The evolution of the airline-airport interface

Transcript

John Thomas:So let's just sort of go back to basics. What are LCCs looking for from airport providers so that you can grow your network?

Rick Howell:Thanks, John. Just in case you were wondering, this is actually the list of death threats that I got from this morning's panel. So I'm actually— I'm going to refer to this just Just to make sure that I don't exclude airports from the death threat list. LCCs, obviously the prime focus, the prime directive for those of you that are sci-fi fans, is that we actually need to be able to offer a low-cost service. It's fairly simple. We have to compete on cost. Now, it's not that we don't value our customers, and it's not that we don't try to find a way to make them comfortable and to provide them a service that they can actually be happy that they paid for. On the airport side, and I think AirAsia have been in the news on this one time and again, The whole investment that governments frequently make in airports tends to be biased towards full-service carriers. It tends to be that there's a way of finding a valet service and a business class lounge and a whole pile of retail opportunity. Changi's done some really interesting stuff with Terminal 4. If you've not been out through Terminal 4 now. It's the new— well, it's not the new low-cost terminal at all, because Cathay operate from it as well. It's replaced what was an entirely acceptable low-cost terminal. And it's effectively slightly larger in terms of internal volume. In fact, it's quite a bit larger in internal volume, but similar number of bays. But it actually hasn't added anything to us as an airline. Now, it may add to the passenger experience. It's nicer to sit in. There's more food choices. But from an airline point of view, all of that infrastructure, all of that additional cost hasn't necessarily made our passengers any happier with our service. They might be happier with the airport service. But don't forget, we're not selling airport service. We're actually— we're trying to get our people from one place to another. If you look at the majority of our passengers, particularly on the domestic side, we're taking them away from a bus or ferry service. So they're quite comfortable with the idea that an airport just needs to be somewhere comfortable to sit, possibly get something to eat before they board the aeroplane. The trend in airports still is not generally in support of LCCs. It generally— decisions made by people that sit in business class lounges, and generally tends to support the full-service carriers. So I'll just add those to the death threats for later.

John Thomas:So, Rick, you sort of, you touch on Terminal 4 at Singapore, but You obviously have a pretty extensive network across Asia, and there's many different alternatives. There are the dedicated LCC terminals, and then, as you say, the mixed-use ones. I mean, what do you see as sort of the pros and cons of each of them? And perhaps referring back to, obviously, your history with sort of the LCC terminal at Singapore versus the, as you say, the hybrid terminal for—

Bashir Ahmad:Yeah.

Rick Howell:Well, as I said, the passenger satisfaction with the airport improves obviously with the quality of the airport. But it's not a determinant for people. People don't choose our airline or not choose our airline on the basis of which terminal we operate from. So in essence, what we're actually trying to do wherever we go is to try to find the most frictionless path for our passengers to actually get into our aeroplane, at the lowest possible cost.

John Thomas:Uh-huh.

Rick Howell:And not just because I actually happen to come from a town just near where Justin lives. I'm actually a big fan of Avalon Airport. Now, I am a farm boy, so, you know, big tin sheds are actually comfortable for me. Avalon Airport, as a big tin shed, is a fabulously productive asset for what I would consider not a significant investment in airport terms.

John Thomas:And you talk about sort of the customer experience, but from an operational perspective, do you find where you do have a dedicated LCC terminal that it does actually help you in things like turn times, and that if you're sort of using the traditional terminal or the traditional terminals, that slows you down, or it doesn't make much difference?

Rick Howell:Oh, that's it. No, well, sorry, John, good question. Because our network is particularly our international network is frequently interchangeable between A320 and A330. There are times where a dedicated traditional-style LCC terminal actually has a disadvantage for us. If we want to upgage from a 180-seat aeroplane to a 436-seat aeroplane and the terminal is actually not set up to deal with wide-body passengers, Sorry, wide-body aeroplanes. Our passengers are all narrow-bodied. That's a slight mistake. There can actually be significant transit time to get support equipment to deal with the A330. In fact, if you look at the way that Singapore's Terminal 4 is designed, the wide-body gates are right at the end of the terminal, which is in a long L-shape. And for our passengers to get to an A330 service when they come through the through the immigration, which is a fabulous new immigration process with facial recognition, and it's as frictionless as it could possibly be. Our passengers, I think, walk about a kilometre to get to the gate that our A330's going to be sitting at. So it is a big step forward in terms of passenger experience, but operationally not necessarily a significant advantage to us.

