AGS Airports Group – Sustainable in Every Way
Since we last spoke with AGS Airports there has been a whole global pandemic, but while the airport has been working hard on recovery, its real focus is on creating a sustainable future.
“It’s certainly been tough for everyone, especially the aviation industry,” says Derek Provan, CEO of AGS Airports. “AGS went from a position of operating at 100% capacity to operating at 1 or 2% capacity almost overnight, and realistically that didn’t change for 18 months.”
“He is telling us about the impact of the Covid pandemic, and it is a story that has been replicated across the aviation industry.
“There were a few moments when restrictions were lifted and things got slightly better but we’ve been operating at less than 10% for most of those 18 months,” Provan points out. “Although we are not generating revenues, we still have a fixed cost base at 80% of what it was before. So that was a challenge.”
Whatever It Takes
It is in times of crisis like this that we often discover what our real priorities are. AGS demonstrated its priorities when it decided to say open and continue to support the regions it serves through the pandemic, even while operating at massive losses.
“That was an important decision which we made early on. We are more than a business serving a bottom line,” Provan insists. “We’re a service that’s vital for people going from the Highlands of Scotland to get to hospitals in Glasgow and Aberdeen for life-saving operations and we do the same for the Channel Islands in the south.”
The goal was to build a lifeline for clinicians to travel, and for PPE to move around the country, as well as the oil and gas that would keep the lights on in the UK.
“Everything we could do to support the country we did and continue to do regardless of the business,” Provan says proudly.
These are fine aspirations, but AGS still had its work cut out for it operating on 80% of its cost base with zero income. From the beginning, the first task was to try and forecast what would come next.
“That was impossible,” Provan says simply. “Whenever we thought we were going to move to a more positive position we found a new negative position.”
Without any promises about the future, AGS had to work closely with shareholders and investors to maintain liquidity and achieve financial stability.
“Once we did that we could look forward to a time without concerns about the longevity of the pandemic,” Provan says. “We had to restructure the business, looking at operational costs, headcount, capital expenditure. We had to let 30% of our colleagues go on redundancy. That was tough because these were people who, through no fault of their own, found themselves in a position where we could not sustain them. It will take a significant amount of time to recover.”
Provan predicts it will be 2025 before the aviation industry returns to pre-pandemic levels, possibly longer for smaller airports.
“Things are far more positive now. Restrictions are being lifted. There’s pent up demand. We are in a positive place, but to put that in perspective the number of passengers we will serve this year are still at 1995 levels,” Provan cautions. “We’re still two decades behind and it will take time to rebuild that.”
The industry that gets built back will not look like the aviation industry of 2019, however.
“Covid was a huge risk to aviation, but coming from that loss of capacity are two other risks,” Provan explains. “One is contraction- fewer airlines, less aircraft, less business. The other is consolidation, with fewer aircraft the main airlines can consolidate through alliances, sharing routes, doing double drops. We may see planes going from Glasgow to Manchester to Reykjavik, instead of directly from Glasgow to Reykjavik.”
While market forces are shifting the industry, so is the drive for a greener aviation industry.
“Over the last two years, we have accelerated the work we do. We have a goal to achieve net-zero carbon for all operations by the mid-2030s. That would be for our own operations,” Provan explains. “All our airports are carbon-neutral, and even since 2018 we’ve reduced our CO2 footprint by 52% over four years.”
AGS boasts a fleet of electric vehicles, and all its utilities come from renewable sources. Now Provan wants to take the next step and the firm has announced a new solar farm along its perimeter fence.
At 30 acres, it will be operational by next summer and will give Glasgow Airport the capability to generate enough power for the airport campus and neighbouring businesses. This is equivalent to powering almost 20% of homes in the city of Glasgow (approximately 52,000 households).
“We’re working with entrepreneurs, private businesses, government and academia to create new opportunities to reduce carbon emissions,” Provan says. “We have created the Scottish Wind Energy Consortium with Strathclyde University and Katrick Technologies. They create small wind turbines in one-metre cubed spaces with oscillating fan blades that can be positioned anywhere. The essence of airports and airfields is wind, and we can use that to reduce our CO2 emissions.”
AGS’s interest extends to the fuels that aircraft use.
“We’re a massive supporter of sustainable aviation fuels and we’re talking about creating sustainable aviation fuel plants,” Provan tells us. “It is not a one size fits all problem, but we are perfectly placed to test hydrogen and electric flight. One of our airline partners, Loganair, is part of a consortium that will trial a hydrogen-powered aircraft later this year. We have partnerships in place for eVTOL (electric vertical take-off & landing) craft. These will be between six and 12-seat aircraft for distances of 4 or 500 miles. They can cover distances typically taken by train much more quickly and at the same price as a train ticket. We expect to see those aircraft starting to fly by 2024 from some of our airports.”
Indirectly, Provan believes all of this is a consequence of the pandemic.
“What the pandemic has done is accelerated everything. Businesses were already looking for a brighter, cleaner, greener aviation industry than we might have been previously and AGS is well-positioned for that,” he points out.
People Focused Sustainability
But for Provan sustainability is about more than carbon emissions. It is also about social and economic responsibility.
“We spend a lot of time on that social and economic element with our communities,” Provan tells us.
One example is that two years ago AGS founded a consortium called CAELUS (Care & Equity – Logistics UAS Scotland), the first medical drone delivery service. The consortium exists to send drones out to remote rural areas that would otherwise face difficulties getting to the hospital for life-threatening conditions.
“Right now, you can’t fly a drone without a visual line of sight, but we’re moving beyond that with drones programmed to deliver directly to the doctor or the patient,” Provan says. “These are patients that would normally be delivered to by road or by sea, so there’s also an environmental benefit.”
The first trial flights will take place later this year, making Caelus the world’s first medical delivery service by drone, with a consortium of partners, predominantly the NHS, using that expertise.
Beyond that, the future is uncertain, but AGS is ready for uncertainty.
“It’s certainly a far more difficult world to forecast today than it was previously,” Provan admits. “But we are used to a crisis. We have come through war, weather, and terrorist attacks. We still see a positive future for aviation. The key is getting back to 2019 levels by 2025. To do that we will be working with national and local government, particularly around ensuring we promote the country and region to get opportunities for business moving forward. We want to make sure that across Scotland and England there is an aviation strategy about growth, but not at the cost of the planet.”