1 Denver International Airport Five Year Strategic Plan
CONTEXT An updated strategic plan for DIA. Nearly 19 years ago, when DIA opened it was the newest, most modern airport in the United States and the largest in the world. Much has changed since; the City of Denver has grown; air transport has evolved; the world has become smaller. We now need a new, updated strategic to put into context a much more competitive global airport industry, define the airport s strategic priorities and establish quantifiable objectives for success. This plan helps us organize performance measures that support Mayor Hancock s vision We will deliver a world-class city where everyone matters focusing on Peak Performance. 2
OUR 5- to 10-YEAR VISION FOR DENVER INTERNATIONAL AIRPORT America s favorite connecting hub, where the Rocky Mountains meet the world The following pages describe how this vision and strategy were developed, why it s the right choice for DIA, and how we will implement the plan. 3
DENVER INTERNATIONAL AIRPORT TODAY Our greatest strength is our size; our greatest weakness is the relatively small population in our large catchment area. + - Key Strengths Largest airport landmass in the United States; one of the few U.S. airports with significant capacity to grow Geographically well-positioned, particularly in the context of no competing hub airport within 450 miles, plus saturated West Coast gateway airports to Asia/Pacific regions: LAX, SFO, SEA and YVR Breadth and depth advantages over competing regional hubs, second only to Atlanta Terminal design allows for simplified passenger connections compared to other large U.S. hub airports Strong local/regional political and community support Unique sources of new non-aeronautical revenues Iconic architecture The only significant greenfield airport in the United States in over 30 years Hotel and Transit Center and Airport City underway A strong, proud employee culture Key Weaknesses Serves a city that is not on the world map, and has a comparatively low population within a very large catchment area Three hub airlines may be unsustainable over the long term, i.e., is traffic growth maintained by uneconomical low fares? Low yields for current hub airlines reducing the appeal of DIA for further expansion Airline costs not low enough to offset airline yield challenges Only three percent international traffic, substantially lower than competing U.S. hubs, and foreign carriers typically avoid gateways served primarily by low-cost carriers Customer service standards are not where we want them to be; DIA consistently ranks low on customer surveys relative to competing hubs Internal culture with an operations focus that appears isolated from the developing changes in the competitive global air transport sector City governance and oversight reduces the independence and agility of the organization, specifically relating to procurement and human resources 4
NO LONGER THE BEST Nearly 20 years ago DIA was the newest, best airport in the United States. However, over the past decade our customer rankings have slipped as other airports have improved their offerings. Ten years ago America s Best-Run Airport TIME Magazine, 2002 One of the World s Top Airports for Customer Satisfaction J.D. Power, 2002 One of the World s Best Airports for Business Travelers Business Traveler Magazine, 2002 Among the Top-Five U.S. Airports The Wall Street Journal, 2001 Among the World s Five Best Airports Official Airline Guide, 2001 Least-Delayed Major Airport in the United States FAA, 1997-2000 Today Best Airports for Connecting 9 th place Travel Leaders Group, Jan 2013 Best Airports in the United States 9 th place Travel + Leisure, April 2012 Best Airport in North America 4 th place Skytrax, 2012 Best Airports for Business Travelers not in top 10 The Wall Street Journal, Feb 2013 Fallen from 10 th busiest airport in the world (2002) to 13 th busiest (2012) Airports Council International, 2012 It s not so much that we ve become worse, rather our competitors in the United States and around the world have become better. 5
THE GAME HAS CHANGED DIA s competitive environment has become more complex with competitors both in our back yard and around the world. DIA s expanded competitors CDG JFK ATH FRA SIN ATL NRT LAX SIN MEX MIA HKG SYD London Las Vegas New York Cancun DIA s nearest hub competitor is Salt Lake City, plus some competition from regional airports, such as Colorado Springs DIA as a hub competes with other U.S. hubs particularly with other United and Southwest hubs United alone has seven hubs in the United States Other U.S. and foreign airports compete for new airline service A United 787 could fly Denver to Tokyo or Houston to São Paulo or Newark to Oslo Denver as a destination for tourism, conventions and business competes with other cities worldwide Colorado as a ski destination competes with other Rocky Mountain states, as well as international ski markets Passengers have a choice 6