John Thomas:Right, right. So you actually like the flexibility from an operational perspective, given that you've got the A320s and A330s, you actually prefer the operational flexibility that, let's call it, a full-service terminal actually gets you?

Rick Howell:Well, I think, and let's just go back a step there. I don't think it's necessarily a full-service terminal that we're looking for. What we're looking for is an asset with flexibility. And not actually, I think it was just announced that the passenger service charge at Cebu Singapore is going up another $13 shortly to fund the expansion programme. It's actually in the same way that right now it's our Filipino passengers flying to Australia pay more for their visa than they do for an airfare. It's very soon going to be the case that our passengers flying from Singapore to the Philippines are going to pay more for a passenger service charge out of the airport And that's to fund an expansion that they actually may never see. They actually may not use that terminal again, and yet they're going to donate, I think it was $13.47 that was actually directly attributable to the development of the eastern side and Terminal 5.

John Thomas:Yeah.

Rick Howell:So, in essence, it's actually a tax on production— sorry, it's a current tax on future future asset. So there's a real mismatch between the benefit for the airline, the benefit for the customer, when an airport starts charging that far in advance to fund its infrastructure programme.

John Thomas:Yeah, probably yet another conference is the funding of airports.

Justin Giddings:Yeah, OK.

John Thomas:I'll just add out of government to my list. One of the topics we did want to touch on this afternoon was the whole issue of increased connectivity with LCCs. I suppose sort of a general question, I mean, how relevant is connectivity to Cebu Pacific? First off, getting passengers to connect over your own network, or do you see the bulk of your network is still very much point-to-point? And what challenges do you face with this increased connectivity over your network?

Justin Giddings:So the—

Rick Howell:I think I gave the figures away earlier this morning, and across our whole network we're sort of a a mid-single-digit connectivity that we sell, that we know about. So we actually have quite a lot of passengers— well, we're talking about sort of 20 million passengers, and we're talking 5% of those, call it 1 million passengers a year, that are actually buying tickets where they actually— we know that they are connecting to another service of ours. If they're going from a domestic to an international or an international to domestic connection, It actually can be quite time-consuming because generally they'll need to collect their bags and then go around and check them in again. If they're going from domestic to domestic, we do offer a through-check program. So it takes us slightly away from the pure religion of point-to-point LCC.

John Thomas:But it's still very much sort of the customer to pick that connectivity. As opposed from you actually having that built in as a prerequisite for your growth.

Rick Howell:Quite right. And that's just the— of course, that's the 5% that we actually see through the reservation system. There are others that do this without us knowing. And so, you know, our customers, I think, are reasonably aware of the idea that, hey, you're not going to be able to go seamlessly through the whole process without some participation. And to be honest, we get very little negative feedback about that. I don't think that actually, again, is a determinant for a lot of our customers as to whether they would choose us versus another carrier.

John Thomas:Right, right. So Bashir, let's go back to the beginning of KLIA where you had Terminal 1 serving full-service carriers And then along comes AirAsia. So what did you see as some of the tensions of the co-location of the full-service carriers and the low-cost carriers co-located in one terminal, and how did that influence the decision to move forward with Terminal 2 being a sort of a dedicated low-cost terminal?

