The Phoenicians The Romans and their roads The Caravansarei of the Silk Road The Venetians in the Mediterranean The Portuguese route around Africa The Dutch and The English in the Americas and Africa –The first multimodal logistics platform History tells a story
Impact of transport nodes on urban form Charles Horton Cooley, The Theory of Transportation, 1894: Population and wealth tend to collect wherever there is a break in transportation. By a break is meant an interruption of the movement at least sufficient to cause a transfer of goods and their temporary storage. If this physical interruption of the movement is all that takes place we have what I may call a mechanical break; but if on account of the close relation between transportation and exchange…the physical interruption causes a change in the ownership of the transported goods we have a commercial break (1894; 91) Today Mechanical breaks generate logistics activities to support them Commercial breaks generate financial and legal activities Charles Horton Cooley
Rail Air Road Sea Trade transactions take place Produces Population and Wealth Attracts real estate Investments, companies to occupy that real estate, residents to serve those companies The Cooley Model As a consequence, trade generates more trade and the cycle has begun Seamless Multimodal Connectivity Mechanical breaks Commercial breaks Applied today
Since Cooley Cars and airplanes have changed the transportation world; ships and trains are faster and more efficient An air traveler can get to anywhere in the world in 24 hours IATA says an airfreight shipment takes on average six days to reach its destination Where is the problem?
Economic Effects of Air Transportation Direct Air transportation sector Airlines, airports and services, air navigation service providers Aerospace sector Airframes, engines, equipment, off-site service providers Indirect Suppliers, manufacturing, business services Induced Spending of direct and indirect employees on clothing, manufacturing, food, healthcare, transportation, housing Catalytic Trade, tourism, real estate investment, labor supply, productivity, market efficiency, consumer welfare, congestion, environmental impact
Use of air services passengers, freight, express, mail Generates revenues for companies in the air transport industry, which Employ staffEarn profit, Pay taxes Buy goods and services from suppliers Indirect ImpactDirect Impact Spending by employees on other goods and services Induced Impact Catalytic Impact Economic Spillovers Trade, tourism, real estate investment, labor supply, produ7ctivity, market efficiency, consumer welfare, congestion, environmental impact Catalytic Economic Effects Larger than direct, indirect, and induced combined Oxford Economics, Eurocontrol Report, 2005, The Economic Catalytic Effects of Air Transport in Europe
The Hypothesis Multinational corporations are not waiting for the challenges to be resolved The opportunities to fill the needs of an underserved market are very attractive By providing seamless multimodal connectivity for passengers and airfreight an airport can attract these supply chains and their ancillary support industries They will need warehouse and industrial sites, specialized logistics operations, commercial and retail sites and support services Supply chain footprints are deepening and widening Where is the opportunity?
As the market of the Russian Federation develops, the supply chains investment profiles change The investment climate in Russia Export of finished products from origin to Russia Manufacture of products in country from components imported and produced in Russia Assembly of finished products from imported components in Russia More Investment Suppliers Manufacture Assembly Distribution Retail Outside RussiaInside Russia Suppliers Manufacture Assembly Distribution Retail Suppliers Manufacture Assembly Distribution Retail
Relative network strength of airports Objective: gain strength as a hub
Brings a positive cycle of investment and increased asset value Brings a positive cycle of investment and increased asset value Connectivity and its Positive Feedback Loop
As FDI increases because of the improved connectivity and market attractiveness, frequencies increase Relative network strength of airports
Behind all this… Six days versus one day The issues on the ground The interests of the citizens and governments of the communities impacted by multimodal transportation They all have to be managed
Business Analysis of Airport Stakeholders David Schaar (Ph.D. Candidate), not member IEEE, Lance Sherry (Ph.D.), Member, IEEE Stakeholder Relationships Airport Management and Operations Airport Infrastructure Service Providers: Carriers, concessionaires, air traffic control, etc Demand Capacity Airport Organizational Boundary Debt Retained earnings Government Funds Private Investors Credit Ratings Passenger Facility Charges Capital Improvement Sources Airport Service Boundary Capital Funds Local Government Organizations (businesses, non-profits, etc,) Taxes Demand Revenue Local Community Noise Pollution Traffic Infrastructure Impacts Passengers as Economic Participants O&D Passengers Transfer Pax Passengers as Travelers O&D Passengers Transfer Pax Demand Service Expectations/ Delivery Municipal Planning Authorities Demand/ Revenue Capacity/ Service Jobs Local economy and community Regulators: Federal Aviation, Customs, Ministries, etc
Airport Cities Air transportation is the only global transportation network Airport cities grow on the nodes of this network Hubs at large metropolitan areas have the greatest relative network strength They have an airline base or hub Multimodal connectivity that is seamless, fast and predictable is critical to differentiate the airport Stakeholder alignment is a fact of life Characteristics of the Successful Cities
Non-aviation revenues Aviation revenues are no longer the core of many airports revenue stream Airports non-aviation revenues often represent 65-70% of total revenue Much of the non-aviation revenue is still passenger focused and within the terminal (retail, service, parking) However, new sources of non-aviation revenue are emerging outside the terminal; the drivers are land, connectivity and infrastructure Real estate and revenue derived from third parties not directly related to the aviation operation are becoming more and more important (Catalytic Economic Effects)
Non-aviation revenues Airlines & Passengers Structure InfrastructureRegional Factors Share of international passengers Multimodal connectivityEconomic development Share of LCC passengersAvailable landRegional infrastructure Share of transfer passengers Utilities availabilityPurchasing power Share of business passengers Zoning Destination mixMaster planPopulation density Critical success factors
The investors criteria InvestorCustomer Customers Investment Criteria Business skills Availability of work force, suppliers Market knowledge about the drivers of future tenant demand Business skills Availability of work force, suppliers Market knowledge about the drivers of future tenant demand Location In-country presence of traditional customer base Access to transportation network Multimodal connectivity High growth rate of lease income Tenant risk Location In-country presence of traditional customer base Access to transportation network Multimodal connectivity High growth rate of lease income Tenant risk Design Modern design Integration with the community Place-making, or character of the development Design Modern design Integration with the community Place-making, or character of the development Financial Preservation of capital Accretive income stream Cash flow Deal structure Financial Preservation of capital Accretive income stream Cash flow Deal structure Come from their customers
The risks Investors have filters and they include the evaluation of the following risks Country Risk Industry Risk Project Risk Required Rate of Return Go-No-Go?