Ken O’Toole: ‘A lot of airports don’t have a clue what airlines want’
Stansted Airport CEO sees baggage-transfer innovation as key part of €675m expansion
Ken O’Toole: as chief executive of Stansted, he’s steering the airport’s £600 million expansion plan
Ken O’Toole, wonders if architect Norman Foster ever anticipated the pace at which London Stansted Airport would grow when he designed its terminal building. Foster won awards for the structure, which opened in 1991, but with passenger numbers heading for 28 million, it is now bursting at the seams.
Stansted has Europe’s biggest short-haul network. Around 21.4 million of those passengers fly with Irish giant, Ryanair, O’Toole’s former employer, whose biggest base is at the airport in south eastern England.
O’Toole took over as Stansted’s chief executive a year ago. The Corkman is now overseeing the building of a new arrivals building, next to the architect’s prize winner, which will give the airport space for 43 million passengers.
With preparatory work underway, anyone leaving the terminal to catch buses, trains or cabs can see builders’ hoardings if they glance to their left.
Once the new building is complete, Stansted will turn the existing arrivals section into an expanded departures area. “Then you are left with basically a new departures building and a new arrivals building,” O’Toole says.
Simple really, only Stansted must complete the new structure by August next year – around 18 months after main contractor, Mace, begins work in earnest. “It’s tight,” he agrees. “But we had four top-tier UK and international contractors bid for the job.We were very clear about what our programme was, and they all felt that, whilst it was challenging, it was feasible.”
He argues that design is often the complex part of a big project. Once you start building, you’re moving.
O’Toole has been here before. He worked on a similar project in Manchester Airport – Stansted’s parent – before handing that £1.2 billion (€1.35 billion) job over to the contractor and moving south to his current role at what is one of three London gateways. “Manchester is going well, so that gives me some confidence about our process.”
Nevertheless, you get the feeling that he will be making a few trips from his modest corner office in a block at the opposite side of Stansted’s terminal to the site of the new arrivals building to keep an eye on progress.
The work is the first step in a £600 million (just over €675 million) expansion designed to give the airport scope to handle 15 million more passengers a year and add long-haul business to its successful short-haul routes.
It is a big bet on the part of owner, Manchester Airports Group (MAG), which wants to cash in on Stansted’s status as the only London gateway with immediate room to expand and its location between the British capital and Cambridge – home not just to a historic university but also to a collection of high-tech and science-oriented companies that need to connect with the rest of the world.
Stansted won approval for its plans late last year from Uttlesford District Council, following a consultation and formal application process that took more than 18 months. Central to this was the local authority’s agreement to lift the airport’s passenger cap from 35 million to 43 million.
Crucially, the airport will remain within agreed noise levels and a condition limiting the number of aircraft landings and take-offs to 270,000 a-year. Those numbers now stand at 200,000.
O’Toole says that new technology will allow Stansted to grow without breaching planning limits. He points at a plane parked at a hangar visible from his office. “If you look at that aircraft out there, the 737-800, the next generation of that actually has an extra nine seats but the noise is 50 per cent lower.”
The aircraft’s manufacturer, Boeing, and its main rival, Airbus, are building new versions of their planes that carry more people, burn less fuel and make less noise. “That’s how we can get 43 million passengers from the same number of movements.”
Over in west London, Heathrow has parliamentary backing for a new runway, but that could take a decade or more to materialise. In the meantime, both it and Gatwick are full. That leaves Stansted with its approval to take 15 million more passengers.
O’Toole believes that it will mop up half of the British capital’s air transport growth over the next decade, giving it a balance of both long- and short-haul services.
“We sit equidistant between the city and Cambridge. The London-Cambridge corridor, it’s high-value, high-tech life sciences, R&D. AstraZeneca has just established its global HQ up in Cambridge. That transformation of those economic centres in the last 15 to 20 years is seeing a huge amount of demand for travel in this particular area.
“Historically, they’ve had to travel around to Heathrow, around the M25, to have their long-haul travel needs met. If you speak to any of the CEOs of the pharma or the life sciences businesses up in Cambridge, they’re telling us they’re having to commit two and half to three hours of their time to get around the M25 to pick up a flight: we’re 20, 25 minutes.”
Emirates began a daily service to Dubai last June and wants to double that in June this year. O’Toole argues that the Gulf carrier’s success illustrates the pent-up demand in Stansted’s catchment. However, he is not forgetting the airport’s bread and butter short-haul business.
In fact, he wants to connect those operators with future long-haul customers in a proposal that that he stops short of calling “transformative”, preferring “evolutionary” instead.
O’Toole points out that low-cost flying is spreading from Europe to destinations further afield such as North America.
“The traditional alliances or large carriers are being disrupted by some of these other players, and one of the things certainly as we look to invest £600 million is the ability to start to link low-cost carriers with long-haul carriers and having a product that actually makes that really easy to do.”
He is talking about the airport managing the transfer of passengers between airlines. Normally, either the carriers handle this or travellers do it themselves. For example, Aer Lingus offers flights from Europe to North America changing in Dublin, handling baggage changes itself.
Agreements between airlines allow passengers and their baggage to transfer from one to the other, which is convenient for the customer but not so easy for the companies, as it involves a lot of administration. If customers transfer themselves, and have checked baggage, they need to collect it after their first flight and check it in with the new airline, for their second flight. This is increasingly common – Emirates and easyJet offer so-called self-transfers at Gatwick. Passengers can buy tickets for the two flights in one transaction but are responsible for getting baggage from one to the other.
“We’re looking at a product that actually takes the best of both worlds. It’s really good for the passenger, it’s really good for the airlines – and when I say it’s good for the airlines, they really don’t need to worry about all this administrative stuff. We will facilitate that.”
