Ten days ago, the U.S. Bureau of Labor Statistics’ Consumer Price Index report showed inflation remained “hot” and exceeded expectations in September. At 8.2% over the past 12 months, the current overall rate of inflation continues at its highest since 1982. High inflation affects everybody – consumers and businesses. But there’s more in the details. ARRA calls your attention to other labor and inflation facts that reveal significant financial disruptions in the airport concessions industry continue unabated.
We report these facts simply to highlight a critical challenge the airport concessions industry faces: with widespread pricing restrictions in the industry, concessionaires increasingly cannot recover costs. For a perspective on the impact of increasing costs on concessionaire finances, we encourage you to re-visit our March 2022 Forum: “A Concessionaire’s Bottom Line.” In this webinar, John Cugasi (Paradies Lagardère) and Chris Demitz (SSP America) explain how increasing costs affect concessions. Watch the Forum here.
The facts described above outline the challenges concessionaires face to make money in this business – while still recovering from two years of losses during the pandemic. It’s difficult … and threatening. The long-term viability of this industry is at stake. Collectively evolving a sustainable business framework for concessions – for serving the traveling public – is the challenge we must accept!
By Andrew Weddig, Executive Director, ARRA
In her recent article for Aviation Pros, Margaret Martin, President of Martin Airport Law LLC and former Chief Development Officer of Nashville International Airport, notes that the ultimate goal of an airport concessions program is to provide food, beverage, retail, and services for passengers. She also notes the challenging circumstances ARRA members and other concessionaires face including soaring construction costs, supply-chain woes, and labor shortages and accelerating cost. Margaret observes that airport contracting practices have not adjusted to current market conditions and, indeed, end up exacerbating the challenges. She calls it “a perfect storm.”
Margaret advises airports to re-consider their contracting terms by honestly assessing the impact of airport decisions on operators, differences between street and airport, or how airport policies may shift costs to concessionaires without adding equivalent value. She concludes that airports should be more flexible and creative to better meet the goal of enhancing the passenger travel experience.
Margaret’s article is a concise analysis of our industry’s pressing challenges. We encourage you to read it at this link to Aviation Pros.
ARRA Encourages Operational Flexibility as Recovery Slows
Air travel news this summer has been dominated by headlines about cancellations, delays, pilot shortages, and frustrated passengers. It has been a summer of discontent! But …
… Lurking in the background is a more serious threat to our industry’s recovery: as reported in a recent article in the Washington Post, American consumers are pulling back on travel. Adobe Analytics reports that U.S. flight bookings were down 2.3% in May from a month earlier. A Barclays Bank analysis of credit card transactions shows spending on services like travel has slowed to half the pace seen at the beginning of the year. Charles Schwab notes “travel-related spending ls weakening.” The Post further reports flight searches on Kayak are down 13% in comparison to the same period in 2019.
The Airport Restaurant & Retail Association (ARRA) urges airports to relax concessions pricing policies in this period of high inflation in order to avoid a second financial crisis for airport restaurateurs and retailers. ARRA recommends airports:
By William Swelbar, Chief Industry Analyst, Swelbar-Zhong Consultancy
The Airport Restaurant & Retail Association (ARRA) asked Swelbar-Zhong Consultancy to provide analysis and commentary on happenings in the U.S. commercial aviation space. The following is the first of occasional articles about trends and events that affect the aviation ecosystem, information you can use as we all make our way through the industry’s recovery.
The Swelbar-Zhong Consultancy is a commercial aviation economic analysis and research firm. They specialize in complex issues regarding airlines, airports, and the aviation network; however, the fundamental focus always begins with changed airline thinking and how that might impact airports and the supply chain that supports the industry.
On March 29, the Wall Street Journal reporters Allison Pohle and Lauren Weber wrote that “Big corporate travel-management companies are hovering around 50% of 2019 booking levels, much of which is due to the lack of international travel.” In the same article, Delta Air Lines said “large corporate contracted travel business, primarily Fortune 500 companies, is about 65% of what it was compared with 2019. Travel for small and medium enterprises is about 5 to 10 percentage points higher, which has been consistent throughout the pandemic.”
