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Airport Marketing

Airport Marketing Lecture teaching:Suiling,Li Associate professor E-Mail:suiling@npu.edu.tw Phone:06-9264115-5519 2010/3/4

Lecture teaching:Suiling,Li Associate professor

E-Mail:suiling@npu.edu.tw

Phone:06-9264115-5519

2010/3/4

The Issues of Managing Airports • The changing nature of airport • Airport economics and

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 Airport Enterprise: Role and Scope of activity

  The Airport Enterprise: Role and Scope of activity   • The Role and Scope of
  The Airport Enterprise: Role and Scope of activity   • The Role and Scope of
 

• 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

 

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The Role and Scope of activity of the Airport Enterprise

The Role and Scope of activity of the Airport Enterprise

The Role and Scope of activity of the Airport Enterprise   • The economic impact on
The Role and Scope of activity of the Airport Enterprise   • The economic impact on
 

• 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

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Airport privatization through share flotation

Airport

Date

Type of sale

UK:BAA

1987

100%IPO

Austria: Vienna

1992

27%IPO

Denmark :Copenhagen

1994

25%IPO

1996

24% Secondary offering

Italy :Rome

1997

45.5%IPO

2001

45.5% secondary offering

N. Zealand : Auckland

1998

51.6%IPO

Malaysia: Malaysian airport

1999

18%IPO

China: BCIA

2000

35%IPO and trade sales

Switzerland : Zurich

2000

22%IPO and 28% secondary offering

Source: Graham, 2001

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Airport Privatization through trade sales

Airport

Date

Share of apt. sold (%)

Buyer

UK: Liverpool

1990

76

British Aerospace

UK: Prestwick

1992

100

British Aerospace

UK: British Midlands

1993

100

National Express

UK: Southend

1994

100

Regional Apts.Ltd.

UK: Cardiff

1995

100

TBI

UK: Bournemouth

1995

100

National Express

UK: Belfast Int.al

1996

100

TBI

UK: Birmingham

1997

51

Aerrianta/Natwest 40%,other private investors 11%

UK: Bristol

1997

51

Firstbus

UK: Liverpool

1997

76

Peel Holdings

Italy :Naples

1997

70

BAA

Australia:

1997

100

Various

Brisbane, Melbourne, Perth

Sweden:

1998

90

TBI

Skavsta Stockholm

South Africa: ACSA

1998

20

ADRI South Africa Consortium (ADR has 69% share)

Germany : Hannover

1998

30

Frankfurt airports

N. Zealand:Wellington

1998

66

Infratil

Australia:15 remaining major airports (excluding Sydney)

1998

100

Various

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Source: Graham, 2001

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Industry-Specific Reasons for low Competition in the Airport Industry

Industry-Specific Reasons for low Competition in the Airport Industry

Industry-Specific Reasons for low Competition in the Airport Industry
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

Apt. Group

Country

Main apt.

Apt. Group

Country

Main apt.

BAA plc

UK

LHR/LGW/STN

F.Munchen

Germany

MUC

Fraport

Germany

FRA

City Chicago

USA

ORD/MDW

Aena

Spain

MAD/BCN

CAA

Singapore

SIN

Singapore

Port Authority

USA

JFK/EWR/LGA

Avinor

Norway

OSL

NY/NJ

ADP

France

CDG/ORY

ADR

Italy

FCO/CIA

NAA

Japan

NRT

SEA

Italy

MXP/LIN

KIA

Japan

KIX

LAW.Apt

USA

LAX

Schiphol G.

Holland

AMS

INFRAERO

Brazil

CPQ/GRU

H.Kong Apt.

China

HKG

SAA

USA

SFO

Luftfart.t

Sweden

ARN

Manchester

UK

MAN

Apt.

Source:Airline Business,December 2003

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The Air Transport Value Chain • The Air Transport Value Chain • The Bundle of

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

• 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

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Asia-Pacific low-carriers

 

Carrier

Base

Start date

Fleet

 

Air Asia

Kuala, Lumpur

Jan 2002

737-300

Air Deccan

Bangalore

Aug 2003

ATR42,A320s

Air Do

Sapporo

Dec 1998

767-300ER

Cebu Pacific

Manila

Mar 1996

757-200,DC9

Freedom Air

Auckland

Dec 1995

737-300

Jetstar

Melbourne

May 2004

717,A320

Lion Airlines

Jakarta

June 2000

MD 82-83

Nok Air

Bangkok

June 2004

737-400

One-Two-Go

Bangkok

Dec 2003

757-200

Pacific Blue

Christchurch

Jan 2004

737-800

Singapore AirAsia

Singapore

Tba

737-300

Skynet Asia

Miyazaki

Aug 2002

737-400

Skymark Airlines

Tokyo

Sept 1998

767-300ER

Thai AirAsia

Bangkok

Feb 2004

737-300

Tiger Airways

Singapore

Late 2004

Tba

Valuair

Singapore

Tba

A320

Virgin Blue

Brisbane

Aug 2000

737-700/800

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Airline Business, April 2004

