Dr Michael Kerkloh reflects on close to 17 years in the hot seat at Munich Airport and is confident that he will leave a gateway and a global airport operator on the up when he retires from his position at the end of the year, writes Joe Bates.
The recent announcement that Jost Lammers will become the new CEO of Munich Airport on January 1, 2020, confirms the fact that Germany’s second busiest gateway, and possibly aviation, will lose one of its biggest and best-known characters when current boss, Dr Michael Kerkloh, leaves his position at the end of the year.
Lammers will inherit an airport operator, Flughafen München GmbH (FMG), at the peak of its powers after a decade of traffic growth and expansion in Munich, and the planned new additions of Terminal 1 at Newark Liberty International Airport in the US and Sofia Airport in Bulgaria to its global business portfolio.
There is no doubting that Kerkloh has been good for Munich Airport (MUC) and that the airport, in turn, has been good for him since he was appointed president and CEO of FMG in 2002.
When he came onboard, the airport was handling around 23 million passengers per annum and had less intercontinental activity as it was 100% focused on developing MUC’s facilities and route network.
That ‘home’ focus meant that the plans for Munich Airport’s Terminal 2 were already in place and overseeing its construction and 2003 opening was one of the first major achievements of Kerkloh’s reign.
However, that was only the start, as since then the airport has added an impressive new Terminal 2 Satellite – Germany’s first midfield terminal – in 2016 and expanded Terminal 1 to raise MUC’s capacity to handle up to 50mppa.
The new infrastructure was certainly needed as a record 46.3 million passengers (+3.8%) passed through the airport in 2018, and Kerkloh believes that the figure will rise to around 48 million this year after a 5% rise in throughput in the first half of 2019.
Next on the agenda in terms of new infrastructure is a new pier for Terminal 1, which is currently under construction and will raise Munich Airport’s capacity by another 7mppa when it opens in 2023.
He also believes that MUC has grown from being an airport to an airport city over the past two decades, based on the assortment of new non-aviation related facilities built across and around the airport site during his time in charge.
The latest and possibly most pioneering of these being LabCampus – an innovation lab on the airport campus that will promote co-operation between companies and across boundaries.
And the growth at home has been supported by success abroad with 100% owned subsidiary, Munich Airport International (MAI), becoming a leading provider of management, consulting and training services across the globe.
Indeed, such are its ambitions in the international arena that MAI and the Carlyle Group’s CAG Holdings recently set up the joint-venture, Reach Airports LCC, to offer operations, training, consulting and management services to the aviation sector in the US, Canada
The secret of FMG’s success
So, what has been the secret of FMG’s success? Kerkloh is quick to point out that MUC’s success would not have been possible without German national flag carrier, Lufthansa, which has effectively been its business partner for 20 years and led to the joint development of T2 and its €900 million satellite building.
“Our joint ventures and close working relationship with Lufthansa have been key drivers of our success,” he says, noting that at one point the airline could easily have concentred its efforts on Berlin and building a hub there.
“The way we work together in Munich has helped transform the airport and proved the catalyst for the increase in traffic and the growth of our intercontinental footprint.
“Our goal is to provide our customers with the best an airport/airline system can deliver. This means striving to ensure that everything we build and every process and procedure serves the prime needs of the passenger.”
He goes on: “As a result of our co-operation, Munich has grown from a mid-size airport into a big European hub and one of the top 10 airports in the world in terms of connectivity. This simply would not have happened if we hadn’t worked in such close partnership with Lufthansa to design, build, fund and operate the new infrastructure. The relationship should not be underestimated.”
He believes that FMG’s holistic vision of what an airport is and its business model – it performs passenger, ground and ramp handling services and most other operational tasks traditionally carried out by third parties at MUC – have also proved integral to the airport’s success.
Kerkloh says this is because he feels that the way it does business ensures that it is very much in control of how MUC operates and performs on a daily basis and because it has allowed FMG to carefully orchestrate the development of its own airport city.
“I sometimes say we have a dinosaur business model because we are heavily involved in the operational side of things and deal with all the end customer segments at the airport,” says Kerkloh.
“So, we have our own retail, F&B, security and ground handling companies, for example, and are responsible for most activities at the airport.
“When you talk to a financial investor about our way of doing business, they don’t like it. They say that others can do things better and we would be better off concentrating on managing the airport. We obviously don’t agree as we believe that it has given us a very deep knowledge of our customers and subsequently the opportunity to create a hassle free and attractive airport for passengers.
