CHAPTER 9

Summary of Findings

Drawing on the research detailed in Parts I and II, several findings were identified as outlined below. These findings informed the development of the shock events methodology described in Part III.

Current Approaches to Shock Events

• Shock events are often overlooked or underresearched when considering projections of the future, both in the aviation sector and in many other sectors of the economy. This can be due to a lack of information, a lack of imagination, or an unwillingness to consider the unthinkable (e.g., “That’s too horrible to consider,” or “I wouldn’t know what to do so I’ll ignore it.”), or a combination of these factors.
• Shock events are often given a low probability of occurrence, which gives them a small weighting in decision-making and a small impact on the modeling (e.g., even where Monte Carlo risk analysis is used for forecasting airport traffic, the perceived low probability of a shock event has little impact on the overall forecast). However, the shock event probability is subjective because typically there are no past experiences to draw on. Shock event probability can also reflect the biases of the decision-makers as much as any objective truth (“I don’t want it to happen, so I give it a low probability.”).
• The literature refers to black swan events (an event that “came out of the blue”), grey swan events (some warning signs were present), and grey rhinos (“it was staring us in the face, but we ignored it”). Ultimately, these characterizations are moot and often a matter of perspective. What is a black swan to one group may be quite obvious to another. However, they do illustrate the need for an open-minded and imaginative approach to potential shock risks.
• Airport managers are not naive to the risk of shock events. However, it is generally not a major focus for managerial and operational planning. For example, the master planning process in the United States is largely guided by the base case or most likely forecast.
• Many airports engage in ERM, and all commercial airports in the United States operate to very high standards in regard to safety and security and, as required by law (14 CFR § 139.325), have an airport emergency plan to deal with accidents, bomb incidents, fires, natural disasters, etc. However, now these plans are often more focused on operations, security, or safety and less strategic in nature. Furthermore, one criticism of ERM (not just at airports) is that it often tends to focus on compliance and known or familiar risks and less on rare events. Nevertheless, this approach to emergency planning, which is in the DNA of U.S. airports, could act as a template for approaches to more strategic shock events.

Shock Event Identification

• Good methods for shock event identification are available, but there needs to be more focus on contrarian, left-field, devil’s advocate approaches. There is a need to consider the less familiar and less comfortable possibilities when identifying shock events. For example, the Delphi method, which is a well-established iterative approach to gathering information from experts and knowledgeable stakeholders, has been put forward as a means of risk identification. However, Delphi is often focused on achieving consensus. This can result in fewer mainstream views being overlooked—and perhaps not a useful approach for identifying rare shock events. Therefore, the method used for shock event identification needs to ensure that “Cassandras” are heard. In Greek mythology, Cassandra was granted the gift of prophecy but also cursed so that nobody would believe her warnings. Thus, she could neither alter events nor convince others of the validity of her predictions.
• Any identification exercise is not about identifying all possible events in all possible detail (although there can be a positive impact in this regard). Undoubtedly, some events will be missed or occur in ways that were not anticipated. Rather, shock identification should be about opening management and planning thinking to the possibility of these events. After all, shock events for airports often result in dramatic changes in traffic volume or mix, regardless of the cause.

Forecasting and Modeling

• There are no effective methods for predicting shock events, particularly for a long-term outlook. Models are often based on some form of historical data, and many shock events have no relevant precedent. Attempts to predict the occurrence and timing of shock events, such as earthquakes or terrorist events, require impractical (or impossible) levels of information and computation and have a poor track record. Similarly, forecasting methodologies in the financial sector have poor track records.
• To quote statistician George Box, “All models are wrong, but some are useful” (Box 1976). The inability to accurately predict shock events does not mean that there is no value in forecasting. What remains useful is forecasting in this context what could happen if an event did occur, often referred to as scenario forecasts.
• Scenario forecasts are not uncommon in air traffic forecasting [several examples are given in ACRP Report 76 (Kincaid et al. 2012)], but generally, they are an adjunct to the main forecasts that drive an airport’s strategic planning and its master plan. There is a need for a wider range of scenario forecasts to be given greater attention and consideration.

Addressing Shock Events in Planning and Strategy

• Scenario planning holds promise as a way of exploring how an airport would be affected by a shock event and how it could respond. This would involve more than producing a forecast but also considering in some detail how the airport could respond, e.g., how the airport’s development might change, financial impacts, or more strategic aspects. It would involve undertaking exercises with relevant parties to consider impacts and approaches.
• As a result, airport plans and strategies could be modified to ensure that there is robustness and readiness built in, where possible. The output could also include the development of response plans or contingencies (similar to emergency response plans) that the airport could draw upon if an event occurs.

• A common theme in the literature on strategic planning under uncertainty is the need for full organizational engagement. It is not sufficient to simply identify risks or possible shock events as an exercise. This information needs to lead to meaningful organization changes and for the organization to be responsive and proactive to these risks. This should not be a one-off exercise that then sits on a shelf. It needs to be a living plan and updated frequently. Also, it must be recognized just because an airport has done the exercise, it does not mean it is now risk-proof. Constant engagement and vigilance are needed.
• While history is an imperfect guide to the future, there are lessons to be learned from past shock events. Therefore, the information on COVID-19 and other shock events in Part I will have significant value.