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Airport enterprises

Two main SBUs of the airport enterprise

Aviation-related activities

Non aviation-related activities

Landing fees

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

Air traffic control (ATC) fee

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

Passenger and cargo boarding fees

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

Handling fees

Other complementary activities

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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 choice choice 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

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Nineteen different airport positioning criteria Market positioning Example Airports integrated into a city ’ s

Nineteen different airport positioning criteria

Market positioning

Example

Airports integrated into a citys market plan

Manchester

Airports integrated into a regions market plan

Munich

Airports with growth potential, although limited by physical constraints

Brussels, San Francisco,Amsterdam

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

Paris Orly and CDG London Heathrow and Gatwick

Airports integrated within a system by the will of a regulator

Milan Linate and Malpensa Tokyo Haneda and Narita Washington Dulles and Reagan

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

Chicago OHare and Midway Stockholm Arlanda and Bromma Milan Malpensa and Orio

Airports attracting overflow traffic

London Biggin Hill Paris Le Bourget Rome Ciampino

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

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Nineteen different airport positioning criteria  

Nineteen different airport positioning criteria

 

Market positioning

 

Example

Airports with an alternative(low-cost) proposition

London Luton and Stansted Paris Beauvois,Brussels Charleroi Milan Orio,Frankfurt Hahn

Airports implementing cooperative policies with neighbouring residents and counties

Frankfurt,Amsterdam,

Tokyo Narita

Airports with technical limitations (city airport)

 

London City Airport Florence, Toronto City Courchevel Chambery Dusseldorf Express,Aosta

Airports under reengineering, due to abandonment by the hub carrier

St. Louis, Raleigh-Durham London Gatwick, Geneva

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

 

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

Airports with a cargo focus(all cargo airports)

 

Vatry, Rotterdam,Memphis, Louisville,Luik

 

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Nineteen different airport positioning criteria  

Nineteen different airport positioning criteria

 
 

Market positioning

Example

 

Greenfield airports

Munich, Oslo, Seoul, Athens

 

Upgraded airports, on the basis of previously existing infrastructures

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

 

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

New York La Guardia Tokyo Narita, Washington Reagan

 

Airports acting as a countrys sole gateway

Singapore,Hong Kong,Malta, Larnaca/Nicosia

 

Airports undergoing conversion from military to civil operation

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

 

Dominant airports (not the sole countrys gateway, but controlling most of the market)

Helsinki,Copenhagen,Tel Aviv,Wein San Juan,Dublin

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Identification of Partners for Airport Development

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

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

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

 
 

Departure hall landside

Departure hall

Arrival Hall

airside

Gourmet shop

Duty-free

Pharmacy

shops

Bar/restaurants/food court

Bars/restaurant

Bars/restaurants

s

Hairdresser

Last minute

Info point

duty-free shop

Thematic shops

Jeweller

Hotel Point

Fashion stores

Money changer

Bank

News-stand

 

Miscellaneous

   

Florist

   

Car rental

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

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The diversification of the airport value proposition many Number of serviced cluster few Service focused
The diversification of the airport value proposition many Number of serviced cluster few Service focused

The diversification of the airport

value propositionThe diversification of the airport many Number of serviced cluster few Service focused (for instance, airports

many

Number of

serviced

cluster

few

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

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

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

Diversified, (but targeting the primary catchment area only)

narrow

wide

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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

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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

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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?

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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

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

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Option of Goals
Option of Goals

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  

Flighting for Acquiring New Market Power

 

new

   

Value

Developing by stretching the current value proposition (upgrade of the airport retailing offer)

Creative diversification (entertainment, logistic, conference business)

 

offer

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

New market development (by attracting new carriers)

 

current

   

current

 

market

new

 

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Implementation of Objectives

 

• Timing of Activities

 

• Assignment of Responsibilities

 

• Budgeting

 

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Auditing of financial result

• gap analysis

• definition of corrective hypotheses

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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 –

Reference

– David Jarach ,Airport Marketing-Startegies to Cope with the New Millennium Enviroment,

2005

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

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