COVID-19: For airport enterprise recovery, it’s time to act now

Written by Dr. Joe Sulmona, ACI World Training Facilitator

“Speed trumps perfection. Perfection is the enemy of the good when it comes to emergency management.” Dr. Mike Ryan, World Health Organization.

Angela Gittens, Director General reminds us “business as usual” no longer applies. The good news is glimpses of recovery existing in East Asia. While contagion momentum remains elsewhere, public and private airports have begun recovery preparations. ACI-World calls for confidence through coordinated action, and avoidance of sector-specific protections. Central banks and finance authorities must protect operating liquidity until travel actively resumes.

Airports must harmonize with airlines on schedules and fees, with regulators over rent and taxes, together with business partners over contract terms. Recovery efforts must also include targeted support for smaller airports. Progress can then be achieved through fair, reasonable, and proportionate public-private partnership efforts.

Airport leadership

Despite the volatility, the constant for airport professionals is the quality of “Leadership”. Hard realities must not be sugar-coated; lives are displaced and commitments broken. These values can provide guidance:

• Transparency – openness is essential, and never more so. Explain to stakeholders why actions are necessary, how decisions will impact others, and what results you expect. Gaining voluntary support for these difficult decisions is best.
• Honesty – Be forthright about failures and explain how gaps in business continuity plans will be fixed. Heightened levels of anxiety mean “no-nonsense” in communications so avoid factual short-cuts.
• Capacity – We should exude confidence. Not with arrogance, yet, recognize airport professionals operate some of the world’s most complex systems. Acting together with our teams and partners, start communicating we will eventually thrive again.
• Decide – Like Dr. Ryan says, do not promise perfection. Rather, explain to stakeholders your decisions and seek to correct evident errors. Even with this orientation towards decisiveness, maintain attention to life-safety systems.
• Modesty – Obviously, the shock buffers in airport business plans are insufficient to prevent hardship. Have empathy and remember the high levels of stress. This means expand compassion in difficult dialogues.
• Innovate – Encourage creativity. Albert Einstein observed “Imagination is more important than knowledge”. New business solutions need field trials, error acceptance, and attention to shared learning.
• Trust – None of this will matter without acceptance. Review relationships and prioritize repair. The alternative is the airport operator must carry the entire load.

In practice, effective leadership is all about “Service to Others”.

The key to an airport’s recovery

Focus

Without question, capable people are essential to recovery. This represents more than just critical airport staff. Airport enterprises operate with a network of suppliers, contractors, and airline partners that together serve passenger and cargo customers.

This illustrates just how crucial stakeholder engagement is. Before serious matters are advanced to the Board of Directors, private owners, or political masters, has management first engaged with internal / external teams on what will work best?

No easy answer exists to where to cut and how. Prudent guidance suggests protecting the organizations’ intellectual capacity. Loss of deep-system understanding will multiply the already heavy blow. In sum, how can airports recover without know-how or imagination!

Purpose

In the midst of calamity some may consider these perspectives on airport enterprise recovery premature. Yet, efforts to care for people and networks cannot be ignored.

Admittedly, the trade and travel industry may be dented, but efforts to re-create purpose and destiny for beleaguered aviation teams is helpful. We must also address the wear-and-tear on the personal psyche that seeks relief. Suggest you read Nobel-Laureate Daniel Kahneman’s work “Thinking, Fast and Slow” for relevant insights.

Priorities

The question is how best to apply these values? We start with a deep capacity built on a culture of resilience that consistently delivers operational excellence, business outcomes, and community service. Through a combination of concrete actions and responsiveness, we will make a difference.

• Strategy – US President Eisenhower reminds us “Plans are worthless, but planning is everything”. While we must undertake immediate and definitive responses, do not fall into the trap of “somebody do something, now”. Rather, re-confirm what remains essential to long-term strategy and contemporary business objectives.

Tomorrow will be different, but why do airports exist? Mission critical priorities towards customer service, operational excellence, business integrity, community support, and environmental protection will not disappear. The world is watching how this high-profile industry responds that will demand support for local goals.

