Airport Marketing [2 ed.] 0367483734, 9780367483739

Table of contents :
Cover
Half Title
Title Page
Copyright Page
Table of Contents
List of figures
List of tables
Preface
Acknowledgements
Abbreviations
1. Introduction
2. The airport marketing environment
3. Airport customers and segmentation
4. Airport marketing research and route development
5. Airport strategic marketing planning
6. The airport product, brand and experience
7. Airport pricing and incentives
8. Airport distribution and customer relationships
9. Airport promotional mix, partnerships and engagement
10. Airport digital marketing
11. Airport marketing for a more sustainable future
12. Airport crisis communications and marketing
Index

Citation preview

Airport Marketing

This accessible, up-to-date, comprehensive and in-depth textbook introduces students and practitioners to the principles and practice of airport marketing as well as the major changes and future marketing challenges facing the airport sector. It applies principles of marketing within the airport industry, and examines airport marketing and its environment, how to define and measure the market for airport services, airport strategic marketing planning and individual elements of the airport marketing mix (product, price, distribution and promotion). The book integrates key elements of marketing theory with airport marketing in practice. Each chapter contains extensive industry examples for different types of airports from around the world to build on the theoretical base of the subject and show real-life applications. This new second edition has been updated to include: zz New

and expanded content on branding and the passenger experience, marketing partnerships, engagement marketing and customer relationship management.

zz Three

brand new chapters on digital marketing, marketing for a more sustainable future, and crisis communications and marketing in light of the Covid-19 pandemic.

zz New

global case studies and examples throughout.

This comprehensive textbook written by two airport marketing experts will be essential reading for air transport students and future managers. Nigel Halpern is Professor of Air Transport and Tourism Management with the Department of Marketing at Kristiania University College in Oslo, Norway. He has previously worked for Molde University College; the Centre for Civil Aviation at London Metropolitan University; the UK Department for Transport, Local Government and the Regions; the UK Civil Aviation Authority; and PGL Travel. Nigel teaches and conducts research and consultancy in air transport and tourism management. Airport marketing is his main area of interest. He has a PhD in airport marketing from the Centre for Air Transport Management at Cranfield University, and he has published widely on the subject in leading textbooks and academic and professional journals, including books, Airport Marketing and The Routledge Companion to Air Transport Management. Anne Graham is Professor of Air Transport and Tourism Management at the University of Westminster, London, UK. One of her key areas of expertise and knowledge is airport management, economics and regulation, and she has over 30 years’ experience of teaching, research and consultancy on these topics. She has published widely with recent books including Managing Airports (5th edition), The Routledge Companion to Air Transport Management, Airport Finance and Investment in the Global Economy and Aviation Economics. She is also a co-editor of three linked books published by Routledge in 2021 related to air transport and regional development. She is a former Editor-in-Chief of the Journal of Air Transport Management.

Airport Marketing 2ND EDITION

Nigel Halpern and Anne Graham

Second edition published 2022 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon, OX14 4RN and by Routledge 605 Third Avenue, New York, NY 10158 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2022 Nigel Halpern and Anne Graham The right of Nigel Halpern and Anne Graham to be identified as authors of this work has been asserted by them in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. First edition published by Routledge 2013 British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data Names: Halpern, Nigel, author. | Graham, Anne, 1958– author. Title: Airport marketing / Nigel Halpern, Anne Graham. Description: 2nd edition. | Abingdon, Oxon; New York, NY: Routledge, 2022. | Includes bibliographical references and index. Identifiers: LCCN 2021020208 (print) | LCCN 2021020209 (ebook) | ISBN 9780367483739 (hbk) | ISBN 9780367483708 (pbk) | ISBN 9781003039563 (ebk) Subjects: LCSH: Airports—Economic aspects. | Airports—Management. | Aeronautics, Commercial—Economic aspects. Classification: LCC HE9797.4.E3 H35 2022 (print) | LCC HE9797.4.E3 (ebook) | DDC 387.7/360688—dc23 LC record available at https://lccn.loc.gov/2021020208 LC ebook record available at https://lccn.loc.gov/2021020209 ISBN: 978-0-367-48373-9 (hbk) ISBN: 978-0-367-48370-8 (pbk) ISBN: 978-1-003-03956-3 (ebk) DOI: 10.4324/9781003039563 Typeset in Iowan Old Style by codeMantra

Contents

List of figures List of tables Preface Acknowledgements Abbreviations 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12.

Introduction The airport marketing environment Airport customers and segmentation Airport marketing research and route development Airport strategic marketing planning The airport product, brand and experience Airport pricing and incentives Airport distribution and customer relationships Airport promotional mix, partnerships and engagement Airport digital marketing Airport marketing for a more sustainable future Airport crisis communications and marketing Index

vii xi xv xvii xix 1 28 62 84 120 152 192 231 263 293 343 375 403

Figures

1.1 1.2 1.3 2.1 2.2 2.3 2.4 2.5 2.6 2.7

‘City of New York municipal airports’ poster from about 1937 6 Change in marketing staff at selected UK regional airports, 1991–1997 8 Marketing expenses at all US commercial airports, 2010–2020 8 The marketing environment 29 Organisational chart for the Metropolitan Airports Commission 31 Organisational chart for Dallas Fort Worth International Airport 32 Organisational chart for Narita International Airport 33 Organisational chart for Athens International Airport 34 Stakeholders at Munich Airport 39 Growth in passenger traffic at Colombo Bandaranaike International Airport and Hong Kong International Airport, 2012–2019 42 2.8 Scheduled passenger kilometres by alliance, 2019 47 2.9 Economic growth and airline passenger demand, 1999–2019 49 2.10 Jet kerosene price and fuel as a proportion of total airline operating cost, 2002–2019 50 2.11 Air passenger and freight traffic worldwide, 1974–2020 53 3.1 Airline and airport factors affecting passenger ticket purchases 69 3.2 ACI’s passenger experience profiles 76 3.3 NPD travel retail’s airport shopper profiles 78 3.4 Passenger segments according to preferences for using digital technologies at airports 80 4.1 Stages in the route development process 89 4.2 Catchment areas of 30, 60 and 120-minute drive times at selected airports 90 4.3 Population (in millions) within a 100-kilometre isochrone catchment area at German airports 91 4.4 Forecasting stages used for route development 94 4.5 Key sources of secondary information 104 4.6 Belfast City Airport’s business passenger survey 110 4.7 Bristol Airport’s travel survey email invitation 116

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FIGURES

4.8 5.1 5.2 5.3 5.4 5.5 6.1 6.2 6.3 6.4 6.5 6.6 6.7 6.8 6.9 6.10 6.11 6.12 6.13 6.14 7.1 7.2 7.3 7.4 7.5 8.1 8.2 8.3 8.4 8.5 8.6 8.7 8.8 8.9 8.10 8.11 8.12 9.1 9.2 9.3 9.4

Key sources of primary information Main stages in the strategic marketing planning process Portfolio analysis models SWOT analysis for Amsterdam Airport Schiphol SWOT analysis for Manassas Regional Airport Nuremberg Airport’s ‘Blue ocean’ opportunities The airport product for airlines The airport product for passengers Share of airports with implemented or planned self-service processes, 2020 and 2023 Munich Airport’s robot – Josie Pepper Chhatrapati Shivaji Maharaj International Airport’s logo Avinor’s logo London Luton Airport’s logo Sydney Airport’s logos: previous (top) and current (bottom) Zagreb Airport’s terminal roof (top) and logo (bottom) Importance–performance grid ACI-Europe’s pyramid of passenger perception levels Top five reasons to visit duty-free shops by passenger age Key features of an omnichannel airport system Jewel Changi Airport – Forest Valley Factors affecting airport pricing decisions Total airport revenue by region and source, 2018 Worldwide airport revenue by item, 2018 Airport charges index, 2020 Main mechanisms for regulating airport charges Distribution structure of an airport Number of level two and three slot coordinated airports worldwide, 2021 Estimated market size of the global ground handling market, 2007–2022 Freedoms and possible restrictions of council directive 96/97/EC Screenshot of London City Airport’s flight search site Screenshot of Oslo Airport’s ‘Click & collect’ site Screenshot of Carrasco Airport’s online store Malaysia Airport’s ‘Shop 24/7 e-commerce platform’ Products or services passengers would be interested in pre-ordering online from airports in Norway The worldwide CRM software market, 2012–2019 The airport CRM cycle Welcome email offer from Bristol Rewards The promotional mix Fort Wayne International Airport’s ‘This flight originated’ campaign Aruba Airport’s ‘Seriously reliable’ advertisement in Airline Business, November/December 2020 Manchester Airport’s ‘More than an airport’ campaign

117 121 125 132 133 141 153 154 157 159 166 166 167 168 170 172 175 184 186 187 193 196 196 209 212 232 237 240 242 248 249 250 252 253 253 254 257 264 266 267 268

FIGURES

9.5 9.6 9.7 9.8 9.9 9.10 10.1 10.2 10.3 10.4 10.5 10.6 10.7 10.8 10.9 10.10 10.11 10.12 10.13 10.14 10.15 11.1 11.2 11.3 11.4 11.5 11.6 11.7 11.8 11.9 12.1

Bristol Airport email marketing campaign Carrasco Airport’s ‘Happy hour’ campaign Singapore Changi Airport’s ‘2xGST’ campaign Malaysia Airport’s ‘KLIA crazy sale’ campaign Hong Kong International Airport’s HKG My Flight and MyTag campaign Budapest Airport’s ‘Runway run’, 2020 Miami International Airport’s ‘Travel tips’ on Instagram Helsinki Airport’s ‘Tallinn holiday album’ campaign Screenshot of Glasgow Airport’s website: ‘The latest news from GLA’ Geneva Airport’s ‘Reach new heights’ B2B campaign profiled on the airport website Google search for ‘gatwick parking’ Google Trends comparison for Heathrow, Gatwick and Stansted, 2020 Google search for ‘airport london’ (a) and ‘business airport london’ (b) Social media sites worldwide, by number of active users, January 2021 Istanbul Airport’s ‘Follow us on social media’ campaign Guam Airport’s ‘Like. Follow. Fly’ Facebook campaign Followers/fans on primary social media sites of airports per 1,000 passengers served Brisbane Airport’s parking promotions (a) and airport news (b) by email Pittsburgh International Airport’s email newsletter – Blue Sky News Cluj International Airport’s paid media advertisement served on an ATN e-newsletter Vancouver International Airport’s paid media advertisement served on anna.aero United Nations sustainable development goals Avinor press releases about electrification initiatives Screenshot of Arturo Merino Benítez Airport’s (SCL) tree donation scheme The Good Traveler programme Hyderabad International Airport’s ‘Think about the earth and act’ campaign Billund Airport’s ‘60% less water’ campaign Poster from Hartsfield-Jackson Atlanta International Airport’s Human Trafficking Awareness Forum Kenya Airports Authority’s support for World Wildlife Conservation Day Sunshine Coast Airport: Australia’s first carbon neutral airport in 2017 Halifax Stanfield International Airport’s ‘Stay healthy’ campaign

272 277 278 288 288 290 297 299 301 303 305 308 310 313 316 317 319 321 324 338 339 344 351 352 353 355 356 358 365 372 390

ix

x

FIGURES

12.2 12.3 12.4 12.5

Las Vegas McCarran International Airport’s ‘LAS all in’ campaign banner images Las Vegas McCarran International Airport’s ‘LAS all in’ campaign creative in the airport environment Istanbul Airport’s ACI AHA Screenshot of Cardiff Airport’s home page

392 393 397 399

Tables

1.1 1.2 1.3 1.4 1.5 1.6 1.7 2.1 2.2 2.3 2.4 2.5 2.6 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9

Marketing expenses at US commercial airports by hub size, 2019 Airport marketing articles and case studies in the Journal of Airport Management The Peggy G. Hereford Award categories The Moodies Airport and Travel Retail Digital, Social Media and Marketing Awards, 2020 Selection of books, guidebooks and chapters on airport marketing Selected journal articles on airport marketing Characteristics of a service and implications for marketing Suppliers of airport services at Humberside Airport and East Midlands Airport, 2019 Stakeholders at Malaysia Airports Examples of airport privatisations LCC seat share by region, 2009 and 2018 IATA’s PESTE analysis identifying 50 drivers of change for 2035 London Heathrow Airport’s analysis of global megatrends to 2040 Percentage share of originating passengers accompanied by well-wishers at UK airports, 2014 Rank and factors influencing LCCs’ choice of airport Airport information provided on The Route Shop and Route Exchange websites for potential airlines Main reasons for passenger airport choice at Washington Airports, 2019 Segmentation variables for key airport customers Segmentation variables related to trip characteristics at Frankfurt Airport, 2019 Segmentation variables related to passenger characteristics at Athens International Airport, 2019 Examples of passenger experience profiles for individual airports Examples of airport shopping profiles for individual airports

9 10 11 13 15 16 19 35 40 44 48 56 57 64 66 67 68 71 74 75 77 79

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TABLES

3.10 Proportion of respondents (%) within each segment 4.1 Typical information provided by airports for airlines at route development meetings 4.2 Questions used in the UK CAA passenger survey for London Heathrow Airport 4.3 AirHelp airport scores (out of ten) for the top ten performing airports, 2019 5.1 Adelaide Airport’s corporate intentions 5.2 Edmonton International Airport’s corporate intentions 5.3 Rijeka Airport’s corporate intentions 5.4 Substitution possibilities at airports in Australia 5.5 Example airport marketing objectives 5.6 Selection of airports that have multiple sister agreements with other airports 5.7 Example marketing programme for an airport 5.8 Example marketing programme for an airport 6.1 Categories of airport brand names 6.2 Proportion of airports (%) in each region that use each name category 6.3 IPA of Taoyuan International Airport 6.4 Examples of measures with ACI Europe’s passenger perception levels 6.5 Example MCTs at airports, July 2019 6.6 Price and product features of PS Lax service at Los Angeles International Airport 7.1 Worldwide airport operating costs, 2018 7.2 Proportion of non-aeronautical revenue at airports worldwide by source, 2018 7.3 Cost-based principles for determining airport charges 7.4 Frankfurt Airport passenger service charges, 2021 7.5 Passenger service charges at Finnish, Norwegian and Swedish airports, 2021 7.6 Nairobi Jomo Kenyatta International Airport landing charges, 2021 7.7 Casablanca Mohammed V International Airport landing charges, 2021 7.8 Brussels South Charleroi Airport landing charge discounts, 2020 7.9 Macau International Airport aircraft parking fees, 2020/2021 7.10 Singapore Changi Airport aircraft parking fees, 2020/2021 7.11 London Heathrow Airport landing charges (differentiated by noise) and emission charges, 2021 7.12 Tallinn Airport ground handling charges, 2021 7.13 Minimum acceptable offers for retail concession at Cochin International Airport, 2019

80 95 99 102 122 123 123 128 134 137 146 148 161 165 173 176 178 181 195 197 198 199 199 200 201 202 202 203 204 205 210

TABLES

7.14 Minimum acceptable offers for retail concession at San Francisco International Airport, 2019 7.15 Examples of airport incentive schemes (established before the coronavirus pandemic) 7.16 Marketing support offered by Aena 7.17 Philadelphia International Airport’s Covid-19 Air Service Recovery & Incentive programme 7.18 Airport incentive schemes launched during the coronavirus pandemic 7.19 Incentive use at 382 US airports, 2020 8.1 Levels of congestion at airports 8.2 Role of airports in slot allocation 8.3 Key attributes of successful concession programmes 8.4 Levels of membership with Venice Airport’s Il Milione Club 9.1 Marketing activities used in airport route development 9.2 How to give the perfect airline presentation 9.3 Marketing partnerships involving airports and DMOs 9.4 Common engagement marketing initiatives 10.1 Digital around the world, 2020 10.2 Main types of content for airports 10.3 Key factors that help determine search results on Google 10.4 Google Trends comparison for Heathrow, Gatwick and Stansted, 12 January 2021 10.5 Website page rank insights 10.6 Categories of social media 10.7 Social media sites of the twenty busiest airports, November 2020 10.8 Use cases for social media by airports 10.9 Factors to consider when carrying out an email marketing campaign 10.10 Email benchmarks, 2020 (figures are percentages) 10.11 Types of mobile marketing 10.12 Airport mobile applications on Google Play, January 2021 10.13 Examples of key features on airport mobile applications 10.14 Installs on Google Play, January 2021 10.15 Performance benchmarks for Google Ads 11.1 Key sustainability impacts, issues and objectives at airports, mapped with SDGs 11.2 Sydney Airport’s sustainability commitments, 2019–2021 11.3 Current and future drivers for sustainability 11.4 Projects supported by Cardiff Airport’s Touchdown programme 11.5 Sydney Airport: stakeholder engagement 11.6 Six levels of airport carbon accreditation 12.1 Categories of crisis situation and airport examples 12.2 Victoria International Airport crisis communications team 12.3 Dane County Airport jurisdiction description

211 217 219 221 222 227 236 238 244 259 274 276 283 286 295 298 306 308 312 313 315 316 325 325 327 330 332 334 340 346 347 347 360 366 371 376 379 380

xiii

xiv

TABLES

12.4 12.5 12.6 12.7

Messages about the impact of volcanic ashes on I Gusti Ngurah Rai Airport Five phases of a crisis and implications for airport management Metropolitan Washington Airports Authority Covid-19 air travel survey Skytrax Covid-19 airport ratings

383 384 395 397

Preface

Historically, airports paid little attention to marketing. However, this has changed for several reasons. The airport industry has moved from being characterised by public sector ownership and national requirements to an industry that is increasingly dominated by the private sector and international players, and with a much greater focus on market-orientated management practices. Deregulation of air transport markets in some parts of the world has provided greater freedoms to airlines and encouraged airports to be more proactive in targeting them through marketing. In addition, new airline business models such as low-cost carriers emerged through deregulation, in many cases requiring airports to adopt different approaches to marketing. The travelling public is becoming more experienced and less loyal, enjoying a greater choice of airports and air services, and generally placing greater demands on airports at a time when more stringent controls are being implemented, especially with regard to security, and more recently, health and safety. In addition, competition for air cargo has intensified and several airports now focus entirely on air cargo, while others are placing much greater attention on developing air cargo, in addition to passenger services. Airports can therefore benefit from targeting passenger and air cargo markets more effectively through marketing. In order to grow and diversify their business, many airports are now just as focused on developing commercial opportunities through marketing as they are on developing air services. This includes from areas such as retail, car parking, car rental, food and drink, advertising, consultancy and real estate. Meanwhile, in line with the United Nations sustainable development goals (also known as the global goals for sustainable development), airports are under growing pressure to address the most significant challenges our world is facing today such as climate change, human and wildlife trafficking, and diversity and inclusion. Airports therefore need to take into account the social and environmental consequences of marketing, as well as the economic consequences. We have written this book in 2020/2021 during the coronavirus pandemic (a global pandemic of coronavirus disease 2019, also known as Covid-19, caused by a severe acute respiratory syndrome coronavirus called SARS-CoV-2). The pandemic emerged in 2019 and is arguably the most significant global crisis ever faced by the airport industry. In addition to managing communications at different stages of the crisis, airports need to rethink their approach to marketing, and lessons to be learned that can help airports to be better prepared for future

xvi

PREFACE crises. Marketing is also expected to play a key role in the recovery process – helping airports to rebuild consumer and business confidence and supporting more general efforts to ‘build back better’, for instance, as a more robust, smarter and greener industry. The changing business environment means that airports have an increasingly diverse range of customers to target, and objectives to achieve through marketing, and there is a growing interest in developing the marketing skills and competencies that are required to succeed. This book therefore fills an important need to introduce students and practitioners to the principles and practice of airport marketing. In the first edition, published in 2013, we produced a book that applied principles of marketing to the airport industry, integrating key elements of marketing theory with airport marketing in practice. That approach has been retained for this second edition including coverage of central topics such as the airport marketing environment, airport customers and segmentation, airport marketing research, airport strategic marketing planning and individual elements of the airport marketing mix: the airport product, price, distribution and promotion. However, in some areas, airport marketing has evolved significantly since writing the first edition. For instance there is an increased focus on branding and the airport passenger experience; a growing number of airports are forming partnerships that enable them to pool resources and develop an integrated approach to marketing; engagement marketing and customer relationship management is increasingly used by airports to nurture deeper and longer-lasting relationships with their customers; airports are making much greater use of digital technologies for marketing; concerns about the need to balance economic consequences with social and environmental consequences are increasingly addressed by airports through marketing; and airports need to rethink their approach to communications and marketing in light of the coronavirus pandemic. In line with these changes and future challenges faced by the industry, this second edition includes three new chapters on digital marketing, marketing for a more sustainable future, and crisis communications and marketing. In addition, chapters from the first edition have been fully revised and updated including with new or expanded content on branding and the passenger experience, marketing partnerships, engagement marketing and customer relationship management; and new examples of marketing at airports worldwide have been introduced. We hope the book will assist those currently working in the field and inspire a future generation of airport marketers. 16 April 2021 Nigel Halpern Kristiania University College, Norway Anne Graham University of Westminster, UK

Acknowledgements

Writing a book of this nature is not possible without the support and cooperation of a range of people. We would like to thank the publisher, Routledge – and in particular Lydia Kessell and Emma Travis – for showing a keen interest in our book and for their patience, support and encouragement along the way. We would like to thank the many students and practitioners we have encountered over the years, who have introduced us to the fascinating world of airports and have contributed to our knowledge and understanding of airports and airport marketing. We would also like to thank the many airports, airport authorities, advertising agencies, and aviation industry agencies and associations that have responded with interest and enthusiasm to our requests for information, and have provided kind permission to reproduce images of their work in this book. Last but not least, we would like to thank family and friends for their support and understanding while we have been writing this book; in particular, Anne-Merete, Leo, Felix, Mia, Ian, Lorna, Callum and Ewan.

Abbreviations

2D 3D 3Ps 4Cs 4Ps 5G

Two-Dimensional Three-Dimensional Private-Public Partnerships Customer, Cost, Convenience, Communication Product, Price, Place (distribution), Promotion Fifth Generation (technology standard for broadband cellular networks) 7Ps Product, Price, Place (distribution), Promotion, Physical evidence, Processes, People 9/11 September 11 Attacks A-CDM Airport-Collaborative Decision-Making A(H1N1) Influenza A Virus Subtype H1N1 (commonly referred to as Swine Flu) AAAE American Association of Airport Executives ACA Airport Carbon Accreditation ACI Airports Council International AD Advertisement ADP Groupe ADP (formerly Aéroports de Paris or ADP Paris Airports) AGES Aircraft Ground Energy Systems AHA Airport Health Accreditation AMA American Marketing Association ANOVA Analysis of Variance AOA Access to Outdoor Advertising AOT Airports of Thailand APD Air Passenger Duty AR Augmented Reality ARI Aer Rianta International ASA Air Service Agreement ASEAN Association of Southeast Asian Nations ASEAN-SAM Association of Southeast Asian Nations Single Aviation Market

xx

ABBREVIATIONS

ASF ASKs ASPO ASQ ATC ATM ATN AU B2B B2C BAA

BAME BCG BITRE BOT BRICS BSP BTS CAA CAR CART CC CDC CDO CEO CES CFI CFO CHF CIM CIPR CM CMF CO2 COMM COO Covid-19 CPA CPC CRITICAL CRJ

Average Seat Load Factor Available Seat Kilometres American Society of Planning Officials Airport Service Quality Air Traffic Control Air Traffic Management Air Transport News African Union Business-to-Business Business-to-Consumer British Airports Authority (only prior to 1987; from 1987 the company was known only as BAA, and then in 2012 it changed its name to Heathrow Airport Holdings) Black, Asian and Minority Ethnic Boston Consulting Group Bureau of Infrastructure and Transport Research Economics Build–Operate–Transfer Brazil, Russia, India, China and South Africa Billing and Settlement Plan Bureau of Transportation Statistics Civil Aviation Authority Commission for Aviation Regulation Council Aviation Restart Task Force Competition Commission Centres for Disease Control and Prevention Chief Development Officer Chief Executive Officer Customer Effort Score Court of First Instance Chief Financial Officer Swiss Franc Chartered Institute of Marketing Chartered Institute of Public Relations Content Marketing Institute Cooperative Marketing Funds Carbon Dioxide Communications Team Chief Operations Officer Coronavirus Disease 2019 (caused by severe acute respiratory syndrome coronavirus 2: SARS-CoV-2) Cost Per Action Cost Per Click Creative, Relevance, Incentive, Targeting & Timing, Integration, Conversion, Attributes, Landing Page Bombardier Canadair Regional Jet

ABBREVIATIONS

CRM CSAT CSI CSO CSR CTOR CTR CUPPS CUTE CVR DCRA DGAC DGCA DMO EASA EC ECE EEA EEC EMAS ESG ETRC EU EUR Eurostat F&B FAA FAM FAQ FAR FBI FBO FIS FSC FTE GBP GDP GDPR GE GIF GPS GRI GST HKD HR

Customer Relationship Management Customer Satisfaction Score Customer Satisfaction Index Chief Strategy Officer Corporate Social Responsibility Click-To-Open Rate Click-Through Rate Common Use Passenger Processing Systems Common User Terminal Equipment Conversion Rate Dane County Regional Airport Directorate General of Civil Aeronautics Directorate General of Civil Aviation Destination Management Organisation European Union Aviation Safety Agency European Commission Employee Survey for Customer Experience European Economic Area European Economic Community Environmental Management Audit Scheme Environmental, Social and Governance European Travel Retail Confederation European Union Euro European Statistical Office Food and Beverage Federal Aviation Administration Familiarisation Trips Frequently Asked Question Federal Aviation Regulation Federal Bureau of Investigation Fixed Base Operator Federal Inspection Service Full-Service Carrier Full-Time Equivalent Great British Pound Gross Domestic Product General Data Protection Regulation General Electric Graphics Interchange Format Global Positioning System Global Reporting Initiative Goods and Services Tax Hong Kong Dollar Human Resources

xxi

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ABBREVIATIONS

HVAC IATA ICAO IMF INR IP IPA IPM ISO IT KOL KRW LAGS LAWA LBS LCC LCT LED LF m2 MAD MAG MAHB MCR MCT MERS MIDT MII MIPFTR MMS MOP MOU MTOW MWAA MWATR MYR NA NextGen NFC NOK NOTAM NOx NPS NTSB NZD

Heating, Ventilation and Air Conditioning International Air Transport Association International Civil Aviation Organization International Monetary Fund Indian Rupee Internet Protocol Importance–Performance Analysis Integrated Performance Management The International Organisation for Standardisation Information Technology Key Opinion Leader South Korean Won Liquids, Aerosols and Gels Los Angeles World Airports Location-Based Services Low-Cost Carrier Low-Cost Terminal Light-Emitting Diode Load Factor Square Metres Moroccan Dirham Minimum Annual Guarantee Malaysia Airports Holdings Berhad Market Share: Capacity Share Ratio Minumum Connect Time Middle East Respiratory Syndrome Market Information Data Tapes Majority-In-Interest Monthly International Passenger and Freight Traffic Report Multimedia Messaging Service Macanese Pataca Memorandum of Understanding Maximum Take-Off Weight Metropolitan Washington Airports Authority Monthly World Airport Traffic Report Malaysian Ringgit North America Next Generation Air Transport System Near Field Communication Norwegian Kroner Notice to Airmen Nitrogen Oxide Net Promoter Score National Transportation Safety Board New Zealand Dollar

ABBREVIATIONS

O-D OECD OIAA OOH OTA OTP PATA Pax PEI PEST PESTE PESTEL PET PFC PHL PLN PPE PPP PR PRM PSC QR QSI QSM RACF RDF RFID RFP ROI RPKs SaaS SAATM SAF SARS SCASDP SDGs SEM SEO SERPS SESAR SGD SLF SMART

Origin-Destination Organisation for Economic Co-operation and Development Ontario International Airport Authority Out-Of-Home (advertising) Online Travel Agent On-Time Performance Pacific Asia Travel Association Passengers Passenger Experience Index Political, Economic, Socio-cultural, Technological Political/Legal, Economic, Socio-cultural, Technological, Environmental Political, Economic, Socio-cultural, Technological, Environmental, Legal Polyethylene Terephthalate Passenger Facility Charge Philadelphia International Airport Polish Zloty Personal Protective Equipment Private-Public Partnership Public Relations Persons with Reduced Mobility Passenger Service Charge Quick Response Quality Service Index Quality of Service Monitor Regional Air Connectivity Fund Route Development Fund Radio Frequency Identification Request for Proposal Return On Investment Revenue Passenger Kilometres Software as a Service Single African Air Transport Market Sustainable Aviation Fuel Severe Acute Respiratory Syndrome Small Community Air Service Development Program Sustainable Development Goals Search Engine Marketing Search Engine Optimisation Search Engine Results Pages Single European Sky ATM (Air Traffic Management) Research Singapore Dollar Seat Load Factor Specific, Measurable, Achievable, Relevant, Time-Orientated

xxiii

xxiv

ABBREVIATIONS

SMS STEEP STEM Surface-CDM SWOT T t-pax TED TKPs TSA TTE UAE UI UK UN UNGC UNWTO URL US USD UV UX VAA VFR VIP VP VR WASB WASG WATR WHO WWACG

Short Message Service Society, Technology, Economics, Environment, Politics Science, Technology, Engineering, Mathematics Surface-Collaborative Decision-Making Strengths, Weaknesses, Opportunities, Threats Tonnes Transfer Passengers Tenders Electronic Daily Tonne-Kilometres Performed Transportation Security Administration Turnaround Time Efficiency United Arab Emirates User Interface United Kingdom United Nations United Nations Global Compact United Nations World Tourism Organisation Uniform Resource Locator United States (of America) US Dollar Ultraviolet User Experience Victoria Airport Authority Visiting Friends and Relatives Very Important Person Vice President Virtual Reality Worldwide Airport Slot Board Worldwide Airport Slot Guidelines World Airport Traffic Report World Health Organization Worldwide Airport Coordinators Group

Chapter

1

Introduction

This chapter provides an introduction to the book and to the subject of airport marketing. It consists of two main sections. The first section considers how airport marketing has evolved including the forces that have influenced change, how airport marketing has emerged within the context of the marketing era and the growing interest for airport marketing in industry and academia. The second section outlines the approach to airport marketing taken in this book including how definitions of marketing can be applied to airports and the implications of service industry marketing. The second section also provides an overview of the book’s structure.

1.1 Evolution of airport marketing 1.1.1 Forces that have infuenced change Until the 1980s, airports generally adopted a passive approach to marketing. The view from many was that airports were natural monopolies and were not in a position to influence the decisions of target markets through marketing. Indeed, that is still the view of some (e.g. see Wiltshire, 2018), while others debate the extent to which airport competition is feasible, or even desirable (Socorro et al., 2018). However, it has been challenged by others. For instance, Tretheway (1998) asks whether airport marketing is an oxymoron – a contradiction in terms such as the phrases ‘jumbo shrimp’, ‘accurate estimate’ and ‘American English’. Fortunately for this book, Tretheway answers in the negative, suggesting that a large proportion of products and services at most airports are subject to competition, and that airport marketing decisions can help to build relationships that have a profound impact on airport customers. Tretheway accentuates these opinions in later articles (e.g. see Tretheway and Kincaid, 2010), while others add compelling evidence of airport competition, at least in the deregulated European aviation

DOI: 10.4324/9781003039563-1

2

INTRODUCTION market (e.g. Barrett, 2000; Forsyth et al., 2010; Thelle et al., 2012; Bush and Starkie, 2014; Thelle and la Cour Sonne, 2018; Bilotkach and Bush, 2020). Much of the focus of previous studies has been on Europe. However, there is also evidence of competition elsewhere. For instance: Pels et al. (2003) between airports for passengers in the San Francisco Bay area in the United States (US); Grosche et al. (2017) between major hub airports in Europe and the Middle East for long-haul connecting traffic; Wong et al. (2016) between Asia Pacific’s major airports for cargo markets; Liu et al. (2019) between airports and high-speed rail in China and Japan; and Gao (2020) between airports for passengers in Indiana in the US. Airport competition has been encouraged by several factors that are mentioned briefly here and examined in more detail in Chapter 2. First, demand for air transport has been characterised by long-term growth. It approximately doubled every 15 years from the 1970s to 2019 and was forecast to double again in the next 15 years. In 2019 alone, the world’s airports handled over 9.1 billion passengers, 119.9 million metric tonnes of cargo and more than 102 million aircraft movements. However, growth has been dramatically affected by the coronavirus pandemic (a global pandemic of the coronavirus disease 2019, also known as Covid-19, caused by a severe acute respiratory syndrome coronavirus called SARS-CoV-2). For the first half of 2020, passenger demand decreased compared to the same period in 2019 by 58.4 per cent (and by 64.5 per cent for international passengers), cargo demand decreased by 12.4 per cent, and aircraft movements decreased by 41.6 per cent (ACI, 2020). At the time of completing this book in April 2021, the long-term implications of the coronavirus pandemic on demand for air transport are not yet known but the industry of course hopes for a strong recovery once the pandemic is under control. Second, in combination with long-term growth, air transport markets have become increasingly deregulated. This process began in the US domestic market in 1978, followed by the liberalisation of a number of international routes to and from the US such as the so-called ‘open market’ agreements signed by the US and the Netherlands, Belgium, Germany, Singapore, Thailand, Korea and the Philippines between 1978 and 1980. Similar agreements were made in Europe during the 1980s such as those signed by the United Kingdom (UK) with the Netherlands, Ireland and Singapore from 1984 (Doganis, 2010). Many domestic markets are now fully deregulated. For instance, Chile, New Zealand and Canada deregulated during the 1980s, while Australia, India, Venezuela, Peru, South Africa, Mexico, Argentina, Malaysia, Thailand, Kenya, Brazil and countries in Europe deregulated during the 1990s (Williams, 2002). The European air transport market was the first international market to be deregulated and this was achieved through three packages of liberalisation introduced in 1987, 1990 and between 1993 and 1997. Each package reduced restrictions on the setting of fares, frequency and capacity, market access, and the ownership and control of airlines. The European Union (EU) has since negotiated a number of so-called ‘open skies’ agreements with other countries such as with the US in 2008. Elsewhere, an Association of Southeast Asian Nations (ASEAN) open skies agreement to create a single aviation market (known as ASEANSAM) between ten Southeast Asian countries was ratified by all members in 2016, while a Single African Air Transport Market (SAATM) programme was launched by the African Union (AU) in January 2018. Prior to deregulation, each country tightly regulated its own domestic market, while international regulation was based on bilateral air service agreements (ASAs) between governments; these set fares, frequencies, capacities and market access. Many international routes are still based on bilateral ASAs, but the restrictions traded by them are generally not as strict as they

INTRODUCTION have been in the past. One of the main consequences of deregulation has been that airlines are now more footloose. They are freer to choose where they fly to and from, and generally set fares, frequencies, capacities and routes according to commercial considerations. This has provided airports not only with increased opportunities to attract new routes through marketing but also with challenges associated with retaining existing routes as a result of high rates of route churn (Thelle et al., 2012; de Wit and Zuidberg, 2016). New types of airline business models such as low-cost carriers (LCCs) emerged through deregulation. These provided further opportunities for airports, in many cases requiring them to adopt a completely different approach and encouraging a further deviation from past practice, initially affecting mainly secondary and regional airports (e.g. see Francis et al., 2003; Barrett, 2004; Francis et al., 2004) but more recently affecting major airports too (e.g. see Dobruszkes et al., 2017). Third, the travelling public is becoming more experienced and less loyal, enjoying a greater choice of airports and air services, and generally placing greater demands on airports to deliver a quality product at a time when more stringent controls are being implemented, especially with regard to security, and more recently, health and safety. Also, competition for air cargo has intensified and several airports now focus entirely on air cargo, while others are placing much greater attention on developing air cargo, in addition to passenger services – because demand for air cargo has been less negatively affected by the coronavirus pandemic compared to passenger services. Fourth, as airports grew (prior to the coronavirus pandemic), they were able to exploit opportunities to develop commercial activities and increasingly seek to do so in order to diversify their business. This means that airport marketing often extends to a much wider range of customers, targeting not only airlines, passengers or cargo companies but also airport workers; the so-called ‘farewellers and weepers’, ‘meeters and greeters’ and the general public; providers of aviation services (e.g. ground handling and catering companies) and commercial passenger services (e.g. retail, food and beverage – F&B, car parking and car rental companies); buyers (e.g. of airport advertising, real estate or airport consultancy services); and suppliers (e.g. construction and engineering companies). Fifth, airport marketing is increasingly important because of the impact an airport can have on the economic and social development of its surrounding areas. For this reason, airport marketing undertaken by both publicly and privately-owned airports often has wider objectives rather than just to enhance the wellbeing of the airport. Also, collaboration with stakeholders such as local businesses, tourism and regional development agencies is more common at airports than with many other industries because of the wider implications of traffic growth. There is also a greater awareness of global concerns relating to aviation, especially with regard to not only climate change but also other issues such as diversity and inclusion, and human and wildlife trafficking, and airports need to be more effective in developing and communicating information about products and services, and initiatives that optimise the balance between environmental protection, social equity and economic growth (Chapter 11). Sixth, changes in the airport business environment have given airports a greater incentive to develop innovative, proactive and aggressive approaches to marketing. This has been encouraged further by recent transformations in the way airports are owned and operated. In many countries, the sector has moved from an industry characterised by public sector ownership and national requirements into a new era of airport management, where larger airports have become major international companies that tend to be owned and operated by the private

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INTRODUCTION sector. The first major airport privatisation, of the British Airports Authority (BAA), took place in 1987, and the trend for airport privatisation has continued globally since then, albeit with varying degrees of success (e.g. see Graham, 2020 for a review and assessment of the airport privatisation journey from 1987 to 2020). Many airports are still publicly owned but a growing number are operated as commercial entities. According to Steer Davies Gleave (2016): 15 per cent of airports worldwide are fully privatised; 18 per cent are owned as a public-private partnership; and 67 per cent are publicly owned. However, as a result of privatisation – or at least commercialisation – being more prevalent at larger airports, privatised or commercialised airports now account for 50 per cent of airport passenger traffic. In Europe, 41 per cent of airports were already privatised or operated as a public–private partnership by 2016 while 78 per cent of publicly owned airports were operated as corporatised entities, abiding by commercial and fiscal discipline such as any other competitive business (ACI Europe, 2016). That data is rather old now and the level of private involvement is expected to be much greater. However, the coronavirus pandemic means there is also a great deal of uncertainty over the sustainability of existing approaches to airport infrastructure, as airports (and other parts of the air transport supply chain) are becoming increasingly dependent on support from their governments in order to survive, for instance, with the European airport industry trade association, Airports Council International Europe (ACI Europe) warning of mass insolvency among its member airports unless support is provided (see ACI Europe, 2020). Much of the debate on whether or not airports compete is linked to arguments over market power and the need for regulation, for instance, of airport fees and charges (Chapter 7). Regardless of where one stands on that particular argument, it is almost impossible to claim that airports are not active in marketing (as this book will show), and while interest in airport marketing within industry and academia is still relatively new, the following section shows that airport marketing has a history that reaches much further back in time.

1.1.2 Airport marketing and the marketing era Parallels can be drawn to some extent between how marketing has evolved as a concept and how airport marketing has evolved in practice. Theory suggests that companies operated in a production-orientated era until the 1950s, with a focus on means of production and an assumption that customer needs and wants do not change quickly. This was followed by the salesorientated era between the 1950s and 1960s when companies would focus on promoting an existing product or service without really determining what customers need and want. Many airports were developed for military rather than civilian purposes, especially around the time of the second world war. Transferring them to civilian use, governments decided which airlines would operate between which airports under the system of government ownership and control mentioned earlier in this chapter. Main airports were often developed as status symbols – the objective being to make the country look strong and powerful – but the airports were not necessarily customer-orientated or profitable. This did not matter, since they were government-owned and did not have private shareholders seeking a return on their investment. Other regional and local airports also tended to be publicly owned, often by local authorities that were proud and protective of their airport, especially given that it provided the region with opportunities for connectivity. Many were created for regional development purposes in schemes driven by (over)ambitious local politicians. This still occurs today. For instance, 24 regional airports were built during Spain’s boom years, often as “monuments to the vanity and

INTRODUCTION hubris of local bigwigs” (Jones, 2012: para 6). Several have since struggled to attract traffic. For instance, Central Ciudad Real Airport, was opened in 2009 but closed in 2012. The airport finally reopened in 2019. Castellón Airport was completed in 2011 but the first commercial flight was not until 2015. In addition to being developed for political as opposed to market-orientated objectives, the vast majority of airports – irrespective of size or ownership – have traditionally focused on operational capabilities needed for safe and efficient movement of aircraft, people and cargo. They have not concentrated on the pre-determined needs and wants of customers, nor operated as commercial enterprises with a focus on marketing. The literature suggests that we are now in a marketing-orientated era that emerged in the 1970s, characterised by companies that are focused on developing products and services that meet customer needs and wants. Despite examples to the contrary such as some of Spain’s regional airports (which are reminiscent of the sales-orientated era), there is evidence of this marketing-orientated era at airports, although it appeared slightly later than the 1970s as a result of significant widespread changes not really taking place in the industry until the 1980s. It is however important to note that companies did not just start marketing as the marketingorientated era emerged. Marketing has existed in some form or another for a long time, albeit in what might be considered a pre-modern form of marketing. Early evidence of this is the barter trade in ancient Egypt, Songhai and Ghana, where exchanges added value for both parties; as Baker points out, “the enigma of marketing is that it is one of man’s oldest activities and yet it is regarded as the most recent of business disciplines” (Baker, 1976: ix). This is also the case with airports. By virtue of the desire of governments to develop them as status symbols, as well as the glamour associated with air travel since its inception, airports have always been marketed in some way or another, although the marketing activities were certainly not as targeted, customer-orientated and varied as they are today. Some of the earliest examples of airport marketing activities can be found on the internet. One example (Figure 1.1) shows an airplane and a seaplane and leads with the text ‘City of New York municipal airports’. It was created by Harry Herzog for the Works Progress Administration Federal Art Project in New York City in about 1937 to promote New York’s municipal airports (Floyd Bennett Field and North Beach Airport on Wall Street and 31st Street). Also, in 1937, British Airways Limited left Gatwick Airport for Croydon Airport to re-commence operations there. Gatwick Airport subsequently launched print advertisements to attract private owners of aircraft to fill the gap with the following announcement: We have pleasure in announcing that in future no landing fees will be charged to private owners of aircraft when landing at Gatwick or Gravesend. In accordance with the new policy of the Company, private owners will find the fullest facilities at their disposal, including spacious lock-ups at low inclusive rentals, refueling and service stations, and all social amenities. (British Caledonian: A Tribute, 2021: no page) On Geneva Airport’s Pinterest site, there is a photo of an original two-colour magazine advertisement for Geneva Cointrin Airport from 1947, focusing on the airport product (Chapter 6), stating that it has the “Only runway in Switzerland suitable for inter-continental traffic: runway length, 6500 ft” (Geneva Airport, 2021). Straplines (Chapter 9) were also used in airport advertisements. For instance, an advert for Zahn’s Airport from about the 1950s used the strapline: “In New York…Touch down where service is the finest” (Freeman, 2021). Content marketing was also used to provide valuable, relevant and consistent content for target markets (Chapter 10). For instance, Tokyo Haneda Airport published a terminal building brochure (an

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Figure 1.1 ‘City of New York municipal airports’ poster from about 1937 Source: US Library of Congress (2021)

example from about 1955 is provided by Old Tokyo, 2021), to help passengers find information about airport infrastructure and services. Also focused on the airport product, Aeroport de Paris ran print advertisements for Paris Orly Airport in 1970 stating that: “Our new installations at Orly make us the first airport in the world to get up permanent handling facilities specially designed to deal with high-capacity transport aircraft of the B747 type”.

INTRODUCTION Airport marketing arguably became more targeted from about the 1970s. According to Aaronson (2013: para 3): “Marketing by airports to airlines, known as ‘air service development’, actually started in the 1970s, with efforts by Baltimore-Washington International and Louisville airports in the USA [United States of America] to expand their flights offer systematically”. However, broad mass media advertisements were also used. For instance, Amsterdam Airport Schiphol highlighted its value to UK travellers in 1981 with advertisements on London buses that read “Amsterdam Airport Schiphol. Hop, Schiphol & jump”, and print advertisements used the strapline “No wonder they call us London’s third airport” (Maslen, 2017). Contemporary approaches to marketing have evolved, for instance, with a much greater focus on relationship marketing (building good customer relations and retaining customers through loyalty), industrial marketing (building and maintaining good relations with other businesses and organisations), engagement marketing (capturing the attention or establishing connections with an audience), digital marketing (marketing that is conducted via digital technologies), sustainable marketing (marketing activities that benefit the economy without harming society and the environment), and more recently crisis communications and marketing (that has been brought into focus by the coronavirus pandemic, which is arguably the most significant global crisis ever faced by the airport industry). As this book will demonstrate, there is evidence to suggest that airports have embraced the full range of contemporary approaches to marketing, for instance, by introducing airport loyalty schemes, partnering with stakeholders, using experiential initiatives and digital technologies for marketing, sponsoring local community events and activities, supporting global goals and introducing coronavirus-related health and safety measures and campaigns. Traditional approaches such as the poster used to ‘push’ a general message about New York’s municipal airports in Figure 1.1 are still used by airports as a way of creating awareness, but they increasingly co-exist with contemporary approaches that bring them closer to their customers.

1.1.3 Industry interest in airport marketing It is not easy to quantify the interest in marketing among airports. Regarding expenditure on it, there tends to be a lack of historical data from which trends can be derived, while current data, such as on budgets and activities for airport marketing, is often commercially sensitive. Publicly available data often lacks transparency because marketing costs are rarely separated from other costs, such as those for sales and administration. Similarly, employees with responsibility for marketing may not be employed or work specifically in marketing but in other areas, for instance, with a local authority, corporate head office or another department in the airport such as sales, administration or public relations. At smaller airports, it may be the airport manager who has responsibility for marketing, along with a wide range of other duties. There have been some attempts to quantify the growth in airport marketing. Humphreys (1999) investigated the number of marketing staff employed at a selection of regional airports in the UK between 1991 and 1997. The number grew at each airport, and the ratio of passengers to marketing staff decreased at seven of the nine airports (Figure 1.2). Thelle et al. (2012) provide further evidence from a number of airports. For instance, the number of marketing staff at Copenhagen Airport increased from two full-time employees in 2000 to four in 2005 and eight in 2012, while expenditure on sales, marketing and administration at Zurich Airport increased from 17.6 million Swiss Francs (CHF) in 1999 to 39.1 million in 2011. Evidence of actual expenditure on marketing at US airports (which includes advertising and promotions but excludes personnel costs) is available from the US Federal Aviation

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INTRODUCTION 400

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Number of passengers per marketing staff employed

Figure 1.2 Change in marketing staff at selected UK regional airports, 1991–1997

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Figure 1.3 Marketing expenses at all US commercial airports, 2010–2020 Data source: FAA (2021)

Administration (FAA). Marketing expenses at all US commercial airports, along with expenses per 100 enplanements from 2010 to 2020, are shown in Figure 1.3. Expenses grew sharply from 103.0 million US Dollars (USD) in 2010 to 202.3 million in 2019. The number of airports in the sample has decreased from 519 in 2009 to 465 in 2019 meaning that average expenditure has increased, from USD 198,517 in 2010 to 435,124 in 2019. Expenses per 100 enplanements also increased from USD 14.8 to 21.3. As can be seen in Table 1.1, average expenditure decreases

INTRODUCTION Table 1.1 Marketing expenses at US commercial airports by hub size, 2019 Average expenses per airport (USD)

Enplanements Expenses (million) (USD) per 100 enplanements

Hub size

Number of airports

Expenses (USD million)

All

465

202.3

435,124

948.0

21.3

Large hub

31

78.1

2,518,081

681.3

11.5

Medium hub

31

49.5

1,595,082

157.6

31.4

Small hub

69

46.4

672,902

80.6

57.6

Non-hub

334

28.4

85,013

28.4

99.7

Data source: FAA (2021)

with the size of the airport. However, expenses per 100 enplanements increase, for instance, from USD 11.5 for large hubs to 99.7 for non-hubs. Of course, the figures for 2020 have been dramatically affected by the coronavirus pandemic. Hence the use of 2019 data in Table 1.1. As seen in Figure 1.3, expenditure on marketing decreased dramatically in 2020, however, it has increased relative to the reduction in traffic. This shows that while priorities may have changed, airports are still marketing during the crisis and it will no doubt play an important role in the recovery efforts of the industry (this is discussed further in Chapter 11). Indeed, London Gatwick Airport was recruiting a Head of Marketing during the crisis, in November 2020, stating that the primary objectives of the role will be to: “drive airline passenger volume, maximise customer spend and develop improved awareness of the full extent of the airport offering as we re-emerge from Covid-19, ensuring that our marketing message is stronger than ever”. Airport marketing also has a high profile within the industry more generally, and not just at airports. For instance, Airports Council International (ACI) is the professional association of airport operators. Globally, ACI represents more than 1,861 airports in 177 countries and territories. In addition to its head office in Montreal, ACI has five regional organisations (ACI Africa, ACI Europe, ACI Latin America/Caribbean, ACI North America and ACI Asia/Pacific). Airport World, launched in 1995, is the official magazine of ACI. Its primary aim is to “provide a forum for airport-related management issues, a vehicle for airports to promote and market themselves, and a direct route for suppliers of products and services to airports”. Feature articles are often focused on airport marketing and the magazine has a specific section on Marketing and Communications. Similarly, Airport Business is ACI Europe’s magazine and also covers marketing. Marketing issues also feature on the ACI Blog (https://blog.aci.aero/) and other magazines and news sites such as International Airport Review, Airport Magazine, Airports International, Airport Improvement, Cargo Airports & Airline Services, anna.aero and Routesonline. In addition, ACI supports the Journal of Airport Management that publishes articles and case studies on airport management that are targeted at industry (e.g. airport management, airlines, ground handling companies and advisers) but also researchers (e.g. in academia) (Table 1.2). Airports regularly seek recognition for their marketing efforts, and in North America, the Peggy G. Hereford Award has been presented annually since 1990. The award is named after Peggy G. Hereford who was a founding member of the Airport Operators Council International Marketing and Communications Committee (now ACI North America’s Marketing, Communications and Customer Experience Committee). There is an overall award but also individual categories that show the breadth of marketing activities that airports are engaged in (Table 1.3).

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INTRODUCTION Table 1.2 Airport marketing articles and case studies in the Journal of Airport Management Author(s) and year

Title

Bork (2007)

Developing a retail marketing strategy to promote both airport and retailers

Hupe (2007)

Cross-border marketing of Dresden Airport

Tiboldi (2007)

Marketing strategy and airport revenue at FlyBalaton Airport

Paternoster (2008)

Excellent airport customer service meets successful branding strategy

Schano (2008)

A ‘balanced approach’ to airport marketing: the impact of lowcost airlines on tourism in Salzburg

Topping (2010)

Promotions and incentives in airport retailing

Ansgar (2011)

Airline marketing and service quality: foundations for growing non-aeronautical revenue — an Indian perspective

Halpern and Regmi (2011)

What’s in a name? Analysis of airport brand names and slogans

Lepièce (2011)

Incentives and aids for the development of routes under EU law: practical guide for airports and airlines

Shashank et al. (2012)

Putting the joy back into the airport experience: can social networking platforms make a genuine contribution to increasing commercial revenues and engaging customers?

