Accelerating technology innovation at airports in the face of budget constraints

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The Covid-19 pandemic has accelerated the aviation ecosystem’s focus on technology solutions that can facilitate improved passenger flow, reduce physical contact in the airport, and enhance social distancing. But airports and aviation organizations around the world are facing budget shortfalls and financial constraints unthinkable based on the industry’s trajectory pre-pandemic.

With such budget shortfalls, airports are challenged to make investments to achieve the type of touchless future passengers now expect. Airports should look for alternative funding sources through creative public-private partnerships to advance their technology agenda in the near term.

The pandemic has accelerated new technology around cleaning and sanitization, while amplifying the importance of existing capabilities such as biometrics, passenger flow solutions, and contactless self-service. Luis Felipe de Oliveira, director general of Airports Council International (ACI) has said that in the future “investment will have to be heavily focused on technology. In ten years we’ll probably see the totality or majority of airports using touchless technologies, biometrics, facial recognition.”

With worldwide traffic down more than 50% in 2020, and even larger reductions in certain regions and locales hardest hit by Covid-19, transit agencies and airports are facing billion-dollar budget shortfalls. Airlines are also feeling the pain with 2020 revenues 51% below pre-pandemic forecasts and grim outlooks for 2021 even if we do witness a modest recovery in travel driven by the emergence of an effective vaccine.

So how can the industry drive critical technological advancement in the airport experience in the face of record-setting budget shortfalls? The answer is strategic technology partnerships and collaborations that match physical assets, solutions, and financing to drive mutual value for multiple stakeholders.

Here are four partnership models depending on need, financing available, and goals:

  1. Value-based collaborations

Airports are valuable assets, with passenger flows and operating models that are challenging to replicate. The brand recognition of major airports around the world further adds credibility to the efforts they pursue. Companies with creative technologies or solutions benefit from the live operational environment airports can provide, while benefitting from the recognition and attention of their airport partnership. This can bring the newest solutions and capabilities to airports at reduced financial cost. The Transportation Security Administration’s Innovation Task Force and San Diego International Airport’s Innovation Lab have effectively leveraged this model to drive new capabilities at reduced cost. Licensing agreements, in the case of San Diego’s lab, can continue to provide ongoing benefit for the most successful solutions.

  1. Joint investments/partnerships 

Public-private partnerships are widely used in aviation and airports, but primarily focused on infrastructure and the built environment. Airports can use a similar model for technology by connecting a financing partner (such as a venture capital firm), a solution provider, and their own airport environment to drive collaborative implementations. Creative funding models that provide returns for the financer in the future, potentially through operational savings, licensing fees, or per passenger unit costs, can defer budget implications for airports until later in the recovery from Covid-19.

  1. Sponsorships and branding

With so many passengers traveling through airports each year, they provide valuable opportunities for companies to market their services and solutions. While a traditional advertising framework provides marketing space in exchange for payment, a services or partnership-based model can provide mutual benefit. For example, a water bottle company could pay for the expansion of contactless water bottle fill stations throughout the airport in exchange for their own branding across all those fill stations. The company benefits and the airport completes needed work without financial cost. Similar partnerships that provide a material benefit to a company in exchange for services or products at the airport can advance technology agendas with reduced near-term cost.

  1. Asset monetization

Airports have valuable assets, and effective use of their data and facilities can provide near term financial injection into the airport’s operation. For example, airports that deploy real time wait time systems can package and license access to the data for tourism organizations or concessionaires looking to better understand passenger flows. Cataloging the key airport assets – particularly space and data – can provide insight on new opportunities for non-aeronautical revenue. This provides a circular model that enables near-term technology investment to become revenue generating in the long-term or can provide critical revenue injection in the near-term leveraged against performance-based returns for investors

Each of these models can help aviation organizations accelerate their technology agendas even in the face of budget shortfalls. But all may not be right for every airport, and it is important to get started with a clear strategic and financial roadmap to make smart investments.

In the current environment, airport leaders receive messages daily pitching new solutions, technologies, or services to advance their technology agenda. It is hard to quickly determine applicability and relevance, as well as whether the capabilities actually work. Not to mention that if airport leaders were to pursue every one of these solutions, they would quickly overwhelm their teams and resources. So where to start?

Airports can take three clear steps to advance their technology agenda in the current environment:

  1. Build your technology roadmap: Understand the specific functional requirements for your stakeholders, employees, and passengers and use them to inform a specific, time-based technology roadmap. This will keep you focused on the capabilities and technologies that advance your agenda, while making it easier to avoid those that don’t.
  1. Create your financing plan: Based on your unique operating environment, existing partnerships, and the technology roadmap; develop a clear financial plan to identify the most effective partnership model, the types of partners required, and expected initial investments and returns over long-term project lifecycles. Returns from technology innovation may take several years to materialize, and so a clear financial roadmap now can justify the long-term investment. 
  1. Identify partners and implement: Put the technology roadmap and financing plan into action by soliciting and establishing key partnerships and identifying new technology aligned to the technology roadmap to pilot in the airport environment. Establish disciplined program management to monitor and control the overall technology program and measure and track Return on Investment.

The pandemic is testing the resiliency and creativity of the entire aviation ecosystem at every level. The leaders and organizations that find creative ways to create new value will emerge at the front of the pack, and become the airport and aviation leaders of the future.

Aviation’s recovery from Covid-19 will undoubtedly advance technology throughout the airport passenger experience. Airports and other aviation stakeholders can overcome current financial constraints by leveraging value-based partnerships to effectively connect solutions, operating environments, and financing to rapidly advance technology innovation and deliver long-term value for the industry.

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