@bizLondon October cover story on @London_airport
/
From his spacious corner office at the north end of the terminal building, London International Airport president Mike Seabrook has a great view. He can see the tarmac and most of the runways. He can see some of the businesses that operate on airport property, building aircraft, training people or, in the case of Western’s Three Little Pigs hangar, studying the effects of extreme weather.
He might even be able to see the hangar where he stores the RV-8 tandem-seat plane he built at home and flies for fun.
Beyond all that, however, he sees something else. Looking past the airport’s 1,500 acres, he sees opportunity. Over the horizon are 2.2-million people who last year drove to a different airport – Toronto, Detroit, Flint, Buffalo, and Niagara Falls to name a few – to catch flights. That compares to half a million who passed through the London airport, arriving or departing.
The desire to capture some of those 2.2-million passengers within his airport’s catchment area has been the primary motivation for everything Seabrook has done since becoming president in May, 2012. And it’s the reason he has set the airport on its most ambitious expansion program since 2003 when it spent $20-million to renovate and enlarge the entire airport.
The current expansion program is not about increasing the size of the building. It’s about drawing hundreds of thousands more people every year and dramatically increasing awareness of the airport across Southwestern Ontario. The two goals are related, but neither will be easy.
In this, the airport’s 75th anniversary year, Seabrook and his colleagues are gunning to boost passenger traffic over the next three years by a whopping 50 per cent, increasing the number of travelers using the airport each year from 500,000 to 750,000.
“We know it’s not going to be easy,” he says. “But we’re up about five per cent already this year over last year. We need to keep that up and build on it. We want to be a better airport.”
“We think it’s doable, but let’s be honest, it’s a reach,” says Jeff Brown, chair of the airport’s 11-member board of directors. “We think the more people who know about the airport and everything it has to offer, the more they will use it. It feeds on itself.”
On the 26th of this month, United Airlines will begin running twice-daily flights direct from London to New York – Newark, NJ, actually, 30 minutes from Manhattan with a full array of connections to the rest of the world. The New York flights are the culmination of four years of cajoling, persuading and selling London to United.
It’s no coincidence that the airline going to New York is the same one that started flying direct from London to Chicago four years ago. “They have seen it’s a profitable route, that there’s enough demand to justify the service,” Seabrook says.
Almost from the day United started the Chicago service, airport officials began pitching the idea of adding New York service. “You have meetings and take in the studies we’ve done showing the level of interest and size of the market,” Seabrook says. “You have a lot of meetings, and then they go back and do their forecasts and modeling. It has to be profitable for them, of course. The fact that Chicago has done so well, getting better every year, I think was a key factor in getting New York.”
Imagine you’re running an auto dealership, selling Fords for example. Your goal is to attract as many buyers as possible, but you have no influence or involvement in what models Ford manufactures. If Ford decided tomorrow to discontinue its most popular brands and reintroduce the Edsel, you’d have a tough time attracting buyers.
Or imagine you’re running a movie theatre. You have comfortable, reclining seats and the freshest popcorn around. But if Hollywood doesn’t make any movies people want to see, how are you going to put bums in the seats?
As much as Seabrook and everyone working at the London airport – more than 1,700 people on the entire property, it’s worth noting – would like to attract 250,000 more travelers annually, if mercurial airlines choose not to set up shop and offer flights, there isn’t much they can do to achieve their goal.
The airport really has two distinct categories of customers. Of course it wants to make travelers happy, which is why it has set about to improve its food and drink service, expand the terminal’s Tim Hortons, retrain parking commissionaires to be more Disney and less Impark, upgrade the P.A. system, add a cell-phone arrival parking lot, build barrier-free washrooms, and generally spruce up the space where people spend time waiting around.
But those customers aren’t coming if the airport’s other customers – the airlines – don’t buy in. Just as municipalities are in a constant battle to attract industrial and commercial ventures to boost local economies, airports are in a constant battle to attract airlines. The London airport has to impress the airlines first and foremost so they deliver the flights people want.
But airlines, if you haven’t noticed, are notoriously unstable. Since the great recession, nearly all mainstream North American airlines have either declared bankruptcy and reorganized, merged with another carrier or radically restructured their operation. It’s a volatile business at the best of times.