Park and Lim (2015)

A study of the effect of protocol services on the image formation of Incheon International Airport

Van Auken (2015)

Using social media to improve customer engagement and promote products and services

Florido-Benítez et al. (2016–2017)

Impact of mobile marketing on passengers’ satisfaction and experience at airports

Klophaus (2016)

Air travel banks: a public-private partnership approach to air services development at smaller airports

Malinowski (2016)

The profession of being social: developing an effective and purposeful social media strategy for an airport

Kinsey (2017)

Strategically depositing into your ‘Goodwill Bank’: an important and necessary asset for airports

Grigsby Smith (2019)

Centennial Airport: a case study for small airport social media strategy

Gould (2019)

Meeting today’s challenges in travel retail with digital commerce marketplaces

Sanchez (2019)

Innovative ideas for improving airport community relations

Source: Compiled by the authors

INTRODUCTION Table 1.3 The Peggy G. Hereford Award categories Category

Sub-category

Description

Marketing

Annual reports

Project a positive image for the airport through wellwritten and well-organised content, excellent design and well-conceived overall packaging

Brand identity

Demonstrate the visible elements of an airport’s brand that together identify and distinguish the brand in the minds of airport passengers

Digital advertising

Web and social media advertisements promoting the airport, including giveaways, contests and other promotional initiatives

Partnering with carriers

Portray and/or describe programmes or events that show how the airport has cooperated with airlines for the good of both entities and the community

Print communications

Brochures and print advertising may be general or targeted to a specifc event, industry segment or special offer

Promotional items

Successful results of using merchandise to promote the airport or a specifc initiative

Radio advertising

Advertisements may be general or targeted to a specifc event, industry segment or special offer

Video/flm productions

Best overall production of an airport video, flm, web commercial or television commercial. Videos may be general or targeted to a specifc event, industry segment or special offer

Overall marketing

Defne the product or service – its features and benefts in detail – and create a strategy for communicating the message that will produce growth

Community education and outreach

Most creative and effective community outreach and aviation education programmes conducted online, inside or outside the airport

Newsletters

Demonstrate consistent delivery of varied content relevant to target audiences and engaging design

Social media campaigns

Campaigns that connect people through social media and allows them to be integrated into a product, service or overall airport experience. Can include internet forums, message boards, blogs and podcasts

Special events

Time-limited events that occurred sometime between 1 July 2019 and 31 August 2020

Responsive communications

Communications surrounding any irregular or otherwise unscheduled operation or event, either internal or external

Public relations (PR)

(Continued)

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INTRODUCTION Table 1.3 Continued Category

Customer experiences

Sub-category

Description

Websites

The outstanding website from a design, communications, accessibility and navigation standpoint. Entrants must demonstrate the website’s overall effectiveness

Overall PR

Planned effort to improve the airport’s image in the public eye

Customer experience technology innovation

Passenger-facing technological innovations inside and outside the terminal including mobile websites, mobile applications and other innovations with the best overall design, functionality and clarity

Partnering with concessionaires/ service providers

Programmes or events that show how the airport has cooperated with concessionaires for the good of the airport, passengers and the community

Overall customer experience

New elements to current programmes or new programmes developed in the customer service arena that have signifcantly enhanced the overall passenger experience at the airport

Source: Adapted from ACI North America (2021)

Similarly, The Moodie Davitt Report is a provider of business intelligence on the global travel retail sector. Since 2014, The Moodie Davitt Report has been recognising best practices in social, digital media and marketing among the airport and wider travel retail community via The Moodies Awards, which in 2020, had two ‘special judge’s awards’ categories for inspiration in crisis and creativity in crisis, as well as 19 ‘best of ’ categories (Table 1.4). Some of the ‘best of ’ categories had separate winners (e.g. for airports, retailers, agencies, vendors and brands). Others just had an overall winner. There are also awards for airport marketing from airlines. For instance, The Routes Awards were created in 1997 to recognise excellence in airport marketing, as voted for by airlines. Airlines are instructed to vote for airports that provided the best marketing services to them in terms of their relationship, the effectiveness of the results, the provision of data and information or innovative techniques to establish new or maintain and develop existing routes. Categories of awards at Routes Europe 2019 were available for: overall winner; winner according to airport size (passengers over 20 million, 4 to 20 million, under 4 million); and highly commended according to airport size (passengers over 20 million, 4 to 20 million, under 4 million).

1.1.4 Academic interest in airport marketing Along with increased industry activity in this area, there is also a growing interest in airport marketing as a field of academic study and there is now a selection of books, guidebooks and book chapters dedicated to the field of airport marketing (Table 1.5). There is also a growing number of journal articles (Table 1.6). The lists in Tables 1.5 and 1.6 have not been compiled from a systematic literature search and are therefore not meant to be exhaustive, especially given the potentially diverse topics that can be associated with airport marketing, for instance, regarding

INTRODUCTION Table 1.4 The Moodies Airport and Travel Retail Digital, Social Media and Marketing Awards, 2020 ‘Best of’ category

Description

Best use of a social platform

Successful social media strategies and how different social platforms were used to foster community engagement; how social media channels have been integrated into campaign planning and the marketing mix; and how they enhanced key messaging and objectives. Separate sub-categories for WeChat, Facebook, Instagram and overall

Best use of video

Video projects and campaigns from 2019/2020 that have delivered exceptional audience engagement and moved awareness beyond the business environment

Best digital agency

Best digital advertising, marketing or creative agency and how their work drove brand recognition for their clients in 2019/2020

Best integrated campaign

Creative, innovative and best practice across multiple platforms and channels, and across more than one organisation

Best omnichannel campaign

Integration of various digital and social channels into a highly successful and cohesive campaign

Best digital marketing/ Online competition, contest or related initiative in 2019/2020 that competition platform embraced new digital innovation, delivered exceptional results and contributed to sustainable business growth Best launch/relaunch campaign

Strategies used to support the launch/relaunch of a new product or service

Best key opinion leaders (KOL)-driven campaign

Partnerships between KOL and airports, retailers and brands in campaigns that clearly demonstrate exceptional results in terms of audience, infuence and return on investment (ROI)

Best corporate social responsibility (CSR) or cause advocacy campaign

Innovative CSR initiatives and how digital platforms were used to advocate for important social causes

Best use of real-time/ geolocation

Campaigns that delivered an impressive audience level to an event or launch in real-time or by using geolocation technology

Best branding advertising campaign

The biggest, brightest and most impactful advertising executions in 2019/2020

Best tactical advertising campaign

Innovative short-term advertising campaigns that delivered signifcant exposure for the client or brand

Best native advertising campaign

Innovative native solutions that integrated seamlessly into the business and campaign and drove signifcant ROI for the client

Best use of digital to an internal audience/employee engagement

Best digital technologies and initiatives in employee engagement that have contributed ongoing success to the businesses involved

Best e-/m-commerce

The most effective use of e-commerce and mobile to achieve a specifc marketing outcome (Continued)

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INTRODUCTION Table 1.4 Continued ‘Best of’ category

Description

Best website/microsite

Excellence in the development of websites and microsites with a focus on functionality, overall structure, navigation, user experience (UX) and user interface (UI) design, use of content and the results delivered

Best use of mobile/ application

Innovative, useful or engaging mobile content, services, applications or utilities

Best digital team

Teams that have embraced new technologies and launched successful campaigns both online and offine throughout 2019/2020

Digital innovator of the year

The company that has thrived in the digital landscape and has led the way in terms of digital innovation throughout 2019/2020 including the delivery of exceptional digital campaigns but also pushing the boundaries of the virtual world

Source: Adapted from The Moodie Davitt Report (2020)

competition and service quality, which are generally not included in the lists. However, they do provide a quick reference source for many of the publications cited within this book.

1.2 Approach to airport marketing in this book This book introduces students and practitioners to the principles and practice of airport marketing, as well as the major changes and future marketing challenges facing the airport industry. It applies principles of marketing to the airport industry, integrating key elements of marketing theory with airport marketing in practice. As such, it is important to start by defining marketing within an airport context.

1.2.1 Defning marketing within an airport context The Chartered Institute of Marketing (CIM) and the American Marketing Association (AMA) are two of the world’s most influential marketing bodies. CIM (2015: 1) defines marketing as “the management process responsible for identifying, anticipating and satisfying customer requirements profitably”, while AMA (2021: para 2) defines it as “the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large” (definition approved 2017). Both definitions stress that marketing is a process that has objectives and outcomes. The CIM definition places emphasis on three key stages in the process: identification of customer requirements, a more long-term objective to anticipate those requirements and a more shortterm objective to satisfy those requirements. AMA has a similar view, highlighting the need to create, communicate, deliver and exchange offerings that have value. In the CIM definition, profitability is an outcome of the marketing process, while the AMA definition emphasises the exchange of offerings that have value. The latter is a broader outcome that may still involve profit but can also include non-monetary values. This is more relevant for airports because although profit may be an important outcome, especially for those that are operated as commercial entities, airports also seek to exchange offerings of value that are not profit-related, for instance, when seeking to address global challenges (Chapter 11).

INTRODUCTION Table 1.5 Selection of books, guidebooks and chapters on airport marketing Author(s) and year

Title

Tretheway (1998)

Airport marketing: an oxymoron? (Chapter)

Jarach (2005a)

Airport marketing: strategies to cope with the new millennium environment (Book)

STRAIR (2005)

Air service development for regional agencies: strategy, best practice and results (Guidebook)

Halpern and Niskala (2008)

Airport marketing and tourism in remote destinations (Chapter)

Biggs et al. (2010)

Guidebook for conducting airport user surveys (Guidebook)

FAA (2010)

Air carrier incentive program guidebook: a reference for airport sponsors (Guidebook)

Halpern (2010a)

The marketing of small regional airports (Chapter)

Kramer et al. (2010)

Marketing guidebook for small airports (Guidebook)

ACI/DMKA (2012)

Airport service quality (ASQ) best practice report: airport loyalty programmes (Guidebook)

Halpern and Graham (2013)

Airport marketing (Book)

Graham (2018)

Airport competition and the role of marketing (Chapter)

Halpern (2018)

Airport marketing (Chapter)

Halpern (2019)

Partnerships between tourism destination stakeholders and the air transport sector (Chapter)

IATA (2019)

Crisis communication and reputation management in the digital age: a guide to best practice for the aviation industry (Guidebook)

Kefallonitis and Kalligiannis (2019)

The effect of airport branding to air traffc and passenger movement: an overview (Chapter)

Ballard et al. (2020)

Building and maintaining air service through incentive programs (Guidebook)

Halpern (2020)

Air transport marketing communications (Chapter)

Vlassi and Papatheodorou (2020)

Towards a method to assess the role of online marketing campaigns in the airline – airport – destination authority triangular business relationship: the case of Athens tourism partnership (Chapter)

Halpern (2022)

Airport marketing (Chapter)

Source: Compiled by the authors

The AMA definition also emphasises the range of markets that may be targeted including customers (end-user recipients of airport products and services) but also clients, partners and society at large. This is again relevant to airports that have both end-user customers (airlines, passengers, freight forwarders and shippers of air cargo) and a diverse range of other customers for whom they need to create, communicate, deliver and exchange offerings of value. The CIM

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INTRODUCTION Table 1.6 Selected journal articles on airport marketing Author(s) and year

Title

Freathy and O’Connell (2000)

Market segmentation in the European airport sector

Jarach (2001)

The evolution of airport management practices: towards a multipoint, multi-service, marketing-driven frm

Vowles and Mertens (2004)

Airport niche marketing: Sanford, Florida’s rise as an international gateway

Gardiner et al. (2005)

Factors infuencing cargo airlines’ choice of airport: an international survey

Jarach (2005)

Aviation-related airport marketing in an overlapping metropolitan catchment area: the case of Milan’s three airports

Halpern and Pagliari Governance structures and the market orientation of airports in (2007) Europe’s peripheral areas Halpern (2008)

Lapland’s airports: facilitating the development of international tourism in a peripheral region

Halpern and Pagliari Direct, moderating and mediating effects of market orientation on (2008) the performance of airports in Europe’s peripheral areas Rankin (2008)

King County: a case study model for strategic marketing planning for airport managers

Martin (2009)

Passenger air service development techniques

Davison et al. (2010) Regional airports in a competitive market: a case study of Cardiff International Airport Halpern (2010b)

Marketing innovation: sources, capabilities and consequences at airports in Europe’s peripheral areas

Fichert and Klophaus (2011)

Incentive schemes on airport charges – theoretical analysis and empirical evidence from German airports

Vujicic and Wickelgren (2011)

Destination branding in relation to airports: the case of the City of Valencia

Halpern (2012)

Use of social media by airports

Malina et al. (2012)

Airport incentive programmes: a European perspective

Rawson and Hooper The importance of stakeholder participation to sustainable airport (2012) master planning in the UK Chung et al. (2013)

Financial-based brand value of Incheon International Airport

Halpern and Regmi (2013)

Content analysis of European airport websites

Park et al. (2013)

Investigating the effects of sales promotions on customer behavioral intentions at duty-free shops: an Incheon International Airport case study

Castro and Lohmann (2014)

Airport branding: content analysis of vision statements (Continued)

INTRODUCTION Table 1.6 Continued Author(s) and year

Title

Hvass (2014)

To fund or not to fund: a critical look at funding destination marketing campaigns

Wittman (2014)

Public funding of airport incentives in the United States (US): the effcacy of the Small Community Air Service Development Grant program

Florido-Benítez and The effects of mobile applications as a marketing tool in airport del Alcázar Martínez infrastructure and airlines (2015) Halpern and Graham (2015)

Airport route development: a survey of current practice

Harrison et al. (2015)

A new model for airport passenger segmentation

Núñez-Sánchez (2015)

Regional public support to airlines and airports: an unsolved puzzle

Wattanacharoensil and Schuckert (2015)

How global airports engage social media users: a study of Facebook use and its role in stakeholder communication

Florido-Benítez (2016a)

The impact of mobile marketing in airports

Florido-Benítez (2016b)

Airport mobile marketing as a channel to promote cross-selling

Halpern and Graham (2016)

Factors affecting airport route development activity and performance

Lee and Park (2016)

Impact of a sustainable brand on improving business performance of airport enterprises: the case of Incheon International Airport

Martin-Domingo and Martín (2016)

Airport mobile internet an innovation

Ryerson (2016)

Incentivize it and they will come? How some of the busiest US airports are building air service with incentive programs

Inversini (2017)

Managing passengers’ experience through mobile moments

Leung et al. (2017)

Why passengers’ geo-demographic characteristics matter to airport marketing

Nghiêm-Phú and Suter (2017)

Airport image: an exploratory study of McCarran International Airport

Figueiredo and Castro (2018)

Passengers’ perceptions of airport branding strategies: the case of Tom Jobim International Airport – RIOgaleão, Brazil

Stephenson et al. (2018)

Stakeholder engagement in the development of international air services: a case study on Adelaide Airport

Straker and Wrigley (2018)

Engaging passengers across digital channels: an international study of 100 airports

Gitto and Mancuso (2019)

Brand perceptions of airports using social networks (Continued)

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INTRODUCTION Table 1.6 Continued Author(s) and year

Title

Spasojevic et al. (2019)

Leadership and governance in air route development

Bilotkach and Bush (2020)

Airport competition from airports’ perspective: evidence from a survey of European airports

Forsyth et al. (2020)

Covid-19, the collapse in passenger demand and airport charges

Wu and Tsui (2020)

Does a reward program affect customers’ behavioural intention of visiting the airport? A case study of Singapore Changi Airport

Halpern et al. (2021) Segmentation of passenger preferences for using digital technologies at airports Source: Compiled by the authors

definition does not specifically refer to types of target market, perhaps taking the view that all those mentioned in the AMA definition may be considered to be customers. That view is taken in this book, using ‘customers’ as a generic term for end-users as well as other target markets such as clients, partners and society at large. The range of airport customers is examined in more detail in Chapter 3. A third definition worth mentioning is from well-known marketing academics Armstrong and Kotler (2007: 5–6). They define marketing as “the social process by which individuals and organisations obtain what they need and want through creating and exchanging value with others”. They go on to say that marketing is “the process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return”. The latter part of the definition recognises the importance of long-term relationships with customers. This is relevant to airports, especially given their reliance on repeat business (e.g. from airlines, passengers, freight forwarders and shippers of air cargo), but also because of their composite nature and the impact they have on their surrounding areas.

1.2.2 Service industry marketing Airports are essentially providers of a service, and marketing plays a different role in service companies than in companies dealing purely with goods, where operational parts of the organisation deal with production and the marketing department deals largely with selling. This approach does not work with services such as airports, in which production and consumption often occur simultaneously and through interaction between the organisation, other stakeholders and suppliers, and the end-user. Staff responsible for marketing in a service company must therefore develop and maintain much closer and more wide-ranging relationships than is typical in many goods companies because of the inseparable nature of the different aspects of the service. Like goods, airports are physical objects that can be seen, touched, heard and smelt, and as discussed in Chapter 6, they offer tangible product features such as infrastructure and facilities for the end-user (e.g. a slot for take-off and landing in the case of an airline or a car parking space in the case of a passenger). However, unlike goods, there is generally no exchange of permanent ownership for physical components of an airport when customers pay to use it, meaning that it is important for airports to reinforce brand identity and encourage loyalty through marketing. In addition, customers paying to use an airport are often paying for

INTRODUCTION service features that are intangible. Airport marketing therefore needs to develop tangible cues that provide evidence of the benefits available such as signals of service quality that customers may then associate with the airport. Heterogeneity of airport services can cause a problem here because features such as service quality may vary depending on when, where and how they are delivered, and by whom. Airports therefore need to invest in recruitment and training, and from a marketing perspective, it is important to measure and manage the performance of service features delivered by the airport and its partners. Finally, services tend to be perishable. They cannot be stored for later sale or use. This is the case for most airport products and services, which means that airports are not able to create inventories and may face problems in matching demand with supply. Using market research to anticipate and plan for future demand is important (Chapter 4), and airports can respond to changes in supply and demand, for instance, by using differential pricing (e.g. incentives to stimulate demand during quiet periods) (Chapter 7), reservation systems (e.g. for car parking and slot allocation) (Chapter 8), and procedures for managing fluctuations in demand (e.g. contracting third-party service providers, sharing capacity with other service providers, and using flexible, part-time staffing during busy periods). A summary of service characteristics and their implications for airport marketing is provided in Table 1.7.

1.2.3 How this book is structured This book takes a systematic approach to the subject of airport marketing. It consists of 12 chapters representing different but very much related and interlinked stages in the marketing process. As such, there is some overlap between chapters. In addition, chapters are not restricted to examining only pure airport marketing issues. Where relevant, wider industry issues that have implications for marketing such as the regulation of airport user charges, slot allocation mechanisms and approaches to concession contracting are also discussed. Airport marketing is also discussed within the context of wider macro-environmental issues such Table 1.7 Characteristics of a service and implications for marketing Service characteristic

Implications for marketing

Inseparable. Service is often produced and consumed at the same time and through interaction between providers and customers

Important to develop and maintain close relationships with customers because interaction determines the service outcome

No transfer of ownership. Customers rarely gain personal ownership of the service they pay for

Important to reinforce brand identity and encourage loyalty

Intangible. Generally, has no substance – cannot be seen, tasted or touched

Important to develop tangible cues for the benefts available such as quality of service

Heterogeneous. Quality depends on where, when and how they are provided and by whom

Important to invest in quality, including staff training and management systems

Perishable. Cannot be stored for later sale or use

Important to anticipate future demand and use the marketing mix to infuence and respond to change

Source: Halpern (2020)

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INTRODUCTION as the role of digital technologies, global concerns and crises. Similarly, airport marketing is often assumed to be focused only on advertising and promotional campaigns; hence the small number of staff often employed in marketing-dedicated functions at airports. However, this book provides a much wider perspective on airport marketing, reflected by the scope of the 12 chapters. Chapter 2 considers the airport marketing environment, which consists of two main elements: the microenvironment – this refers to internal forces within the company and industry that affect a company’s ability to serve its customers; and the macroenvironment – this refers to wider societal forces that affect the microenvironment such as politics and legislation, the economy, culture and society, technology and environmental issues. Chapters 3 and 4 investigate how to define and measure the market for airport services. In particular, Chapter 3 examines the range of airport customers and their behaviour, and airport market segmentation, while Chapter 4 assesses how airports can use marketing research as a function for linking customers to the marketer, including the role of marketing research and research methodologies that can be used by airports. Chapter 4 also explores airports’ use of marketing research, giving special attention to the route development process. Chapter 5 provides a long-term perspective by examining airport strategic marketing planning; a systematic process through which airports can anticipate how best to exploit their future business environment. The chapter introduces the strategic marketing planning process, including its role and importance for airports, and focuses on individual elements of the process, including corporate intentions, situation analysis, marketing decisions and implementation. Chapters 6–9 provide an operational, short-term perspective by exploring the airport marketing mix: a tactical toolkit that can be controlled and used by airports to exploit market trends and to position their products and services in the marketplace. Individual elements of the marketing mix are widely known as the ‘4 Ps’ first introduced by McCarthy (1960). These include the product (the product or service produced), price (the amount charged for the product or service), place (the distribution channels used to sell the product or service) and promotion (the methods used to market the product or service). The 4 Ps have been reinvented on a number of occasions. For instance, they have been extended to the 7 Ps in order to include three service-orientated elements: physical evidence, processes and people, while Lauterborn (1990) has suggested that the 4 Ps should be replaced with the 4 Cs in order to reflect a more customer-orientated philosophy, whereby product becomes customer needs and wants, price becomes cost to the user, promotion becomes communication, and the place becomes convenience. Despite the range of philosophies, the fundamental principles are the same: individual elements of the marketing mix are combined to generate the optimal desired response from target markets. The traditional 4 Ps provide a sufficient framework for this book. Chapter 6 defines the airport product, exploring its main product and service features and the amount of control an airport has over them. The nature and use of branding by airports are also discussed. The chapter concludes by examining the concept of the passenger experience and assesses how the product can be evaluated and planned to meet the needs and expectations of airport customers. Chapter 7 examines factors that can affect airport pricing decisions before considering the cost and revenue structure of airports, types of airport charges, economic regulation of airport charges, and incentive mechanisms used by airports.

INTRODUCTION Chapter 8 investigates how approaches to airport distribution have evolved, especially in terms of the way airports conduct business with their target markets. The chapter also discusses how airports use customer relationship management (CRM) as a way of managing interactions with customers. Chapter 9 explores the range of marketing communications tools used by airports (known collectively as the promotional mix) and the common marketing objectives and strengths and weaknesses of each tool. The chapter also covers factors airports need to consider when developing an integrated and effective approach to marketing communications, and the use of marketing partnerships and engagement marketing by airports. Chapter 10 follows on from Chapter 9 because it continues to explore the range of marketing communications tools used by airports but with a focus on content marketing and the use of digital technologies: websites, search engines, social media, email, mobile devices and paid media. Chapter 11 examines the growing interest in sustainable marketing and the ways in which airports can market themselves for a more sustainable future. This includes developing an airport product and initiatives that optimise the balance between environmental protection, social equity and economic growth. The chapter also examines how airports can communicate with stakeholders including the messages and media that can be used, how to encourage stakeholder engagement and considerations regarding credibility. Chapter 12 examines the role of communications and marketing during a crisis. It focuses on key characteristics of a crisis and the main types of crisis situations that are potentially faced by airports, the role of communications during a crisis including three key elements of a crisis communications plan (the identification and assessment of potential risks, organisational roles and responsibilities, and guidance on communications with key stakeholders) and marketing implications of crisis situations. The latter is written within the context of the coronavirus pandemic and considers implications for airport priorities and positioning, pricing, the introduction of new health and safety measures and campaigns, accreditation and recognition for new measures, and messaging.

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INTRODUCTION Halpern, N. (2018). Airport marketing. In: A. Graham and N. Halpern, eds., The Routledge companion to air transport management. Abingdon: Routledge. Halpern, N. (2019). Partnerships between tourism destination stakeholders and the air transport sector. In: A. Graham and F. Dobruszkes, eds., Air transport: A tourism perspective. Amsterdam: Elsevier. Halpern, N. (2020). Air transport marketing communications. In: S. Ison and L. Budd, eds., Air transport management: An international perspective, 2nd ed. Abingdon: Routledge. Halpern, N. (2022). Airport marketing. In: D. Buhalis, ed., Encyclopedia of tourism management and marketing. Cheltenham: Edward Elgar Publishing. Halpern, N. and Graham, A. (2013). Airport marketing. Abingdon: Routledge. Halpern, N. and Graham, A. (2015). Airport route development: a survey of current practice. Tourism Management, 46, 213–221. Halpern, N. and Graham, A. (2016). Factors affecting airport route development activity and performance. Journal of Air Transport Management, 56, 69–78. Halpern, N. and Niskala, J. (2008). Airport marketing and tourism in remote destinations: exploiting the potential in Europe’s northern periphery. In: A. Graham, A. Papatheodorou and P. Forsyth, eds., Aviation and tourism: Implications for leisure travel. Aldershot: Ashgate. Halpern, N. and Pagliari, R. (2007). Governance structures and the market orientation of airports in Europe’s peripheral areas. Journal of Air Transport Management, 13(6), 376–382. Halpern, N. and Pagliari, R. (2008). Direct, moderating and mediating effects of market orientation on the performance of airports in Europe’s peripheral areas. Journal of Travel and Tourism Marketing, 24(1), 47–61. Halpern, N. and Regmi, U. K. (2011). What’s in a name? Analysis of airport brand names and slogans. Journal of Airport Management, 6(1), 63–79. Halpern, N. and Regmi, U. K. (2013). Content analysis of European airport websites. Journal of Air Transport Management, 26(1), 8–13. Halpern, N., Mwesiumo, D., Suau-Sanchez, P., Budd, T. and Bråthen, S. (2021). Segmentation of passenger preferences for using digital technologies at airports. Journal of Air Transport Management, 91(March), 102005, 1–13. Harrison, A., Popovic, V. and Kraal, B. (2015). A new model for airport passenger segmentation. Journal of Vacation Marketing, 21(3), 237–250. Humphreys, I. (1999). Privatisation and commercialisation: changes in UK airport ownership patterns. Journal of Transport Geography, 7(2), 121–134. Hupe, M. (2007). Cross-border marketing of Dresden Airport. Journal of Airport Management, 2(1), 30–37. Hvass, K. A. (2014). To fund or not to fund: a critical look at funding destination marketing campaigns. Journal of Destination Marketing & Management, 3(3), 173–179. IATA (2019). Crisis communication and reputation management in the digital age: a guide to best practice for the aviation industry. Montreal: IATA. Inversini, A. (2017). Managing passengers’ experience through mobile moments. Journal of Air Transport Management, 62, 78–81. Jarach, D. (2001). The evolution of airport management practices: towards a multi-point, multi-service, marketing-driven firm. Journal of Air Transport Management, 7(2), 119–125. Jarach, D. (2005a). Airport marketing: strategies to cope with the new millennium environment. Farnham: Ashgate. Jarach, D. (2005b). Aviation-related airport marketing in an overlapping metropolitan catchment area: the case of Milan’s three airports. Journal of Air Transportation, 10(2), 96–108. Jones, D. (2012). The price of financial folly: as airports and luxury flats stand empty as monuments to Spain’s overspending, miners’ protest over subsidy cuts ends in bloody clashes. [online] Daily Mail. Available at: https://www.dailymail.co.uk/news/article-2172339/Airports-seen-plane-ghosttowns-luxury-flats-The-hubris-Spains-descent-anarchy.html [Accessed 15 April 2021]. Kefallonitis, E. and Kalligiannis, K. (2019). The effect of airport branding to air traffic and passenger movement: an overview. In: A. Kavoura, E. Kefallonitis and A. Giovanis, eds.,

INTRODUCTION Strategic innovative marketing and tourism. Springer Proceedings in Business and Economics. Cham: Springer. Kinsey, T. (2017). Strategically depositing into your ‘Goodwill Bank’: an important and necessary asset for airports. Journal of Airport Management, 11(2), 154–167. Klophaus, R. (2016). Air travel banks: a public-private partnership approach to air services development at smaller airports. Journal of Airport Management, 10(2), 200–208. Kramer, L., Fowler, P., Hazel, R., Ureksoy, M. and Harig, G. (2010). ACRP report 28: marketing guidebook for small airports. Washington D. C: Transportation Research Board. Lauterborn, B. (1990). New marketing litany: four Ps passé: C-words take over. Advertising Age, 61(41), 26–27. Lee, Y. K. and Park, J.-W. (2016). Impact of a sustainable brand on improving business performance of airport enterprises: the case of Incheon International Airport. Journal of Air Transport Management, 53, 46–53. Lepièce, A. (2011). Incentives and aids for the development of routes under EU law: practical guide for airports and airlines. Journal of Airport Management, 5(2), 160–169. Leung, A., Yen, B. T. H. and Lohmann, G. (2017). Why passengers’ geo-demographic characteristics matter to airport marketing. Journal of Travel & Tourism Marketing, 34(6), 833–850. Liu, S., Wan, Y., Ha, H.-K., Yoshida, Y. and Zhang, A. (2019). Impact of high-speed rail network development on airport traffic and traffic distribution: evidence from China and Japan. Transportation Research Part A: Policy and Practice, 127, 115–135. Malina, R., Albers, S. and Kroll, N. (2012). Airport incentive programmes: a European perspective. Transport Reviews, 32(4), 435–453. Malinowski, H. (2016). The profession of being social: developing an effective and purposeful social media strategy for an airport. Journal of Airport Management, 10(3), 245–252. Martin, S. C. (2009). ACRP report 18: passenger air service development techniques. Washington D. C: Transportation Research Board. Martin-Domingo, L. and Martín, J. C. (2016). Airport mobile internet an innovation. Journal of Air Transport Management, 55, 102–112. Maslen, R. (2017). Hop, Schiphol and jump! – Amsterdam showcases aviation marketing. [online] Routes. Available at: http://www.routesonline.com/news/29/breaking-news/271922/ hop-schiphol-and-jump-amsterdam-showcases-aviation-marketing/ [Accessed 15 April 2021]. McCarthy, J. (1960). Basic marketing: a managerial approach. Irwin: Homewood. Nghiêm-Phú, B. and Suter, J. R. (2017). Airport image: an exploratory study of McCarran International Airport. Journal of Air Transport Management, 67(March), 72–84. Núñez-Sánchez, R. (2015). Regional public support to airlines and airports: an unsolved puzzle. Transportation Research Part E: Logistics and Transportation Review, 76(April), 93–107. Old Tokyo. (2021). Tokyo (Haneda) International Airport. [online] Old Tokyo. Available at: http:// www.oldtokyo.com/haneda-tokyo-international-airport/ [Accessed 15 April 2021]. Park, J.-W., Choi, Y.-J. and Moon, W.-C. (2013). Investigating the effects of sales promotions on customer behavioral intentions at duty-free shops: an Incheon International Airport case study. Journal of Airline and Airport Management, 3(1), 18–30. Park, J.-W. and Lim, K.-Y. (2015). A study of the effect of protocol services on the image formation of Incheon International Airport. Journal of Airport Management, 9(2), 175–184. Paternoster, J. (2008). Excellent airport customer service meets successful branding strategy. Journal of Airport Management, 9(2), 175–184. Pels, E., Nijkamp, P. and Rietveld, P. (2003). Access to and competition between airports: a case study for the San Francisco Bay area. Transportation Research Part A: Policy and Practice, 37(1), 71–83. Rankin, W. B. (2008). King County: a case study model for strategic marketing planning for airport managers. Journal of Aviation Management and Education, 1, 1–14. Rawson, R. and Hooper, P. D. (2012). The importance of stakeholder participation to sustainable airport master planning in the UK. Environmental Development, 2(April), 36–47.

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INTRODUCTION Ryerson, M. S. (2016). Incenitvize it and they will come? How some of the busiest U.S. airports are building air service with incentive programs. Journal of American Planning Association, 82 (4), 303–315. Sanchez, D. (2019). Innovative ideas for improving airport community relations. Journal of Airport Management, 13(2), 174–185. Schano, R. (2008). A ‘balanced approach’ to airport marketing: the impact of low-cost airlines on tourism in Salzburg. Journal of Airport Management, 3(1), 54–61. Shashank, N., Cook, R. and Stark, C. (2012). Putting the joy back into the airport experience: can social networking platforms make a genuine contribution to increasing commercial revenues and engaging customers? Journal of Airport Management, 6(1), 7–11. Socorro, M. P., Betancor, O. and de Rus, G. (2018). Feasibility and desirability of airport competition: the role of product substitutability and airlines’ nationality. Journal of Air Transport Management, 67(March), 224–231. Spasojevic, B., Lohmann, G. and Scott, N. (2019). Leadership and governance in air route development. Annals of Tourism Research, 78, 102746, 1–17. Steer Davies Gleave. (2016). Study on airport ownership and management and the ground handling market in selected non-EU countries. London: Steer Davies Gleave. Stephenson, C., Lohmann, G. and Spasojevic, B. (2018). Stakeholder engagement in the development of international air services: a case study on Adelaide Airport. Journal of Air Transport Management, 71(August), 45–54. STRAIR. (2005). Air service development for regional agencies: strategy, best practice and results. Brussels: STRAIR. Straker, K. and Wrigley, C. (2018). Engaging passengers across digital channels: an international study of 100 airports. Journal of Hospitality and Tourism Management, 34, 82–92. The Moodie Davitt Report (2020). Judging criteria. [online] The Moodie Davitt Report. Available at: https://themoodies.events/judging-criteria/ [Accessed 15 April 2021]. Thelle, M. H. and la Cour Sonne, M. (2018). Airport competition in Europe. Journal of Air Transport Management, 67(March), 232–240. Thelle, M. H., Pedersen, T. T. and Harhoff, F. (2012). Airport competition in Europe. Copenhagen: Copenhagen Economics. Tiboldi, T. (2007). Marketing strategy and airport revenue at FlyBalaton Airport. Journal of Airport Management, 2(2), 153–157. Topping, P. (2010). Promotions and incentives in airport retailing. Journal of Airport Management, 4(3), 208–210. Tretheway, M. and Kincaid, I. (2010). Competition between airports: occurrence and strategy. In: P. Forsyth, D. Gillen, J. Müller and H.-M. Niemeier, eds., Airport competition: the European experience. Abingdon: Routledge. Tretheway, M. W. (1998). Airport marketing: an oxymoron? In: G. F. Butler and M. R. Keller, eds., Handbook of airline marketing. New York: McGraw Hill. US Library of Congress. (2021). City of New York municipal airports No. 1 Floyd Bennett Field - No. 2 North Beach. [online] US Library of Congress. Available at: http://hdl.loc.gov/loc.pnp/ cph.3g04242 [Accessed 15 April 2021]. Van Auken, K. (2015). Using social media to improve customer engagement and promote products and services. Journal of Airport Management, 9(2), 109–117. Vlassi, E. and Papatheodorou, A. (2020). Towards a method to assess the role of online marketing campaigns in the airline– airport–destination authority triangular business relationship: the case of Athens Tourism Partnership. In: A. Graham, N. Adler, H.-M. Niemeier, O. Betancor, A. P. Antunes, V. Bilotkach, E. J. Calderon and G. Martini, eds., Air transport and regional development policies. Abingdon: Routledge. Vowles, T. M. and Mertens, D. P. (2004). Airport niche marketing: Sanford, Florida’s rise as an international gateway. Journal of Travel & Tourism Marketing, 17(4), 35–44. Vujicic, S. and Wickelgren, M. (2011). Destination branding in relation to airports: the case of the City of Valencia. European Journal of Transport and Infrastructure Research, 11(3), 334–345.

INTRODUCTION Wattanacharoensil, W. and Schuckert, M. (2015). How global airports engage social media users: a study of Facebook use and its role in stakeholder communication. Journal of Travel & Tourism Marketing, 32(6), 656–676. Williams, G. (2002). Airline deregulation’s mixed legacy. Abingdon: Routledge. Wiltshire, J. (2018). Airport competition: reality or myth? Journal of Air Transport Management, 67(March), 241–248. Wittman, M. D. (2014). Public funding of airport incentives in the United States: the efficacy of the Small Community Air Service Development Grant program. Transport Policy, 35(September), 220–228. Wong, J.-T., Chung, Y.-S. and Hsu, P.-Y. (2016). Cargo market competition among Asia Pacific’s major airports. Journal of Air Transport Management, 56(Part B), 91–98. Wu, H. and Tsui, K. W. H. (2020). Does a reward program affect customers’ behavioural intention of visiting the airport? A case study of Singapore Changi Airport. Journal of Air Transport Management, 82(January), 101742, 1–15.

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The airport marketing environment This chapter examines the environment in which airport marketing operates. It consists of three main sections. The first provides an introduction to the airport marketing environment including the two main elements – microenvironment and macroenvironment – and their role and importance for airport marketing. The next two sections examine each of these environments in detail.

2.1 Introduction to the airport marketing environment Airport marketing activities cannot be considered in isolation. Every airport operates within a marketing environment that, as will be shown in Chapter 5, plays a key role in influencing the airport’s marketing strategy and planning decisions. It provides both opportunities and threats for airports and is constantly changing, often with dramatic and unpredictable consequences. It is therefore essential for airport marketers to fully develop their marketing research skills and techniques (Chapter 4) to ensure that a thorough and reliable knowledge and understanding of their unique marketing environment is gained. There are a number of ways that the marketing environment can be assessed. Fletcher et al. (2019) identify four different levels. Level one is ‘the organisation’, which includes marketing functions that need to be well organised, well-resourced and integrated with other organisational functions. Next is level two, ‘company markets’, which includes all the markets for the products and services being offered. Level three is ‘organisational stakeholders’, which includes all interest groups that affect the decision-making of the organisation such as shareholders, competitors, customers, employees, unions, the government, suppliers, debtors, banks and the local community. Finally, there is level four, ‘the wider environment’, which covers factors outside the direct control of the organisation. A closely related alternative view involves

DOI: 10.4324/9781003039563-2

MARKETING ENVIRONMENT Macroenvironment Political and legal, economic, socio-cultural, technological and environmental factors Microenvironment Suppliers, intermediaries, customers, competitors and stakeholders

Internal environment The company

Figure 2.1 The marketing environment Source: Compiled by the authors

dividing the marketing environment between the micro (or internal) and macro (or external) environments (Kotler et al., 2020). A similar approach is taken in this chapter (Figure 2.1). The microenvironment consists of factors and forces close to the organisation that have a direct effect on its ability to serve its customers and on its marketing strategy. These consist of the organisation or company itself, suppliers, marketing intermediaries, customers, competitors and stakeholders. By contrast, the macroenvironment consists of factors and forces that belong to the broader society, affecting all organisations operating in a particular market. These factors influence the microenvironment, and hence the marketing activities undertaken. There are a number of ways of categorising macroenvironmental factors such as with a PEST (political, economic, socio-cultural and technological) analysis, or an extended PESTEL (political, economic, socio-cultural, technological, environmental and legal) analysis or some similar grouping (Dibb et al., 2019; Hooley et al., 2019; Pride and Ferrell, 2020). The categories may not be mutually exclusive, with some issues coming under more than one heading. For this chapter a PESTE (political and legal, economic, socio-cultural, technological and environmental) approach has been adopted, similar to that of Shaw (2011), who argues that in the aviation industry most quasi-legal issues are better dealt with under the political heading. Irrespective of the mnemonic chosen, the key aim is to assess all the external forces that influence the organisation. Knowledge of the micro- and macroenvironments is vital for undertaking the situation analysis that is a key stage of the airport strategic marketing planning process, as discussed in Chapter 5. In particular, an in-depth understanding of the nature of suppliers, customers, competitors and PESTE factors is crucial in order to carry out an effective external marketing audit. Since it is constantly changing, research into the marketing environment must be continually updated to ensure that such changes are reflected in the analysis, and that realistic opportunities and threats are identified. The microenvironment contains many controllable factors that a company can have some influence over. Many of the macroenvironmental factors are less

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MARKETING ENVIRONMENT controllable, although in some instances there may be scope for organisations to exert influence to encourage change, for instance, by lobbying the government or running media campaigns.

2.2 The airport’s microenvironment 2.2.1 The company The company aspect of the microenvironment refers to all the internal functions of the organisation. Each of these will influence marketing decisions. Marketers must work closely with top management associated with all these activities and ensure that their marketing plans are consistent with overall corporate intentions and with the strategies of all the other departments. Most importantly, the marketing function of any organisation must be seen as an integral activity by all to ensure success. There is considerable variation in the organisational structures of airports and in the location of marketing activities within these structures. For instance, comparing two airports in the US, the Metropolitan Airports Commission is serving Minneapolis-St. Paul International Airport where marketing is under the responsibility of the Strategy and Stakeholder Engagement Vice President (VP) (Figure 2.2). By contrast at Dallas Fort Worth International Airport the VP Communications and Marketing is placed within the Administration and Diversity Division (Figure 2.3). At Narita International Airport there is a separate marketing division that covers a number of different marketing roles such as Aviation Sales, Retail Operations, Cargo Sales and Aviation Fuelling (Figure 2.4). Meanwhile, at Athens International Airport, Communications and Marketing appear under the direct control of the Chief Executive Officer (CEO) (Figure 2.5). At many other airports, the various tasks of marketing are covered by different departments or divisions. In particular, there is often a distinction made between the marketing of the aeronautical and non-aeronautical areas. For instance, Zurich Airport has four divisions, namely Aviation, Commercial, Real Estate and Finance. Marketing to the airlines comes under the Aviation Division, whereas marketing to the airport’s end customers (primarily passengers), including branding and the airport’s digital presence, comes under the Commercial Division. Likewise, within Singapore’s Changi Airport Group, there are eight main divisions (excluding the fully owned subsidiary Changi Airports International). These are Air Hub Development, Airport Emergency Service, Airport Management, Changi East Development, Commercial, Engineering and Development, and Enterprise Performance and Development. Marketing activities are primarily split between Air Hub Development, which promotes passenger and cargo traffic, markets the Changi Airport brand and undertakes market research, and Airport Management, which is responsible for marketing facilities to passengers. In addition, the Commercial Division focuses on maximising commercial revenue streams, and so is strongly influenced by marketing strategies, especially those directed at the passenger. These are just a few examples of the many varied organisational structures that exist. However, irrespective of the specific structure, it is essential for airport marketers to work closely with other departments and functions (especially human resources (HR), finance and terminal operations) as these will have major impacts on their ability to successfully deliver their marketing strategies and plans.

2.2.2 Suppliers Suppliers provide the organisation with the goods and services it needs to create its products. In the manufacturing industry, this is relatively straightforward as it will relate to materials that

Director CM&AA (mergers / acquisitions)

Director Finance

VP Finance & Revenue Development

Director Reliever Airports

VP Management & Operations

Director of Public Safety

Chief Operating Officer (COO)

Source: Adapted from Metropolitan Airports Commission (­2020)

­Figure 2.2  Organisational chart for the Metropolitan Airports Commission

VP Human Resources & Labour Relations

Chief Financial Officer (CFO)

Chief Executive Officer (CEO)

Director Building Official

Director Airport Development

VP Planning & Development

Director Strategic Marketing

Director Stakeholder Engagement

Director Strategic Communications

Director IT Project Management

Director, Infrastructure & Operations

Director Air Service Development

VP Strategy & Stakeholder Engagement

Director IT Systems

Chief Information Officer (CIO)

MARKETING ENVIRONMENT 31

VP Parking

Source: Adapted from Dallas Fort Worth International Airport (2019)

Figure 2.3 Organisational chart for Dallas Fort Worth International Airport

VP Communications & Marketing

VP Public Safety

VP Environmental Affairs

VP Human Resources

VP Treasury Management

VP Risk Management

VP Concessions

VP Intergrated Operations Center

VP Business Diversity & Development

VP Finance

VP Aviation Real Estate

VP Customer Experience

VP Operations

VP Procurement & Materials Management

VP ITS

SVP Customer Experience

Executive VP Operations

Executive VP Admin & Diversity

Executive VP Finance & IT Services

Executive VP Customer Experience & Revenue Management

Chief Executive Officier (CEO)

VP Innovation

Executive VP Innovation

VP Airline Relations

Executive VP Global Strategy & Development

Energy, Transport & Asset Management

VP Planning

VP Design, Code & Construction

VP Commercial Development

Executive VP Infrastructure & Development

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Community Affairs & Land Property Division Marketing Division

Source: Adapted from Narita International Airport (2020)

Figure 2.4 Organisational chart for Narita International Airport

Corporate Planning Division

Airport Operations Division

Chief Executive Officier (CEO)

Engineering Division

Finance Division

Adminstration Division

MARKETING ENVIRONMENT 33

Business Control

Environmental Services

Corporate Quality

Human Resources Management

Corporate Finance Unit

Chief Finance & Adminstration Officer (CFO)

Source: Adapted from Athens International Airport (­2019)

­Figure 2.5  Organisational chart for Athens International Airport

Business Control

Technical Services

Security Operations

Corporate & Strategic Projects

Property Business Unit

IT & Telecomms Business Unit

External Business Development

Consumers Business Unit

Chief Development Officer (CDO)

Aviation Business Unit

Chief Operations Officer (COO)

Airport Planning

Chief Strategy Officer (CSO)

Communications & Marketing

Chief Executive Officier (CEO)

Legal Affairs

Data Protection & Compliance

Corporate Control

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MARKETING ENVIRONMENT are needed in the manufacturing process. Poorer quality or more expensive materials will have a direct impact on the final product and its price, and hence affect its attractiveness to target markets. Similarly, any delay in supplying the materials will have a bearing on the organisation’s ability to satisfy the demand for its goods in a timely manner. Thus, it is very important for organisations to develop strong and effective relationships with their suppliers. The situation is more complex for the airport industry because it offers a composite of many products and services such as air traffic control (ATC), security, ground handling and retail (the airport product is discussed in detail in Chapter 6). Each element is reliant on a different subset of suppliers. In addition, the airport may choose to outsource many of the services that it provides; in effect, such outsourced service providers, in turn, become suppliers themselves to the airport. The way such outsourced services are provided, and whether there are competing firms, will have an impact on the price and quality of service. Thus, decisions relating to the choice of supplier will affect not only the airport’s finances but also its ability to effectively satisfy the needs of its target markets. However, in some cases such as with the provision of immigration, customs and maybe security services, the airport will have no choice but to accept the government agency (which is responsible for this activity) as their sole supplier. Table 2.1 illustrates that even for two airports in the same country – the UK – there can be considerable variation in the supply of individual airport services and processes. At Humberside Airport nearly all services are provided in-house, while the majority are outsourced at East Midlands Airport. It is therefore important for marketers to be aware of supplier developments at two levels: first, which is related to suppliers of the airport’s own activities, and second, which is related to the outsourced services at the airport. Table 2.1 Suppliers of airport services at Humberside Airport and East Midlands Airport, 2019 Airport service

Humberside Airport

East Midlands Airport

Passenger search

In house

Outsourced

Hold baggage

In house

Outsourced

Access control

In house

Outsourced

Trolley circulation

In house

In house

Fire service

In house

In house

Air traffc control

In house

In house

Car park operations

In house

Outsourced

Direct retailing

Concession

Concession

Cleaning

In house

Outsourced

Passenger handling

In house

Outsourced

Baggage handling

In house

Outsourced

Freight handling

In house

Outsourced

Fuel supply

In house

Outsourced

Data source: Jacobs (2020)

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2.2.3 Marketing intermediaries In general, marketing intermediaries are firms that help organisations promote, sell and distribute their products to customers. With manufacturing companies, physical distribution intermediaries that stock and move goods can be important. This is less relevant to airports because of the fixed location of their product, although travel agents (physical or online) that sell the airline product, which in part is made up of a specific airport’s services, can indirectly be considered distribution intermediaries. There are also financial intermediaries such as banks and credit companies, which help with the buying and selling of products. These include insurance companies, which help to insure against the risks associated with an organisation’s activity. The traditional public sector ownership of airports meant that there used to be more limited scope for using different financial intermediaries, while state ownership also usually reduced the perceived risks of the operation. However, in today’s world of greater private sector involvement in airports and high public sector debt, the situation is rather different. There are also marketing service agencies, which include intermediaries such as market research companies, advertising agencies, media and marketing consultancy firms. As with other industry sectors, airports vary in their use of such intermediaries. Some take the view that the requirement for specialist airport knowledge, together with other factors such as irregular hours and security checks, makes it more worthwhile to have their own market research team. Organisations such as anna.aero and Routes, discussed in Chapter 9, are examples of intermediaries that help promote the airport product to airlines, while intermediaries involved specifically in the airport distribution process are discussed in Chapter 8. Airport marketers need to ensure that they are familiar with all the intermediaries they could potentially use and are able to evaluate the potential benefits and drawbacks of using them.

2.2.4 Customers Customers are individuals or firms that buy the goods and services an organisation produces, and satisfying their needs and requirements is vital for the success of any organisation. In general terms, there are usually five different customer markets: individuals, businesses that use the goods and services for their own product, resellers such as certain intermediaries, governments that use the goods and services for public services, and international consumers that could include any of the previous customer groups if they are from another country. Again, the airport industry is rather unusual when this concept is applied to the sector. The two main customers are often defined as airlines (which pay airports directly for rights to use their products and services), and passengers as well as possibly freight shippers (who use airport products and services but do not pay airports directly). Most airports tend to define both airlines and passengers as key customers, whereas some airlines consider passengers as solely their customers, and themselves as the main customers of airports. With leisure or holiday travel, it might be the tour operator rather than the airline that is the core business customer. Travel agents and other distribution intermediaries could be characterised as resellers. As Chapter 8 demonstrates, there is more of a grey area with other businesses such as ground handlers, retail concessionaires and freight forwarders. These use parts of the airport product (and pay for it through concession fees or rents) to sell their own individual services and so could be defined as customers. However, they also contribute to the airport’s overall product and so could alternatively be described as suppliers. The same reasoning could be applied to businesses that are developed on airport land beyond the terminal as a consequence of an airport’s strategy to develop an airport city or aerotropolis (Chapter 6).

MARKETING ENVIRONMENT In addition to passengers, there will be other individuals that can be considered airport customers. These include those who see off or meet the passenger. There may also be aviation enthusiasts who will come to the airport because of this interest and other visitors with a desire to use the commercial or meeting facilities. Staff employed in any of the organisations at the airport may also use the airport facilities and so again in a broad sense can be defined as airport customers. Hence a typical airport serves a significant number of different customer markets. The global nature of the air transport industry means that many of these markets are international by nature. Each of these markets has its own specific characteristics, needs and requirements, which will be discussed in more detail in Chapter 3.

2.2.5 Competitors Competitors can be simply defined as other organisations that create and market products that are similar to, or can be substituted for, the products on offer from the organisation whose marketing environment is under consideration. All potential competitors must be continually monitored to assess their relative strengths and weaknesses and to determine how to gain a competitive edge over them. Trends such as globalisation and lower barriers to entry may lead to more new entrants to the market and a greater threat of substitute products; these need to be taken into account. Airport competition is a complex area and, as mentioned in Chapter 1, the extent of competition has been fiercely debated (e.g. see Thelle and la Cour Sonne, 2018, and Wiltshire, 2018). For each airport, the number and nature of the competitors will depend on numerous factors (Forsyth et al., 2010). Clearly, location is a key determinant, but as with other organisations the range and quality of facilities and services on offer and the price paid will also play important roles. The passenger market is particularly complicated to consider because passenger choice of airport will be largely determined by the nature of the airlines which serve the airport, in terms of the fares, destinations and services on offer. Hence airport competition here will be closely linked to the amount of airline competition that exists (Graham, 2006). If an airport is located on a small island or in a remote region, it may have very few direct competitors. Likewise, airports that have a high concentration of both short-haul and long-haul services, which are likely to appeal most to scheduled legacy or full-service carriers (FSCs) with networked services, may have quite a limited number of competitor airports. This is unless the airport is competing as a hub by providing good flight connectivity and efficient passenger transfers. For instance, in Europe airports such as Amsterdam Schiphol, Frankfurt and Paris Charles de Gaulle have traditionally been viewed as competitors for transfer passengers; now Istanbul is also developing its role as a hub in this region especially with the opening of the new Istanbul Airport at the end of 2018. These hub airports have been joined by a growing number in Asia such as Beijing Capital International Airport, Hong Kong International Airport, Incheon International Airport, Kuala Lumpur International Airport, Singapore Changi Airport and Suvarnabhumi Airport. Competing hubs do not even need to be in the same region, a notable example being Dubai International Airport, which competes with some of these Asian airports for transfer traffic between Europe and Oceania. Other Middle Eastern airports, notably Abu Dhabi International Airport and Hamad International Airport, play a similar role and compete fiercely with each other. If airports are physically close, their catchment areas may overlap, especially for short-haul traffic, so airports may have a number of direct competitors for such traffic. This is less common for long-haul services as a result of tighter traffic rights restrictions in bilateral ASAs,

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MARKETING ENVIRONMENT and since competing long-haul services tend to be less viable because of the thinner nature of the traffic. Regional airports often have overlapping catchment areas that may continually expand or contract, depending on the nature of air services and surface links on offer at neighbouring airports (see Chapter 4 for a discussion about catchment areas). There are some major urban areas or cities where more than one airport serves the local population. Notable examples are the European cities of London and Paris, and the American cities of New York and Washington. Moscow and San Francisco are also served by multiple airports. Sometimes the airports may be under the same ownership, as with Groupe ADP (referred to hereafter as ADP), which owns Paris Charles de Gaulle, Paris Le Bourget and Paris Orly airports, and the Port Authority of New York and New Jersey, which owns John F. Kennedy International, LaGuardia and Newark Liberty International airports. Such common ownership may reduce the amount of potential competition between the airports. In the UK, the airport company BAA used to own three London airports (Gatwick, Heathrow and Stansted) and three Scottish airports (Aberdeen, Edinburgh and Glasgow) but the Competition Commission (CC) concluded that this common ownership inhibited competition and hence BAA was required to sell Gatwick, Stansted and Edinburgh or Glasgow (Edinburgh was picked) (see UK CC, 2009). There is also the situation where there may be a secondary airport competing with a major airport within a common catchment area. This is often the case with secondary airports that serve LCCs such as Brussels South Charleroi, Frankfurt Hahn and Paris Beauvais but the nature of such competition is evolving with some LCCs, such as Ryanair, shifting services from secondary airports to primary ones (Dobruszkes et al., 2017). However, there are other types of alternative ‘secondary’ airports, such as London City Airport, that compete while offering a product designed for the business market rather than for LCCs. Finally, there are a few cases when an airport can compete with other airports that do not share a catchment area or serve common transfer traffic. For instance, an airport may compete to be a base for a LCC, especially in Europe where there are a number of pan-European carriers now (e.g. easyJet, Ryanair and Norwegian). In this situation, LCCs will be less influenced by the proximity in location and more concerned about the operating environment and costs. Likewise, freight forwarding companies will often decide which airport to use based on cost, the schedules and handling factors rather than the specific location of the airport, particularly in Europe where most long-haul cargo is trucked on arrival to its final destination. Elsewhere, for instance in North America, airports may compete as embarkation points for cruise holidays. In a broader sense, airport competitors do not necessarily have to be other airports. For instance, competition may come from other modes of transport, most notably high-speed rail (as is the case in some European regions and in countries such as China and Japan), or from videoconferencing facilities. The impact of the coronavirus pandemic, with home working and travel restrictions, is expected to have a major impact on future video-conferencing use. In terms of commercial facilities for passengers, there may be a whole range of competitors including airlines, downtown tax-free shopping, discount stores and most importantly internet retailing. In summary, identifying potential competitors in all areas of operation is very important for airport marketers, particularly as these competitors provide crucial input to the external audit for strategic marketing planning, which is discussed in Chapter 5.

