2010 Airport Marketing

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2010/3/4

Lecture teaching:Suiling,Li Associate professorE-Mail:[email protected]:06-9264115-5519

Airport Marketing

2010/3/4 airport marketing 2

The Issues of Managing Airports

• The changing nature of airport• Airport economics and performance benchmarking• Service quality and its measurement• Airport-airline relationship• The provision of commercial facilities• Airport competition and the role of airport marketing• The economic and social impact of airports• The environmental impact of airports

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The Airport Enterprise: Role and Scope of activity

• The Role and Scope of activity of the Airport Enterprise

• Fund-Raising Activity and Main Governance Patterns in the Airport Business

• Industry-Specific Reasons for low Competition in the Airport Industry

• The International path of Evolution in the Airport Business


The Role and Scope of activity of the Airport Enterprise

• The economic impact on countries and regions• The Logistical and Infrastructural Dimension• The Hub Dimension in the marketing of places’

Perspective• The marketing Dimension of airport enterprises

in the air transport value chain• The Political value of airport enterprises

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Fund-Raising Activity and Main Governance Patterns in the Airport Business

• Financing and Fund-Raising Phase• Governance Phase

– Direct government control– Decentralized public control through airport

authorities– Mixed public/private control– Private ownership programs


Airport privatization through share flotation

22%IPO and 28% secondary offering

2000Switzerland : Zurich35%IPO and trade sales2000China: BCIA18%IPO1999Malaysia: Malaysian airport51.6%IPO1998N. Zealand : Auckland

45.5%IPO45.5% secondary offering

19972001

Italy :Rome

25%IPO24% Secondary offering

19941996

Denmark :Copenhagen27%IPO1992Austria: Vienna100%IPO1987UK:BAA

Type of saleDateAirport

Source: Graham, 2001

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Airport Privatization through trade sales

Various1001998Australia:15 remaining major airports (excluding Sydney)

Infratil661998N. Zealand:Wellington

Frankfurt airports301998Germany : Hannover

ADRI South Africa Consortium (ADR has 69% share)201998South Africa: ACSA

TBI901998Sweden: Skavsta Stockholm

Various1001997Australia: Brisbane, Melbourne, Perth

BAA701997Italy :Naples

Peel Holdings761997UK: Liverpool

Firstbus511997UK: Bristol

Aerrianta/Natwest 40%,other private investors 11%511997UK: Birmingham

TBI1001996UK: Belfast Int.al

National Express1001995UK: Bournemouth

TBI1001995UK: Cardiff

Regional Apts.Ltd.1001994UK: Southend

National Express1001993UK: British Midlands

British Aerospace1001992UK: Prestwick

British Aerospace761990UK: Liverpool

BuyerShare of apt. sold (%)DateAirport

Source: Graham, 2001


Industry-Specific Reasons for low Competition in the Airport Industry

• Two additional industry-specific elements that may help to explain airport fragmentation

• International regulatory framework Industrial and financial centers both airlines’ productive decisions and customers’ purchase choice are narrowed

• Open Skies Policies• Hub-and-spoke vs. non-stop threat

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The International path of Evolution in the Airport Business

Top 20 Airport groups by revenue

Luftfart.tH.Kong Apt.Schiphol G.KIA

NAAADP

Port Authority NY/NJ

AenaFraportBAA plcApt. Group

SwedenChinaHollandJapan

JapanFrance

USA

SpainGermanyUKCountry

ARNHKGAMSKIX

NRTCDG/ORY

JFK/EWR/LGA

MAD/BCNFRALHR/LGW/STNMain apt.

MANUKManchester Apt.

SFOUSASAACPQ/GRUBrazilINFRAEROLAXUSALAW.Apt

MXP/LINItalySEAFCO/CIAItalyADR

OSLNorwayAvinor

SINSingaporeCAA Singapore

ORD/MDWUSACity ChicagoMUCGermanyF.MunchenMain apt.CountryApt. Group

Source:Airline Business,December 2003


The Air Transport Value Chain

• The Air Transport Value Chain• The Bundle of Actors Involved in the Air

Transport Value-Chain• Channel leader vs. Gate Guardian: The Two

Primary Actors in the air Transport Value Chain• New Patterns of Conduct for Airport Enterprises:

Skipping Peripheral Positions in the Value Chain

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• Airline Operators• Airport Enterprises• Hard Providers• Soft providers for the aviation business

– General Sale Agents– Airline catering operator – Car rentals– Aircraft lessors– Airport handlers– Air charter brokers– Tour operators– Travel agents– End Customer

