Jost Lammers, CEO of Budapest Airport, was named the Budapest Business Journal Expat CEO of the Year for 2016 on January 22. After receiving the award, he spoke to us about working and living in Budapest – and the challenges and rewards of operating an airport.
When you arrived here in 2007, was it your first visit, or had you seen much of the country, and Budapest, before that?
No, I had been here earlier; if I recall correctly, I was here in 1990 and again in 1996 for one or two weeks each time with my friends and immensely enjoyed it.
What are some of the biggest challenges to doing business here, as opposed to doing business in Germany?
We Germans are sometimes called bureaucratic by other nations but in this sense we can share this position with Hungary. Just to throw some light on why I say this: It took more time to get all the necessary permits and papers from dozens of authorities and institutions to build SkyCourt here at the airport back in 2009-2010 than to actually build it, though it was a €100 million complex construction. In my view red tape is slowing down the economy and despite some breakthroughs being made, much more could be done.
What are some of the benefits of doing business in Hungary?
As an airport operator, we are benefiting from the growing attractiveness of Budapest as a travel destination for the inbound traffic. The City of Budapest, the national tourism organization, Budapest Airport and many other stakeholders have developed over the last few years an excellent cooperation in marketing and promoting Budapest in European and overseas markets, for example the strong demand for river cruises is a joint success story. Major events like Formula 1, Red Bull Air race, Sziget Festival and all the cultural and upcoming sports events are also very important elements helping airlines launch new routes or increase flight frequency to Budapest each year.
With regard to the outbound passenger and cargo segments, they too are benefiting from the positive development of Hungarian macroeconomics in recent years.
In early 2012, well after you took over at the airport, Malév Airlines folded, potentially dealing a blow to passenger traffic. How did you react to that event? Has the absence of a national carrier actually given you the freedom you needed to increase passenger numbers or was it a setback you had to overcome?
It was the most severe blow that an airport can suffer, believe me. We anticipated this in a way, but never thought it would happen so quickly and with such devastating effect. We not only lost approximately 36% of our passenger traffic, but almost 50% of Budapest Airport’s revenues in 2012 since Malév was based here with offices, hangars, storage facilities, aircraft, crew rooms etc. We had to react immediately and had to introduce extremely strict financial measures in order to survive, including downsizing our staff by more than 200 people due to a lack of work for them. In parallel we put maximum effort and resources on our marketing and sales activities in order to recover traffic. We were talking to airlines all over the world to convince them that Budapest and Hungary are perfect leisure and business destinations for all kinds of travelers and thankfully many airlines took up the opportunity. Looking at the passenger numbers now, we can be very proud of the team at Budapest Airport for meeting this significant challenge.
What have been the major factors to achieving the spectacular growth in passenger numbers at the airport?
There might be several parallel answers for the growth. Hungary and Budapest have become a very attractive tourist destination for all age and income groups. There are a variety of activities one can do when visiting Budapest, including cultural activities such as the opera, classical concerts at the Palace of Arts or MÜPA, and visiting the numerous museums whilst you can also enjoy a rich and eclectic night life in many of the now world famous ruin pubs or festivals. Not to mention the year-round spa bath capabilities. When underpinned with the forint representing great value when compared to other EU currencies, it is one of the best city break destinations in the world. Also, the Hungarian economy has come out of the European financial crisis much stronger than others, with local GDP outperforming most of Europe and this has presented disposable income for Hungarians in the last five years alone. The number of Hungarians traveling has grown by 10% and now accounts for 52% of total travelers, which ironically is much higher than when Malév existed as it carried many foreign transfer passengers through the airport. With these dynamics, airlines are adding Budapest to their networks, especially as kerosene prices remain very low.
What is the impact on the local economy of higher airport numbers?