2.2.6 Stakeholders Stakeholders or publics are groups with an interest (actual or potential), or an effect on, an organisation’s ability to successfully implement its marketing strategy. In general, these groups

MARKETING ENVIRONMENT can be classified as financial (e.g. banks, investors), governmental (e.g. government departments, agencies), media-related (e.g. newspapers, television), citizen-action focused (e.g. consumer organisations, pressure groups), local (e.g. resident and community groups) and internal (e.g. employees, managers) (Kotler et al., 2020). The financial stakeholders will influence the organisation’s ability to generate investment funds, while government stakeholders will play a key role in defining an organisation’s operating and business environment through their policy initiatives and legislation. Media attention can have either a positive or negative impact on an organisation and so needs to be managed carefully. Organisations also have to take account of other stakeholders such as citizen-action and local resident groups that will have views and attitudes towards the products on offer and associated marketing activities. Similarly, internal stakeholders need to be effectively communicated with to ensure that they are adequately informed and motivated to successfully perform their individual roles. The airport industry is no different: an airport has many stakeholders it needs to engage with and keep well informed. Jarach (2005) divides these into four main groups, namely citizens, public stakeholders, logistic stakeholders and support stakeholders. Airports themselves often classify their key stakeholders in different ways although there are a number of common features, as would be expected. For instance, Figure 2.6 illustrates how Munich Airport views its stakeholders, splitting them between those that create value and those that exist in the broader environment. Each major airport stakeholder group will have different expectations, for instance, customers seeking quality, efficient operations and value; employees seeking security, fair pay and job satisfaction; governments seeking economic development for the region, country and taxation revenue; and local communities and society seeking preservation of the environment and of their quality of life. Table 2.2 demonstrates Malaysia Airports Holdings Berhad (MAHB)’s view of the areas of interest of its stakeholders.

Environment Media, associations and organisations, politics and authorities, science and research, region Value creation Airlines, passengers and visitors, suppliers and business partners, employees

Munich airport The company

Figure 2.6 Stakeholders at Munich Airport Source: Adapted from Munich Airport (2019)

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MARKETING ENVIRONMENT Table 2.2 Stakeholders at Malaysia Airports Stakeholder group

Areas of interest

Employee

Employee wellbeing Workplace safety Work-life balance Corporate integrity Training and career development

Airlines

Innovation and technology advancement Airport safety Terminal and building infrastructure

Regulators and government

Regulatory compliance Airport competitiveness Land development Carbon emissions Licensing

Investors

Financial returns and results Governance and transparency Company reputation

Tenants

Landlord–tenant relationship Customer satisfaction

Vendors and service providers

Procurement process Prompt payments Compliance

Passengers

Service quality and airport experience Customer service Cleanliness Communication and announcements Passenger and curbside traffc Airport security and safety

Local community

Employment opportunities Access to education Environmental impact Corporate citizenship

The media

Environmental, social and governance issues Media relations

Source: Adapted from MAHB (2020)

MARKETING ENVIRONMENT Quite clearly, stakeholder interests will not always align, as with the trade-offs associated with benefits gained from customers in constructing a new runway against the added environmental nuisance and disruption for the local communities. It is therefore important for airport marketers to fully understand the interests of these different groups and to establish, alongside management from other relevant departments, effective dialogue and cooperation with them all, so that issues of mutual attention and conflicts of interest can be addressed.

2.3 The airport’s macroenvironment 2.3.1 Political and legal factors These include all government policies and associated regulations, conventions and laws. Consideration of these involves an assessment of general issues such as political stability, ideology and motivation, as well as specific policies that directly affect the organisation. The policies may place constraints on the operating environment of the organisation, protect customers, employees and other stakeholders, and open up new business opportunities. There are many political and legal factors for the airport industry, but it is difficult to view these in isolation from other parts of the aviation industry such as airlines and ATC, because of the close interrelationships between these sectors. In addition, aviation’s international nature means that most governments do not have total freedom to initiate policies that are fully independent of those of other countries. Many decisions related to aviation are determined at a global level through the International Civil Aviation Organization (ICAO), which is an agency of the United Nations (UN) and has around 190 countries as members. Many policies have emerged as a consequence of the Chicago Convention of 1944, which established an international regulatory air transport system to deal with the many aspects of aviation. There are also likely to be regional influences that airports need to consider, for instance, the European Commission (EC) plays a very active role in aviation policies and regulation in Europe. As a result, the consequences of the UK leaving the EU (the so-called Brexit) in 2020 are very significant and wide-ranging.

2.3.1.1 The global political situation The general political environment continues to be unstable in certain regions of the world; as a result, there is an ongoing threat of terrorist attacks, war or internal conflict. This has an impact on both the demand and supply of airport services and has created a more volatile or uncertain operating environment. This may cause airlines to reduce, suspend or withdraw services as demand falls because of safety and security concerns. The impacts can potentially be widespread, such as after 9/11 when global airport passenger traffic declined by 2.6 per cent in 2001, and again by 0.4 per cent in 2002. For North America, the impact was greater, with corresponding drops in passenger numbers of 6.3 and 2.7 per cent (Graham, 2008). Then there was political unrest in North Africa, known as the Arab Spring of 2011, which resulted in substantial declines in international passenger numbers in Africa for most months in 2011 as tourists shifted their holidays to different destinations. More recent examples include a series of bombings in Sri Lanka in 2019, and anti-government protests in Hong Kong in the same year, which were primarily to blame for a reduction in tourist numbers, and hence airport passengers in that year (Figure 2.7). Many of these developments may have more localised effects but nevertheless will result in major challenges for the airports concerned. In such cases, effective crisis and recovery management must be a key element of marketing strategies of all sectors of the travel industry, including airports (see Chapter 12 for a detailed discussion).

41

MARKETING ENVIRONMENT 20 Growth on the previous year (%)

42

15 10 5 0 2012

2013

2014

2015

2016

2017

2018

2019

-5 -10

Year Columbo

Hong Kong

Figure  2.7 Growth in passenger traffc at Colombo Bandaranaike International Airport and Hong Kong International Airport, 2012–2019 Source: Compiled by the authors from annual reports of the two airports

The impact of such developments can also mean that passengers become subject to more rigid security and immigration procedures that can cause disruption to journeys and affect the passenger experience, increasing the hassle factor associated with passing through an airport. The turning point in the US was the September 11 terrorist attacks, often referred to as 9/11, after which security services were totally reorganised with the establishment of the Transportation Security Administration (TSA), which consequently had far-reaching impacts on airport costs, passenger travel habits and flow patterns through airport terminals (Raffel and Ramsay, 2011). Other examples when more stringent security regulations have been introduced have come after the attempted shoe bomb in December 2001; after the liquid explosives scare in August 2006; the attack on Glasgow Airport with a Jeep in 2007; the attempted underwear bomb of December 2009; and the use of explosive-tampered toner cartridges shipped via air cargo in 2010. Such responses have tended to be reactive, adding new security measures after each occurrence. For instance, as a consequence of the liquid explosives scare, only a limited amount of liquids, aerosols and gels (LAGS) can now be taken on board as hand luggage and must be in a see-through plastic bag, although these restrictions may well end soon with more effective scanning. Similarly, the attempted underwear bomb encouraged greater use of full-body scans to detect such bombs. All these changes can clearly have marketing implications, especially in terms of how passengers perceive air travel and their airport experience, and their ability to fully take advantage of the commercial facilities at the airport. Future developments to streamline some of the processes and make them less onerous and intrusive will very much depend on enhancing the ties between government agencies, airports and airlines to ensure more harmonisation and better sharing of intelligence information, together with developing more efficient detection processes, especially with the use of advanced technology and biometrics (see discussion about technology later in this chapter, and in Chapter 6). Indeed, ACI has been developing a Smart Security strategy for its member airports, which is achieved through the introduction of risk-based security concepts (abandoning a ‘one-size-fits-all’ approach), advanced screening technologies and process innovation (ACI, 2020a).

MARKETING ENVIRONMENT

2.3.1.2 Airport ownership and privatisation As discussed in Chapter 1, the airport industry has come a long way from being viewed as purely a state-owned public utility, dependent on public finances to serve the needs of airlines. Worldwide, many airports have loosened their ties with the government, have adopted more business-like management philosophies, and are now viewed as commercial enterprises rather than public infrastructure. This has required a shift in government thinking concerning its involvement with airports. In some cases, to fulfil certain objectives such as raising additional capital funds or improving efficiency, governments have gone one stage further by privatising their airports (Graham, 2020a). The first major privatisation occurred in the UK in 1987 with BAA; since then a significant number of other countries, in both developed and developing regions, have seen it become an increasingly important trend. The most recent global data for 2017 (ACI, 2018) shows that of the top 100 busiest airports for passenger traffic, 51 per cent have some type of private sector participation. This drops to 39 per cent for the top 500 busiest airports as it tends to be the larger airports that have experienced such changes. This also means that only around 14 per cent of scheduled commercial airports of all sizes have some private participation – 614 of around 4,300 airports in the world – but this represents 41 per cent of all passengers. Substantial differences exist for world regions. Leading the way is Europe with 43 per cent of airports having some private sector involvement (representing 75 per cent of the passenger volume) followed by Asia-Pacific (26 per cent airports; 45 per cent passengers) and Latin AmericaCaribbean (25 per cent airports; 60 per cent passengers). The share of airports in Africa is only 3 per cent (11 per cent passengers) and is similarly very low in North America (2 per cent airports; 1 per cent passengers) and the Middle East (1 per cent airports; 13 per cent passengers) (ACI, 2017). Airport privatisation is actually a very broad term that covers a range of different alternatives (Graham, 2018). In all cases, there is a transfer of management to the private sector and there may also be a transfer of ownership. A partial or total share flotation has been used at some airports but has not been a popular model in recent years. More common options now are a trade sale, when some or the entire airport is sold to a trade partner or consortium of investors, or a concession agreement, when the airport will be operated by a partially or totally private consortium for a fixed period of time – typically between 20 and 30 years. A special kind of concession model is a so-called build–operate–transfer (BOT) approach, which requires investment in a major large piece of infrastructure such as a new airport or terminal (Table 2.3). Concessions and BOTs are commonly known as Private-Public Partnerships (PPPs or 3Ps). The amount of influence a government can exert over an airport is clearly dependent on the type of ownership that exists. For many countries, the transfer to the private sector of airports considered to be strategic and vital national or regional assets with both economic benefits and environmental costs to the communities they serve is a politically sensitive policy. So, a substantial number of airports choose to remain under public ownership and opt to benefit from private management expertise and funding through PPPs. By contrast, little state control will remain after an airport has been floated on the stock market or privatised with a trade sale. However, even in these cases, governments may decide to maintain control by only partially selling the airport, which has also been a popular option with many airports. Private and public sector owners are likely to have different objectives and priorities that may affect all areas of operation, including marketing. In particular, through their ownership of airports, governments may support airline services because of the broader catalytic impacts,

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MARKETING ENVIRONMENT Table 2.3 Examples of airport privatisations Type of privatization Share fotation

Trade sale

Concession

BOT

BAA

Liverpool

Barranquilla

Athens

Vienna

East Midlands

Caratagena

Ankara

Copenhagen

Birmingham

La Paz

Hyderabad

Rome

Naples

Santa Cruz

Bangalore

Ljubljana

Brisbane

Cochabamba

Tirana

Auckland

Melbourne

Luton

Larnaca

Malaysia Airports

Sydney

Argentinean airports

Paphos

Beijing

Dusseldorf

Montevideo

Varna

Zurich

South Africa

San Jose

Burgas

Florence

Wellington

Cali

Amman

Frankfurt

Hamburg

Lima

Tbilisi

Hainan Meilan

Malta

Montego Bay

Batumi

Airports of Thailand

Brussels

Delhi

Monastir

Venice

Budapest

Mumbai

Enfdha

Paris

Kosice

Antayla

Izmir

Pisa

Leeds Bradford

Male

Medinah

Aena (Spain)

Xi’an

Pristina

Istanbul

Milan

St Petersburg

Cuzco

Manchester

Zagreb

Santiago

Toulouse

Sao Paulo

Nice

Rio

Lyon

Kansai

Source: Compiled by the authors from various sources Note: The table only shows the frst privatisation. In a few cases a different model now exists

such as an increase in inbound tourism or the encouragement of inward investment that such services may bring to the surrounding region. This may result in direct internal marketing support and airline incentives, but such policies have proved controversial in some cases, especially in the EU, where it has been argued that they could be viewed as state aid to airlines, which is illegal. Elsewhere, if government links through ownership have been severed with privatisation, support may come from external public bodies such as regional development agencies or tourism authorities. Route development funds (RDFs) and the Regional Air Connectivity Fund (RACF) in the UK are valid examples of these (Graham, 2020b), and are discussed in more detail in Chapter 7. Whether the airport is in public or private hands will also have an impact on how it is viewed by the local community, and hence will influence other marketing activities such as PR. Privatisation of airports has also opened the door for the emergence of multi-airport

MARKETING ENVIRONMENT international companies. Some of these are well-established airport operators such as ADP, Changi Airport Group, Fraport, Malaysia Airports and Zurich Airport that have expanded beyond previously well-defined national barriers, and new airport operators such as TAV Airports, have joined them. However, there are also other operators, originally from other sectors such as property, utility, infrastructure and construction that saw some potential synergies with airport operations. These include AviAlliance, Ferrovial, GMR and Vinci. Indeed Vinci has an interest in airports in countries as varied as Brazil, Cambodia, Chile, Dominican Republic, France, Japan, Portugal and the UK. Nevertheless, airport privatisations are now tending to be dominated by international funds from financial institutions such as infrastructure funds, pension funds, insurance funds and sovereign wealth funds (Condie, 2015), an example being the Ontario Teachers’ Pension Plan that has interests in Birmingham, Bristol, Brussels, Copenhagen and London City airports. Clearly, the type of organisation that owns the airport will have a significant impact on all operations, from its mission and vision established by top managers and downwards through the organisation, including its marketing function. It is also different managing a group of airports compared to being focused on just one. From a marketing viewpoint, such airport groups may be able to benefit from shared knowledge and expertise and economies of scale with certain activities. However, the promotion of a common brand, which is typical of so many other multi-national companies, is not a usual feature of such companies (branding is discussed in Chapter 6).

2.3.1.3 Airport regulation It is often feared when airports have been privatised that they will abuse their market power and will not always operate with the interests of the airport users in mind, raising charges, reducing the quality of service and under-investing in facilities. This has frequently resulted in formal economic regulation being introduced at the same time as privatisation. Although such prescribed systems are not solely limited to privatised airports, it is generally more common to find fewer formal processes and instead just a requirement for government approval of charges at state-controlled airports. Clearly, the system of economic regulation a government adopts will have a major influence on how the airport prices its products, the amount of control exerted by the regulator, and the type of relationship that can be developed between the airport and its customers. In addition, airports need to comply with the worldwide charging principles established by ICAO, and if based in Europe, will also be subject to the EC directive on airport charges. These are explained in detail in Chapter 7, which looks at pricing. If the regulatory system introduces some control on prices, there is often a concern that this will consequently provide a strong incentive for airports to cut service levels in pursuit of cost-saving measures. For this reason, under some regulatory regimes, there is a condition that service quality should be monitored, and in some cases, rebates to airlines are allowable if certain targets are not achieved. In Australia, satisfaction ratings by passengers and survey feedback from airlines and agencies at the airports are monitored. At other airports, such as the airports of ADP, Delhi’s Indira Gandhi International Airport, Dublin Airport, London Heathrow and Mumbai’s Chhatrapati Shivaji Maharaj International Airport, service targets are set. For instance, at London Heathrow Airport, these are based on an aerodrome congestion delay measure, a group of objective operational measures, and some scores from passenger feedback surveys (Chapter 4 provides a discussion on how airport service quality is measured). Rebates for poor performance and bonuses for good service are linked to these. In addition to government policies related to security, ownership and price control at airports, there are many others – established at a global, regional or national level – that need to be

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MARKETING ENVIRONMENT taken into account by airports. These cover diverse areas such as safety, persons with reduced mobility (PRM) and consumer protection. Airports are also subject to an increasing number of environmental regulations. In Europe, there is also the directive on access to the ground handling market at community airports, which was introduced in 1996 to ensure that such activities were offered on a fully competitive basis. It had as its aim the end of all ground handling monopolies and duopolies within the EU by opening up the market to third-party handlers, recognising the right of airlines to self-handle and guaranteeing at least some choice for airlines in the provision of ground handling services (the ground handling market is discussed in more detail in Chapter 8). This clearly has marketing implications, as it will have an impact on the airport product which is on offer to its customers. One of the most basic obstacles to airport competition is the shortage of airport slots (which is discussed in more detail in Chapter 8). The EC’s 1993 regulation on common rules for the allocation of slots at community airports gave a legal basis in Europe to the voluntary International Air Transport Association (IATA) scheduling committee rules; these are used virtually everywhere (except the US) where demand for slots exceeds supply. The most important of these rules is ‘grandfather rights’, which gives any airline that operated a slot in the previous season the right to operate it again, as long as 80 per cent of the flights are actually operated (the so-called ‘use it or lose it’ rule). Although this system provides a relatively stable environment for allocating slots, it is not the most effective in managing their scarcity or in encouraging competition. Hence there has been increasing pressure, particularly in the EU, for slot allocation reform using market mechanisms. For airports, slot reform is an important issue, as it can play a key role in determining an airline’s ability to operate from a congested airport.

2.3.1.4 Airline developments In addition to the political forces that have substantially changed the ownership and regulation of airports, there has been a fundamental transformation of the airline political environment. This has been primarily due to the continuing liberalisation and deregulation of the airline industry, which has moved away from the traditional system of tight regulatory interference of airlines’ operations by freeing up constraints in the areas of market entry, capacity and pricing. As mentioned in Chapter 1, this trend started in the US with domestic deregulation in 1978, followed by the liberalisation of a number of US international routes. The movement then spread to other regions such as the EU, with the stepwise implementation of three liberalisation packages for international routes within Europe between 1987 and 1997. In Asia, the ASEAN open skies agreement between ten Southeast Asian countries was agreed upon in 2016. Domestic markets in other countries such as Australia, Brazil, Canada and India have been deregulated, as have many international routes. Some notable examples include the 2008 EU–US open skies agreement and the subsequent agreement with Canada, but elsewhere many other countries in regions such as Asia, the Middle East and South America have also renegotiated more liberal open market or open skies ASAs. In 1999, African states adopted a policy framework, the socalled Yamoussoukro Decision, for the liberalisation of the continent’s air transport industry, but this failed to be effectively implemented. So, in 2018 the SAATM was established by 23 African states with the aim to put into effect the provisions on Yamoussoukro and to create an African open skies agreement (Doganis, 2019). Liberalisation and deregulation have been demonstrated to encourage growth and to open up many markets to much greater competition although several issues related to fair competition, labour standards and environmental impacts still need to be addressed. Moreover, the impact varies significantly between countries, particularly depending on whether developed markets

MARKETING ENVIRONMENT or emerging markets are being considered, and arguably, there is still a lack of a global level playing field for airline competition (Gillen, 2018; Njoya and Warnock-Smith, 2018; ITF, 2019). There have also been major changes in the structure and ownership of the airline industry. Historically, almost all the world’s major airlines (like airports) were state-owned, primarily for reasons of prestige, defence and to fulfil wider objectives such as economic development and the growth of tourism. However, in the last three decades or so attitudes have changed significantly, and many formerly state-owned airlines have been totally or partially privatised. Prior to the coronavirus pandemic, fully private airlines included carriers as diverse as Aegean Airlines, Air Canada, British Airways, JAL, LATAM, Lufthansa and Qantas, while a mixed ownership structure existed for many other airlines such as Air China, China Eastern, China Southern, Finnair, Kenya Airways, SAS and TAP Air Portugal (ICAO, 2016). The situation may of course change as a result of the coronavirus pandemic, with several governments under pressure to renationalise their airlines. The combined impact of airline deregulation and privatisation encouraged the development of the global alliances of Star, oneworld and SkyTeam, which now account for nearly 60 per cent of all scheduled passenger kilometres (Figure 2.8). The more liberal environment and more uncertain market conditions have also encouraged metal-neutral joint ventures, particularly on North Atlantic and Pacific routes. They are called metal neutral because the airlines involved share revenue and costs on a given route no matter which is doing the actual flying. There have also been international airline mergers and acquisitions such as Air France/KLM/VLM, Avianca/TACA, British Airways/Iberia/Aer Lingus, LAN Chile/TAM and Lufthansa’s purchase of other airlines such as Austrian, Brussels Airlines, Eurowings and Swiss. This is in addition to domestic mergers such as Air India/Indian Airlines, Alaska Airlines/Virgin America, Alitalia/Air One, British Airways/BMI, Continental/United, Delta/Northwest, Southwest/Air Tran and US Airways/American Airlines. From a marketing viewpoint, such airline consolidation provides both opportunities and threats for airports. Links with alliances may bring access to larger markets and an opportunity to serve more widespread destinations. However, the consolidation process may also bring the realignment of schedules and capacities, and even the dropping of a hub entirely to avoid duplication and to streamline services.

SkyTeam 16% Others 46% oneworld 16%

Star 22%

SkyTeam

oneworld

Star

Others

Figure 2.8 Scheduled passenger kilometres by alliance, 2019 Data source: IATA (2020a)

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MARKETING ENVIRONMENT Table 2.4 LCC seat share by region, 2009 and 2018 Intra-regional (%) 2009 Africa

2018

Between-regions (%) 2009

2018

9

12

8

16

Asia-Pacifc

16

29

4

8

Europe

34

41

4

9

Latin America

25

36

10

23

8

17

6

13

North America

28

32

6

15

World

25

33

6

13

Middle East

Data source: CAPA (2019)

Liberalisation and deregulation have also encouraged the development of the LCC industry, which in 2019 had a global revenue passenger kilometre (RPK) share of 23 per cent (IATA, 2020a) compared to 17 per cent in 2011 and just 6 per cent in 2003. This compares with the FSCs that had a RPK market share of 74 per cent in 2019 and the leisure/charter airlines with a share of just 3 per cent. In some regions, such as Europe, the market share of LCCs is much higher. Initially, most LCCs just operated short/medium-haul flights in the same global regions but prior to the coronavirus pandemic there was some growth in long-haul services with airlines such as Air Asia X, Jetstar Airways and Norwegian, which had major implications for airport operations. Table 2.4 shows the seats offered for each region (split by intra-regional and between regions) for 2009 and 2018. The growth in LCCs for all regions can be seen, although the market shares vary and for the major markets of Europe, the Americas and Asia-Pacific, the intra-regional share is much larger than the between-region one. There are numerous examples of LCCs bringing much-needed traffic, especially to smaller airports, and having other positive impacts such as reducing seasonality and raising the airport’s profile. However, a significant number of these carriers have not survived, including Air Berlin, EUJet, Niki, Polonia, Sky Europe, Skybus, Snowflake, Sterling, Volare and WOW (although this sector is not unique in producing failures). LCCs also tend to be rather footloose in terms of shifting from one airport to another, and some, as discussed previously in this chapter, have moved to larger primary airports. This has added to the more volatile environment, with various airports seeing dramatic increases in traffic as LCCs launch services, and then sudden decreases if the airline fails or shifts to another airport. In addition, as airline consolidation is now accelerating in both the FSC and LCC sectors, many airport marketers have the challenging task of negotiating and satisfying the needs of these ever-changing and potentially more dominant customers. Long-term contracts between airports and LCCs have been adopted in some cases. The evolving airport–airline relationship is examined in more detail in Chapter 3.

2.3.2 Economic factors Economic factors include both national and global factors that can have a major impact on demand for the products of an organisation, as well as the way it operates and makes decisions. Some of the most important factors include income growth and distribution, inflation rates,

MARKETING ENVIRONMENT exchange rates, trade patterns and business cycles, buying power and willingness to spend, and levels of employment and taxation. Demand for aviation services has always very closely followed trends in income growth (Doganis, 2019). Typically, when income or gross domestic product (GDP) rises, passenger and cargo volumes increase; when GDP falls or stagnates, the reverse situation generally occurs. For leisure passengers, this will clearly be the result of greater consumer confidence, more disposable income and higher levels of employment when there is economic prosperity. By contrast, when the economy slows down or moves into recession there will be less disposable income, higher unemployment and general insecurity. Likewise, business travel and cargo traffic will mirror the peaks and troughs of business and trade activity, which are closely linked to the economy. In fact, a decline in cargo traffic (before passenger traffic) is often seen as a reliable indicator of a forthcoming economic downturn. Figure 2.9 clearly shows the link between economic growth and passenger demand, particularly when there was relatively healthy growth in the late 1990s and mid-2000s and with the deep recession of 2008 to 2009. There was also a period of uncertainty from 2001 to 2003, both in terms of economic growth and in terms of passenger confidence in the aftermath of 9/11 and ongoing security threats, as discussed earlier in this chapter. Weak or negative passenger and cargo growth during challenging economic conditions is likely to be a result of airlines flying less full aircraft, reducing frequencies and even suspending some services. This will clearly have an impact on the aeronautical revenues generated by an airport. However, commercial revenues will also decline, not only because fewer passengers will be flying but also because they are likely to have less money and less confidence in spending on commercial services. It is thus crucial for airport marketers to understand the role played by the health of the economy and the need to work hard to grow or even just maintain traffic levels when the economic and market conditions are poor, perhaps by sharing more of the risk with airlines and other vulnerable customers.

12

8 6 4 2

-4

Year Passengers

Global GDP

Figure 2.9 Economic growth and airline passenger demand, 1999–2019 Source: Compiled by the authors from ACI and IMF data

2019

2018

2017

2016

2015

2014

2103

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

-2

2000

0 1999

Growth on the previous year (%)

10

49

MARKETING ENVIRONMENT Clearly, economic factors also have major influences on the regional distribution of air traffic. Prior to the coronavirus pandemic (which has had a major impact on future forecasts), higher growth in passenger and cargo traffic was predicted for emerging economies, especially those such as China and India, that have experienced rapid urbanisation. Also, new trade links between the emerging economies of, for instance, Asia and Latin America were also expected to encourage air services directly between these continents, with the decline of the classic model of the developing world almost exclusively supplying goods to the developed world. Boeing (2019) predicted that the highest annual RPK growth rates until 2038 would occur within China (6.2 per cent), between the Middle East and Asia-Pacific (6.2 per cent), within Latin America (6.0 per cent) and within Asia-Pacific (5.5 per cent). This compares with a global annual forecast of 4.6 per cent. Likewise, ACI (2019) predicted that by 2023 passenger traffic in emerging economies would surpass that in advanced economies, and by 2040, will likely represent 11.5 billion passengers and 58.4 per cent of the total. Other important economic influences are cost factors, especially those that will affect an airline’s ability to operate efficiently and a passenger’s ability to afford to travel. Air fares have fallen significantly as a result of deregulation and liberalisation (especially with the rapid expansion of LCCs), in combination with more efficient operations. For instance, between 2001 and 2018, average worldwide yields in real terms, measured in USD per tonne-kilometre fell from around 1.50 in 2001 to around 0.80 in 2018 (Pearce, 2018). However, a major uncertainty is the volatile price of fuel, which peaked in 2008 and 2012 (accounting for a third of airline operating costs) but also came down to representing just 20 per cent of costs in 2016 (Figure 2.10). Another key cost factor is government passenger or ticket taxes, which are often defined as environmental or eco-taxes. These taxes exist in a number of European countries, such as France, Germany, Italy, Norway, Sweden and the UK, and a number of other countries including Australia, Brazil, Mexico, Singapore, Thailand and the United Arab Emirates (UAE) (CE Delft/SEO Amsterdam Economics, 2019). Such taxes increase the cost of air travel and may 140 120 100 80

60 40 20 2019

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2014

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0 2002

Price (USD) or proportion (%)

50

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Fuel as a % of airline operating cost

Figure  2.10 Jet kerosene price and fuel as a proportion of total airline operating cost, 2002–2019 Data sources: IATA (2015, 2020b)

MARKETING ENVIRONMENT have a significant impact on an airport’s relative attractiveness, particularly if there are alternative airports nearby. These are highly controversial taxes that have been fiercely debated, particularly as regards their relative economic and environmental impacts. For instance, a study by CE Delft/SEO Amsterdam Economics (2019) concluded that if all aviation taxes in the EU were abolished, the number of passengers would increase by 4 per cent; the carbon dioxide (CO2) emissions of aviation would increase by 4 per cent; the number of people affected by aircraft noise would increase by 2 per cent; but the overall positive impact on GDP would be just 0.2 per cent.

2.3.3 Socio-cultural factors Social factors related to population and demography (e.g. age, household, education, occupation) and cultural factors (e.g. attitudes, preferences, values, beliefs, religion and lifestyle) can have many influences on the market potential and customer needs of an organisation and help to explain trends and fashions. For aviation services, these factors, combined with the economic factors previously discussed, will affect the volume and nature of passenger and cargo demand. A key development, with regard to leisure passenger demand, is the growth of the so-called ‘grey’, ‘mature’ or over-65s market. In many developed countries this market segment contains people who not only have the time to travel but are also wealthier, healthier and more experienced travellers than before. In addition, as people live longer and the birth rate falls, in many countries people of this age group will represent an important and growing share of the total population. This development will have a bearing on the types of air service demanded and their timing because these market segments are typically more flexible with travel dates. In turn, this will influence the airport facilities that support these airline services and other airport product and service features such as the retail offer and help for PRMs, as argued by Graham et al. (2019) for the UK case. At the other end of the age spectrum, there are youth travellers, especially the so-called millennial generation or Generation Y (born early 1980s to mid-1990s) and Generation Z (born mid-1990s to 2010), also known as the ‘iGen’ or click‘n’go children as they are very technologically savvy. This travel market has been steadily growing (UNWTO, 2016) due to a number of demand-related factors such as increased participation in higher education, falling levels of youth unemployment and increased travel budgets through parental contributions, savings and combining work and travel. There are also supply-side factors that have encouraged this such as the rise of LCCs, wide-spread availability of home-sharing and ride-sharing digital platforms, growth in long-distance travel specifically targeted at young travellers, shorter employment contracts for those working leading to significant gaps in employment, and the growth of dedicated student and independent travel suppliers. There are numerous other travel trends – especially those related to family structure, lifestyle and life stage – that airports have to take account of, not only because they will affect the volume and nature of airline services but also since they will have an impact on the facilities offered at the airport and the potential for generating commercial income. For instance, in Western economies, there is a tendency to have smaller families at an older age and this, combined with an increasing number of couples who are opting to remain childless, means that there are a growing number of young travellers who have fewer income and time constraints than families with children. When there are children, there is a trend for longer periods of living with parents. There are also higher divorce rates and a growing number of singles and one-parent families who are travelling. In addition, there has been a significant growth in

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MARKETING ENVIRONMENT multigenerational travel, with parents, siblings, children and grandchildren travelling together for shared experiences (Schänzel and Yeoman, 2015; Hajibaba and Dolnicar, 2018). The nature of business travellers is also changing, with a much wider age range and an increasing share of female passengers. In addition, shifting labour flows in Europe and elsewhere, and a weakening of links related to historic emigration patterns, are causing a shift in the key markets related to visiting friends and relatives (VFR) traffic. Moreover, passenger travel preferences are changing, particularly with experienced travellers of the more developed world. They are becoming more sophisticated and demanding, which is reflected in the growth in adventure, cultural, ethical and special interest holidays and in the demand for new, especially long-haul, destinations. Another trend is that leisure tourists are demanding greater flexibility, which is reflected in the trend towards holidays of different and shorter duration, rather than the traditional two-week break. Some of this growth has been fuelled by the development of the LCC sector and the sharing economy (e.g. Airbnb, Uber) which has made it possible for many to afford a weekend break away, particularly in Europe. This has encouraged the growth in activities such as hen and stag weekends, festivals and beach parties, as well as celebrations for significant birthdays and other special anniversaries. This need for flexibility has also caused a major shift towards independent travel rather than organised package holidays and a considerable growth in dynamic packaging, where tourists construct their own individual package tours. All these shifts in preferences have had a direct impact on the airline industry, but again this has spread over to the airport industry as marketers seek to target and satisfy the needs of market segments that have future potential. As discussed previously, an unstable political environment and a threat of civil unrest and terrorism can have influences on a passenger’s ability and motivation to travel. Other shocks or crisis events due to natural disasters, climatic incidents and health concerns can have similar impacts. Recent events include the health scares of the Acute Respiratory Syndrome (SARS), the Middle East Respiratory Syndrome (MERS), A(H1N1) ‘swine’ flu, Ebola and the Zika virus, and environmental disasters such as the Indian Ocean tsunami of 2004, the Icelandic volcanic eruption of Eyjafjallajökull in 2010 and the Japanese earthquake of 2011. Such events tend to have negative effects on traveller perceptions of the safety and security of their transport mode and destination, as well as on their overall motivation to travel and hence influence travel patterns, especially in the short term. However, by far the most significant development to date has been the coronavirus pandemic, commonly referred to as Covid-19, that emerged in parts of China in December 2019. Only a few countries were immediately affected by the virus. However, it continued to spread rapidly and globally, and by March 2020, the UN World Health Organization (WHO) declared it a global pandemic. In response, many countries implemented lockdown measures, border closures and travel restrictions that largely remained in place in one form or another for the rest of the year. As a result, air transport activity decreased dramatically. For instance, at the time of writing, it was estimated that passenger traffic fell from 4.4 billion in 2019 to 1.8 billion in 2020, which is the lowest it has been since 2003. International passenger traffic fell most; by 74 per cent, while domestic passenger traffic fell by 50 per cent. The decline in total passenger traffic was approximately 60 per cent. Freight, less affected by lockdown measures and travel restrictions, showed much more resilience compared to passenger traffic. However, that also fell; from 215.2 billion tonne-kilometres in 2019 to 192.4 billion in 2020, which is an 11 per cent decrease, and is the lowest it has been since 2015 (Figure 2.11). The impact of this on airport marketing is discussed in detail in Chapter 12. However, in terms of its impact on the marketing environment, the pandemic brought air transport activities to

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Figure 2.11 Air passenger and freight traffc worldwide, 1974–2020 Data source: ICAO Civil Aviation Statistics of the World Note: full-year data for 2020 was not available at the time of writing but was estimated from IATA (2020c); ICAO (2021)

a virtual standstill in 2020. At the time of completing this book in April 2021, vaccine programmes were being rolled out in several countries, albeit with different rates of progress. However, lockdown measures, border closures and travel restrictions remain and the standstill in air transport activity is ongoing in most countries. As a result, revenue streams have plummeted across all parts of the air transport supply chain, and many actors face severe liquidity problems. For instance, according to ACI (2020b), the airport industry was expected to generate about USD 172 billion in 2020 but the pandemic is predicted to have resulted in a 65 per cent reduction to 60 billion. This, and the currently dismal outlook, at least in the shortterm, is affecting the financial viability of airports, airlines and suppliers to the industry, and is threatening millions of industry jobs worldwide. There may well be pent-up demand, especially in passenger markets where people are desperately waiting to be able to fly again, for instance, to visit friends and relatives or to take an overseas holiday. However, at present, a return to flying is still heavily restricted for most people. As discussed in Chapter 12, airports have needed to respond to the crisis at a strategic level, for instance, in terms of reassessing their priorities and positioning, but also at a more tactical level, for instance, by adapting individual elements of their marketing mix such as introducing new health and safety measures for passengers and adapting the way they charge business partners such as airlines and concessionaires. This not only allows airports to respond to the current situation, but it also allows them to lay the foundations for an eventual recovery.

2.3.4 Technological factors The technological environment is perhaps the fastest-changing feature of the macroenvironment. New technologies and technological advances can create new products and new processes that can benefit customers as well as the organisation providing the product. Technological developments can reduce costs, improve quality and lead to innovation.

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MARKETING ENVIRONMENT Technology has always played a major role in the development of the aviation industry. Advances in aircraft technology and the arrival of new aircraft types have strongly influenced the types of service that airlines offer, and the reliability and costs associated with these. This in turn has had an impact on the airlines and passengers that can be attracted to certain airports. The supersonic jet Concorde, which was flown on the North Atlantic services of British Airways and Air France between 1976 and 2003, is a historic example that gave London Heathrow Airport and Paris Charles de Gaulle Airport a distinct advantage for passengers seeking this type of niche service. Historically, the average aircraft has increased in size to cope with demand growth and to take advantage of the better economics that are available when flying larger aircraft. One of the most significant recent developments in terms of aircraft size was the emergence of the world’s largest aircraft, the Airbus A380. This came into service in 2007 and on average has around 550 seats in a three-cabin configuration. Airports had to be ready to cope with these aircraft which required changes to airport infrastructure (such as reinforcing airfield pavements, extending runway and taxiway widths, and enlarging gate rooms and airbridges) and modifications to other processes (such as check-in, immigration, customs, security and baggage handling) to cope with the larger passenger volumes. However, modern aircraft technology has enabled airlines to achieve much better economics and further range with a new generation of much smaller widebody aircraft (such as the Boeing B787 or Airbus A350) and in fact, the A380 will no longer be manufactured in the future. These new-generation aircraft have reduced the need to make intermediate stops, especially at hub airports which can now be bypassed and can extend the direct flying time from numerous secondary key airports such as Barcelona in Spain (Tembleque-Vilalta and Suau-Sanchez, 2016). Prior to the coronavirus pandemic, the airline Qantas was proposing to fly the ‘ultra-long-haul’ London-Sydney nonstop route (taking over 19 hours – the longest ever commercial route) with the A350. Clearly, to take advantage of the opportunities new aircraft types can bring, airports have to ensure that they are ready to cope with the new fleet and potentially different types of passengers. There are many other technological developments related to airfield and airspace infrastructure that are likely to improve the efficiency of operations, bring down costs in the long run and help to reduce the negative environmental impacts of aviation. As regards overall European air traffic management (ATM), this includes the single European sky project, which is now fully implemented, successor projects such as the Single European Sky ATM Research (SESAR) programme, and individual airport initiatives such as airport-collaborative decisionmaking (A-CDM). This latter aims to improve airport operations and streamline traffic flows through improved technology that allows the sharing of information in real time between the key stakeholders such as airports, airlines, ATC and handling agents. Brussels, Munich and Paris Charles de Gaulle airports were the first to become A-CDM compliant in 2011 and by 2020, 28 European airports were using A-CDM, and more plan to implement it in the future. In Asia, a number of airports in countries such as China, India, Singapore and South Korea have implemented it and, in the US, there is a similar concept called surface-collaborative decision making (Surface-CDM). In the US, there is also the Next Generation Air Transport System (NextGen) project that aims to improve overall ATM performance. All these developments can enhance the attractiveness of the airport product. However, other technological developments such as high-speed rail or video conferencing (as mentioned earlier in this chapter) may have an opposite effect and so have to be continually monitored. Within the terminal, there are also many opportunities for technological advances in relation to the essential processes (e.g. check-in, border control, security and baggage collection) and the commercial services (e.g. shops and F&B). Some relevant technologies include biometric identification, the Internet of Things, artificial intelligence, robotics and blockchain (SITA,

MARKETING ENVIRONMENT 2020). Technologies can enhance the overall passenger experience (Chapter 6) and improve the effectiveness of marketing activities (Chapter 10). Technological developments have also transformed how airport marketing research is undertaken with the emergence of huge databases, big data and associated advanced marketing analytics (Chapter 4).

2.3.5 Environmental factors Environmental factors have always been a key feature of the marketing macroenvironment but have received a greater profile in recent years as governments and industries have paid more attention to addressing climate change challenges and achieving higher levels of environmental sustainability. They include factors such as global warming, pollution control, waste disposal and conservation of energy and other scarce and natural resources (European Environment Agency et al., 2019). The travelling public and many other concerned individuals and groups are far more aware of, and alarmed by, the detrimental environmental impacts of aviation, especially regarding climate change. This may dampen demand growth, as advocated by movements such as ‘flight shame’ in Scandinavia, and the young Swedish activist Greta Thunberg who has been particularly successful in mobilising Generation Z around the world and influencing behaviour and attitudes. As global warming concerns escalate, this could potentially have a fundamental effect on the demand for airline and airport services, as strong moral pressure builds against the taking of air trips, and consumers opt for other modes of transport or not to travel at all. There may also be greater pressure for business travellers to use video conferencing, especially after its widespread use during the coronavirus pandemic. Environmental policies at tourist destinations may also influence traveller preferences and holiday choice – trends that airport marketers need to be aware of. Most airports have always had to address environmental resistance to their activities, primarily because of the noise nuisance and local air pollution created around the airport. This opposition has been very apparent, particularly when proposals have been put forward for expansion plans. In spite of the fact that aircraft models have become significantly quieter and cleaner over the years, the growth in air travel demand, coupled with a greater public voice about environmental issues, has meant that it is important now, more than ever before, for airports to deal effectively with these concerns to ensure the continued wellbeing of the airport. The measures that airports can use to reduce environmental impacts can have a direct bearing on their attractiveness to airlines, so this needs to be taken into account by airport marketers. In addition to the environmental impacts caused by aircraft operations, the surface transport to and from the airport will also cause emissions and noise. As a result, a growing number of airports have introduced initiatives to improve public transport use. This may make the airport product more attractive to passengers (e.g. with the building of direct rail links) but could also have a negative effect (e.g. with limits on parking spaces or higher charges). As with other environmental issues, there is a balancing act that needs to be performed for all the different stakeholders of an airport (especially customers versus local residents) and airports must ensure that they take this into consideration. Chapter 12 covers these environmental issues, along with social and economic issues in greater detail.

2.4 Industry examples As already discussed in this chapter, a PESTE analysis provides a framework for airport marketers to analyse opportunities and threats in their macroenvironment and is an important input for the situation analysis discussed in Chapter 5. The factors will clearly vary in importance

55

• Strength and volatility of global economy

• Geopolitical (in)stability

a

• Expanding human potential

• Urbanisation and the growth of megacities

• Changing nature of work and competition for talent

• Open data and radical transparency

• Unionisation of labour and regional independence

• Concentration of wealth into a ‘Barbell economy’a

infrastructure

• Disability, ftness and health

• Shifting ethnic, political and religious identity

• Global population growth driven by Asia and Africa

• Tensions between data privacy and surveillance

• New modes of consumption

• Shift to knowledge-based • Middle-class growth in China and the Asiaeconomy Pacifc region • Privatisation of

• Price of oil

• Circular economy (i.e. continual use of resources)

• Human-controlled weather

• Rising sea levels and reclaimed habitats

• Extreme weather events

• Environmental activism

• Water and food security

• Alternative modes of • Infectious disease and rapid transit pandemics • Geospatial technology

• New aircraft designs

• Alternative fuels and energy sources

• Internet(s) of Things

• Virtual and augmented reality

• Three-dimensional (3D) printing and new manufacturing techniques

• Personal carbon quotas

• Resource nationalism

• International regulation of emissions and noise pollution

Environmental

A Barbell economy has a high proportion of people with high and low income and a comparatively smaller number of people in between

Source: Adapted from IATA (2018)

• Rise of populist movements

• Trade protection and open borders

• Increasing infuence of alternative regional and global institutions

• Shifting borders, boundaries, and sovereignty

• Defence priorities dominate civilian needs

• Anti-competitive decisions

• Strength of governance

• Cybersecurity

• Terrorism

• Robotics and automation

Technological

Socio-cultural

• Passenger identity and fraud • Level of integration along • Global ageing air industry supply chain

• Global income inequality

• Bribery and corruption

• Government ownership of airspace and critical infrastructure

Economic

Political/legal

Table 2.5 IATA’s PESTE analysis identifying 50 drivers of change for 2035

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MARKETING ENVIRONMENT depending, for instance, on the location of the airport, the markets the airport serves and the type of services it offers. It is possible to use a PESTE analysis to identify a number of different scenarios that might develop, which can help in guiding the strategic marketing planning process. An interesting PESTE was produced by IATA in 2018 (before the coronavirus pandemic) by looking at future opportunities and challenges to 2035, identifying 50 drivers of change. It was produced for the airline industry but is also relevant for airports. Table 2.5 summarises the findings, and originally this was defined within a STEEP framework (society, technology, economics, environment, politics) but has been adjusted to fit within the traditional PESTE structure. A number of the key factors shown have been discussed in this chapter already, whereas others are fairly self-explanatory. IATA chooses to define ‘infectious disease and pandemics’ as an environmental factor, whereas in this chapter, it is discussed as a socio-cultural factor – clearly there are arguments for its inclusion under either category. IATA’s PESTE analysis is very extensive and would be beyond the scope of that just used by an individual airport, but nevertheless, it gives a useful overview of the range of factors that might be considered. An alternative assessment is provided in Table 2.6. This presents 13 megatrends to 2040 (again before the coronavirus pandemic) that London Heathrow Airport identified. Whilst they are not specifically grouped into the PESTE categories, strong links between them and those of IATA in Table 2.5 can clearly be seen. Table 2.6 London Heathrow Airport’s analysis of global megatrends to 2040 Megatrend

Sub-trends

Connectivity and convergence

Augmented and virtual reality (VR) Big data Space jam (proliferation of satellites) Cyber security Connected living Autonomous world Fifth generation (5G) – high-speed connectivity

Cognitive era

Predictive analytics Machine learning Mobile robots Quantum computing

Bricks and clicks

Experience stores Click and collect Digital kiosks Online hypermarkets

Smart is the new green

Smart cities Smart mobility Smart buildings Smart security (Continued)

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MARKETING ENVIRONMENT Table 2.6 Continued Megatrend

Sub-trends

Social and geopolitical trends

Empowerment of women Ageing population Generation Y and Generation Z Rise of middle class

Health, wellness and wellbeing

e-health/m-health Personalised medicine Medical tourism Wellness gadgets (smart watch)

New business models

Crowdsourcing Personalisation Sharing economy On-demand services

Urbanisation – city as a customer

Mega cities (population of over 8 million) Mega regions (population of over 15 million) Mega corridors (population of over 25 million)

Future of infrastructure

High-speed rail New trade routes Future of transportation

Innovating to zero

Zero waste Zero accident Zero error Carbon-neutral world

Future of energy

Energy harvesting Smart grids Energy management Renewable energy

New markets beyond BRICS (Brazil, Russia, India, China and South Africa)

New passenger routes Future of Africa Rise of Southeast Asian nations

Future of mobility

Connected cars Integrated mobility Car sharing Autonomous transportation

Source: Adapted from Heathrow Airport Limited (2018)

MARKETING ENVIRONMENT

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MARKETING ENVIRONMENT Graham, A., Budd, L., Ison, S. and Timmis, A. (2019). Airports and ageing passengers: a study of the UK. Research in Transportation Business and Management, 30, 100380. Hajibaba, H. and Dolnicar, S. (2018). The multi-family travel market. In: S. Dolnicar, ed., Peerto-peer accommodation networks. Oxford: Goodfellow Publishers. Heathrow Airport Limited. (2018). Heathrow strategic brief. Hounslow: Heathrow Airport Limited. Hooley, G., Nicoulaud, B., Rudd, J. and Lee, N. (2019). Marketing strategy and competitive positioning, 7th ed. Harrow: Pearson Education Limited. IATA (International Air Transport Association). (2015). Economic performance of the airline industry: industry forecast December 2015. [online] IATA. Available at: https://www.iata.org/en/ iata-repository/publications/economic-reports/airline-industry-economic-performance--2015-end-year---tables/ [Accessed 15 April 2021]. IATA (International Air Transport Association). (2018). Future of the airline industry 2035. Geneva: IATA. IATA (International Air Transport Association). (2020a). World air transport statistics. Geneva: IATA. IATA (International Air Transport Association). (2020b). Industry statistics fact sheet June 2020. [online] IATA. Available at: https://www.iata.org/en/iata-repository/publications/economicreports/airline-industry-economic-performance-june-2020-data-tables/ [Accessed 15 April 2021]. IATA (International Air Transport Association). (2020c). Air cargo market analysis, December 2020: robust end to 2020 for air cargo. [online] IATA. Available at: https://www.iata.org/en/iata-repository/publications/economic-reports/air-freight-monthly-analysis---december2020/ [Accessed 15 April 2021]. ICAO (International Civil Aviation Organization). (2016). List of government-owned and privatized airlines. [online] ICAO. Available at: https://www.icao.int/sustainability/SiteAssets/Pages/ Eap_ER_Databases/FINAL_Airlines%20Privatization.pdf [Accessed 15 April 2021]. ICAO (International Civil Aviation Organization). (2021). 2020 passenger totals drop 60 percent as COVID-19 assault on international mobility continues. [online] ICAO. Available at: https://www. icao.int/Newsroom/Pages/2020-passenger-totals-drop-60-percent-as-COVID19-assaulton-international-mobility-continues.aspx [Accessed 15 April 2021]. ITF (International Transport Forum). (2019). Liberalisation of air transport. Paris: ITF. Jacobs. (2020). UK airport performance indicators 2018/19. London: Jacobs. Jarach, D. (2005). Airport marketing: strategies to cope with the new millennium environment. Farnham: Ashgate. Kotler, P., Armstrong, G., Harris, L. and He, H. (2020). Principles of marketing, 8th ed. Harrow: Pearson Education Limited. MAHB (Malaysia Airports Holdings Berhad). (2020). Sustainability report 2019. Kuala Lumpur: MAHB. Metropolitan Airports Commission. (2020). Metropolitan Airports Commission organizational chart. [online] Metropolitan Airports Commission. Available at: https://metroairports.org/airportauthority/metropolitan-airports-commission/administration [Accessed 15 April 2021]. Munich Airport. (2019). Munich Airport integrated report 2018. Munich: Munich Airport. Narita International Airport. (2020). Organizational structure. [online] Narita International Airport. Available at: https://www.naa.jp/en/company/naa_soshiki.html [Accessed 15 April 2021]. Njoya, E. and Warnock-Smith, D. (2018). Liberalisation developments in key selected emerging markets. In: N. Halpern and A. Graham, eds., The Routledge companion to air transport management. Abingdon: Routledge. Pearce, B. (2018). Economic performance of the airline industry: mid-2018 update. Geneva: IATA. Pride, W. and Ferrell, O. (2020). Marketing, 20th edition. Boston: Cengage. Raffel, R. and Ramsay, J. (2011). Aviation security in the United States. In: J. O’Connell and G.Williams, eds., Air transport in the 21st century. Farnham: Ashgate.

MARKETING ENVIRONMENT Schänzel, H. A. and Yeoman, I. (2015). Trends in family tourism. Journal of Tourism Futures, 1(2), 141–147. Shaw, S. (2011). Airline marketing and management. 7th ed. Farnham: Ashgate. SITA. (2020). Air transport IT insights 2019. Geneva: SITA. Tembleque-Vilalta, M. and Suau-Sanchez, P. (2016). A model to analyse the profitability of long-haul network development involving non-hub airports: the case of the Barcelona–Asian market. Case Studies on Transport Policy, 4(2), 188–197. Thelle, M. H. and la Cour Sonne, M. (2018). Airport competition in Europe. Journal of Air Transport Management, 67(March), 232–240. UK CC (United Kingdom Competition Commission). (2009). BAA airports market investigation. London: Competition Commission. UNWTO (United Nations World Tourism Organisation). (2016). Global report on the power of youth travel. Madrid: UNWTO. Wiltshire, J. (2018). Airport competition: reality or myth? Journal of Air Transport Management, 67(March), 241–248.

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3

Airport customers and segmentation This chapter explores the market for airport services and consists of two main sections. The first section discusses the range of airport customers, their behaviour, and factors affecting their choice of airport. The second section considers airport market segmentation including the concept of market segmentation and segmentation variables for key airport markets.

