A holistic approach to asset management

Posted: 11 September 2006 | Mogens Kornbo, Vice President and COO, Copenhagen Airports | No comments yet

Respect for quality, efficiency and economy drive asset management at Copenhagen Airports. Mogens Kornbo discusses how a holistic approach, tracking the broadest sector developments down to the smallest gear wheel, makes it possible to plan and build for the airport of tomorrow based on a flexible, total economy.

Respect for quality, efficiency and economy drive asset management at Copenhagen Airports. Mogens Kornbo discusses how a holistic approach, tracking the broadest sector developments down to the smallest gear wheel, makes it possible to plan and build for the airport of tomorrow based on a flexible, total economy.

Asset management has always had top priority at Copenhagen Airports (CPH). To an airport like CPH, our assets are part of the image we want to uphold in respect of our passengers. Passengers regard the airport as an important part of the trip. The overall ambience of the airport means something to the passenger. It must be easy for the passenger to find his or her way around the airport, which should also have atmosphere as well as shopping, café and restaurant environments – all of which contribute to a pleasant beginning and end of one’s journey.

It is not an impossible mission to unite the airport’s functional, architectural and aesthetic qualities without squandering your budgeted resources. On the contrary, it is even possible to take a total economic approach when constructing new assets and evaluating such variable aspects as service life, maintenance, user friendliness, flexibility and future orientation.

All the other assets underpinning this great traffic and logistics machine require just as much focus. For a traffic and logistics machine like an airport, even a tiny gear wheel can have a great impact on airport operations.

The necessity of rolling forecasts

When working with forecasts, it is crucial to keep in mind technological developments and trends in travelling patterns. Since the 1930s, for instance, the check-in process has consisted of passengers coming to a counter and being checked in manually. Today, however, we use CUSS machines, baggage drop off and Internet check-in. What should an airport’s check-in facilities look like just a few years from now?

Because we are an international airport, it is important for us to continue to keep our innovative eye open to ensure that our passengers get the fastest, smoothest trip possible without compromising safety or security. As air travel has become more complicated and time-consuming in recent years, it has become paramount for airports to find solutions that counteract this – particularly to remain competitive in respect of alternative transport options.

At CPH, we base our planning on various forecasting models. The relative unreliability of these forecasts requires flexibility in all our planning. The models contain both qualitative and quantitative forecasts for future trends. As many forecasts are involved in this process, I will merely describe some of the most important in the following.

Developments of the airport’s route network play a major role in the structure and design of the airport. The dispersion of intercontinental, continental, low cost and point-to-point routes and status changes are important parameters for the airport’s layout. Just a few years ago, CPH had only two types of coauntries to deal with; now there are four and passengers from each require separate processing.

The number of passengers and their different travel patterns (e.g. passengers departing locally or passengers in transit) are important to the overall design of the airport complex. In recent years, the logistical handling of security related to flow patterns has also played a role in every passenger area. The need for terminals, gates, lounges, check-in facilities, baggage handling equipment, etc., has to be projected in relation to the numbers of passengers and their make-up.

Familiarity with the various types of business partners, as well as with CPH’s own development, is a significant aspect of describing and deploying back-office facilities.The number of airlines, handlers and other partners is very important to this deployment.

New and different types of aircraft also have a decisive impact on how an airport should be designed and organised, and in this respect it is a question of designing solutions that are intrinsically logical and flexible. For this reason, we are continually studying whether changes are occurring in the types of aircraft that serve CPH, their size and configuration, etc. This information is incorporated into master models that also contribute to the deployment of equipment, installations and number of gates, as well as taxiways and other airside infrastructure.

The outer (landside) infrastructure – roads, forecourts, hotel facilities and overall parking needs – is continually being projected and these forecasts lay the groundwork for the deployment of the rather limited, but highly valuable areas at the disposal of CPH near the terminals.

In addition, CPH has many areas in the immediate vicinity of the airport at its disposal and these areas are also included in the development forecasts that we make to describe needs and logistics facilities, air freight terminals, distribution centres, etc.

CPH is constantly developing its own forecasting models and all forecasting is carried out on an ongoing basis as required. The forecast models are employed in their entirety as well as separately. Certain forecasts are updated and adjusted on a daily basis (e.g. parking forecasts), while others have a more long-term perspective several years into the future (e.g. the need for taxiways). CPH’s short-term forecasts are highly reliable, while it naturally follows that the long-term forecasts are relatively uncertain.

Master planning at CPH

An important obligation of an asset manager is to offer passengers and business partners excellent, qualitative and future-orientated facilities at all times. In addition, it is important to constantly set aside the requisite areas for the subsequent expansion of planned facilities, of course, but also of new, unforeseen facilities.

This requires us to have a broad view of the situation that can describe all the essential contexts. Every year, CPH expends great energy on developing a master plan that lays the groundwork for expanding and operating the airport. The master plan is a management tool for constantly ensuring that we have an up-to-date, modern airport and this plan constitutes the basis for tangible investment planning and budgeting.

Accordingly, it is important for CPH to take a holistic approach and ceaselessly strive to infuse our planning with as much flexibility as possible. CPH places a high priority on a master planning process that is meticulous, constantly up-to-date and carried out in close dialogue and cooperation with our business partners.

In aviation it is crucial to be able to quickly adapt plans and strategies in response to changed situations in the surrounding world – or our own.

The master planning performed at CPH is continually looking 25 years into the future and tangibly describes in great detail the developments and initiatives of the next five years. The latter, short-term segment of the master plan is adjusted every year.

