FRIEND OR FOE?

Mark Streeting of LEK Consulting considers the pros and cons of transportation network companies and the potential impact of autonomous vehicles on airports.

Ground transport into and out of airports is already experiencing unprecedented levels of disruption. Digital technology and the business model innovations of transportation network companies (TNCs) are generating new transport modes at higher convenience and often lower cost to current alternatives.

Illustrating this trend is the growth of TNCs from 8% of US business traveller spending to a staggering 62% between 2014-2017.

Airports are indeed a key battleground for disruptors — in major cities, up to 25% of TNC revenues are from rides to and from airports. For consumers and passengers, these new mobility options are increasing choice. For airports and investors, they are bringing uncertainty.

The arrival of TNCs is affecting airports in three significant ways:

• Financially. Parking and ground access charges typically contribute one-quarter of total airport revenues. TNCs are already generating substantially less revenue per passenger than parking, taxis and rental cars.
• Infrastructure planning, decision-making and return on capital. Parking facilities, access roads and kerbside pick-up/drop-off areas are capital intensive and have long life spans, leaving them at risk from changes in mobility trends.
• The passenger experience. TNCs may improve the passenger experience, making point-to-point travel easier and offering new features such as location sharing, but they may also worsen it, increasing kerbside congestion. Airports could be left with reputational as well as operational issues to manage.

And this is just the beginning because the advent of autonomous vehicles (AVs) promises an acceleration of current trends over the next decade if they are deployed as ‘robo-taxis’, raising crucial questions about the future-proofing of airport infrastructure.

By removing the need for drivers, AVs further decrease costs per journey. Fleet-owned, cheap and constantly moving, AVs will increase passenger utilisation and accelerate adoption rates — resulting in an increase in demand for kerbside space, and potentially a decrease in demand for parking spaces.

How airports can respond?

TNCs and the emergence of AVs need not be viewed as a threat. Airports have an opportunity to improve the health of their business, increasing returns, reducing congestion, enhancing passenger experience and building greater brand equity.

To ensure future success, airports and investors must be proactive and consider six key steps:Ensure that ground access and parking pricing is providing appropriate economic signals, and differentiate between kerbside and other pick-up/drop-off areas.Develop a more sophisticated parking offering, including dynamic pricing and new products.Develop tailored strategies based on a firm understanding of passenger responses to mobility options, and conduct robust analysis and research based on their own unique situation.Manage the key trade-offs between ground transport revenues, operational efficiency and reputational implications created by the future proliferation of AVs. While financial and operational outcomes have always been a priority, reputation (influenced by a multitude of factors including customer journey and perceptions of safety) is increasingly important, given the wide stakeholder ecosystem and the growing influence of social media.Plan now for AVs and incorporate flexibility into infrastructure plans wherever possible, such as considering alternative uses for parking spaces.Adopt a broader view of the passenger experience, by considering the journey to — and arrival at — the airport. Airports may even be able to take ownership of the passenger experience during the ground travel-planning phase, participating directly in service provision via a fleet of shared automated vehicles that manage pick-up/drop-off.

TNCs are transforming airport ground transport and the arrival of AVs promises more disruption. Airports and investors that are proactive in their approach and adopt a disruptive mindset will find themselves at a distinct advantage in the future.

About the authors

Mark Streeting is a partner in LEK Consulting’s Sydney office and also a member of the firm’s global New Mobility practice. He regularly advises airports, public and private surface transport operators in the area of new mobility.