3.1 The airport’s customers The focal point of any marketing system is always the customer, and a thorough understanding of customers is essential for effectively planning the marketing mix at the later stage of the marketing process. For this, airports first need to understand who their customers are.

3.1.1 The range of airport customers For airports, there are a variety of markets, each containing customers with specific requirements that need to be satisfied with the blend of tangible and intangible product and service features on offer at the airport. These include passengers, airlines, tour operators, travel agents, freight forwarders and visitors. In a broad sense, other businesses such as ground handlers and retail concessionaires use parts of the airport product to sell their own individual services and pay for it through concession fees or rents, and so can also be considered airport customers. Likewise, employees at the airport contribute to the product but additionally act as customers when commercial facilities such as retail are involved. Airport and airline views of the importance of these different groups vary. Airports often define both airlines and passengers as key customers, whereas airlines may consider passengers as solely their customers, and themselves as the main customers of the airports. Freathy and

DOI: 10.4324/9781003039563-3

CUSTOMERS AND SEGMENTATION O’Connell (2000) discuss how airlines can be defined as primary customers with passengers as secondary customers but argue that this distinction is difficult to maintain in practice because the boundaries of responsibility between airports and airlines are often obfuscated in the mind of the passenger. Hermann and Hazel (2012) divide airport customers into five groups: airlines, passengers, non-travellers (employees, visitors and retail customers, meeters and greeters, and neighbours), tenants/service providers (retail, car park, ground handling, advertisers), and potential development partners (real estate developers, hospitality, transportation service providers, government). Graham (2018) uses a simpler classification that defines customers as trade, passengers/freight shippers, other individuals and other organisations. Trade customers include airlines, general aviation, tour operators, travel agents and freight forwarders. Airlines are clearly the primary drivers of the overall air travel business because, without them, passengers and freight shippers will not be able to use a certain airport. As discussed in Chapter 2, FSCs accounted for 74 per cent of revenue passenger kilometres (RPKs) globally in 2019. The second-largest passenger market is LCCs, representing 23 per cent of RPKs, and then there are charter/leisure airlines (3 per cent). In addition, the tonne-kilometres performed (TKPs) of cargo (freight and mail) markets account for a global market share of 24 per cent (while passenger TKPs account for 76 per cent). This cargo traffic is carried by a mixture of passenger and all-cargo airlines and integrated or express carriers. Furthermore, at some airports, general aviation may be an important market. This can cover activities such as flight training, police aviation, air ambulance, aerial firefighting, surveying and crop spraying, as well as private flying and leisure pursuits such as skydiving, aerobatics and gliding. Another significant area may be private business or corporate aviation. Other trade customers include tour operators, which have traditionally sold charter airline seats as part of a package tour. Hence, the tour operator may make the decision as to which airports should be served, while the charter airline will pay for, and consume, the airport product. In this respect, tour operators can be considered separate customers from charter airlines, although this is a grey area as many charter airlines and tour operators belong to large integrated travel companies. Travel agents indirectly sell certain parts of the airport’s product by selling airline seats, and so can be defined both as customers and distribution intermediaries. For cargo traffic, there are other intermediaries such as freight forwarders or global logistics suppliers, which provide the interface between the freight shipper and airline. They will often make decisions regarding which airport to use to transport the cargo. The end-users – namely the passengers and owners of cargo that is being transported – are another group of customers. Passengers are clearly of key importance to airports, not only because they consume the product the airline provides but also because they are direct customers for airport commercial facilities. Globally, the most significant passenger markets are North America, Europe and Asia-Pacific, with the last expected to become much more dominant in the future. By contrast to passengers, the end-user in the cargo market rarely comes into contact with the airport itself. Instead, freight shippers tend only to deal with the forwarder or integrator away from the airport. The ‘other individual’ customer category includes all individuals who will use some features of the airport product but will not be direct customers of the airlines. This includes employees at the airport who work for the airport, airlines, ground handlers, commercial concessionaires and other organisations. These individuals may use airport commercial facilities, primarily because of their convenience, and other facilities such as car parking. As a very broad rule of thumb, there will be around 800 to 1,000 employees at an airport per million passengers; they will be potential customers, but this can vary considerably depending on the type of airline and

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CUSTOMERS AND SEGMENTATION passenger and the role of the airport (Graham, 2018). A survey of west coast international airports in the US found that 45 per cent of employees used the F&B facilities daily and 26 per cent used them just weekly. Equivalent figures for retail were four and 18 per cent respectively (LeighFisher, 2011) although more up-to-date information is not available to confirm that these findings are still valid today. In addition, there will be the accompanying visitors known as ‘farewellers and weepers’ or ‘well-wishers’ and ‘meeters and greeters’. These visitors may use the retail and F&B facilities in the terminal and the car parks. The size of this market will depend considerably on the purpose of the trip and length of haul of the associated passengers and will be influenced by other factors such as surface transport options, culture and nationality. Table 3.1 confirms that at airports in the UK in 2014 (this is the last year when the data was available), there are more meeter-greeters for leisure originating passengers than business passengers, presumably because the business passengers are more likely to have their surface access trip paid for as well as having less luggage (thus reducing the need for others to take them to the airport) and with typically shorter trips there might be less of a need to be ‘waved off ’ (Budd, 2016). In the majority of cases, there is just one well-wisher. Another example is Los Angeles International Airport where a passenger survey in 2019 found that 12 per cent of the originating passengers had been accompanied by at least one well-wisher (7 per cent one well-wisher; 7 per cent two or more), with residents having a higher share of well-wishers than visitors (14 per cent compared to 11 per cent) presumably because of closer connections of residents to the local population (Unison Consulting, 2019). However, with the coronavirus pandemic, this is a customer group that has been severely affected because at many airports, well-wishers have been told not to enter the terminal building, to reduce the risk of infection. There will also be visitors not directly related to air transport activity. For instance, there may be aviation enthusiasts who visit the airport to view aircraft, buy specialist merchandise and perhaps have a tour of the airport. Local residents may also visit the airport to use the retail and F&B facilities, or businessmen and women may use conference and meeting facilities. Again, the coronavirus pandemic has deterred such visitors. Table  3.1 Percentage share of originating passengers accompanied by well-wishers at UK airports, 2014 Business

Leisure

All passengers

Gatwick

0.7

1.9

1.7

Heathrow

1.4

7.7

5.8

Luton

0.9

1.8

1.6

Stansted

2.0

3.1

2.8

Birmingham

2.5

9.9

8.4

East Midlands

1.0

2.0

2.0

Manchester

0.9

2.3

2.1

London:

Regions:

Data source: UK CAA (2015)

CUSTOMERS AND SEGMENTATION The ‘other organisation’ customer category includes concessionaires, who typically provide the terminal commercial facilities such as shops and F&B. Organisations such as handling agents can also be considered customers of the airport. These groups contribute to the airport’s overall product and so are also defined as suppliers. The same reasoning can be applied to organisations that rent space or land from the airport both within and outside the terminal, and to businesses that are developed around the airport as a consequence of an airport’s strategy to establish an airport city or aerotropolis (Chapter 6). It is important to acknowledge that some of these different customer groups will inevitably be interdependent. For instance, if the number of airlines serving the airport decreases, this is likely to reduce the volume of passengers, employees and accompanying visitors, and could ultimately – if the decline is sufficiently large – make the airport less attractive to other customers such as the providers of commercial facilities. It is also certainly true that the different customer groups, especially the airlines and passengers, will view airports from different perspectives. In most cases, given the competitive nature of the airline industry, the interests of airlines will align quite closely with the interests of passengers. However, this may not always be the case, for instance, with airlines giving too much attention to higher-yielding premium passengers, or not supporting expansion plans that might benefit passengers but increase airline competition.

3.1.2 Customer behaviour and factors affecting airport choice Having identified the airport’s main customers, it is important to assess their behaviour in relation to the factors that will affect their choice of airport. For each customer, choosing an airport is the result of an amalgam of many complex decision processes. For passenger airlines (and tour operators if relevant), one of the most important factors is the size and nature of the catchment area, especially if point-to-point services are the main focus (Chapter 4 explains how the catchment area is measured). Depending on the type of route being considered, key factors are the business and tourist appeal of the catchment area for incoming passengers, and the characteristics and purchasing power of those residing in the catchment area. The opportunities for carrying cargo (preferably in both directions) on passenger flights need to be considered. If an airline wants to develop or maintain a hub and draw on traffic beyond the immediate catchment area, it will also look for a central geographic location in relation to the markets it wants to serve. Clearly the airport product has to be able to meet the needs of the airline. There must be sufficient capacity and slots to enable the airline to operate the services they want now and in the future, and other airfield physical capabilities, such as runway length, need to be appropriate. The infrastructure also needs to fit the requirements of the specific airline such as fast turnarounds for LCCs or reliable transfer facilities for network carriers. Corporate aviation operators will look for a swift, efficient and personalised service for their company executives. Commercial factors to consider include the presence of other airlines and the extent of competition that exists at the airport, the fit with the rest of the airline’s network, and the potential for its passengers to feed onto other services, or for other services to provide feed for them. Just as important will be the total visiting costs of operating from the airport. Undoubtedly, the level of aeronautical charges can be crucial here, which is the reason many airports offer pricing discounts and incentives (Chapter 7). Assistance with related activities such as the funding of market research and promotional campaigns can also be significant. In addition, airline choice will be influenced by other costs such as for handling and refuelling, which the airport will

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CUSTOMERS AND SEGMENTATION Table 3.2 Rank and factors infuencing LCCs’ choice of airport Dziedzic and Warnock-Smith (2016)

Loh et al. (2020)

1. Airport costs/availability of discounts

1. Airport costs

2. Demand for LCC services/catchment area

2. Demand for LCC services

3. Quick and effcient airport operations

3. Passenger throughput

4. Proximity to the primary city

4. Availability of incentives

5. Free airport capacity/slot availability

5. Potential growth opportunities

6. Airport potential to attract business passengers

6. Availability of LCC dedicated facilities

=7. Airline competition

7. Airline competition

=7. Airport competition

8. Flexibility in negotiating airport charges deals

9. Airport potential to attract leisure passengers

9. Effciency of aircraft-related processes

=10. Availability of LCC dedicated facilities

10. Airport ground accessibility

=10. Good non-aeronautical revenues

11. Proximity to populated/tourist areas

=10. Positive experience of LCCs

12. Opportunities for fight connections

13. Airport ground accessibility

13. Previous experience of LCCs

Data sources: Dziedzic and Warnock-Smith (2016); Loh et al. (2020)

generally have less control over. If the airline is planning a significant presence at the airport, or wants to develop the airport as a base, this will involve recruiting local staff and so the cost of labour may be important. The airline choice of airport is clearly very dependent on the type of airline being considered. As an illustration of the factors that affect LCC’s choice of airport, Table 3.2 compares the findings of two different studies related to this. The Dziedzic and Warnock-Smith (2016) research is based on a content analysis of literature on how airline managers and industry executives have described their network policies, whereas the Loh et al. (2020) research is based on the view of airlines in China and Korea. Both studies unsurprisingly find airport costs and demand the most important factors. With regards to cargo operations, airports need to have strong demand for such services or be centrally located to operate as a cargo hub. Visiting costs can again be very important as cargo traffic can be highly price-sensitive and easily shifted from one airport to another by freight forwarders, as long as they can meet the delivery requirements of the shippers. More specific factors will be the ability of the airport to operate at night and to have quick customs clearance times, a good weather record, and convenient road access so that cargo can be efficiently trucked to its final destination. All-cargo flights often use large aircraft that need specialist loading and transfer equipment. In addition, certain types of cargo such as livestock, dangerous or perishable goods may require specialist handling and storage facilities that may not be available at all airports. Gardiner et al. (2005) divided the factors affecting cargo operations into location (geography, local demand, operational availability), airport quality (congestion

CUSTOMERS AND SEGMENTATION Table 3.3 Airport information provided on The Route Shop and Route Exchange websites for potential airlines The Route Shop

Route Exchange

• Unserved, underserved and recently served routes

• Airline opportunities

• Marketing and other support

• Route development/marketing

• Reasons to serve the airport

• Pricing and incentives

• Airport catchment area

• Catchment and demographics

• Freight opportunities and other economic impact factors

• Facilities

• Airport facts (geography, infrastructure and operations, important infrastructure developments and/or other news, vital statistics, fnancials)

• Tourism

• Airport infrastructure • Economic and trade • Data and statistics

Data sources: The Route Shop (www.therouteshop.com) and Route Exchange (www.routesonline.com/ route-exchange/) websites

and delays, user charges, infrastructure, ground access, labour), and third-party influences (environmental restrictions, bilateral ASAs), government legislation, freight forwarders, airport marketing). The results of a survey of non-integrated carriers, which were asked to rank the most significant factors that influenced their choice of airport, indicated that night operations were the most important followed by costs, the airport reputation and local demand. For integrated carriers, factors such as the weather record to ensure high reliability and space to build dedicated facilities needed for such operations appeared to be vital. Chapter 9 discusses two key websites that airports use to market themselves to airlines: The Route Shop and Route Exchange. Table 3.3 identifies from these websites the main information airport marketers consider it important for airlines to know, and this matches very closely the actual research undertaken concerning airline choice factors in Table 3.2. The information can be broadly categorised into route opportunities, pricing and marketing support, catchment area characteristics, airport facilities, cargo potential and other useful data. Considering passenger choice of airport is more complex. The nature of air services on offer (e.g. in terms of fares, destinations and schedules) – in effect the airline product – will be the crucial factor, as no one will choose to fly from an airport unless it offers the required travel opportunities. The airport can only indirectly influence these factors by marketing to airlines, so in many respects, passengers will be more concerned with the flight rather than the airport. They may, for instance, choose to use an airport that would not normally be their preferred choice just to get a cheap airline deal or to gain frequent flyer points. They may also need to travel to airports beyond their local environment to access certain types of flights such as long-haul services that are not available locally. Each individual will go through a unique and complicated process of analysing many factors in order to make a decision as to which airport to use, and it is essential for airports to try and understand this consumer behaviour. A key factor that will affect passenger choice will be the airport’s proximity and/or ease of access. This will be influenced by the cost and availability of public transport to an airport as well as the cost and convenience of car parking. It may well be that the nearest airport is not the easiest or most convenient for passengers to use. Passenger choice will also be influenced by

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CUSTOMERS AND SEGMENTATION personal preferences for a certain airport because of factors related to the airport product and the overall experience. For instance, in a qualitative study of UK passengers, Sykes and Desai (2009) found that passengers preferred smaller airports because they were less formal, offered better customer care, were less congested, and allowed passengers to feel more in control. Familiarity and reliability were also considered to be important factors, especially for business travellers. Passenger choice may also be influenced by the involvement of third parties or intermediaries such as travel agents or corporate travel offices during their decision process. A passenger survey for seven UK airports: four in London (Gatwick, Heathrow, Luton and Stansted) and three in the regions (Birmingham, East Midlands and Manchester) found that location and surface access were the most important factors for all airports, but especially for those in the regions (UK CAA, 2012). Routes and frequency factors were much more important at Heathrow; this reflects its role as the UK’s main hub airport, with a higher share of business passengers. By contrast, the cost was much more important at Stansted and Luton, which are predominantly served by LCCs. This is confirmed by Accent (2011), whose UK survey found that availability of flights was identified as a reason for the choice of airport by 63 per cent of business passengers compared to 55 per cent of leisure passengers, while only 23 per cent of business passengers mentioned the cost of the flight in contrast to 35 per cent of leisure travellers. Only 8 to 10 per cent of both groups identified airport facilities as being a significant factor. Similarly, a more up-to-date survey of the three Washington airports (Baltimore Washington International, Dulles International and Reagan National) also demonstrated the importance of accessibility, especially for the centrally located Reagan National, with 69 per cent of passengers citing ‘closest airport’ as a reason for their choice (Table 3.4). The cost of air travel at Baltimore, which has the LCC Southwest as one of its main airlines, was given as a reason by 19 per cent of passengers compared with 8 per cent at Dulles and 7 per cent at Reagan National (National Table 3.4 Main reasons for passenger airport choice at Washington Airports, 2019 Baltimore

Dulles

Reagan National

Accessibility Closest airport

61

44

69

Better public transport

1

2

4

Better access roads & parking

2

3

1

More convenient fight times

7

17

8

Only airport with direct times

3

11

4

19

8

7

Frequent fyer with a specifc airline

1

2

2

Only airport serving market

2

7

2

3

5

4

100

100

100

Quality of air services

Less expensive air fares

Other Other Total

Data source: National Capital Region Transportation Planning Board (2020)

CUSTOMERS AND SEGMENTATION 90 Proportion of respondents (%)

80 70 60 50 40 30 20 10

D

ire

va i

gh ta

ct

fli

Ti c

ke t

pr ic

e Co la bl nn ity ec tin A irp g tim or tr e ep ut A at irl io in n er e vi Sp ew ec s ifi A ca i rp A i rli or irl ne tr in ep er ut ec at om io m n A e nd irp A at or irp io tc or n on tr A n e vi irp ec ew tin or s td g fa e pa ci A lit irp rti ie ng or s ta fa rri ci l vi ng ities Fr eq fa ci ue A lit nt irp ie fly s or er tr ec po om in ts m en da tio n

0

Airline Factor

Airport factor

Figure 3.1 Airline and airport factors affecting passenger ticket purchases Data source: ACI (2017)

Capital Region Transportation Planning Board, 2020). Figure 3.1 shows a survey undertaken by ACI which also shows the greater importance of airline factors as compared to airport factors when passengers are booking airline tickets. The most significant factors are ticket price, direct flight availability and connecting time whilst the airport factors (reputation/view and facilities) are less important. With regards to other individual customers, many are directly linked to the airline or passenger markets and so have no choice but to use a certain airport. This includes employees and accompanying visitors. However, aviation enthusiasts will be attracted to the airport if specific products are provided. Manchester Airport, for instance, has its ‘runway visitor park’. This includes a tour of Concorde, raised viewing mounds, a children’s play area themed on aviation, an aviation shop and an airport orbital cycleway. Similarly, Munich Airport has a visitor park that includes a cinema, an observation hill and terrace, an aviation shop, airport tours, old historic aircraft and an airport exhibition (see Chapter 6 for further examples). In terms of attracting other visitors to the airport, this will very much be influenced by the nature of the product provided, be it a medical centre such as at Frankfurt Airport, wedding facilities such as at Stockholm Arlanda Airport, or a more fully developed airport city or aerotropolis that may include sport, cultural, entertainment and conference amenities, business parks and shopping centres. Local customers for these facilities will tend not to make choices between different airports but will compare the product at the airport with other similar ones nearby (e.g. out-of-town shopping malls) and make their decision based on general factors such as price, quality and accessibility. ‘Other organisation’ customers will take into account different factors. For instance, retailers will only want to operate at an airport if they have proof that the passenger, non-travelling

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CUSTOMERS AND SEGMENTATION visitor and employee profile is attractive enough for their product, and that the airport has sufficient traffic throughput. The average dwell time and the penetration rate – namely the proportion of passengers that use facilities – will also be considered. For instance, facilities such as duty free or F&B tend to have a wide appeal and high penetration rate, but more specialist shops may only interest a smaller share of passengers. For this reason, smaller airports often find it hard to attract specialist retailers. For some organisations such as those providing F&B, car hire and other surface access services, their product will be closely linked to travelling and flying to and from the airport and will be in limited competition with other such organisations. However, retailers may have to take into account the volume and quality of retail space in nearby city centres and shopping malls.

3.2 Airport market segmentation Once customers are identified and an understanding of their behaviour has been gained, it is appropriate to consider market segmentation, which is crucial for the development of a successful marketing strategy. The segmentation process consists of dividing total markets, of either individuals or organisations, into submarkets or segments of potential customers with characteristics in common that can lead to a similar demand for a product. There are many variables that can be used to segment markets, all of which should relate in some way to the customers’ needs for, or uses of, the product. Pride and Ferrell (2020) identify a number of these variables, dividing them between consumer and business markets. For consumer markets they have four categories: demographics (e.g. age, gender, income, ethnicity and family life cycle), geographic (e.g. population, market density and climate), psychographic (e.g. personality traits, motives and lifestyles) and behaviouristic (e.g. volume usage, end-use, expected benefits, brand loyalty and price sensitivity). For the business market, they have other variables such as geographic location, type of organisation, customer size and product use. In selecting the most appropriate variables for market segmentation certain conditions must exist in order for the process to be effective. Dibb et al. (2019) identify six such conditions. First, the needs for the product should be heterogeneous or there will be no value in trying to divide up the market. Second, the segments must be easy to identify and measure. Third, each segment must be substantial enough to justify developing and maintaining its own specific marketing mix. Fourth, the segment must be easily accessible with the marketing mix. Fifth, the segments must be reasonably stable over time so that they can be used as a basis for future marketing plans. Finally, they must be useful to managers to help them better satisfy the needs of their customers. Similarly, Kotler et al. (2020) argue that the effectiveness of the process of segmentation depends on finding segments that are measurable, accessible, substantial and actionable. As the first step for successful airport market segmentation, variables for key airport markets need to be identified. This will vary for consumers (e.g. passengers and other individuals) and business markets (e.g. trade and other organisations). Table 3.5 provides a summary of common variables for key airport customers: commercial service providers, airlines and passengers. Table 3.5 shows that there are a number of ways to segment the commercial service providers at airports. The simplest way is related to the product they sell, such as duty-free goods, specialist merchandise, F&B, car parking, conference facilities and hotel beds. Another method, especially in the terminal, is to divide the facilities by location, especially airside versus landside. Other segmentation models may differentiate by size (e.g. number of outlets, square metres), customer type (e.g. arriving, departing, transfer) or product purpose (e.g. necessity, souvenir and impulse buy).

CUSTOMERS AND SEGMENTATION Table 3.5 Segmentation variables for key airport customers Customer

Variable

Examples

Commercial service providers

Product type

Duty-free, specialist retail, F&B, car park

Location

Airside, landside

Size

Outlets, square metres

Customer type

Arriving, departing, transferring

Product purpose

Essential, souvenir, impulse buy

Type

Passenger, cargo, general aviation

Nature of route

Domestic, international

Passenger business model

Network, charter, LCC, regional

Cargo business model

Combination, freight-only, integrators

Alliance membership

Star, oneworld, SkyTeam

Trip characteristics

Purpose, transfer or terminal, group size, length of stay, seasonality, surface access mode

Passenger characteristics

Nationality, income, age, gender, life stage, education, occupation

Travel behaviour and attitudes

Loyalty to the airport, product preferences and requirements, frequency of travel

Shopping behaviour

Price sensitivity, product and quality preferences, propensity to spend, shopping motivations, average dwell time

Airlines

Passengers

Source: Compiled by the authors

The most common segmentation for airlines is to distinguish between types of airline or business models. Many major airports still rely on the traditional market of network carriers (also known as flag carriers, FSCs, national airlines, mainline airlines or legacy carriers) which used to be, or in some cases still are government-owned. Such carriers tend to have some competitive advantages in terms of grandfather slot rights at many of the world’s large airports and bilateral air service protection in some areas. Many of the world’s network carriers also belong to one of the three global alliances (oneworld, SkyTeam and Star). If an airline joins a global alliance, its network scope may be increased and it may gain access to wider markets, but the number of direct flights from a certain airport may reduce. Alliance members will expect shared facilities such as check-in and airline lounges, and efficient transfer facilities. A number of network carriers have also merged such as British Airways and Iberia or Korean Air and Asiana Airlines, which again has important implications for airports served by these airlines. A very specialist segment is airlines that offer all business class services and hence demand premium services at airports. There have been various attempts at establishing independent business airlines – notably EOS, Maxjet and Silverjet – which all operated business class services between London and the US for a couple of years, but all ceased operations by 2008 when general economic conditions became more challenging. British Airways launched the Parisbased all-business transatlantic operator OpenSkies in 2008, and in 2009 added an all-business

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CUSTOMERS AND SEGMENTATION service out of London City Airport. Singapore Airlines also had a premium service to the US, and in 2012 Hong Kong Airlines launched business-only flights to London. However, all these services have now been terminated, in some cases since the coronavirus pandemic with the resultant dramatic decline in business traffic. The Swiss-based airline Privatair also provided a few premium services for Lufthansa, SAS and Saudi Arabian Airlines but ceased operations in 2018. The only premium service that still appears to be operational is provided by La Compagnie on the New York-Paris route (and seasonally on the New York-Nice route) and so currently this airline business model for airports has very little relevance, especially with the huge uncertainty related to business travel since the coronavirus pandemic. By contrast, as discussed in Chapter 2, there has been a considerable growth in the LCC sector (also known as no frills, budget or low fares airlines) over the last two to three decades, which has stimulated new and existing markets and placed different demands on airports. Common needs for LCCs tend to be efficient, simple and low-cost services for fast turnarounds (e.g. no airbridges, no buses, no transfer facilities), which have encouraged some airports to introduce specialist LCC areas or even terminals (Chapters 5 and 6). However, whilst the term LCC is often used to refer to a homogenous product, in reality, there are many variations of the model that have somewhat different airport requirements. For instance, the conventional LCCs (e.g. Air Arabia, easyJet, flydubai, Indigo, Lion Air, Wizz Air, VietJet); the ultra-LCC (e.g. Frontier Airlines, Spirit Airlines, Volaris) and LCCs with long-haul services (AirAsia X, Norwegian) (O’Connell, 2019), although Norwegian cancelled its long-haul services in 2021 when restructuring its business for survival during the coronavirus pandemic. Regional airlines tend to provide hub-feeder traffic (e.g. regional feeders) or point-to-point services for regions or local communities (e.g. independent regionals). Many of the routes will be low density, focused on business travel and will typically be served by regional jets or turboprop aircraft. Ownership can vary from independent companies (e.g. Skywest Airlines or Bangkok Airways) to wholly owned subsidiaries of network carriers (e.g. American Eagle and Lufthansa CityLine). In addition, some of the independent carriers will operate as franchises for the larger carriers such as Air Nostrum for Iberia in Spain or Comair for British Airways in South Africa. Charter or leisure airlines are mainly a European phenomenon, having developed during the 1950s and 1960s package holiday boom. They traditionally served short- and medium-haul seasonal routes but have diversified over the years to serve long-haul destinations, as well as having year-round operations. They tend to serve dense routes with relatively large aircraft out of regional and secondary airports, rather than those serving capital cities. Increasingly, this market is dominated by large pan-European travel companies such as TUI. However, in recent years such carriers have lost considerable market share to LCCs and have adopted a number of response strategies such as developing an LCC product themselves or focusing on more specialist holiday products like those associated with adventure travel or new faraway destinations. In spite of this, there have still been a number of major failures such as Monarch Airlines in 2017 and Thomas Cook Airlines in 2019. For cargo traffic, there are three types of business models, which again have different needs at the airport. There are combination carriers, which may carry cargo in the cargo holds or in combi-aircraft with passenger flights, or alternatively may operate a network of scheduled, all-cargo flights. Some airlines such as Lufthansa and Singapore Airlines have hived off their cargo operations into a separate subsidiary company. Then there are a few all-cargo carriers, the most notable being Cargolux and Atlas Air. The third type of operator is the express carrier or integrator such as Federal Express and UPS, which integrate the full logistics chain within one company. Unlike the two other types, which tend to operate an airport-to-airport service,

CUSTOMERS AND SEGMENTATION the integrators offer a multi-modal door-to-door service (usually road and air) to their final customer, with features such as guaranteed delivery times. This puts different demands on the airport. The other two types of operators often rely on intermediaries such as freight forwarders or global logistics suppliers, to provide the interface between the freight shipper and airline. One of the problems with segmenting airlines by their business model, especially for the passenger market, is that the models are becoming increasingly blurred and hybrids are emerging. For instance, network carriers have adopted pricing structures introduced by LCCs, while LCCs have added on frills such as flexible pricing, fast-track boarding, frequent flyer points, or even connecting services (e.g. Norwegian, Ryanair). In Asia, some of the LCCs established an LCC alliance in 2016 called the Value Alliance. Meanwhile, a few airlines that traditionally served regional services have transformed themselves into LCCs, as have charter airlines, while some LCCs now sell accommodation through their website and may have gone one stage further by setting up a tour operator (e.g. easyJet). This blurring of models has produced a number of different airline businesses based loosely around Porter’s sources of competitive strategy related to differentiation, cost leadership and focus. Porter’s model is considered within an airport context in Chapter 5. Another popular way of segmenting airlines is according to the routes they operate, such as whether they have domestic or international services, or short-haul versus long-haul routes. This may have an impact on their airport operational requirements, especially in the terminal. For instance, in the UK Virgin Atlantic specialises in long-haul services, while Loganair only operates domestic and short-haul flights. Globally, domestic RPKs accounted for 36 per cent of total traffic in 2019, of which the largest markets were in North America, Latin America (due to Brazil) and Asia-Pacific (due to China, India and Japan) (IATA, 2020a). A further distinction can be made regionally, as at European airports, where EU and non-EU airline segments may be covered by different aviation rules and regulations in certain areas of operation. Airlines can also be segmented by nationality, although as regards marketing activities it needs to be acknowledged that international aviation regulation prohibits discrimination on the basis of nationality. There are many ways that passengers can be segmented at airports. The easiest and most basic way is to use the airline models and services. For instance, domestic and international passengers have needs for different facilities (such as customs and immigration) and may have access to additional commercial facilities (such as duty-free and tax-free retailing). Passengers can also be segmented according to whether they are terminal or transfer passengers. Other variables related to travel characteristics can be used such as group size, length of stay and seasonality. One of the most popular variables is trip purpose. At the most basic level, passengers can be grouped by business and leisure, and then each of these categories can be further subdivided. Business passengers can be grouped according to whether they are travelling for internal business, meetings with external customers, conferences, trade fairs or exhibitions. Leisure passengers may be going on short breaks, long holidays or package tours, or may be VFR or travelling to study. Linked to this, there can be segmentation by travel class such as premium or economy. Typically, business passengers are thought to be more time-conscious and demanding, travelling for short periods of time and requiring easy parking, executive lounges, higher-end branded commercial products and speedy processes. In contrast, leisure passengers often travel in groups, are more price-sensitive but less demanding, have more dwell time and require a wider range of retail, F&B and entertainment facilities. Table 3.6 shows the segmentation variables related to travel characteristics used at Frankfurt Airport. It is important to note that the same person may belong to different passenger segments depending on the nature of

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CUSTOMERS AND SEGMENTATION Table 3.6 Segmentation variables related to trip characteristics at Frankfurt Airport, 2019 Variable

Category

Passenger variables: importance out of 100%

Cargo variables: importance out of 100%

Flight distance

Short haul

62

15

Medium haul

11

16

Long haul

27

69

Star

74

56

oneworld

4

8

SkyTeam

4

10

Other

18

26

Terminal

46

–

Transfer

54

–

International

90

98

Domestic

10

2

1st quarter

21

25

2nd quarter

27

25

3rd quarter

29

25

4th quarter

23

25

Cargo

–

62

Passenger

–

38

Alliance use

Type

Destination

Seasonality

Type of aircraft

Data source: Fraport (2020)

their trip. For instance, an individual may travel alone on business and be a demanding and time-poor passenger, whereas they may then travel for leisure with their family and have totally different priorities for their ideal passenger experience. The table also shows similar variables for cargo throughput which can be important if the airport is actively involved with handling cargo. There are very noticeable differences with flight distances (short haul being dominant for passengers, long haul being dominant for cargo) and cargo traffic is also less dependent on the Star Alliance and less seasonal. Other airports use passenger characteristics to segment demand. This can include general demographic and geographic variables such as nationality, income, age, gender, life stage, education and occupation variables. Travel frequency and length of stay could also be included here (or under trip characteristics). Table 3.7 presents the passenger characteristic variables used at Athens International Airport. ACI Europe (2018) identifies five traditional categorisations of passengers used for planning airport products, namely air carrier products (e.g. first class, business, economy, LCCs), personal needs (e.g. unaccompanied minor, elderly, cultural background, PRM, travel frequency (frequent flyers, few times a year, seldom, first-time travellers), number of people (groups, family, cruise hub, alone) and process-oriented (arriving, departing, transfer, multimodal).

CUSTOMERS AND SEGMENTATION Table  3.7 Segmentation variables related to passenger characteristics at Athens International Airport, 2019 Variable

Category

Importance (out of 100% unless otherwise stated)

Gender

Male

49

Female

51

18–24

9: 4

25–34

27: 25

35–44

27: 32

45–54

20: 25

55+

17: 14

High School

5

College/University

95

Greece

40

Other EU

34

Other Europe

6

US/Canada

9

Middle East

3

Asia Pacifc

6

Africa

1

South America

1

Up to 2 times

69

3–9 times

27

10+ times

4

Up to 2 times

17

3–9 times

74

10+ times

10

Business

15

Other

85

Greek residents

9 days

Foreign residents

9 days

Age (male: female)

Education

Nationality

Frequency of air travel to/ from Athens per year

Frequency of air travel per year

Purpose of trip

Average trip length

Data source: Athens International Airport (2020)

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CUSTOMERS AND SEGMENTATION However, it argues that a more sophisticated segmentation is now needed, because today’s passengers are more informed, more empowered and more in need of personalised experience, and also since the airport experience depends on the passenger’s own feelings and their mindset. So, this should involve cross-referencing psychographic and behaviouristic market segmentation with some of more traditional categorisations, particularly when an airport is considering passenger needs and requirements in order to enhance their experience. A relevant segmentation example is the six key passenger profiles or personas developed by ACI based on its Airport Service Quality (ASQ) passenger survey data (see Chapter 4 for details about this survey). The profiles are the airport enthusiast; the friendly vacationer; the sunlounge tourist; the timekeeper; the value seeker; and the workman (Figure 3.2). Such segmentation can help airports create different customer experiences to meet the needs of these different passenger types and can provide much more insight into passenger behaviour and needs than more traditional segmentation. Through more specialist market research, unique profiles can be developed for individual airports. Examples for Copenhagen, Swedavia, Brisbane, Denver and Dallas Fort Worth are provided in Table 3.8. The relative importance of the different segments can help the airport determine how to prioritise its marketing strategies. For instance, at Copenhagen airport, the most popular segment was found to be the ‘experienced’ representing 42 per cent of all passengers. ‘Efficiency’ and ‘selection’ accounted for a further 23–24 per cent each, whilst ‘attention’ was only associated with 11 per cent of the passengers. Each segment also had a different travel frequency (e.g. high – efficiency; medium – experienced/selection; low – attention).

Airport enthusiast

• Wants to enjoy the airport experience and has a very positive attitude towards it. Understands the passenger processes and will tolerate occasional delays

Friendly vacationer

• Organised and likes airports, being highly responsive to airports with consistently clear wayfinding and friendly staff. Sees traditional customer service as important and looks for efficient airport porcesses

Sunlounge tourist

• An experienced consumer who is keen to enjoy an entertaining airport experience, although not a seasoned airport passenger

Timekeeper

• Confident in using airports, although not a frequent flyer. Satisfied if needs are met and has priorities which are clear and specific

Value seeker

• Confident in airport experience expectations although not a frequent flyer. Expects value for money. Has clear expectations regarding the airport processes and commercial facilities and is highly demanding

Workman

• Has high expectations with specific needs. Experienced and demanding

Figure 3.2 ACI’s passenger experience profles Source: Adapted from Bates (2017)

CUSTOMERS AND SEGMENTATION Table 3.8 Examples of passenger experience profles for individual airports Copenhagen1

Swedavia2

Brisbane3

Denver4

Dallas Fort Worth5

• Experienced customers

• The servicedemanding cautious traveller

• Airport enthusiast

• Explorers

• Frugal vacationer

• Effcient enthusiast

• Experts

• Effciency customers • Selection customers • Attention customers

• The cost-conscious adventurer • The well-planned dreamer

• Time fller • Effciency lover

• Elites • Escapists • Aspirers • Early birds

• The comfort seeking luxury traveller

• All business road warriors • Value voyagers • Indulgent explorers

• The effcient business traveller Sources: 1 Copenhagen Airport (2012); 2 ACI Europe (2018); 3 Harrison et al. (2015); 4 Boudreau et al. (2016); 5 M/A/R/C Research (2019) Note: Swedavia owns and operates ten of Sweden’s largest airports

Some of these segmentation models for passengers will also be useful for consideration of commercial facilities. Charter passengers have traditionally been favourites for impulse buys, while LCC passengers tend to be heavy users of F&B facilities because of the limited offer on board aircraft. International or long-haul passengers tend to have more time to shop than domestic and short-haul passengers. Transfer passengers will not need access to car hire or car parking facilities but may want to make some retail purchases if there is sufficient time between flights. Some airports such as Dubai International and Singapore Changi place much emphasis on providing and marketing their retail offer to transfer passengers to encourage them to choose the airport. Business travellers tend to make purchases relatively infrequently, although their average spend is usually quite high. Inbound and arriving passengers are likely to spend on car hire and currency conversion, whereas outbound and departing passengers are likely to use car parks and make retail purchases. Nationalities and culture will also influence spending and shopping behavioural patterns. For instance, Scandinavians – who are used to relatively high duties and taxes in their home countries – are regular spenders on duty and tax-free shops, while Americans tend not to be, especially because of the many downtown shopping malls selling discounted products in the US. As with the aeronautical areas it is useful to segment passengers using psychographic and behaviouristic variables. This can include factors such as price preferences, product and quality preferences, propensity to spend, shopping motivations and average dwell time. Echevarne (2008) describes a classification devised by Pragma Consulting/ARC Retail Consultants based on motivation. There is travel necessity (e.g. books, toys, music, confectionery), souvenirs (e.g. local produce, t-shirts, ornaments), gifts for those at home or in the destination, personal self-treats (e.g. designer label clothing, watches, jewellery and accessories), convenience (e.g. ties for executives), exclusive opportunities to buy (e.g. reduced prices or unique merchandise in duty-free shops), and trip enhancement (e.g. sunglasses for holidays).

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CUSTOMERS AND SEGMENTATION

Conservation passenger

• Travels low cost or economy. Flies infrequently and is just keen to get to the destination. Spends time on F&B but less likely to use social media or a smartphone at an airport

Enthusiastic shopper

• Loves travelling. Arrives early at the airport, with plenty of time for shopping when on holiday. Loves international brands, is happy to pay more for quality and willing to try new brands. Responsive to airport advertising

Experienced seeker

• Loves travelling, enjoying unfamiliar cultures and new places. Likes to buy locally produced products when travelling. Spends time at airports on social media and emails rather than shopping

Routine flyer

• Flies most frequently, seeing air travel as a necessity not a luxury. Spends little time at airports. Airport shopping is not a priority and time is spent working. Has a clear idea about brand preferences but is responsive to airport advertising

Seasoned tourist

Tech savvy adventurer

• Flies frequently and enjoys travelling. Is older and often flies in a group and mainly for leisure. Enjoys sightseeing, spends plenty of time at an airport and brings home gifts and souvenirs

• Flies frequently and enjoys being adventurous. Is often younger, an early adopter of new teachnology and uses social media to plan. Enjoys airports and shopping and is most likely to be influenced by airport advertising

Figure 3.3 NPD travel retail’s airport shopper profles Source: Adapted from JCDecaux (2018)

Airports also use psychographic and behaviouristic market segmentation in their assessment of commercial facilities. For instance, Figure 3.3 presents some general airport shopper profiles based on a survey of 22,500 travellers from over 25 nationalities, whilst Table 3.9 presents some profiles for individual airports. Alternatively, airport experience profiles can be linked to use of, and attitudes towards, commercial facilities. For instance, with the profiles for Dallas Fort Worth (identified in Table 3.8) where 44 per cent of commercial spending came from Indulgent Explorers, who made up 26 per cent of the sample. By contrast only 8 per cent of the spending came from Frugal Vacationers, which represented 37 per cent of the sample. As will be discussed in Chapter 6, airports are increasingly focused on implementing digital technologies at key stages of the airport journey to enhance the airport experience, and passengers can be segmented according to their preferences. For instance, Halpern et al. (2021) surveyed 6,082 passengers at airports in Norway to investigate preferences for seven key processes: check-in; identity checks; bag tag; bag drop; security screening; making payments for products or services at the airport; and accessing customer services. Their analysis split passengers into two groups; those travelling with baggage and those travelling without baggage. TwoStep Cluster Analysis revealed the presence of three distinct segments for each group: those that prefer traditional manual processes, those that prefer automated technology-based

CUSTOMERS AND SEGMENTATION Table 3.9 Examples of airport shopping profles for individual airports Amsterdam

Brussels

• Satisfed • Mood atmosphereshoppers tasters • Apathetic • Certaintyshoppers seekers • Shopping• Active pleasureseekers • Trendy shoppers • Exclusivityclaimers

lovers

Lisbon

London Heathrow

Manchester

Taipei

• Shopaholics

• Mass market leisure fyers

• Shopaholics

• Mood shoppers

• Supporters • Pure convenience • Minimalists • Controlled • Valueseekers • Unlikely shoppers

• Well-to-do functionals

• Agitated passengers

• Unfulflled • Young shoppers upmarket • Valueleisure seekers fyers • Unlikely • Older shoppers upmarket leisure fyers

• Apathetic shoppers • Shoppinglovers • Traditional shoppers

• Measured shoppers

• Timestarved frequent business fyers

Source: Adapted from Graham (2018)

processes, and those that prefer more personalised technology-based processes (Figure 3.4; Table 3.10). The analysis also found that those who belong to the technology-based segments are more likely to be business passengers and/or frequent flyers, have higher levels of income and education, and are less concerned about the privacy and human dignity impacts of using digital technologies at airports, compared to those who belong to the manual segments. The findings of Halpern et al. (2021) support previous studies by IATA (2020b) and SITA (2020) that suggest high levels of technology adoption among passengers at airports. However, they also highlight considerable diversity. In particular, about a quarter of all passengers belong to the manual clusters that are more reticent to adopting digital technologies as part of their journey. It means that airports wanting to meet the needs of different segments will have to offer technology-based processes for passengers that want them and manual processes for those who prefer more traditional approaches. This is the case at many airports today, for instance, at check-in, where it is common to offer staffed check-in desks, self-service kiosks, self-service bag-drops and/or entirely mobile paperless processes in the same airport – potentially resulting in inefficiencies, inconsistent service levels and confusion among passengers. As observed by Halpern et al. (2021), the extent to which airports will be able (or willing) to continue to accommodate diverse passenger expectations in this way will likely depend on a number of internal organisational factors such as the current and/or desired passenger mix and market position of the airport. For instance, a hub airport that has a strong focus on business traffic, where speed and reliability of the airport experience are valued, might adopt digital technologies more readily than a regional airport that is focused on seasonal leisure traffic, whose passengers might value a more traditional approach to the airport experience where manual processes are more common.

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CUSTOMERS AND SEGMENTATION With baggage (N 4185)

Personalised 34%

Without baggage (N 1897)

Manual 28%

Automated 38%

Manual

Automated

Manual 23%

Personalised 32%

Automated 45%

Personalised

Manual

Automated

Personalised

Figure  3.4 Passenger segments according to preferences for using digital technologies at airports Data source: Halpern et al. (2021) Note: N = number of responses

Table 3.10 Proportion of respondents (%) within each segment With baggage Variable

Preference

M

Check-in

With staff at a check-in desk

70

0

2

19

0

0

Via a self-service kiosk

14

62

15

56

0

1

Via a website

5

3

4

16

0

1

Via text/SMS

5

11

16

5

33

29

Via a mobile application

6

24

64

4

67

69

Paper pass and passport/ identifcation card

76

44

0

72

0

0

Electronic pass and passport/ identifcation card

20

55

57

23

100

54

Pass linked to pre-registered biometric features

3

1

43

5

0

46

With staff at a check-in desk

82

3

2

–

–

–

Via a self-service kiosk

10

79

20

–

–

–

Self-printed and attached (e.g. at home or work)

5

3

5

–

–

–

Digital bag tag connected to a mobile device

3

16

74

–

–

–

Identity checks

Bag tag

A

P

Without baggage M

A

P

(Continued)

CUSTOMERS AND SEGMENTATION Table 3.10 Continued With baggage Variable

Preference

M

Bag drop

With staff at a check-in desk

69

8

Via a self-service bag drop

24

At airport but before entering terminal (e.g. airport car park)

Security screening

Payments at the airport

M

A

P

7

–

–

–

90

75

–

–

–

6

0

10

–

–

–

Off-airport (e.g. train or bus station, downtown)

1

1

3

–

–

–

Pay for home collection

0

1

5

–

–

–

Current process of removing items for scanning

52

75

16

60

50

24

Biometric process1

48

25

84

40

50

76

9

3

1

6

0

4

83

79

49

83

100

22

8

18

51

11

0

74

With staff only

36

25

9

29

28

14

With staff or self-service (e.g. touchscreen)

22

47

34

45

41

34

As above or via augmented reality or artifcial intelligence

43

28

57

27

31

53

Cash Credit or debit card Mobile payment application

Customer services at the airport

A

P

Without baggage

Source: Adapted from Halpern et al. (2021) Notes: M = manual segment, A = automated segment, P = personalised segment; 1 use of infra-red cameras, facial recognition and other technologies that scan passengers as they move so they can walk through security without needing to remove items for screening; fgures for each variable do not necessarily equal 100 due to rounding up or down

However, external factors also play a key role. For instance, the coronavirus pandemic has encouraged a greater focus on contactless and touchless processes, and it is conceivable that a passenger who once valued the personal service offered by staff at airports now prefers more technology-based processes to minimise the risk of transmitting the virus. Airports can use the segments of Halpern et al. (2021), that were determined prior to the coronavirus pandemic, as a basis for identifying which groups of passengers are ready to adopt technologies that offer contactless and touchless solutions, and which groups require additional information, assistance, or reassurance if they are to be forced away from using traditional manual processes.

References Accent. (2011). 2131 Consumer research: final report, May 2011. London: Accent. ACI (Airports Council International). (2017). Low cost and conventional airlines: passenger expectations for departure airports. Montreal: ACI.

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CUSTOMERS AND SEGMENTATION ACI Europe (Airports Council International Europe). (2018). Guidelines for passenger services at European airports, 2nd ed. Brussels: ACI Europe. Athens International Airport. (2020). 2019 aerostat handbook. Athens: Athens International Airport. Bates, J. (2017). In the know. [online] ACI Asia-Pacific Airports. Available at: https://aci-apa. com/in-the-know/ [Accessed 15 April 2021]. Boudreau, B., Detmer, G., Tam, S., Box, S., Burke, R., Paternoster, J. and Carbone, L. (2016). ACRP report 157: improving the airport customer experience. Washington D. C: Transportation Research Board. Budd, T. (2016). An exploratory examination of additional ground access trips generated by airport ‘meeter-greeters’. Journal of Air Transport Management, 53(June), 242–251. Copenhagen Airport. (2012). CPH and society 2011. Copenhagen: Copenhagen Airport. Dibb, S., Simkin, L., Pride, W. and Ferrell, O. (2019). Marketing: concepts and strategies, 8th ed. Andover: Cengage. Dziedzic, M. and Warnock-Smith, D. (2016). The role of secondary airports for today’s lowcost carrier business models: the European case. Research in Transportation Business & Management, 21(December), 19–32. Echevarne, R. (2008). Impact of attracting low cost carriers. In: A. Graham, A. Papatheodorou and P. Forsyth, eds., Aviation and tourism: implications for leisure travel, Aldershot: Ashgate. Fraport. (2020). Frankfurt Airport: air traffic statistics 2019. Frankfurt am Main: Fraport. Freathy, P. and O’Connell, F. (2000). Market segmentation in the European airport sector. Marketing Intelligence and Planning, 18(3), 102–111. Gardiner, J., Ison, S. and Humphreys, I. (2005). Factors influencing cargo airlines’ choice of airport: an international survey. Journal of Air Transport Management, 11(6), 393–399. Graham, A. (2018). Managing airports: an international perspective, 5th ed. Abingdon: Routledge. Halpern, N., Mwesiumo, D., Suau-Sanchez, P., Budd, T. and Bråthen, S. (2021). Segmentation of passenger preferences for using digital technologies at airports. Journal of Air Transport Management, 91(March), 102005, 1–13. Harrison, A., Popovic, V. and Kraal, B. (2015). A new model for airport passenger segmentation. Journal of Vacation Marketing, 21(3), 237–250. Hermann, N. and Hazel, B. (2012). The future of airports: Part 1 – Five trends that should be on every airport’s radars. New York: Oliver Wyman. IATA (International Air Transport Association). (2020a). World air transport statistics. Geneva: IATA. IATA (International Air Transport Association). (2020b). IATA global passenger survey 2019. Geneva: IATA. JCDecaux. (2018). JCDecaux & NPD travel retail: getting to the heart of the airport passenger. [online] JCDecaux. Available at: https://www.jcdecaux.com/blog/jcdecaux-npd-travel-retail-gettingheart-airport-passenger [Accessed 15 April 2021]. Kotler, P., Armstrong, G., Harris, L. and He, H. (2020). Principles of marketing, 8th ed. Harrow: Pearson Education Limited. LeighFisher. (2011). ACRP report 54: Resource manual for airport in-terminal concessions. Washington D. C: Transportation Research Board. Loh, H. S., Yuen, K. F., Wang, X., Surucu-Balci, E., Balci, G. and Zhou, Q. (2020). Airport selection criteria of low-cost carriers: a fuzzy analytical hierarchy process. Journal of Air Transport Management, 83, 101759. M/A/R/C Research (2019). 2019 DFW segmentation. [online] M/A/R/C Research. Available at: https://webfids.dfwairport.com/cs/groups/webcontent/documents/webasset/p2_689963. pdf [Accessed 15 April 2021]. National Capital Region Transportation Planning Board. (2020). Washington-Baltimore regional air passenger survey 2019. Washington D. C: National Capital Region Transportation Planning Board.

CUSTOMERS AND SEGMENTATION O’Connell, J. (2019). The role of different airline business models. In: A. Graham and F. Dobruszkes, eds., Air transport: a tourism perspective. Amsterdam: Elsevier. Pride, W. and Ferrell, O. (2020). Marketing, 20th ed. Boston, MA: Cengage. SITA. (2020). 2019 passenger IT insights. Geneva: SITA. Sykes, W. and Desai, P. (2009). Understanding airport passenger experience. London: Independent Social Research. UK CAA (United Kingdom Civil Aviation Authority). (2012). Heathrow: market power assessment: Non-confidential version. London: UK CAA. UK CAA (United Kingdom Civil Aviation Authority). (2015). CAA passenger survey report 2014. London: CAA. Unison Consulting. (2019). 2019 passenger survey Los Angeles International Airport. Los Angeles: Unison Consulting.

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Chapter

4

Airport marketing research and route development This chapter investigates how airports can use marketing research as a function for linking customers to the marketer: the information obtained helps airports to address marketing issues such as the identification of marketing opportunities, solving of marketing problems, refinement of marketing actions and monitoring of marketing performance. The chapter begins by examining the role of marketing research in general. This leads on to exploring the specific nature of airport marketing research, giving special attention to the route development process (known as air service development in some parts of the world). The rest of the chapter considers the different research methodologies and sources of information available to airports both from secondary and primary research.

