In the fluctuating global economy, how is the global sector poised to change, and what countries are you considering as potential new markets?
Dr. M. Sani Sener Southeast Asia and Africa will have the highest growing air travel market. According to the IATA forecasts, the Asia-Pacific region will see an extra 1.8 billion annual passengers by 2034. Its annual average growth rate, 4.9%, will be the joint-highest with the Middle East region. Meanwhile, Africa is poised to grow by 4.7%. The North American region will grow by 3.3%, which is higher than Europe. The US will remain the largest air passenger market until around 2030, when it will drop to number two behind China. Currently, the ninth largest market, India, will see a total of 367 million passengers by 2034, an extra 266 million annual passengers compared to today. It will overtake the UK to become the third-largest market around 2031. Indonesia will enter the top 10 around 2020 and attain sixth place by 2029. By 2034, it will be a market of 270 million passengers. The UAE, Qatar, and Saudi Arabia will all enjoy strong growth of 5.6%, 4.8%, and 4.6%, respectively. The Philippines has high potential for us. We are tendering for the privatization of five regional airports in the Philippines and are closely following the Manila NAIA airport project. We also continuously monitor African countries. We believe that Africa has great opportunities in terms of market growth. Morocco, Nigeria, Ethiopia and Tanzania are African countries with significant potential.
With more passengers, the profile of the typical air passenger is broadening. What services will airports require in the future and how is TAV preparing itself?
Flight information systems will be integrated with mobile devices. At TAV, we have an online intelligent communication platform. Our passengers can track their departure time and gates directly from their smartphones. TAV is one of the pioneers of this technology, spearheading innovation in the field. TAV Information Technologies is one of our most prominent subsidiaries. We invest in R&D and export innovation. Istanbul Atatürk Airport is our hub to test new technologies and, as the third busiest airport in Europe, a great place to evaluate the results. We continuously share our experiences with other operators and airport authorities all over the world. I always say our motto is “connectivity is productivity." In the near future, this concept will be requirement for all airports. With higher numbers of passengers, security systems should be fully automated and enabled for rapid processing, and all should have a biometric security scan. Passport queues may constitute a problem for passengers and operators. In the near future, passengers will be recognized by fingerprints and retina, thus eliminating queues. We have been investing in such new technologies, and as soon as the Interior Ministry of Turkey and security commissions grant permission, we can implement them at our airports immediately. Long-standing hubs and airports often lack flexibility for expansion due to available space as cities grow in the surrounding area. For this reason, runway capacity will become a bottleneck, constraining the capacity and leading to long delays. In the future, with the introduction and implementation of advanced GPS and radar systems, takeoff and landing queues will be reduced significantly, decreasing the distance required between the airplanes while increasing the airport capacity. Due to the prevalence of online shopping, we have to redefine our retail strategies. Much has changed. Many of the standard duty free products can now be purchased online. The important thing is that retail operators should sell attractive and uncommon products at airports. Our creative team conducts surveys among millions of passengers in order to find desirable products. At airports the importance of lounges is increasing every year. Since with lounges, airlines increment their offerings to the passengers; therefore, the lounge services need to be more sophisticated than providing a sofa to rest on. Passengers demand good WiFi connection, decent food and beverage offerings, and soothing and comforting decoration so that they can unwind, making their journey more pleasant. Soon, we will witness fierce competition among the lounge operators to offer the best product.
What are your goals for 2016?
In 2016, we target the expansion of operations like we did in 2015. Despite the uncertainties in the global economy and geopolitical instabilities in our surrounding geography, TAV Airports achieved an increase in its annual turnover by 10% to €1.079 billion. In 2016, we expect 7-9% growth in our revenues and 10-12% in our net profit growth. We aim to continue the expansion of our airport portfolio. We are interested in the Philippines, India, Tanzania, Saudi Arabia, and Serbia, among many others. In the long term, our aim is to increase the proportion of non-aeronautical income to total income to 70%. In 2015 it was 54%. Meanwhile, TAV Construction maintained its position of first in the Engineering News Record (ENR) list in the field of airport construction in 2015. We expect to maintain our success in 2016.