Bashir Ahmad:Yeah, I think, as you remember, AirAsia was initially operating out of Subang Airport. the whole airport. And if I remember correctly, somewhere in 2002, they moved to KLIA. Of course, when they moved to KLIA, their business model was different. They were using their own check-in system. We had a common check-in system. We had a baggage system that allows transfer of passengers and all that, but they wanted a dedicated point-to-point baggage system. So we allowed them to use the outlet. out-of-gauge system to collect their bags. We had aerobridges, but they didn't want to use aerobridges. So we allowed them not to use aerobridges. But, you know, we wanted to support their growth. And we knew for a fact that had they remained as they are at the main terminal, they're not going to grow because, you know, they're going to get more and more flights coming in. And, you know, they don't have enough check-in counters. They are using gates with aerobridges but not using aerobridges. So when we discussed with them, we said, look, the best thing for you is in order for you to grow is we build something else for you, whatever it is. So we worked together with them and we looked at about 6 or 7 sites, but we wanted a site where we could build for them as quickly as possible. And that happened to be the cargo area. So in order for us to build a terminal there, we had to build a cargo warehouse. Otherwise, you're not going to get approval. So actually, we built a shell, a cargo warehouse. In hindsight, that was the right decision anyway. And then we worked together with AirAsia and asked them, you can design the interior the way you want it. That means you want to have check-in, how many check-in counters you want. At that time, they had more domestic than international. They want to have a point-to-point baggage system where you just put on the bag on the trolley onto the aircraft. They have their own check-in system. So we allowed them to design the interior. of the warehouse, but it had a warehouse. At that point in time, our decision was that if it succeeds, then we move to a new terminal. If it doesn't succeed, we have a warehouse, ready warehouse anyway. So it was the right decision. But as they went along, their business model changed, and I think they were right to respond to the market. Initially, there was no transfer of baggage. No transfer of passengers. So it became very inconvenient for the passengers to collect their bags, go out of the terminal and check in again. So we devised a way for them to have transfer baggage. Not very much, it's limited. The terminal was small anyway. So they transfer baggage coming in, they transfer passengers coming in, and the passengers demanded it. So they accommodated, and I think they did the right thing. So we went along with it. Then they brought the wide-body aircraft. That terminal was not designed for wide-body.

Justin Giddings:Right.

Bashir Ahmad:They brought in wide-body aircraft, so we have to build a— we expanded the terminal to accommodate the wide-body aircraft. So as their business model changed, we changed the design of the terminal accordingly. But it was not a perfect thing because it was not designed for all those things in the first place. So it's very hard to make up. Talking about a lounge, we didn't have a lounge at that point in time. But the passengers wanted a lounge. So we got Plaza Premium to have a lounge. And And we made a lot of money out of that because the passengers were prepared to pay. Then we had VIPs started travelling on AirAsia. So they wanted a VIP room. So we had a small space in the VIP room. So, but certainly that terminal, it served its purpose because it allowed AirAsia to grow. Certainly had they remained at the main terminal, they would not have grown. And had we waited for us to build a second satellite, it would be too late for them. So we managed to build this terminal within 9 months. And they moved on to this terminal. They, I mean, they could grow at random because the terminal was initially designed for 10 million, went up to 15 million.

John Thomas:Well, and it sounds also from what you said with the speed with which you built it, it wasn't to be, let's say, a Taj Mahal. No, no, no. To Rick's point, it was to a certain extent, it was a shed that was purpose-built very quickly.

Bashir Ahmad:It was built specifically to allow them to grow. and grow fast, quickly. And we knew that once it started growing, we'll have to build another one anyway. And that's how KLIA2 came about, because by the time KLIA2 was built, they were already at 20 million passengers, and that terminal was getting suggested. But the good thing about the LCCT, the first one, was that it definitely allowed them to grow and grow their business model as they wanted, and allow them to also change their business model as it evolved. And that's what happened. Right.

John Thomas:Excellent, thank you. So if you roll forward now, as you said, to KLIA Terminal 2, the website claims that it allows seamless connectivity for both local and international low-cost and full-service carriers. So I'm assuming, again, connectivity between both. So 3 questions here. What drove you from the outset, again, because the interim solution was form-fit to where Asia was at the time, What drove you from the outset to offer this functionality? What were the critical design aspects that allowed this to occur? And after nearly, I think, about 4 years of operations, how effective do you think this has been? And I suppose from an effectiveness standpoint, has, you know, and you may not be privy to the AirAsia numbers, but what percentage of AirAsia passengers passing through T2 And now connectivity versus point-to-point.

