BUD Future: Creating a landmark for Budapest

Posted: 11 December 2009 | Jost Lammers, CEO of Budapest Airport | No comments yet

A new high-tech terminal building, a vastly extended apron, a new on-airport hotel and the development of a cargo city. These are just the main features of a five-year development plan at Budapest International Airport that will reach 261 million Euros altogether. Ground works have already started last year and this summer 70 metre high cranes have been added to the Ferihegy skyline around Terminal 2.

A new high-tech terminal building, a vastly extended apron, a new on-airport hotel and the development of a cargo city. These are just the main features of a five-year development plan at Budapest International Airport that will reach 261 million Euros altogether. Ground works have already started last year and this summer 70 metre high cranes have been added to the Ferihegy skyline around Terminal 2.

Budapest had reached a record 8.7 million passengers in 2007 when, only 18 months after the successful privatisation of the airport, a second new owner took control of the airport operator company. An international consortium, lead by Hochtief AirPort, have acquired the 75% minus one vote package of the shares of Budapest Airport from the British Airport Authority, itself being taken over by the Spanish Ferrovial Group. Hochtief AirPort (37.25%), the runner-up in the original 2005 privatisation, has lead a group of investors including GIC Special Investment (13.625%), Caisse de depot et placement du Quebec CDP (13.625%), Aero Investment S.á.r.l. (7.5%) and KfW IPEX-Bank (3%), with the Hungarian State retaining 25% plus one vote through the Hungarian State Property Agency (MNV) in the company. Under the privatisation agreement the consortium will own the operational rights of the airport until 2080 and made a commitment to invest 261 million Euros over the next five years.

Budapest Airport has set an ambitious long-term goal of turning Ferihegy airport (this is the historic name of the airfield in Hungarian) into the most successful airport in Central and Eastern Europe in terms of service quality, passenger growth and operational efficiency. The stage is set for this in every aspect. Ferihegy airport, with its two parallel runways and a centrally located terminal building between them, is an ideal setup for the so-called bayonet-type operations, with one runway dedicated to landings and the other for take-off. Also there is enough physical space around the airport for any development projects. With its huge territory of 1550 hectares, it is slightly bigger than Heathrow.

Budapest Airport was also attractive for investment in the sense that there was a booming aviation market (remember: that was 2006 and 2007!) in the region, with traditional and low-cost airlines in a healthy mix and healthy competition. At that time some newly emerging low-cost operators produced stable double-digit growth numbers year-on-year. Also Ferihegy had an ideal set-up in the sense that it was and still is the only major international aviation gateway in Hungary. Featuring all four major elements in one airport that may be expected: there is Terminal 2 for the traditional airlines with Schengen-non-Schengen separation, the old or historic Terminal 1 (1950 vintage wonderfully re-built in 2005) for the low-cost operators, a well established cargo facility and also a General Aviation Terminal. All this is quite near to downtown Budapest: only 16 kilometres away from the city centre by road and some 20 minutes by train from Terminal 1.

In 2007, when the development programme (BUD Future) was launched for Budapest Airport, the only serious bottleneck was the capacity of Terminal 2 in peak season and peak times, especially in July and August. Though passenger numbers were growing rapidly, no major construction or extension of existing facilities have taken place at the airport since 1998, when Terminal 2B was commissioned. Since then, the needs of the low-cost airlines were quite well catered for by Terminal 1. The key project for development was to modernise and seriously extend the through-put of Terminal 2.

Thus SkyCourt, a state-of-the-art, light and elegant shell-shape central Terminal building was designed, that will connect the two existing wings of the building. Approximately 40.000 square metres of passenger area will be added to the existing facility, that will cover everything from underground baggage processing through to central passenger screening and a lot of new area for duty free/travel value shopping, food and beverage facilities. Until 2012 two new piers are planned, with 9-10 new air jetways for aircraft.

The foundation stone of SkyCourt was layed on 10 June 2009 in the presence of Prime Minister of Hungary Mr. Gordon Bajnai and Chairman of Budapest Airport Dr. Reinhard Kalenda, with the participation of major airlines, ground handling companies and retailers from the airport. Since then, the Budapest Airport skyline has been seriously altered since two 70 metre high giant cranes have been added to the landscape of Terminal 2, with an additional two medium size cranes. These gigantic cranes will help to put in place the 70 metre wide steel structures that will bridge the roof of SkyCourt from landside to the apron. The design of SkyCourt was executed by a Hungarian partner called KÖZTI (or Középület Tervező Intézet – in Hungarian), while the development team is led by Mr. Stephan Schattney a seasoned Hochtief AirPort specialist.

High interior spaces, a towering glass front overlooking the apron and Runway 2, natural light flooding the passenger areas, an open, glass covered rooftop connecting the eye with the sky – just a few key features that will make SkyCourt unique for Budapest, a real landmark in its own right. From the architect’s point of view Budapest mixes centuries old tradition with trendy glass and steel and concrete structures, so the airport will have to reflect these parallels in a certain way. A group of brand and design experts will join the team of Budapest Airport to produce some interior features that will be unmistakably Hungarian and welcoming for SkyCourt.