4.1 Defnition and the role of marketing research Marketing research is “the systematic design, collection, interpretation and reporting of information to help marketers solve specific marketing problems or take advantage of marketing opportunities” (Pride and Ferrell, 2020: 124). This means that for successful marketing, organisations need to have practical and unbiased information to enable them to make appropriate and effective marketing decisions. Any information an organisation uses in assisting their marketing decision-making process, collected through marketing research or gathered more informally (e.g. by developing ideas within the organisation), is usually defined as marketing intelligence (Dibb et al., 2019). A distinction needs to be made between market research and marketing research. The former has a specific focus on the characteristics, attitudes and behaviour of customers. Marketing research includes a much wider spectrum of research that covers not only market research but also different types of research such as an assessment of the product and price on offer, or

DOI: 10.4324/9781003039563-4

MARKETING RESEARCH AND ROUTE DEVELOPMENT an analysis of the competitive situation, or the effectiveness of a promotional or distribution strategy. While a considerable amount of marketing research effort tends to be concentrated on researching products and services, it is still likely to cover the whole marketing process from initial data collection and identifying marketing opportunities to monitoring marketing strategies and the marketing mix that has been used. Thus, marketing research is designed to help marketers reach decisions and monitor the results of those decisions. Many different marketing research activities can be undertaken but all have a common process that consists of four stages: defining the problem and the research objectives, developing the research plan, implementing the research plan, and interpreting and reporting the findings (Kotler et al., 2020). The first stage involves focusing on a problem or issue that needs exploring and defining specific research objectives or questions related to this. These objectives or questions tend to be linked to explanatory research for gathering information to define the problem, descriptive research (that investigates characteristics or attitudes of certain customer groups), or causal/experimental research to test a cause-and-effect relationship (e.g. between price and sales). Examples of general research questions could be: why are there so many complaints or why have sales decreased? Having established the objectives or questions, the research plan is developed. Decisions need to be made regarding the information required and how it will be collected. The latter will be through quantitative or qualitative research, or a combination of the two. Quantitative research can be described as relatively objective, producing numerical data or information that is often factual in nature. Qualitative research is a more subjective research discipline that goes beyond the figures and probes areas where deeper insight is needed, exploring attitudes, preferences and feelings. Such information can be gathered from secondary sources (sometimes referred to as desk research), primary sources (sometimes referred to as field research), or both. Secondary sources include internal databases (e.g. on sales figures, customer feedback, customer characteristics, customer website and social media activity) or external databases (often commercially driven and online), the general and trade press, government agencies, international organisations, and specialist market research companies. Secondary sources offer instantly available and accessible information, but it may not be entirely up-to-date, reliable or free from bias. In addition, information from secondary sources will have been collected for another purpose. This means that it may not be focused enough on the specific research objectives of the marketer, even though it may be possible to reanalyse the information. Information from secondary sources provides a useful starting point for marketing research but when the data is inadequate, unreliable or even non-existent, it is necessary to gather information from primary sources. This means that information will be collected in connection with specific research objectives. It is a more up to date, but often a more expensive, means of gathering information compared to using secondary sources. In addition, there can still be the problem of biased or unreliable data if the research is not undertaken correctly. Information can be gathered in a number of ways such as from surveys (especially online but also by telephone, post or face-to-face), personal diaries, focus groups or panel discussions. Online survey research is very common with the most obvious advantages being lower costs, a quicker timeframe and the opportunity to reach a much larger sample. Online qualitative research using online focus groups, blogs and other social networks is now also very common and usually a cheaper option. Crowdsourcing can be used as well to obtain the views or needs of the ‘crowd’. However, online primary research does often mean less control over the sample of respondents used.

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MARKETING RESEARCH AND ROUTE DEVELOPMENT Observational research can also be undertaken; this involves observing relevant people, actions or situations, such as recording the time it takes a customer to make a purchase or how they interact with a product or website in a real-world environment. This can be done in-person or via sensors such as cameras, beacons and Global Positioning System (GPS) trackers. Ethnography, which is all about observing the consumer’s behaviour and product usage in their natural environment is becoming increasingly popular, especially netnography which is a branch of ethnography concerned with online behaviour. Additionally, experimental research can analyse the results of adjusting how a product is sold. For instance, this can be carried out by certain retailers under controlled conditions (keeping everything else the same) to try to establish a link between product position and sales. Online experiments are particularly useful and can be used to assess the effectiveness of product offers and prices on different online sites, to test new products or to learn about consumer clickstreams (pathways that consumers take through their online journey; normally on a single website – although multiple site visits can be included if possible – and typically showing how they progress through that journey e.g. from search to purchase). In designing the research plan the most appropriate research methods have to be selected, not only to ensure that the information collected will allow the research questions to be answered but also so that practical considerations such as costs, availability of resources, and planning time deadlines are taken into consideration. Once methods have been selected, research details need to be agreed. With surveys, for instance, decisions need to be made concerning the selection of the population, sample size, sampling technique, questionnaire design, and how to pre-test and pilot the survey. Similarly, for observations, decisions need to be made concerning who or what is going to be observed, where and when the research will take place, and what method is going to be used to record information (e.g. video, audio). This may require using ‘mystery shoppers’. The third stage of the research process involves implementing the plan by collecting, processing and analysing the data. If quantitative research methods have been used, it should be possible to conduct a statistical analysis of the data. This may be descriptive analysis such as calculating measures of central tendency (e.g. mean, median and mode) and the dispersal of data (e.g. standard deviation) but also measures of association (e.g. correlation and regression) and inferential statistics (e.g. analysis of variance – ANOVA, t-tests or chi-square). If qualitative research has been undertaken, the analysis will usually involve identifying categories, patterns, themes and relationships in the data; techniques such as content and narrative analysis can also be used. The final stage of the research process consists of interpreting and reporting the findings, and it may be appropriate to use the findings to make relevant and informed estimates (e.g. for current and potential demand). The digital age has meant that ‘Big Data’ is transforming how marketing research is undertaken. Big Data has been defined by Pride and Ferrell (2020: 143) as “massive data files that can be obtained from both structured and unstructured databases” and by Dibb et al. (2019: 282) as “data that are too large, numerous, complex and frequent for conventional data tools to capture, store, manage and analyse”. For instance, consumers themselves generate huge volumes of information and GPS data on their smartphones, personal computers and tablets by online browsing and blogging, or using mobile and social media applications, short message and multimedia messaging, and video. This brings huge opportunities for gaining detailed timely consumer insights, but also major challenges in managing such volumes of data and ensuring that the right information is used. Marketing analytics is “the analysis tools, technologies and processes by which marketing digs out meaningful patterns in Big Data to gain customer insights

MARKETING RESEARCH AND ROUTE DEVELOPMENT and gauge marketing performance” (Kotler et al., 2020: 126). Such tools allow data storage and management, data cleaning, data mining, data analysis, data visualisation, data integration and data collection, sometimes in real time.

4.2 The nature of airport marketing research For airports, just as any other organisation, marketing research is essential for effective strategic marketing planning. As airports have become more engaged in marketing their services, the quality of their marketing research has also improved, with a vast array of different research now being undertaken. In some respects, marketing research for airports may be considered easier than for other industries because airports have access to a considerable amount of data regarding passenger numbers, airline services and air transport trends that are generally available as a by-product of the information that has to be collected for operational requirements. This means that providers of commercial facilities also have access to details about their customers, which is something that high street retailers struggle to obtain. It could also be argued that undertaking primary research at airports, especially among passengers, is easy given that they all go through common processes at airports and in many cases have time to spare that can be occupied by participating in surveys. However, there are many factors that make airport marketing research quite challenging. The wide range of different airport customers (e.g. passengers, airlines, visitors, employees, investors, local residents) means that it is a complicated task to fully research the needs and trends of all customers. In addition, a consequence of the airline industry becoming progressively more competitive is that it has become much more difficult for airport marketers to access airline-specific data. Furthermore, the continual tightening of security regimes at airports has made survey work in the airside area more problematic. On the other hand, the development of more accessible large databases and Big Data has helped to overcome some of these other data challenges. Clearly, the amount of marketing research an airport can undertake will depend largely on the size of the airport and the resources available. At larger airports, there may be a department dedicated to marketing research. At smaller airports, marketing research may be just one of the functions that marketing staff undertake. At some airports, marketing research is carried out by one department, whereas at others, aeronautical and commercial research may be the responsibility of different departments. Many smaller airports will not have the resources to undertake much marketing research themselves and may therefore need to focus on developing partnerships (e.g. with tourism organisations, regional development agencies and other stakeholders at the airport) to pool resources and information. Partnerships such as these will be discussed in Chapter 9. While there are airport-specific factors that need to be taken into account when conducting marketing research, airports still need to go through the general four-stage process already discussed. The question or problem that needs to be addressed by airports could relate to a wide range of issues including exploring unserved or underserved routes, assessing the price sensitivity of customers to inform pricing decisions, identifying features of airport product and passenger experience that need improving, and monitoring the effectiveness of promotional campaigns. The research requirements vary for each of these areas, but in practice, a large part of airport marketing research can be divided into three different categories covering customer characteristics; product, service quality and passenger experience issues; and the use and performance of commercial facilities. While separate marketing research may be undertaken for

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MARKETING RESEARCH AND ROUTE DEVELOPMENT each of the three areas, there is likely to be a considerable amount of overlap. For instance, information about passengers’ characteristics that may be gathered for market assessment purposes can be used to determine the best commercial offer mix. Similarly, customer satisfaction scores may offer insight into attitudes towards commercial facilities. In addition, external economic information such as income and GDP will be useful for predicting the potential for new routes and also for assessing trends in commercial revenues. There is a considerable amount of information that can be gathered concerning market characteristics for airlines, passengers and other customers. Some of this has already been discussed in Chapter 3 in relation to market segmentation choices. For instance, airline data can be collected by type of airline, nature of the route, passenger business model, cargo business model and alliance membership. Similarly, passenger data can be collected by trip and passenger characteristics, attitudes and behaviour. This data and the associated market segments can be used to identify strategies for airport market targeting and positioning (Chapter 5), and to plan the marketing mix in terms of product design and delivery (Chapter 6), pricing strategies (Chapter 7), distribution channels (Chapter 8) and promotional activities (Chapters 9 and 10). The data also plays a key role in the route development process, which is discussed later in this chapter. Research concerning service quality and customer satisfaction has traditionally been undertaken in two ways. First, an objective approach can be adopted by measuring the services delivered; this can cover areas such as flight delays, availability of lifts, escalators and trolleys, and other factors such as queue length, space provision, waiting time and baggage reclaim time. This measures the functional factors driving service quality. To be accurate and reliable, these measures need to be collected regularly and at varying time periods when different volumes and types of passengers are being processed through the airport. The advantages of these measures are that they are precise and easy to understand. However, this approach to researching service quality can only cover a limited range of issues and service dimensions. For instance, while they can evaluate the reliability of equipment, they cannot tell whether consumers feel safe, assured and satisfied with their use of the equipment. Similarly, a passenger’s perception of the time they have spent waiting in a queue may be very different from the actual waiting time. Therefore, more subjective research looking at passenger satisfaction ratings is also needed, to enable the quality of service to be assessed through the eyes of users rather than airports. This measures the emotional factors driving service quality. However, as discussed in Chapter 6, airports are now going much further than just considering service quality data in isolation and instead are focusing much more on the overall passenger experience, by taking a holistic and experiential perspective of the various encounters that passengers face in their airport journey. Any information an airport has gathered on market characteristics may be useful for research related to commercial facilities, as passenger profile information can be important in explaining price sensitivity, product and quality preferences, and propensity to spend with commercial facilities. More specific information on customers of commercial facilities (e.g. passengers, employees and visitors) in terms of their characteristics, dwell times and attitudes and behaviour towards commercial facilities can also provide insight, as can sales and performance data.

4.3 The route development process An important area of airport marketing research is associated with the development of air services (STRAIR, 2005; Martin, 2008; Halpern and Graham, 2015, 2016). For this, airports will typically go through a route development process, which will have different data and research

MARKETING RESEARCH AND ROUTE DEVELOPMENT Define catchment area

Undertake market assessment and leakage analysis Indentify unserved or underserved routes Produce growth forecast for potential routes Choose possible airlines to operate the routes Undertake a financial viability assessment of the route

Present the business case to the airline and follow-up on it

Figure 4.1 Stages in the route development process Source: Compiled by the authors

requirements at each stage (ASM, 2016a). The overall task is to identify potentially viable routes that are not currently being served or to optimise existing services, and ultimately to produce route by route forecasts and feasibility assessments. Marketing research is an essential component that provides the foundations for this. The typical stages of the route development process, as it was prior to the coronavirus pandemic, are outlined in Figure 4.1. The first stage involves determining the catchment area of the airport. This refers to the geographic reach of the airport services on the surrounding population and economy they serve. Hence, it is the area where most of the outbound passengers originate from, or where most of the inbound passengers are travelling to, and so airports will tend to concentrate their marketing effort on this area. EC (2014: 9) describes a catchment area of an airport as being: …a geographic market boundary that is normally set at around 100 kilometres or around 60 minutes travelling time by car, bus, train or high-speed train; however, the catchment area of a given airport may be different and needs to take into account the specificities of each particular airport. The size and shape of the catchment area varies from airport to airport, and depends on various characteristics of the airport, including its business model, location and the destinations it serves. Thus, catchment areas can be formally defined by using isochrones that identify an area within which it is possible to reach the airport within a certain time. These can be identified with distance or different time periods (e.g. one- or two-hour isochrones; or 100 kilometres or 60 minutes as is used in the EC definition). This can be more complicated if different forms of ground transport modes are taken into account, for instance, a two-hour drive time on public transport might be quite different from a two-hour drive time in a personal car. The appropriate drive time is dependent on the passengers’ willingness to travel to the airport, which needs to be assessed by considering the true origins and destinations of passengers. Various types of passengers will have different preferences and willingness to accept certain travel times. For instance, more time-sensitive business passengers will tend to demand shorter travel times than leisure passengers; long-haul (or perhaps international) travellers are likely to be less con-

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cerned with this element of travel time than short-haul (or perhaps domestic) travellers, since it accounts for a smaller share of their overall journey time. Hence, the airport needs to take into account the nature and purpose of the journey when defining its catchment areas. Cargo traffic catchment areas also often stretch further. A distinction can be made between the primary catchment area where most travellers (both residents and visitors) are likely to consider the airport as their first choice based on proximity, and weaker or secondary catchment areas where the airport will not necessarily be the first choice. An airport may even have three or more categories of catchment area. Drive time isochrones of 30 minutes, 60 minutes and 120 minutes tend to be popular. Figure 4.2 includes a number of airports that use these. There are very significant differences between the population in these areas and the passenger numbers. This is because the catchment area will only show the maximum outbound travellers that exist and will not take into account the population characteristics and travel characteristics of the catchment area. As another example, Figure 4.3 shows the significant differences that exist for a 100-kilometre isochrone catchment area at German airports. Once the airport has established its catchment area boundaries, it must quantify the level of air travel demand generated in the area, which is the second stage of the route development process. The number of potential passengers travelling to or from a catchment area will depend on many variables. This is especially the case for outbound traffic factors such as population size, attitudes and propensity to travel, demographic characteristics of the residents and past immigration patterns. Influencing factors for inbound travel will include the business and tourist activities in the area. If the airport has a central location, it can potentially draw traffic from all areas around the airport, which would not be the case if it was located near a coast. In addition, catchment area size will be dependent on the quality of the road network or public transport services (depending on how the isochrone has been defined), with better quality increasing the catchment size. If subsequent improvements are made to transport links, the catchment area will increase. In

MARKETING RESEARCH AND ROUTE DEVELOPMENT

Dusseldorf (18)

Cologne Bonn (16)

Frankfurt (10)

Hannover (7)

Hamburg (6)

Munich (6)

Figure 4.3 Population (in millions) within a 100-kilometre isochrone catchment area at German airports Data source: SEO Amsterdam Economics (2021)

recent years, the existence of more readily accessible databases and more sophisticated sets of data has helped to improve the quality and timeliness of such catchment area analytics. It is important to note that any estimate of the level of demand in the catchment area is only a hypothetical maximum measure of the traffic-generating power of the area, as it will fail to take account of nearby competitor airports and the impact such airports will have on potential traffic volumes. In reality, many airports have overlapping catchment areas, so potential passengers within these areas will make their choice of airport dependent on a number of factors such as fare levels, service levels (frequency or whether the service is non-stop or connecting), preferred airlines, parking and so on. For short-haul travel to popular destinations, there may be significant competition from other airports, and so catchment areas will probably overlap considerably, whereas this may not be the case for less popular or longer-distance destinations. Overlap typically occurs with regional airports or when there is more than one airport serving a major city. The larger the overlap of the two catchment areas, the higher the likelihood that the two airports will compete directly for the same passengers. However, the relative attractiveness of overlapping airports will vary constantly as improvements are made to the road infrastructure or public transport, new or additional air services are offered, or there is some other change such as a reduction in car parking prices. A good example of overlapping catchment areas occurs in the UK where the Civil Aviation Authority (CAA) found that the catchment area of London Stansted Airport overlaps with that of London Luton Airport, Bristol Airport, Birmingham Airport and East Midlands Airport, but has very little direct overlap with Manchester Airport (UK CAA, 2011). However, this concept of overlap is only relevant if the airports are providing substitutable air services or products. For instance, within the London area, there are the two business and general aviation airports London Biggin Hill Airport and Northolt Airport, whose catchment areas overlap considerably

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MARKETING RESEARCH AND ROUTE DEVELOPMENT with London Heathrow Airport and London Gatwick Airport, but who offer distinctly different aviation products and are therefore not really in direct competition. If past data exists that shows passengers’ use of a number of airports categorised by small residential regions (e.g. planning or postal districts), it may be possible to determine whether each region is within each airport’s catchment area, and therefore whether any of the catchment areas overlap. For instance, an assumption could be made, as in the UK CAA study, that an airport is considered to be serving a region if it captured a quarter of its originating passengers. Therefore, such past usage data can provide some insight into the market share each airport is likely to achieve but, as conditions are constantly changing, this cannot necessarily be a realistic guide for future strategic marketing planning. In reality, the competitive strength of an airport and the success of its marketing effort can be assessed by determining its effectiveness in capturing all the potential passengers in its catchment area. When traffic is lost or diverted away from its ‘natural’ catchment area to another airport as a result of factors such as insufficient airline capacity or frequencies, higher air fares, or a lack of non-stop services at the airport in question, this is defined as traffic leakage. Reverse leakage is the opposite situation when passengers will use a given airport even though they have not been directly associated with its catchment area. LCCs have been particularly successful in attracting passengers from outside catchment areas and causing leakages because of the lower prices they offer. This has been especially the case with leisure passengers because of the lower value of their own time. The airport can use this assessment of the market within its catchment area and the associated leakage analysis to determine the adequacy of air services at the airport, and to identify routes not served satisfactorily, or at all, by considering the schedules of current air services. This is the third stage of the route development process. The next stage of the process will involve estimating the potential future demand for the route, which will usually require the input of other marketing research data related to key drivers of demand such as income, population, propensity to travel and journey purpose. Forecasting methods may vary from simple time-series projections of past traffic performance into the future to more complicated procedures such as regression analysis or scenario building. This will be largely dependent on data and time availability, and expertise. Reference to aviation industry forecasts may also be useful here. This will involve looking at the direct origindestination (O-D) traffic and perhaps any connecting traffic (‘behind’ and ‘beyond’ traffic in relation to the two O-D points at each end of the service, and also any ‘bridge’ traffic that connects both ends of the route). One of the most challenging situations will be when there is no relevant historical data to use as a basis for the forecasts or when major shocks such as the coronavirus pandemic affect the usability of historical data. Once a total forecast for the route has been made, it is possible to estimate the likely market share of new services to and from the airport by weighing up the factors that passengers take into account when considering different flight and airport options such as air fares, frequencies and schedules, and accessibility of the airport (in terms of cost and time). This can be undertaken in a number of different ways. A fairly straightforward approach is to assume that the share of traffic on an existing route that a new entrant will capture is proportionate to its share of seat capacity in the market. This uses the ‘market share: capacity share’ ratio known as the MCR which may be higher, lower of equal to one. The airport may look at airlines with similar characteristics compared to the new entrant to give a benchmark MCR value to apply to the forecasts. Certain types of carriers may have different MCR values, for instance, LCCs may be

MARKETING RESEARCH AND ROUTE DEVELOPMENT able to achieve a value greater than one because of the low fares that they offer. This approach is best used for looking at O-D traffic. However, for connecting traffic, a frequency share approach is usually more suitable when it is assumed that the market share of the connecting flight is proportional to the share of connecting frequencies (ASM, 2016b). A more detailed measure is the quality service index (QSI) that estimates passenger behaviour by quantifying the relative attractiveness of different flight options. It is used by airlines when assessing their networks but can also be used by airports during the route development process to evaluate route opportunities, and perhaps to add credibility to the business case proposal to airlines. The inputs to the model are the factors that passengers consider when choosing different flight options such as air fare, flight frequency, travel time, aircraft time and number of stops. A coefficient is then applied to each of these factors, which can have a relative value (e.g. non-stop flight = 1.00, single connection = 0.25) or an absolute value (e.g. number of frequencies) (Belobaba et al., 2016). By inputting data related to the city pair market size, airline schedules, air fares, stimulation factors and so on, the model can calculate market share and other variables such as load factor and airline revenues. These models can be useful but require a considerable amount of data, as well as realistic assumptions related to the coefficients, to ensure that credible estimates are produced. The QSI is best used when exploring the potential demand for a direct service that does not already exist, but it can also be used to analyse markets where a direct service already exists, and there are going to be additional frequencies or a new entrant. It is particularly useful for markets where there is significant traffic from alternative nearby airports. An alternative more complex approach is to have some kind of passenger choice model that uses generalised travel costs, although this is rarely used by airports in practice. For instance, Boonekamp (2020) describes a passenger choice model called NetCost which has three different generalised travel costs that feed into a passenger choice model that can be used to estimate market share. First, there are value of time costs related to the in-flight time, transfer time and airport access time. Second, there are out-of-pocket costs related to the access costs, air fare and parking costs. Third, there are frequency costs related to the value of time in waiting for the next flight. Applying this to an example of a passenger wanting to travel from Arnhem to Budapest, the highest generalised cost would be on a service from Brussels Airport on Brussels Airlines. The lowest cost would be from Eindhoven Airport on Wizz Air. This matches up with the actual market share of six possibilities of six competing airports with the Brussels service only having a share of 8 per cent whilst the Eindhoven service had a market share of 23 per cent. Once the market share forecasts have been produced there may be a need to make some final adjustments. For instance, there may need to be consideration of the amount of stimulation or generation of new demand, which may be caused, for example, by a significant reduction in air fares, reduced ground time, the introduction of a non-stop route or a route which has reduced connection points or time, or high marketing activity. Using passenger booking data from 2005 to 2015, SEO Amsterdam Economics (2017) identified 5,157 new routes that were introduced from Europe to various domestic, European and intercontinental destinations during this period. They found that the market stimulation factor was inversely proportional to the original market size. For instance, the stimulation factor varied between 9.1 for small routes (2,500 indirect air passengers per year) and 1.3 for larger routes (50,000 indirect air passengers per year). Moreover, they found that market stimulation was 28 to 36 per cent larger for LCCs than for FSCs. This confirms what is generally assumed that LCCs can stimulate new demand because of the lower fares that they offer. IATA has a market stimulation curve, constructed by comparing passenger traffic before and after a new route is launched,

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Market share forecasts options • Local • Beyond • Behind • Bridge

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• Capacity share (O-D traffic) • Frequency share (connecting) • QSI (especially indirect traffic) • Generalised travel costs

• Stimulation factor • Seasonality • Seat capping

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Figure 4.4 Forecasting stages used for route development Source: Compiled by the authors

which confirms that in general, smaller markets tend to experience higher stimulation. Other adjustments may also have to be made, for instance, to take account of seasonality which may mean that at certain periods there may be more passengers than seats available, and by applying a seat cap to limit the number of seats to prevent the predicted load factor reaching 100 per cent. Figure 4.4 provides a summary of the different stages and key considerations associated with the forecasting part of the route development process. Once future demand has been forecast, the airport will need to research which airline would be the most suitable to operate the route, in terms of having the most appropriate network, flying aircraft that can reach the destination, and the capacity to carry the projected traffic. In addition, the general strategy (e.g. expansion plans, hub development and alliance membership) and business model (e.g. FSC versus LCC) of the airline, as well as its attitude towards the airport in question and market characteristics of the new route, need to be considered to ensure a good match with the new route requirements. As a final stage, the airport will undertake a feasibility assessment of the route by bringing together the forecast traffic, revenues, yield (e.g. revenue per seat-kilometre) and load factor data. This will require additional research to ensure that the estimates are realistic and credible when they are presented to the airline as it has to be convinced that a new opportunity exists – even though the airline will undertake its own assessment as well. Airlines will know their cost structure better than the airports so they tend not to want cost estimates, although for the airport internally some cost calculations should be undertaken to ensure that the route is sustainable. Airlines will do their own detailed profit and loss analysis. Having undertaken all these stages in the route development process, the airport will be in a position to present the business case to the target airline. It must explain in sufficient detail the assumptions. Usually, instead of just presenting one business case as a single case, the airport should be prepared to discuss and deviate from the original assumptions and present alternative scenarios to the airline. Initially, some of the research concerning the market assessment and potential for new routes may be presented on websites such as The Route Shop or Route Exchange, or on the business

MARKETING RESEARCH AND ROUTE DEVELOPMENT Table 4.1 Typical information provided by airports for airlines at route development meetings Information

Examples

Route forecasts

Nature of traffc, traffc forecasts, stimulated traffc, schedule, load factor

Financial evaluation

Forecast revenues and yields

Catchment area characteristics

Population, travel propensity, demographics, business/ tourist activity, surface transport links

Marketing support

Fee deductions or incentives, joint advertising campaigns, sharing of market research data

Airport facilities and profle

Infrastructure, services, other airlines at the airport

Source: Compiled by the authors

section of an airport’s website to encourage dialogue with airlines or to be discussed during meetings at route development networking events such as Routes. If an airline is interested in the proposal, the airport will normally make a formal business presentation to the airline (tips on how to do this are provided in Chapter 9, along with more information on The Route Shop and Route Exchange). Table 4.1 summarises the typical information presented during one of these meetings. To present a convincing and compelling business case, in addition to the traffic and financial assessment, other information relating to the attractiveness of the catchment area such as demographic and economic data needs to be provided (as well, of course, as details about price incentives, marketing support and airport facilities). While this information will primarily be used by airports to make a business case to the airlines, it can also be used to encourage other organisations such as tourist boards or development agencies to cooperate by financially supporting price incentives and marketing assistance to encourage the airlines. Through time route development teams have become much more professional with more experienced personnel (Leigh, 2015). Typically, at mid-sized airports (e.g. serving 5–30 million passengers per annum), marketing research will be one of three functions (the other two being sales and account management, and marketing management), with all three reporting to a head of route development. The sales and account management team will be experts in negotiation and bringing in new airlines, whilst the marketing management team will aim to build awareness and passenger numbers. Alternatively, responsibility can be divided up geographically to enable a greater understanding of specific markets, which is often undertaken at larger airports (ASM, 2016a). For instance, Copenhagen Airport has separate route development managers for Asia, Europe and Africa, Russia and the Americas, and air cargo. The HR devoted to route development activities have increased in recent years with Halpern and Graham (2015) estimating it to be 3.6 full time equivalent (FTE) employees in 2013 compared to 3.1 in 2008. In a recent survey of airports in 24 European countries in 2019, it was found that the FTE employees involved with route development were 4.74 which varied from large hubs (6.17), smaller hubs (5.89) and regional airports (4.74) (Bilotkach and Bush, 2020). However, it does need to be noted that for a number of airports, particularly the smaller ones, the management may choose to hire specialist consultants to conduct some of the tasks. As with all areas of airport marketing, route development has changed quite significantly since the coronavirus pandemic, which will be discussed in more detail in Chapter 12. At the time of writing, with very reduced traffic, airports have reduced their number of route development

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MARKETING RESEARCH AND ROUTE DEVELOPMENT staff or furloughed them (placed them on temporary leave). This may well mean that they will have reduced the specialisms amongst the remaining staff and have fewer resources to conduct research. This is coming at a time when airports and airlines are having to rebuild networks and reshape their operations to match new demand patterns and accommodate ongoing travel restrictions and supply constraints. The focus is very much on rebuilding traffic and relationships, and revisiting charging incentives and route support (Chapter 7), hence the route development networking events that were called ‘Routes’ have been renamed ‘Routes Reconnected’. In the short term, since the coronavirus pandemic, the networks and airlines at many airports will change. Airports need to identify which routes are likely to be less risky (e.g. domestic, short-haul, VFR, cargo, and possibly holiday/leisure) and those which are more uncertain (e.g. business, long-haul). There will be opportunities, but these may well be different than in the past and so airport target markets and future positioning may change. Using historic data for forecasts and decision-making will be less relevant but it will be paramount that airports understand what is happening in the marketplace and their catchment area, particularly in terms of passengers’ sentiments and travel plans. For instance, airlines abandoning large aircraft and using smaller ones has implications for hubs and non-hubs. Route development will be more important than ever before as the major priority for airports will be to attract and retain routes. This will involve cash-strapped airports supporting cashstrapped airlines with relevant data and building closer relationships to support decision-making and underpin recovery growth. Moreover, a closer collaboration with other stakeholders (as discussed in Chapter 9) will be critical to reduce risk, share resources and provide a more integrated approach to route development that considers the wider benefits of route development to the region. This will also open the door to many new opportunities with airports being more flexible, creative and innovative in how they approach route development (Charnock, 2020).

4.4 Secondary research One of the key decisions to be made in developing any research plan once the problem or issue to be considered has been identified is the choice of the most appropriate research method, and whether secondary, primary or both information sources are going to be used. For the airport industry, a range of sources are available, but all have their benefits and limitations. Therefore, cross-checks should be made whenever possible, using all available sources. In making choices, consideration has to be given to the accuracy, reliability, relevance and timeliness of the data, as well as to practical considerations related to the cost, resources and time involved. The rest of this chapter will discuss the types of research that can be undertaken, starting with secondary research and concluding with primary research.

4.4.1 Air transport statistics Internally, particularly for operational reasons, a considerable amount of traffic data is available to airports. This includes volume figures such as the number of aircraft movements, passengers and cargo tonnes. Each of these can be broken down into further detail, for instance, by flight destination or airline and by daily, weekly and monthly patterns. In addition to internal traffic statistics that are directly available to the airport, there are a number of global publications of data that can prove useful. ACI traffic reports provide passenger, cargo and movement data, for instance, its annual World Airport Traffic Report (WATR) and dataset cover over 2,500 airports in more than 180 countries. Airports can also subscribe to

MARKETING RESEARCH AND ROUTE DEVELOPMENT monthly reports such as the Monthly World Airport Traffic Report (MWATR) covering 1,200 airports and ACI Monthly International Passenger and Freight Traffic Report (MIPFTR) covering 900 airports. ACI also offers custom data reports that can include selected traffic indicators, measures of traffic seasonality, or a raw data set for a specific group of airports and time-series data. Additionally, ACI Europe and ACI North America produce detailed reports of airport traffic in their regions. ICAO reports monthly and annual traffic data at major international airports worldwide. Within Europe, data at major international airports worldwide reports European airport traffic. National government departments or agencies often publish airport traffic data, usually on their websites, for instance, in Australia (Bureau of Infrastructure and Transport Research Economics – BITRE), India (Directorate General of Civil Aviation – DGCA), Mexico (Directorate General of Civil Aeronautics – DGAC), the UK (CAA) and Germany (Federal Statistical Office – Destatis). However, with most of the aforementioned sources of secondary data, especially those of international databases, there tends to be some time lag before the data is available. While airport traffic volumes can be helpful for assessing the comparative performance of competing airports, for route development planning purposes, more detailed passenger traffic between city pairs is needed. ICAO has two publications related to this but again there is usually a time lag. There are also other sources for certain markets such as Eurostat in Europe and the Bureau of Transportation Statistics (BTS) in the US. A number of government bodies in other individual countries report such data, although the coverage, reliability and timeliness of statistics vary considerably. The major problem with all these sources is that they do not normally show the true O-D of a passenger. For each route, all will include passengers who are connecting at both ends but will not count passengers who have flown indirectly between the two points. In addition, they do not take into account leakage when passengers have travelled out of their way to another airport to reach the same destination. For some airports, the difference between route data and OD data may not be very large, but for others, it may be very significant. This problem is usually overcome by using airline booking data. There are two major sources of booking data: market information data tapes (MIDT), which come from the global distribution systems such as Sabre and Amadeus that are used by high street and online travel agents (OTAs), and billing and settlement plan (BSP) data from IATA and its accredited travel agents. The typical information gathered is passenger volume by origin or destination, travel routing and connection points, operating and ticketed airline and ticket class, and average air fare. For instance, on the Route Exchange website, Edinburgh Airport listed a number of possible routes where it identified (before the coronavirus pandemic) the indirect traffic and associated share of premium traffic from Sabre MIDT traffic including Boston (24,000 passengers, 15 per cent premium traffic), Hong Kong (29,000, 11 per cent), San Francisco (49,000, 14 per cent) and Shanghai (17,000, 9 per cent) (Routesonline, 2021). There are a number of shortcomings with the MIDT and BSP datasets. First, in terms of measuring travel to, from or via an airport, they do not include tickets sold through direct distribution channels such as airline call centres and airline internet sites, and so do not provide complete coverage, especially with the trend towards more direct selling (e.g. with the LCCs). In addition, they do not cover charter activity. Therefore, the total market size may have to be estimated by airports (e.g. by assessing total schedules with OAG data), although most data sources such as IATA’s AirportIS and Sabre’s AirVision Market Intelligence airport data already come with such estimates by using advanced algorithms and other databases available in order to capture 100 per cent of traffic around the world. In terms of traffic leakage, there may be

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MARKETING RESEARCH AND ROUTE DEVELOPMENT other limitations. Data on sales by travel agents in the catchment area may be used to estimate leakage by assuming that the place of sale represents the passenger’s residency, but this may not always be the case. Airports will also need supply-side data, as well as this demand-side data, related to flight capacity and frequency. Other information that airports may require is flight information. The two largest organisations offering such data are OAG and Cirium with their Schedules Analyzer and SRS Analyser products. Both have almost a global coverage of schedule data going back nearly 20 years. They can provide flight schedule data (such as seat capacity by aircraft and flight, cabin class by aircraft and flight, available seat kilometres (ASKs), aircraft manufacturer, aircraft class, aircraft type and configuration), flight status and updates, and post-flight analysis such as on-time performance (OTP) and much more. They offer numerous analytics related to this data and other sources. For instance, as well as offering the Schedules Analyzer, OAG also offers Traffic Analyzer (using MIDT data), Connection Analyzer (analysis using a QSI index) and Demand Analyzer (enabling forecasts to be undertaken). There are also flight tracking and route map options linked to this. The website Route Exchange has the interactive OAG Routemapper product linked to the profile of each airport which can help support route development proposals and demonstrate potential market opportunities. Such organisations handle huge volumes of data, for instance, Cirium manages more than 300 terabytes of data every day. This information can be most useful for airports, but the costs can be high and beyond the budget of a small airport. In this case, airline flight search data available on metasearch engines, such as Momondo, Skyscanner and Kayak, can be useful.

4.4.2 Survey and performance data In addition to air transport statistics, there are some secondary sources of survey data that airports may use for marketing research. While many airports design and undertake airport surveys themselves, there are also organisations that carry out such research. For instance, the UK CAA undertakes passenger surveys at airports annually, with interview numbers ranging from 3,000 to 70,000 depending on the size of the airport. The face-to-face interviews usually take place in the gate rooms, using a stratified sample (by carrier, route and quarter), which is then weighted to actual traffic levels. The major London airports of Heathrow, Gatwick, Stansted and Luton, as well as Manchester Airport, are surveyed every year; other airports are surveyed every three to five years. Table 4.2 lists questions used in the Heathrow survey. Questions cover passenger characteristics (e.g. trip length and purpose, group size, income levels and household composition). There are also questions that relate to the origin and destination of passengers and modes of surface transport used, which are particularly useful for route development purposes. It is possible for airports or other organisations to request additional questions to be asked. The advantage of surveying groups of airports (unlike surveys carried out by individual airports themselves) is that leakage to, and reverse leakage from, different airports can be considered. For instance, as well as using MIDT data as discussed previously to highlight positive features about new routes on websites such The Route Shop/Route Exchange, Edinburgh Airport also used the CAA surveys (e.g. stating that 35 per cent of all passengers between Orlando and the neighbouring Glasgow Airport came from the Edinburgh Airport catchment area). Service quality and the passenger experience is another area where secondary survey data is available. Although a number of airports survey this area themselves, the advantage of secondary information is that it allows for cross-airport comparisons and benchmarking. The major source of data is ACI’s ASQ data which is obtained from a quarterly survey undertaken at more than 300 airports covering more than half of the world’s annual passengers. Over 550,000

MARKETING RESEARCH AND ROUTE DEVELOPMENT Table 4.2 Questions used in the UK CAA passenger survey for London Heathrow Airport Have you arrived at any UK airport by air within the last 24 hours? At what airport did you arrive? Did you come to this airport just to change planes? Have you been through customs control at this airport? Which airport did you fy from? Which airline did you fy with? Did you start your air journey from (start airport)? At which airport did you start your air journey? Why did you choose to transfer through this airport? Which airport are you travelling to on the fight you are now boarding? Which airline are you fying with? What is your fight number? Are you fying there to change planes or are you completing your air journey at your frst stop? At which airport will you complete your air journey? Which airline will you use to fy from (your frst stop)? What nationality passport do you hold? In which country have you been living for most of the last 12 months? Where is your home in the UK/Northern Ireland - what is your home postcode? Where, in the UK, did you start your journey to catch this fight - what is the postcode? Was this a transit stop or did you have a reason for being in (ground origin)? What is the nearest railway station to this address you started your surface journey from today? Can you tell me in detail how you travelled from (ground origin) to this airport today? What was your main mode (in terms of distance) used? Was your vehicle an electric car? How long did your journey take from (ground origin)? How many people came into the terminal to see you off today? Including yourself, how many people are travelling in your immediate group? What is the chief purpose of your present trip? Which tour operator did you use? Which of these age groups do you come into? Is this your outward, return or a single journey? How long will you/have you been away? (Continued)

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MARKETING RESEARCH AND ROUTE DEVELOPMENT Table 4.2 Continued What type of ticket do you have? How much was paid for your fight, including ticket, tax and other charges excluding insurance? Ticket type single or return? How would you rate the value of the service received at this airport today for the money you paid for your ticket? Where did you book your ticket? On arrival at (fnal air destination) where is your main destination? Do you own a property (at your fnal destination)? When was this trip booked? How many times have you fown in the last 12 months - on any route? (excluding current trip) _ And on any route for leisure? (excluding current trip) How many times have you fown in the last 12 months on this route? (excluding current trip) _ And on this route for leisure? (excluding current trip) Why did you choose to fy from this airport today? Do you have a disability or impairment that makes accessing and/or using this airport diffcult? Did you ask for assistance? Were you satisfed with the assistance provided by this airport? Looking at this screen, to which of these ethnic groups do you consider you belong? How many people live in your household including yourself? How many are children under 16 years of age? Looking at the screen, which description best describes the chief income earner’s (CIE) current role? (leisure passenger) What is the main business of your frm or organisation? How many people work at your current location? Looking at the screen, which description best describes your current role? (business passenger) Can you indicate from this screen your total annual income before tax and other deductions? Can you indicate from this screen the total annual income of all people living in your household before tax and other deductions? How would you rate your overall experience at this airport today? What single improvement would you like to see at this airport? Based on your experience today how likely is it that you would recommend this airport to a friend or colleague? (Continued)

MARKETING RESEARCH AND ROUTE DEVELOPMENT Table 4.2 Continued Which other UK airport did you mainly consider as an alternative when booking this fight? Why did you choose not to fy from this airport? Based on your departure experience today and other recent departures please rank 1 to 3 where you think Heathrow should focus its main improvements Have you arrived at Heathrow Airport by air in the last 6 months? Based on your arrival experience please rank 1 to 3 where you think Heathrow should focus its main improvements Source: Courtesy of UK CAA

passengers are interviewed each year, with a requirement for each airport to have a minimum of 350 responses per quarter to ensure a representative sample, although in practice most airports survey considerably more passengers. This is a self-completion survey on print or tablet devices undertaken at the departure gate. Traditionally, it has included 34 service quality areas including check-in, passport/personal identification control, security, airport facilities, the airport environment and overall satisfaction. However, in 2020, a new section on health and safety was added to take account of the coronavirus pandemic. Questions cover the efficiency of safety and hygiene measures, the clarity of signage and instructions to inform passengers about safety and hygiene measures, and questions around the deployment of staff. There is also an arrival survey consisting of 37 service quality areas. These are the main surveys but there is also a more specialist one for regional airports and a ‘unique’ one-off survey option as well. Other optional features that ACI offers include passenger comments analysis, dissatisfied passenger probe, terminal analysis report, comprehensive insight report (e.g. to identify factors driving passenger satisfaction), passenger personas (Chapter 3) and journey mapping (Chapter 6). There is also the newer and more specialist ACI ASQ commercial survey, which focuses on three key areas: F&B, duty and tax-free, and general retail. Its 30 measures cover performance aspects (e.g. the number of passengers spending at outlets and the amount spent) and passenger characteristics and behaviour (e.g. who are the typical shoppers, how many shops did they visit, how much time did they spend there, whether purchases were planned or on impulse). In the retail area, another publication called the Airport Commercial Revenues Study, published by the Moodie Report, provides useful performance data such as sales figures and passenger penetration rates from a number of airports. This can be used, perhaps together with customer surveys, to assess the commercial aspects of the airport product. Complementing the ASQ programme, there is an online self-administered survey of around 73 questions undertaken among all employees at the airport (not just airport employees). This Employee Survey for Customer Experience (ECE) is designed to help the airports better understand the thoughts, actions and motivations of staff in the airport and how they interact with customers. In addition, there is the Skytrax online airport customer satisfaction survey, which covers over 550 airports and over 100 passenger nationalities, and which is used to produce their ‘best airport rankings’. The survey results are also utilised as one factor that Skytrax uses to categorise certain member airports with one- to five-star ratings. It covers just under 40 different airport service and product areas from check-in, arrivals, transfers, shopping, security and immigration through to departure at the gate. As discussed in Chapter 12, Skytrax has also introduced

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MARKETING RESEARCH AND ROUTE DEVELOPMENT new measures to assess health and safety performance in relation to the coronavirus pandemic. There may also be national as well as international sources covering passenger service quality. For instance, in North America, there is the J.D. Power North America Airport Satisfaction Study. In the UK, the consumer organisation Which? undertakes an annual survey of passenger satisfaction of UK airports and the CAA also includes a key question about the overall passenger experience in its airport passenger surveys. The assessment of online and social media content, for instance via sentiment analysis, is an increasingly important source of performance data for airports and has also attracted a fair amount of attention from researchers (e.g. see Bogicevic et al., 2013; Gitto and Mancuso, 2017; Halpern and Mwesiumo, 2018; Lee and Yu, 2018; Martin-Domingo et al., 2019). Skytrax publishes customer reviews and comments as do many other online and social media sites such as Google Reviews, TripAdvisor, Facebook and Twitter. This feedback is cheap and timely but as with all voluntary forms of feedback, it may not always be representative of the majority of passenger views. However, it can overcome some of the problems associated with focusing on individual service quality features (as with traditional service quality surveys) rather than considering the overall passenger experience. Another important area concerning service delivery, particularly for the airlines, is the level of delays and punctuality. This is typically considered with measures such as the average delay on departure or arrival and percentage of flights on time, for instance, OTP. Organisations such as OAG and Cirium provide such data, and in Europe, Eurocontrol produces more detailed assessments of the delay situation at different airports. National data is also often available such as from the BTS in the US and the CAA in the UK. Table 4.3 provides an interesting although unusual example of an airport ranking produced by AirHelp, the passenger compensation site. This looks at all three aspects of performance, namely OTP, service quality (based on an online survey of more than 40,000 passengers in more than 40 countries covering customer service, security waiting times and cleanliness) and food and shops (based on ratings from the online

Table 4.3 AirHelp airport scores (out of ten) for the top ten performing airports, 2019 OTP

Quality of service

Food and shops

Overall score

Hamad International Airport

8.3

8.5

8.5

8.39

Tokyo International Airport

8.4

8.4

8.4

8.39

Athens International Airport

8.1

9.0

8.1

8.38

Afonso Pena International Airport

8.4

8.4

8.3

8.37

Gdan´sk Lech Wałe˛sa Airport

8.2

8.7

8.5

8.35

Moscow Sheremetyevo International Airport

8.5

8.1

8.0

8.35

Singapore Changi Airport

7.8

9.2

8.7

8.27

Hyderabad Rajiv Gandhi International Airport

7.8

9.0

8.8

8.27

Tenerife North Airport

8.2

8.4

8.2

8.26

Viracopos/Campinas International Airport

8.4

8.2

7.9

8.25

Data source: AirHelp (2019)

MARKETING RESEARCH AND ROUTE DEVELOPMENT survey). These are combined with different weightings (OTP 60 per cent, service quality 20 per cent, food and shops 20 per cent) to produce an overall airport index. Another area of performance that airports may be interested in when devising their pricing policies is the comparative level of airport charges at different airports. This information is usually available on individual airport websites, or from IATA or ICAO sources, and there are specialist publications by organisations such as Jacobs, Airportcharges.com and SEO Amsterdam Economics that undertake benchmarking analysis in this area. However, the drawback with all these sources is that they primarily consider published fees and will not take account of any incentive arrangements agreed between airports and airlines, which as shown in Chapter 7, are widely used.

4.4.3 Other secondary information Externally, in addition to specific air transport data, airports need to collect and analyse other information that will help them understand the trends and characteristics of passengers and cargo flows, especially for market assessment purposes. Tourism data from national statistics or global organisations such as the United Nations World Tourism Organisation (UNWTO) and the Pacific Asia Travel Association (PATA) can give an indication of the volume of tourists and current trends and will be relevant if most tourists arrive by air. A limitation with such sources is that they often do not differentiate by mode of transport. They also tend to focus on inbound tourism, so it may not be possible to evaluate outbound flows. The UNWTO, as with air transport organisations such as IATA, ICAO, ACI, Boeing and Airbus, produces demand forecasts that may be useful during the route development process when future traffic patterns are being predicted. Airports may need to access general economic, social and demographic data to assess the key drivers of demand in the catchment area such as population trends, the main employment sectors, possible links with the target route destination, and main exports and imports. Various organisations such as the Organisation for Economic Co-operation and Development (OECD), International Monetary Fund (IMF), Eurostat and the US Census Bureau produce datasets that may be relevant. Local and regional stakeholders such as local governments, chambers of commerce, tourist boards, and events and hospitality associations, may have some useful datasets. Figure 4.5 provides a summary of the secondary sources of information that are commonly used by airports.

4.5 Primary research 4.5.1 Passengers The previous section has discussed the sources of secondary information available to airports as they undertake their marketing research. As explained, a considerable amount of data is routinely collected at the airport or is available from other organisations. However, in some cases, this information will not be sufficient to address the specific research issue or problem that has been identified. In such a situation, the airport will need to carry out primary research. Surveys have traditionally been a popular primary research method, which can be undertaken among various airport stakeholders including passengers, employees, airlines, tenants, local residents, local businesses and travel companies and air cargo businesses (Biggs et al., 2010). The overall purpose is usually to gather more information about the stakeholder under consideration (on both aeronautical and commercial sides of the airport business) and to assess levels of satisfaction with the airport experience. Airport surveys may also cover other marketing

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Airport and route traffic data Economic data

MIDT and BSP data

Frequency and capacity data

Tourism data Secondary sources

Passenger surveys

OTP data

Social media monitoring

Service quality surveys

Figure 4.5 Key sources of secondary information Source: Compiled by the authors

areas such as the effectiveness of an airport promotional campaign or the perceived strength of brand used at the airport. Clearly, one of the key advantages of an airport undertaking its own survey in any area is that it can be focused on issues that are specific to the airport in question. Once the purpose of the survey has been established, the method of either interviewercompleted questionnaires (e.g. by telephone or face to face) or self-completed questionnaires (e.g. online via email, a website or social media, using a laptop or tablet device, or by paper) has to be selected. Choices have to be made regarding the survey population and sample, the sampling strategy and plan, and the detailed design and wording of the questionnaire. Decisions have to be taken concerning where and when the survey will take place and for how long, as well as how to pre-test and pilot the chosen method. In undertaking survey work, especially with passengers, choices have to be made as to whether the surveys are performed in-house or with an external agency. There are a number of factors that make face-to-face surveying passengers in the terminal challenging, such as their international nature, the time constraints they face, the 24-hour day of many airports, and the security clearances all interviewers need to obtain if they are working airside. So, for these reasons, some airports will choose to have their own team of interviewers. As regards the choice between interview-completed or self-completed questionnaires, the airport is faced with balancing cost and accuracy requirements and taking into account a number

MARKETING RESEARCH AND ROUTE DEVELOPMENT of other practical considerations. Personal interaction may increase response rates, particularly as further explanations to questions can be given, but will tend to increase costs. Face-to-face surveys can also be subject to interviewer bias and provide no anonymity to the respondent. By contrast, self-completion methods usually produce more responses for a given budget (as they can use a larger sample), but the questions will have to be simple, with no probing possible, and there will be no control over questionnaire completion. The international nature of airports also means that consideration needs to be given to whether the questionnaire should be translated into other languages or whether interviewees need to speak other languages. Electronic data collection on devices such as laptops and tablets is becoming the norm at many airports. The survey location is very important. A popular area is the gate room, where passengers are more relaxed, having passed through all the essential processes and made all their retail purchases, and so in most cases have nothing else to do but to wait for their flight. However, this may introduce bias into the results as the responses will be limited to passengers travelling on certain flights. An alternative approach is to intercept passengers just after they pass through security and enter the airside area, but at this stage, passengers may be too anxious to get to their gates or too keen to visit the shops or F&B outlets. This location may also fail to pick up transfer passengers. In some cases, it may be useful to obtain the views of arriving passengers, but this is more difficult since most are reluctant at this time to participate in a survey as they will be keen to return home or get to their final destination. A possible interview point is in the baggage reclaim area if they have to wait for their baggage, although this would then discount passengers travelling without baggage – that have been found to display different characteristics and travel preferences to those travelling with baggage (e.g. see Halpern et al., 2021a). If any interviewing is done in the secure airside part of the terminal, thorough security checks will clearly need to be undertaken for all interviewers, which will complicate the process and may lengthen the time period needed for the research. If surveys are undertaken in the landside area, they can provide information not only on passengers but also on visitors and meeters and greeters. This can be particularly useful when surface access aspects of the airport product are being considered, or when information regarding non-passenger usage of commercial facilities is needed. Sometimes a special survey of just these non-passenger groups may be undertaken. The timing of the survey needs to be carefully chosen as the volume of passengers and their characteristics will vary by time of day, day of week and month of year. Therefore, depending on the purpose of the survey, it may need to be undertaken at a number of different times or designed as a continuous survey to be undertaken on an ongoing basis throughout the year. The survey may be undertaken on an ad-hoc basis or it may become a regular activity undertaken every year, as is the situation at many large airports. There is a considerable variation in sample sizes used in airport surveys. For instance, at Los Angeles International Airport, a passenger survey is undertaken around every four years to obtain data about passenger characteristics and demographics. The 2019 survey used a sample of around 15,000 passengers with around 20 interviewers and supervisors (the majority being bilingual and with prior survey experience at the airport) with electronic tablets in the postsecurity gate area. Likewise, in 2019, a similar survey was undertaken at the three Washington airports (Baltimore, Reagan National and Dulles) covering around 24,000 passengers with self-administered questionnaires in the gate area. London Heathrow Airport has a Quality of Service Monitor (QSM), in addition to the ACI ASQ, which involves around 30,000–40,000 surveys undertaken by an external specialist company with tablets in the departure gate for

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MARKETING RESEARCH AND ROUTE DEVELOPMENT departing passengers and in the arrivals concourse for arriving passengers. Montréal-Trudeau Airport also uses an internal service quality survey undertaken using a tablet with a sample of about 10,000 passengers to complement the ACI ASQ. Another source of data increasingly used by airports are voting kiosks (also known as ‘happy or not’ emoji machines or traffic lights). These are typically located at key areas to capture realtime feedback on the passenger’s experience at critical places in the airport such as security, customs, restaurants and toilets. An advantage of this type of data collection, compared to using surveys, is that it provides immediate feedback, giving the airport an opportunity to react to issues very quickly. Some airports also offer comments boxes (physical boxes located at the airport and/or online options such as via the airport website or social media) where passengers can provide feedback to the airport. An advantage of this type of feedback mechanism is that if passengers are dissatisfied it allows them to express their view immediately, and by doing this, it can help to reduce their level of frustration (voting kiosks can also have a similar effect). It can provide valuable information concerning service quality and the passenger experience, along with suggestions for improvements. If comments are favourable, they can potentially be used for engagement and/or public relations initiatives (Chapter 9). Airports can also record customer comments received by post, email or by telephone. The airport, however, has very little control over this type of feedback. The comments will not come from a representative sample of travellers at airports and will usually reflect only extreme views since users tend not to be motivated to comment unless they feel very strongly about their experience at the airport. Hence, while such feedback may be able to identify a weakness that can be rectified swiftly, it is not scientific enough to be used for a more systematic approach to product improvement. Surveys are clearly better here as they can be much more representative, but a key drawback can be their higher cost. Mystery shoppers are also an option that some airports use, particularly in relation to assessing ease of flow through essential processes and the quality of commercial facilities. Point-ofsale data from commercial facilities, which contains flight information obtained from boarding passes shown when purchases are made in airside areas, can also be used by airports, for instance, to investigate the buying behaviour of passengers by type of flight, therefore, enabling them to better match their commercial facilities to different groups of passengers. Digitalisation is providing further opportunities for airports to conduct marketing research and to respond to information that is gathered in (near) real-time using digital operational and/or digital marketing analytics. Regarding digital operational analytics, airports can install a range of sensors including motion sensors (e.g. for video surveillance), optical sensors (e.g. for biometric screening), pressure sensors (e.g. for smart energy monitoring) and proximity sensors (e.g. for tracking passenger movements via Bluetooth, GPS or wi-fi) (Halpern et al., 2021b, 2021c). Data that is collected from sensors can then be used for a range of purposes. Most of them are operational, for instance, to reduce bottlenecks through improved flow and throughput management practices. However, the systematic collection of such data (e.g. on passenger flows and facility usage) can also be used to take advantage of marketing opportunities such as sending personalised and location-based offers or notifications to passengers, via proximity sensors, as they move through the airport. Proximity marketing is discussed in more detail in Chapter 10. Digital marketing analytics identify and respond to passenger interactions online, for instance, via digital channels such as the airport website, social media, email or a mobile application, as well as airport links on other sites and search engines. Unlike digital operational analytics that tend to be based on interactions at the airport, digital marketing analytics extend to all

MARKETING RESEARCH AND ROUTE DEVELOPMENT parts of the passenger journey (including pre- and post-trip). The ways in which such channels can be used to systematically collect and respond to data are discussed in Chapter 10. In addition, some airports have comprehensive CRM systems that help them to manage interactions with their customers (Chapter 8), and these will typically contain vast amounts of data that can also be used. It is clear that large electronic datasets have transformed the ability of airports to conduct marketing research. However, large volumes of data can be difficult to manage and one of the greatest challenges facing airports is to ensure that they have developed the appropriate analytics to ensure that data is secure, privacy compliant and used in a meaningful way. It is very clear that now, more than ever before, airports have an opportunity of using many different methods and channels to obtain a comprehensive insight into passenger characteristics and behaviour, and the quality of their airport experience. The digitisation of measurement has made it easier to deploy many more tools than before, often at a very reasonable cost, and to shed light on some issues that previously could not be explored. Using multiple tools can combine areas of different focus (e.g. quantitative survey versus qualitative interview, mystery shopper subjective assessment of bottlenecks versus queue time data). It can be tempting to rely on the results coming from Big Data analytics but the human insights from passenger research and observation can be just as useful. It is also very important to choose the right metrics when using the data. ACI Europe (2018) has identified two key indexes or metrics that have been used by some airports with the use of these multiple data sources. One is the CSI (Customer Satisfaction Index) which considers the passenger’s overall satisfaction, the gap compared with the passenger’s expectations and the gap compared to their ideal airport. The second metric is the Net Promoter Score (NPS) that measures if a passenger would recommend an airport to friends and relatives. This method is based on the idea that when somebody is satisfied, they will tend to suggest the same experience to others, allowing passenger loyalty to be measured. Montréal-Trudeau Airport uses two surveys: one internal that has roughly 150 questions and the ASQ survey with over 30 questions. The airport uses mystery shoppers that are recruited through a network of local travel agencies to evaluate the customer service of airport service providers such as retail stores and restaurants. In addition, it has voting booths, comments boxes and monitors comments on social media. The airport has identified three overall metrics produced from the information gathered. The first relates to satisfaction with the passenger experience and is a seven-point Customer Satisfaction Score (CSAT). It also has a ten-point NPS which asks passengers how likely they would be to recommend using the airport or airport services to friends and relatives. The main purpose of the NPS is to measure loyalty and attachment to a brand, product or service. At Montréal-Trudeau Airport, NPS is used for areas where it perceives that there is competition with the services provided, for instance, for connecting travel, for car parking, and for mystery shoppers and their retail experience. The airport is also planning to implement a five-point Customer Effort Score (CES) which measures the perceived level of effort the passenger has to go through in order to either execute the whole passenger process or a specific airport sub-process such as using shops or F&B outlets. This aims to measure the functional aspects of the experience (rather than the ‘delight’ aspects) recognising that if the passenger experience is not effortless, full satisfaction cannot be achieved (Dussart, 2018). Munich Airport also combined the ACI ASQ scores with other internal measurements to define a key metric called the Passenger Experience Index (PEI). For instance, it used shadowing which is an ethnographical qualitative research approach used to understand passenger emotions and to observe their passenger journey. As well as considering satisfaction and the passenger

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MARKETING RESEARCH AND ROUTE DEVELOPMENT journey, it also takes into account other factors such as the NPS but also brand perception and public image (Hinterholzer and Garcia-Alonso, 2018). London Heathrow Airport is another airport that has used a range of data sources to inform research into the passenger experience. It used a mixture of digital ethnography tools (e.g. capturing live passenger journey experiences) combined with direct observation of patterns of behaviour. It integrated this with feedback from the QSM and ACI ASQ surveys, focus groups/workshops involving the airport, airlines and other stakeholders, and social media sentiment analysis. This was used to inform knowledge about the door-to-door passenger journey (including surface transport) through developing 24 behaviour personas and 70 multidimensional journey maps (Heathrow Airport Limited, 2018).