Bashir Ahmad:Okay, of course, ideally we would like to see seamless travel, not only within the terminal, but between the 2 terminals. So if we talk about seamless travel, I mean, I won't say it's perfect right now. A passenger can move from Terminal 1 to Terminal 2 and vice versa.

John Thomas:But sorry, this was not specifically AirAsia asking for it, but you thinking that— yeah, yeah, thinking ahead that ultimately, even though they may not want it today, ultimately You think they would eventually want there?

Bashir Ahmad:As an airport, we would like to see seamless travel between 2 terminals, whether it's from low-cost to full-service, and we would like to make provision for that. So what we have right now is that a passenger can move from Terminal 1 to Terminal 2, main terminal to Terminal 2, on the land side very easily. There is a train service, you pay RM2 and you can go across, or you have a bus service. But on the air side, air side, I think Malaysia Airports is prepared to provide busing, but it will need the airlines to agree to interline the passengers. So at the moment, there's no agreement between, let's say, AirAsia and Malaysia Airlines or any other full-service carriers to interline the bags.

John Thomas:Right.

Bashir Ahmad:So that's not available. Not that it cannot be available, it can, but the airlines have to agree. I mean, just like Heathrow Airport, you can move from Terminal 2 to Terminal 3, whatever it is, but airlines must agree to interline the passengers.

Justin Giddings:Right.

Bashir Ahmad:By this stage, there's no such agreement. So what we do have today is very efficient, seamless transfer within the respective terminals. Like in the case of Terminal 2, passengers coming from Asia domestic or regional can connect to AsiaX as well. So within that terminal itself, the connectivity is seamless and is good. But within the 2, at this point in time, only on the land side, yes, but among themselves, no.

John Thomas:Right, right. And so obviously, you've got Some airports around the world, and I think perhaps Gatwick was one of the first with this Gatwick Connect proposition, which basically said, look, the airlines aren't interlining, but is there a way that we can actually keep people airside by actually having check-in counters that are airside so that we can do this more seamlessly? Are they the types of things that we're exploring?

Bashir Ahmad:I think Malaysia Airports is looking at that, yes. Providing busing, but at the same time, I think, I mean, it'd be more efficient if the airlines agree themselves, right, for the passenger. But I mean, airlines have their own business models and we have to accept that.

John Thomas:And any sense, so obviously landside Terminal 1 to T2, any sense that within T2 with AirAsia, say AirAsia X to AirAsia on more of the regional, any sense as to the amount of connections that take place?

Bashir Ahmad:Okay, I think at Terminal 2, if I'm not mistaken, is about 20% right now, right, transfer passengers. The terminal is designed to handle 50% because you've got a huge centre area. But I think right now they're doing around 20%, right? And I think they will continue to do more because as they add more flights, there are more and more transfer passengers, right? Right.

John Thomas:So certainly if you sort of take Rick as perhaps one extreme at the 5%, so at 20%, they're actually They're actually connecting a fair bit.

Bashir Ahmad:Oh, yes. Yeah.

Rick Howell:We actually see double digits on the long-haul to domestic. So, 5% is sort of more the network-wide rather than the specific for long-haul to domestic.

John Thomas:Right.

Bashir Ahmad:I think, I mean, even though Asia started initially as a point-to-point carrier, they have become a very good network carrier right now. Very good, because the way they network their passengers, they've done very well on that.

John Thomas:Right, right. And any sense that— so presumably they think it works well within T2?

Bashir Ahmad:Yeah, hopefully for them, yes.

John Thomas:Yeah, excellent. So Justin, Avalon promotes itself as offering passengers a convenient, uncomplicated, and time-efficient service. And certainly when you've got carriers like Jetstar who on their flights out of Avalon have consistently recorded the highest load factors in the industry. And again, congrats on AirAsia announcing that they're going to switch across to Avalon in the coming months. So as Rick said, a wonderful efficient shed.

Rick Howell:How—

John Thomas:what are the challenges that you face in attracting more flights and airlines here? into Avalon, and perhaps, perhaps without giving too much away, you can sort of tell us some of the, some of the secrets behind the big win with AirAsia.