CPH’s master planning is headed by a team responsible for drawing up CPH’s complete master plan. This team works together with all parts of the organisation and attaches great importance to including external partners such as airlines, handlers and retailers.

Interdepartmental coordination

The CPH organisation consists of one centralised field of responsibility with one management who perform all functions ranging from master planning to operation and maintenance of airside and landside.

As a fundamental principle, the Real Estate organisation is responsible for space management, planning, design and implementation of construction management; in the same vein, all project management is performed in-house.

From a purely practical point of view, we situate all our forecast analysts, planners, architects, engineers and other staff with relevant competencies within the same area, a few metres from each other under the joint management. This provides close contact among the various technical fields and generates synergy and inspiration in the daily work. Operations and management are also gathered in the same area and report to the same management in our matrix organisation.

Sometimes the ‘right’ solution to a problem is so obvious that it is overlooked. For this reason it is important for us to keep asking whether we are still working on the right solution during the master planning process and during the individual projects.

This approach ensures that the solutions we arrive at are correct not only from a limited economic perspective, but also in the broad scheme of things.

Meeting the needs of customers and business partners without compromising the overall economy

CPH gives high priority to meeting the needs and expectations of our passengers and business partners. However, it is equally important for us to precisely identify the actual needs that are sufficient for meeting these expectations.

There are examples from the past where CPH’s attempts to interpret an expectation resulted in a project that the customer hadn‘t actually asked for. Therefore, CPH works according to a method where we, together with the customer, specify the key points that are important to the customer. The customer in this context might be a passenger, business partner or internal department at CPH.

This process leads to a common understanding and description of the project, thereby clarifying the parties’ mutual expectations. The process also involves a description of the project economy to ensure that the customer agrees to the financial aspects.

In CPH’s view, every investment must be regarded over its entire lifetime, making concepts such as “total economy” and “life cycle” the mainstays of our assessments of an investment’s validity. CPH not only seeks to calculate the final economy for the entire period, from project launch until demolition and re-establishment have occurred, but also to include – to the best of our judgement –subjective values such as flexibility, functionality and aesthetics.

CPH’s basic approach tries to live up to the following statement, among others: “Whatever is worth doing is worth doing well!” This way, a deliberate qualitative choice is included in all investments. The following is a sterling example of this philosophy’s viability during the course of many years: about 45 years ago – in connection with a refurbishment project – it was decided that relatively expensive wooden floors were to be laid in the terminal areas, instead of vinyl flooring or similar materials, which usually had to be replaced every five or six years. Obviously, this choice promoted a wish for an aesthetic, functional solution, but was also the result of calculations substantiating that this would definitely be a good investment in the long term. Now, 45 years later, these very same wooden floors are still an attractive asset and give the airport’s users a feeling of well-being that helps attract customers and thus adds value to our core business.

Keeping your assets active and vital

In the view of CPH, all types of sound asset management either contribute to added value in itself or are a fundamental part of the core business – i.e. qualitative, efficient and economic airport operations.

Maintaining a constant awareness of the condition of each individual asset is vital. For this reason, we closely monitor many different assets at CPH to ensure not only that they are always in optimal condition, but just as importantly to assess whether the asset can be optimised.

This applies not only to the assets owned by CPH but also to assets owned by our business partners at the airport. As the airport owner, we should and must be interested in the big picture. Accordingly, if CPH identifies circumstances that could be optimised, we enter into an open, constructive dialogue with our partners to jointly find optimal paths of development. An example worth mentioning is a situation where one of our partners was having difficultly selling a substantial asset that was not being used. In CPH’s assessment, the building had unexploited potential. CPH purchased the property and developed it, so that today the asset has added new jobs and activities to the airport. The partner was able to dispose of a ‘passive asset’ while CPH received new sources of income and helped to establish more jobs. This was a win-win situation for both parties in every respect.

CPH also attempts to develop the airport in areas that can provide sufficient critical mass. This maximises asset use and, as a result, lowers the unit costs. An example of this is our check-in counters, all of which are prepared for common check-in. This makes their use highly flexible with a high production capacity and relatively low unit costs.

CCC – continuous cost control

In order for us to maximise our business management, we have to know the figures “inside out”. For this reason, CPH has, in recent years, emphasised the importance of reporting and has strived to base this reporting on standards. Despite all the advantages and drawbacks of this standardisation, we unanimously decided to use the financial system SAP for all our reporting.

A close cooperation between the operational departments and the economists has meant that these parties now work closely together on optimising airport operations on an economic basis. A substantial spin-off of this is that the classic differences in outlook between operations staff and economy staff are slowly disappearing. A good example of this was the discovery (during one of our frequent cost reviews) that the financial viability of the operations and maintenance of certain passenger boarding bridges had started to worsen. The department’s management team and controller unit worked out an analysis showing that speeding up the replacement of certain passenger-boarding bridges was a sound business move, after which this was set in motion.

In my opinion, CPH is following the proper course. We are attempting to take an overall approach to being asset managers with respect for quality, efficiency and economy. We do not claim to have resolved all the problems that this entails but we have discovered that taking a systematic, overall approach leads us forward in the right direction. Although we are heading towards a future that each of us has some idea of where it will end, in our industry the future almost always ends up being totally different than we imagined or arriving with totally unexpected haste. This and many other challenges are what make the job of a professional asset manager for an international airport so incredibly interesting.

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