4.5.2 Other stakeholders In addition to, or as an alternative to, participating in the ACI ASQ employee survey, a number of airports (e.g. Copenhagen, Frankfurt and Munich) undertake their own surveys of employees working at the airport. While the purpose for such surveys is sometimes beyond the scope of direct marketing activities (for instance, they are often used to measure employment instead – to help airports estimate their economic impact), employees nevertheless also need to be considered for marketing research for two main reasons. First, employees contribute to the airport product and so knowledge about their characteristics and attitudes to the workplace is important for ensuring that an attractive product is offered to airport customers. Second, employees act as customers themselves for certain commercial facilities such as F&B and car parking, so an understanding of their behaviour and preferences related to these can be important. As with passengers, airports may undertake continuous or ad-hoc surveys of employees, although the continuous surveys tend to be less regular, partly because of resources and cost implications, and partly since the findings are likely to change less rapidly over time. Unlike with passengers, because the identity of employees is known, implementation of the surveys is easier. Issues covered with all types of employee surveys can range from assessing their general understanding of and satisfaction with their specific role and relationship with management, to evaluating their use of and needs for commercial facilities and ground transport modes. Airline, concessionaire and tenant surveys may also be undertaken to identify the needs of the respective customer groups and to gauge their satisfaction with the airport. They may also be undertaken to provide insight into the economic impacts of the airport. However, at most airports there is usually a regular dialogue between airlines, concessionaires, tenants and other service providers, and so additional information through more formal surveys may not be necessary. In addition, the smaller number of organisations involved with all but the largest airports, compared to passenger or employee groups, means that airports may be able to survey all or most of the target population rather than having to select a representative sample. Another group of stakeholders that airports frequently want to obtain information from is local residents that may or may not use the airport. The target population here would be the airport’s catchment area. Issues covered might be how they view the airport and any planned developments in the future, but also the extent to which they use the airport and what factors influence whether or not they would use the airport in the future. As with local residents, surveys of local businesses can provide valuable information about their support for the airport and factors that influence their decisions. The advantage of surveying local businesses, compared with local residents, is that contact details (e.g. email addresses) are more readily available. Also, one organisation may represent many individuals who have the potential to become customers if the needs of the organisation are met, so their opinions can be of great value to airports. Travel

MARKETING RESEARCH AND ROUTE DEVELOPMENT agents and corporate travel businesses are also useful groups to contact and survey, along with suppliers of tourist products and information such as hotels, attractions and tourist boards. Often, airport surveys will target current and potential customers at the same time. Therefore, falling somewhere between being a passenger survey and a stakeholder survey. This is common when surveys are used to find out which destinations respondents would like to see served by the airport. These surveys are often delivered via the airport website, social media or an airport e-newsletter (e.g. to subscribers of the airport e-newsletter and/or members of the airport loyalty programme and CRM database) meaning that they extend to the airport’s wider following and may therefore be completed by respondents that have no intention of using the airport anyway. Airports should make sure they control for this in the design of their survey, for instance, with questions on the previous and expected future use of the airport. Punta Gorda Airport, Belfast City Airport and Edinburgh Airport provide interesting examples of airports that have recently used surveys to collect data from current and potential customers. The Punta Gorda Airport survey, available for completion via the airport website in 2019, wanted to find out where within Florida respondents would fly to from the airport at USD 200 each way, as well as how often, why, with how many people, which days and times of the week, and what times of the year. Response options included Destin, Fort Lauderdale, Jacksonville, Key West, Palm Beach, Tallahassee. A second part of the survey asked similar questions for major US hub airports (Atlanta, Charlotte, Chicago, Dallas, Denver, Newark, Washington) that passengers could potentially travel via to reach international destinations. The Belfast City Airport survey was created using SurveyMonkey and available for completion via the airport website in 2017. It targeted local corporate and business customers (Figure 4.6). Similarly, in 2021 Edinburgh Airport conducted a business travel survey created using SurveyMonkey and available for completion via the airport website. Questions asked participants: how often they used the airport for business travel; where they tend to fly domestically and internationally; what they prefer to do if a direct flight for their chosen destination is not available from the airport; if travelling long haul, what major airports do they use to connect to onward destinations; what direct business routes they would like to see offered from the airport; how they arrange their business travel (at work or via intermediaries); factors influencing the choice of flights when planning a business trip; facilities used at the airport when taking business trips; which factors are most important to them when using the airport for business trips; how their business travel habits have changed over the last two years; factors taken into consideration when using the train versus plane for business travel within the UK; and other comments or suggestions about the airport. As another example, Bristol Airport conducted a travel survey, via e-newsletter to contacts in the airport’s CRM database, in March 2021 (Figure 4.7). This was at a time when the UK was emerging from lockdown with what appeared to be a successful implementation of its vaccine programme and was therefore hoping to reduce restrictions on foreign travel, at least to some destinations, later in the year. The survey therefore aimed to learn more about people’s future travel plans and what would matter most to them when booking their next trip from the airport. Questions focused on the number of flights respondents usually took from the airport (prior to the coronavirus pandemic); when they expect to take their next flight from the airport; how many flights they are likely to take in the next 12 months from the airport; what they would like to do for their next trip (example options related to VFR, holiday/leisure, or business travel); what would make them more likely to book their next trip (example options related to flexible booking arrangements – allowing them to make changes and/or to cancel if needed, clearer rules on travel restrictions, waiting until they have received the vaccine, or the availability of attractive prices and/or special offers). Other airports conducting online travel

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Business Passenger Survey

Belfast City Airport is committed to providing the best possible experience for our corporate and business customers. As such, we are seeking your input and feedback on how we can provide a stronger airport product and route network to support the minutes of your time to complete this survey. All responses received will be entered into a draw to win a

forward on to the

1. Please specify your business sector.

2. How many employees does your business have in locations in Northern Ireland? 1 to 20 21 to 50 51 to 100 101 to 250 251 to 500 501 to 1000 + 1000

Figure 4.6 Belfast City Airport’s business passenger survey Source: Courtesy of Belfast City Airport

MARKETING RESEARCH AND ROUTE DEVELOPMENT

3. How do you currently book travel in your oganisation? Business travel agent (please state below) In-house travel booker/team or implant Self Personal assistant/secretary/administrator If business travel agent, please state who you use

4. Please advise contact details for the person responsible for booking your travel. Name Email address

5. Which airport does your business use most frequently for business travel?

6. If all airports offered the same routes and schedules which would be your preferred airport?

7. Thinking about your overall business operations in Northern Ireland, how many

Figure 4.6 Continued

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8. Please select which destinations people in your the last year. Aberdeen Alicante Amsterdam Birmingham Cardiff East Midlands Edinburgh Exeter Faro Glasgow Inverness Isle of Man Leeds/Bradford Liverpool London City London Heathrow Majorca Malaga Manchester Newcastle Newquay Reykjavik Southampton Other (please specify)

9. How often does your business use Belfast City airport? less than once a month

Figure 4.6 Continued

MARKETING RESEARCH AND ROUTE DEVELOPMENT 2 - 3 times a month weekly more than once a week

*

10.

employees have by

any airport, (please enter in order of highest number

1 2 3 4 5

11. How important to your business are the following airport facilities? Please rank in order of importance, where '1' is most important and '7' is least important. Airport business lounge

Retail outlets

Car parking

Fast track security

Airport loyalty programme

Food and drink outlets

Figure 4.6 Continued

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12. Is your business a member of business-wide airline loyalty schemes, such as British Airways On Business or KLM Blue Biz and if so, how important are these to your travel decisions? No, we are not members and not important to our travel decisions No, we are not members because we are not aware of these schemes Yes, we are members but they are not important in our travel making decision Yes, we are members and they are important in our travel making decision Other (please specify)

13. What new destinations would your business like to see served from Belfast City Airport?

14. What are the key factors you consider when booking importance, where '1' is most important and '7' is least important.

Departure airport

Cost of ancillaries such as parking

Figure 4.6 Continued

MARKETING RESEARCH AND ROUTE DEVELOPMENT

15. What improvements would you like to see at Belfast City Airport?

16. Please enter any further information you would like to share about your business travel requirements or patterns

17. If you would like to be entered into the prize draw to win 2017, please provide your name and email address below. Name Email address

18. If someone forwarded you this email and they want to be included in the prize draw, please give us their details too! Name Email address

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100%

Powered by

See how easy it is to create a survey.

Figure 4.6 Continued

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Figure 4.7 Bristol Airport’s travel survey email invitation Source: Courtesy of Bristol Airport

surveys related to the coronavirus pandemic in 2020/2021 include Incheon International Airport, Ireland West Airport, Metropolitan Washington Airports Authority, Minneapolis–St. Paul International Airport, San Luis Obispo County Regional Airport, Tampa International Airport, and Wichita Dwight D. Eisenhower National Airport. Some of the findings from those surveys are mentioned in Chapter 12. Finally, there are cargo surveys. A different approach to passengers has to be adopted here as cargo itself cannot be surveyed and so the focus has to be entirely on the organisations involved

MARKETING RESEARCH AND ROUTE DEVELOPMENT with handling the cargo such as the airlines, integrators and freight forwarders. In some cases, if relevant, airline surveys can cover both passenger and cargo markets. However, in general, the amount of data related to cargo operations is much more limited and less available to airports. Information in this area tends to be more commercially sensitive and more complicated because of the unidirectional nature of much of the traffic and because cargo capacity is often provided as a secondary by-product of passenger capacity. Frankfurt Airport has an annual cargo customer barometer satisfaction survey that in 2018 covered 34 airlines, 52 freight forwarders and 11 cargo handlers. There are therefore a number of different stakeholder surveys that airports may use for marketing research. These may differ quite considerably in the specific methodology used, the survey frequency and the pressures exerted on the marketing research budget and resources. With many of the stakeholders mentioned above it may be useful to undertake in-depth interviews, focus groups or panel discussions, which will give the airport a chance to discuss certain issues in more depth than could be achieved with a survey. In this case, more qualitative information will be gathered, which will typically investigate opinions and attitudes rather than gathering data about stakeholder characteristics. With group discussions, the selection of participants will be very important, and ideally, a trained facilitator should lead the discussion to maximise the effectiveness of this approach. Figure 4.8 provides a summary of the primary sources of information that are commonly used by airports.

Passenger surveys Digital marketing analytics and CRM

Voting kiosks

Digital operational analytics

Comments boxes Primary sources

Interviews/ focus groups/ panels

Mystery shoppers

Stakeholder surveys

Figure 4.8 Key sources of primary information Source: Compiled by the authors

Point of sale data

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References ACI Europe (Airports Council International Europe). (2018). Guidelines for passenger services at European airports, 2nd ed. Brussels: ACI Europe. Airhelp. (2019). AirHelp score 2019: global airport ranking. [online] Airhelp. Available at: https:// www.airhelp.com/en-gb/airhelp-score/airport-ranking/#about-score [Accessed 15 April 2021]. ASM. (2016a). The fundamentals of route development. Manchester: ASM. ASM. (2016b). Route traffic forecasting data, tools and techniques. [online] ASM. Available at: https://www.asm-global.com/wp-content/uploads/2016/06/3.-Miami-Route-TrafficForecasting.pdf [Accessed 15 April 2021]. Belobaba, P., Odoni, A. R. and Barnhart, C. (eds). (2016). The global airline industry, 2nd ed. Chichester: John Wiley and Sons. Biggs, D. C., Bol, M. A., Baker, J., Gosling, G. D., Franz, J. D. and Cripwell, J. P. (2010). ACRP report 26: guidebook for conducting airport user surveys. Washington D. C: Transportation Research Board. Bilotkach, V. and Bush, H. (2020). Airport competition from airports’ perspective: evidence from a survey of European airports. Competition and Regulation in Network Industries, 21(3), 275–296. Bogicevic, V., Yang, W., Bilgihan, A. and Bujisic, M. (2013). Airport service quality drivers of passenger satisfaction. Tourism Review, 68(4), 3–18. Boonekamp, T. (2020). Modeling catchment areas. Course on Market Research for Air Transport, University of Westminster, London, October 2020. Charnock, W. (2020). Relationship reset. Routes Magazine, 8(November), 12–18. Dibb, S., Simkin, L., Pride, W. and Ferrell, O. (2019). Marketing: concepts and strategies, 8th ed. Andover: Cengage. Dussart, A. (2018). Making sense of multiple measurements of passenger satisfaction. Journal of Airport Management, 12(1), 36–44. EC (European Commission). (2014). Communication from the Commission: guidelines on state aid to airports and airlines, Official Journal C99, 4 April. Brussels: EC. Gitto, S. and Mancuso, P. (2017). Improving airport services using sentiment analysis of the websites. Tourism Management Perspectives, 22(April), 132–136. Halpern, N. and Graham, A. (2015). Airport route development: a survey of current practice. Tourism Management, 46, 213–221. Halpern, N. and Graham, A. (2016). Factors affecting airport route development activity and performance. Journal of Air Transport Management, 56, 69–78. Halpern, N. and Mwesiumo, D. (2018). Effect of individual service components on overall airport experience. 22nd Air Transport Research Society World Conference, Seoul, South Korea, July 2018. Halpern, N., Mwesiumo, D., Suau-Sanchez, P., Budd, T. and Bråthen, S. (2021a). Segmentation of passenger preferences for using digital technologies at airports. Journal of Air Transport Management, 91(March), 102005, 1–13. Halpern, N., Budd, T., Suau-Sanchez, P., Bråthen, S. and Mwesiumo, D. (2021b). Conceptualising airport digital maturity and dimensions of technological and organisational transformation. Journal of Airport Management, 15(2), 182–203. Halpern, N., Mwesiumo, D., Suau-Sanchez, P., Budd, T. and Bråthen, S. (2021c). Ready for digital transformation? The effect of organisational readiness, innovation, airport size and ownership on digital change at airports. Journal of Air Transport Management, 90(January), 101949, 1–11. Heathrow Airport Limited. (2018). Heathrow strategic brief. Hounslow: Heathrow Airport Limited. Hinterholzer, T. and Garcia-Alonso, A. (2018). Munich airport’s passenger experience management framework: key success factors. Journal of Airport Management, 12(3), 272–282. Kotler, P., Armstrong, G., Harris, L. and He, H. (2020). Principles of marketing, 8th ed. Harlow: Pearson Education Limited. Lee, K. and Yu, C. (2018). Assessment of airport service quality: A complementary approach to measure perceived service quality based on Google reviews. Journal of Air Transport Management, 71(August), 28–44.

MARKETING RESEARCH AND ROUTE DEVELOPMENT Leigh, R. (2015). Key tips for airport route development. [online] RDC Aviation. Available at: https://rdcaviation.com/News/Key-tips-for-airport-route-development [Accessed 15 April 2021]. Martin, S. C. (2008). ACRP report 18: passenger air service development techniques. Washington D. C: Transportation Research Board. Martin-Domingo, L., Martín, J. C. and Mandsberg, G. (2019). Social media as a resource for sentiment analysis of Airport Service Quality (ASQ). Journal of Air Transport Management, 78(July), 106–115. Pride, W. and Ferrell, O. (2020). Marketing, 20th ed. Boston, MA: Cengage. Routesonline. (2021). Edinburgh Airport: airline opportunities. [online] Routesonline. Available at: https://www.routesonline.com/airports/5601/edinburgh-airport/opportunities/ #mainContent [Accessed 15 April 2021]. SEO Amsterdam Economics. (2017). Market stimulation of new airline routes. Amsterdam: SEO Amsterdam Economics. SEO Amsterdam Economics. (2021). Airport catchment area database. [online] SEO Amsterdam Economics. Available at: https://www.seo.nl/en/expertises/aviation/ [Accessed 15 April 2021]. STRAIR. (2005). Air service development for regional agencies: strategy, best practice and results. Brussels: STRAIR. UK CAA (United Kingdom Civil Aviation Authority). (2011). Empirical methods for assessing geographic markets, in particular competitive constraints between neighbouring airports. London: UK CAA.

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Airport strategic marketing planning This chapter considers airport strategic marketing planning. It introduces the strategic marketing planning process including its role and importance for airports. The chapter also examines individual elements of the process: corporate intentions, situation analysis, marketing decisions and implementation.

5.1 Introduction to the strategic marketing planning process Marketing strategy is about ensuring that organisational capabilities are matched to the current and future marketing environment (Hooley et al., 2020), whereas marketing planning is the process through which companies identify what they want to achieve through marketing and how they plan to achieve it (McDonald, 2008; McDonald and Wilson, 2011). Strategic marketing planning is therefore a systematic process that can be used by airports to anticipate the best ways in which to exploit their current and future marketing environment. The process is illustrated in Figure 5.1. It typically involves a description of corporate intentions that are represented by the vision, values, mission and objectives of the airport. Corporate intentions are not a specific marketing function, but it is important to include them in the planning process because they help to guide marketing decisions. A situation analysis investigates the internal strengths and weaknesses of the airport and any external opportunities and threats. This also guides marketing decisions because it encourages the airport to assess both the environment in which it operates and how it should position itself in that environment for the future. Marketing decisions are a key part of the process. They determine the marketing objectives for the airport and the strategy and specific programmes to be used to achieve the objectives. The final part of the process involves the implementation of any marketing programmes including the allocation of resources, and any mechanisms for control and evaluation. The findings of any control and evaluation should then feed into future cycles of the process.

DOI: 10.4324/9781003039563-5

STRATEGIC MARKETING PLANNING

Situation analysis • Vision • Values • Mission • Objectives Corporate intentions

• Marketing audit • SWOT analysis

Implementation • Objectives • Strategies • Programmes

• Resources • Control • Evaluation

Marketing decisions

Figure 5.1 Main stages in the strategic marketing planning process Source: Compiled by the authors

Figure 5.1 gives the impression that strategic marketing planning is a simple process, and conceptually, that might be the case. In practice, it is difficult to implement because it seeks to combine different and often complex elements of marketing into a single plan. In addition, the process is dependent on being incorporated into an institutionalised management system (Hooley et al., 2020). Airports may therefore find that the process is affected by their style of corporate governance, the culture and organisational structure of the airport, and the size and nature of the airport’s activities. Strategic marketing planning is also likely to be one of a number of planning functions at an airport. In addition to a marketing plan, airports produce plans for business, operations, and planning and development. These are all linked in one way or another and may come under the umbrella of an overall airport strategic plan that has subsequent implications for resource allocation including finance and staff training and development (National Academies of Sciences, Engineering, and Medicine, 2009; Ashford et al., 2011). Indeed, overall strategic planning sets the stage for the rest of the planning within an organisation (Armstrong et al., 2019; Kotler and Armstrong, 2021). Strategic marketing planning is important for all airports, regardless of their role or individual objectives and resources for marketing. It is particularly important given the challenging business environment in which airports find themselves (Chapter 2). This chapter provides a general description of the individual elements of the strategic marketing planning process in Figure 5.1. However, it is important to note that plans themselves must be unique to airports, and the extent to which plans vary will depend largely on the marketing objectives of each airport. At larger airports, marketing objectives are likely to target many different market segments and affect a range of strategic business units. It is therefore important to develop a plan that reduces the complexities that come with being a large organisation, exploits the strengths of the airport and produces marketing decisions that are relevant to any opportunities that exist. At smaller airports, marketing objectives are likely to target more narrowly defined market segments and affect fewer strategic business units. In this instance, developing a marketing plan can help smaller airports to find a niche and deliver key messages to the community and customers. For many airports, the marketing plan will form the basis for securing funding for marketing and will need to be approved by a board of directors or a relevant authority.

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5.2 Airport corporate intentions Corporate intentions underpin the strategic marketing planning process because they describe the desired priorities and purpose of the airport, and how the airport is positioned in its main markets. They are typically presented as vision, value and mission statements that say something about what the airport hopes to achieve. A vision statement says something about the future scenario the airport wants to achieve for its stakeholders, while a value statement represents what the airport wants its stakeholders to say about the way it conducts itself. A mission statement puts the vision into practice and says something about the purpose of the airport and what it ultimately wants to achieve. Corporate objectives can then be used to show how the airport intends to achieve its mission. Objectives may focus on different aspects of performance such as finance, market share, service levels or safety. They should be listed in order of priority because this will subsequently help to guide the focus of the airport, including any marketing objectives. The corporate intentions of a selection of airports are provided as examples in Tables 5.1–5.3. Although not directly relevant to the strategic marketing planning process, corporate intentions are important because marketing strategy needs to be compatible with the overall intentions of the airport and support the strategies of other departments at the airport. According to Brassington and Pettitt (2012), corporate strategy guides, directs, controls and coordinates marketing strategy, while marketing strategy informs, achieves and operationalises corporate strategy. This emphasises the need for some degree of consistency between them.

Table 5.1 Adelaide Airport’s corporate intentions Intention

Description

Vision

To be a top-tier airport business in the Asia Pacifc, recognised for delivering exceptional outcomes to our customers, partners, shareholders and community.

Values

A: be accountable and authentic I: conduct ourselves with integrity R: be responsive, effcient and respectful P: take pride in our achievements O: be open and friendly and encourage diversity R: build relationships based on trust T: foster great teams

Mission

To realise our vision, we will consistently nurture strong relationships with our stakeholders; offer a great customer experience; develop the expertise of our talented team; deliver high-quality facilities and services that are regarded as best in class, safe, secure and sustainable; strive for innovative solutions and continuous improvement; and partner responsibly with our community

Objectives

Grow our business; deliver an exceptional experience; shape our business to perform; and nurture our great people and relationships

Source: Adapted from Adelaide Airport (2020)

STRATEGIC MARKETING PLANNING Table 5.2 Edmonton International Airport’s corporate intentions Intention

Description

Vision

More fights to more places

Values

Safety and security frst: ensuring the safety and security of customers, employees, facilities and environment is a primary concern in all aspects of doing business Own the outcome: be motivated by customer expectations in providing quality facilities and services in a customer-sensitive and service-driven manner Doing the right things right: be accountable for all our actions, including fnancial management, and act honestly and respectfully in business relations, use of our resources, treatment of our customers and each other, and in the general conduct of our business Invested in our talent: people are our most important resource; we work together to foster an open and cooperative environment that encourages teamwork, communication and mutual respect Dedicated to sustainability: committed to responsibly managing our assets to advance our region’s environmental stewardship, social wellbeing and economic prosperity

Mission

Driving our region’s economic prosperity through aviation and commercial development

Objectives

Improve fnancial sustainability; enhance passenger experience; improve social, environmental and economic impact; enhance airline productivity; improve employee engagement, performance and wellbeing

Source: Adapted from Edmonton International Airport (2021)

Table 5.3 Rijeka Airport’s corporate intentions Intention

Description

Vision

To be a competitive international airport with full-year regular and charter traffc that meets all modern air transport requirements; an active, reliable and secure participant in the region’s tourist traffc and an active participant in the creation of sustainable development and prosperity of the Primorskogoranska County and beyond

Values

Social responsibility; professionalism; ethnicity; security and protection

Mission

Fulfl a signifcant social role in meeting the community’s need for adequate infrastructure and the highest level of quality experience to enable safe and regular traffc to people and goods by air, while continuously increasing the quality of service and customer satisfaction

Objectives

Increase of aircraft, passengers and cargo traffc; quality of service; development of infrastructure; safety and security of air traffc; employee education; environmental protection

Source: Adapted from Rijeka Airport (2021)

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5.3 Situation analysis The next stage in the strategic marketing planning process is to conduct a situation analysis for the airport, which provides a systematic way of organising information for planning. It is typically based on the findings of a marketing audit, which is: a systematic, critical and unbiased review and appraisal of all the external and internal factors that have affected an organisation’s commercial performance over a defined period. It answers the question: ‘where is the organisation now?’ The marketing audit is essentially a database of all market-related issues for the company, which forms part of the company-wide management audit. By providing an understanding of how the organisation relates to the environment in which it operates, the marketing audit enables management to select a position within that environment based on known factors. (McDonald, 2008: 39) The marketing audit requires airports to conduct an internal audit of their own strengths and weaknesses and an external audit of their business environment, which provides a means for reflecting on the airport’s business environment and its actual or planned ability to respond to that environment. As shown in Chapter 2, airport capabilities – as well as the environment in which they operate – are constantly changing, often with dramatic consequences. As a result, the marketing audit should be continuous and based on current research (Chapter 4).

5.3.1 Internal marketing audit An internal audit will not only typically assess the marketing effectiveness of the airport according to absolute market position but also its market position relative to competitors. The assessment is typically carried out in the form of a portfolio analysis that focuses on individual strategic business units (also called core activities) (e.g. aeronautical; non-aeronautical such as retail and car parking; non-aviation such as advertising, property or consultancy) or sets of products within a strategic business unit (e.g. for aeronautical this could be domestic, intra-regional and intercontinental routes; or passenger or cargo services). It is therefore important to define what units or products the airport has or would like to develop. Brassington and Pettitt (2012) suggest that a number of key questions should then be addressed by the internal audit. Are there enough strong units or products to support the weak ones? Do any of the weak units or products have development potential? Are there new units or products that should be developed to take over declining ones? Figure 5.2 provides adaptations of two well-known models that may be used in support of portfolio analysis: the Boston Consulting Group (BCG) matrix and the McKinsey/General Electric (GE) matrix. Airports can plot individual units or products in the matrix cells, using different circle sizes to represent the contribution of each unit or set of products to total volume (e.g. turnover or the movement of passengers, cargo or aircraft). An arrow can be included to indicate the expected direction of movement in the matrix for the unit or set of products in the future. Each cell in each matrix represents a different competitive position, along with opportunities and threats to the airport, and the main strategic choices have been added to the respective matrices in Figure 5.2. A third model, called the Shell directional policy matrix, F used. It has two dimensions: competitive capabilities (weak, average and strong) and prospects for sector profitability (unattractive, average and attractive). As with the GE matrix, units or products can be plotted in one of the nine cells that represent different strategic choices. Brassington and Pettitt (2012) recommend that companies should try to develop a balanced portfolio with

STRATEGIC MARKETING PLANNING High market growth

Low market growth

Poor performer (‘question mark’)

Market leader (‘star’)

Give it time (if new) or invest (e.g. in infrastructure or marketing). Alternatively, reposition or withdraw

May consume resources but offers rewards. Grow and/or defend

Loss-maker (‘dog’)

Mature (‘cash cow’)

Difficult to increase market share. Withdraw or reduce exposure unless it is strategic (e.g. blocking a competitor) or supporting other units or products

Likely to be a former market leader but now mature or in decline. Defend the strong position but limit investment. Reduce costs versus increase volume

Low market share

High market share

Market attractiveness

BCG matrix

High Medium Low

Derive short-term gain or withdraw Weak

Cautious investment without overcommitting Medium

Investment for defence and further growth

Strong

Competitive strength Zone 1

Zone 2

Zone 3

GE matrix

Figure 5.2 Portfolio analysis models Source: Compiled by the authors, based on the original models

units and products that generate resources, which can then be invested in those that should be defended or offer opportunities for growth. Portfolios that are unbalanced will result in either too few resources for investment or too few opportunities for future growth. Criticisms of each model are well documented in the marketing literature (e.g. see Armstrong et al., 2019; Kotler and Armstrong, 2021), and those criticisms are relevant to the airport context. For instance, owing to the presence of multiple competitors, airports may find it difficult to decide who their market share should be relative to in the BCG matrix. Alternatively, some airports have a monopoly or quasi-monopoly situation or are exposed to structural or regulatory constraints that affect their ability to compete. Quantifying values for the different dimensions should be possible for aeronautical products such as air services but may be difficult for products in non-aeronautical and non-aviation areas such as retail, advertising, property or consultancy. In addition, the models become less appropriate for smaller airports with few units or products to assess, and for airports with limited opportunities for growth. A further criticism of the BCG matrix relates to the use of market growth and share because it does not take account of possible ROI, which is sometimes more important to an airport than market share. Finally, some airports are more focused on being better at what they do than pursuing increased market share in growth markets, and this strategy is not really represented by any of the portfolio analysis models.

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STRATEGIC MARKETING PLANNING Despite the criticisms, portfolio analysis models are a useful part of the internal audit. Airports can develop their own model with dimensions that meet their needs, which can then be used to plot elements of the airport portfolio conceptually, visualise the marketing effectiveness of the airport, and subsequently assess the opportunities and problems associated with different elements of their portfolio. This knowledge and understanding can then be used to make marketing decisions later in the strategic marketing planning process. In addition to portfolio analysis, airports can use the dimensions of the GE matrix to conduct a more general and descriptive audit of their key attributes. For market attractiveness, this may include the size and growth, or diversity and profitability of markets served, the level of competitive intensity experienced by the airport, and any market trends and behaviour that have an impact on it. For competitive strength, this may include location (e.g. proximity to a central business district or holiday destinations), accessibility (e.g. surface access), operational capabilities (e.g. handling, runway dimensions, capacity, navigational aids and designations such as for customs, immigration or foreign trade), management capabilities (e.g. experience and qualifications), company assets and financial resources (e.g. to support future investment needs), how the airport is perceived (e.g. image and brand recognition, community support, service levels, customer satisfaction and loyalty) and economic or operational performance (e.g. pricing and economic or operational efficiency). A more general and descriptive audit of this nature can be used by airports to indicate how they should position and promote themselves in order to gain a competitive advantage. It can also be used to assess how any planned or recently completed improvements (e.g. in infrastructure or services) will have an impact on the airport’s market attractiveness and competitive strength.

5.3.2 External marketing audit An external audit should cover aspects already discussed in this book such as the influence of macroenvironmental and microenvironmental factors (Chapter 2), and market forecasting and potential (Chapter 4). Macroenvironmental factors provide a range of opportunities and threats for airport marketing. For instance, policy decisions influence the planning and development of airport infrastructure and services, while regulatory forces such as price regulation affect the extent to which airports are free to make decisions (e.g. about pricing). Airports may need to focus on cost control and reduction during times of economic hardship, which may subsequently have an effect on which markets they position themselves for. Socio-cultural trends such as changes in population or travel trends and behaviour may influence which markets airports should target, while public attitudes (e.g. towards the airport and their level of corporate responsibility) may influence the extent to which an airport concentrates its efforts on public relations. Technological change may influence marketing decisions by offering new ways of conducting business that can help the airport to be more cost-efficient and productive, or by offering different products and services. It is important that the external audit identifies key factors and the way they influence airport marketing decisions. Another important part of the external audit is to identify microenvironmental factors, especially competition because this can influence airport marketing decisions and determine the success or failure of an airport in its chosen markets. It is therefore important for airports to identify their competitors and the unique advantages they have over them that can then be exploited through marketing. Competition has already been discussed in Chapter 2 but is covered again here within the context of Porter’s five forces: a model developed by Michael E. Porter in 1979 (see Porter, 1979). The model identifies five competitive forces that are experienced

STRATEGIC MARKETING PLANNING in an industry and shape the characteristics of a market: threat of new entrants, threat of substitutes, bargaining power of suppliers, bargaining power of customers and rivalry amongst existing companies. The model provides a wide definition of competitors that encourages airports to look beyond direct competition for end-users (e.g. for airlines, passengers and cargo) and to consider indirect and future competition for suppliers. Graham (2010) and Halpern (2018) apply Porter’s five forces to the airport industry and some of that discussion is repeated here. The threat of new entrants is generally low in the airport industry because it is increasingly difficult to find suitable locations for new airports, the planning and regulatory processes involved tend to be long and complicated, and high levels of investment are needed. The threat of substitutes provides a few potential sources of competition such as the introduction of high-speed rail as a threat to short-haul air services, although the growth of the LCC sector has meant that air travel may be a cheaper and more attractive option on routes where rail and air services compete. While it may have a negative impact on hub connections at airports, high-speed rail may also provide opportunities, for instance, its connections may provide airports with railbased feeder services, and it may also allow capacity-constrained airports to replace short-haul routes served by smaller aircraft with long-haul routes served by larger aircraft, resulting in fewer aircraft movements per passenger. Airports that serve holiday destinations may experience a high threat of substitutes. This is because airlines that provide holiday traffic are less likely to serve an airport due to network or public service considerations and are less likely to be based at the destination airport. As a result, they are likely to have lots of alternative airports to choose from. Australia’s Productivity Commission investigated substitution possibilities at a number of airports in Australia as part of a price monitoring process (see Productivity Commission, 2019). A summary of the findings is provided in Table 5.4. Possibilities for substitution are generally low for Sydney, Melbourne, Brisbane and Perth, which have significant market power in the provision of air services (domestic and international) because they generally act as the gateway to the cultural, business and tourism destination that they serve, and they are not readily substitutable for passengers or airlines wishing to access the destination. The remaining airports such as Adelaide, Cairns, Canberra, Darwin, Gold Coast and Hobart do not have significant market power and should not be added to the monitoring regime at this time. For instance, Darwin International Airport competes with other airports for holiday traffic, and Canberra Airport competes with other modes of transport. Differences are noted for profitable and unprofitable regional airports but in general, they are unlikely to exercise, or even have, market power. Airports may also experience a threat of substitutes for commercial activities, especially retail. For instance, hub airports with a high proportion of transfer traffic such as Amsterdam Airport Schiphol, Dubai International Airport and Singapore Changi Airport compete in retail with other airports and with downtown or internet shopping. They also compete as stop-over destinations. In addition, airports offer a composite product that consists of many different services provided by the airport, airlines operating at the airport or a third-party provider. The way services are provided will affect the extent to which airports face competition in terms of the bargaining power of suppliers. For some operational services such as ATC and security, the airport may have no choice over suppliers as this will be determined by government policy. However, the airport may not have to pay for all these, especially if they are provided by a state agency. For ground handling services, there may be regulations such as the EC’s directive on access to the ground handling market at community airports, which stipulates the number and nature of suppliers that must be available (Chapter 8). The situation is complicated further

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STRATEGIC MARKETING PLANNING Table 5.4 Substitution possibilities at airports in Australia Airport(s)

Description of market power and substitution possibilities

Sydney

A geographic monopoly (until Western Sydney Airport commences operations) and gateway to Sydney, which is a signifcant business hub and highly differentiated product in domestic (and international) tourism markets. Passengers are unlikely to substitute to another destination and there are few modal substitutes, with the exception of the SydneyCanberra route, but that only accounts for less than 2% of total domestic passenger movements at Sydney Airport

Melbourne

A business and tourism hub. Passengers are unlikely to substitute to another destination and there are no strong modal substitutes for the majority of passengers. Competition from Avalon Airport, even in the LCC market, is limited

Brisbane

Faces competition for some domestic services, for instance, Gold Coast Airport and Sunshine Coast Airport could theoretically serve up to about 90% of its passengers. However, in practice, these two airports are imperfect substitutes because fight times and schedules, facilities and travel time to Brisbane varies signifcantly

Perth

A geographic monopoly with few modal substitutes. Ninety-four per cent of interstate overnight domestic visitors to Western Australia use air transport. However, Perth is less of a business and tourism hub compared to other major cities

Adelaide

Serves a fairly high proportion of leisure passengers who tend to be relatively sensitive to price changes, which reduces the airport’s market power

Canberra

Serves a fairly high proportion of non-leisure passengers who tend to be relatively insensitive to price changes. However, there is good availability of road transport alternatives for the Canberra-Sydney route that is equivalent to a third of passenger movements at Canberra Airport

Gold Coast, Cairns, Hobart, Darwin

Do not act as gateways to major business hubs and serve a relatively high proportion of leisure passengers. The airports therefore have limited market power

Proftable regional airports

Some such as Hervey Bay Airport cater to the tourism industry, while others play an important role in the resources sector providing services to charter aircraft. This means that some have market power, but they are unlikely to be able to exercise it (e.g. due to relatively lower barriers to entry for small scale private airports that support construction and extraction activities in the resources sector; countervailing power from airlines as many of the airports are served by only one airline; and competition from airports serving alternative tourism destinations)

Unproftable regional airports

Unable to cover their operating costs and unlikely to have or be able to exercise any market power. The aeronautical charges needed to cover the cost of running the airport are higher than what passengers and airlines are willing to pay

Source: Adapted from Productivity Commission (2019)

STRATEGIC MARKETING PLANNING because suppliers of some services such as ATC or ground handling charge airlines directly for use of their services. For commercial activities such as retail, airports are likely to be less restricted and may have a greater choice of suppliers. In extreme cases, entire terminals may be managed by different suppliers. The bargaining power of customers – especially airlines – can vary significantly and is likely to be influenced by the extent to which airlines serving the airport are able to switch to an alternative airport (as shown in Table 5.4). It is likely to be higher for more footloose airlines such as charter and LCCs than for airlines serving the airport as part of their wider network or for public service considerations. In developed areas, a national carrier can often have strong political power due to its role in encouraging trade or tourism. The degree of power may also be influenced by other factors such as the amount of spare capacity at the airport, the extent to which an airport needs or wants to attract new business, the degree to which an airport is dependent on just one or a few airline customers, and whether an airport’s airline customers belong to an airline alliance. Such considerations will determine the balance of power between airports and their airline customers. The degree of power wielded by an airport is likely to influence its approach to pricing although, as will be discussed in Chapter 7, airport aeronautical charges may be controlled directly by governments or indirectly through some type of economic regulation in order to limit an airport’s ability to abuse its strong bargaining power. The scope for a competitive rivalry between existing airports varies considerably. Rivalry is likely to be low at airports located in remote regions with a limited touristic appeal because such airports are most likely to appeal to traditional scheduled carriers who serve the airport for network or public service considerations and may not necessarily have alternative airports to choose from. The greatest scope for rivalry will be at airports that are physically close, have overlapping catchment areas, and have a high concentration of point-to-point services, especially inbound services provided by charter or LCCs. Rivalry will be particularly high in major cities such as London that are served by a number of different airports, or in regions where catchment areas can be continually expanded or contracted, depending on the nature of air services and surface links on offer at neighbouring airports (e.g. see Lian and Rønnevik, 2011). Rivalry may also be high at airports in different countries that are not physically close. For instance, at hubs providing good flight connectivity and efficient passenger transfers, or at LCC bases providing budget-minded infrastructure and services for their airlines. Porter’s model is fairly broad and focused largely on macro-level forces. Airports also need to consider micro-level forces, identifying current and potential competitors, their characteristics such as infrastructure and markets served, their relative strengths and weaknesses (including the extent to which market needs are currently being met and are likely to be met in the future), and their current and potential reaction to changes in the business environment. Micro-level competitive forces were discussed in Chapter 2. Airports need to be careful about selecting relevant competitors for comparison. For instance, comparing a large international airport with a small local airport may not be worthwhile, even though each may have certain unique advantages over the other. In addition, many airports have identified weaknesses such as capacity constraints at competing airports that allow them to carve out a niche for themselves in a different market by focusing, for instance, on leisure, low cost or business-related markets. In this instance, airports are competing, although not necessarily for the same markets. Airports need to be specific about identifying companies that realistically compete or have the potential to compete. For airports serving large and diverse markets, it may be useful to group competitors into clusters depending on their focus and strategy. As mentioned in the

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STRATEGIC MARKETING PLANNING internal marketing audit section of this chapter, the identification of strengths and weaknesses could cover a broad range of areas including infrastructure or services available, organisational and managerial capabilities, spatial factors such as airport location and environmental restrictions, financial strength and success, customers and market segments served, operational performance and position in the market. Consideration of market position should include areas where competing airports are strong, areas where they are weak and vulnerable, and the direction they seem to be moving in. Competitive reaction is also worth considering, such as the speed and decisiveness with which competing airports tend to react to the actions of others or to changes in the business environment. The competitor analysis will need to be continuous, not just for strategic marketing planning, and be based on sound and current research. The external audit should also consider market potential and forecast the size of future markets the airport wants to compete in and the proportion of the market they want to capture. This relies on airports being able to make a precise definition and quantification of market size, which is difficult given that they operate in an uncertain environment affected by many factors – not just the behaviour of competitors – but wider macroenvironmental factors too. The dynamic nature of the airport industry also makes it difficult to estimate the proportion of the market the airport wants to capture, and results will always need to be considered relative to how the market changes over time. Despite the challenges, it is important to base marketing decisions on forecasts of market size and potential. It is therefore worth investing in accurate and effective means of forecasting (Chapter 4). Estimating market potential is important for strategic marketing planning as it helps set marketing objectives, guides marketing strategy, and determines any marketing programmes to be used. It also provides a measurable indicator for success or failure that can guide future planning. Dallas Airport System (2010) provides an example of how competition and market potential have guided marketing decisions at Dallas Executive Airport. The airport is located 10 kilometres southwest of the city of Dallas, Texas in the US. The airport serves the general aviation market and acts as a reliever for Dallas Love Field Airport. The Dallas Executive Airport marketing plan of 2010 identified opportunities for growth in terms of aircraft operations (take-offs and landings) and based aircraft. An airport market area analysis based on a 30-minute drive time radius for each airport identified seven airports located close enough to Dallas Executive Airport to be considered competitors, especially for based aircraft. Market growth for based aircraft had stagnated in the years leading up to the analysis, and market share analysis suggested that the airport was underperforming its rivals. For instance, there were 1,782 based aircraft at Dallas Executive Airport and its seven competing airports in 2009. Dallas Executive Airport had 10.1 per cent market share (179 aircraft) compared to 12.5 per cent (223 aircraft) if each airport had equal market shares. This was a shortfall of 2.5 per cent (44 aircraft), which represented a market share deficiency but also an opportunity for growth. A number of airport characteristics were compared in the competitor analysis including those related to airport rates and charges and airport infrastructure and services, in order to identify the position of Dallas Executive Airport relative to its competitors. The airport had also implemented a number of enhancements to infrastructure and services in recent years that improved its competitive position. Marketing objectives and the marketing programme of activities subsequently focused on ways to enhance the airport’s image, increase airport visibility and exposure, inform local aircraft owners about the enhanced infrastructure and services, and promote the benefits of using the airport. According to FAA Airport Master Records for 2021, Dallas Executive Airport has 278 based aircraft (up from 179 in 2009) and a market share of 17.3 per cent (up from 10.1 per cent in 2009), which is now some way above the 12.5 per cent if each airport had equal market shares.

STRATEGIC MARKETING PLANNING

5.3.3 SWOT analysis A large amount of information may be generated by the marketing audit and the diverse nature of that information can be difficult to make sense of. A SWOT analysis is commonly used as a method for structuring audit information and for providing a critical analysis that helps drive the marketing plan forward (Brassington and Pettitt, 2012). SWOT is an acronym for strengths, weaknesses, opportunities and threats. Strengths and weaknesses focus on internal factors that can, to some extent, be controlled by an airport. They are inward-facing factors that affect an airport’s past or present situation and typically include individual elements of the marketing mix as well as corporate strengths and weaknesses. Less controllable factors such as characteristics of main markets served may also be included. Opportunities and threats focus on outward-facing external factors that cannot be controlled by an airport but are likely to affect an airport’s current or future situation. They tend to have a more strategic orientation. More specifically, Hooley et al. (2020) suggest that strengths and opportunities highlight good points by answering the questions: “what are we good at relative to competitors?” (strengths) and “what changes are creating new options for us?” (opportunities), while weaknesses and threats highlight danger points by answering the questions: “what are we bad at relative to competitors?” (weaknesses) and “what emerging dangers must we avoid or counter?” (threats). Strengths and opportunities therefore tend to help airports achieve their marketing objectives while weaknesses and threats tend to hinder them. There may be some degree of overlap. For instance, a small airport may view its size as a strength (allowing it to be dynamic and able to react quickly to change) and a weakness (restricting the ability of the airport to invest and diversify its business). Similarly, an opportunity may also pose a threat. This is typical where the emergence of a new market may provide an opportunity for an airport but also pose a threat to existing markets. This is sometimes the case for airports in holiday destinations that are served by charter carriers and view the possibility of attracting scheduled LCCs as an opportunity for growth and diversification of their business but also a threat to services provided by existing charter carriers. A similar situation is experienced at airports seeking to replace public air services with commercial ones. Commercial air services may be more competitive (e.g. offering lower fares, larger aircraft and a higher frequency) but are more likely to base their decisions on commercial versus public service considerations and may therefore reduce or withdraw services at short notice. SWOT analyses are used by airports, regardless of size or nature of traffic. For instance, Figure 5.3 provides a SWOT analysis produced by the Royal Schiphol Group for one of the busiest airports in the world; Amsterdam Airport Schiphol, while Figure 5.4 provides a SWOT analysis for a general aviation airport; Manassas Regional Airport. The latter was created from the findings of a survey of the airport commission and interviews with city and county leaders, fixed base operators (FBOs) and airport businesses. Consultants might also be used to conduct airport SWOT analyses. For instance, in 2006, Northern British Columbia and Alberta Aviation Communities commissioned consultants to conduct a review of airport strategies in relation to the airport strategy of the federal government. As part of that review, the consultants produced individual SWOT analyses for 36 of British Columbia’s northern airports based on the findings of airport questionnaires and workshop sessions. Researchers have also been interested in conducting SWOT analyses of airports. For instance, Rankin (2011) produced a SWOT analysis for King County International Airport, based on a review of airport corporate publications; Davison et al. (2010) produced a SWOT analysis for Cardiff International Airport based on interviews with airport management; Wang and Hong (2011) produced a SWOT analysis for

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STRATEGIC MARKETING PLANNING Strengths Network of destinations Strong hub position of Schiphol in Europe Sustainability at our premises Price-quality ratio Economic strength of the Randstad region Attractiveness of the Netherlands as a destination Airport City and growing real estate portfolio

Opportunities Single European Sky and Dutch airspace redesign Digitisation, automation and Big Data International activities and partnerships Sustainable aviation sustainability and innovation initiatives Opening of Lelystad Airport

Weaknesses Relatively small catchment area Capacity shortage: terminal, stands and railway station Dependency on key airline customers No direct metro connection with Amsterdam Limit on air traffic movements

Threats Diminishing public support base for aviation Implications of air transport movement restraints on quality of network Terrorism and cyber threats Growing competition in transfer market from other hub airports and hub-bypassing Impact of ultra-fine particles and nitrogen oxides (NOx) Construction activities affecting perception of quality Pressure on cargo volumes due to new slot allocation system

Figure 5.3 SWOT analysis for Amsterdam Airport Schiphol Source: Adapted from Royal Schiphol Group (2019)

developing Taoyuan International Airport as an ‘airport city’ based on a literature review, secondary data analysis and interviews with focus groups and experts. It is not always easy for airports to decide what factors to include in their SWOT analysis and in which cell of the matrix to place them because of overlap between some factors. The most important task is to list the main factors somewhere in the matrix where it makes sense to the airport and helps to identify key issues and their impact. Creative analysis may be required to make sense of the information and it helps to think of strengths and weaknesses as representing where the company is now and opportunities and threats as representing where the company could be or wants to be in the future. Marketing decisions can then represent what the company needs to do in order to close the gap (Brassington and Pettitt, 2012).