What is the significance of the Gulf region in TAV Construction's global strategy and what projects has the company been involved with in the region?
Ümit Kazak The GCC region has been the primary venue of TAV Construction's expansion and rapid growth. The value of work undertaken so far has reached $12.5 billion. Before citing numbers, it is important to acknowledge that our goal has been to establish our brand synonymous with airports and to become a preferred contractor for airports. Having significant presence on five airport projects of the six capitals of the GCC, we believe that this is an important endorsement for the quality of our work and we are thankful for all authorities for this trust. The GCC region is really the backbone of our operation. In 2003, we opened our offices in Dubai to monitor airport developments in the region. Following our successful bid to build Terminal Building 3 of the Cairo International Airport, we undertook our first major GCC contract in Qatar, the Passenger Terminal Complex of the New Doha International Airport. This project was a great opportunity to display our capabilities. In 2009, we won the Airside & Landside Infrastructure Works package, referred to as MC-1, of the Muscat International Airport in Oman. The year 2012 was glorious year in which made a great entrance into the Kingdom of Saudi Arabia's construction market with two awards: the Saudi Airlines' MRO Facility at the Jeddah King Abdulaziz International Airport and the Expansion of the Medina Prince Mohammed International Airport. The region's first full-fledge public-private partnership (PPP) project, the Medina PMIA project, was successfully completed and is now operating. Following this successful entry, we won the design and build project tender for Terminal 5 at the King Khalid International Airport in the capital, Riyadh, where construction is complete and is currently at hand-over stage. At the moment, we have four live sites in the region: the multi-billion Midfield Terminal Complex of the Abu Dhabi International Airport in the UAE, the Saudi Airlines MRO Facility in Jeddah, the Phase 2 of the MC-1 of Muscat International Airport, and the recently won Bahrain International Airport Modernization Program.
What impact has the privatization process of national airports had on the sector?
Cumhur Kaur Improving airport infrastructure, handling higher levels of air traffic, responding to expanded international trade, and providing better air traffic control all require efficient management. Thus, it is necessary to provide more capital investment to airports through privatization. The benefits of private-sector involvement are not only limited to investments. The flexible nature of private-operation companies brings the advantage of efficient operations, customer-oriented services improvement, and higher level of services for all stakeholders involved. In Saudi Arabia, TAV Construction was among the team that realized the first public-private partnership (PPP) airport development project in the region, which has been a success story, an exemplary project for future PPP infrastructure projects for the region.
What benefits come from being a world leader in airport construction, with a total contract value of $18.3 billion?
Ümit Kazak TAV Construction is an expert in airport construction. Born as the contracting arm of the group, the company has accumulated invaluable experience, having a successful track record in all types of airport construction projects from terminals to runways. This specialization, with the extensive experience gained over the last 19 years, brings the company its competitive edge. The Middle East is set to become one of the fastest-growing markets in the region and it is anticipated by Boeing and Airbus that over 2,000 aircraft will be needed over the next 20 years. Aircraft manufacturers and airlines are capable of sustaining a certain level of supply in the face of growing demand, but airports will be challenged to keep up and expand, reconfigure, and renovate fast enough. In order to assure accurate planning and proper management, airport privatization seems like a feasible alternative.
TAV Construction was recently awarded for its Prince Mohammed Bin Abdulaziz Airport Project. What led to this success of this project?
Cumhur Kaur Established through the BTO model, the Prince Mohammed Bin Abdulaziz International Airport is the first airport privatization project in Saudi Arabia and the first ever PPP in the Gulf Region in the aviation industry. Medina Airport is also the first LEED Gold certified airport by USGBC in the Middle East and North Africa region and the first LEED Gold terminal building outside US. The airport received the Airport Project of the Year in ENR's 2015 Global Best Projects Awards. We have been awarded this title as a result of fulfilling important criteria, such as international teamwork, occupational health and safety, design functionality and quality, innovation, and contribution to the sector.