Justin Giddings:Yep, thank you. So look, without doubt, we're the lowest-cost airport probably in the world, really. So it's not just the terminal, but the world. And so the cost side of it is easy to sell. I think everyone believes us. Where my challenge has been in the past is getting people to believe that we can deliver this, and and do it. You think about where Avalon is at, we're probably— and there'll be people who can give better examples of some— but I can't think of an airport in the world that has started a second international airport against— whilst the major airport has got capacity, or it's not owned by the same secondary airport. So it's— we're actually going head-to-head in competition with Tullamarine and, and trying to achieve this. So, so the challenge has been trust, and I'll give you an example. I spoke to an airline CEO a few years ago, and I wanted them to come into Avalon. It was a low-cost carrier, and I gave them a ripper deal. I offered them a ripper deal, not as good as I offered AirAsia, I must say, but a ripper deal. And he said to me, Justin, I really, really want to do this. He said, but the issue is, if I go into Tullamarine and we just pull out and go to Sydney or go somewhere else.

John Thomas:Mm.

Justin Giddings:He said, if I come into Avalon and it fails, I'll probably lose my job. So there's almost a personal risk for the CEO who is making this. And so, and that's why I'm so obviously grateful, but also encouraged by, you know, not— well, Tony Fernandes and Ben, by, you know, really putting this out. And so when I got asked a similar question by AirAsia, you know, You know, what if we, what if we pull out and it fails? I said, well, we fail too, you know, and it'd be, sure, it'd be embarrassing. They'll go back to tell us, sorry guys, you know, we made a mistake, and they'll go back and it'll be all forgotten. But it'd be terminal for the airport, certainly terminal for me. So we just have to make that happen. So we've gone really, really hard. We've offered a ripper deal. We know that the first couple of years there might be a yield deletion. So we've sort of calculated all that. We've worked very close. We've with AirAsia in terms of marketing. But like I said, we're all about costs today. Our costs are very, very low.

John Thomas:So it's sort of too good to be true. Like, if the costs are that low, they must screw up operationally.

Justin Giddings:That's right. That's right. And it all comes down to the investment we made in the terminal. I mean, all up, we're building a $20 million terminal for AirAsia, which is basically another shed, because we have to build it in 6 months, not 9 months. And so we're building a shed. We're fitting it out as we go. We're negotiating with the Australians government regarding border agencies as we go, and I imagine that we'll be doing that for a couple of months yet, so we can't wait for that. Yeah, so it's just so important that we deliver a product firstly on time that's functional, but it's one that people don't come down and go, oh gee, you know, I wish I'd gone to Tulla. You know, it really does have to come in and go, well, that was easy. It's not going to have all the shops and what Tullamarine has, but it needs to people go, wow, that was good and efficient.

John Thomas:Right, right. So you promote Avalon Airport as only a 30-minute drive to and from the very— the iconic Australian tourism attraction of the Great Ocean Road. So what role does— and again, perhaps reflecting on the AirAsia win— what role do and could the local tourism authorities play in promoting Avalon's access to tourism destinations? Yeah, look, you're sort of there by yourself doing it.

Justin Giddings:It is, it is. Look, we, um, no, no, no, not by myself. But so Grocer and Load last year had 5.1 million visitors, and, and I think it's growing about 13% every year. So it's huge. And we are, like I said, half an hour. If you're flying to Tullamarine, you're about an hour and a half. So I've been approaching Chinese airlines for many years and, and asking them to come in, and without success. A couple of years ago we changed tack and we worked with the local tourism authorities. So there's a Geelong group, there's a Great Ocean Road group, there's a number of groups, which is a bit painful, but unfortunately. And we put together a package to the agents who book the flights, not to the airlines. We actually went to them and we said, when you're flying people through to Sydney, you should get them to fly from Sydney domestically on Jetstar through down to Avalon and then actually get them to encourage to go to Gresham Road because we're so much closer, we're so much cheaper.

Bashir Ahmad:Yeah.

