Budapest Airport: Investing in the future

Transcription

1 Aviation THE AMROP INTERVIEW Budapest Airport: Investing in the future The Amrop Interview >> December 2010 >> Pg

2 Investing in the future Budapest Airport is investing heavily in improving the quality of its services for passengers, with a brand new terminal building due to be finished in the first quarter of 2011 and many more plans in the pipeline, says CEO Jost Lammers. Almost three years ago, Lammers came over from Düsseldorf Airport, where he was managing ground handling. One of the things he had to learn here in Budapest, he says, was how after setting common and clear goals he had to step back and give his executives a certain freedom to do as they saw fit to reach these goals. In this Amrop interview he explains his approach to management and he also talks about the changes in management structure, some differences in working culture between Germany and Hungary, the strong and weak points of Budapest Airport and the overall trend in aviation: up. Jost Lammers, Budapest Airport The Amrop Interview >> December 2010 >> Pg 01

3 Amrop: It is clear to anyone passing through Budapest Airport that a considerable amount of investment is taking place. What is happening and where are you heading? The mentality must be "how can we solve this together?" Jost Lammers: It is not a big surprise that one of our major weaknesses always was our infrastructure. Over the last twelve years nothing was invested in this airport at all and one of the biggest complaints we are always getting from passengers is the poor situation in terms of shopping, travel experience, food and drinks, all these issues that can make waiting for the departure of your flight at an airport a nice experience. Security is also one of the key issues, nowadays. At the moment, the buildings always impose restrictions simply because of their limited sizes. You cannot plug in more than five or six security lanes, so you cannot manage things effectively in peak times and you cannot provide, for example, a separate lane with a red carpet for business travellers or a dedicated space for families with children. Everything always requires considerable preparation and even then you can provide extra services only to a certain extent. So that is one of the major jobs now, to really improve the quality of buildings and facilities, especially the ones dedicated to passenger convenience. The new SkyCourt that is currently being built and that will bridge terminals 2A and 2B will change the entire situation dramatically. Passengers will have a central screening area where we will have a totally flexible security situation. There will be operational improvements such as a new luggage system and new gates. And passengers will finally have a fully developed after security area where they can walk from 2A through the SkyCourt to 2B with state of the art facilities for duty free shopping, beverages, a food court etc. So we can really improve services and manage these facilities in a much more customer friendly way. This more than 100 million construction is part of a 260 million investment program that was agreed upon in the original privatisation contract of Ferihegy airport in December So when the Hochtief Concessions Group took over in mid 2007, we started implementing this program immediately. It took a lot of time to get all the approvals and go through procedures and public procurement processes. We needed a total of 17 different permits which took us two years to get, while the actual construction process will last only one and a half years. We signed the construction contract at the end of 2008, started the physical construction of the new terminal building at the end of 2009 and then site installation, preparation, The Amrop Interview >> December 2010 >> Pg 02

4 SOME FACTS AND FIGURES Ferihegy airport was opened in May 1950, transporting 7,133 passengers that year. There were only a few foreign flights, in particular those to Prague, Bucharest, Warsaw and Sofia. Malév, established in 1954, started the first regular flight to the West (Vienna) in summer The first Western airline which launched a flight to Budapest was KLM in In 1974, the passenger traffic of Budapest Airport reached one million, and by 1985, when the new terminal 2 was opened, that had risen to 2.2 million. In 1998, terminal 2B was added to the facilities and the number of transported passengers had grown to four million. In 2005, terminal 1 was reconstructed to serve as the low cost carrier terminal of the airport. The total number of passengers that year had grown to eight million. The airport was privatized in 2005, when BAA won a tender and bought a majority stake. This was taken over by a consortium, led by Hochtief Airport, in June excavations etc. took another couple of months. But in the end, we are only three years down the line and close to finalizing the first stage. We want to have the SkyCourt finished in the first quarter of 2011, probably at end of March if everything runs as smoothly as it does at the moment. Amrop: And what is the strategic thinking behind these developments? Jost Lammers: We need it because we see very strong growth perspectives for Budapest Airport in the region of Central and Central Eastern Europe. This has absolutely not changed during the recent financial and economic crisis. Throughout Europe, 2008 and 2009 were very difficult years everywhere, but 2010 is already stronger and Budapest is really a perfect location. There will always be smaller ups and downs, but if you look at the expectations of the International Air Transport Association (IATA), which have always been very reliable over the last 20 or 30 years, you see that the overall worldwide trend is a continuous three, four or five percent growth for aviation. Of course there are regional differences with the Asia Pacific region and the Americas performing stronger these days, but there are a lot of growth opportunities for Europe, as well. And as you know, infrastructure is a long term investment. Our management contract for Budapest Airport is for more than 70 years, so we need to carefully consider how to manage continuous growth. Amrop: So what will come after the SkyCourt? Jost Lammers: First, the car park must be improved dramatically as soon as the SkyCourt is finished. And then, one of the first projects will be a hotel. We won't invest in that ourselves, but would go with an investor and hotel operator who has the know how. We are currently talking with parties who are interested and we're working on procedures and permits. As part of the hotel concept, we would also like to have dedicated space for business people to meet. We're not planning a major convention centre for a few thousand people or so, as that would be too early at this stage according to our marketing research. But we are thinking of meeting space for let's say 50 to 100 people. We have also done an integrated design exercise to match the capacity increases for the next five, ten and twenty years. So we have a rough idea a master plan that shows the development directions. It is not a detailed design, but in The Amrop Interview >> December 2010 >> Pg 03

