Revitalization in the Bayou

NEW ORLEANS — A major medium air passenger transport hub, Louis Armstrong International Airport (MSY) is responsible for three-quarters of all passengers in the state of Louisiana.

Newly appointed director of aviation Iftikhar Ahmad (assumed role on May 24) defines MSY as an ‘institution’ in need of rebuilding. In his 100-day report to the New Orleans Aviation Board, the airport operator, Ahmad states that the airport and it’s operation have deteriorated since Hurricane Katrina devastated the region in 2005.

Ahmad says part of Katrina’s impact was the deterioration of human capital within the MSY organization that created a gap in resources that was plugged with consultants and contractors.

Now, Ahmad looks to change the direction of the MSY ‘institution’ by focusing on a three-part strategy involving operations, finance, and infrastructure. Key issues identified for improvement include staffing and customer service, succession planning, third-party contracting, and higher than average enplanement costs.

The scope
Ahmad began in airport management in the mid-90s for the Houston Airport System, eventually coordinating some $3 billion in capital program dollars. In 2001 he took a position as vice president for the Metropolitan Nashville Airport Authority. From there he became director at Dayton International in 2006.

“There is quite a bit of potential in this city,” relates Ahmad. “But there have been some inhibitors that have kept enplanements down — to begin with, the effects of Hurricane Katrina.”
The airport generates some $64 million in annual revenue, and manages some $46 million in operating expenses.

According to an economic impact study, MSY contributes more than $2.6 billion worth of impact on tourism and creates more than 12,000 jobs as a result of airport operations, directly and indirectly, says Ahmad.

Regarding the effects of the economic downturn, Ahmad says the airport saw positive growth last year. Annual enplanements were at some four million in ’09. “We are hoping to see a 2.5 percent increase this year; our capacity is up quite a bit,” he relates. “I’m projecting that we will have a record of five million enplanements by 2017.”

MSY has eleven carriers currently; Southwest is the top airline with some 30 percent of the marketshare here, followed by Delta. The airport has announced additional air service recently with United, Air Canada, and WestJet.

The airport currently has 42 gates, 21 of which are occupied. “We have quite a bit of capacity on the gate side; counters are pretty much all taken … but the airport may get a few back due to the merger of Continental and United, and also AirTran and Southwest,” says Ahmad.

The airport is practically a 100 percent O&D (origin and destination) market, he adds. With New Orleans’ tourism-based economy, the airport is looking for low-cost carriers to bring the tourists in. “Tourism-based travel is discretionary,” explains Ahmad. “Discretionary travel tends to be cost dependent and would-be travelers can wait for bargains.

“This makes our type of destination suited for low cost carriers because they offer low fares, and low fares leave airlines with low margins.”

Because low margins are sensitive to airport-related costs, a high cost per enplanement is a threat to good business in New Orleans, says Ahmad.

“We have an issue with that,” he comments. “We were expected to reach a cost per enplaned passenger of above $17 in 2019; in 2014 we were going to be at $16.42 (figures projected by a consultancy). I made a commitment with our airlines — I said we will decrease and start to have a negative slope to our numbers.

“Even though I was supposed to go above $11 next year, I have already announced to the carriers that we will be at something above $9, not $11. That’s to show them that I am very serious about bringing new business into New Orleans.”

All carriers here have a five-year ‘heavily residual’ lease agreement with the airport; the current agreement expires in 2013. “I would be open to going to a total compensatory lease structure,” says Ahmad.

“If I wean myself off of airline revenues to the extent of 70/30 — if I could lean on airline revenue for 30 percent of my expenses, then compensatory deals create a lot of discretion on the part of management to do things to enhance the value of the customer experience, and to fortify the airport as an asset of the community; especially in New Orleans where a Katrina 2 could come in… I would like to make sure that the ups and downs of the airline business does not rattle the base of this institution.”

Staffing for service
MSY currently employs 114 people, compared with other similar sized airports that employ closer to 250 people, says Ahmad.