How to proceed? Convene and engage Boards and owners, stakeholders and staff, and the community. Openly ask what must change and what must not, without fear or favour? Then, identify near-term initiatives that provide early relief, and build a base for recovery.

The Business Plan review can create motivation and excitement. Although, this effort may discover some doubtful actions. Yet, always better to confirm whether headed in the right direction and fix those activities that diverge from core purpose.

• Engage – Airport enterprises are high catalyst businesses that generate broad benefits well beyond operator returns. Thus, airports cannot back away from successful multi-decade campaigns to promote local jobs, taxes, and value-added.

This reality will make changes to business priorities even more difficult. Hard budget choices are coming, many of which will create unintended harm to partners. However, airports that attempt business recovery without a forward-looking approach that protects reputational integrity may pay a far greater price later.

What to do? Medium to larger airports may need to carry a greater share of the financial load. Why? Stakeholders will monitor their own situations and the actions of related parties. Do not become the example for selfish behaviour that will engender backlash.

Kudos must then go to the Government of Canada for a rental waiver, and to the Vancouver International Airport Authority with rent deferral to local airport tenants. According to Craig Richmond, CEO, “We know that your success is our success and we must all be well-positioned for eventual recovery”.

This is a great pro-active initiative to prevent the collapse of vulnerable business partners which can lead to a quicker recovery. While a range of options exist, and each situation is different, you should first discuss with your local partners.

For more best-practices, the ACI Airport Revenue Generation course efforts of the San Francisco International Airport Authority offers insight. This world-class operator has a clear “force majeure” clause in its new Duty Free contract with the DFS Group. Even before the contagion, the “Minimum Annual Guarantee” (MAG) model was already under challenge, and does this tool remain fit-for-purpose? New model commercial contracts will require a complete rebuild of the airport’s financial model, along with revised relations with financiers.

For smaller operators, whether private or public, airport budgets are challenged at the best of times. Governments must prioritize financial assistance here as these remote sites are crucial avenues for connectivity life-lines.

• Influence – Airports must continue to nurture goodwill, and lever past efforts that demonstrate why airports still matter. Operators must show that with some help, aviation services can lead value-added recovery. Many airports already promote such messages; but check content for relevance to current realities. If your airport is just starting, connect to your network, including your regional ACI office.

This means committing more resources towards advocacy. But positive messages will go nowhere and may be viewed as self-serving without a crucial first step. The medical community remains steadfast against travel, especially for border crossings. The travel supply chain must become a fully secure workplace that controls contagion spread as air travel will not recover without such a commitment. Employees must not fear their jobs and equally our customers cannot lack confidence; rather, every airport must operate at the highest level of sanitation.

This reminds of a professional mentor who insisted advocacy be pursued with the objective that “a rising tide will raise all ships”. Thus, to be successful in airport enterprise recovery, all stakeholders must raise their capacity and performance too. Nothing short of a global inter-connected response will be sufficient – get on board and immediately push for a contagion-free airport system.

• Reliability – The capital-intensive nature of the airport business limits cost flexibility. A smaller terminal footprint, or shuttering runways generates only small cost-savings. Thus, unthinkable questions must become thinkable. For example, how to protect the asset base while reducing cash outflows? Many airports operate with skeleton staff levels based on contracted services, while others have more internal controls with a larger scope of operations.

How will the airport’s reputation be affected if relevant options go unexamined? Discussions with creditors will become challenging if cost controls are insufficiently pursued in the face of broken bond covenants. Policymakers, stakeholders, and the public may not understand unavoidable airport costs. Explain cost management constraints and demonstrate what is being done to ensure the airport is ready for business partners to re-launch operations.

Attention is also necessary to the large flows of cash dedicated to debt service. While operators typically use fixed term instruments with little flexibility, review the contracts for alternative options. Re-negotiate terms and/or replace existing funds with lower cost borrowings.

Is vendor financing possible? Discuss creative means to keep business partners to avoid contract termination that will harm all involved. Engage early with legal and human resource advisors so savings do not disappear via judicial and/or bargaining table challenges later.

• Networks – Vital to success will be team building that cuts across the value chain. Networks of cross-team “agents of change” will function best when oriented towards trust, not control; have empathy rather than self-brand promotion; avoid centralizing mentality by connecting system capacities; and focus on mission success not organizational triumph. Start by encouraging willingness to experiment.