5 The new SkyCourt... will change the entire situation at the airport dramatically the future we can add piers to the passenger facilities in several directions and we can enlarge the cargo area and logistical facilities. Amrop: Budapest s geographical location is well situated in the heart of Europe. But clearly Budapest Airport is not alone in the region. Who do you see as your main competitors? Jost Lammers: These are Vienna, Prague and also to a certain extent Warsaw, because these are all places which have a certain overlap with our catchment area as we call it: the circle around your airport where you get your origin destination passengers from. So people who, for example, want to travel to Lake Balaton, can make a choice to go via Budapest or Vienna. On a broader scale and in another business model, transfer passengers are also very important. At the moment around 20% of our total number of passengers are transfer passengers, which is quite an amount. These are coming for example from Asia to visit Europe in ten days and they don't care whether they change the aircraft in Budapest, Münich, Milan or even Amsterdam, it is all the same to them where they start. So that is a broader radius of competition. The Amrop Interview >> December 2010 >> Pg 04

6 PERSONAL BACKGROUND I have found that sometimes it is good to take a small step back and allow yourself to get a fresh view on things, says Jost Lammers. But if, after discussing with your colleagues in the management team, you have made your decision and you have a clear direction, you must hold on to it. There is always room for improvement but you don't immediately swing and turn around the other day because little things have changed or look different, he adds. Before becoming CEO at Budapest Airport in 2007, Jost Lammers (age 43) worked as Managing Director Commercial at Flughafen Düsseldorf Ground Handling GmbH from 2004, and from 2005 he was appointed as Chairman of the Management Board. Prior to this, between 2001 and 2004 he worked for HOCHTIEF AirPort as Divisional Manager and Director of Düsseldorf Airport. During that period he held a position as member of the Supervisory Board of Mönchengladbach Airport, too. Between 1998 and 2001 he has worked for HOCHTIEF AirPort as Senior Asset Manager at Athens International Airport. After studying Business Administration and Economics in Bayreuth, San Diego and Witten/Herdecke, Jost Lammers graduated in Economics at the University of Witten/Herdecke and started his professional career in the automotive industry in 1994 before joining HOCHTIEF in Jost Lammers is married with two children. We believe growth will be in both segments, origin destination as well as transfer, and that is why we believe Budapest Airport is so attractive. As far as the origin destination traffic is concerned, that is very much driven by the GDP of an area, so there is a strong correlation between the GDP of a country and travel behaviour. As the propensity to travel is still comparatively low here, there is a good possibility for uplift, certainly if you also include price sensitivity and booking behaviour. People are very much aware of special offers and are jumping for low cost traffic, which is also part of our strategy. As far as transfer passengers are concerned, for them very important factors are, for example, the attractiveness of the airport, transfer times, the attractiveness of the location is Budapest interesting to visit and they can maybe stop over and have a short stay. So that is very much about marketing the city and the region. Amrop: Budapest Airport has two home carriers, Malev and Wizz Air. How important are they for you? Jost Lammers: It is a very lucky situation for us to have two home carriers, especially because both are operating in different segments. Malev has always been the national flag carrier, running scheduled origin destination traffic and handling transfer passengers. As I explained, the transfer business is important for us and the majority of our transfer passengers are carried by Malev which really has an excellent reputation in this field. On the other hand, there is Wizz Air with its low cost business model. Since they have a different and very, very price sensitive product, we have set aside a different terminal for them. Of course, there is a certain overlap. Malev also works with discounts and special offers, while business people also use Wizz Air for flights of two or three hours. The Amrop Interview >> December 2010 >> Pg 05