THE WORLD IS CHANGING Over the next decade, populations are expected to become older in the United States, richer elsewhere, and have more women controlling spend everywhere. Global retirement market 2010-2020 could grow from $28 to $46 trillion Before 2050, travelers over 60 will increase from 9-20 percent worldwide and 22-33 percent in the developed world By 2020, Asian consumers could account for over 40 percent of global middle class consumption Global middle class could rise from 430 million to 1.2 billion people by 2030 By 2030, Asian consumer spending could hit $32 trillion By 2014, wealth controlled by women could reach $18 trillion Women could control 70 percent of global consumer spending How can DIA best tap into these demographic trends for future growth? Source: Fast Future, ACI EUROPE Note: images may not be reproduced without prior permission of Exambela Consulting 7
AIRLINE TRAFFIC IS CHANGING International markets drive growth: 50-percent higher air traffic growth in emerging markets over the next 20 years is anticipated. MATURE MARKETS: 1 billion people 3.7 percent forecast annual growth in airport passenger traffic EMERGING MARKETS: 6 billion people 6.1 percent forecast annual growth in airport passenger traffic United States and Canada Western Europe Japan Australasia China India Other Asia (excluding Japan) Middle East Africa CIS Latin America Eastern Europe Given the relatively stagnant prospects for growth within the United States, how can DIA position itself for future growth? Source: Airbus 8
DIA UNDENIABLE DOMESTIC BASE International traffic represents only 3.3 percent of total DIA traffic, the lowest percentage of any major U.S. hub. Even under ambitious international growth assumptions, DIA will remain a largely domestic airport. Percentage of international passenger traffic by selected major gateway hub airport DIA s traffic mix under varying international growth assumptions (assuming 1.8 percent average annual DOMESTIC growth) Domestic 51% 50% 2012 2022 2032 International 33% 27% 22% 21% 16% 10% 10% 10% 7% 7% 6% 3.3% 3.3% 4.4% 6.9% 10.4% 28.1% 13.8% 6.0% 5% 10% 15% 5% 10% 15% Average annual int l passenger growth Average annual int l passenger growth Source: 2012 USDOT International Traffic Statistics/flydenver.com 9
A DIVERSE CUSTOMER BASE DIA serves a wide range of customers, each with different needs. Airport Customer Group Airlines Passengers Concessions Local Residents and Airport Employees Local Businesses Global and Local Businesses Facilities and Services Essential operations (gates, jetways, runways, etc.) Handling Fueling Catering Office space Check-in and baggage claim Food and beverages Connections Business lounges Rental space Access to utilities Parking for employees Supermarkets Banking services Post Office Entertainment and leisure facilities Offices and conference facilities Warehousing services Service processing and delivery Global commerce Value-added logistics Highly skilled workforce DIA faces an expanding range of customers, particularly with the Hotel and Transit Center and Airport City. Source: Exambela analysis 10
LIMITED PASSENGER CONTACT Like at most airports, DIA s interaction with passengers is largely through tenants, such as airlines and concessionaires, or through government agencies. Our Passengers Different Interfaces 11
WHAT OUR PASSENGERS SAY Based on customer surveys, DIA generally lags behind our two major domestic competitors: Atlanta and Dallas-Ft. Worth. Category 1 st 2nd 3rd Overall DFW DEN ATL Business travellers DFW ATL DEN Leisure travellers DFW ATL DEN Waiting at check-in ATL DFW DEN Waiting at passport control ATL DFW DEN* Courtesy of security staff DFW ATL DEN Waiting at security DFW ATL DEN* Finding your way DFW ATL DEN Making connections DEN DFW ATL Staff courtesy DFW ATL DEN Eating facilities DFW ATL DEN Shopping facilities ATL DFW DEN Internet DFW ATL DEN Cleanliness of toilets ATL DFW DEN Baggage delivery ATL DFW DEN Source: ACI ASQ, 2012 * Indicates DEN came in last among all North American airports surveyed 12
STRATEGIC POSITIONING Four different strategic positions for DIA were developed; each incorporates elements of the previous position, but pushes a little further. OPTION I Steady Ahead OPTION II Domestic Excellence and Innovation OPTION III Position DIA for 20 more years of success, on an ambitious new level OPTION IV Do a Dubai Continue on the current path, ongoing incremental improvement and internal culture change to be more like a private business Building upon Option I, but focus on core domestic market, closer partnerships with hubbing airlines, lower cost per enplanement Building upon domestic strength in Option II, reposition DIA at the same level as leading int l airports around the world with comparable customer service standards The key question for DIA today is how far do we want to go? With Supercharged Option III, Denver becomes one of the world s 50-best cities by 2025; 5 to10 Fortune- 100 companies are based in Denver; Aerotropolis II underway; Air Beijing A380-XXL hub; and Concourse E 13