There are several ways of measuring it, but one thing is sure – higher passenger numbers and more flights and more destinations create more jobs both in aviation and at the airport and also in tourism and within the business community. Our joint study with University of Szeged economists found that every extra one million passengers at the airport will create around 1,300 new jobs in Hungary, not to mention the billions of forints in taxes created for the economy by not just the visiting tourists and business travelers but also from contributions from the additional employees too. This is what really matters. We should also mention that just last year we had approximately 6% increase in air cargo. One would be surprised to learn that since we have Air China flying the Beijing-Budapest route, the 12 ton cargo capacity of the aircraft is very much used by Hungarian companies from the automotive, pharmaceutical or electronic industries exporting their goods to China.
Other major developments in your tenure included the closing of Terminal 1 and the expansion of Terminal 2. What was the impetus for this work? What were the challenges?
Every major investment is a challenge in itself but the extra burdens created for an operating airport are considerably higher than a greenfield site for that matter. An example would be to think about the security aspect of a major construction site at the airport where building materials need to be transported between daily flights through the apron or across runways. This requires meticulous planning and coordination. Whilst building SkyCourt, an exciting moment came when the developers assembled 70-ton steel beams of 70-meter spans designed to hold the curved ceiling of the building and as they were lifted into place, it was similar to watching an orchestra being finely directed by the conductor. Such memories are priceless...
The greatest achievement is still in my view the delivery of more than €360 mln of investment, and further to that delivering SkyCourt on-time and strictly within the planned budget. This rarely happens with investments of this size; just think about Vienna, where costs were doubled, apparently, and delivery was two years behind schedule. Or Berlin-Brandenburg Airport which is still not open!
Closing down Terminal 1 after the Malév collapse was a logical operational and an economic decision. It is very expensive for all market players to keep double operations in two terminals. Moreover, the building structure became increasingly challenging for modern airport needs, especially in the areas of security screening. There was simply not enough room for the efficient and extra security scanners of today in a building from the early 1950s with national heritage protection. We have found other uses for the wonderful old building that we have to preserve as a historic monument: we use it for events, concerts, conferences and also for film-shooting, so contrary to what people believe, it is still used in some capacity.
We’ve heard about plans for a new hotel and expansions at Terminal 2: What are some of the more exciting changes coming to Budapest Airport?
With the pace of traffic growth we already have to think about the future. The present airport facilities can handle up to approximately 12-13 million passengers and we may reach this target in about three years’ time. In anticipation of this, with a target start date of Q4 this year, we will start the construction of a new pier expanding the size of Terminal 2B with 7-10 aircraft stands, some of which will be designed to cope with the growth of long-haul wide-body aircraft, since we have in the last 12 months alone welcomed Air Transat, Emirates and Air China, which will be complemented by a new Air Canada Rouge service to Toronto from this summer. Of course, we would still like to connect with destinations in the United States, Japan and Korea as priorities, which is why our work and coordination with the Hungarian Tourism Office and foreign ministry continues to be high on our agenda this year.
We also invest into modernizing airport infrastructure, which cannot be seen but is essential for safe operations like state-of-the-art new ILS (Instrumental Landing System), new ground lighting, or energy-saving boilers for the whole airport.
As an umbrella to all of these planned works, as well as highlighting some exciting additional developments, we expect to be ready with details of our next major investment program for the period 2016-2020 by Q2 this year.
This is not the first award recognizing your efforts: You won the Entrepreneur of the Year in 2014, for example. You have also overseen enviable growth in the volume of business you handle. What tips can you offer CEOs looking to succeed – especially those looking to succeed in this market?
There are lots of talented young people in Hungary, well-trained and eager to deliver at lots of companies. I think here at Budapest Airport, by being transparent about our vision and with our open leadership style, we have invested in trusting these young managers and they have helped us in return by delivering the targets.
Is there anything else you would like to add?
I believe it is a very exciting moment in time to live and work in Hungary. Budapest is a beautiful and fantastic city, continuously developing and changing. I have no doubt that we will see growing tourism and more foreign business people, more FDI and more international companies discovering all these positive developments in Hungary. Therefore I believe the best for the capital city and the airport is yet to come! As expats living in Hungary, all of us can contribute to this by being an ambassadors in our home countries and sending out the message that many things are moving in the right direction in Hungary, making it a very attractive place with lots of opportunities.