Interview with Atlantia CEO Giovanni Castellucci for Infrastructure Channel
Atlantia is the leading player in Italy’s toll-road sector, an industry in which the company has played a key role in consolidating an international growth path in countries with high potential growth rates. Two years ago, Atlantia also entered the airport sector by buying Rome’s operator. What is your strategy for this new sector?
Italy’s toll-road sector is a mature industry now, and our company is already the leader. Over the past decade we embarked on a process of geographic diversification, investing in highway assets in fast-growing countries. Airports represent another investment opportunity that allows us to leverage our management skills and logistical resources in terms of project design, construction, infrastructure management and financing.
It’s worth noting that the airport sector is not geared only to domestic growth drivers. It benefits from exposure to international growth; just think that two-thirds of the passengers who arrive at Fiumicino come from another country. We’re interested in further investments in airports with characteristics similar to those of Fiumicino, meaning those that serve as final destinations, as exclusive top-of-the-mind international tourist stops with ample growth potential, especially those strategically positioned to handle international connections going to or coming from the Middle East and Asia.
Two years after joining forces with Aeroporti di Roma, what results can you say you have already achieved in the airport sector?
We have made a big and fruitful effort to improve the quality of the services on offer in terms of customer perception and satisfaction. For example, the overall ACI indicator, which measures passengers’ sense of airport qualities, rose to 3.73 in 2015, using the scale of one to five where one is negative and five is excellent. That’s a 7.5 per cent increase from the 3.47 the airport posted in 2013.
We have also boosted the hub’s connection network. We have launched nine new intercontinental routes, most of them towards the Far East. That makes Rome Fiumicino, along with Paris, the main gateway for greater China, with nine direct flights. On top of that we have opened new direct long-haul flights to Seoul, and soon we will have new direct links to Santiago in Chile, to Mexico City, to Minneapolis in the United States and to Vancouver, Canada. The fact that our relevant flagship carrier, Alitalia, is renewing its focus on long-haul flights will give an extra impetus to Fiumicino’s development, as Rome is the reference hub and can serve to boost transfer traffic to and from other destinations.
To succeed in all of this we have sharply increased our investment outlay. It rose from 52 million euros in 2012 more than six fold to 335 million euros in 2015.
On a purely engineering and technical level, what are the greatest challenges in building a fourth runway at Fiumicino Airport?
Our main challenge is to avoid wasting land and producing negative environmental effects with a “cathedral in the desert.”
Our projections are that passenger traffic will increase from around 40 million annual travellers in 2015 to 100 million in 2044. To prepare our infrastructure capacity for this we will need new terminals and at least two more aircraft runways. Our approach is to roll out the investments in line with the expected growth in demand.
In the near to middle term we will focus on areas the airport already occupies, strengthening and restructuring existing structures whenever possible. We should complete a new terminal within a year as well as an auxiliary structure destined to host flights outside of Europe’s passport-free Schengen zone and containing a large shopping mall focused on luxury goods. Another terminal, for Schengen destinations, will be added in 2020 and 2021, and that will boost our capacity to around 58 million passengers a year.
In the longer term, we have developed a project for a new airport zone north of Fiumicino, with adequate links to downtown Rome and other metropolitan areas via connections to Italy’s High-Speed railway network as well as dedicated connections to the highway network. Once complete this will take our total capacity up to 100 million passengers a year. The new terminal is also being designed so that it can be built in a modular way, allowing it to expand as a function of growing demand.
What kind of impact do you think a busier FCO will have on the immediately surrounding area? Will the baricenter of Rome “shift west towards the sea”?
It is certainly a priority – in fact it’s a fundamental premise – that a clear improvement in links between the airport area and the city of Rome is enabled. This entails a significant broadening of train links, both with the city and beyond, as well as the reinforcement of the road network to accommodate airport users, local traffic and freight. Our intention is to make Fiumicino a powerful magnet for external investments, with growth opportunities, new local job creation, and positive impact on the tourism industry - in the city of Rome, the region of Lazio and the entire country.
If we take the classic Silk Road itinerary, Venice-Shanghai, it turns out that flying via Rome instead of Dubai shortens the distance by 800 miles (6000 instead of 6800) – a substantial in terms of flight times and fuel costs. How essential is the assumption that large long-haul planes will play a growing role in the future?
We certainly see a growing role for Rome Fiumicino as a domestic hub for Italy, but also as a major reference point for traffic flows heading for the Mediterranean area and all of southern Europe.
When one thinks of the Silk Road – but also including prospective flows to and from North Asia – it’s quite clear that Rome Fiumicino’s geographic position offers significant competitive advantages. Amongst these are benefits for actual routes, with lower costs for the same kind of aircraft, and benefits for passengers, in terms of fewer hours in flight.
For this reason, Rome is aiming to attract not only large-capacity airplanes, but also high-efficiency aircraft such as the Boeing B787, which is already flying between Rome and the Chinese cities of Wuhan and Guangzhou as well as to New Delhi. That said, Fiumicino is already gearing up, with already budgeted plans, to host the Airbus A380, which today is the airplane that can carry more passengers than any other.
Alitalia has a smaller share of long-haul flights from Fiumicino than is the case for any other national pair – Heathrow/British; Frankfurt/Lufthansa; Charles de Gaulle/Air France. Does this in fact represent a possible asset in terms of managerial experience in the long run?
