1
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
2
Beauvais-Tillé airport (BVA) – Terminal 2 arrivalsIn 2011, BVA handled over 3.5 million passengers
_Motivation
Competition
3
Athens airport (ATH) – Operations control centreThe relevance of non-aeronautical activities only increases complexity
_Motivation
Complexity
4
How can airports do better?
_Motivation
Opportunity
5
Outline
1.The trend-breakers
2.The airport customers
3.The competitive environment
4.The airport business
5.The strategies
6.Final remarks
6
1· The trend-breakers
_Trend-breakers
Liberalisation
Competitionbetweenairlines
Airportownership
LCCgrowth
Freedomof choice
Non-aeronauticalrevenue
Low-costairports
7
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An airport-airline-passenger chain is no longer valid to define the customers of such firm.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
8
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
9
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
10
3· The competitive environment
Trend-breakers>Customers>Competition
European airports that had a direct passenger commercial flight from OPO, LIS or FAO between 2001 and 2010.
11
3· The competitive environment
Trend-breakers>Customers>Competition
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
12
3· The competitive environment
Trend-breakers>Customers>Competition
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)
13
3· The competitive environment
Trend-breakers>Customers>Competition
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: Outbound (catchment area)
Traffic: Transfer
14
3· The competitive environment
Trend-breakers>Customers>Competition
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: Outbound (catchment area)
Traffic: Transfer
Traffic: Inbound (destination)
15
3· The competitive environment
Trend-breakers>Customers>Competition
Provision of services to airlines
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: Outbound (catchment area)
Traffic: Transfer
Traffic: Inbound (destination)
Global competition
16
3· The competitive environment
Trend-breakers>Customers>Competition
Provision of services to airlines
Access to grants Tax reductions Incentives Private investments
Examples Spanish airports (AENA) Initiative: pt London/Luton
Traffic: Outbound (catchment area)
Traffic: Transfer
Traffic: Inbound (destination)
Global competition
Competition for funding
17
3· The competitive environment
Trend-breakers>Customers>Competition
Provision of services to airlines
High speed railways Long distance coaches Private car
Also complementarity Air + rail Air + bus (especially low-cost)
Traffic: Outbound (catchment area)
Traffic: Transfer
Traffic: Inbound (destination)
Global competition
Competition for funding
Competition with other modes
18
4· The airport business
Trend-breakers>Customers>Competition>Airport business
The airport business network
Agents
19
4· The airport business
Trend-breakers>Customers>Competition>Airport business
The airport business network
20
4· The airport business
Trend-breakers>Customers>Competition>Airport business
The airport business network
21
4· The airport business
Trend-breakers>Customers>Competition>Airport business
The airport business network
22
4· The airport business
Trend-breakers>Customers>Competition>Airport business
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
23
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
24
5· The competitive strategies
Trend-breakers>Customers>Competition>Airport business>Strategies
25
5· The competitive strategies
Trend-breakers>Customers>Competition>Airport business>Strategies
Example. Necessary elements for a competitive strategy that focuses on network provisionas a differentiation factor
26
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
27
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
28
The Airport Business in a Competitive Environment
Edgar JimenezMIT Portugal – Transportation Systems
PhD Student
[email protected]@gmail.com