The region of North Asia, by many accounts, is considered a pioneer in offering innovative technologies as a service, and countries are generally more geared towards the establishment of digital societies. Take China, for example, which has hastily emerged from its traditional industrial and manufacture economy to partake in the development of more disruptive and inventive technologies.
The supportive attitude towards digitisation is arguably even more prevalent at airports in North Asia, with South Korea, Hong Kong, China and Japan outpacing airports in many other regions in the search for digital mastery.
In late 2017 South Korea's Ministry of Land, Infrastructure and Transport (MOLIT) announced plans to roll out a series of advanced technology upgrades at Jeju, Seoul Gimpo and Seoul Incheon airports with the aim of reducing, by 2022, the average duration of the airport departure process for passengers by 17%. The systems include biometric-enabled paperless check-in devices at Seoul Gimpo and Jeju, and an automated inter-terminal passenger transport shuttle at Incheon.
For Incheon, the new systems will complement an already impressive array of infrastructure supporting a push for digitisation.
In the first month of operation of Incheon’s self-service check-in at terminal two over Jan/Feb-2018, 36% of passengers used the new systems. Additionally, 11% of passengers also used accompanying self-service baggage drops, while the new infrastructure has collectively reduced the overall duration of the passenger throughput process by approximately 30%.
In China, Beijing Capital International Airport has implemented a self-proclaimed ‘full electronic boarding service’ at both terminals two and three as of late Apr-2018. Available for six airlines on domestic routes, the service means passengers can go from entering the airport to boarding the aircraft in just three steps. The entire process mainly uses electronically generated information. Compared to the original process of using paper boarding passes, the process can save passengers at least 10 minutes, Beijing Airport expects.
And in Japan, its Ministry of Justice plans to install 134 facial recognition technology- enabled immigration screening devices at five international airports by the end of 2018. The airports of Tokyo Haneda and Narita, Osaka Kansai, Nagoya Chubu and Fukuoka will use the devices to screen departing foreign nationals from 2019.
Digitisation in the airport industry has been hailed as revolutionary, but the other side of the coin is seldom explored
With airports in North Asia and airports on a global backdrop continuing to explore these digitisation opportunities, a Roland Berger study actually suggests that digital applications could deprive airports of a substantial part of their margin.
The strategy consulting firm envisages that USD2.5 billion to USD5 billion in revenues could be lost by airports over the next five years. Roland Berger attributes this to passengers spending less time in the airport as a result of digitisation, which means less opportunity to purchase products or use the services on offer.
Roland Berger also emphasises that competition by services providers is on the increase. Fees for new service offerings that give customers the ability to book their parking space, use car sharing or book a shuttle, for example, may not be ending up in the pockets of airports. Should airports not adapt to these threats, the loss in revenue translates into a 3%-6% hit on operating margins.
Ultimately, digitisation should be a balancing act for airport operators. It clearly offers opportunities for realising new business concepts and putting process ideas into practice.
But at the same time it compels airport operators to ward off competition in order to protect their revenues. In some cases, airports will have to cooperate with the same business partners as they are competing against in other areas.