“I think we need more than 200, maybe even closer to 250 total people employed here, depending on which services we do in-house and which we outsource,” he says. “Our staffing is very poor; I wanted to tell the folks out there, and our board, from a SWAT analysis point-of-view, it’s a weakness. We don’t have enough staff, and because of it we don’t have control over some things.

“We plan to place a strong focus on customer service by increasing our number of employees and launching an ambassador program with about 130 volunteers; we are also going to have customer service counters throughout the airport for customer relations.”

The staffing shortage here relates to the airport’s concessions, which MSY gets its fair share of complaints about, says Ahmad. The airport is also working with concessions consultant, SI Partners, to see how it can reconfigure the spread of concessions inside the airport.

A blend of projects
The airport is currently in the midst of a half billion dollar capital improvement program that involves terminal renovation work, a concourse expansion, and infrastructure rehabilitation, among other projects.

“We are trying to look at ways to do more capital work, but in a way that the cost per enplanement goes down,” says Ahmad.

“There are a lot of ROI-type discussions going on right now … there are many projects that are underway. This is going to be a very nice facility in about two years. We have restroom renovation projects; a ticketing-lobby project; an external façade project; the expansion of Concourse D is taking place, as well as the many phases involved with an apron rehabilitation program.”

There are currently three projects in the planning stage at MSY. This accounts for $106.7 million in improvements. Projects include consolidated checkpoints, expansion of the West Terminal, and construction of West Annex Gates.

There are three projects in the design phase totaling over $72 million. These projects include expanding Taxiway G, improving the baggage system, and converting Runway 6/24 into Taxiway H. There are 2 projects in the design phase totaling over $9.6 million. These projects include improving the north perimeter road and runway 10/28 approach light relocation.

The airport currently has 13 projects in the construction phase totaling over $209 million. There are a variety of projects ranging from a new communications center to new loading bridges. Two of the projects, the Concourse D expansion project and the consolidated rental car garage project, have a Webcam in operation and can be viewed at www.flymsy.com.
With regard to incorporating the local flavor of New Orleans at MSY, Ahmad says that can happen in many different ways. “I think that can happen by having a lot of local art; live music is something we plan on starting next year,” explains Ahmad. “We will also be doing some things in terms of architectural design elements that reflect the region.

“I want to hire a sort of ‘chief of aesthetics’ here; an architect that specializes in interior design and landscape design. That person would review all tenant submittals and make sure there is cohesion in how the airport looks visually to the traveler, and the local community.

“Much like in Hawaii where you are handed a lei upon arrival, we want to give everyone coming in to New Orleans at the airport Mardi Gras beads upon arrival; we are looking for sponsors for that.”

Funding for the improvements comes from PFCs, AIP, and CFC (car facitly charge), says Ahmad. In terms of the construction market, he relates that it’s a good time to build.

Cutting costs; enhancing revenue
Comments Ahmad, “Right now I have a $1.3 million cost to bring people from the employee parking lot to the front of the terminal. Now that I have abandoned one of our concourses, I can now put those employees at the abandoned area closer to the terminal and save that expense.

“I can also do some things with our parking that will create some increased revenue.

“A concession consolidation could also give me a few million dollars … these are the types of things that we can do to increase our revenues and decrease our costs.”

Ahmad says he wants to get away from relying so heavily on airline revenues, and start exploring non-aeronautical resources. “We need to cut costs for enplanements to grow; I want to get ahead in terms of enplanements, and I want the airlines to be happy doing business in New Orleans,” he adds.

With a background in civil engineering, Ahmad says his view on airport operations and airport business is different because of how he was introduced to management — by having to build structures around operations, and learning operations as he went. “My perspective on airport management is unique for that reason,” he says. “It’s much different when you come from just the operations side; when I look out there, I don’t even see aircraft — all I see is revenue, expenses, and passengers.”

 

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