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EMBRACING THE FUTURE HARNESSING INNOVATION FOR THE NEXT GENERATION

EMBRACING THE FUTURE HARNESSING INNOVATION FOR THE NEXT GENERATION. PRESENTED BY: FRANK GRAY FOUNDER AND MANAGING DIRECTOR C.P.I. LIMITED. THE TITLE OF MY PRESENTATION TODAY IS……. SO, I WANT TO START WITH THE PAST TODAY, COMMENT ON SOME CURRENT TRENDS AND THEN GO ON TO SPEAK ABOUT THE FUTURE.

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EMBRACING THE FUTURE HARNESSING INNOVATION FOR THE NEXT GENERATION

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  1. EMBRACING THE FUTUREHARNESSING INNOVATION FOR THE NEXT GENERATION

  2. PRESENTED BY: FRANK GRAY FOUNDER AND MANAGING DIRECTOR C.P.I. LIMITED

  3. THE TITLE OF MY PRESENTATION TODAY IS……..

  4. SO, I WANT TO START WITH THE PAST TODAY, COMMENT ON SOME CURRENT TRENDS AND THEN GO ON TO SPEAK ABOUT THE FUTURE

  5. IN OUR INDUSTRY, THE PAST 25 YEARS HAS, IN MY VIEW, BEEN DOMINATED BY ONE MAJOR TREND - THE EMERGENCE OF LOW COST CARRIER AIRLINES.

  6. IN 1985, RYANAIR CARRIED 5,000 PASSENGERS LAST YEAR, RYANAIR CARRIED OVER 75 MILLION PASSENGERS

  7. RYANAIR •  NOW THE LARGEST AIRLINE IN EUROPE •  HAVE 290 AIRCRAFT (4.2 YEARS OLD) •  OVER 20% OF REVENUES FROM ANCILLARY SERVICES

  8. RYANAIR • PULLED OUT OF VALENCIA IN 2008 • PULLED OUT OF BELFAST CITY IN 2010 • REDUCED FLIGHTS OUT OF SHANNON • THEY PLAN TO START RYANATLANTIC IN 2014

  9. EASYJET • STARTED IN 1995 • LARGEST BRITISH AIRLINE, WITH 55 MILLION PAX • SECOND LARGEST AIRLINE IN EUROPE, WITH 193 AIRCRAFT

  10. SOUTHWEST • THE ORIGINAL LOW COST CARRIER: HAS JUST CELEBRATED ITS 39TH YEAR OF SUCCESSIVE PROFITS • ACQUIRED AIRTRAN IN 2011 • LARGEST OPERATOR OF 737’s

  11. SOUTHWEST • 46,000 EMPLOYEES • LARGEST US AIRLINE BASED ON DOM PAX • 575 AIRCRAFT + 390 ON ORDER AND 242 ON OPTION • GOING INTO INTERNATIONAL ROUTES (MEXICO, CARIBBEAN) IN 2014

  12. IN THE PAST, AIRLINES PAID FEES TO THE AIRPORTS AND HAD NO REAL POWER OVER THE AIRPORT THIS IS CHANGING…………

  13. THE REST OF MY PRESENTATION TODAY WILL COVER THE MAIN ISSUES WHICH WILL BE IMPORTANT TO FUTURE AIRPORT RETAIL GROWTH: • SECURITY • OIL PRICES • DWELL TIME • THE INTERNET • AIRLINE INFLUENCE • WHY THE ‘MODEL’ NEEDS TO CHANGE

  14. SECURITY TWO OF THE MOST SUCCESSFUL AIRPORTS COMMERCIALLY ARE AMSTERDAM SCHIPHOL AND SINGAPORE CHANGI BOTH HAVE SECURITY AT THE GATE…….

  15. SECURITY • GATE SECURITY IS BETTER SECURITY • IN FUTURE, TERMINALS WILL NEED TO BE DESIGNED TO TAKE INTO ACCOUNT DIFFERENT LOCATIONS FOR SECURITY • IN FUTURE, NEW TERMINALS WILL HAVE TO BE DESIGNED WITH ALTERNATIVE LOCATIONS FOR SECURITY

  16. OIL PRICES • IN 1985, OIL (BRENT CRUDE) WAS US$40 PER BARREL • LAST WEEK, IT WAS US$108 PER BARREL • INDUSTRY ANALYSTS SAID THAT WHEN THE PRICE OF AVIATION FUEL WAS MORE THAN 30% OF TOTAL AIRLINE OPERATING COSTS, AIRLINES COULD NOT BE PROFITABLE

