Airport charges may bring in a little money, but the brand damage will scare off investors who are waking up to the sector
City Insider: Raising revenue, draining value – the airport fee myth
Airport charges may bring in a little money, but the brand damage will scare off investors who are waking up to the sector
Travel long ago become a chore. Now it threatens to becomes utterly penurious. Last week my colleagues in Travel Weekly revealed that Durham Tees Valley airport was joining an increasingly long line of airports who charge for using their public amenity.
Quite rightly, Travel Counsellors chairman David Speakman slammed this penny-pinching, recession-defying move as cynical. But David’s own distinction between businesses based on relationships and those based on transactions reveals an even more cynical truth.
Good brands do everything in their power to make the customer experience pleasurable and provide the illusion that their product is good value. Every once in a while a good brand balls up and imitates BA’s ludicrous attempt to charge for picking a seat online, but by and large good brands build trust and that doesn’t involve treating your customers as idiotic moneybags who can be charged for using the toilet or breathing in public spaces.
But airports aren’t brands – rather they’re super-transactional entities for whom no sensible customer can retain any trust or respect. We’ve long become inured to the devious tricks deployed to extort more money out of us and most customers will simply react by spending less in the shop as a consequence.
No, I think this scurrilous tale of airport excess hides some more interesting cross-currents. The first is that as soon as a super-transactional entity like an airport or airline starts finding more excuses to charge, customers start to assess relative value. They also start to assess whether the airport or airline delivers on its proposition – i.e. is this airport really worth an extra few pounds per person. Sadly in my view most airports will be found wanting.
The airports may have calculated that they are in effect local monopolies, and that customers have no choice. But therein lies an equally interesting tale – airports are in fact hugely valuable investment assets, and these charges simply give the whole sector a bad name.
Barely a day goes by without this writer encountering a major City institutional investor who wants to buy an airport asset. When Peel Airports CEO Craig Richardson says that the charges “are something we have to do”, I’d counter by saying he’s dead wrong. Well-run airport assets are like gold dust and annoying your customers for a few extra bob is just plain silly – the cyclical upturn will deliver all the revenues you need.
This insight into the value of infrastructure assets reveals an even more curious tale. The aviation industry’s increasingly desperate efforts to raise margins as we go into an upturn are bizarrely timed, because investors are beginning to understand that the sector is poised to become very profitable and very lucrative after removing so much capacity.
Last week Bloomberg Business Week ran a fascinating article focused on a leading US fund manager called Janus with a great record in picking winners. This manager was now switching out of sexy emerging markets assets into developed world markets and was focusing on buying airlines. Yes, US-based airlines! Ditto airport assets. Airlines and airports are hardly going to become long-term growth stars but they are about to become cash-rich value gems.
My last observation is that this small charge might feed into a big phenomenon which I’ve been expecting for some time: rebellion.
Over in the US the TSA has sparked a storm of protests over its new full-body scanners and invasive search procedures. The TSA have always been a little too gung-ho, and many of their measures don’t seem motivated by blind panic rather than common sense.
If these practices will find their way to the UK we might start copying the tactics of some American travellers, who are complaining and shouting. Add in a charge for the privilege of being treated like cattle and we could see widespread airport-based protests.
Everyone understands the necessity of sensible security measures judiciously applied, but isn’t it too much to ask for us to pay for the privilege of being mistreated? Comrades, our day will come… assemble at Gate 12. And bring along some extra money to pay for the toll.