Justin Giddings:And, um, and it works out perfect. And if— and they normally go down there for a day trip, so if they can go down and save an hour, it works out really well for them. And ever since we did that, it's just gone bang, it's taken off. And that's why our loads are so high, because often the planes, especially from Sydney, are full of Chinese people coming down to Gresham Road. So That's what I'm so excited about AirAsia, to be honest, because they connect to these 130 destinations. It's not just a KL for us. I mean, Right. I've been talking to them about, you know, where the passengers are going to come from, and they're talking to me far more than 20%, simply because we don't have any other airlines yet. Hopefully we do, but we don't yet. And so they'll be feeding from the Chinas, from the Indians, and all those other places coming down through us to the Greater Road. But also to Melbourne as well. Most people do go to Melbourne, you know, we have the good connections into Melbourne now. So, but Gradation Road has been tremendous, and it's, and it's also in a marginal electorate, if you understand how all that works. So in Australia, that makes a big sense. So we get a lot of support to help encourage more people and airlines to come through.

John Thomas:But it sounds like some real out-of-the-box thinking about not necessarily going to the airline, but actually going to the tour operators and promoting the fact that sort of should bring more people to Avalon.

Justin Giddings:Yeah, absolutely. So, and it just, it just went bang, you know. Speaking to— I remember there was a, uh, I forget the name of the airline now, uh, the agent now is Shanghai, Shanghai-based one. I went there and I told them where Avalon was and they go, oh right. And then I flew them down, you know, and they had a look and they went down the Great Ocean Road and they go, wow. And so now every time they just go bang, Avalon. And the issue is that sometimes we just don't have the flights. So it's just overwhelming. And you're finding now that a lot of the passengers, a lot of the tourism is FIT, so free independent travel, and they're wanting to come in, hire a car, and then drive down there. Now if you do that from Tullamarine, you've got all the road and the traffic and all that. It's just extra, it's harder, tollways and all these things that they have to go through. Whereas Avalon, there's not even a red light, not even a traffic light down the road. Good, they go straight in. Straight in, yep. But likewise, they can get into Melbourne as well. So it's been a really good change of tack for us.

John Thomas:Right, excellent, excellent. So Rick, just swinging back to alliances, Cebu Pacific is obviously one of the founding members of the Value Alliance formed in 2016. So how important is this LCC-to-LCC connectivity as part of alliance's value proposition?

Rick Howell:It's interesting, John, that in some ways The value alliance is really an electronic alliance in terms of us being able to distribute our flights via the websites of our partners and our partners being able to do the same on ours. The connecting piece, well, that adds some complexity to the business and of course complexity adds cost. And I was acknowledging Bashir's comment about interline. AirAsia doesn't want to do it.

Bashir Ahmad:Yep.

Rick Howell:I completely understand why, because it's actually not just the idea that you actually have to move some bags and move some people. It's actually that you have to develop the systems and put people in place to be able to manage the connectivity. As far as the Value Alliance goes, Still, right now, it is a work in progress. One of our— well, we had a board meeting last week. And it's been about 2 years since we kicked off. Software side continues to develop the— I think we probably see more of the benefit than any of the other partners right at the moment.

Justin Giddings:Right.

Rick Howell:And the connectivity piece is important, but it's similar to the connectivity that we actually see within our own network for our domestic to international or international to domestic. It's not a determinant—

Bashir Ahmad:Right.

Rick Howell:As to whether people will fly on us. Obviously, it's a whole lot better if they're in a position to be able to run a bag all the way through, and in some circumstances that works. But in other circumstances when we're going from, you know, travelling to international versus domestic destinations where there's a distinct change of terminal and a distinct change of airline, it's a little more difficult.

John Thomas:Right, so something that sort of again let people self-interline. Sort of, yeah. And perhaps sort of longer-term opportunity there.