It’s true that AZ, Alitalia’s code, has a smaller share, but it is precisely for this reason that Fiumicino has hosted faster growth of other long-haul routes than our European peers. Many airlines are eager to seize current and future opportunities linked to Rome Fiuicino’s natural catchment area. However, it’s worth noting that as far as we know Alitalia has ambitious expansion plans of its own and forecasts strong growth in long-haul destinations as befits its role as a full-service carrier.
Aeroporti di Roma has shown it can be a proactive player in contemporary markets and accelerate the growth of long-haul flights. It is special in its ability to focus on sustainability and complementarity between carriers, and in this it is helped by foreign markets’ strong attraction to Rome.
Recent data clearly show that Fiumicino (and Ciampino) serves a long menu of European destinations – 134, compared to 142 for Amsterdam and 123 for Gatwick. On the other hand, total demand is a bit less. How does the fourth runway impact the ability to leverage the first positive fact (more destinations) into profitability despite the second fact (less demand)?
Just as Fiumicino currently has less long-haul activity linked to a flagship carrier than other European hubs, it has a high share of routes served by smaller mid-range aircraft. But note, this does not mean we have significantly different performances in terms of the seats-per-flight number. For Fiumicino, this ratio is higher than Schiphol in Amsterdam, for example, and not distant from Madrid or Frankfurt. Even when you consider the percenage of transfer passengers using Fiumicino it’s clear we are not just a final destination. We are in line with London – in share, not in absolute terms – and not far from Madrid or Paris.
This is why we are confident of Aeroporti di Roma’s strategy of positioning itself as a “Natural Hub,” leveraging its geographic position at the centre of both Italy and the Mediterranean. Our goal is to boost the long-haul component in general, and this will lead to an increase in transfer passengers using Fiumicino as a relay point.
A fourth runway would free up new productive capacity, in terms of landing slots, so that we can satisfy the richest for new flights linked to the growing demand we expect, both in the short-hop and log-haul arenas, both of which increase Italy’s connectivity with the rest of the world. In particular, the availability of new slots at peak hours – morning and evening – will make it easier for us to operate a greater number of multi-day flights, which tend to have a clear business-class vocation. This will have a positive impact on our operational profitability as well as attract carriers interested in basing their aircraft in Rome, which translates into more jobs and auxiliary services.
About one in six FCO flights currently goes beyond Italy and Europe. Thinking about the future, say 2030, what is your forecast for this quota, and what is your hope in a best-case scenario? Is the hub-and-spoke model for airlines likely to be the relevant model for the future?
We are concentrated on supporting the development of long-haul routes with higher profitability and growth expectations, notably Asia and the North Atlantic. I imagine that while percentages remain broadly the same, there will be a doubling of flights from Rome Fiumicino to non-European destinations by 2030.
In the best-case scenario, Italy as a whole will boost its logistical capacities, making Fiumicino more easily accessible and thereby enlarging the catchment area for potential customers interested in intermodal solutions. That’s why as I said above it is essential that the High-Speed rail connections are increased – this will make Rome the obvious airport for highly-desirable tourist markets such as Naples and Florence.
In this sense, we do incline towards a hub-and-spoke model, enriching so-called air-to-air solutions and completing them with Train-Air and Cruise-Air options. We are already witnessing an evolution in the way traditional systems link mid-range and long-range flights, and this will support Fiumicino’s viability as a hub by vocation, given Rome’s geographic position and strong attraction as a destination. Rome already figures prominently in the imaginations of many foreign travelers and is a natural entry gateway for all of Europe.
Inevitably, and naturally, the Fiumicino expansion has an impact on the natural and social environment. As you shepherd the plan through the environmental impact assessments, do you have any particular thoughts or advice on how this process can be enhanced in the future?
Aeroporti di Roma’s Master Plan, which was recently approved by Italy’s civil aviation authority, proposes various actions and guidelines to reduce the impact of the planned expansion. These include maximizing the use of renewable energy sources, reducing the carbon footprint of both the construction work and ordinary operations, a re-assessment of the surrounding landscape, the integration of cultural and museum offerings inside the airport area and an environmental park. In terms of local engagement, we are reaching out to schools and academies with plans for events and valorisation of the magnificent archaeological sites in nearby areas.
The Fiumicino plan is targeting 100 million visitors, more than double the current level. The IATA just lowered its forecast for global passenger growth through 2034, now expecting a 3.8% annual growth instead of its earlier 4.1%. Still, the big increase is seen in China, the US, India, Indonesia and Brazil. Where does Europe and where does Rome stand in light of the new subdued forecast?
Naturally we are highly aware of what the major research institutes are offering as long-term predictions, and in fact we collaborate effectively with several of these think tanks. Nonetheless we believe – not least on the basis of characteristics particular to the Italian and Roan market and on the basis of the results achieved over the past three years – that the trends we project will be confirmed and that we will achieve 100 million passengers a year by 2044.
As noted, Fiumicino is clearly investing in the markets cited above, but we also have unique opportunities in future potential growth areas, notably Africa, where Rome’s geographic position offers a significant competitive advantage compared to other European players. On top of that, do remember that Rome Fiumicino can count on an infrastructure development plan without parallel in Europe.