  17. OIL PRICES • IN 2008, JET FUEL WAS 32.3% OF TOTAL AIRLINE OPERATING COSTS (source: IATA, Feb 2010) • BETWEEN 2001 AND 2003, THE FIGURE WAS 12 TO 13% • IN 2008, JET FUEL WAS THE LARGEST SINGLE AIRLINE COST

  18. OIL PRICES • IN 2012, THE GLOBAL AIRLINE’S FUEL BILL WILL BE US$ 33 BILLION MORE THAN IT WAS IN 2011 (source: IATA Jet Fuel Price Monitor) • AIRLINES MUST CONTINUE TO GROW ANCILLARY REVENUES IF THEY ARE TO SURVIVE

  19. DWELL TIME • A KEY FACTOR IN AIRSIDE SPEND BY PASSENGERS • BUT TECHNOLOGY IS THREATENING DWELL TIME • BOARDING PASSES RUN OFF IN ADVANCE OR ON I-PADS • SMART PHONES SPEEDING THE BOARDING PROCESS

  20. DUTY FREE •  LOST ITS WAY IN EUROPE AFTER ABOLITION • NOLONGER THE MAJOR ‘DRAW’ IT WAS IN MANY MARKETS • PRICE PROPOSITION IS QUESTIONABLE IN SOME • MARKETS AND NOT COMMUNICATED WELL IN OTHERS

  21. DUTY FREE • IMPORTANCE OF DUTY FREE IN TERMS OF THE RETAIL OFFER IS DIMINISHING • TOBACCO UNDER THREAT • LIQUOR TO FOLLOW? • ELECTRONICS UNDER PRESSURE FROM ON-LINE SALES?

  22. THE INTERNET • THE LARGEST GROWTH AREA (IN TERMS OF SALES CHANNEL) IN MOST COUNTRIES • 10% OF TOTAL UK RETAIL SALES ARE ON-LINE TODAY • BY 2022, A THIRD OF ALL UK RETAIL SALES WILL TAKE PLACE ON-LINE (SOURCE: E.I.U.)

  23. THE INTERNET ON-LINE SALES IN WESTERN EUROPE IN 2011 WERE SOME US$120 BILLION, UP 13% ON 2010, WITH CONSUMER ELECTRONICS LEADING THIS GROWTH

  24. THE INTERNET ON-LINE BUYERS AS A % OF ON-LINE POPULATION: UK 72% GERMANY 66% SWEDEN 70% FRANCE 59% HOLLAND 70% ITALY 34% SPAIN 34% (SOURCE: FORRESTER RESEARCH ON-LINE RETAIL FORECAST, 2010 TO 2015)

  25. INTERNET • IN 2011, ASIAN ON-LINE SALES WERE OVER US$170 BILLION • SINGAPOREANS AND SOUTH KOREANS WERE THE BIGGEST ON-LINE SPENDERS BUT CHINA (WITH 500 MILLION ON-LINE SHOPPERS) HAS THE BIGGEST ON-LINE SALES

  26. AIRLINE INFLUENCE • INCREASING (PARTICULARLY LCC INFLUENCE) • AIRLINES WILL TAKE THEIR PLANES TO ANOTHER AIRPORT • AIRPORTS CAN NO LONGER TREAT AIRLINES AS JUST ‘OTHER TENANTS’ • THE ‘MODEL’ MUST CHANGE: AIRPORTS WILL, IN THE FUTURE, NEED TO SHARE COMMERCIAL REVENUES WITH AIRLINES

  27. SO, TO SUM UP: SECURITY WILL, IN FUTURE, BE UNDER PRESSURE TO MOVE TO THE ROOT OF PIERS OR TO GATES THE PRICE OF OIL WILL CONTINUE TO PUSH AIRLINES IN THE DIRECTION OF GROWING ANCILLARY REVENUES

  28. DWELL TIME WILL CONTINUE TO BE THREATENED BY TECHNOLOGY DUTY FREE WILL DIMINISH IN IMPORTANCE THE INTERNET WILL BE A GROWING THREAT TO AIRPORT RETAIL SALES

  29. THE IMPORTANCE OF (AND THE INFLUENCE OF) LOW COST AIRLINES, IN PARTICULAR, WILL CONTINUE THE CURRENT ‘MODEL’ WILL CHANGE – IT HAS TO

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