Feb 17, 2011
What’s the best way to understand something apparently obscure?
Easy: look at how that business, that institution, that group of people or that individual thrives.
How it makes money. How it survives.
From this, you can understand almost everything else.
Let’s take a look at airports: most people would agree that airports suck, big time.
Some of them suck less, because they are beautiful, well organized, and treat you very well during your wait for the flight. Such as Changi airport in Singapore, voted world’s best airport for several years in a row. But they still suck.
They suck for the occasional traveler; they suck much more for people like me, frequent traveler.
I took 60 flights in 2008. 102 flights in 2009. 106 flights in 2010, and 9 so far in 2011.
Half of these are intercontinental flights.
I’ve seen about 60 different airports, in four continents.
So, even if my expertise is technology, I can humbly state that I know something about air transportation as well.
Then, let me tell you the real reason why airports suck, for travelers, but are a gold mine for the companies owning them.
Before we dig into this, let me ask you something about retail.
There are different types of retail shops: real ones, virtual ones; the ones located at very expensive locations in the City center; the others in less populated areas. Some of them are in remote locations, where you don’t have any other choice, and so they can reap you off with very high prices, because you don’t have competition, or alternative.
Ok, good so far.
What if I tell you that I invented a new type of shop?
This shop has lots of visitors per day.
People that want to kill time by visiting your shops, because there’s nothing else to do.
People with a lot of money, compared to the average person.
People that can’t compare prices easily.
People convinced that you don’t pay taxes on products, therefore you should be cheap… But in fact you aren’t.
People that would happily take a look at your advertising on the walls, because they’re bored and they don’t know what else to do.
People that can find exciting to go shopping, because there’s nothing else to do.
Would you like to sell your products in this shop? Of course you do. And you would pay a lot of money to do it.
Did you catch my hint? That’s how airports make money.
Not by letting airplanes take off and land, no. That’s about one third of the profits for airports, and it’s made of small things like: aircraft refueling, referred to as a flowage fee (normally .07 to .15 US cents per gallon of fuel), aircraft parking fees, parking garage fees, passenger facility charges (PFCs, normally $4.50 per passenger enplanement), and so on.
The other two thirds of profits come from everything else: selling advertising space, renting shops and restaurants, renting space for airline lounges and for money changers, selling parking lots, providing extra services, or taking shares of profits from third party services such as taxis or shuttles.
But wait, there’s more: what would you do to maximize the profits from these shops, so you can ask for higher rents?
Think about it for a few seconds.
1) What about telling people: you have to be at the airport three hours before your flight. I fly more than 100 times a year, and most of the time I arrive at the airport just one hour before the flight (which, by the way, it’s often late by at least 10-20 minutes), and I never lost a flight. But hey, if you tell people to come earlier, they’ll have more time to shop, right?
2) What about, making security procedures long and tedious? Yes, that’s another good idea, because then people would be convinced to be at the airport earlier, to make sure they don’t lose their flight. Even frequent traveler. Even business people. They come early, and if they have extra time they go to the airline lounge to check their email, drink a coke, perhaps have a quick meal. Ah, and yes: you can’t bring drinks inside, so you have to buy a new drink once you go through security.
Also, now that security is so stupidly organized, no one wants to go out and say: ok, forget about these measures, just step in. Do you know why? Because, if something happens, they would be blamed for having reduced security measures. Even if these security measures are just a complete waste of time. They don’t stop the real terrorists. They only bother the honest travelers.
3) What about, not providing plugs to let people use their laptops. If passengers use laptops, they don’t buy. Using laptops should be restricted as much as possible. So, no tables to sit, no electric plugs, and please go shopping!
4) What about, maximizing the distance between the entrance of the airport and the departing gate, so that passengers are exposed to as many shops as possible?
5) Since your customers, or passengers, are richer than the average person (because they can afford flying, or because they fly for business and in most cases their company covers their food&beverage costs, because when people fly they tend to bring more money with them, etc.), you can focus on luxury items (watches, gold, jewellery, high end fashion and bags, spa treatments and massages, alcohol, chocolate) or other high margin items (postcards, souvenirs, etc.). Which means, you can rent your space to companies that can make huge profits on these products. Therefore, higher rents for you.
Instead, passengers, or customers, would like to address different things, such as:
1) Can you make security procedures more straightforward? I don’t want to stay in line for half an hour, take out my shoes, be searched, take out my laptop, take out my belt and watch and phone.
2) Can you make it easier to arrive at the airport with a taxi or subway or train, and get to my gate as quick as I can? Can you make traveling time to or from the airport more predictable (maybe not with cars, but with trains and subways)?
3) Can you charge fair prices for food, beverage, etc?
4) Can you provide plugs, seats, tables, so if I really need to wait, I can wait comfortably?
Is there anything that we can do, as customers, to change this? I doubt it.
These are trans-national entities, and the only thing that would work is to stop buying stuff at airports.
But we can’t convince millions of people to do that.
This is just scrapping the surface, you know.
There is much more, and I’m sure that I am missing many other subtle things… If you have suggestions, comments, I’d be happy to hear them.
I could also write a similar post on Airlines, and their subtle mechanisms to squeeze as much money as they can from passengers.
For example, why changing the name of a passenger should cost money?
Why airlines can arbitrarily raise the cost of tickets when there’s scarcity? I once saw a flight go from the usual 500 USD to more than 12,000 USD. Yes, perhaps a few seats left… But why you should rob people with prices like that? It is the equivalent of the only water shop in front of the Egyptian pyramids, selling water at 100 USD per bottle because these people have only one other option, to die. Would you accept that?
But hey, that’s life.