“It has also given us an almost unrivalled knowledge of almost every aspect of how airports operate and do business, and this is part of our appeal when it comes to working in the international arena.”
As for FMG’s international success, which hit new heights this summer with confirmation of the Newark Liberty and Sofia Airport deals, Kerkloh admits that this is 100% down to the decision to look abroad for new business to create additional revenue streams and ensure that FMG’s success was no longer solely dependent on Munich Airport.
“Our good reputation at home has led to a number of opportunities in other countries and I believe that FMG will grow this side of the business in the future,” says Kerkloh.
FMG has been building up its international activities for nearly three decades and has formed an international business arm, MAI, for this purpose.
Up until now, Munich Airport has been engaged in numerous global projects for consulting, training and management services. These have ranged from planning and design contracts, IT services, training programmes, and advice on business continuity management, non-aviation revenue optimisation and airport privatisation projects to Operational Readiness and Airport Transfer (ORAT) services.
However, this is about to change as last year the Port Authority of New York and New Jersey (PANYNJ) awarded Munich Airport the contract to operate the $2.7 billion Terminal One currently under construction at Newark Liberty International Airport. The recently finalised agreement will effectively see MAI operate the terminal for 15 years when it becomes fully operational in 2022.
Confirming the deal in July 2019, PANYNJ chairman, Kevin O’Toole, said: “We wanted to bring a world leader in customer service and concession management to Newark Liberty, and MAI fits the bill.”
And the bar was arguably raised even higher a few weeks ago when the SOF Connect consortium – comprising Munich Airport, Meridiam and STRABAG – was awarded a 35-year concession to manage, operate and develop Sofia Airport. Kerkloh declined to discuss the deal until the contract becomes legally binding. The consortium has, however, clearly stated its intention to develop Bulgaria’s capital city airport into a world-class and attractive facility, grow traffic and introduce best practices to “maximise the customer experience.”
Sense of place
With its own brewery, selection of local shops and F&B outlets across its terminals, and outdoor arena (MAC Forum) – which regularly hosts events ranging from markets, car shows and sports competitions to pop concerts – there are certainly many examples of sense of place facilities and activities at Munich Airport.
Kerkloh admits that FMG’s motivation for transforming MUC into a destination in its own right includes the ambition to surprise and delight passengers, attract more non-flyers to the airport and, of course, boost the revenues the company makes from non-aviation related activities.
“From a business perspective, the aim is to make money to fund the airport’s future growth and development,” he comments. “Think of it this way, half a litre of our wonderful Bavarian beer at the airport cost just €3, and €1 from this will be used to finance our new expansion projects.”
When asked to look back at the achievements he is most proud of over the last 17 years, in addition to FMG’s partnership with Lufthansa, perhaps not surprisingly Kerkloh lists the new facilities that have been built during his time, MUC’s expanded route network, the number of awards the airport has won – ASQ and SKYTRAX, which still lists it as the only Five-Star Airport in Europe – and FMG’s business model of keeping most operational services at MUC in-house.
The honest Kerkloh is also open and upfront about the things he didn’t achieve during his time at FMG, listing the failure to get a high-speed MAGLEV train link to MUC and a third runway, something he says he fought to get for nearly 15 years, as his “biggest disappointments”.
Indeed, the government’s decision to refuse permission to build the new runway is one of the key reasons he has decided to step down, citing that it will be at least another five years before it might be on the table again and therefore a minimum of 10 to 12 years before it could become reality.
“I am leaving because I believe that it is a case of job done as I have achieved all that I can now at Munich Airport and it is time to hand over control to one of the new generation of airport leaders to plan for the future,” says Kerkloh.
“I leave knowing that my successor will be inheriting a good team and a well-run business with the potential to grow even bigger in the future.”
Kerkloh also jokes that the best time to leave is when you will be missed, as outstaying your welcome rarely ends well.
Throughout our conversation, Kerkloh has been keen to point out that he is retiring from Munich Airport but not from work or life, for that matter, as despite being 66, he still believes that he has plenty to offer in terms of his knowledge, experience and skill set.
Undoubtedly, the former ACI Europe president and ACI World Governing Board member will have plenty of job offers and I, for one, hope he can be persuaded to stay in aviation as the industry will be a poorer place without the wit and wisdom of Dr Michael Kerkloh.