ISRAEL REPORT Airport authority perspective January 2006

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1 ISRAEL REPORT Airport authority perspective January 2006 Busy first year for Ben Gurion s new T3 Design and security issues have created a few problems at Tel Aviv Ben Gurion Airport s new Terminal Three, but with retail accounting for some 75% of its revenue Israel Airports Authority is determined to make life as smooth as possible for travellers using the facility. Hui Min Neo reports. As Israelis cheered the long-awaited opening of the new Terminal Three at Ben Gurion International Airport in November 2004, many had sentimental memories of the old T1, which bore witness to much of the country s history. But just a year after the opening, a survey found that 90% of the public prefer the new terminal and no longer miss the old facility. The new T3 is pleasant and spacious inside. Architects have combined Jerusalem stone with drop-floor glass and steel structures, giving the terminal a traditional character while offering all the conveniences of modernity. Surrounding the airport complex, sculptured gardens feature Israeli topography and olive trees. Israel Airports Authority Commerce & Logistics Director Hagai Zamir tells The Moodie Report: You cannot The old terminal was characterised by complaints of overcrowding the new terminal oozes spaciousness compare the two. In size alone, the new terminal is five times bigger than the old one. The old terminal, built by the British, was 60 years old. Until the new terminal opened, anyone landing at Tel Aviv had to walk across the tarmac to a waiting bus to deliver them to the terminal. Similarly, departing passengers did not have the comfort of aerobridges to take them directly to their aircraft. And where the old terminal was characterised by the complaint of overcrowding, the new terminal oozes spaciousness. Corridors are wide and ceilings are high. The slope down from Customs to the duty free area alone is some 250m long. The commercial area in the old terminal was just 1,000sq m, but now there is more than 3,000sq m of retail space. 52 The Moodie Report

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3 January 2006 ISRAEL REPORT Airport authority perspective And this has allowed the IAA to increase its commercial revenue by US$50 million to about US$200 million for Some 75% of its commercial revenue in 2005 was derived from retail, says Zamir. The IAA had earlier announced that for the period from January to September total revenue was US$281.7 million, up +19.2% from the same period last year. Commercial revenues grew +29% to US$155.4 million for the three quarters. Net income was US$11.7 million. Non-aeronautical revenues make up about 55% of the airport s total income, with the remaining 45% derived from aeronautical fees and charges. Zamir notes that the high proportion of commercial revenue has enabled the IAA to keep passenger charges down. In fact, the US$13 per passenger charge has been unchanged for the past decade. Despite recent problems (with security), we haven t changed the charge, he says, pointing out that many other airports around the world have slapped on extra charges for security. The airport is also offering free wi-fi connections airside, and scrapped a plan to charge for baggage trolleys. But while the new terminal cannot be faulted for its modern facilities, there have been teething problems. For example, due to the much larger space at T3, travellers used to the tight squeeze in T1 were somewhat disoriented in the first few months. High ceilings greet Ben Gurion passengers as they step from the restricted area into the grand arrival hall It is our job to make a balance between retailers and passengers needs queues for security checks and Customs as officials conduct thorough checks not just on foreigners, but also on Israelis. Passengers are now finding themselves spending more time getting through security, check-in and Customs than in the old terminal. This, in turn, is chipping away at the airside dwell-time of passengers (see features on Sakal Duty Free and James Richardson). Zamir acknowledges the problem, and the IAA sits down with the duty free retailers weekly to talk through issues. He remarks that the IAA has run a campaign asking Israelis to come to the airport three hours, instead of two hours, before departure. In addition, he reveals, about US$5 million has been spent on additional security equipment to help speed up checks. A recent survey indicated that most people (70%) completed the entire check-in procedure and reached the duty free area in an average of 57 minutes. About half were able to do this in 35 minutes. Zamir stresses that further improvements will be made as the IAA is planning to implement the Hold Baggage Screening (HBS) system, allowing checked baggage to be screened underground in the absence of the passenger. This will save the passenger from queuing up first to have baggage X-rayed, then to have it manually searched before it is handed over to the check-in staff. Responding to retailers concerns that the airside Rotunda area is too wide, and thus having a negative impact on penetration rates, Zamir says that the retail tender was a public tender and that retailers were aware of the design when they bid for the space. Nobody wants to lose money. But this was a public tender, they visited the site and they offered the bids. Nobody forced them to offer those bids. We cannot offer any reductions now. You have to understand that it is our job to make a balance between retailers and passengers needs, he says. And current security sensitivities have resulted in longer At least business airside is visibly brisk. Many shops The Moodie Report 55

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5 January 2006 ISRAEL REPORT Airport authority perspective landside were empty on both days when The Moodie Report visited the airport. Zamir says that retail turnover landside represents just 2% of the total, while the other 98% is generated airside. For food & beverage, the proportion is slightly better; but even at 10% of total F&B turnover, it is a far cry from the bustling commercial centre that it was originally expected to be. Even though the stores may not be generating much turnover, Zamir notes, so far none of the retailers have come to the airport authority asking to shut their landside outlets. But is it even possible to abandon landside shopping? Zamir shrugs his shoulders. They never asked us, he says. Zamir points out that the landside retail space is provided virtually free to the retailers. This is because tenders for airside space, such as the electronics store, were inclusive of the landside area. We expected them to bid the same amount even if the landside space was not included, so in a sense the landside space is costing them nothing, he says. The 250m-long walkway from Customs to the airside shopping area characterises the spaciousness of the terminal The airside Rotunda features a spacious seating area. However, retailers complain that it is too wide, thus having a negative impact on penetration rates. But he adds that more developments are afoot, meaning that larger numbers of non-passengers may yet pass through the landside mall. At the moment, the railway station is a terminus of the Ben Gurion Airport Tel Aviv Haifa Akko (Acre) Naharia route. But an ambitious NIS20 billion project to be carried out over five years through to 2009 by Israel Railways will result in more linkages to the airport. For example, the airport will be a stop on the Tel Aviv Jerusalem fast train route. In addition, the airport authority is planning a tender for a hotel/convention centre project. Scheduled for completion in about 2009/2010, the hotel is set to have between 250 and 300 rooms. This should give further impetus to the airport s landside shopping. Passenger traffic has been growing steadily in the past two years. The airport authority had budgeted for 8.7 million passengers to use the airport in 2006, but this figure was based on the forecast of 8 million passengers for As December came to a close it was announced that traffic had hit 8.5 million for the year. Hence, with the expectation of +5% growth, passenger numbers should be more like 9 million for However, at the time of writing, Prime Minister Ariel Sharon was fighting for his life in hospital after a major stroke. As a result, the optimism that was growing in Israel has been put on hold. The contest for leadership of the country, as well as the upcoming Palestinian and Israeli elections, will have far-reaching consequences not just for Israel, but for the whole Middle East. The Moodie Report 57