7 We changed a lot at key management positions. Obviously, a strong airport and strong home carrier rely on each other and need each other to develop. And in spite of the difficulties Malev has encountered in recent times, we are not pessimistic, on the contrary. The transformation of Malev back into government hands and the additional funding that was recently promised to stabilize the airline, those are strong hands on commitments and that is excellent news for Budapest Airport, because it also brings stability to our concepts and plans. Amrop: Relations with various authorities are crucial for an airport: the government and its ministries, the city and the Tourism Board. How do you see these relations developing? Jost Lammers: Yes, these relations are very important, but much depends on the direct contact between people. Since the last parliamentary election, we have also witnessed a lot of personal changes in the institutions we are dealing with, from the government hierarchy to the police, the fire brigade, and the disaster management. I think it is decisive to develop good working relations and joint opinions with the new people. A good example is the new management of the National Tourism Office. When we succeeded in getting a new flight from Edinburgh to Budapest by Jet2.com, they decided in a really short time to support that new flight with the necessary marketing activities. So that is excellent. What we have also managed in the last years is to reach good cooperation on the working level. It is most important for us to have really short communication channels in daily operation, so if something goes wrong, we can immediately call police or customs to send somebody to check something and get the flight out. Such close working relations have improved substantially, and that is to be continued. Amrop: Since this summer Hungary has had a new government, which has promised to look into privatisation deals from the past. Does this worry you at all? Jost Lammers: We also heard about such issues, especially before the elections. But we honestly do not see any change in direction. The Hungarian State Holding Company is a shareholder in Budapest Airport and their people on the board are correct partners. I think this public private partnership is working well and we don't have any negative indications, quite the opposite: we feel that what we are doing here is appreciated and supported. The Amrop Interview >> December 2010 >> Pg 06

8 Amrop: Prior to coming to Hungary you were responsible for ground handling at another Hochtief owned airport, Düsseldorf, while here in Budapest you are the CEO responsible for the entire airport. What challenges has this transition brought and what changes have you needed to make in your personal management style to cope better with your broader management responsibilities? Jost Lammers: People wise it was similar. Düsseldorf is double the size of Budapest Airport in terms of passengers, about 18 million passengers this year compared to 8.3 to 8.4 million for Budapest. But my staff in Düsseldorf was also about 1,200 people, more or less the same size as here. What is, of course, totally different is that there I was only responsible for a core operation and the management of daily operations, which meant I was always close to the aircraft, passenger issues and the airlines. But here what is much more required is strategic management: to run the entire organisation, its development program and the investment of 260 million, which is a lot more than buying a high loader for 600,000. And then there are the businesses that are not core aviation, such as retail and property development. We just signed a contract to move the headquarters of Wizz Air from neighbouring Vecsés to the airport. It is very important to us to have key players of the industry on the site. We have a similar contract with Lufthansa Technik. These are all new lines of business responsibility for me. Amrop: And has this also influenced the way you manage people? Jost Lammers: Compared again to Düsseldorf, where I was very close to daily business and operations, it was in the beginning a little bit difficult for me to learn to step back and give more freedom to the executive team. First, we changed numerous key management and executive level positions, but there was also considerable change needed on the second and third layers. We now have a good middle management of people, plus an excellent executive team with good competences and of international make up. In my opinion, it is very important to give everybody enough room to get things done, and not monitor every little step and cross check immediately. Of course, you have to set clear targets and there must be a clear joint understanding what should be delivered and until when, but you do not have to prescribe every millimetre of how to reach that The Amrop Interview >> December 2010 >> Pg 07

