During the annual meeting of the Airport Consultants Council in Phoenix in November, Laddie E. Irion was relating the changing landscape, both of his company, URS, and the aviation consulting business. It has been a top convention topic at ACC meetings in recent years, and URS reflects the massive consolidation that has occurred among consultants. It’s become an industry segment of mega-firms and start-ups, and one of a growing shortage of engineering-level new hires. For URS, the ‘mega’ growth continues with the recent acquisition of Washington Group International, a move which tangentially has brought into the forefront the opportunity to take on operations management contracts for airports. In aviation, URS is focused heavily on the U.S. market, says Irion; however, many firms today see offshore as a major priority.
Irion, who is vice president and director of the Air Transportation Business Line at URS, says the trend toward consolidation among consulting firms is in part driven by the need for more talent.
Comments the 51-year old Irion, “That’s really one of the only things that a firm like URS sells — our people and their capabilities. During an effective merger you’re getting the talent as well as the portfolio of projects that that firm did. For example, when URS purchased Greiner back in ’96, that came right after the successful completion of the Denver airport and Hong Kong airport. So, automatically, URS, which was not a big player in the airport industry, suddenly became one of the key players.
“It’s across the board in all of our service areas. It is a problem. I think we’re seeing a lot of movement in the industry; you know, just moving chess pieces between consulting firms, FAA, and airports. We’re seeing some of the same people moving around and not enough coming in to replace the demographic problem I think we’ve got in the industry.”
It’s a huge problem in the engineering industry, he says, explaining that college students aren’t studying engineering, planning, or environmental — the latter at a time when going green is becoming a global phenomenon (see sidebar). He sees that trend leading to more outsourcing to other countries where there is a pool of talent to access, particularly at lower rates.
At the same time, many North American consulting firms are looking oversees, notably Asia, for future growth. For URS, offshore opportunities will likely come via acquisition or partnering.
“URS has done lot of work in Asia. Most of those projects have been completed and we’ve not replaced them with similar projects. A lot of that has to do with our tolerance for risk. Also, we believe there is enough work stateside that we should be focusing our staff here.
“We would like to grow overseas by acquiring other firms or partnering with other companies.
“What’s happening in the overall marketplace in Asia, particularly China and India, does affect the whole industry. A big thing is the low-cost carriers that we’re seeing proliferate in China and India.
“It could be taking resources away from the U.S. From an airport A&E [architecture & engineering] standpoint, those that are choosing to go abroad are probably leaving a void for those firms that choose to work more stateside.”
Meanwhile, the industry is seeing the emergence of mega-firms like URS as well as offshoots — small firms started up by former employees of merging companies.
CASE IN POINT: URS
Irion defines URS as a full-service A&E company of which aviation is one component, albeit a relatively large one. Planning, environmental, terminal architecture, runway design, boarding bridges, fueling systems, and corporate hangars are all in the firm’s portfolio. For FY2006, URS reported record revenue and income ($4.2 billion and $113 million, respectively), according to CEO Martin M. Koffel.
In late November, URS reported the acquisition of Boise-based Washington Group International. WGI also had grown through acquisition, via Morrison-Knudsen and others, with ties to projects from the Hoover Dam to the Trans-Alaska Pipeline. It also had acquired civil engineering expertise in the Rocky Mountain region and a contract to manage the Addison (TX) Airport under private contract.
This is the second airport management contract now under URS; the company operates the Republic Airport on Long Island through a team effort with Macquarie, via its Avports acquisition.
“They bought out Morrison-Knudsen, which was our partner for the program management at the new Denver airport, the Greiner/MK team,” explains Irion. “We had a very good relationship with that firm. There’s a history of the firms working together. One of my missions is to combine and leverage that.”
He also sees opportunity in contracting to manage airports and will seek to grow that business for URS, he says. However, he does not see his firm getting into the fixed-base operation arena, à la Macquarie Infrastructure, which now operates airports and FBOs in the U.S.
What’s been his company’s bread and butter with airports in recent years, says Irion, has been program management contracts to oversee large infrastructure projects. “There are fewer firms capable of doing it,” he says, “largely because of the mergers. That has a lower profit margin as well — you have staff located onsite at the airport, or in trailers.”
Irion says he sees a shift in how such projects are managed, what he terms a bit of a reversal in program management. “It was not a very refined practice until maybe the early 1980s,” he relates.
“We’re seeing a transition — and maybe it’s the best situation — to a blended team of airport and consultant staff working together. As a program winds down, the consultants can leave to go to another project and the airport staff is left with the knowledge of how that program was implemented.”
Then, there are emerging business segments in which the opportunity is still being defined. Explains Irion, “Something that’s kind of cool is the spaceport business. URS was recently contracted to design the facilities for the new spaceport south of Albuquerque. It’s caught a lot of interest within our company.”