THE RIGHT STRATEGY Why Positioning DIA for another 20 years of success, on an ambitious new level is the right strategy for the airport and the City. OPTION III Position DIA for 20 more years of success, on an ambitious new level Building upon domestic strength in Option II, reposition DIA at the same level as leading international airports around the world with comparable customer service standards This strategy Balances ambition (what we want to do) and pragmatism (what we can do well) Supports economic development in both metro-denver and the region Recognizes DIA s core domestic foundation but pushes for global excellence, closing the gap between DIA and its U.S. competitors in international traffic Capitalizes on DIA s core strengths (size, space, etc.) while addressing its most visible weaknesses (international traffic, customer service perceptions) America s favorite connecting hub, where the Rocky Mountains meet the world 14
STRATEGIC PLAN ELEMENTS How the various elements of the strategic plan work together FIVE-YEAR STRATEGIC PLAN Vision DIA s Strategic Objectives DIA s Top-10 Goals Management Priorities DIA Strategic KPIs and Targets Divisional KPIs and Targets Performance Management 15
FIVE-YEAR GOALS To achieve the seven objectives, and be well on our way to achieving our vision, DIA needs to achieve nine goals: Rank What When Customer Driven Operations Driven Employee Driven Finance Driven 1 Become the first U.S. airport to obtain a Skytrax 4-star rating by 2015; 5-star rating by 2018 2 Increase international passengers by 40 percent and nonstop service to 200 destinations 3 Increase commercial revenue per passenger to 50 percent of total revenue 4 Achieve the top-20 th percentile for appropriate ASQ measures compared to other large hub airports 5 Reach the top-three for on-time performance among comparable hub airports 2015/2018 2018 2018 2018 2015 6 Decrease amount of solid waste by 10 percent 2018 7 Become one of the top-10 best places to work in Metro Denver (as per the Denver Post annual survey) 2018 8 Ensure Airport City is on track, on time and on budget Set annually 9 Achieve a CPE equal to or better than the average CPE of comparable U.S. airports 2015 16
STRATEGIC OBJECTIVES Seven strategic objectives were developed to support DIA s vision and strategy. Enablers to achieve success Inspiring our employees Winning the hearts of our customers Excelling in financial performance Partnering for operational excellence America s favorite connecting hub Building Airport City Investing for sustainability Where the Rocky Mountains meet the world Putting DIA on the world map 17
KEY PERFORMANCE INDICATORS KPIs provide the measures and targets to track progress towards achieving our strategic objectives and goals. 18
STRATEGIC RISKS Risks to achieving the strategic plan can be divided between the macro risks and DIA-specific risks. Macro Risks U.S. economic downturn or prolonged stagnation Aviation fuel price increases International hostilities, terrorist acts or threats Hefty environmental taxes leading to reduced demand Protectionism and counterprotectionism limiting growth of international routes Little can be done, but some contingency planning required DIA-specific Risks DIA perceived as unattractive due to high percentage of low-cost and foreign carriers choosing other airports Changes in hubbing airlines strategies/airline industry consolidation Lack of stakeholder buy-in Stakeholder concerns about Airport City Too much, too soon, and then it fizzles out A specific risk management plan needs to be put in place 19
IMPLEMENTATION TIMELINE Phase I Phase II Phase III Phase IV Setup Program Development Delivery Steady State Set up project management team and office space Develop standard processes Standardize documents Finalize strategic KPIs and establish targets Present plan to airlines and other partners (Concessions, Customs, TSA, etc.) Review division KPIs and targets and align with strategic plan Report on monthly quick wins Assign data analysts to objectives Start quarterly business reviews Align 2015 budget with strategic plan Implement governance Gather data Present plan (vision and objectives) to section managers and employees Develop division KPIs and targets Develop programs and projects to deliver strategic objectives Assign objective owners to review programs and projects to bridge gap between current and target states Finalize deputy and section manager PEPs to align with plan for 2014 Launch dashboard 20