Project Management Institute

Air traffic control

More travelers mean more airport projects—and a growing need for flexible project managers equipped to handlechange

A rendering of the interior of Mexico City, Mexico’s new airport

A rendering of the interior of Mexico City, Mexico’s new airport

IMAGE COURTESY OF DBOX, FOSTER+PARTNERS

US$415 billion
Total cost of airport projects underway around the world
US$32 billion
Budget of project to expand Dubai, UAE’s international airport
229
Number of new airports underway or planned around the world

As more travelers are taking off into the skies, more airport projects are happening on the ground. With their lengthy timelines, projects to build or upgrade airports invariably involve change and uncertainty. That ambiguity leads to a high degree of complexity—and requires flexible, nimble project management, according to a 2014 PwC report on airport projects.

“If the degree of project complexity is not evaluated and addressed using new techniques of risk appraisal and project management, then sponsors are unnecessarily accepting a significant probability of project impairment that even unlimited funds cannot resolve without incurring delays,” Anthony Holmes, director of the Institute for Infrastructure Studies, London, England, told Qatar business magazine The Edge.

“Our clients are making long-term forecasts—20, 30 years out—about demand and passenger traffic, and then building based on those forecasts.”

—Anthony Morgan, PwC, London, England

Such risks have expanded as a rise in travel has led to a boom in airport projects. Globally, there were 36 million more tourist arrivals in the first eight months of 2014 compared to one year earlier—a 5 percent increase, according to the World Tourism Organization. To accommodate all those travelers, cities around the world have launched US$415 billion worth of airport projects, CAPA-Centre for Aviation reports.

Most of these projects involve existing airports: building or expanding runways and terminals. The Los Angeles International Airport (LAX), in Los Angeles, California, USA, is undergoing a US$7 billion modernization project—the largest public works project in the city’s history. In September, the city of Dubai, the United Arab Emirates announced a US$32 billion expansion of its Al Maktoum International Airport, which will accommodate 200 million passengers annually, making it the world’s largest airport.

Meanwhile, there are 229 new airports globally—either underway or planned—representing US$70 billion of investment. When complete by early 2019, the new US$9.2 billion airport in Mexico City, Mexico will initially see 50 million passengers a year and will double the runway capacity of the city’s existing airport.

Change in the Air

Whether they’re new airports or upgraded ones, these projects share protracted timelines that render them highly susceptible to change. Over the construction phase, the airports’ airlines, the sizes and shapes of planes, and airline technology can be in flux.

So can the number of passengers an airport can expect to see. Given the volatility of the air travel industry, it’s often difficult to make accurate growth projections, especially for emerging, dramatically expanding markets in Asia and the Middle East.

“Our clients are making long-term forecasts—20, 30 years out—about demand and passenger traffic, and then building based on those forecasts,” says Anthony Morgan, a PwC partner, London, England, who specializes in capital projects and has consulted on airport projects in Asia, Europe and the Middle East. “If you’re two or three percentage points off for each year, cumulatively that’s going to have a big impact on your project.”

“You have to think through the risks and uncertainties at the outset of a project and try to mitigate the risks, especially when it comes to regulators, approving authorities and governments.”

—Anthony Morgan

To overcome that challenge, Mr. Morgan says, project practitioners should break down these initiatives into components. “Then, as you get more confident with your projections over time,” he adds, “you can add more components.” That allows changes to be made along the way.

In 2009, London Heathrow Airport launched the first phase of a £2.5 billion new terminal. During construction, the carrier that would have the largest presence in the terminal, BMI, was sold and integrated into British Airways. Fortunately, the Heathrow team had strong project controls in place that allowed for changes, even late in the construction phase, to accommodate a new mix of carriers—while not affecting the budget or the June 2014 opening.

By contrast, at Qatar’s new Hamad International Airport, construction changes resulted in a years-long delay and a US$15 billion budget that had doubled from the initial estimate by the time the facility opened in April 2014.

Bend, Don’t Break

A flexible project management approach also means flexible construction and design, Mr. Morgan says.

With an adjustable airport design—in particular, a modular design that allows walls to be moved—more space can be added later, spaces can be repurposed as needs change, and construction can be reined in if demand does not meet projections, he says.

Function should trump form. Many cities want their airports to be innovative, architectural jewels, but ambitious designs can create unexpected challenges. “Some of these terminal buildings have a wow factor, but from an engineering standpoint, such buildings create risk and uncertainty, because the structure hasn’t been done before—in that shape, with those materials or for this purpose,” Mr. Morgan says.

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Airport expansion projects in Dubai, United Arab Emirates and Los Angeles, California, USA, below

Airport expansion projects in Dubai, United Arab Emirates and Los Angeles, California, USA, below

The demand for an airport that’s also an architectural marvel speaks to another challenge facing these high-profile, politically sensitive initiatives: the management of stakeholders, whether sponsors or the public.

Community opposition stymied the LAX modernization project for more than a decade. “Airports aren’t necessarily the best neighbors,” says Roger Johnson, deputy executive director, Los Angeles World Airports, the owner and operator of LAX.

Ultimately, to get the project approved by local and federal agencies, Mr. Johnson’s team had to focus on improving existing structures and had to cap new gate construction, framing the project as modernization rather than expansion.

Getting Right With Regulators

Airports’ myriad safety and other regulations also pose significant challenges: Consider the case of the Berlin Brandenburg Airport in Berlin, Germany.

A month before a scheduled partial opening in 2012, a problem found in the airport’s fire safety and suppression system led to a delay—just one of many in a project beset with technical glitches and cost overruns. Its budget has ballooned to US$5.8 billion—US$1.6 billion more than planned.

“You have to think through the risks and uncertainties at the outset of a project and try to mitigate the risks, especially when it comes to regulators, approving authorities and governments,” Mr. Morgan says. That means putting together teams experienced in airport projects so that they’re familiar with the regulatory issues at play, he adds.

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Team performance and data forecasting should be reviewed, preferably by an external organization, throughout the project, he says, to ensure accuracy and counter optimism bias. That way change, while inevitable, can still be manageable. —Liz Logan

Projects worth US$70 billion are now underway or planned around the world to build new airports.

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI.

PM NETWORK APRIL 2015 WWW.PMI.ORG
APRIL 2015 PM NETWORK

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