AGS Airports – Runway to a New Decade
It’s been over a year since we spoke with AGS Airports, the airport group that runs Aberdeen, Glasgow and Southampton Airports. At the time we were impressed with AGS’s high levels of customer service, but with the confusion that remained around Brexit and the collapse of some European airlines, there were uncertain times ahead. As we leave behind a challenging year and enter a promising new decade, AGS is making big changes to the way they do business.
Since then, times have continued to be challenging. When we speak to the group’s CEO, Derek Provan, he doesn’t sugar-coat the difficulties the airports have faced, but at the same time, he is clear the company has never been more than ready.
“It’s been a challenging and difficult year for us,” he says frankly. “We expected that to be the case and we expect the uncertainty of next year to be as challenging. So, we’ve been ensuring we’re resilient and ready for 2020 when it comes. 2020 is the start of a new decade and it’s set to be a very transformative one in the aviation business and for AGS Airports Ltd.”
The problems the industry have faced are well known, the collapse of Thomas Cook had an impact on the entire UK travel industry, hitting Glasgow in particular. Glasgow Airport had more bad news at the end of 2018 when Ryanair announced the closure of their operations there.
However at the same time, there is plenty to be optimistic about, as Provan explains, “We welcomed Emirates at Glasgow and the A380 aircraft, we were the first and remain the only airport in Scotland to have A380 service following Emirates’ decision to introduce the aircraft on its Glasgow to Dubai service in April 2019. Also, in Glasgow, a number of our airline partners have added additional capacity, including Jet2.com which added a seventh based aircraft ahead of summer 2019 and EasyJet which confirmed it will introduce a fifth based aircraft in Glasgow in March 2020.”
When we speak to them AGS are also about to complete their Aberdeen terminal transformation, a £25 million extension upgrading significant necessary infrastructure and increasing the footprint of the terminal by 50% in the retail and catering areas, while also upgrading 90% of the airport in the process.
“In Southampton, we have embarked on our expansion programme to extend the runway. We have to ensure that we deliver a diversity of airlines and routes at the airport to ensure we can meet the requirements of the communities we serve” Provan says. “There are 3.5 million people within a 60-minute drive, a huge customer base for us to serve.”
It’s been a time for big changes across all of AGS’s airports, and Provan is insistent that the company needs to be ready for an exciting, but challenging future.
“At AGS we have transformed the business over the last 12 to 18 months so we’re more ready than we’ve ever been to tackle the challenges that lie ahead,” Provan says. “We relish some of the challenges and see them as opportunities where other businesses might perceive threats. We want to make sure we deliver the connectivity for our regions in a sustainable manner.”
One big challenge the air travel industry has faced lately has been the increased public awareness of climate change, but this is one that AGS is positively embracing.
“The climate change emergency, and the movement supporting it that’s been growing and developing for the last couple of years is one area we see as an opportunity,” Provan says. “It’s about the future of society and how aviation operates within it so o we’re looking to accelerate the work we’ve already been doing in this area.”
For AGS this means more than a PR friendly green initiative, but asking questions about the fundamental nature of the way airports do business.“Traditionally, companies have focused on business-to-business or business-to-consumer strategies, however, our CSR strategy will have a strong focus on business-to-people relationships,” he says. “There’s a lot of conversation right now around traditional capitalism and its future. We’re clear that’s not the future for AGS.”
This means as well as looking at environmental issues, AGS is also looking at how it can better serve the communities it operates alongside.
“We want to ensure we play a much bigger role within the communities we serve,” Provan says. “When you look at the economic value airports deliver by way of jobs and GVA for example, the figures are more than often compelling, however, when you look at the communities around our airports, we can see levels of deprivation. The vast majority of people working in the airport do live in the surrounding communities but not always the most deprived areas, and we want to target those communities to ensure they can benefit from our success.”
Meanwhile, despite these and many other challenges, including the demise and consolidation of the airlines and continuing political uncertainty, business is still good.
“From an airlines’ perspective, looking at the issues they face, including the rise in fuel prices, the uncertainty of Brexit and pilot shortages, quite remarkably, we still see significant expansion in
aviation,” Provan says.
Whatever other challenges exist, it’s clear the demand from the airlines is there.
“Airlines are knocking on our door every day to find ways to work with us profitably,” Provan. “So, we’ve embarked over the last 18 months to change the operating model we have in the group, to create a more sustainable business model that can respond more quickly to the changes in the industry.”
NEW OPERATING MODEL
One of the ways AGS has been changing is revisiting its cost-base, delivering a sustainable business model that meets the needs of airlines, provides sustainable employment for its employees and
ensures future success. This has resulted in the outsourcing of 50% of the business to become more competitive in the market.
“The decision to outsource is never taken easily. Before that decision was taken we researched a number of organisations operating in different airports across the UK and Europe, to look at their performance and to determine if they had the same performance levels and values we share as an airport group,” Provan says.
“From there we shortlisted through a normal tender process while I met personally with the chief executives of the organisations to understand what they could offer my people. They had to be clear that they could offer more career growth and development than we could today before we’d consider them. Because the companies we chose to operate globally they can provide career and growth opportunities we’re unable to offer our staff. So, people will move to the organisation without the glass ceiling that exists at airports.”
AGS is entering a new era, and they have a clear-eyed view of the task that awaits them over the next ten years. “The 20s will be about balancing requirements of aviation, the environment and the communities that surround our airports,” Provan says.