Overcoming three key challenges regional airports face

Three-Key-Challenges-Regional-Airports-Face---Blog

Regional airports play a crucial role in connecting communities and facilitating travel for millions of passengers every year. However, smaller aviation hubs handling fewer than 10 million passengers annually encounter three common challenges affecting their operations, growth potential, and overall sustainability. 

1. Financial Constraints

Regional airports operate on tight budgets, largely due to their limited passenger numbers. With fewer travelers passing through their gates, these airports struggle to generate direct aero revenue for critical infrastructure upgrades, maintenance, and operational enhancements. This financial squeeze can create a downward spiral, where aging facilities and reduced service quality deter both passengers and airlines. Balancing financial prudence with growth is a constant challenge.

2. Limited Connectivity and Routes

Regional airports often struggle to diversify the range of airlines and routes they can attract. This limitation affects the connectivity options available to passengers, reducing convenience and flexibility. Unlike their larger counterparts with an array of global destinations and services, regional airports find it challenging to cater to the varied needs of both leisure and business travelers.

3. Sustainability

Sustainability efforts often take a back seat due to financial and resource constraints, preventing regional airports from adopting environmentally friendly practices and complying with stringent regulations. Consequently, partnering with these airports can be unattractive for airlines, retail concessionaires, and passengers.

A Multidimensional Solution to a Complex Problem

Overcoming the challenges regional airports face requires a multipronged approach covering business model changes, technology upgrades, operational optimization, and a focus on customer centricity.

Currently, non-aero revenue stands at around 35% at regional airports, roughly translating to US$5 per passenger—at least 20% lower than larger airports. Diversifying revenue streams through partnerships with retail concessionaires and optimizing on-premises assets is vital for boosting non-aero revenue. For example, dynamic pricing of airport services, such as parking, can provide a 3-4% uplift in overall non-aero revenue. This additional revenue can allow airports to reduce airline landing charges and attract more airlines for increased connectivity.

Leveraging airport data is instrumental in increasing non-aero revenue. Data insights into passenger profiles and behavior enable personalized traveler journeys. These insights are gold dust for airports and retail concessionaires to tailor products and services based on airline, time of journey, destination, passenger interests, and evolving trends. Collaboration between regional airports and tourism boards to promote local attractions and businesses further stimulates economic activity.

From Ideas to Results

With so many options to leverage partnerships and maximize asset utilization while having to grapple with resource constraints, how do we get to the end destination?

An airport's underlying technology infrastructure is the backbone of growth, efficiency, and innovation. Yet, disparate systems based on legacy technology often result in high running costs and complexity. Now, imagine a modern, cloud-native platform that streamlines airport management by harmonizing critical activities seamlessly while reducing IT overheads. Add AI to the mix for data-driven insights, predictive maintenance, and automation that optimize operations and systems stability. End result? Revenue uplift through contextual retailing and a reduction in costs and the carbon footprint through increased efficiency.

Suddenly, regional airports gain a strategic card over larger rivals through faster innovation, agile technology, and streamlined processes, enabling them to carve out a unique niche in the market. As their value proposition evolves and performance improves, so does their attractiveness to airlines, passengers, retailers, and partners, positively impacting the local economy.

Author Info

Vishnu Prasad Prabhu is Senior Product Manager at IBS Software's Airport Operations Line of Business. He has 17 years of experience in steering product strategy, development, and implementation within the aviation industry.
His extensive understanding of airport operations, regulatory requirements, and technology innovation underscores his commitment to shaping the future of airport management through strategic product leadership and visionary insight.

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