Aerotropolis - the new airport phenomenon

Dr. Ruwantissa ABEYRATNE

AIRPORT CITY: A new urban economic phenomenon is on the rise in the airport industry. Popularly called “aerotropolis”, it is an airport city which has a core and outlying area of aviation oriented businesses and associated residential developments.

Being very similar to the traditional “metropolis” which is a contrived formation of a central city and commuter linked suburbs, the aerotropolis will respond to a society’s demands for communications through speed and agility of multi model transportation systems and sophisticated telecommunication systems.

A functional aerotropolis will be optimized by corridor and cluster development of high volume commercial activity facilitated through aero-lanes such as expressway links and aero trains linking the airport city to the airport itself.

Infrastructure has also to be created for the smooth flow of buses, taxis and trucks between the two points.

In the past an airport was simply a terminus, much the same as a bus terminus of that time, assigning it as the focal geographical point at which people gathered to embark on a plane for a journey by air, or disembark after an air journey.

However, the traditional definition of an airport is being reshaped and refined to accord with the fact that airports are now complex industrial enterprises.

Quite apart from the essential air side support given by airports to landing and departing aircraft, there are commercial facilities provided for both passengers and the public within the terminal building by concessionaires who are specialists in their own fields of business.

The airport authorities collect concession fees (non aeronautical revenues) from the concessionaires and in numerous airports around the world, the income derived from such resources are significant, often exceeding traditional income derived through the provision of landing fees and airport and air navigation services charges (aeronautical revenues) to incoming and outgoing aircraft.

More and more, airports are evolving from being basic aeronautical infrastructures into complex multi functional enterprises serving the travelling public while at the same time catering to their commercial needs and those of others who visit the airport.

Such enterprises include duty free shops, specialty retail and brand name shops, restaurants, hotels and accommodation, banks, business and office complexes, leisure, recreation and fitness centres just to name a few.

In the present context, the major hubs are facing a non aeronautical boom in their commercial activities which are not directly related to air travel. For instance Chek Lap Kok, Hong Kong’s international airport, has more than 30 high end designer shops.

Singapore’s Changi International pampers the human’s physical fitness cravings and the continuing need for entertainment by hosting cinemas, saunas and even a swimming pool in the airport itself.

Frankfurt has the world’s largest airport clinic having the facilities to serve 36,000 patients annually while Detroit Metropolitan Wayne County has a 420 bedroom hotel in its main concourse.

Munich airport has its own hospital while Amsterdam Schipol has a Dutch master’s gallery.

Beijing has quite a few banks carrying on business within the terminal building while Stockholm’s Arlanda airport solemnized marriages and officiated over 450 weddings in 2005 in the vast chapel located within the terminal.

All this is of course due to the fact that the average air traveller is more affluent than the non traveller (they have higher incomers, typically three to five times the average) and a busy airport has scores of them continuously flowing through the airport.

This has prompted airport managers to re-structure their operational management.

For example, many airports have established separate real estate management and property units and divisions to capitalize on their landside commercial activities and enhance real estate values.

One of the foremost in this area is Aeroports de Paris which established its real estate division in 2003 to manage landside commercial activities coming under the purview of the airport both in Paris and Orly.

Some others have aggressively put in place free trade zones, customs free zones, golf courses, child and day care centers, factory outlet stores and fitness centers.

Amsterdam Schipol is also doing the same and developing its real estate potential to build large office complexes, meeting and entertainment facilities logistics parks, shopping and other commercial activities.

Beijing, which is coming up as one of the busiest airport in the next few years, is going ahead with building its Capital Airport City, which will provide shopping, entertainment, education, sports and leisure activities while accommodating activities related to commerce, finance trade and housing.

Dallas Fort Worth (US) has concentrated its activities in the field of real estate development as a profitable adjunct to its traditional airport activities.

Hong Kong airport’s SkyCity is a colourful and fabulous project, which will contain a million square metres of retail, exhibition, business, office and hotel complex very near to the terminal. This complex will also accommodate cinemas and mini theme parks.

Yet another spectacular development is the new airport city of Kuala Lumpur International Airport which will be commercially held together by its large Gateway Park.

This Park will host office complexes retail stores, an automotive hypermarket and leisure venues which will cater to the aviation and non aviation market in the city.

In Seoul, Incheon International Airport would have its own mega complex in its “Winged City” which provides for large business areas, shopping and tourism districts, housing and medical services for airport workers and residents.

While still in Asia, Suvarnabhumi, the new Bangkok International Airport which has just opened, has an entire airport city within the boundaries of the airport that houses an international business centre, international conference and exhibition complex, shopping malls, car parks, hospitals, restaurants and a large entertainment centre.