The actual start of the development programme in Budapest has been preceded with a series of rather costly measures to bring the airport standards up to generally accepted European requirements. One of these urgent investments was an earlier neglected area of airport security. Though Hungary has definitely not been seriously influenced by the post 9/11 tension, the airport did not meet the common security standards prescribed by the European Union. One of the major and quite costly measures was to build a brand new security fence of over 20 kilometres around the airport and introduce much more stringent security procedures, both for passengers and personnel.

Thanks to these investments, estimated to be just over four million Euros, Ferihegy has reached the “clean” airport status of the EU from December 2007. Another major investment was the replacement of the outdated passenger security lanes with brand new Smiths and Heimann products (iLanes and aTics X-ray). Altogether, nine new lanes have been installed in both Terminals 2A and 2B and a further batch of three in the low-cost Terminal 1. These were originally earmarked for the SkyCourt, however the problem of queues exceeding 30 minutes at passenger security needed to be addressed. With the introduction of the new systems not only have the queues been reduced to a mere five minutes in peak periods, but the earlier number of passenger complaints have almost totally disappeared. And of course the thoroughness and efficiency of the security check has significantly increased.

One other item missing from the airport’s landscape was the on-site hotel. Though the vicinity of downtown Budapest did not make this a matter of urgency for some years, the sharp increase in traffic and the central location of Budapest in the heart of Europe, has added to the need for the construction of a new hotel. Preliminary studies have shown that though video-conferences and internet-based conference calls are very common practice in the world of globalised companies, the need for personal get-togethers of managers based in different countries has not diminished. Maybe the three-four day conferences, topped with a long weekend at a nice destination, have suffered a mortal blow during the last financial crisis however there is a definite demand for one day meetings, hence the need for an airport hotel has increased.

Budapest Airport has determined that a 250 room four star hotel, with lots of conference facilities, will meet the projected market demand. Both the development and the operation of the new airport hotel is planned with partners, the tender procedure will be finished by the end of the year. The seven storey hotel building will have direct pedestrian links to both Terminal 2 and the airport parking area. The cost of the development is estimated at around 25-30 million Euros and the future operation of the hotel is foreseen in close cooperation with the airport.

In the run-up of the tender, major international hotel chains and real estate developers are teaming to grab the lucrative business opportunity, since the hotel is just the first milestone in the planned further development of Budapest Airport City – a new business and office area for typical airport dwellers ranging from the automotive industry to telecoms people.

Another major development is underway, namely the creation of a Cargo City. Though there are certain cargo areas around Terminal 1, the further development of these is not a viable economic solution. The area near Terminal 2 and Runway 2, just outside the official city boundaries of Budapest, is an ideal location for the development of a major cargo base. This area (approx. 70 hectares still on airport premises) would theoretically allow for the development of several giant cargo hangars of several tens of thousands of square metres. Though the cargo community was sent into temporary deep-freeze by the economic crisis, the ground has literally been broken for the first major project at Ferihegy. Budapest Airport has signed an agreement to construct a new air-mail handling and processing unit for the Hungarian Post. The actual physical construction of this facility will start at the end of 2009, the cornerstone laying is expected to be held just before Christmas.

The new airport cargo facility is ideally located for operations in Central and Eastern Europe. All major cities of the region are within a 600 kilometre radius, be it Cracow (Kraków) in Poland or Belgrade (Beograd) in Serbia. The airport itself lies at the junction of the Budapest ring highway M 0 and the South-Eastern M 4 road leading to Rumania. The major railway container terminal of Budapest (BILK) is just a 15 minute drive away on the ring highway from the airport. Two major railway lines also border the Northern and Southern perimeters of Ferihegy. Budapest Airport estimates that by 2012 the airport will be capable of handling 132.000 tonnes of cargo per annum. Those who join the cargo project at an early stage will enjoy all the benefits of tailor-made facilities, to serve the individual demands of customers and partners.

The development of Budapest Airport is not only focused on the “hardware” of the company but also on changing the business structure, the “software”, of the airport operator. One key driver behind the changes at the company is the focus on the so-called ‘airport core business.’ We also need to address all other issues, either by way of a proper outsourcing project or looking for external professional service providers wherever it is deemed necessary. This is definitely a long and painstaking process, but there is no other or better catalyst for this process than the market itself. The complicated and quite frequently overlapping directorate and department structure has been replaced by much simpler cost and profit centres. Three major branches or business units have been established in the company restructuring process: Aviation (dealing with airlines, cargo and tourism), Customer (retail, food and beverage, parking and transportation) and Property (overseeing all rental and real estate development projects). It is our belief that this structure will respond much better and quicker to market demands and will provide much better service to our major customers, the airlines and the passengers.

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