Rick Howell:Yeah, and I think one of the things that low-cost carriers actually— that add complexity to their business, and we're a pretty complex low-cost carrier, to be honest, across the fleets and the network plan. Complexity is expensive. And complexity is a hidden expense. It's actually hard to be able to put your finger on it specifically and say, Oh, I've added this much management effort to deal with complexity. It's not just about the fact that you might have to employ 5 people to be able to man a desk to arrange the interline. It's also the fact that you've added a management function somewhere along the line because somebody has to supervise those people. And then there's the policy discussions and then there's dealing with the customer expectation. And actually it's very easy to distract yourself from what's the sort of the core aspect of being a low-cost carrier. Lose the religion and you're halfway between nowhere and shutting down.

John Thomas:Right, right. So Bashir, we've talked a lot about customers connecting. Again, be they full-service or LCCs, you know, travellers are becoming much more sophisticated and so they're self-connecting. I mean, from an airport's perspective, obviously you want to track that to make sure that you are making the right decisions in terms of the facilities, etc. I mean, how do you actually identify just the number of people that are self-connecting?

Bashir Ahmad:No, I know, actually we have statistics. That's why I could give you the figure of 20%. At the main terminal, it's about 27%. We can monitor these on a monthly basis on who are the people who actually connect and who are the guys who depart the airport. So we do have those statistics.

Justin Giddings:Right.

Bashir Ahmad:And like I said, we've seen it growing, especially for Asia, 5%, 12%, or 20%, I think, and it will continue to grow. And that's a good sign. That's a good sign for us because it means that the airport is starting to become a hub for transfer passengers. And we're happy with that.

John Thomas:Right. And do you sort of use sort of the old metrics minimum connect times to sort of gauge how well you're going with that self-connect?

Bashir Ahmad:Yeah, I mean, we— I mean, I think—

John Thomas:I'm thinking too much like a full-service airline.

Bashir Ahmad:Yeah, of course. I mean, it should be as minimum as possible, but it has to be reasonable as well. So I suppose, you know, normally you gauge about 60 to 90 minutes, right? 90 minutes is quite safe, right? But you can try and push it for 60.

John Thomas:So, on the land side, T1 to T2, it's 90 minutes?

Bashir Ahmad:Yeah, it has to be 90 minutes. Right, right.

John Thomas:Okay, which is actually sort of pretty standard. Yeah, so even with people, let's say, self-connecting, it's really not that much of a deterrent.

Bashir Ahmad:And because people can have their boarding passes right now, earlier on, and if you don't have baggage, 90 minutes easily.

John Thomas:Yeah, right.

Bashir Ahmad:And with baggage, even if you have a You can check in your baggage, you can give your baggage to the counter, 90 minutes is fine.

John Thomas:Yeah, yeah, excellent. So, we left some time for questions. We've got about 5 minutes to go. Any questions for the panellists? We made it all too easy. So Justin, another one for you. I mean, one of the sort of ongoing debates in Australia at the moment is obviously sort of the role of Australia versus New Zealand and whether the Tasman should be domesticated. I would imagine that that would be a pretty significant benefit to Avalon if it if it was domesticated?

Justin Giddings:Yeah, look, definitely. I think just right around Australia, the passenger service charge is $60. So it's crazy, you know, when you're looking at some of the fares, $140, $150, and $60 is taken by the government. They're pretty much the same country, let's face it. So it should be, we should just take them over. No, no, no, we, um, but it is just mad how long it's been going on for would certainly help us for sure, but it'd help Tullamarine and Sydney just as much.

Bashir Ahmad:Right.

Justin Giddings:But it's just about making, you know, everyone can fly, you know, that's what everyone's here for. It's all low cost and being able to get people to fly who normally can't. And if you can take off $60 and make it far more efficient through the terminal, it just makes sense, doesn't it? So, yep, so I would fully support that. I don't think there'd be too many people that wouldn't, but unfortunately It just seems to have hit a gap. And I understand it's the Australian side. I'm not sure, but I think it's the Australian side. And yeah, we need to fix that.

John Thomas:Right, right. And presumably, I mean, one of the arguments has always been, well, sort of the loss of duty-free for the airports and all that. But I would imagine that given how well-developed airport retail has become, that if you look, and I'd be interested, again, you may not be able to divulge it, but When you sort of look at an AirAsia sort of international versus your Jetstar customer, I mean, the average retail spend between an international LCC versus a domestic LCC, do you see or do you think there'll be significant differences?