It is clear that what these airports are doing is merely anchoring their strategically placed airport resources and potential on a metropolitan Commercial Business District (CBD) formula to create employment and generate revenue.

This is a highly lucrative and eminently strategic commercial practice among the major airports of the world who are aware of the trends with regard to passenger movements in their terminals.

The aerotropolis is a natural corollary of the upturn of the economy in major cities as well as the contemporaneous advantages provided by airports in providing and promoting business in a fast moving globally networked economy.

Advanced technology and high speed communication are essential for today’s businesses and these are provided by these modern airport complexes and systems.

The success of an aerotropolis is smoothness and fluidity that would ensure a combination of high speed business, convenience and high quality products to the customer.

Although this concept has attained fruition as a successful business model mostly in the Western world, Asia is not far behind and is gaining rapidly on a competitive level as the examples already given indicate.

To begin with, any airport would have the potential of becoming an aerotropolis if it has dedicated expressway links and high speed rail which links airports to businesses and residential clusters.

In addition, there should be efficient Information Communications Technology (ICT) supporting the activities of an aerotropolis.

There are three basic factors that enable the aerotropolis to flourish. They are privatisation, liberalisation and globalisation. Privatisation involves a whole spectrum of economic activities which affect infrastructural services and could extend to such facilities as power generation and clearing services.

Two of the main advantages of privatisation are maximizing profit and improving efficiency of the services at airports. Public enterprises, in sharp contrast, tend to focus on job creation, supporting national identity and pride and stimulating tourism, all of which could have a stultifying effect on profit making and efficiency.

Be that as it may, public enterprise has largely lost its appeal, not only due to the cumbersome bureaucracy involved but also because of the evolution of globalisation which has changed economic reality and made enterprises move toward markets and efficiency from being mere non-profit making services and facilities.

The liberalisation and globalisation of markets were a necessary corollary to the shift in perception of world leaders from the evils of monopoly to the advantages and virtues of competition.

This change in attitude was mainly due to the realization that with liberalisation comes more entrepreneurs and companies who in turn, with their market entry, make larger markets potentially available.

Furthermore, with liberalisation and globalisation come better opportunities for entrepreneurs to enter markets, thus intensifying competition. The result is of course more quality service at more competitive prices.

In the case of airports this effect can immediately be seen in the typical reduction of consumer goods in some airport shops immediately after they are privatised.

Privatisation also usually results in improved operational efficiency and aggressive market related business practice such as opening up new non-traditional capital sources calculated to contribute towards financing airport infrastructure and service development.

Privatisation remains a part of an overall strategy to replace the public sector culture with a private sector culture by more efficient use of resources and modernization of the economy concerned.

Privatisation, when essentially related to the change of ownership and management in the provision of airport services, is rather loosely associated with any deviation or movement away from government ownership and management of facilities and services.

Although this is generally the case, and privatisation has been generically defined as the shifting of governmental functions and responsibilities to the private sector, partially or wholly.

It has been claimed that privatisation can involve various scenarios. These range from change of ownership from public to private sector; change of ownership from central to local government; change of legal status from an autonomous governmental authority to a body corporate that is traded in public; involvement of private sector participation without the legal benefit of ownership; and financing by the private sector.

Globalisation is the removal of trade boundaries and it becomes a necessity in the construction of an aerotropolis.

Once trade boundaries are broken, competition, encouraged through a liberalized market would ensure economic advancement sufficient to implement the aerotropolis plan. An aerotropolis need not necessarily be built near a major hub airport.

The potential for an aerotropolis would lie primarily in the airport’s location and secondly on whether there are nearby aerotropolis’ in neighbouring countries. With these two factors, airport planners can start building an aerotropolis gradually.

The most needed facilities are infrastructure related as well as communications related. For example, an exotic location where there is wildlife attractions would be a suitable asset on which to plan an aerotropolis.

Of course, in addition to the main attraction, there would have to be the traditional allures such as theme parks, hotels, restaurants and recreation facilities.

However, the main attraction would be the uniqueness of the environment and the degree of sophistication of the facilities that connect the aerotrop¢lis with the airport.

The second factor - lack of similar facilities in neighbouring countries, would be of significance as the demand for such a facility around the world is eminent and the whole market share would concentrate on the only facility available.

Around the world, the aerotropolis venture has yielded exponential increases in job opportunities for locals and an influx of foreign exchange.

Therefore this concept, which has been tried and tested, should be on the minds of any airport and urban development planner, particularly in tourist destinations.

A fitting example is Miami, which boomed in terms of passenger traffic by air after the construction and commencement of operations of Walt Disney World.

The writer is Coordinator, Air Transport Programmes International Civil Aviation Organization.