Airport Strategies to Gain Competitive Advantages

1
Airport Strategies to Gain Competitive Advantages

• Dr Anne Graham
• University of Westminster
• London

2
Introduction

• Airport commercialisation and airline
  deregulation has increased opportunities for
  competitive advantage
• Competitive analyses, strategic options,
  directions and methods are all considered in this
  paper
• Relevance of general business models are assessed

3
Porters Five Force Framework of Competitive
Analysis
Threat of new entrants
Power of suppliers
Power of buyers
Rivalry amongst existing firms
Threat of substitutes
4
Competitive Analysis Airline Customers (I)

• Threat of new entrants
• Large investment needed
• Long/complex planning processes
• Lack of available sites
• Economies of scale?
• Threat of substitutes
• High speed rail links
• Improvements in road/rail infrastructure to major
  airports
• But Lacks have changed economic balance between
  rail and air

5
Competitive Analysis Airline Customers (II)

• Power of suppliers
• How are the services provided?
• How much competition is there?
• Power of airlines
• Influences government pricing control/economic
  regulation
• Broader role of increasing trade/tourism may be
  considered
• Small number of airlines, even smaller number of
  alliances
• But can the airline shift to an alternative
  airport (Network carriers v LCCs, charters,
  freight ops)

6
Competitive Analysis Airline Customers (III)

• Rivalry amongst existing airports
• Small islands/remote regions
• Major airports with concentration of short-haul
  and long-haul operations
• Hub airports
• Overlapping catchments area
• Urban situation
• Regions

7
Competitive Analysis Passenger Customers

• Many other retailers
• Many passengers and other customers
• Attractiveness of captive market and affluent
  customer
• High street and internet shopping competition
• Different competitive forces as regards
  aeronautical and commercial services but both
  ultimately dependant on airline services

8
Controllability of the Sources of Competitive
Advantage

• Two main sources
• Price
• Product
• Airport has varying levels of control
• Most control non-aeronautical areas
• Partial control aeronautical areas
• Least control Location and catchment area

9
Porters Generic Competitive Strategies
COMPETITIVE ADVANTAGE
Uniqueness perceived by the customer
Low cost position
COMPETITIVE SCOPE
Industry wide
Particular segment only
10
Airport Strategies Cost Leadership

• Controllability of costs
• Economies of scale
• Price insensitivity of markets
• Weak relationship between costs and prices in
  some cases
• Not very relevant to airport industry

11
Airport Strategies Differentiation

• Examples proximity to population, quick transfer
  times, lack of environmental restrictions
• Differentiated products for different passengers
  eg fast track
• But differentiated products not common but major
  issue with LCCs

12
Airport Strategies Focus or Niche

• By type of airline (eg charter, LCC, freight
  operators)
• By particular geographic area
• Cost focus LCCs
• Differentiation focus
• Liege airport
• London City airport

13
Ansoffs Positioning Matrix
PRODUCTS
Present
New
MARKETS
Present
New
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Internal Growth (I)

• Market penetration
• New regional services
• Loyalty cards
• Niche airports
• Market development
• New types of traffic (eg Vienna)
• New commercial products (eg internet, travel
  value)
• Differentiation airports

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Internal Growth (II)

• Market development
• Improved surface access
• Consultancy services
• Related diversification
• Commercial services for other markets (eg
  AirportCity)
• Surface links eg Heathrow Express
• Unrelated diversification
• Ireland Great Southern Group of Airports

16
Horizontal Integration

• Brought about by privatisation
• Horizontal
• Established and new operators
• Knowledge transfer, risk spreading, cost
  synergies?
• Market/brand benefits?
• PlaneStation concept
• Market penetration (Manchester airport, Hahn
  airport)

17
Vertical Integration

• Forward
• Travel agencies at Cardiff, Norwich
• Backward
• Established practice of some airports
• BAA World Duty Free
• Stronger links with airline (supplier of
  passenger product)
• LCCs
• Copenhagen, Australia, Frankfurt
• Charter flights at Norwich
• Planestation and EUJet

18
Alliances and Franchises

• Alliances could potentially benefit from shared
  resources/knowledge, joint bidding for
  international projects
• But no market accessibility benefits
• Very limited impact of Pantares
• Airport branding needs to improve market
  potential and image for franchising to work

19
Retrenchment and Divesture

• Most strategic directions/methods focused on
  growth
• Retrenchment Zurich and Brussels
• Divesture
• Concentrating on core business
• BAA
• TBI

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Competitive Strategies for LCC Customers

• Small sized airports Use spare capacity but what
  happens when investment is needed?
• Medium sized airports Do LCCs supplement or
  substitute conventional airlines
• Strategic options
• Standardised product
• Differentiated product
• Low cost terminal
• Two airports

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Conclusions

• Broad focus has been adopted number of airport
  strategies identified
• Complex issues to consider more than one key
  customer, nature of composite product
• Relevance of concept of competitive advantage for
  different airports