Some airport operators already have innovation labs set up, now is the opportunity to expand this type of lateral thinking. Engage retired professionals to support front-line leaders and ensure networks are built with a challenge process to avoid group-think solutions.

Extraordinary times are not an excuse for extraordinary human costs. Nor can we discard sound economic principles, fair social supports, and planet-saving environmental protections.  

Aviation networks have purpose to facilitate global connectivity. Airport professionals must therefore participate in legitimate local, regional, and global priorities. While divergent perspectives are necessary, at the same time operators must resist “short-termism” that has little place in airport business planning. And collaboration demands something hard for many, and that is “a willingness to let go”. Yesterday’s aviation system is no longer viable; instead, new forward-looking objectives are necessary to deliver resilient solutions.  

• Choose – Airports have fine-tuned operations, streamlined budgets, and pursued sound business practices. Even so, more must be done to examine what is vital.

Admittedly, such choices are not simple and demand attention to the decision-making framework. For example, how to weigh short-term cash measures against the airport’s reputation in the community? How can airports preserve functions to enable quick business partner responses? The Business Plan will provide useful guidance, along with understanding government recovery priorities.

When airports seek public financial assistance, what obligations come with this aid? Attention is needed to state funding controls and the accompanying limits to strategic flexibility. A parallel, attractive choice is to work with policymakers and stakeholders to strengthen the entire value-chain.

As well, reach out to financial partners to demonstrate the strength of the airport’s Business Plan, especially medium to long-term. Find creative solutions to extend credit, encourage risk sharing, and build shock tolerances.

• Appraise –  Performance improvement tools from internal audits through broader measures, such as the ACI Airport Service Quality (ASQ) initiative, must continue. Of course, delay some customer-facing aspects until activity returns.

Nevertheless, airport managers need operational, business, and other system intelligence to make better decisions. Also, focus on gap detection as recovery initiatives will have unintended consequences.

Airports will experience significant changes in areas of design, business activity, and community acceptance. The challenge is how to reconcile past operational models and practices with how to measure the “new normal”.

How to respond? Might the contagion simply accelerate what was coming anyway? For example, in the world of airport retailing, sales per floor area is a crucial performance measure. Will consumer experience with home delivery really question the bricks-and-mortar model even further? Will long and tightly packed passenger queues be viewed as acceptable? There are simply too many questions. The answers can only come from an open-minded appraisal system.

• Connect – Communicate what success may look like to maintain staff and stakeholder allegiance through these difficult times. Initial steps must be modest, like “We don’t fully know what success is going to look like, but the goal is this…”.

Crisis communications demands honest talk. Messages should be frequent and with little self-congratulation. Avoid speculation about recovery timelines and benchmarks. Keep it simple, explain the priorities, the actions that follow, and the necessary coordination.

However, avoid “rush to microphones” on complex inter-agency subjects. Without widespread agreement, premature announcements will lead to dashed expectations. And give credit where due, including politicians, stakeholders, staff, and all supportive partners.

Even if airports are instrumental to aviation recovery, share the glory. Why? The next crisis is just around the corner. Rebuild goodwill as soon as possible. Publicly commit to apply contagion lessons to the Business Plan toolkit. Recovery will be difficult, and success may be measured in years, not months. The outreach that may best serve airports likely involves the wise adage “under-promise and over-deliver”.

Launch

Successful recovery will demand commitment, without exception, to an inclusive approach. In doing so, we create a viable path for what is possible for our people and networks to welcome again our many customers.

All this demands effective partnerships like never before.  Despite the complexity, our messages need to be clear that while options are few, we will make the best of our situation. As everyone is bombarded with conflicting information, be concise and relevant.  Also demonstrate the compelling reasons the airport’s vision and tactics will make a difference.

Airport professionals must do their part to lead recovery of global connectivity.

The article was provided by a third party and, as such, the views expressed therein and/or presented are their own and may not represent or reflect the views of ACI, its management, Board, or members. Readers should not act on the basis of any information contained in the blog without referring to applicable laws and regulations and/or without appropriate professional advice.