The Bundle of Actors Involved in the Air Transport Value-Chain

2010/3/4 airport marketing 12737-700/800Aug 2000BrisbaneVirgin Blue

A320TbaSingaporeValuair

TbaLate 2004SingaporeTiger Airways

737-300Feb 2004BangkokThai AirAsia

767-300ERSept 1998Tokyo Skymark Airlines

737-400Aug 2002MiyazakiSkynet Asia

737-300TbaSingaporeSingapore AirAsia

737-800Jan 2004ChristchurchPacific Blue

757-200Dec 2003BangkokOne-Two-Go

737-400June 2004BangkokNok Air

MD 82-83June 2000JakartaLion Airlines

717,A320May 2004MelbourneJetstar

737-300Dec 1995AucklandFreedom Air

757-200,DC9Mar 1996ManilaCebu Pacific

767-300ERDec 1998SapporoAir Do

ATR42,A320sAug 2003BangaloreAir Deccan

737-300Jan 2002Kuala, LumpurAir Asia

FleetStart dateBaseCarrier

Airline Business, April 2004

Asia-Pacific low-carriers

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Airport enterprisesTwo main SBUs of the airport enterprise

Rents from additional spaces to: airlines, General Sales Agents, Catering firms, forwarders, cargo operators, tour operators, travel agents

Rents and commissions from various commercial ventures (boutiques, duty free shops, bank, parking sites, etc.)

Direct sales arising from shops owned or managed directly by the airport authority

Other complementary activities

Landing fees

Air traffic control (ATC) fee

Passenger and cargo boarding fees

Handling fees

Non aviation-related activitiesAviation-related activities


The Aviation-related SBU: the airport enterprise’s technical core business

• The Traditional Value Proposition of Airport Enterprises

• A Change in the “Rules of the Game”• The Rise of Airport Marketing for the Aviation-

Related Business• Airport’s Market Positioning• Primary Hub, Secondary Hub, Regional

,All-Cargo Airport• More Positioning Criteria • A Clear View of its Role on the Market• Identification of Partners for Airport Development

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Main elements involved in airport choice

• Width, density and potential market growth of the catchment area• Slot availability• Presence or absence of direct competitors• Network and operational Consistency• Airport charges (landing and handling fee plus fuel price)• Minimum guaranteed turnaround times• Presence of economic and commercial incentives at start-up of operation• Width and availability of airport infrastructural facilities• Availability of a range of intermodal solutions for accessing and leaving the

airport• Absence of environmental restrictions• Availability of maintenance centers at the airport• 24 hrs. non stop opening time• Presence of upgrade projects for terminal expansion

• Low historical rate of accidents on apron caused by handling operations


Nineteen different airport positioning criteria

London Biggin HillParis Le BourgetRome Ciampino

Airports attracting overflow traffic

Chicago O’Hare and MidwayStockholm Arlanda and BrommaMilan Malpensa and Orio

Airports operating within the same catchment area, although with different value proposition

Milan Linate and MalpensaTokyo Haneda and NaritaWashington Dulles and Reagan

Airports integrated within a system by the will of a regulator

Paris Orly and CDGLondon Heathrow and Gatwick

Airports integrated within a system and where the same hub carrier is dominant

Brussels, San Francisco,AmsterdamAirports with growth potential, although limited by physical constraints

MunichAirports integrated into a region’s market plan

ManchesterAirports integrated into a city’s market planExampleMarket positioning

http://www.tsis.com.tw/menu/airmap_all.htm

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ExampleMarket positioning

Vatry, Rotterdam,Memphis, Louisville,Luik

Airports with a cargo focus(all cargo airports)

Wien, Miami,Toronto, Dubai,Johannesburg,Los Angeles, Bangkok, New York JFK

Airports designated as national or pan regional gateways(primary and second hubs)

St. Louis, Raleigh-DurhamLondon Gatwick, Geneva

Airports under reengineering, due to abandonment by the hub carrier

London City AirportFlorence, Toronto CityCourchevel ChamberyDusseldorf Express,Aosta

Airports with technical limitations (city airport)

Frankfurt,Amsterdam,Tokyo Narita

Airports implementing cooperative policies with neighbouring residents and counties

London Luton and StanstedParis Beauvois,Brussels CharleroiMilan Orio,Frankfurt Hahn

Airports with an alternative(low-cost) proposition

Nineteen different airport positioning criteria


Nineteen different airport positioning criteriaExampleMarket positioning

Helsinki,Copenhagen,Tel Aviv,WeinSan Juan,Dublin

Dominant airports (not the sole country’s gateway, but controlling most of the market)

Torrejon (Spain)El Toro (California)Grazzanise (Italy)

Airports undergoing conversion from military to civil operation

Singapore,Hong Kong,Malta,Larnaca/Nicosia

Airports acting as a country’s sole gateway

New York La GuardiaTokyo Narita,Washington Reagan

Airports with limitations in the range of air service offered, due to infrastructural constraints

London Heathrow, Milan Malpensa, Doha,Dubai,Bahrain, Madrid, Paris CDG

Upgraded airports, on the basis of previously existing infrastructures

Munich, Oslo, Seoul, AthensGreenfield airports

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Identification of Partners for Airport Development

