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Features

Adapting to a digital world

Kirstie PickeringBy Kirstie PickeringAugust 2, 20166 Mins Read

Diogenis Papiomytis (left), director of aerospace and defense for consultancy Frost & Sullivan, speaks to Passenger Terminal World about the digital transformation of airports and the impact of new technologies when planning for the future

Why are we seeing the digitization of airports?

The digital transformation (DT) of airports is not a new phenomenon and runs in parallel with the DT of the global economy and of all industries. What we call ‘digitization’ is just one of the three main facets of DT (the other two being connectivity and big data) and is seen mainly in marketing processes (airport customer relationship management (CRM)), passenger processes (self-service) and internal processes (smart baggage handling, digital communication/notification systems).

The driver behind digitization (and DT as a whole) is the constant struggle to optimize performance, reduce costs, improve the customer experience and innovate. The latter two aspects are new to airports and have to do with their intent to become customer-centric organizations.

How do you measure airport IT spending, and how did you arrive at an estimated global figure of US$14bn by 2025?

The airport IT spending figure is a calculation of the annual spending of airport IT departments globally (and therefore excludes IT-related spending found in other departments). The Frost & Sullivan (F&S) methodology is a combination of top to bottom (adding up known budgets or actual IT OPEX from airports that publish these figures) and bottom up (estimating value of projects). Forecasts are based on interviews with airport professionals to gauge general industry confidence levels and intent to increase spending over the next 5-10 years.

What affect has the digitization of marketing tools had on the airport industry?

Digital marketing is a major focus within the DT program. Quick wins can be found in airport CRM/loyalty and the digitization of the passenger journey, where airports now collect an increasing amount of passenger data from digital touchpoints. In the long-term, the objective should be the development of an efficient e-commerce platform, growing the non-aeronautical revenue streams of airports. Overall, airports are evolving from process-driven to customer-centric organizations.

What is meant by the ‘threat of digital conformity’? How can airports measure their return on investment for these new systems?

Digital conformity is the result of IT managers who command ever increasing IT budgets and feel the pressure to buy into new technologies without sufficient planning. Pressure comes from both peers and suppliers.Every project has to be linked to measurable KPIs, which in turn are attached to short- and long-term strategic objectives. The airport should also view digital projects as part of a much wider and dynamic digital transformation program. Defining the vision of the program is crucial. 

What are the most disruptive technologies affecting airports today?

Most technologies are not really disruptive, as they don’t ‘disrupt’ the airport business model, but rather make an airport more efficient. Real disruption can come from those technologies that will help airports to develop new products and (sizeable) new revenue streams.

The management of UAV/drone traffic is potentially disruptive. The centralization of ATC in remote towers is potentially disruptive. Location-based services could be disruptive, but I doubt revenue streams will be significant enough.

On the other hand, there are technologies today that can negatively disrupt the airport business model. The ‘sharing economy’ and growth of companies like Uber are disrupting airport parking revenues. The real estate business of airports (and airport cities) can be disrupted by more efficient ground transportation.

What technologies have the potential for the greatest affect on airports in future?

The self-service airport concept has a big impact on airport operations – but is not disruptive – and it will continue to do so. This is simply because self-service systems change the traffic flow patterns of people and objects at the airport and improve processes/employee productivity.

Intelligent buildings, as seen in ‘smart cities’, will have a major impact in the digital management of energy and waste. And big data analytics will certainly define the airport of the future.

Do you believe that we’ll ever see a fully automated self-service airport with very few employees?

With productivity improvements come fewer employees, except in cases where airports witness substantial growth in operations and sustain their workforce. However, there is an opposing force to the reduction of employees and that is the increasing focus of airlines and of some major hub airports on the ground experience of their passengers.

If we take the Middle East as an example, airlines like Emirates, Qatar Airways and Etihad are key decision makers in airport development – either because they own the airport (see Qatar) or because of a joint long-term vision. So on one hand, these airports are implementing new technologies to become more efficient, but they are also investing in creating resort-like structures and pride themselves on personalized customer service.

What should airports invest in today?

First and foremost, airports should define their 2030/2040 vision and then develop a DT program aligned to that vision, not the other way around. New technologies should not shape the long-term vision but rather meet specific strategic objectives.

Is Frost & Sullivan working with any major airports on their digital transformation strategies?

Frost & Sullivan is a strategy consultancy that helps airports develop and implement effective strategy plans, but no two projects are the same. Projects range from running senior management macro-to-micro (megatrends) workshops to define the long-term vision, to performing feasibility studies on specific technologies and helping to develop the digital transformation roadmap.

We work with airports and airport suppliers alike, through our local offices in San Antonio, London, Dubai and Singapore, as well as at more than 40 other locations globally. One visionary project we are currently working on is with a major European hub airport. We have also done work for major airport IT suppliers such as SITA and Amadeus.

Furthermore, we are now launching a global IT benchmarking study where we will interview over 200 airport professionals to assess the status and future direction of digital transformation programs. The results will be made available to our clients.

Bio:

Diogenis Papiomytis is responsible for managing and growing the commercial aviation business of Frost & Sullivan’s European aerospace and defense department, with expertise in strategy, business case and business plan development. Papiomytis has delivered bespoke projects on behalf of aircraft integrators, aerospace suppliers, airlines and airports.

August 2, 2016

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