Stansted will provide software that will communicate between two airlines’ booking systems, so it can track where the baggage is supposed to go. Physically, the airport will treat the bags as if the carriers have an interline agreement, moving them from one craft to the other and so eliminating the need for multiple check-ins.
O’Toole is hoping to launch the service this year. Stansted is already discussing it with airlines. He argues that once low-cost carriers such as Ryanair do not have to change how they operate, they will bite.
“If we can provide them with an opportunity that can create additional demand, that doesn’t see them taking responsibility for missed connections or stuff like that, makes it easy to integrate into their booking flows, why wouldn’t they take that opportunity? They don’t have to do much for it – in fact, they don’t have to do anything for it.”
He won’t comment on Ryanair’s response but instead points at its efforts to do a transfer deal with Aer Lingus and the fact that the carrier already offers transfers between some of its own services through Italian airports.
O’Toole reels off a list of places, including Cork and Billund in Denmark, with frequent daily Stansted flights but with little or no long-haul or transatlantic services. “And in many of those cases – and I say many because I don’t want to be disrespectful to any of them – the likelihood of them getting transatlantic or long-haul services is quite low; not impossible, but quite low. So there’s a potential for them to come here. Some of these already are taking lots of volume through places like Amsterdam or Frankfurt – or dare I say London, or dare I say Dublin.”
So can his airport add the long-haul services that make up the other side of the equation?
“There’s demand for probably 30 long-haul routes from people literally living within an hour and a half to two hours of Stansted... I’m pretty confident that we are going to give airlines the confidence that Stansted can meet their mid- to long-haul development plans in London.”
If this sounds familiar, it’s because it is. At one point, O’Toole compliments Aer Lingus’s and Dublin’s move to develop the Irish airport as a transatlantic hub. He sees similar potential at Stansted, albeit with a broader mix.
So, yes, the two are competitors, but he adds that he is also up against the likes of Zurich, Copenhagen and Oslo. All of them are in the top tier of Europe’s airports. “That’s the market in which we are operating.”
Airlines will put their craft where they believe they will make money. Stansted, like all UK airports, suffers one disadvantage – travel tax, levied at £14 (almost €16) on every passenger leaving on a short journey and £70 (€79) on those taking longer trips. British aviation, including MAG, is lobbying hard for a reduction.
Another obvious challenge – one which also threatens the Republic – is Brexit. MAG believes this will slow growth over the long term, but O’Toole maintains there will still be enough to support expansion. A threat of grounded flights in the immediate aftermath of the UK’s exit from the European Union still hangs over the industry, particularly in a no-deal scenario.
O’Toole points out that Westminster and Brussels have been clear that UK-EU flights will not be grounded in those circumstances. “If you speak to airlines, that message has filtered out into public awareness because there’s no reference to any fall-off to any future bookings, which, I suppose, is a key illustration of what people are hearing and whether they are believing that.”
In the meantime, it’s business as usual. Stansted now has 23 airlines, from just eight when MAG bought it in 2013. O’Toole maintained this momentum by hiring former airline executives for his commercial and development departments. “I’ve taken a pretty conscious decision to staff the aviation team with ex-airline people because my own experience told me that a lot of airports don’t really have a clue what airlines want.”
That experience was six years with Ryanair. While Stansted is building new relationships with Emirates, Jet2 and others, its chief executive recognises that his old employer remains central to the business. “I think it’s useful to have an appreciation of how they may be thinking. They’ve done very well out of Stansted over the five years that MAG has owned it, but likewise it’s been a good partnership for Stansted, and also for MAG overall.”
O’Toole joined Ryanair as a revenue manager before moving to new route development. Those roles meant he worked closely with its two former deputy chief executives, Howard Millar and Michael Cawley, and, obviously, their boss, Michael O’Leary. Route development gave him a good insight into what drives the company’s decisions.
“Ryanair’s decisions are all about the long term. And I think that was probably one of the best lessons that I learned. Ryanair will take some short-term pain for the long term if it’s the right long-term decision, and not all companies and organisations will do that, and certainly not all publicly-listed companies.”
He joined Ryanair in a “blind leap of faith” in 2006 from the supermarket company Musgrave Group, where he had begun in finance but moved into a commercial job.
O’Toole originally qualified as a chartered accountant, joining Deloitte straight from St Aidan’s Community College in Cork. At the time, such firms sponsored students.
“I was lucky enough to do well in my Leaving. I knew where I wanted to go, so it was the quickest route there. It was six-year course. I was doing my exams at 21. I was out the gap at 23. I was pretty young for a chartered accountant. I went to London for three years. I went working for one of the investment banks, which was good experience but probably more driven by just getting over to London to see a bit of the world.”
O’Toole swopped aviation industry sides when he joined MAG, and its board, as chief commercial officer in 2012. One of his first tasks was the purchase of Stansted. He then became chief executive of Manchester Airport while it was adding destinations such as Beijing, Hong Kong and San Francisco.
After working on its £1.2 billion redevelopment, he switched with his opposite number at Stansted, Andrew Cowan, a year ago, “so that’s how I ended up – circuitously – to where I am today.”
Name Ken O’Toole
Post Chief executive, Stansted Airport, England
Why is he in the news? Stansted has begun a £600 million expansion designed to take it from 28 million passengers a year to 43 million and add long-haul services to its successful short-haul business
Family Married, with four sons and a daughter
Interests Sport. He recently did his first triathlon
Something that won’t surprise He’s a qualified chartered accountant
Something that might surprise He commutes every week between the family home in Cork and Stansted