• Key drivers impacting on the size of an airport’s catchment area– Richness of aviation-related proposition– Efficient intermodal solutions– Competition from other airports– Competition from other means of transportation– Existence of geographical or legal barriers– Magnitude of economic and tourist activity of the area– Distinctive features of the area’s residents, in terms of

income per capita and propensity to fly


Ideal placement of outlets and services within a terminal: airside vs. landside area

Car rentalFloristMiscellaneousNews-standBankMoney changerFashion storesHotel PointJewellerThematic shops

Info pointLast minute duty-free shop

Hairdresser

Bars/restaurantsBars/restaurants

Bar/restaurants/food court

PharmacyDuty-free shops

Gourmet shop

Arrival HallDeparture hall airside

Departure hall landside

Source:Jarach,2002

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The Development of the Non Aviation-Related Value Proposition

• Towards an Evolution of the “Traditional Airport”Business model

• New Evolutionary Patterns for Airport Enterprises• The commercial airport’ philosophy: A new

perspective• A Best-in Class Airport Enterprise: BAA and the

Non-Aviation Business• Best Airport in the world: the case of Singapore

Airport


The diversification of the airport value proposition

Diversified,(but targeting the primary catchment area only)

Focused on a single positioning(for instance, low-cost airport)

Aggressively diversified(targeting primary and secondary catchmentareas in a wider and creative way)

Service focused (for instance, airports serving all categories of carriers)

narrow wide

Number ofserviced cluster

many

few

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Modern airport enterprise~ the commercial airport’ philosophy: A new

perspective• Wide product: logistic service, commercial

service, congressional services, tourist service, consulting service

• Expected product: multi-modal service• Generic product: frequency of route, service

personalization, cargo, comfort, baggage handling, check-in, information, operational efficiency, ticketing

• Core benefit: Passenger’s and good’s transfer from A to point B


New Marketing-Driven Paradigms for the airport enterprise’s Aviation-related

Business• The First “Quantum Leap” of the airport enterprise• Low-Cost Airports: A possible Evolutionary Path for

Airport Enterprises?• The Possible Role of Helicopters as a Complemetary

Feeder and Defeeder of Hub Airport• Airport Revenue Management• Airport Alliance

– Point to point alliances,– Multi-point alliances– Management Contract

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How to Construct an Airport Marketing Plan

• A Creative Marketing Approach for the Airport enterprise

• Assessment• Definition of Goals• Implementation of Objectives• Auditing of Financial Results• Some Concluding Remarks about airport

marketing planning• London City Airport: A Best-in-Class Provider in

the Airport Business


The contents of an airport marketing plan into four phases

• An assessment of the firm’s macro and micro competitive position

• A definition of the main goals and objectives for the airport enterprise

• Implementation of the chosen objectives• Auditing of actual performance achieved

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Assessment

• How did the airport’s market position change since the last period of observation?

• What is the airport’s current market position?


The main types of macro environmental changes concerning the airport industry

• Macro environment changes– 1.induced and controlled changes by political

or governmental bodies(ex. Euro introduction, deregulation acts, OPEC fuel decisions)

– 2.changes induced by some private based or private-acting organizations, according to some trust agreement( ex: airline insurance fees )

– 3.Mutations related to totally exogenous and unpredictable events (ex: Twin Towers effect)

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Definition of Goals

• The flight option, that promises to increase an airport’s market share

• The retrench option that works to protect the current market share in a highly turbulent environment

• The streamlining option, that looks at divesting unprofitable SBUs

• The abandon option, that sees a company exiting a current business


Option of Goals

• Flighting for Acquiring New Market Power• Reinforcing and defending current market

share• Divesting• Abandon an Entire SBU

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Flighting for Acquiring New Market Power

New market development(by attracting new carriers)

Better penetration of served market (by improving satisfaction on KPIs)

Creative diversification(entertainment, logistic,

conference business)

Developing by stretching the current value proposition

(upgrade of the airport retailing offer)

market

Valueoffer

newcurrent

new

current


Implementation of Objectives

• Timing of Activities• Assignment of Responsibilities• Budgeting

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Auditing of financial result

• gap analysis• definition of corrective hypotheses


London City Airport: A Best-in-Class Provider in the Airport Business

• the creation of a permanent joint committee between the airport authority and citizens’ representatives, with the goal of discussing both occasions of growth for the airport and pace of negative externalities generated by aircraft operations

• LCA has strictly cooperated with regional aircraft manufactures to research full operational ability and certification to land their various types of aircraft at LCA.

• LCA management has strongly believed in an airport-related marketing strategy aimed at extending the number of connections and attracting new operations its airport

• the terminal building has been designed to provide excellence in the most significant processes for its business target audience.

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Reference– David Jarach ,Airport Marketing-Startegies to

Cope with the New Millennium Enviroment, 2005

– Anne, Graham, Managing airports an international perspective, 2008

Documents

2010 Airport Marketing