5.4 Marketing decisions 5.4.1 Marketing objectives Marketing objectives must be based on the findings of the situation analysis. They should also be linked to the corporate intentions of the airport, especially corporate objectives that describe what the airport is trying to achieve as an organisation. Compared to corporate objectives that have a more visionary and strategic orientation, marketing objectives are specific and functional and describe what the airport is trying to achieve through its marketing activities. Some airports use the terms marketing goal and marketing objective interchangeably, so it is important to emphasise that a goal is a general statement about what an airport wants to achieve through marketing while an objective is a specific and measurable target. For instance, an airport may have a goal to increase air service provision at the airport. Marketing objectives for that goal may then include targeting a new market segment or growth in an existing market segment (e.g. by attracting new air services or increasing frequency or capacity on existing air services). Tasks will be set; these are the specific activities that support the achievement of this objective

STRATEGIC MARKETING PLANNING Strengths Opportunities Modern facilities, security, and aircraft rescue and Proximity to Washington D.C (30 miles) firefighting resources (customer convenience) Proximity to Dulles International Airport (itinerant Longest general aviation airport runway in and overflow air traffic) Northern Virginia, with room for extension Transportation options for travellers (Virginia Available infrastructure to support a charter service Railway Express, Interstate 66) and FBO development and expansion Availability of state and federal grants Resources for generating income and increasing New hotel construction in Manassas awareness of the airport (e.g. terminal building, Growth and expansion of Manassas businesses and conference room, tours) local population Land available for development and expansion Legacy events that raise awareness of the airport (e.g. airshow, community events) Good reputation and excellent communication among airport staff, city and tenants Efficient and effective daily operations to provide services to the public: personal attention from airport and FBOs, minimal wait time for arrivals and departures, privacy for users Effective mix of Federal Aviation Regulations (FAR) Part 135 aircraft (i.e. commuter and on-demand operations) to encourage a broad customer base Consistent effective use of FAA and Virginia grant money to improve the airport in a strategic manner Weaknesses Lack of effective marketing and promotion to raise awareness of airport services and capabilities Lack of on-site aircraft rescue and firefighting Lack of effective signage to and around the airport Many decision makers/target audiences Long waits for aircraft release Current runway length limits types of aircraft that can use the airport Freedom museum limits broader use of terminal building and perpetuates the perception of the airport as ‘Podunk’ Current lease agreements contribute to customer’s perception of risk to investment in long-term infrastructure development

Threats National security issues impacting air travel Reduction in FAA funding Special flight rules area restrictions; airspace congestion Overall poor economy; increased cost of doing business Local opposition to the airport; change in local government support Restrictions on available land; encroachment of non-compatible land use Limited land available for long-term development beyond current footprint Drive time to Washington D.C. due to periodic road congestion (Interstate 66, Interstate 95, Route 28) Lack of local access to world class hotels and conference centers Competition from other local airports Environmental laws and requirements, especially regarding storm water

Figure 5.4 SWOT analysis for Manassas Regional Airport Source: Adapted from Manassas Regional Airport (2019)

(e.g. deliver a proposal for a new air service to an airline or offer a growth incentive to an airline to encourage added frequency or capacity to an existing air service). Objectives should be achievable within the timeframe of the marketing plan and therefore tend to have a short- to medium-term focus of between one to five years. A range of example marketing objectives for different areas of the airport business is provided in Table 5.5. Marketing objectives are a vital part of the planning process. They guide decisions relating to marketing strategies and underpin any marketing programmes. They also provide purpose and

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STRATEGIC MARKETING PLANNING Table 5.5 Example airport marketing objectives Business area

Example marketing objectives

Aviation

Increase total passenger movements at our airport by 10% within three years Increase market share of passenger movements vis-à-vis our main competitor by 5% within three years Reduce airport leakage (of passengers to neighbouring airports) by 5% within fve years Attract at least two scheduled, year-round passenger services to an international destination not currently served from our airport within two years

Property

Achieve 75% hangar utilisation within three years Achieve 60% occupation of airport commercial rental property within three years Increase income from property leases by 10% within four years

Consultancy

Increase turnover from business consultancy projects by 5% within two years Secure a minimum of three new process optimisation projects each year for the next three years Increase the number of consultancy projects that our airport does through joint ventures by 5% within three years

Retail

Contract a master concession to assume overall responsibility for retail management at the airport within three years Increase income from airport retail activities by 5% within four years Attract three new concessions within one year

Other areas

Achieve 75% brand awareness in each of the airport’s main target markets within three years Create and launch a new airport logo within one year Reach 100,000 followers on Facebook within three years Offer free wi-f in the airport terminal within one year

Source: Compiled by the authors

direction, with ultimate goals for attainment that form the basis for controlling and evaluating marketing performance. Objectives will benefit from being SMART. SMART is a mnemonic used to set objectives. The first known use of the term was by Doran (1981), and while there are different adaptations and interpretations of the mnemonic, it typically refers to the need for objectives to be specific (state exactly what is to be achieved), measurable (in quantitative terms such as number of movements, market share or turnover), achievable (realistic given the circumstance within which they are set and the resources available), relevant (to the airport and to those responsible for achieving them) and time-orientated (framed within a specific and realistic time period).

5.4.2 Marketing strategies Marketing strategies “allow an organisation to concentrate its limited resources on the greatest opportunities to increase sales and achieve a sustainable competitive advantage” (Baker, 2008: 3).

STRATEGIC MARKETING PLANNING Strategies underpin the marketing plan and should be designed to meet market needs and achieve the marketing objectives. Plans and objectives tend to provide time-related milestones that can be measured and assessed. Marketing strategies tend to be more long-term visions for the marketing activities of the airport and tend to be dynamic and interactive, changing as changes take place in the business environment or in response to competitor behaviour.

5.4.2.1 Ansoff’s growth matrix Some airports may be pursuing survival or the status quo. The latter may involve a focus on being better at what they do without seeking growth, which is sometimes referred to as ‘harvesting’. The growth matrix developed by Igor Ansoff (see Ansoff, 1957) provides a useful framework for airports that do seek growth. It helps identify strategic options in terms of product and market growth and offers four main strategies (market penetration, market development, product development and diversification), depending on whether an airport decides to market new or existing products to new or existing markets. As with the BCG matrix discussed earlier in this chapter, it is useful for airports to have a balanced mix of growth strategies in order to avoid an overreliance on one type. Market penetration is where the airport focuses on existing products in existing markets. This is a safe option for airports because it involves focusing on known markets and products and is not likely to require much investment. The strategy can be achieved through increased use of the airport by existing customers such as passengers and airlines (e.g. with loyalty schemes, growth incentives or promotions), maintaining or increasing market share of existing products (e.g. by using more competitive pricing or promotions), or dominating growth markets. Many airports have introduced loyalty schemes for passengers in recent years that offer free or exclusive offers on retail, catering, car hire and parking, fast track services, lounge access and exclusive competitions (Chapter 8). Similarly, airport price incentives are widely used to stimulate market growth in air services (Chapter 7). Another strategy for achieving market penetration would be to restructure a mature market by driving out competitors and securing market dominance, although this is less common in the airport industry. Market development is where airports focus on existing products in new markets, for instance, by entering new geographical areas with existing products. Some airport operators such as Changi Airports International have pursued growth in new markets through overseas airport investment, consultancy and management projects, for instance, with global experience at over 60 airports in Africa, Asia-Pacific, Europe, North and South America, the Commonwealth of Independent States and the Middle East. However, these types of global expansion rarely seek to offer the same product. One exception is where common approaches to retail are used. Airport mergers, or the formation of airport alliances and franchises, may also be seen as a way of entering new markets with existing products. For instance, Amsterdam Airport Schiphol and Frankfurt Airport established the Pantares agreement in December 1999 that aimed to offer a common range of services to, and subsequently gain market share in, the global airport market, as well as to achieve cost synergies from optimising hub operations at the respective airports. Six key areas for cooperation were targeted: passengers and retail; aviation, ground handling and cargo; real estate development; facility management; information and communications technology; and international activities. However, the agreement achieved very little and was eventually phased out. In December 2008, the Royal Schiphol Group and ADP acquired eight per cent of each other’s share capital and signed an agreement for industrial cooperation for an initial period of 12 years. As with Pantares, this aimed to achieve cost synergies but also set up synergies in management structure that place the CEO of each group on

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STRATEGIC MARKETING PLANNING the board of directors of the other group. It also aimed to enhance the operational performance of the Air France–KLM route network. In 2020, the Royal Schiphol Group and ADP announced a one-year extension to the alliance that is now named ‘Hublink’. The trend for cooperation between airports has sped up rapidly during the last few decades. For instance, via so-called ‘sister agreements’ between airports (Stone, 2011). Many airports now have multiple sister agreements in place (Table 5.6). The agreements are typically based on a memorandum of understanding (MOU) for cooperation in several areas. For instance, Airports of Thailand (AOT) have four main frameworks for their agreements: (1) regular meetings – organise executive meetings to set out directions and activities between airports in each year and exchange visions on airport management; (2) exchange of information – share information via emails or answer questionnaires regarding different operations such as aircraft waste management, space rental rate, security system and fire truck usage; (3) joint work activities – airport visits for exchange of experiences and on-the-job training; (4) joint marketing promotion – conduct marketing and tourism promotional activities to increase volumes of flights and air cargo transport among AOT’s airports and airports under the sister airports agreement. The last point (point four) is most relevant from a marketing perspective. For instance, the MOU between AOT and Airports Company South Africa, signed in 2019, includes provisions for collaboration on marketing and promotional activities aimed at expanding passenger and air cargo traffic between Suvarnabhumi International Airport and O.R. Tambo International Airport. Similarly, the MOU between Hartsfield-Jackson Atlanta International Airport and Prague Airport, signed in 2019, includes provisions for collaboration on marketing and promotional activities aimed at working with airlines to establish a direct connection between Atlanta and Prague. MOUs and marketing partnerships are covered in more detail in Chapter 9. Product development is where airports focus on new products in existing markets. Although the markets will be familiar to the airport, the product may not, unless it is simply a modification of an existing one. The strategy may require the development of new competencies to ensure that new or modified products appeal to existing markets. Product development might be considered a form of differentiation, which is discussed later in this section. Diversification is where airports focus on new products in new markets. This is generally considered a high-risk strategy because it involves moving into markets in which the airport has little or no experience, and with products of which the airport again has little or no experience. Airports pursuing diversification should therefore conduct a thorough and honest appraisal of the risks and be clear about what they expect to achieve. A common approach is when airports diversify their revenue sources in order to exploit opportunities for non-aeronautical or non-aviation revenue and to reduce their dependency on aeronautical revenue. Athens International Airport provides a good example of this with the development of their Airport Retail Park, which is located two kilometres south of the main terminal building and offers megastore shopping opportunities with companies such as IKEA (home furnishing), Kotsovolos (electrical appliances), Factory Outlet (a ‘shop in shop’ concept with more than 200 wellknown brands of apparel, footwear, sportswear and accessories), and Leroy Merlin (home and garden improvement, decoration and accessories). Diversification is also important for the aeronautical side of the airport business because an overreliance on one airline customer can leave an airport exposed to risk from airline failure or a reduction or withdrawal of air services. This was the case at Brussels Airport, which lost most of its air services when its main airline customer Sabena went bankrupt in 2001. The airport still serves Brussels Airlines (formed after taking over part of Sabena’s assets) but has diversified its customer base to include a wider range of traditional scheduled and LCCs, along with a

STRATEGIC MARKETING PLANNING Table 5.6 Selection of airports that have multiple sister agreements with other airports Airport or airport operator

Sister airports or airport operators

Airports of Thailand

Airports Company South Africa Airports Corporation of Vietnam Airports of Laos City of Austin Department of Aviation Incheon International Airport Corporation Kansai Airports Liege Airport Munich Airport Narita International Airport Corporation Yangon Aerodrome Company

Chicago Department of Aviation

Abu Dhabi International Airport Aeropuerto Internacional de la Ciudad de México Beijing Capital International Airport Belgrade Nikola Tesla Airport Birmingham Airport Hong Kong International Airport Incheon International Airport Istanbul Airports Mariscal Sucre International Airport Shanghai Airport Authority

Hartsfeld-Jackson Atlanta International Airport

Airports Authority of Jamaica Ben Gurion International Airport Félix-Houphouët-Boigny International Airport Monseñor Óscar Arnulfo Romero International Airport Prague Vaclav Havel Airport Roberts International Airport Shanghai Airport Authority

Munich Airport

Airports Company South Africa Airports of Thailand Beijing Capital International Airport Centrair International Airport, Nagoya Denver International Airport Moskow Domodedovo Airport Singapore Changi Airport (Continued)

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STRATEGIC MARKETING PLANNING Table 5.6 Continued Airport or airport operator

Sister airports or airport operators

Narita International Airport Corporation

Abu Dhabi International Airport Airports of Thailand Beijing Capital International Airport Changi Airport Group Denver International Airport Fraport AG Incheon International Airport Corporation Korea Airports Corporation Port Authority of New York and New Jersey Pulkovo Airport Taoyuan International Airport Corporation

Source: Compiled by the authors, based in information from airport websites

number of airlines offering charter and cargo services. Similarly, Budapest Airport has diversified its customer base since its main airline customer Malév went bankrupt in 2012. Oslo Rygge Airport was a major base for Ryanair from 2010 to 2016 and was also used to a lesser extent by Norwegian and a selection of charter operators. The airport served almost 2 million passengers per year but was forced to close to civilian traffic in 2016 when Ryanair closed its base at the airport. There are plans to reopen shortly, and the airport would no doubt benefit from attracting a more diverse selection of airline customers to reduce its overreliance on one customer.

5.4.2.2 Growth strategies based on market dominance An alternative to market growth strategies is those based on market dominance. Within this category, four main types of competitive positions have an impact on airport marketing strategy: market leader, challenger, follower and nicher. Market leaders occupy a dominant position in their main markets. For example, Dallas Fort Worth International Airport is the busiest airport in Texas and serves the Dallas Fort Worth area with a range of regional, national and international services. Strategies for market leaders may involve expanding the market or their share of the market, defending their position or maintaining the status quo. Challengers pursue aggressive strategies to gain market share, for instance, by attacking the market leader or other competitors. Dallas Love Field may be considered a challenger to Dallas Fort Worth International Airport. The airport is about 10 kilometres northwest of the central business district of Dallas. Dallas Love Field was the primary airport for scheduled air services in Dallas and one of the 10 busiest airports in the US until 1974 when Dallas Fort Worth International Airport opened and immediately assumed its dominant position as market leader. Dallas Love Field lost most of its passenger services after Dallas Fort Worth opened but the airport has worked hard to regain market share since the 1970s, especially in recent years following the completion of a number of modifications to airport infrastructure and services that coincide with an end to restrictions in the Wright Amendment, which was a federal law governing traffic at Dallas Love Field that limited most non-stop flights to destinations within Texas and

STRATEGIC MARKETING PLANNING neighbouring states from 1979. Limits were phased out in 1997 and 2005, but some restrictions remained until October 2014. On the same day as the restrictions were lifted, Southwest Airlines launched services to Baltimore, Denver, Las Vegas, Orlando, Washington–National and Chicago, and just one month later, the airline added new services to Atlanta, Nashville, Fort Lauderdale, Los Angeles, New York LaGuardia, Phoenix, San Diego, Orange County and Tampa. Dallas Love Field is now a base for Southwest and the airport served 16.8 million passengers in 2019 compared to 8.5 million in 2013, an increase of 98 per cent over six years. Followers are not in a dominant position. Instead of pursuing aggressive strategies to gain market share from a market leader, followers are more likely to play it safe and take any overflow from the market leader (Huff, 2011). This is common in situations where competing airports are owned and operated by the same company. If one of those airports is a market leader, others may become followers. Los Angeles International Airport is a market leader, owned and operated by Los Angeles World Airports (LAWA), which also owns and operates Van Nuys Airport, and formerly owned and operated Palmdale Regional Airport and Ontario International Airport. Ontario served the overflow from Los Angeles for years but declining passenger numbers while under the operation of LAWA prompted Ontario city officials to question the way the airport was owned and operated, claiming that there is a conflict of interest because LAWA is largely concerned with bolstering traffic at Los Angeles (see Pierceall, 2011). After years of negotiations, LAWA sold Ontario to Ontario International Airport Authority (OIAA) in December 2015 and transferred operational management of the airport to OIAA in 2016. After experiencing an almost year-on-year decline from 7.2 million enplanements in 2005 to 4.0 million in 2013, the airport experienced year-on-year growth to 5.6 million in 2019 (its highest since 2008). Nichers specialise in serving one or a few specific markets, focusing on developing expertise and a marketing mix that meets the needs of those markets (e.g. Paris-Le Bourget Airport that is ‘Exclusively dedicated to business aviation’, Liege Airport with ‘Services 100 per cent adapted to the needs of the European cargo market’, and Oslo Rygge Airport ‘The only airport in Norway dedicated to low-cost operation’). The niche strategy is discussed again later in this section. Strategies may also be based on innovation, where airports pursue cutting edge technology and business innovation as pioneers (risk-takers that like to be first to try new technologies or approaches to business), followers (who are more risk-averse but recognise the value of investing in new technologies and business innovations) or late followers (who like to adopt new technologies and business innovations, but after others have done so). There are various arenas for recognising innovative airports such as the American Association of Airport Executives (AAAE) Annual Airport Innovation Awards. In 2019, there were winners across three categories: Metropolitan Washington Airports Authority (MWAA) as the Most Innovative Airport Partnership (Large Hub); LAWA as the Most Innovative Airport Passenger Experience (Large Hub); and Portland (Maine) International Jetport as the Most Innovative Airport (Small/Medium Hub). Receiving the award, Goutam Kundu, VP and Chief Information Officer for MWAA emphasised their focus on being leaders in innovation, stating that: at the Metropolitan Washington Airports Authority, we strive daily to be a leader in cutting-edge innovations that help not only our airline partners achieve greater operational efficiency but provide a less stressful and more streamlined airport experience for our traveling customers. (AAAE, 2019)

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5.4.2.3 Porter’s generic strategy framework Michael E. Porter, who developed the five forces model introduced earlier in this chapter, also described a framework consisting of three general types of strategy used by businesses to achieve and maintain competitive advantage (see Porter, 1980). Porter’s generic strategy framework provides a useful model within which airports can frame their strategic decisions. It uses dimensions of strategic scope (market penetration) and strength (competitive advantage). The framework comprises three main strategies: cost leadership, differentiation and focus or niche. Companies pursuing a strategy based on cost leadership aim to compete by offering lower prices. In order to achieve this, companies may need to focus on achieving reduced costs, offering a standardised product, achieving high sales volume, or taking advantage of economies of scale. Some airports are committed to a cost leadership strategy. For instance, Saskatoon Airport Authority seeks a low-cost advantage with the goal of being Canada’s premier low-cost airport and has pursued this strategy since taking over the management and operation of the airport in 1999. The authority immediately reduced the aviation fees published by Transport Canada by 11 per cent (Saskatoon Airport Authority, 2005) and has endeavoured to maintain the lowest possible aviation rates and charges ever since, despite the challenges of increased security, regulatory compliance and administrative costs, as well as more recent reductions in traffic as a result of the coronavirus pandemic. Saskatoon Airport Authority views price as a determining factor in generating traffic throughput at the airport and cost leadership provides a strategic advantage for future growth and development. The authority feels that a prudent approach to financial management demonstrates to the public, passengers and airline customers that Saskatoon Airport offers an efficient and economical base from which to travel by air. Low cost does not need to mean low value and the airport “strives to exceed the expectations of our guests, partners, and community by providing service quality initiatives that meet our vision to be Canada’s Most Valued Airport Experience” (Saskatoon Airport Authority, 2021: para 6). Cost leadership is not an easy strategy for airports to pursue, partly because of their high operating costs and investment needs, but also because their fixed location and apparent lack of economies of scale beyond a certain size mean that it is difficult for them to achieve cost savings. In addition, the relationship between costs and prices is weak at some airports, especially those where public sector owners subsidise airport operations to achieve a broader objective such as to stimulate regional economic development, or those operated as part of a group where uniform prices across the group do not reflect the costs of individual airports. It could also be argued that cost leadership is not necessary for many airports on the basis that their main markets may be fairly price insensitive. Companies pursuing a strategy based on differentiation aim to develop products or services perceived as being different from those of their competitors or indeed unique. Differences may be real (e.g. through differences in design) or perceived (e.g. through the use of advertising). There is plenty of scope for airports to pursue differentiation strategies. For instance, an airport may differentiate itself from its competitors as a result of being in closer proximity to a particular area, or by offering enhanced service features, having a superior brand image, being more innovative, using more advanced technology, or offering more advanced operational capabilities. In an attempt to differentiate itself from ‘Red ocean’ airports where there is intense competition (a ‘Shark tank’) between airlines, Nuremberg Airport launched a strategy that promotes ‘Blue ocean’ opportunities as an airport where airlines can enjoy access to markets with low levels of competition and a great deal of untapped potential. The airport raises awareness for this (Figure 5.5), for instance, via its digital channels and when attending industry networking events.

STRATEGIC MARKETING PLANNING

Figure 5.5 Nuremberg Airport’s ‘Blue ocean’ opportunities Source: Courtesy of Nuremberg Airport

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STRATEGIC MARKETING PLANNING Another way of achieving differentiation is to offer dedicated products or services for different target markets. For instance, airports with multiple terminals sometimes offer dedicated terminals for different types of passengers or airlines (e.g. short haul versus long haul, domestic versus international, or by airline alliance). Dubai International Airport offers an Al Majalis VIP Pavilion, an Executive Flight Terminal and a Cargo Mega Terminal for VIPs (very important persons), executive and cargo operations respectively. Some airports offer dedicated low-cost terminals (LCTs) that are designed and built with only basic amenities so that construction and operating costs can be minimised and savings passed onto LCCs by way of lower landing and/or handling fees. Examples include Terminal billi at Bordeaux Airport, MP2 at Marseille Provence Airport, and KLIA2 at Kuala Lumpur International Airport. Some airports even have competing terminals such as at John F. Kennedy International Airport, where the terminals are operated by different airlines or consortiums of airlines that use them, with the exception of Terminal 4, which is operated by the Schiphol Group (see Chapter 6 for further examples of airport product differentiation). Focus or niche strategy is sometimes used by airports that are not large enough to target the whole market. Instead, the airport will specialise in serving one or a few specific markets such as a particular type of airline (e.g. charter, LCC or cargo) or services to a particular geographic area. Focus or niche strategies can be focused either on cost (e.g. airports that offer price incentives to LCCs) or on differentiation (e.g. airports that provide specialist facilities such as for cargo). In reality, many airports fit into what Porter’s framework would define as being ‘lost-in-themiddle’. This includes airports whose costs are too high to lead on cost, whose product is too standardised to differentiate, and whose appeal is too broad to be a focus or niche airport.

5.4.3 Marketing programmes Marketing programmes provide a detailed implementation of the marketing objectives and strategies – a written account of the actual tasks that need to be carried out. This typically includes an assessment of how each element of the marketing mix should be used to meet each marketing objective. Programmes should provide a written account of the person responsible for each task, allocated resources and any timescales involved. The dynamic nature of the industry means that they need to be reviewed continually. They need to be affordable, realistic and relevant. They also need to be budgeted, controlled and evaluated, which will be considered in the next section.

5.5 Implementation The final element of the strategic marketing planning process is to implement any marketing programmes. This may be straightforward at larger commercial airports with dedicated marketing staff working in a marketing or similar department. The head of that department may occupy a senior position within the airport hierarchy (Chapter 2), meaning that marketing is considered a core business function of the airport with its own resources and responsibility for decision-making. Smaller commercial or general aviation airports may not have personnel dedicated to marketing. In such cases, it may be the airport manager or their assistant who assumes responsibility for marketing. This will be in addition to other operational and managerial functions, meaning that marketing may not be given a top priority even though the corporate objectives of

STRATEGIC MARKETING PLANNING the airport may be heavily dependent on marketing such as the desire to develop air services, increase passenger throughput, improve public relations or enhance the image of the airport. If the airport is operated as part of an airport group, responsibility for marketing may be complicated further since it may be assumed by someone at the corporate head office as opposed to someone at each individual airport. In this situation, there is always a risk that marketing decisions made by the head office may be in conflict with what individual airports and their local stakeholders want to achieve. Similarly, airports may be owned by a government department, agency or regional or local authority. The owner is likely to have an interest in airport marketing but may not necessarily be forthcoming in funding any marketing activities. As with airports operated as part of an airport group, there is always a risk that the owner’s opinions about marketing the airport may be in conflict with what the airport and their local stakeholders want to achieve. Regardless of how the airport is owned or operated, it is important that overall responsibility for the implementation of any marketing programmes is assumed by one person, although individual tasks within each programme may be delegated to others. Responsibilities should be specified on any programmes in the marketing plan.

5.5.1 Resources In addition to responsibilities, it is important for airports to specify the resources allocated to any marketing programmes. The amount of resources available is likely to depend on the source and allocation of funding for the airport. At larger commercial airports there may be a designated budget for airport marketing, while at smaller commercial or general aviation airports marketing may be funded from other budgets such as for airport operations, so it may be difficult to determine what resources are specifically available. The situation may be complicated further if an airport is owned as part of an airport group or by a government department, agency or regional or local authority because the budget from which airport marketing activities are funded may not be owned by individual airports and may be used to fund a range of activities other than airport marketing. Some airports seek support from stakeholders with an interest in supporting airport marketing such as a chamber of commerce and industry, regional or local government, a tourism or regional development agency, an employment agency, local businesses or individuals, interest groups or airlines. This may be in the form of a partnership where resources are pooled and costs shared, and collaborations such as these will be discussed further in Chapter 9. For route development, individual airports can also pool resources with airports at the other end of the route. Grants are a common source of funding for airports in the US (Kramer et al., 2010) including from the US Department of Transport’s Small Community Air Service Development Program (SCASDP) that can be used as a source of funding for the marketing of small commercial airports (Chapter 7). Airports may hold fundraising events or try to access in-kind support (which is not financial but is free or provided in exchange for something from the airport) for marketing. For instance, airports may offer work experience opportunities for universities or colleges and their students in return for assistance with executing marketing activities. Airports may also seek opportunities for free advertising or publicity from local media or marketing and advertising agencies. The budget available for marketing will need to be specified in the marketing plan. Marketing literature often refers to four main methods for budget-setting (e.g. see Kotler et al., 2008) that can be applied to airports. The affordable method involves setting a budget according to what

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STRATEGIC MARKETING PLANNING management thinks the airport can afford or what the authority responsible for the airport can afford. The percentage of sales method involves setting a budget according to a set proportion of current or expected income. Some businesses will budget according to a set proportion of sales price, but this is complicated for airports given their range of customers and income sources. Instead, the budget may be calculated according to a set proportion of the overall budget for the airport. The competitive parity method involves setting a budget that is similar to competing airports. The objective and task method sets a budget according to specific marketing objectives and their desired outcomes. This involves defining specific objectives, determining tasks needed to achieve the objectives, and estimating the cost of performing each task and subsequently the overall cost for all tasks. Affordable and percentage of sales methods are common at larger commercial airports because the diversity and complexity of their marketing programmes make it difficult to use the competitive parity or objective and task method. However, they may use the objective and task method when budgeting for specific activities such as retail promotions or advertising campaigns. Smaller commercial and general aviation airports also tend to use a combination of methods. A budget may be set according to what management thinks the airport can afford or what the authority responsible for the airport can afford, but it may be negotiable if the objective and task method identifies a need to increase (or reduce) the overall budget. Many smaller commercial or general aviation airports will not have a budget for marketing or will have a budget that represents a very small fraction of the total operating budget for the airport. In these circumstances, low-cost or no-cost opportunities for marketing will need to be sought to fund any marketing programmes. An element of prioritising may also be necessary, for instance, by allocating a larger budget to the most important objectives and tasks. Airports then need to decide if the budget is sufficient to get the job done or whether certain objectives or tasks should be modified or withdrawn. Airports may also decide to seek additional funds such as through collaboration with stakeholders, grant applications or from in-kind support. Any budget an airport sets for marketing should be detailed enough to allow for the identification and allocation of necessary resources. It should also allow for any control and evaluation processes to be undertaken. However, there also needs to be a degree of flexibility built in, perhaps in terms of a contingency fund, which allows for amendments in response to any changes in the business environment. During the implementation of any marketing programmes, it is important to have some form of budget control such as using a live budget to track any income and expenditure according to what was projected and the current status. Cash flow projections should be used to ensure that cash is available to pay any bills. Purchase orders and coded invoices should be used to record details of any payments. One designated budget holder should be responsible for managing the budget, including approving and recording all income and expenditure and any invoices.

5.5.2 Control and evaluation Marketing control is used to monitor how the marketing plan is working in practice and to adjust it where necessary. Brassington and Pettitt (2012) distinguish between two main forms of control: strategic and operational. Strategic control is a long-term view of whether the overall marketing plan is driving the business in the desired direction, while operational control is a short-term view of whether any marketing programmes and their individual tasks are working in practice. Strategic control is typically conducted on an annual basis as part of the strategic marketing planning cycle, while operational control will need to be frequent enough to assess

STRATEGIC MARKETING PLANNING progress, identify any issues or problems, and address them before they get worse. Operational control may be conducted during ad-hoc or regular periodic meetings. Evaluation assesses the effectiveness of any marketing programmes and their individual tasks. Evaluation can also be used as part of the control process to help identify issues or problems. The evaluation process should normally be designed at the same time as marketing decisions are made and should be documented in the marketing plan, as opposed to being designed or used as an afterthought. There are two main types of evaluation metrics: product and process. Product metrics help to decide whether to continue, modify or stop using a strategic business unit or set of products. For instance, they may measure elements of financial performance (e.g. ROI or change in profit) or sales performance (e.g. increased sales or revenue). Metrics should assess whether enough new business has been generated as a result of marketing to justify the expense. Ideally, product metrics will allow airports to benchmark their performance with that of other airports or the airport industry in general. Process metrics measure the response to, and effectiveness of, any marketing activities. For instance, they may measure advertising efficiency (e.g. enquiries generated as the result of an advertisement for the airport), promotions efficiency (e.g. the proportion of vouchers redeemed during a retail promotional campaign at the airport), networking effectiveness (e.g. business stimulated as a result of collaboration with airport stakeholders), sales conversion rate (e.g. success at securing a new concession rather than simply generating an interest) and the extent to which marketing activities have made it easier to sell the product or service (e.g. delivering an airline presentation for a new route opportunity that provides the information needed by an airline to make their decision). Four main methods of evaluation can be used to investigate product or process metrics: topdown (e.g. by soliciting feedback from senior management), bottom-up (e.g. by soliciting feedback from customers), interactive (e.g. by soliciting feedback from a range of sources including potential, actual or lost customers, senior management, stakeholders, analysts and consultants) or objective (e.g. by using quantitative data). Evaluation metrics allow airports to measure the success or failure of marketing objectives. However, they will only measure what they have been designed to measure, so they need to be relevant and carefully designed. It is useful if the metrics are already widely used by other airports or by the airport industry in general so that benchmarking can be carried out. Metrics should be designed before any marketing programmes are implemented because it may be necessary to gather quantitative or qualitative information before, during or after implementation in order to measure any outcomes. It is also important not to change the metric to fit the situation because that will introduce bias, although there should be scope to consider using additional metrics where relevant, so that marketing opportunities or achievements that fall outside the scope of the metrics are not ignored.

5.6 Example airport marketing programmes This chapter concludes by providing some example airport marketing programmes for goals to increase the provision of air services (Table 5.7) and to raise community awareness and support (Table 5.8). The examples are purely hypothetical. They illustrate how airport marketing programmes might be presented as opposed to providing recommendations for what airports should do to achieve the respective goals. Marketing objectives that may be used to reach the goals are shown along with tasks, responsibility, timing, budget, and mechanisms for control and evaluation. Objectives and tasks should be listed in order of importance and the

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Weekly When relevant When relevant Feb-Jul

Director Director Executive Executive Director Executive Executive

Deliver route proposals to operators at their corporate offces

Share a stand with our tourism partners at two travel trade exhibitions p/year

List un-served route opportunities for our airport on The Route Shop

Monitor airline requests for proposals on Route Exchange

Guided tour of our airport and region for target operators

Offer price incentives and marketing support for new routes

Advertise in Airline Business magazine (six issues)

Continuous

Mar, Nov

When relevant

May, Sep

Director

Deliver route proposals to operators at two route development forums p/year

75,000

500,000

35,000

0

20,000

50,000

40,000

100,000

Fortnightly meeting

Fortnightly meeting

Fortnightly meeting

Fortnightly meeting

Fortnightly meeting

Fortnightly meeting

Fortnightly meeting

Fortnightly meeting

(Continued)

Response to advert

Feedback from operators

Feedback from operators

Relevant opportunities

Response to listed routes

Feedback from trade

Feedback from operators

Feedback from operators

Process evaluation

Timing

Responsible

Tasks

Operational control

Objective 2: three additional inbound international charter passenger services within three years

Total budget: USD 1 million for three years Budget (USD)

Objective 1: six additional scheduled international passenger services within three years

Goal 2022–2025: Increase the provision of international passenger services

Table 5.7 Example marketing programme for an airport

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Executive Executive Director Director Director

Update tourism information page on our website

Generate interest and awareness for new routes on Twitter and Facebook

Generate media coverage for route and tourism potential in our region

Launch events for new routes

Contingency budget for additional tasks

When relevant

When relevant

When relevant

When relevant

Jan

Jan

150,000

30,000

0

0

0

0

Fortnightly meeting

Fortnightly meeting

Fortnightly meeting

Fortnightly meeting

Fortnightly meeting

Fortnightly meeting

Feedback from benefciaries

Feedback from attendees

Coverage

‘Followers’, ‘likes’ and other engagement

‘Hits’ on the page

‘Hits’ on the page

Source: Compiled by the authors

Product evaluation: prepare an annual analysis of the number of international passenger air services (scheduled and charter) and the ROI.

Strategic control: review the marketing plan with the Board of Directors at annual Board meetings.

Executive

Develop a market intelligence page on our website

STRATEGIC MARKETING PLANNING 147

Objective 2: Reduce the number of complaints to our airport by 10% within three years

Total budget: USD 50,000 for three years

Sep Aug

Manager Manager Manager Manager

Organise an annual open day at our airport

Deliver at least two community outreach presentations p/year

Generate feature articles and positive media coverage for our airport

Organise an annual runway fun-run for charity

Organise an annual community BBQ event Manager for charity

When relevant

Mar, Nov

Jul

When relevant

Assistant

Host education and other community group visits to our airport

Timing

Responsible

Tasks

10,000

10,000

0

5,000

10,000

10,000

Budget (USD)

Weekly meeting

Weekly meeting

Weekly meeting

Weekly meeting

Weekly meeting

Weekly meeting

Operational control

(Continued)

Feedback form

Feedback form

Coverage

Feedback form

Feedback form

Feedback form

Process evaluation

Objective 5: Increase hits on the community section of our website by 15% within three years

Objective 4: Achieve 2 feature stories in the local media each year for three years

Objective 3: Host 2 charity events at our airport within three years

Objective 1: Increase community group visits to our airport by 15% within three years

Goal 2022–2025: Raise community awareness and support for our airport

Table 5.8 Example marketing programme for an airport

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Assistant

Manager Manager

Use social media to generate awareness and support for our airport (e.g. via the blog, Twitter, Facebook and Instagram)

Produce and distribute a biannual newsletter (online & e-mail)

Contingency budget for additional tasks

When relevant

Jun, Dec

Continuous

Continuous

5,000

0

0

0

Weekly meeting

Weekly meeting

Weekly meeting

Weekly meeting

Feedback from benefciaries

Subscribers and other engagement

‘Views’, ‘followers’, ‘likes’ and other engagement

‘Hits’ on the page

Source: Compiled by the authors

Product evaluation: prepare the annual number of community group visits, the annual number of complaints to the airport, the number of annual charity events and money raised, the annual number of feature articles on the airport in the local media, ‘hits’ on the community section of our website and benchmark results from our annual community survey with the previous years.

Strategic control: review the marketing plan with the Board of Directors at annual Board meetings.

Assistant

Improve the community section of our website

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STRATEGIC MARKETING PLANNING programmes may be more or less detailed, depending on the specific needs of the airport. For instance, a more detailed breakdown of the budget for each task can be provided (e.g. for staff travel and accommodation, registration fees for attending events, agency fees for the production of advertising materials and food and drink costs for hosting any visitors to the airport); staff and non-monetary resource allocation can be specified; a more detailed breakdown of each task can be provided and a Gantt chart can be produced to provide a detailed schedule for the programme; and more detailed metrics for process evaluation can be defined, for instance, beyond simply using ‘followers’ and ‘fans’ on social media as a measure of interest and awareness, but also more meaningful forms of engagement, including the response to any targeted campaigns or competitions, which is discussed in more detail in Chapter 10. Finally, airports may also want to specify key messages and the target audience for each marketing programme.

References AAAE (American Association of Airport Executives). (2019). Press release: AAAE announces three recipients of airport innovation awards. [online] AAAE. Available at: https://www.aaae.org/AA AE/AAAEMemberResponsive/Press_Releases/2019/AAAE_Announces_Three071119. aspx [Accessed 15 April 2021]. Adelaide Airport. (2020). Adelaide Airport 2020 integrated review. [online] Adelaide Airport. Available at: https://www.adelaideairport.com.au/corporate/wp-content/uploads/2020/10/AAL2020-Integrated-Review-1.pdf [Accessed 15 April 2021]. Ansoff, I. (1957). Strategies for diversification. Harvard Business Review, 35(5), 113–124. Armstrong, G., Kotler, P., Harker, M. and Brennan, R. (2019). Marketing: an introduction, 4th ed. Harlow: Pearson Education Limited. Ashford, N. J., Mumayiz, S. and Wright, P. H. (2011) Airport engineering: planning, design and development of 21st century airports, 4th ed. Hoboken, NJ: John Wiley & Sons. Baker, M. (2008) The strategic marketing plan audit. Axminster: Cambridge Strategy Publications. Brassington, F. and Pettitt, S. (2012) Essentials of marketing, 3rd ed. Harlow: Pearson Education Limited. Dallas Airport System. (2010). Dallas Executive Airport marketing plan, briefing for the transportation and environment committee. Dallas: Dallas Airport System. Davison, L., Ryley, T. and Snelgrove, M. (2010). Regional airports in a competitive market: a case study of Cardiff International Airport. Journal of Airport Management, 4(2), 178–194. Doran, G. T. (1981). There’s a S.M.A.R.T. way to write management’s goals and objectives. Management Review, 70(11), 35–36. Edmonton International Airport. (2021). About EIA: noble cause, vision, mission, goals and values. [online] Edmonton International Airport. Available at: https://flyeia.com/corporate/abouteia/noble-cause-vision-mission-goals-values/ [Accessed 15 April 2021]. Graham, A. (2010). Airport strategies to gain competitive advantage. In: P. Forsyth, D. Gillen, J. Muller and H.-M. Niemeier, eds., Airport competition: the European experience. Abingdon: Routledge. Halpern, N. (2018). Airport business strategy. In: A. Graham and N. Halpern, eds., The Routledge companion to air transport management. Abingdon: Routledge. Hooley, G., Nicoulaud, B., Rudd, J. M. and Lee, N. (2020). Marketing strategy and competitive positioning, 7th ed. Harlow: Pearson Education Limited. Huff, A. (2011). What’s your airport’s marketing strategy? [online] AviationPros.com. Available at: http://www.aviationpros.com/blog/10442121/whats-your-airports- marketing-strategy [Accessed 15 April 2021]. Kotler, P. and Armstrong, G. (2021). Principles of marketing, 18th ed. Harlow: Pearson Education Limited. Kotler, P., Wong, V., Saunders, J. and Armstrong, G. (2008). Principles of marketing, 5th European ed. Harlow: Pearson Education Limited.

STRATEGIC MARKETING PLANNING Kramer, L., Fowler, P., Hazel, R., Ureksoy, M. and Harig, G. (2010). ACRP report 28: marketing guidebook for small airports. Washington D. C: Transportation Research Board. Lian, J. I. and Rønnevik, J. (2011). Airport competition – regional airports losing ground to main airports. Journal of Transport Geography, 19(1), 85–92. Manassas Regional Airport. (2019). Manassas Regional Airport strategic plan 2019. Manassas: Manassas Regional Airport. McDonald, M. (2008) Malcolm McDonald on marketing planning: understanding marketing plans and strategy. London: Kogan Page. McDonald, M. and Wilson, H. (2011). Marketing plans: how to prepare them, how to use them, 7th ed. Chichester: John Wiley & Sons. National Academies of Sciences, Engineering, and Medicine. (2009). Strategic planning in the airport industry. Washington D. C: The National Academies Press. Pierceall, K. (2011). Ontario Airport: City’s bid to take reins short on rescue strategy. The PressEnterprise, 5 April 2011. Porter, M. E. (1979). How competitive forces shape strategy. Harvard Business Review, 57(2), 137–145. Porter, M. E. (1980). Competitive strategy: techniques for analysing industries and competitors. New York: Free Press. Productivity Commission. (2019). Economic regulation of airports: productivity commission inquiry report, Report No. 92. Canberra: Commonwealth of Australia. Rankin, W. (2011). King County: a case study model for strategic marketing planning for airport managers. Journal of Aviation Management and Education, 1(March), 8–17. Rijeka Airport. (2021). Rijeka Airport: mission and vision. [online] Rijeka Airport. Available at: http://rijeka-airport.hr/en/mission-and-vision [Accessed 15 April 2021]. Royal Schiphol Group (2019). Annual report 2019. Amsterdam: Royal Schiphol Group. Saskatoon Airport Authority. (2005). Saskatoon Airport Authority business plan 2005–2009. Saskatoon: Saskatoon Airport Authority. Saskatoon Airport Authority. (2021). About us: mission & history. [online] Saskatoon Airport Authority. Available at: https://skyxe.ca/en-us/about-us/mission-history [Accessed 15 April 2021]. Stone, R. (2011). Sister act. Airport World, 14(4), 34–35. Wang, K.-J. and Hong, W.-C. (2011). Competitive advantage analysis and strategy formulation of airport city development – the case of Taiwan. Transport Policy, 18(1), 276–288.

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The airport product, brand and experience This chapter examines the airport product. It begins by defining the product and goes on to discuss the main features of the airport product and the amount of control an airport has over these. The nature and use of branding by airports are also explored. The chapter concludes by assessing how the product and overall airport experience can be evaluated and planned to meet the needs and expectations of the airport’s customers.

6.1 Defnition of the airport product Chapter 1 discussed the differences between marketing goods and services and identified the problems in applying general marketing concepts, traditionally used with manufactured commodities, to airports. These difficulties become very apparent when the airport product is being considered. In its broadest sense, the product consists of the supply of facilities and services offered by the airport to meet the needs of different customers. It is extremely complex because of the wide range of features that are brought together by airports in order to fulfil their role within the air transport industry. These include ATC, security and police, fire and rescue in the airfield, and ground handling facilities so that passengers, their baggage and cargo can be successfully transferred between aircraft and terminals and processed within the terminals. Car parking infrastructure and approach roads need to be considered, as do immigration and customs services. Also included is the increasingly diverse offer of commercial/non-aeronautical and non-operational/non-aviation facilities within and outside the terminal, ranging from shops, restaurants, banks and car hire to hotels, conference services, entertainment/leisure amenities and business parks. This airport product is composite, as many of these services (e.g. in ground handling or commercial areas) are often provided by other companies or by government agencies, for instance, in the case of security and immigration.

DOI: 10.4324/9781003039563-6

PRODUCT, BRAND AND EXPERIENCE The product has tangible elements such as the physical infrastructure and intangible elements such as the provision of services. Urfer and Weinert (2011) classify the tangible features as the airside infrastructure (e.g. runways, taxiways and navigational aids), landside infrastructure (e.g. terminals, parking facilities and ground transport interchanges), airport support infrastructure (e.g. aircraft maintenance, in-flight catering services, police and security facilities) and support areas such as industrial areas and duty-free zones. The intangible components are defined as the organisational, structural and operational aspects such as state support, administration (e.g. airport planning and management), operations (e.g. ATC, airport safety and security), airport maintenance and external factors such as regulations and the environment. While dividing the product between tangible and intangible features goes some way to help understand its detailed nature, this definition gives little indication of how the product relates to customer needs and expectations, so a more demand-focused definition is needed. A popular approach adopted in marketing theory divides the product into the core, actual or physical, and augmented elements (Kotler et al., 2020). The core product is the essential benefit the customer is seeking, while the actual product delivers the benefit. Product features, design and packaging all make up the physical product. The augmented product is then additional customer services and benefits that will be built around the core and actual products and will distinguish the product from others. Much of the competition will typically take place at the augmented level. Furthermore, it is common to differentiate between business-to-consumer (B2C) products purchased to satisfy personal and family needs, and industrial or business-to-business (B2B) products bought to use in a company’s operations or to make other products (Pride and Ferrell, 2020). The airport industry has both types of products (Figures 6.1 and 6.2). For instance, it offers a B2B product to airlines and a B2C product to its passengers. For the airline, the core is the ability to land and take off an aircraft, while for the passenger it will be the ability to board

Augmented product

Actual product

• Runway, terminal, airbridges • Fire and rescue • ATC facilities • Fuel services • Ramp handling equipment

Core product

• Ability to land and take-off

Figure 6.1 The airport product for airlines Source: Compiled by the authors

• Service level agreements • Airport opening hours • Minimum connect time (MCT) • Marketing support • Price discounts

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PRODUCT, BRAND AND EXPERIENCE

Augmented product

Actual product

Core product

• Airport lounges • Loyalty schemes • Commercial facilities • Conference facilities • Transfer services • Hotels • Check-in desks and self-service kiosks • Baggage handling • Security, customs, immigration • Ground transport • Information services

• Ability to board or disembark an aircraft

Figure 6.2 The airport product for passengers Source: Compiled by the authors

or disembark an aircraft. For every airport customer – not only airlines and passengers – there will be a core product, for instance, for freight forwarders, it will be the ability to load and unload freight on the aircraft. In order to provide the core product for the airline, the actual product will need to consist of the runway, the terminal building, the equipment, and so on, as well as the expertise to provide all these facilities efficiently and safely. For passengers, the actual product will include check-in desks or self-service kiosks, baggage handling and other features such as immigration control that will enable passengers to fulfil their need of boarding or disembarking the aircraft. The actual product will also include adequate transport services to and from the airport and the provision of other facilities such as information desks and toilets. At the augmented level the airport may, for instance, set service level agreements with its airlines to speed up processes or open for longer hours to improve accessibility. For the passenger, the range and diversity of shops, F&B services and other commercial facilities, as well as other features such as the ease of transfer between different aircraft, could all be considered part of the augmented product. Loyalty schemes that offer passengers additional benefits could also be included here. As will be mentioned later in this chapter, technology increasingly plays a key role in providing differentiated services at the augmented level for both airlines and passengers. A comparable product model can be applied to others in the airport’s extended customer base such as meeters and greeters, visitors, employees and local residents and with typical augmented level products being sporting, leisure or cultural events that are organised to appeal to the local community. Jarach (2005) adopts a similar approach to defining the product when he divides it into four levels of value proposition. He defines the core benefit (equivalent to the core product) as being to transfer passengers and goods between two points. His next two levels, the generic and expected product, are similar to the actual product. He gives examples of frequency of routes, service personalisation, cargo, comfort, baggage handling, check-in, information, operational efficiency and ticketing for the generic product and multi-modal services for his expected

PRODUCT, BRAND AND EXPERIENCE product. His final level is the wide product (like the augmented product), which consists of logistic services, commercial services, congressional services, tourist services and consulting services. Table 3.4 in Chapter 3 identifies the main factors that influence the passenger’s choice of airport in Washington (Baltimore, Dulles or Reagan National). This clearly demonstrates the limited appeal of the tangible airport product in affecting passenger choice (other than accessibility – closest airport – which was identified by 44–69 per cent of passengers as being an influential factor). Likewise, Figure 3.1 also shows that the airport tangible product features associated with connecting time, departing and arriving facilities play a much less significant role in influencing passenger choice than airline product features. It is the airport’s augmented level product that typically has the most significant impact.

6.2 Features of the airport product and its controllability Irrespective of how the airport product is defined, its characteristics will have a major impact on the type and quantity of traffic that uses the airport. With product planning, it is the role of airports to design features that are appropriate to the target markets they are considering and attractive enough to give the airport a competitive edge over rival airports. With such a dynamic industry as aviation, the needs and expectations of customers are continually changing, and airports have to be responsive to the ever-evolving marketing environment (Chapter 2). However, a major challenge is that, unlike many other industries, there are a number of parts of the product where the airport may have only limited control and influence. Most obvious is the actual location of the airport, which cannot be changed, and is one of the most important factors that influences choice. Airports need to ensure that they meet all the physical airfield infrastructure requirements and associated technical capabilities of the airlines they are aiming to attract. This will include adequate runway length and capacity; appropriate ATC, instrument landing, lighting and weather monitoring systems; and sufficient ramp and apron space and gate capacity. These physical facilities will play a key role in determining what type of airline is able to use the airport, and by enhancing this part of the product, for instance, by increasing runway length, the airport might be able to accommodate new airlines such as those operating longer-range aircraft. Such infrastructure improvements are invariably costly to implement, so the trade-off between increased costs that may in turn impact on the airport’s price competitiveness has to be weighed up against the enhanced attractiveness of the airport product. Governments may impose night curfews or quotas that will make airports unattractive to certain types of traffic, especially long-haul carriers, who may only have a certain limited time period when they can serve a country, or cargo operators and integrators. Cargo customers often require 24-hour operations in order to meet the demands of clients in different time zones and to achieve overnight delivery. If airports cannot operate around the clock, this may give them a competitive disadvantage in this area. While it may be difficult for the airport to have any significant effect on these environmental restrictions, or indeed on any planning decisions related to additional capacity, it is nevertheless always beneficial for the airport to try to develop good relations with the local community in the hope that some influence can be exerted. This can be undertaken primarily with public relations activities (Chapter 9), for instance, by emphasising the positive economic impacts of airport operations; by sponsoring or getting directly involved with local events; by arranging educational visits and open days; and by developing effective communications with the local and national press.

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PRODUCT, BRAND AND EXPERIENCE Another aspect of airfield operations where the airport may have limited control is slot allocation (Chapter 8), particularly if the airport is congested and slots are allocated through the formal IATA scheduling committee processes which favour incumbent airlines by giving them grandfather rights to slots (the right to use a particular slot time used in the previous equivalent season). However, if the scarcity of runway capacity is not such an issue, it is the airport’s role to ensure, by communicating with all its airline customers, that slots can be made available as much as possible to suit their needs. Within the terminal, the product generally tends to be less influenced by external factors, so it is here that the airport can more readily have an impact on the product offering. A good terminal design will be crucial, and at a general level, decisions have to be made on the overall layout such as choosing between linear or curvilinear terminals, or piers as opposed to remote satellites. Airports must ensure that they use realistic planning standards related to space requirements, queuing and waiting that are appropriate to their target markets. Airports wanting to attract transfer traffic must possess the more sophisticated and costly passenger and handling systems needed for this type of traffic; likewise, if the airport is interested in connecting cargo traffic, it must offer efficient transshipment facilities. If the airport wants to appeal to FSCs or global alliances it must be able to offer product enhancements such as dedicated business lounges and other dedicated facilities that their passengers desire, while if the airport wants to attract LCCs it must provide a product that fits in with the LCC business model, which typically requires simple, efficient and low-cost facilities, although (as discussed later in this chapter) the needs of FSCs and LCCs are changing as the models evolve. Many of the individual product features within the terminals are related to passenger, cargo and baggage processing. This includes areas such as security, customs and immigration. There have been considerable changes to such processes over the last few years, particularly in the biometrics and technology areas that have helped airports, in collaboration with other service providers in these areas, to enhance the passenger experience (e.g. self-service check-in kiosks – some with bag-tags, assisted and unassisted baggage drop, automated biometric checking of passports and visas, self-boarding e-gates at departure). Figure 6.3 shows the share of airports that had embraced such technologies in 2020 (self-service check-in and assisted bag-drop being the most popular) and how many planned to use such technologies by 2023. By then, all such technologies are expected to have been adopted by at least 70 per cent of airports (based on a survey of 146 airports representing around a quarter of all global passenger numbers). At the actual product level, the airport clearly needs to ensure that it provides appropriate customs and immigration services if it is interested in attracting international passengers. However, a major complication for airports is that immigration and customs services will normally be provided by state agencies, as is often also the case with security, and in turn, many practices will be determined by national and international regulation, which will consequently limit the airport’s influence in this area. Perhaps at the augmented product level though, there may be the opportunity to provide pre-clearance services as offered, for instance, with some flights to the US. In this case, passengers go through US customs, immigration and agriculture inspections at their originating airport and as a result are treated as domestic passengers when they arrive; this allows a quicker process through the US airport. Such services are offered at Dublin and Shannon in Ireland, a number of Canadian airports and a few other locations such as Bermuda, the Bahamas and Aruba. Abu Dhabi International Airport introduced such a service in 2014, and it is planned for Amsterdam Airport Schiphol, Brussels Airport and El Dorado Airport in the near future.

