Larry Summers, former Clinton Treasury Secretary, Obama chief economic advisor, and Harvard President, observed last year that “the newer the [airport] terminal, the less convenient it is to use” thanks to all of the long walks and wondered why that’s the case.
The reason is actually simple economics, but to see that you have to be aware of the details of how terminals are financed, and how airport revenue agreements work.
I have just travelled thru the new LaGuardia airport. It confirms a theory of mine. The newer the terminal, the less convenient it is to use because all the walks are longer. I wonder why?
— Lawrence H. Summers (@LHSummers) April 26, 2023
When an airport authority brings in private companies to finance construction of a new terminal, there’s rarely much discussion of how those companies will make their money. One of the primary ways is from concessions. They’re going to rent out space in the terminal to retail shops.
- The more revenue those shops makes, the more they can charge in rent
- And deals are generally structured so that the terminal owner takes a percentage of revenue as well
- Where there’s a dominant airline especially, the airline will often share in concessions revenue as well.
New York LaGuardia Central Terminal
Passengers are not an airport’s customer, they’re the product an airport (and airline) sells to merchants who rent space inside the terminal.
Long walks frequently designed to accommodate more shopping, with more retail space in the terminal. And airports don’t want passengers skipping the shops!
This seems obvious if you’re familiar with airports, but a lot of very smart people aren’t aware of it, so it also seemed worth explaining.
Why? The whole point of redoing LaGuardia was that everyone was sick of it being absurdly crowded…no place to sit, nothing to eat except deep fried pretzels. So this seems like asking, "why, in seeking to make it bigger and less crowded, did they make the airport bigger?"
— Stuart Buck (@stuartbuck1) April 26, 2023
Designed to improve “on time” arrival and departure which are measured gate-to-gate. This also why airports like Denver are so far from town. Ironically, these things make your door-to-door timing worse.
— Bill Gurley (@bgurley) April 26, 2023
This principle isn’t limited to large new construction terminals, either. Both Dallas-Forth Worth and Chicago O’Hare removed moving walkways that used to assist passengers in their journey and speed up travel in the terminal (which reduced the risk of passengers missing flights!). Dallas spent one million dollars to remove theirs. The reason is that passengers on a moving walkway skip all of the shops along the way!
You’ll frequently see international airports that route you through duty free on the way to your gate, forcing you to take a circuitous route. Sydney’s airport is famous for this, and so is London Heathrow. In fact, British Airways reportedly pays Heathrow £1 million per year to have a door immediately past security on the right that allows first class passengers direct access into the Concorde Room lounge rather than having to be routed the long way through the shops.
Now retail isn’t the only reason that terminals are often larger. They may need to accommodate more planes, and larger planes, that the ones an earlier facility was built for. You may need a midfield concourse to accomplish that, given what other structures are already in place. But the thing that’s common across airports is that incentives are aligned to push travelers to do more walking past shops because that’s a tremendous source of revenue.
Ultimately though the purpose of an airport is to get somewhere quickly. You want an airport that you can get to quickly, get through security quickly, and get to your gate quickly. New larger terminals may be more beautiful, and more revenue-generating, but that doesn’t make them “better.”
I like the challenge of finding the shortest path through the needless shopping. At LGA it’s not the gradual counterclockwise arc but a sharper left turn through the little aisles.
Before retiring I lived out of a suitcase. One year I was platinum with both UA and AA – nearly all of it was domestic hops. I have a 2nd house in Europe so I do fly there RT at least once yearly. Thus, I am too familiar with airport terminals around the planet. In my experience, the best airport is Reagan Washington National (DCA). Even brief walks have peoplemovers. In contrast, the worst terminal on the planet is the new international Terminal C at Orlando (MCO). My last several arrivals from Paris I had to walk up (not down) 7 flights of rampy stairs (no elevator or escalator options) then I had to walk close to 2 miles, thru the baggage claim to get to passport control with no people movers or shuttle trains – nothing – just walk. I did pass one toilet along the way. Like most new terminals, C is a shopping mall with hundred-foot-high ceilings (for no reason). The real killer is if you have a connecting flight at MCO. By my reconning, you face a 5-mile walk which takes you from your arrival gate, thru the terminal, out of the airport, and thru the parking garage to get to the shuttle train to the A & B domestic terminals. Expect to get lost enroute, the signage is useless.