Justin Giddings:I hope there is, because I've done a lot of assumptions. You know, the money we make on— because our model is all around making money out of the customer, not the airline, and that's a long-term model. Airlines love that. They do, but that has to be the case. You know, when you're a challenger brand, we've got to make it good for the airline as well as the passenger, but it needs to work for them long term. So we have to start making some good money out of duty-free. But look, if they were to— if we were flying New Zealand and we were to lose revenue on duty-free, I think that would be compensated by more people flying and then other airlines coming in to actually feed it. So it'd be more of a hub, and I think you you make that back tenfold. So look, I wouldn't even say that's an argument. I'd say that it just needs to be, you know, it's probably the quarantine side, a bit of a change in the culture of the border agencies, getting their head around it. But yeah, it needs to be done. I don't know if it ever will.

John Thomas:Yeah, excellent. Anyone like to add any closing comments?

Rick Howell:I guess, John, I'd just reiterate that in the same sort of discussion that we had earlier today— and I don't know where Andrew Cohen is, who asked the very leading question about how do LCCs get aircraft manufacturers to understand that they really should be paying attention, because LCCs are where the growth is. And if you keep designing widebodies for full-service carriers, Unfortunately, you're missing the boat. The discussion for, and it's not necessarily for airports like Justin's, because Justin's is a Challenger brand, and we actually negotiated with Justin for a while. It didn't quite work out, but it was certainly not anything to do with Avalon Airport itself. The idea that the controller of the investment purse strings actually continues to understand. And Malaysia is a great example of where an investment in a low-cost terminal actually has changed the economy of the country.

Justin Giddings:Mm-hm.

Rick Howell:Because if you're in a slot-constrained airport, like many of us are, it's a whole lot better to get 430 30 passengers through in one movement than 230. And it might just unfortunately mean that the people that are making that decision aren't your target market. That's clearly acknowledged. But in the developing economies, if as an airport designer you've forgotten to deal with low-cost airlines, you're actually— you're forgoing probably 80-90% of your market.

Justin Giddings:Right.

Rick Howell:And Peter threw up some data this morning about 52% of the domestic market in the Philippines being low-cost. My numbers are actually closer to 85% because we actually have 57% of the domestic market share ourselves as of last month, and I'm fairly sure that we actually didn't slip 5 of those into the full-service category. So, yeah, we're not the— we're never going to be the highlight in terms of, you know, where the politicians go because there's a chairman's lounge, but I can guarantee you that that's actually where the economic growth is going to come from. And if you don't actually— don't focus, as Malaysia did, on encouraging LCC, then you're actually— you're leaving your Yeah, yeah, excellent.

John Thomas:Great way to finish off. Please join with me.

Bashir Ahmad:One more point. I think, you know, we have been discussing about accommodating airline business models from the terminal point of view. I think what's even more important is actually in terms of slots and runways, right? Because there's no point focusing on the terminal, expanding terminals, if you don't have sufficient slots. And that's where I think in the case of Malaysia Airlines, Malaysia Airports, You know, we also built— when we built KLIA2, we also built another runway because what we found out was the low-cost carriers have a lot of movements on small aircraft.

John Thomas:Yeah.

Bashir Ahmad:Because they take up slots, and we cannot have a situation where we build another terminal and you have 2 runways and you congest in the longer term. So we also provided room for growth for the low-cost carriers by building a 3rd runway. And then now we have 78 movements, and by improving the airspace, we will probably go up to 108 movements And our entry runways.

John Thomas:Yeah.

Bashir Ahmad:So actually, we are probably one of the only airports in this part of the world where we won't see any congestion for the next 10 years.

John Thomas:So it's not about just the terminals, it's about the whole infrastructure. Yeah, that's right.

Bashir Ahmad:You've got to provide capacity for growth on the runways as well.

John Thomas:Yeah, exactly. Please join with me in thanking our panellists.

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