraft would require more airport capacity to ease the potential congestion at airports. Mattala therefore is a good response to things to come in the aviation business, not only with regard to Katunayake but also in the context of airports in the surrounding region. It would be a good coupling agent with Male, as already seen with the decision of Korean Air to operate to both destinations in one flight arrangement. In view of this development and others to come at Mattala, the airport cannot be left to run idle and needs to be economically sustainable from the start.
The writer is certain that the planners and operators of this airport have taken into consideration the following facts which would help keep the airport financially viable.
An airport subsists on the charges it levies from aircraft which fly into and out of them. Of course there are other charges too, such as those collected from the landside. The airline and airport business are interlinked and inter-connected and, since air transport is a growth industry, so is the airport industry. Airports, like any other business enterprises, are compelled to compete with each other to attract air traffic and business flowing therefrom and from the general public. To this end, many airports are now privatized and operate as autonomous entities. Privatization brings not only fiscal benefits, but also legal liability (as the discussion below will show) which is a possible cost factor that should be taken into account. More importantly, privatization connotes a business-like approach that requires a certain involvement with market forces and competition that would necessitate reinvestment in the airport business for the commercial sustainability of the airport.
The attractiveness of airports to the average shopper is largely due to the range of shops and services available in the airport premises. In this regard, local residents and airport employees share common interests and many airports have expanded the range of their shops to meet the demand posed by these categories. It has been known that those items which do not fall into the category of daily purchases, such as furniture, electrical goods, hardware are popular consumer items at some airports.
The local business community, which would find it more cost effective and productive from a sales perspective to conduct their business at the airport, could be another important customer of the airport. They could require office space, conference and meeting facilities which can enable them to take advantage of the airport’s strategic location, inter-connectivity and diversity of nationalities which an airport attracts. Businesses may also need large storage and warehouse space for freight and therefore may seek space close to the passenger terminal. There needs may extend to land, warehouses, hangars or office buildings from which the airport can generate substantial rental income.
In view of the current trends in the airport business model, airports have to make strategic decisions to be financially self-sufficient and be run like businesses. There should therefore be a commercial airport model which maximizes revenue, whether such is generated through aeronautical revenues (such as airport charges from airlines) or non- aeronautical revenues (such as from concessionaires). They should also have a reasoned view on who their target clients are and who their most attractive customers are.
Another important element in the airport business caters to the financial transactions a passenger or visitor to the airport might need and his transport needs when he leaves the airport on arrival. These services are essentially related to those provided by banks, post offices, travel agents, car hire and hotel reservations. While car rentals produce most of the revenue, banks are the most popular. Car parks are clearly another source of revenue generation for airports, particularly where there are no regular public transport services. Finally, leisure facilities, which is a growing need for a generation acutely aware of the travails of air travel and the need to stay in shape, has proved popular. This category begins with health spas and health clubs but extends to swimming pools and entertainment facilities such as cinemas, discotheques, night clubs and billiard rooms.
It is an incontrovertible fact that there are many airports around the world that are run as commercially oriented profitable enterprises. Most of these airports initially started off as public utilities or instrumentalities of States with public service obligations. They have now transcended from their public role to an essentially private role of providing quality service and value for money. This is mostly because modern day airports not only serve airline passengers who use the airport for egress or ingress but also those who visit the airport to see these passengers off or meet them as well as members of the local community. Although there are still some States which regard their airports as public utilities, this approach is fast being relegated to the background and is being replaced by the profit making business model based on service.
Government or public ownership may take the form of direct control and management, for example through a civil aviation administration, or through another ministerial department, or through regional or municipal levels of governments. Government control can also be exerted through bodies benefiting from a certain degree of autonomy, such as a government body with financial and operational autonomy, an autonomous corporation established under the provisions of a special statute (a statutory body), or a company established under company law. Under this type of management, airports remain under the overall ownership and control of the government and the organizations operating them are expected to act with public interest in mind rather than primarily governed by profit considerations, although this should not preclude the setting of clear objectives and adoption of best commercial practices. This option may provide flexibility to States in ensuring that the development of airports will suit their national political, social and economic requirements. It has to be noted that in some cases the government may keep the ownership of airports (land and/or facilities), while the operation (i.e. the control) is vested to other interests.
On the other hand, an autonomous airport entity is essentially an independent body established for the purpose of operating and managing one or more airports, one objective of which is to permit local and user needs to be better met. In some instances, the scope of such autonomous airport entities has extended to the operation and management of air navigation services as well, although autonomous entities have also been established exclusively to operate and manage air navigation services, particularly with regard to the en-route (and approach) phase(s) of flights.
The number of autonomous airport entities is growing in all regions. They are particularly common in Europe and the United States. For example, in a majority of the States in Europe, the major international airports are operated by autonomous airport entities. While the establishment of an autonomous airport entity would not necessarily result in an unprofitable airport becoming profitable, experience gained worldwide from these developments indicates that where airports have been operated by autonomous entities their overall financial situation has generally tended to improve. Consequently, it is recommended that, where this is in the best interest of providers and users, States consider establishing autonomous entities to operate their airports.
The above notwithstanding, the most important feature for this new airport is to attract as many airlines as possible. This does not happen automatically. Someone must go out there and negotiate on behalf of the airport. The saying, “build it, and they will come” does not hold good in the airport business.
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