“It took us seven years to get those Chicago flights,” says Brown.
It’s not just the whims of airlines that affect the fortunes of the airport. Even when there are flights to popular destinations, the cost of flying from London is often much higher than flying from an airport just over the border. It’s no coincidence, Seabrook says, that discount American airlines have flooded into airports within an easy drive of the Canadian border. Dealing with a much lower cost structure, they can provide cheaper flights, on balance, than airlines flying out of Canada.
American airports, Seabrook says, are part of that country’s industrial policy. They operate at a loss or are subsidized significantly. By contrast, Canada’s airports, run by local, non-profit authorities, contribute about $1.2-billion to federal government coffers in the form of taxes and fees every year.
“We would like to be more competitive,” he says. “The Canadian model was supposed to be user-pay, but it’s not anymore. It’s a profit maker for the federal government.”
The London airport earns about $10.5-million annually, the majority of which comes from landing and terminal fees paid by airlines, both passenger and freight. Cargo and freight will never be as profitable as passenger service, but the airport’s cargo terminal is 80 per cent full, steadily attracting logistics companies that deliver just-in-time parts to various manufacturers in Southwestern Ontario.
About $1-million comes from rent paid by businesses of all kinds operating on airport property. Another $2-million comes from parking.
Normal operating expenses come in at about $9.5-million, giving the airport an annual surplus of about $1-million. That surplus has helped knock down the $20-million debt incurred to undertake the 2003 terminal expansion. The debt today stands at about $13-million. “We haven’t borrowed money since we did the terminal,” Seabrook says.
The plan to attract 750,000 travelers has four tenets, and as Seabrook explains them he draws four equal-sized circles on his yellow legal pad, a rudimentary Venn diagram distilling the game plan. But the circle labeled ‘product’ is far more important than any of the others. Without more product – more direct flights to places like Vancouver, Halifax, Florida, and maybe Europe – the rest of the plan will have little effect.
Besides ‘product’, the plan calls for a better passenger experience. “We know people like this airport because it’s easy and comfortable to use,” Seabrook says. “In our surveys, 88 per cent of people are positive. We need to build on that.”
The culture of the airport is another pillar of the plan. Last year, the union representing the 35 people directly employed by the airport decertified. Seabrook says the airport’s own employees and the hundreds employed indirectly in rental car offices and other services, are dedicated to the 750,000 goal.
The fourth pillar is marketing. The airport has launched an advertising blitz of sorts connected to the Oct. 26 launch of New York service. “We’re letting people know what we’re doing, the changes we’ve made and the flights they can find here.”
United is flying 50-seat regional jets to New York, back and forth twice a day. If the flights are 80 per cent full, that works out to just over 1,100 passengers per week, somewhere in the neighbourhood of 60,000 per year.
That’s an impressive bump in airport traffic, but it would represent only a quarter of what’s needed to reach 750,000. The good news is there are even more flights coming. In addition to the usual winter charters operated by Transat, Sunwing and WestJet, Celebrity Cruises will fly direct to Miami beginning in February.
To reach its goal, one acknowledged to be ambitious, the airport will have to attract still more flights and also hope the New York flights are so popular that United offers more seats, either on larger planes or with more flights per day.
“We have the terminal and runway capacity to handle more flights,” Seabrook says. “And we’re working hard to make that happen. We’re only about 20 per cent of the way done with the improvements to the airport overall. We’re going to keep working and make sure we let people know what we’re doing.”
“Listen,” Brown says. “Why would most people know the details of everything going on at the airport? There’s no reason for them to pay such close attention. We need to educate people about the resource we have here.”
For most Londoners, the airport is rarely top of mind. It’s a great place from which to fly, if they can find the flight they need at a price they can accept. The market is there, waiting for improved service, and the airport brain trust is determined to deliver. If the airport can reach 750,000, or something very close, it will grab the attention of airlines, which in turn will schedule more flights. Which will attract more people. And so it goes.
This month’s inaugural New York flights may be the first step toward reaching the critical mass needed to help the airport reach its vaunted goals. Seabrook, Brown and everyone associated with the airport are hoping that’s precisely the flight plan they follow over the next three years.