The Airport Business in a Competitive...

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AIRDEV 2012 Conference

The Airport Business in a Competitive Environment

Edgar Jimenez, João Claro, Jorge Pinho de SousaINESC Porto

Faculdade de Engenharia, Universidade do PortoMIT Portugal

Lisbon, April 19, 2012

FCT scholarship SFRH / BD / 51128 / 2010

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Beauvais-Tillé airport (BVA) – Terminal 2 arrivalsIn 2011, BVA handled over 3.5 million passengers

_Motivation

Competition

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Athens airport (ATH) – Operations control centreThe relevance of non-aeronautical activities only increases complexity

_Motivation

Complexity

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How can airports do better?

_Motivation

Opportunity

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Outline

1.The trend-breakers

2.The airport customers

3.The competitive environment

4.The airport business

5.The strategies

6.Final remarks

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1· The trend-breakers

_Trend-breakers

Liberalisation

Competitionbetweenairlines

Airportownership

LCCgrowth

Freedomof choice

Non-aeronauticalrevenue

Low-costairports

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2· The airport customers Airports have evolved from infrastructure providers to

commercial multi-service firms.

An airport-airline-passenger chain is no longer valid to define the customers of such firm.

Our proposition:

Special group: Non-user stakeholders

Trend-breakers>Customers

Aviationtrade Individuals Commercial

trade

Air side Land side

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2· The airport customers

Aviation tradeCommercial airlinesGeneral aviationTravel agents and tour operators

Individuals

PassengersVisitorsLocal residentsEmployees

Commercial trade

Tenants and concessionaires (business partners)Local and global businesses and institutionsOther airports

Non-user stakeholders

National/regional/local governmentsTourism promotersRegional/local development associationsRegional/local commercial associations

Trend-breakers>Customers

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3· The competitive environment

Trend-breakers>Customers>Competition

When you look at an ordinary map you think there’s no more airports, in actual fact the place is absolutely awash with airports.Michael O'Leary, Chief Executive, Ryanairin “No Frills” by Simon Calder (p. 110)

The OpenFlights Airports Database as of January 2012www.openflights.org

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European airports that had a direct passenger commercial flight from OPO, LIS or FAO between 2001 and 2010.

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Provision of services to airlines Hub Traffic node Airline station Airline base

Examples Philadelphia vs. Pittsburgh:

US Airways shifted hub Lisbon vs. ?:

TAP privatisation New European destination:

For an Asian/Middle East carrier Lisbon vs. Rest of Europe:

easyJet new base

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Provision of services to airlines Network provision (air and land) Access to low fares Airport convenience (location,

services, “easy of use”, bypass)

Examples Porto vs. Vigo Brussels/National vs. Brussels

South Charleroi Porto vs. Lisbon London/Gatwick vs. London/

Stansted London/City vs. London/xxx

Traffic: Outbound (catchment area)

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Provision of services to airlines Congestion/Expansion Airport convenience (loyalty,

location/detour, services) Low travel cost

Examples Frankfurt vs. Paris/CDG vs.

Amsterdam vs. London/Heathrow All above vs. Dubai All above vs. London/Stansted vs.

London/Luton vs. Frankfurt/Hahnvs. Paris/Beauvais...


Traffic: Transfer

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Provision of services to airlines

Tourism attractiveness Airport services and activities Hinterland development

Examples Faro vs. Palma de Mallorca vs.

Casablanca But also Faro vs. Geneva! Vancouver airport Zurich “The Circle” vs. Frankfurt

Airport City


Traffic: Transfer

Traffic: Inbound (destination)

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Consultancy Management or acquisition of

other airports Management of terminals

or retail areas in other airports

Examples Airport companies Airport – airline “alliances” Property developers Other transport companies


Traffic: Transfer


Global competition

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Access to grants Tax reductions Incentives Private investments

Examples Spanish airports (AENA) Initiative: pt London/Luton


Traffic: Transfer


Global competition

Competition for funding

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High speed railways Long distance coaches Private car

Also complementarity Air + rail Air + bus (especially low-cost)


Traffic: Transfer


Global competition

Competition for funding

Competition with other modes

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4· The airport business

Trend-breakers>Customers>Competition>Airport business

The airport business network

Agents

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Approaches to the airport business in relation to the “service packages” implementation

Public utility provider

Multi-modal interface

Commercially oriented

Consumer oriented

Airport city

Global business

Infrastructure andaeronautical services

Transport network

Retail and nonaeronautical services

Activities and events

Real estatedevelopment

Consultancy andmanagerial services

Aeronautical revenues

Non-Aeronautical revenues

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5· The competitive strategies

Porter's generic competitive strategies Focus (Niche segmentation)

− Al Bateen Executive Airport – Abu Dhabi

− Cascais Tires Airport – Lisbon

− Paris Beauvais-Tillé Airport – France

− Chicago Rockford Airport - USA

Cost leadership− Normally associated only to airport fees

− Risk of increase congestion, thus decrease competitiveness

− Useless, if lower aeronautical revenues cannot be compensated with higher non-aeronautical income

DifferentiationTrend-breakers>Customers>Competition>Airport business>Strategies

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Trend-breakers>Customers>Competition>Airport business>Strategies

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Trend-breakers>Customers>Competition>Airport business>Strategies

Example. Necessary elements for a competitive strategy that focuses on network provisionas a differentiation factor

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6· Final remarks

New dynamics in liberalised markets force airport managers to develop strategies to create competitive advantage.

Indeed, there is an increasing awareness from airport operators regarding this issue.

It is crucial to align the goals of competitive strategies with those of infrastructure planning.

Trend-breakers>Customers>Competition>Airport business>Strategies>Final remarks

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6· Final remarks

Bear in mind:

Low-cost carriers keep on growing using point-to-point networks.

“Traditional” carriers will strive to get their costs down, and/or focus on long-haul and more profitable segments.

Freight integrators (express cargo) are among the largest airlines in the world, and they are developing their own network of airports.

What business models will appear next?

Trend-breakers>Customers>Competition>Airport business>Strategies>Final remarks

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The Airport Business in a Competitive Environment

Edgar JimenezMIT Portugal – Transportation Systems

PhD Student

[email protected]@gmail.com

The Airport Business in a Competitive...

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