9 Better have short meetings and agree on less, because less is more, if you set goals that can realistically be implemented. target, they can do that in their own way as long as they keep in line with expectations, within reasonable time and with reasonable resources. In the past, everything was too much formalized at Budapest Airport, and to my surprise there were even CEO decrees as they were called. But that didn't work well. It is important to make people feel like entrepreneurs who have the freedom to do as they see fit. So empower people, give them room to make decisions, but request performance at the same time and also act if that performance is not reached. This is very transparent. Amrop: You already referred to the difference between working in a German or a Hungarian environment. What was the biggest surprise you encountered here? Jost Lammers: Let me start by saying that at an airport there are always changes and surprises because processes here are more complex than for example in a car factory. Every flight and every passenger is somehow standard and procedures are known, but at the same time they are unique and the unexpected can happen. Look at the flights you have made yourself; what was good and what was not so good, and you know what kind of challenges we have and what kind of things can go wrong. A part of things going wrong is that it is sometimes a challenge to identify who is responsible for what. We are the airport manager, but we rely on many subcontractors: individual and independent partners like ground handlers, luggage handlers, check in staff, air traffic control, airlines and of course all kinds of authorities like customs, police, national security, etc. There are more than 13,000 people working here at the airport, but less than 10% are Budapest Airport employees, the vast majority of people are not under our direct control. The biggest surprise for me when I came was how fragmented business was here at the airport, how groups were operating on their own and people lacked the full understanding of 360 degrees to say: in the end this is one airport, one flight, and one passenger experience. As a passenger, you do not care whether a delay is the result of something with Malev, the bus company, the airport management, or the policeman who wasn't fast enough in checking your passport. For a passenger, a flight is a single airport experience, and must be handled as such by us, which requires very intensive working relations, coordination and communication. Things can always go wrong, but the mentality must then be How can we The Amrop Interview >> December 2010 >> Pg 08

10 solve this together? instead of How can we prove that it was not our responsibility but somebody else's? Improving our management structure was one important part of the answer to this problem, while another important issue was to get the right partners around the table and come to joint decisions. We have made certain improvements, I think, but you do not change a culture in a year or 18 months; it takes years before you reach everybody on all levels and that is an exercise we are continuously working on, to empower people on every level and to make everybody, within the framework of their possibilities, feel responsible. Very often you see a mentality where responsibilities are continuously delegated to the next higher level, with people saying: you're the boss, you've got highest pay, so you solve the problem. That is so hard to change, but you have to repeat that no, it is exactly the other way around; you are there where it happens, you have the best understanding of this problem, please come with suggestions and options how to overcome the situation and improve things, and then we can discuss and decide jointly. That is hard work, which requires a lot of discipline and monitoring. Because it is not enough to talk, have long meetings and write minutes. Better have short meetings and agree on less, because less is more if you set goals that can realistically be implemented. And you always have to check: follow up, follow up, follow up. Still, I take all this positively and see it as a big, big opportunity to improve things: turn around times, passenger convenience, really good services. Amrop: The Airport s relationship with the unions is undoubtedly one of your major challenges, as well. What is your approach to this important but prickly relationship? Jost Lammers: In the beginning, my approach was a very German one, which was not too good. I mean, it was surprising to see, again from a German perspective, what the role and functions of unions here are, which is totally different from the German situation. There, the Workers Council is the most important body in a company and all local and specific problems are discussed on that level, with all the knowledge these people have about daily operations and issues. You only deal with unions when, once a year or so, you have to talk about overall topics like salary increases, but then you deal with one union that covers the whole branch. Here in Budapest I found a situation that to me was very mixed and confusing: a Workers Council dealing with certain subjects, but The Amrop Interview >> December 2010 >> Pg 09

11 also three or four unions which are dealing with issues that are part of the daily practice. On top of that, unions haven't harmonized their activities and opinions and are sometimes representing partial interests of groups of workers. It was a bad experience, sometimes resulting in endless meetings, politicized discussions without a clear purpose, and consultations just for the sake of having consultations. But today, the atmosphere is much better. On the one hand we have one HR colleague who is solely dealing with union issues, so these get continuous attention and are dealt with correctly. At the same time, I as a CEO have a monthly meeting with the Works Council, the people who are coming up with the daily issues that are troubling our employees, like winter clothes, protective clothes, and the benefits system, issues that sound small but are very important to the people. In my opinion, this is a body we should really strengthen. To speak to someone at Amrop Budapest, contact: Richard Kohlmann and David Young are the Managing Partners of Amrop Kohlmann & Young in Budapest. Amrop Kohlmann & Young Rómer Flóris u Budapest Hungary T E [email protected] W Richard Kohlmann, managing partner The Amrop Interview >> December 2010 >> Pg 10