“Malenko, you may want to keep an eye out for PDX pricing – having street side prices at airports just leads to unsustainable concessions. Think of all the cost that you have at an airport that you don’t have on the street (employee badging, longer delivery times plus a charge for delivery, employee parking…)”
I doubt that street side prices lead to unsustainability. The prices will not be the lowest prices available streetside, rather an average or even near the top. Without the specific wording of the contract, precisely what is meant by streetside pricing is hard to determine. The pricing could even be more than at any streetside vendor if enforcement is lax. Further, at many airports you have large crowds of people as a captive audience. That is not as common in many places that have actual competition. The long walks past all of the concessions is kind of like how Ikea (which advertises it’s affordability) sets up their stores. A downside to airport terminal sales and especially sales past the security check is that people have limited luggage space to take on items. So even if the price is reasonable, people still cannot stock up on a lot of snacks and carry on food. I think unsustainability for airport concessions is related to high pricing, trying to sell the same things as the next store (unnecessary competition) and not really studying what should be sold. I think the high pricing scares a lot of potential customers from even stepping inside of the stores. More reasonable pricing may lead to significantly higher sales volume.
You have not experienced ridiculous amounts of walking until you have been to the new Istanbul Airport. You walk and walk and walk to Transit security and then walk and walk some more back to your gate. It is on another level. All the walking, lack of water fountains plus generally rude and unhelpful ground staff make IST one of my least favorite airports.
I have worked in airport management for the past 34 years at airports of all sizes even building several terminals and this is an interesting and timely topic. I assure you that the passenger experience is front of mind for airport executives as traveler expectations continue to evolve and mature. There are several reasons for this and as Gary stated in the story it has some to do with the need for space to generate revenue to cover the ever-growing operating costs of the terminals, but also to cover the shifting of capital costs.
Over the past few decades, the capital burden for new terminals has shifted from the feds and airlines more to the airport owner (authority, city…). In the early days the airlines often took on the task of terminal development, however that now only occurs at key hubs, albeit they do help to cover some debt service through rents at most airports. Federal participation such as the AIP grant program which come from ticket taxes covers some costs, but they are not keeping pace with construction inflation. Also, the PFC has been frozen at $4.50 for 20 years and only buys cents on the dollar these days, so this requires airports to get more creative. Build a few more square feet and add an espresso or wine bar to help pay off some of the bonds. Another option available to larger airports is a public private partnership which is how LGA and others were able build these great new terminal buildings. These 3Ps must also generate a return on investment, so optimizing concession space productivity is crucial.
Another reason the walk is getting longer is more people are flying which means more and larger hallways and airplanes, especially at hubs. The larger airplanes must also be spaced further apart and the departure lounges must also grow in capacity and number. Airport and architects put a great deal of effort and thought into planning and simulating passenger circulation in an effort to find ways to move passengers from gate to gate efficiently. Airports will also shift airlines around to group airlines, but the airlines, not airports, ultimately decide how connecting banks are structured and who will have how much time to walk between gates.
Most airports understand that the experience effects airport and airline decisions and there is more to be done to improve travel. P.S. the walk is shorter at the smaller airports.
Recently returned from FRA on AA landed in DFW had to make it to my connecting flt to OKC my “Walk-about” was at least 20+ minutes. Absolutely ridiculous!!
At O’Hare Terminal 5, there are three relatively short moving walkways going “outbound” (for departing passengers), even though there are very few stores or restaurants beyond the central part of the terminal. And there are no moving walkways “inbound” for arriving passengers, even though arriving passengers are much less likely to stop at the stores and restaurants on arrival — and, as I said, there aren’t many stores or restaurants outside the central part of the terminal.
Jns, I agree with some of what you are saying, and price gouging at concessions is plain wrong- but most airports adhere to a Street Plus 10% or Plus 15% cap, which I think is right in line. Volume may work things out in some concession units, but if you want a variety and units that are open for passenger service requirements not just high turnover, you have to make some other accomodations for the cost difference.