Analyses - October 12, 2005



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October 2005


Print Around the world, Transportation,

Airports in the marketing era (Conference summary)

Northern Europe has a large number of secondary airports, many of which were built for military or regional development purposes. Until recently, the primary role of these airports was to provide a public service to small communities located far from big centres, by linking them to the main transportation networks. In a more open, less regulated environment that is increasingly influenced by new economic realities, airport management approaches must change. Nigel Halpern, a researcher at the Centre for Civil Aviation, London Metropolitan University, is interested in these changes and calls into question the traditional marketing practices of airports. He presented his thoughts at the 14th Nordic Symposium in Tourism and Hospitality Research, held in Iceland. Several interesting parallels can be drawn between the situation he describes and Québec's network of airports.

A limited, regional role

As a general rule, smaller airports are confined to playing a limited role, overshadowed by the hub used by major carriers. The connections offered are often provided by small aircraft and quasi-monopolistic situations lead to particularly high prices. This type of situation is certainly not unique to Québec.

Secondary airports are usually public entities owned by municipal or governmental authorities. Under-utilized, most of them operate at a loss and require subsidies to keep afloat. A monopolistic environment, as we experienced here with Air Canada, can create an unusual situation of minimal competition between airports and a lack of incentive for airports to reduce costs and improve efficiency. The result is that these airports have virtually nonexistent marketing practices, limited primarily to passive approaches such as publishing an airline timetable.

A changing environment

According to Nigel Halpern, airport marketing is evolving rapidly to adapt to a new business environment characterized by changes in travel behaviour and structural changes in the airline industry. In Northern Europe, several airports have embraced these new business realities and adopted more market-driven management practices. Competition is now global, both for all-inclusive packages and independent travellers. Furthermore, in several regions, the presence of low-cost or discount carriers is making the market extremely dynamic.

In an increasingly open business environment, airport managers have to deal with often unpredictable airline decisions that are increasingly based upon market forces. Airports wishing to strengthen their position as a tourist destination must adapt their management practices accordingly and become much more pro-active in their approach to marketing.

More and more airports, like Oslo's Gardermoen Airport, for example, are using advertising campaigns to target specific markets (see photo). However, due to the high cost, such initiatives are usually available only to larger airports or, at the very least, to airports that have developed joint campaigns with other partners. Some groups also make a point of attending tourism trade shows to stimulate the development of new markets.

A clientele that now includes more than just airlines

Airports are increasingly called upon to offer services directly to tourists, notably by providing travel planning tools such as online timetables and links to online agencies. Surprisingly, only 10% of the world's airports provide timetables on their websites. The service provided by Highlands and Islands Airports Limited is an interesting example because the website offers advanced search options (see photo. In comparison, the Aéroports de Montréal website only posts information on the day's flights.

Working to develop business

Airports can use a number of practices to take advantage of market trends and meet the needs of their clientele, the airlines. To successfully compete and attract new destinations, airports must become aware of the incentives that can enhance their market position.

If an airport wants to attract new business, key factors are the rates charged and the existence of promotional campaigns developed with strategic partners. For example, carriers who select Cork Airport in Ireland for a new scheduled route benefit from substantial savings on airport charges. The five-year business model offers the following incentives:

  • 100% discount for the first year
  • 80% for the second year
  • 60% for the third year
  • 40% for the fourth
  • 20% for the fifth

The strategy appears to have worked because traffic at the Cork Airport nearly tripled in the 10 years from 1994 and 2003. This is all the more impressive considering Cork essentially shares its market with Shannon Airport, the Irish hub of low-cost carrier Ryanair. Competition between the two airports is limited, however, by the fact that both are owned by Aer Rianta. In fact, since 2005, Cork Airport has employed a different incentive program, based instead on fare reductions per passenger.

Obviously, a carrier could terminate a new route once the lease has expired. But with financial incentives, airlines can take a risk on a connection that is more of a gamble. And a five-year time frame is usually long enough to generate a sufficient client pool to ensure profitability. The first few years following the introduction of a new route is when a carrier truly needs support from the airport.

Another interesting development is the World Route Development Forum called “Routes”. This annual event facilitates meetings between airports and air service providers and encourages airports to pursue new options. A type of “speed dating”, Routes provides airports with multiple opportunities to forge new business relations with various tourism industry stakeholders.

Avenues for specialization

Airports wishing to target the tourist market can choose to specialize and focus primarily on the following areas:

  • Costs (e.g. by operating a very simple terminal and offering a minimum of services)
  • Flexibility (e.g. by employing a multi-skilled workforce and outsourcing handling)
  • Speed (e.g. by offering fast turnarounds and advantageous positioning for aircraft)
  • Access (e.g. by offering longer opening hours and emphasizing its proximity to the destination)
  • Infrastructure (e.g. by having a longer runway and enhanced terminal capacity)

Airports wishing to grow their market are, nevertheless, dependent upon demand. Marketing efforts cannot, in themselves, guarantee success. However, airports can certainly benefit from gathering market intelligence and collaborating closely with local tourism stakeholders and regional development agencies.

See also

Highlands and Islands Airports Limited 
World Route Development Forum

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