The Airport Restaurant & Retail Association (ARRA) today announced changes to its board of directors for 2022, led by the election of Brian Quinn to serve as new board chair. Quinn is executive vice president and deputy chief executive officer of Hudson, where he has worked for more than 30 years in roles of growing responsibility for the travel retailer. Quinn succeeds Patrick Murray, deputy chief executive officer of SSP America, who will now serve as immediate past chair for ARRA.
Business travel as we’ve known it is a thing of the past. From Pfizer Inc., Michelin and LG Electronics Inc. to HSBC Holdings Plc, Hershey Co., Invesco Ltd. and Deutsche Bank AG, businesses around the world are signaling that innovative new communications tools are making many pre-pandemic-era trips history.
Take Akzo Nobel NV, Europe’s biggest paint maker, for instance. At its Amsterdam headquarters, Chief Executive Officer Thierry Vanlancker has spent the past year watching his manufacturing head, David Prinselaar, flap his arms, madly gesticulate and seemingly talk to himself while “visiting” 124 plants by directing staff with high-definition augmented-reality headgear on factory floors. A task that meant crisscrossing the globe in a plane before is now done in a fraction of the time — and with no jet lag. For Vanlancker, there’s no going back.
Read Full Article Here
After a surge in bookings early this summer, U.S. airline passengers are planning fewer trips as the spread of the coronavirus Delta variant continues to discourage travel.
Spending for the Labor Day holiday was down 16% from 2019 as of Aug. 21, while bookings were off 15%, according to the Adobe Digital Economy Index. The weekend typically marks the end of stepped-up summer travel for U.S. carriers and demand often rises as families seek to squeeze in a last trip before school resumes.
Read Full Article Here
DENVER -- On a recent Monday morning, Necole Lowe, the recruitment head for Prospect Airport Services here, sat behind a table at Denver Airport's outdoor plaza, where a job fair was underway.
Prospect, which contracts with Southwest, Delta and Frontier to provide wheelchair attendants and baggage handlers in Denver, has a bit more than 200 workers on the payroll. Full staffing in Denver would be at least 250 employees, Lowe said.
In its effort to close that gap, the company has raised its lowest entry-level wage to $15.50 per hour from $14.50 per hour. Managerial pay has also been bumped up a dollar, to $19 per hour.
Read Full Article Here
August 3, 2021
Dear Airport Leaders:
During the last year, the aviation system has faced many challenges due to the COVID-19 pandemic. We will continue to see new challenges that require the entire industry to work together as the burgeoning recovery takes off.
As the number of passengers traveling has increased, so has the number of unruly and unsafe behavior incidents on planes and in airports. The FAA adopted a Zero-Tolerance policy toward this behavior on airplanes earlier this year, and we are taking the strongest possible action within our legal authority. But we need your help.
While FAA has levied civil fines against unruly passengers, it has no authority to prosecute criminal cases. Every week, we see situations in which law enforcement was asked to meet an aircraft at the gate following an unruly passenger incident. In some cases, flight attendants have reported being physically assaulted. Nevertheless, many of these passengers were interviewed by local police and released without criminal charges of any kind. When this occurs, we miss a key opportunity to hold unruly passengers accountable for their unacceptable and dangerous behavior.
Our investigations show that alcohol often contributes to this unsafe behavior. The FAA requests that airports work with their concessionaires to help avoid this. Even though FAA regulations specifically prohibit the consumption of alcohol aboard an aircraft that is not served by the airline, we have received reports that some airport concessionaires have offered alcohol “to go,” and passengers believe they can carry that alcohol onto their flights or they become inebriated during the boarding process. Airports can help bring awareness to this prohibition on passengers carrying open alcohol onboard their flights in 14 CFR 121.575 through signage, public service announcements, and concessionaire education.
Many of you are already showing our Zero Tolerance video in your passenger lounges and other common areas. You might be aware that our robust public education campaign included a short “Kids Talk” PSA, where children talk about the importance of behaving properly on a flight. We ask that you also show this PSA in any location in your airport where it might catch passengers’ attention, particularly in boarding areas.
We have the safest aviation system in the world, and you are a key partner in that success. I know that we can keep it that way with your continued help and these additional actions.
Steve Dickson Administrator