PRODUCT, BRAND AND EXPERIENCE 100

Respondent airports (%)

90 80 70 60 50 40 30 20 10 0 Check-in via kiosk

Bag-tag available at kiosk

Implemented by 2020

Bag-drop (assisted)

Bag-drop Automated Self-boarding (unassisted) border control gates

Planned for implmentation by 2023

Figure 6.3 Share of airports with implemented or planned self-service processes, 2020 and 2023 Data source: SITA (2021)

Airports tend to have a greater control over the ground handling services provided, and again the major technological changes that are occurring may give an opportunity to the airport, with other service providers in this area, to gain a competitive edge. The supply of ground handling services may be the responsibility of the airport, airlines or handling agents or a combination of these. At some airports there may be a monopoly provider (usually the airport or its main airline), which may not be popular with certain airline customers – although such practices are prohibited in some countries, most notably in Europe for all but the smallest airports, owing to the EC directive on access to the ground handling market at European airports. Circumstances do vary but the ability of an airline to self-handle or to have a choice in handler may be significant in their choice of airport, so the airport needs to ensure that they take this into account. In addition to these essential processes at the actual product level, there is also a diverse range of commercial/non-aeronautical facilities, many at the augmented level, which can be provided both within and maybe outside the terminal. These include not only traditional commercial outlets such as retail and F&B but also entertainment, leisure, beauty and wellness facilities such as spas and salons. The airport will normally have considerable control over these, as even though they are typically provided by third-party specialists or concessionaires, it is the airport that will choose the concessionaire and determine the conditions of the contract. While such product features will generally play an insignificant or only a small role in influencing a passenger’s choice of airport, such facilities are nevertheless important in generating invaluable non-aeronautical revenues for the airport. For many passengers, particularly those travelling for leisure purposes, they will also undoubtedly enhance the airport product and improve the overall passenger experience. With the specific case of transfer passengers, commercial facilities may have a greater impact on choice, if passengers cannot perceive other significant differences between the convenience and quality of the choice of connecting flights at different airports. Hence many airports that serve a significant proportion of transfer passengers such as Dubai International, Hamad International and Singapore Changi, offer a huge range of airside commercial facilities to meet

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PRODUCT, BRAND AND EXPERIENCE the needs of their transfer passengers. A notable example is Istanbul Airport, the new airport that opened in 2018, which has a terminal floor area of 1.4 million square metres. It is the biggest terminal in the world under one roof and has a duty-free area of 55,000 square metres and a F&B area of 32,000 square metres that has more than 400 local and international outlets. The availability of wi-fi at airports is crucial for airports to be able to undertake a multitude of marketing activities (Chapter 10). It is also a very important product feature for passengers and has changed over the last decade from being an optional amenity into an absolute necessity. Consequently, at most airports, it is now free, and it is no longer an exclusive, paid-for service. However, the quality varies, not only in terms of speed but also in duration, and at some airports, a faster connection or a longer period of connectivity still incurs a fee. Whilst this may generate some non-aeronautical income, most airports agree that wi-fi needs to be a free, fast and easy-to-register service to serve the dual purposes of meeting the needs of passengers, and also to allow the airport to have an effective digital marketing strategy (e.g. see ACI Europe, 2018). Other important related features are charging stations for electronic devices, electrical plugs and working areas for laptop users. Another vital feature of the airport product relates to the airport’s accessibility. This in turn will not only concern the various car parks (e.g. short term, long term and fast track) and product features of the car park (such as security and distance from the terminal) but also the availability of surface access links (e.g. direct rail and supply of taxis) and convenience of drop-off places. While the airport may have limited influence over surface transport issues, it may be able to support local road and rail improvements through the planning process or through public relations initiatives, or alternatively perhaps by providing financial support to such services. It may even decide that in order to meet the expectations of its customers it needs to operate some of the surface access links itself, as is the case with London Heathrow Airport and the Heathrow Express link with London. Information provision and wayfinding is also an important part of the airport product (National Academies, 2011). Traditional physical self-help tools such as maps and leaflets can play a role here, but technology has provided many more options. For instance, a number of airports have experimented with virtual assistants such as life-size holograms (e.g. Bristol Airport, Paris Orly Airport and John F. Kennedy International Airport) whilst others are using robots. For instance, Incheon International Airport has the robot AIRSTAR, which passengers can communicate with in a number of different languages using voice recognition, touch-screen panels or barcode recognition. Similarly, Munich International Airport has Josie Pepper (Figure 6.4) and Brussels Airport has BRUce Pepper, which can read boarding passes, inform passengers of their boarding gate, tell the weather in real time, direct people to the nearest toilet and provide other practical information. Since the coronavirus pandemic, and with the need to have as much contactless communication as possible, such virtual assistance has been encouraged. However, whilst such technologies can be useful in providing information, many airports have clearly recognised (both before and since the coronavirus pandemic) that virtual assistance may not be totally sufficient to satisfy all passengers. As a consequence, some airports have human airport helpers or ambassadors that move around the terminals to assist passengers and answer their questions. These can be external volunteers, as at the airports serving Atlanta, Austin, Baltimore/Washington, Charlotte, Houston, Jacksonville and Minneapolis-St. Paul in the US, and Halifax Stanfield in Canada. Such schemes are also popular at the Australian and New Zealand airports. Alternatively, there may be volunteers from businesses located at the airport, who are specially trained to provide help and are readily accessible (e.g. with an identification badge). In Europe, Lyon-Saint Exupéry’s Airport pioneered the scheme (having over

PRODUCT, BRAND AND EXPERIENCE

Figure 6.4 Munich Airport’s robot – Josie Pepper Source: Courtesy of Flughafen München GmbH

2,000 helpers) and a number of other airports have followed them. Elsewhere, airports may employ paid staff specifically with the role of helping passengers, for instance, Changi Experience Agents at Singapore Changi Airport or Heathrow Airport’s Passenger Ambassadors, who wear a distinctive purple uniform in keeping with the airport’s brand image. Since the coronavirus pandemic, information provision and help has become even more important than ever, and even though physical contact is more challenging with social distancing, many airports have brought in staff not only to help passengers but also to serve the dual role in facilitating compliance with new health and safety requirements, such as the Wellness Ambassadors at Abu Dhabi International Airport and San Francisco International Airport. Combining the use of technology with a human touch, while maintaining social distancing, Munich Airport has introduced an information system called InfoGate – that allows passengers to speak with a person via a kiosk. This complements the use of robots (Figure 6.4) with an interactive, digital communication system that is capable of supplying information in-person (albeit via a screen) to any number of locations from a central office. The system is designed to look and feel like a face-to-face interaction with staff at a conventional information desk. Such a system may be of particular interest to operators of multiple airports due to the potential cost savings without necessarily having a negative impact on the passenger experience. In fact, the system is able to scan, print and edit documents, therefore providing fast and effective customer services. Also, by placing highly skilled staff at a single, central location, the system makes it easy to increase the availability of these skills at dispersed locations. Other rapidly changing parts of the airport product are digital channels such as the airport website, social media or mobile application. These play an important and complex role not only in

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PRODUCT, BRAND AND EXPERIENCE providing information but also in promoting the airport (Chapters 9 and 10) and acting as a distribution channel (Chapter 8). However, in terms of their role solely as a product feature, airport digital channels can enhance the product by providing useful information for passengers such as check-in periods, security arrangements, surface transport details and maps of the layout of the airport. The use of mobile networks and smartphone applications allow passengers to use a mobile device as a virtual customer service desk. This can help passengers navigate the airport and give them details of where they are in the check-in process, for instance, by providing gate numbers. It can also provide up-to-date information concerning the commercial services and facilities on offer and provides a means of payment. The role that digital channels play in airport marketing is further discussed in Chapter 10. Overall, in providing the product, the airport must clearly take account of the changing needs and expectations of its customers, even though in some areas this will be particularly difficult because of limited actual control and the involvement of other bodies in providing the product. A critical factor affecting all parts of the airport product is also a need to provide more sustainable infrastructure and services, which is discussed in detail in Chapter 11. Moreover, as with other industries, there may be dilemmas in trying to introduce changes in technology while still keeping a customer, face-to-face focus, particularly in a post-coronavirus pandemic world. There may also be challenges in producing the right balance between operational and commercial facilities to ensure that passengers can be moved efficiently from terminal to plane with a commercial offer that is attractive but not too much of a distraction, yet at the same time generates the much needed non-aeronautical revenue for the airport.

6.3 The airport brand According to Dibb et al. (2019) a brand is a name, term, design, symbol or any other feature that identifies one seller’s goods or service as distinct from those of other sellers. The brand name is the part of the brand that can be spoken (including letters, words and numbers) whereas the brand mark – commonly in the form of a symbol (i.e. logo) and/or design – is the part that cannot be spoken, and is therefore an important graphical component of the brand. Within the airport industry, the brand can add more tangible cues to the intangible service that the airport offers and can potentially promote preference and loyalty among target markets. Paternoster (2008) argues that, if used successfully, branding can significantly improve customers’ satisfaction with the airport experience. Brand design and development is also an area where airport management can have a very significant influence, unlike a number of other aspects of the airport product. As a result, branding has become an important element of airport marketing strategy and is often underpinned by some kind of a ‘brand manual’ that explains the rationale behind a company’s brand and provides strict guidelines for how graphical components of it should be presented and used by people – internally within the company as well as externally by others that interact with the brand. The guidelines are essential for maintaining a clear and consistent implementation of the brand, at least visually. Starting with the airport name, a number of different types exist with airports (Halpern and Regmi, 2011) (Table 6.1). The simplest option is to name the airport after the city that it serves such as Auckland Airport or Brisbane Airport. Two names can also be included in the name such as Leeds Bradford International Airport or Dallas Fort Worth International Airport. An airport may decide to include the name of the nearest large city or town, even if it may not be particularly close. If it does this, it may well make the airport easier to market and find in airline computer reservations systems and internet searches. This is typically the case with secondary airports that serve LCCs. Examples include Stockholm Skavsta Airport, which is

PRODUCT, BRAND AND EXPERIENCE Table 6.1 Categories of airport brand names Categories

Sub-categories

Examples

Place

Country, city-state, administrative region

Malta International Airport

Region

Sunshine Coast Airport

City, town, village

Melbourne Airport

Multiple cities, towns, villages

Frankfurt Hahn Airport; Tri-Cities Airport

Natural attraction

Lakselv North Cape Airport

Man-made attraction

Bardufoss Snowman International Airport

International

Vienna International Airport

National

Leros Island National Airport

Regional

Asheville Regional Airport

Domestic

Bisha Domestic Airport

Executive

Orlando Executive Airport

General aviation

Miami Homestead General Aviation Airport

Royalty

King Abdulaziz International Airport

Political leader/revolutionary

Indira Gandhi International Airport

Sportsperson

Cristiano Ronaldo International Airport

Music

Blue Danube Airport Linz

Attraction Scope of services

Famous person

Other

Source: Adapted from Halpern and Regmi (2011) and other sources Note: Several of those listed such as Lakselv North Cape Airport and Bardufoss Snowman International Airport only use the full name for marketing purposes (e.g. when advertising to airlines and the travel trade), with the airports offcially named as Lakselv and Bardufoss respectively

100 kilometres from Stockholm, Frankfurt Hahn Airport, which is 120 kilometres from Frankfurt, Chicago Rockford International Airport, which is 145 kilometres from Chicago, and Brussels South Charleroi Airport, which is 46 kilometres from Brussels. This may result in many airports seemingly serving one city. A prime example is London, which appears to be served by nine airports: London Heathrow, London Gatwick, London Stansted, London City, London Luton, London Southend, London Biggin Hill, London Oxford and London Ashford. Another example is New York where in 2018 Stewart International Airport was renamed New York Stewart International Airport to emphasise its proximity to New York City. Rather than including a city in the name of the airport, an airport may include the region it serves such as Gold Coast Airport in Australia or Girona Costa Brava Airport in Spain. Another example is Knock Airport in Ireland which was re-branded as Ireland West Airport Knock to emphasise its importance as an access point to the west of Ireland. Basel-Mulhouse Airport was given the full name EuroAirport: Basel-Mulhouse-Freiberg in 1987 to reflect its central European location and bi-national (Swiss and French) ownership. East Midlands Airport in the UK is a further case. In 2003 this airport decided to change its name to Nottingham East Midlands Airport to make its location seem more specific, but this was an unpopular move for the residents of the nearby towns of Leicester and Derby, which are nearer the airport. Hence, in 2006 the airport adopted a fuller title: East Midlands Airport: Nottingham-Leicester-Derby but the

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PRODUCT, BRAND AND EXPERIENCE ‘Nottingham-Leicester-Derby’ part has now been dropped. The alternative is not to name the specific cities served, as with Tri-Cities Airport in the US that serves a number of cities in Northeast Tennessee, Southwest Virginia and North Carolina. For small countries, it might make more sense to name the airport after the country served such as Malta International Airport. Another option is to name the airport after nearby attractions. These may be natural (e.g. Lakselv Banak North Cape Airport – although the cape is about 190 kilometres away and Annecy Mont Blanc Airport) or man-made (e.g. Bardufoss Snowman International Airport). Other airports use famous people associated with the location. These may be members of the royal family (King Abdulaziz International Airport and King Khaled International Airport), politicians (John F. Kennedy International Airport, Delhi Indira Gandhi International Airport, Paris Charles de Gaulle Airport, Bill and Hillary Clinton National Airport, Gdan´sk Lech Wałe˛ sa Airport), religious icons (John Paul II International Airport Krakow Balice, Tirana International Airport Mother Teresa Albania), mythical gods (Quetzalcóatl International Airport), composers, entertainers and musicians (Warsaw Chopin Airport, Louis Armstrong New Orleans International Airport, Liverpool John Lennon Airport), artists (Pablo Ruiz Picasso Airport, Leonardo da Vinci-Fiumicino Airport), and others such as at Venice Marco Polo Airport and Skopje Alexander the Great Airport. Tenzing-Hillary Airport in Nepal is named after the climber Sir Edmund Hillary and his partner Tenzing Norgay. Some airports are named after sports stars, for instance in 2017 Madeira Airport was renamed Cristiano Ronaldo International Airport after the famous footballer who was born there, whilst in 2019 Louisville International Airport was renamed Louisville Muhammad Ali International Airport following the boxer’s death in 2016. Serious consideration needs to be given to the appropriateness of the chosen name, to ensure that it has a positive impact on the airport image and operations. In Germany, Weeze Airport – which is 70 kilometres from Dusseldorf – wanted to include Dusseldorf in its name but this was blocked by a court ruling that considered this too misleading for passengers. Alternatively, the name may be too distinctive and attract too narrow a range of customers. Rovaniemi Airport in Finland is known as the official airport of Santa Claus in order to contribute to Santa-based tourism in Finnish Lapland (Halpern, 2008). This type of traffic is very seasonal, however, and is dominated by charters; as a result, such naming may discourage other airlines that might provide a more regular service. In addition, when using famous names, airports need to ensure that the name they choose is closely associated with the airport and the surrounding area. In the UK there has been some debate as to whether the name ‘Robin Hood’ is appropriate for Doncaster Sheffield Airport, given that this legendary figure is more strongly linked with Nottingham versus Doncaster or Sheffield. Similarly, although the footballer George Best came from Northern Ireland and is included in the name of Belfast City Airport, he is also closely associated with Manchester, where he played for many years for Manchester United Football Club. Changing an airport’s name is not that unusual, especially in the US, but it is often controversial. For instance, in 2021 it was agreed after a considerable debate that McCarran International Airport serving Las Vegas, named after the controversial politician of the 1930s–1950s, should be renamed after Senator Harry Reid. Elsewhere, in 2016 a petition was gathered to support a change in name of Pittsburgh International Airport to Fred Rogers International – Fred Rogers being a late well-known presenter of a local television programme. However, the airport authority declined to change the name, stating that vacation planners were more likely to search online for Pittsburgh Airport than for Fred Rogers. Meanwhile, in 2017 in Southern California, Bob Hope Airport was renamed Hollywood Burbank Airport with the airport authority stating that, while the general public knew that the late Bob Hope was a comedian, few outside the region knew the airport was located so close to Hollywood and many top Los

PRODUCT, BRAND AND EXPERIENCE Angeles-area attractions. In 2019, General Mitchell International Airport was also changed to Milwaukee Mitchell International Airport to add the geographical location. An interesting UK airport example is the regional airport Teeside International. In 2004 the name was changed to Durham Tees Valley Airport to the disappointment of many local people. However, an online poll of 14,000 people in 2018 indicated that 93 per cent supported a rebrand back to the pre2004 name and so this was undertaken in 2019. The other key decision an airport has to make about its name is whether to give any indication of the size or scope of the services available. The most common situation is when an airport is called ‘international’, especially if it is quite small and wants to demonstrate that it serves international as well as domestic destinations. On the other hand, as airports become more developed and well known for their range of services, they might choose to drop the international part of their name, as has occurred at the UK airports of Birmingham, Bristol and Cardiff. Other names indicating the role of the airport include Leros Municipal Airport in Greece, Asheville Regional Airport in the US, Bisha Domestic Airport in Saudi Arabia, and Orlando Executive Airport, Miami Homestead General Aviation Airport and Mount Hawley Auxiliary Airport in the US. In addition to this diverse range of names, airports throughout the world have also developed different slogans, taglines or straplines associated with the airport as part of the brand name (Halpern and Regmi, 2011). Some slogans relate to the connectivity the airport provides. For instance: zz Dubai zz Kuala

Airports ‘Connecting the world’ Lumpur ‘KLIA Next Gen Hub – The new way to the world’

zz Munich

‘Living ideas – connecting lives’

zz Seattle-Tacoma

‘Your global gateway’

Other airports have focused on location characteristics. For instance: zz Adelaide

‘Gateway to Australia’

zz Brussels

‘The heart of Europe’

zz Cluj

‘Gateway to Transylvania’

zz Miami

‘America’s new global gateway’

zz Taoyuan zz Vienna

‘Bringing the world to Asia’

‘Where Central Europe takes off ’

Sometimes airports in the same general geographical location may emphasise the location in different ways. For instance, in London, London City, which is close to the city centre used to have the slogan ‘Get closer’ whilst London Gatwick used ‘Your London airport’. In Scotland, Glasgow and Edinburgh compete for Scottish traffic and both reflect this in their slogans, namely ‘Proud to serve Scotland’ and ‘Where Scotland meets the world’. Likewise, Orlando and Miami both serve Florida with the slogans ‘Your Florida airport of choice’ and ‘Florida’s global gateway’. The slogan may be less specific and relate to the journey. For instance: zz Abu

Dhabi ‘ABU Dhabi Airports: innovation in aviation’

zz Aéroports

de Montréal ‘Where everything takes flight’

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PRODUCT, BRAND AND EXPERIENCE zz Bristol

‘Amazing journeys start here’

zz Cleveland zz Flint zz Fort

Hopkins ‘Enjoy going places’

‘Not the only way to fly. Just a better one’ Lauderdale-Hollywood ‘Breeze in. Breeze out’

zz Geneva zz Gerald

‘Reach new heights’

R. Ford ‘Getting there is better here’

zz Grantley

Adams ‘Rising higher’

zz Guangzhou zz Istanbul zz London

Baiyun ‘Breeze into a wonderful journey from Baiyunport’

‘Magical journeys start here’ Heathrow ‘Making every journey better’

zz Melbourne zz Nuremberg

Avalon ‘Flying made easy’ ‘Relax and take off ’

Elsewhere the slogan may be more closely linked to the passenger experience, for instance: zz Princess

Juliana ‘The experience will move you’

zz Wellington zz Tampa

‘Wild at heart’

‘Memories start here’

zz Singapore

Changi ‘More than an airport’

zz Cologne

Bonn ‘So simple’

zz Incheon

‘Expect exceptional’

zz Brisbane

‘It all begins here’

In some cases, the slogan may be a play on words associated with famous people of the area, for instance, Liverpool John Lennon Airport used the slogan ‘Above us only sky’, quoting words from the Lennon song ‘Imagine’. The airport now uses ‘Faster. Easier. Friendlier’. Since the coronavirus pandemic, some airports have changed their slogans or logos to reflect a greater focus on health and safety. For instance, the slogan at San Diego, which was previously ‘Let’s go’, was changed in 2020 to ‘Let’s go safely’. Likewise, Miami adopted ‘Fly safe, fly smart’, Taoyuan adopted ‘Attentive services for a safe airport’, and as will be discussed in more detail in Chapter 12, McCarran International Airport, serving Las Vegas, adopted the gamingthemed ‘LAS all in’, reflecting the main attraction of the city as a gambling destination. A comprehensive study of 1,562 world airports gives some insight into the typical uses of names and slogans (Halpern and Regmi, 2011) (Table 6.2). Over three-quarters of the airports were named after a single place, with almost half of these including a reference to the scope of services available. Regional differences existed with other names. For instance, calling an airport after natural or man-made attractions was most common in Europe, while names associated with political leaders and/or revolutionaries were most popular in Latin America and the Caribbean. Royalty names were the most common in the Middle East. As regards slogans, only one-tenth of all airports publicly presented these on their website, and usage was most common in North America. Other ways that an airport can develop its brand identity, in addition to using names and slogans, is with its brand mark, for instance, by adopting an eye-catching logo such as using the shape of the ‘H’ as a runway configuration for Hannover Airport. Using a runway or other aviation images such as a swoosh, a plane or some kind of arrow are very popular to symbolise

PRODUCT, BRAND AND EXPERIENCE Table 6.2 Proportion of airports (%) in each region that use each name category Category

Africa

AsiaPacifc

Europe

84.9

77.5

89.8

57.1

78.3

76.0

80.0

Country

1.1

2.4

0.9

0.7

3.3

0.0

1.0

Region

3.0

4.0

3.3

3.3

1.7

10.9

5.2

City, town, village

81.4

71.9

88.9

53.9

73.3

66.7

75.4

Multiple places (2 or more)

11.4

12.5

27.3

3.9

1.7

9.4

14.5

Attraction

3.8

11.2

14.0

8.4

6.6

7.3

9.3

Natural attraction

2.3

10.4

13.1

5.8

3.3

5.2

7.8

Man-made attraction

1.5

0.8

0.9

2.6

3.3

2.1

1.5

Services

40.5

47.4

16.8

63.6

85.0

59.4

43.4

International

39.4

47.4

12.2

63.0

53.3

44.8

37.0

National

1.1

0.0

4.0

0.0

0.0

3.7

2.2

Regional

0.0

0.0

0.0

0.6

8.3

7.0

2.1

Domestic

0.0

0.0

0.0

0.0

21.7

0.0

0.8

Executive

0.0

0.0

0.0

0.0

1.7

1.6

0.5

Other

0.0

0.0

0.6

0.0

0.0

2.3

0.8

14.8

13.3

10.4

42.2

16.7

27.9

19.3

Royalty

1.9

4.4

0.9

2.0

10.0

0.0

1.9

Political leader/ revolutionary

9.5

4.0

3.5

23.4

5.0

14.0

9.2

Other

3.4

4.8

6.0

16.9

1.7

13.8

8.2

Other

0.7

0.8

0.0

1.3

0.0

1.0

0.7

Place

Famous person

Number of airports

264

249

451

Latin Am./Carib.

154

Middle East

60

North America

384

Total

1,562

Source: Adapted from Halpern and Regmi (2011)

motion and flight, but some argue that these are predictable, outdated and bland, and do not reflect the fact that the airport experience is on the ground, not the air. Another popular theme is stars, planets, clouds, birds, flowers or feathers, again to depict the idea of flight, but used with local attributes. For instance, a peacock feather is used in the logo of Chhatrapati Shivaji Maharaj International Airport to represent the country’s heritage and value and to reflect India’s vibrant and colourful city (Figure 6.5). At the newly named Louisville Muhammad Ali International Airport, the logo shows a silhouette of Ali with arms raised against a butterfly, paying homage to Ali’s famous phrase ‘Float like a butterfly, sting like a bee’ within the context of flight for the airport.

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PRODUCT, BRAND AND EXPERIENCE

Figure 6.5 Chhatrapati Shivaji Maharaj International Airport’s logo Source: Courtesy of Chhatrapati Shivaji Maharaj International Airport

Figure 6.6 Avinor’s logo Source: Courtesy of Avinor

One logo that incorporates the airport experience is Adelaide. The airport’s logo consists of a smooth, continuous line that curves gracefully into an infinite loop. The graceful loop represents ease and seamlessness that are hallmarks of the customer experience at the airport, while the continuous line represents endless opportunities offered by the airport. The symbol also forms the letter ‘A’ for Adelaide. Representing the wider role of the airport, Incheon International Airport’s logo depicts a hub at the centre of mankind whose logistics and information capabilities reach out to the world as a futuristic airport. It also incorporates flight and local attributes by combining subtle images of a bird, Korea´s traditional cloud form and the taegeuk, which typically represents balance in the universe. Again representing the wider role of the airport, or in this case, the airport operator, is Avinor’s logo, with two points that are connected. This is a simple yet effective way of showing how the operator’s 44 airports link Norway together and link Norway to the world (Figure 6.6). Re-branding every few years has been an increasingly popular activity, especially when an airport has experienced a significant change that it wants to convey to its customers. For instance, when London Gatwick Airport was sold by BAA it launched a new brand with the slogan ‘Your London Airport Gatwick’ to differentiate itself from London Heathrow Airport and its previous owners BAA. Birmingham Airport also re-branded itself with the new slogan ‘Hello world’ to reposition itself as a global airport when the original two terminals were merged into a single entity. Likewise, Kuala Lumpur International Airport developed the slogan ‘KLIA Next Gen Hub: The new way to the world’ when it opened a new terminal. Rebranding occurred at London City Airport at the same time as a major development programme, with a new logo with vivid colours and a heart motif. This aimed to reinforce the

PRODUCT, BRAND AND EXPERIENCE airport’s role as the most central London airport (at the ‘heart’ of the city) and an airport which many passengers ‘love’ to use. The rebranding was thought particularly necessary because the passenger mix was changing, as leisure travellers and East Londoners joined the established business traveller base. The vivid blue is said to represent the River Thames which is nearby, and the vivid green is said to represent the many parks and green spaces in London. These colours have replaced a more conservative grey and blue combination which reflected the city worker demographic (Bates, 2019). Nearby London Luton Airport has also been rebranded. The airport, serving LCCs and charter passengers, had suffered from under-investment and a poor passenger reputation until a new 160 million British Pound (GBP) investment was undertaken to improve the facilities and passenger experience. A specialist brand design company was brought in (as is usually the case with rebranding) to launch a new brand at the same time as this development. They defined the brand essence as ‘simplicity with a smile’ and produced a visual identity for this. Again, this abandoned a more conventional approach and is based around a flexible, modular mark that can be arranged horizontally or vertically and filled with block colours, graphic patterns or photography (Figure 6.7). The mark acts as a symbol and also an acronym, LLA (London Luton Airport) (Holmes, 2018). Other recent rebrandings have included Sydney Airport changing its logo from Sydney Airport to SYD Sydney’s Airport. With this, the airport aimed to change its image from an infrastructure asset to a community asset, and its messaging sells Sydney rather than just the airport (Figure 6.8). Dubai Airports has developed a new DXB brand, again with the aim of changing the image from an airport operator to a consumer-led company. The new DXB logo represents multiple pathways or routes converging to one pinpoint putting Dubai, an aviation hub, at its centre. Nearby in Qatar, a new brand was developed in 2014 when the old Doha International Airport in Qatar was closed, and the new Hamad International Airport was opened. The design of Hamad International Airport’s new identity combines the Arabic star around the world, airplane motifs and Arabic geometric patterns. It incorporates the Qatari national colour, which is a maroon hue. Other examples include Munich Airport that has also been rebranded with the slogan ‘Living ideas – connecting lives’. Its old logo had a large M – the cornerstone of the new identity is still a M but with a right upstroke in the letter playing a fundamental role in terms of bringing the concept to life visually. This portion of the letter is described as the linking element within the M or between two words, and thus symbolises the place where two lives join

Figure 6.7 London Luton Airport’s logo Source: Courtesy of London Luton Airport

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PRODUCT, BRAND AND EXPERIENCE

Figure 6.8 Sydney Airport’s logos: previous (top) and current (bottom) Source: Courtesy of Sydney Airport

together and connect. Rebranding can be controversial though. For instance, in 2020 SeattleTacoma International Airport unveiled a new brand identity that focused very much on the large SEA airport code letters, which was meant to reflect the spirit of the Pacific Northwest. However, many residents objected to the brand change – as Tacoma was left off the brand – even though the airport name remained the same. The airport’s branding needs to be used extensively to be effective, especially in all advertising and promotional campaigns, using both digital platforms and more traditional channels. It should be incorporated into the colour scheme and interior design of the airport. It also needs to be firmly embedded within individual product features as diverse as signage, employee uniforms, flight information display systems and ground vehicles. However, one of the problems in trying to achieve a distinctive airport brand within the passenger terminal is that its effectiveness may be affected by the presence of brands belonging to retailers, airlines and alliance groups. Brand effects may also be diluted as many airports will sell empty and blank wall space to advertisers, since this can be a very lucrative source of revenue. Care therefore needs to be taken to ensure that passengers are not exposed to too many brands, as this is likely to convey mixed messages and could have a negative impact on the airport’s image and distinctiveness. Too much brand information can also cause visual pollution and give a cluttered feel to the airport and may inhibit passengers’ progress to their departure gate.

PRODUCT, BRAND AND EXPERIENCE Rather than focusing purely on a unique brand for the airport, the branding can also be linked to the character and culture of the city or country the airport serves. The aim will be to create a sense of place and community and to contribute to the travel experience of passengers. It can be argued that the airport product is in fact just an element of the overall tourism product, which in turn can influence a destination’s brand or appeal (Martin-Cejas, 2006; Vujicic and Wickelgren, 2011; Nghiêm-Phú and Suter, 2018). In this case, by branding itself as a destination gateway, the airport will be using the brand extension rather than its own brand to market itself. It can do this by replicating a destination’s traits such as the scenery, history, adventure and culture, and thus convey the same image and message as the destination. Numerous examples exist. For instance, the distinctive peaked roof architecture at Denver International Airport was designed to represent the nearby Rocky Mountains and native American teepees. Vancouver International Airport is themed to represent the physical characteristics and cultural heritage of British Columbia through its architecture (depicting, for example, the northwest coast with a sandy beach, an indoor creek showing the nature of the west coast and a large collection of native art including wooden sculptures and totem poles). It also has a large aquarium. McCarran International Airport in Las Vegas has a number of outlets themed after hotels and entertainment in the city, and there are slot machines located throughout the terminal. Memphis International Airport is themed around blues, rock and roll and Elvis Presley, and at Orlando International Airport there are shops representing the major theme parks in the area. Terminal 4 at Singapore Changi Airport has a heritage zone inspired by the traditional Peranakan shophouses. The decoration of the Relaxation Area at Helsinki Vantaa Airport reflects elements of Finnish nature such as ice and snow. Brisbane Airport has a central green zone in the terminal called the Village Green, designed to reflect the lifestyle of Brisbane and Queensland. The new Midfield terminal at Abu Dhabi International Airport is designed according to the city’s/emirate’s natural landscape characteristics including the terminal’s roof (wave-like giving the impression of rolling desert dunes) with the four themed areas (piers) representing the ocean, city, oasis and desert. Zagreb Airport’s logo represents the triangle-shaped glass construction of the terminal that reflects a part of the Zagreb skyline, which visitors can see through the construction when they enter the terminal. A secondary graphic element to the logo represents St. Mark’s Church, the most visited attraction in Zagreb (Figure 6.9). Locally branded commercial facilities such as retail and F&B can add to this sense of place, with the actual goods sold reflecting the character and culture of the destination by using local merchandise, handcrafted goods or gourmet products – this is discussed later in this chapter. By successfully engaging the passenger in the airport brand it is likely that this will enhance the volume of commercial sales made. Exhibitions, museums and art galleries can also help reinforce this vision. For instance, Incheon International Airport has a Traditional Culture Experience Center, while Amsterdam Airport Schiphol has a branch of the national Rijksmuseum. The new airport in Istanbul has a museum, claimed to be the largest airport museum in the world, housing an exhibition entitled ‘Treasures of Turkey: faces of the throne in 2020’. Abu Dhabi International Airport’s new Midfield terminal will also have a large heritage and culture museum to reinforce the Emirates’ desire to become a regional centre for culture and art. At Nashville International Airport there are exhibitions and events designed to reflect the city and region such as musical performances, puppet shows, dance performances and craft demonstrations. Indianapolis International Airport also has local artists and jazz performances supporting the local Indy Jazz Fest and a race car exhibition promoting the Indianapolis Motor Speedway. At Guangzhou Baiyun International Airport, in 2019, the airport organised a seasonal flower celebration, Cantonese operas and mini concerts to celebrate Chinese traditional festivals.

169

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PRODUCT, BRAND AND EXPERIENCE

Figure 6.9 Zagreb Airport’s terminal roof (top) and logo (bottom) Source: Photo by J. Škof courtesy of International Zagreb Airport Jsc; logo courtesy of International Zagreb Airport Jsc

Airport employees can also contribute to this image. For instance, at Halifax Stanfield International Airport ‘The tartan team’, who are mostly retired volunteer ambassadors, give a welcome to passengers and visitors and wear tartan to reflect the area’s Scottish heritage. It is important to note that while a name, term, design, symbol or other features can be used by airports to design and develop their identity, the brand represents a great deal more than that, and it is important to avoid starting with such features when designing or developing the brand. Instead, it is necessary to recognise what the company stands for (this relates back to the corporate intentions covered in Chapter 5 including the vision, values and mission), the strategic objectives of the company, and the brand’s role in helping to achieve those objectives. Only then is it possible to design and develop the necessary features.

6.4 Evaluating the product and experience on offer Once an airport has identified the target markets it wants to attract and serve, it needs to ensure that it is providing the appropriate product and branding to meet the needs and expecta-

PRODUCT, BRAND AND EXPERIENCE tions of these market segments. To achieve this, the airport needs to fully evaluate its product and brand attributes, as well as the product benefits, and to have a detailed appreciation of how the interaction and combination of all the product features can satisfy customer needs. At the actual product level such evaluation is a relatively straightforward process, and in many cases, this will be related to ensuring that all the physical facilities and processes these customers need are provided. Such product features (e.g. number, length and configuration of runways and navigational aids; slot allocation status; opening hours; check-in desks; passenger gates; parking stands; terminal capacity; turnaround times and MCT) can easily be supplied to airlines and appear on marketing sites such as The Route Shop (Chapter 9). However, the airport needs to focus most of its attention at the augmented level, where it can determine the extent to which customers are satisfied with the product it is offering and the degree to which its services provide it with a competitive edge. For airlines, one of the most crucial elements of the augmented product will be the level of overall flight delays. This is a very difficult area for the airport to assess because there will be many factors such as bad weather, ATC problems or airline technical problems that are beyond its direct control. Nevertheless, it needs to ensure that when delays occur, for whatever reason, they are dealt with in a timely and appropriate manner (e.g. efficient snow clearance of the runway after a snowstorm). Other key areas of concern to airlines relate to the availability of gates, stands, airbridges and operational equipment (e.g. electrical ground power and baggage carousels), and the reliability and degree of delays related to these specific features of the product. For passengers (and again the airlines, as they too will naturally pay attention to the overall experience in the terminal for their passengers), there will be a vast range of tangible and intangible elements to be considered at the augmented level. This will include physical aspects such as queue lengths and waiting times at the key processes, walking distances and baggage delivery times. Then there will be more intangible features such as the clarity of wayfinding and flight information systems; the ambience, lighting, colour and cleanliness of the terminal; the helpfulness and attitudes of the staff; and value for money and choice of commercial facilities. From the global results of ACI’s ASQ programme (Chapter 4) it was found that the top drivers of airport passenger satisfaction were security (21 per cent), facilities and services (20 per cent), infrastructure (20 per cent), wayfinding (15 per cent), check-in (14 per cent) and access (10 per cent) (ACI, 2017). It is important to recognise when considering airport product planning that improving areas of lowest satisfaction may not necessarily improve overall satisfaction and meet customers’ needs. It is best to focus on areas regarded as less than satisfactory but important to the customer. Importance–performance analysis (IPA) (also called key driver analysis), originally suggested by Martilla and James (1977), is a simple way to consider this (Figure 6.10). By plotting importance scores against performance scores (or satisfaction rates) on the grid, four different situations can be identified in the four quadrants. Quadrant A (typically labelled ‘concentrate here’) has features perceived as important but with poor performance scores, whereas quadrant B (‘keep up the good work’) requires less attention as both importance and performance scores are high. For quadrant C, where importance and performance are both low, it is acceptable to give this ‘low priority’, whereas if the performance scores are high but importance scores low, as in quadrant D, it might be a ‘possible overkill’. This is a common way to assess a product with multiple features. BCG (2016) used this approach with a survey of passengers from 56 countries. The results showed that low satisfaction/low importance included transfer areas; low satisfaction/high

171

172

PRODUCT, BRAND AND EXPERIENCE

Quadrant A Concentrate here

Quadrant B Keep up the good work

Quadrant C Low priority

Quadrant D Possible overkill

Figure 6.10 Importance–performance grid Source: Adapted from Martilla and James (1977)

importance included security, gate holding area, retail area, arrival immigration, bag collection; high satisfaction/low importance included bag drop, airport lounge, departure immigration; and high satisfaction/high importance included check-in and pre-journey. IPA results will clearly vary for each individual airport. For instance, Table 6.3 shows a detailed study at Taoyuan International Airport where terminal comfort, ambience and design; immigration – queuing times/system; power charging facilities; baggage delivery times; and lost luggage services were identified as the key ‘concentrate here’ areas. Focusing on areas that are important to passengers rather than just on how services are being delivered and assessed, links with the concept of the passenger experience, which is now a fundamental area of consideration at most airports (Wattanacharoensil, 2019). During the last two decades, airport management has increasingly turned to ideas about the passenger experience to help design and deliver the airport product and improve passenger satisfaction. This comes at a time when airports are placing more attention than ever on the B2C aspects of airport marketing. The passenger experience involves taking a subjective holistic and experiential perspective of the various encounters that passengers face in their airport journey, covering the overall door-to-door experience, including transport to/from the airport. This means that there is less emphasis on individual processes and services, and more focus on achieving a seamless journey. A wider viewpoint of service provision is also required by considering other organisations such as airlines and government agencies, as well as the airport, that contribute to the entire journey. Ultimately the overall experience is determined by the weakest link, and passengers are rarely familiar or concerned with the distribution of responsibility amongst different service providers as they do not rationally perceive their airport journey as divided into different functions. There are many ways that the passenger experience has been defined. For instance, it has been described as all the activities and interactions that passengers encounter at an airport,

PRODUCT, BRAND AND EXPERIENCE Table 6.3 IPA of Taoyuan International Airport Quadrant

Areas

Concentrate here

• Terminal comfort, ambience and design • Immigration - queuing times/system • Power charging facilities • Baggage delivery times • Lost luggage services

Keep up the good work

• Washroom and shower facilities in the terminal • Cleanliness of washroom facilities • Terminal cleanliness, foors, seating and public areas • Seating facilities throughout the terminals • Getting to and from the airport, ease of access • Standards of disabled user access and facilities • Public transport options, effciency and prices • Check-in facilities, queuing systems and seating • Language skills for airport staff • Friendliness of airport staff • Waiting times at security screening • Wi-f service • Wayfnding and terminal signage • Clarity of boarding calls and airport perception of security and safety standards • Ease of transit through the airport

Low priority

• Children’s play area and facilities provided • Smoking policy/smoking lounges • Location of airline lounges • Quiet areas, day rooms, hotel facility, rest areas • Television and entertainment facilities • Choice of bars, cafes and restaurants • Prices charged in retail outlets • Prices charged in bars, cafes and restaurants • Choice of shopping: tax-free and other outlets • ATM facilities • Telephone and fax locations • Priority baggage delivery effciency

Possible overkill

• Availability of luggage trolleys (airside and landside) • Immigration – staff attitude • Courtesy and attitude of security staff • Bureau de change facilities

Source: Adapted from Tseng (2020)

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174

PRODUCT, BRAND AND EXPERIENCE with these activities being divided between the necessary processes and discretionary activities (Popovic et al., 2009). Alternatively, it has been defined as the net impression of all of the experiences a passenger has in an airport as judged by a passenger’s individual standards, expectations and perceptions (National Academies, 2016). Irrespective of the definition, it is a key consideration within the modern airport industry. Numerous examples exist of the application of the concept of passenger experience, one being Los Angeles International Airport that introduced a new passenger experience programme in 2016. The key elements of this so-called LAXceptional Xperience initiative were identified as guest first; happy guest; informed guest; ambience and feeling; engaged employees and partners, guest delight and policy integration (Yamamoto and Paternoster, 2017). Likewise, Orlando International Airport has its Orlando Experience (Engle and Ryan, 2020). A common way to reinforce the passenger experience concept is to use technology to ensure that the journey is as seamless and holistic as possible. The ideal solution is to combine a passenger’s flight, passport and facial biometric information into a single travel token, typically identified with facial recognition at the start of the passenger’s journey. Then this digital identity token can be used at all key airport touchpoints, such as self-service bag drop, border control and the self-boarding gate and will significantly reduce human-to-human interaction points. Passengers can also make purchases in duty-free shops without showing their passport and boarding pass to the cashier, as their facial identification will be scanned instead. The first airport to have adopted the single token technology is the Queen Beatrix International Airport in Aruba in 2015, with others using the technology including Hamad International Airport, Beijing Daxing International Airport, Singapore Changi Airport, Hong Kong International Airport, and Bangalore International Airport. Many more airports are likely to follow, with this trend being accelerated by the coronavirus pandemic and the need for contactless touchpoints. Evaluating the passenger experience clearly requires a different approach to traditional service quality measurement, necessitating a more qualitative sentiment analysis, which delves deeply into passenger attitudes and experiences. Passenger journey mapping is a relevant concept here where a holistic view can be obtained through uncovering positive and negative experiences throughout a series of interactions. It is used by a number of airports, such as London Heathrow Airport, and by ACI with its analysis of the ASQ data. The research at London Heathrow Airport has helped them establish five features of the passenger experience (Heathrow Airport Limited, 2020: 331): zz I

am confident I can get to and from the airport

zz I

have a predictable and reliable journey

zz I

feel comfortable and secure at the airport

zz I

feel cared for and supported

zz I

have an enjoyable experience at the airport

Other relevant passenger experience research includes a study by Bogicevic et al. (2013) who used data mining techniques on 1,095 traveller comments to identify the dissatisfying factors within the passenger experience. It was found that a passenger’s positive airport experience is threatened by three key factors, namely location for the security check procedures, poor signage and long waiting lines. However, levels of satisfaction with potentially stressful processes can vary at different airports, depending on the airport environment, the internal design of the service flow (space and queue management), and the design of the terminal. An analysis of online and social media reviews can be particularly insightful, for instance, using Google Reviews (Lee

PRODUCT, BRAND AND EXPERIENCE and Yu, 2018) or Skytrax (Gitto and Mancuso, 2017; Wattanacharoensil et al., 2017; Halpern and Mwesiumo, 2021) or Twitter (Martin-Domingo et al., 2019). As regards the shopping experience, in an analysis of Skytrax comments for London Heathrow Airport, Graham (2019) found that were a number of favourable remarks related to the range of facilities, but that this was outnumbered by negative comments concerning the high prices of goods, the excessive space allocated to retail and its interference with the operational and functional role of the airport. National Academies (2016) discuss how there are different levels of the passenger experience which are somewhat similar to Maslow’s well-known hierarchy of human needs model. The Maslow model is usually presented as a pyramid with five levels, with the most basic physiological needs – air, food, and water – at the lowest level, then safety, social, esteem and finally self-actualisation at the top of the pyramid. As the lower-level needs are satisfied, the individual moves up to other levels, and the same is said to be true with an airport which must get the basics right first before they can move to higher levels such as social considerations (friendly and courteous service, commercial facilities offering variety and quality), esteem (priority services such as lounges and valet parking) and self-actualisation (top-rated terminal facilities, landscaping, gardens and entertainment). ACI Europe (2018) developed a similar concept called a pyramid of passenger perception levels based on three different levels (Figure 6.11). At the bottom of the pyramid is the required level covering all basis and mandatory ‘must-do’ elements. The second level is related to what passengers expect of an airport whereas at the top ‘valued’ level there are features that surprise passengers and create a ‘wow factor’. Table 6.4 provides some examples of the features at different levels. At the time of writing this book, the coronavirus pandemic was having a dramatic impact on the airport products on offer, through the introduction of significant new health and safety measures in order to ensure that airports are as coronavirus secure as possible and that passengers are confident to fly. Such changes relate to, for instance, social distancing, sanitisation, face

Valued (wow factor) Passengers are touched, surprised and become loyal

Expected (airport’s conceived image) Standard basic passenger needs are met at a global level

Required (bare minimum/meeting regulation) Does not create passenger satisfaction but if not in place dissatistaction

Figure 6.11 ACI-Europe’s pyramid of passenger perception levels Source: Adapted from ACI Europe (2018)

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PRODUCT, BRAND AND EXPERIENCE Table 6.4 Examples of measures with ACI Europe’s passenger perception levels Level

Normal measures

Health and safety measures since the coronavirus pandemic

Valued

• Best practice • Hassle-free

• Full digital airport: new technologies for a seamless/contactless experience

• Outstanding architecture

• Surprise and delight concepts

• Excellent hospitality

• Kindness and authenticity

• Surprising concepts Expected

• Seating, F&B • Pleasant environment • Wayfnding • Smooth processes • Free, fast and easy-to register wi-f

Required

• Clear premises

• Touchless/contactless/biometric infrastructure and equipment • Clear information provided by different means • Reassurance from staff • Enhanced leisure opportunities for all passengers

• Signage

• Local/regional/national health standards and requirements are met

• Basic facilities available

• Cleaning/disinfection of premises

• Contingency planning

• Availability of sanitising stations at different touchpoints • Processes performed with risks to health and safety • Clear wayfnding/guidance to comply with new health requirements

Source: ACI Europe (2018, 2020)

mask wearing, contactless and low-touch technology, protection of staff, and physical layout, as discussed in more detail in Chapter 12. This also means that the process of health screening has had to be built into the airport journey. Inevitably this has a negative impact on the passenger experience in relation to the motivation to fly and enjoyment of the airport journey. In relation to commercial facilities, passengers may be more reluctant to browse in shops or relax in restaurants, and as a result, may be more likely to use contactless services such as click and collect or click and deliver shopping. However, there is also a new small opportunity for airports to sell health-related products such as masks, hand gel and personal protective equipment (PPE), as well as other health-related services that might generate some new non-aeronautical revenue. The coronavirus pandemic has led to ACI Europe defining a new passenger category – the health-concerned passenger – when considering the passenger experience and the pyramid of passenger perception levels (ACI Europe, 2020). To satisfy the needs of such passengers, airports need to ensure that the premises constitute a safe environment; that airport processes are redefined to comply with new health and safety requirements while respecting operational needs and using innovative solutions; and that people are protected. Table 6.4 illustrates how the pyramid of passenger perception levels can be revised to take account of this new passenger category. In relation to this, as well as ACI’s Airport Health Accreditation (AHA) and Skytrax’s

PRODUCT, BRAND AND EXPERIENCE rating scheme (as described in Chapter 12), ACI has also introduced new hygiene-related questions added to the survey questionnaire of the ASQ (Chapter 4) and has awards for ‘best hygiene measures’ airports. In normal times, it has already been explained that airports often try to create a sense of place and community by linking to the character and culture of the city or country it serves. Thus, it can be argued that the passenger experience can have a major impact on the overall tourist experience, or image of a destination, especially as airports are often natural gateways and are the first and last places that travellers visit. The airport can become the ambassador of the destination and this can enhance the passenger experience. Research based on 20,000 travellers worldwide found that over 60 per cent ranked sense of place as an important part of their overall airport experience. The Middle Eastern and Asia airports had an overall satisfaction score of 60 per cent (excellent/very good) with all other regions having scores in the forties – with the exception of Africa with a score of only 32 per cent (Holland, 2017). Another survey showed that 56 per cent of travellers want more personalisation of airports and more culturally sensitive and authentic experiences in the future (Masjutina, 2016). Overall, the passenger experience is now a key aspect of product differentiation at most airports. Moreover, investing in the passenger experience will often have a positive effect on non-aeronautical revenues. Indeed ACI (2016) found that a one per cent increase in global passenger satisfaction – as defined in the ASQ survey – generates an average growth of one and a half per cent in non-aeronautical revenues. Thus, planning the most appropriate products to satisfy airport customers, which is the next topic to be considered, can have a significant impact on the airport’s financial performance as well as enhancing the passenger experience.

6.5 Planning airport products The previous sections have discussed the nature of the product and brand, and how it can be evaluated. This now needs to be considered within the context of how an airport can design and deliver its product to ensure that it is appropriately attracting and serving its target markets. Clearly, this needs to fit in with the overall positioning strategy discussed in Chapter 5. How the product can be developed to differentiate the airport from its competitors in order to gain a competitive advantage and create superior customer value is likely to be of major consideration. Airports can differentiate themselves in many ways with pricing, distribution and promotion, but also with the brand and with different aspects of the product and passenger experience. Historically, the airport industry tended to offer a fairly common set of services and facilities, or a rather generic product to serve all their airlines, passengers and other customers, regardless of the specific needs of the different market segments within these customer groups. Focus tended to be at the core and actual product level rather than at the augmented level. The key differentiation that did occur was separate check-in for the economy and business class passengers (which was actually an airline product feature) and remote stands rather than airbridges for passengers travelling on charter or leisure airlines. Differentiation was achieved at a general rather than market segment level, for instance, by having quicker processes than other airports, greater ambience in the terminal building or particularly helpful staff. However, within the modern airport world this focus on a predominantly ‘one size fits all’ product for customers is clearly no longer appropriate. Stronger competitive forces have meant that airports have had to give far greater attention to differentiating their product to meet the requirements and expectations of different market segments, while at the same time the range of different airline segments has become more varied (e.g. LCCs, alliance groups, cargo

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PRODUCT, BRAND AND EXPERIENCE specialists). In addition, unbundling of the product – a trend observed in the airline industry for a number of years – has occurred at airports, with airlines and passengers only paying (or paying more) for the parts of the overall package of services and facilities they want.

6.5.1 Airline customers A key area where airports have tried to gain a competitive edge with their airline customers is in increasing the efficiency of the essential processes. In particular, if an airport wants to attract airlines that plan to use it as a hub for processing transfer traffic, it must offer an attractive MCT. This is the minimum interval that must elapse between a scheduled arrival and a scheduled departure for two services to be bookable as a connection. Some airports have one MCT that applies to all services, while in other cases a range of different MCTs may be in operation depending on the airline, terminal, type of passenger and route. Terminal design is important when considering how to minimise connection times – multiple terminals that are set some distance apart are not well suited to connecting traffic. Segregating international and domestic traffic, although efficient because of the different processes involved, also hinders the speed of domestic–international transfers. Table 6.5 shows the variety of MCTs at a number of different airports. Table 6.5 Example MCTs at airports, July 2019 Airport

MCT (minutes)

Between

MCT (minutes)

Amsterdam

40

Europe-Europe

50

Europe-International

Atlanta

55

Domestic-Domestic

60

DomesticInternational

Bangkok Suvarnabhumi

75

All routes

–

–

Brussels

50

All routes

–

–

Chicago O’Hare

50

Domestic-Domestic

75

DomesticInternational

Delhi

90

Domestic-Domestic

180

DomesticInternational

Dubai

75

All routes

–

–

Frankfurt

45

All routes

–

–

London Heathrow

60

Terminal 5-Terminal 5

Seoul Incheon

40

Domestic-Domestic

Singapore

60

All routes

Sydney

30

Domestic-Domestic

Vienna

30

All routes

90 100 – 60 –

Between

Terminal 3-Terminal 5 DomesticInternational – DomesticInternational –

Data source: OAG (2019) Note: MCTs are directional so international-domestic may not be the same as domestic-international

PRODUCT, BRAND AND EXPERIENCE Likewise, there will be particular attributes an airport has to have in order to appeal to specialist cargo operators and integrators. Certain airports such as East Midlands Airport, Leipzig/Halle Airport, Liege Airport and Paris Vatry have targeted such market segments by having a product that offers reliable and secure connecting processes plus other appealing features such as good connections to motorways and no night curfews. Traffic of the global alliances of oneworld, SkyTeam and Star is also reliant on achieving good transfers between alliance members. Again, if international and domestic traffic services are not closely linked an airport would be at a considerable competitive disadvantage. In addition, if the airport is really keen to attract airlines from the global alliances, it needs to demonstrate that its design and facilities allow the alliance members to get the cost economies and brand benefits from operating joint facilities such as check-in desks and airline lounges. Such design may be difficult to achieve with established facilities but is easier with new terminals. An example is London Heathrow Airport, where the completion of Terminal 5 made it easier to allocate British Airways and oneworld traffic to Terminals 3 and 5, SkyTeam to Terminal 4 and Star to a new Terminal 2. Certain airports also have the option to design their entire product to appeal to airlines serving premium passengers. This is comparatively rare, but London City Airport is a good example of an airport whose original focus was on premium, and in particular business traffic. Even though it has diversified its target markets somewhat and rebranded (as discussed earlier in this chapter), it still describes itself as the UK’s leading business airport (business passengers accounting for 46 per cent of all passengers in 2019). To appeal to business travellers, it has shorter check-in times than at any other airport in London and on average passengers take just 15 minutes to travel from the aircraft to the main terminal on arrival. It has numerous free power outlets, complimentary shoeshine, fast upmarket food and retail outlets, and car parks located only a short walk from the terminal. It was the first airport in the world to have a Bloomberg Hub, to give business travellers access to relevant financial news and data. It also offers a first-class lounge product (cost from GBP 95) where passengers are collected from the terminal or car park and transported to the lounge, and then escorted directly to the aircraft. It handles private business jets as well. Its product was appealing enough, combined with an ideal location near the business and financial centre of London, to attract British Airways to operate business-only flights from the airport to New York but these were permanently terminated in 2020 after the decline in traffic due to the coronavirus pandemic. Indeed, the huge uncertainty concerning business travel since the pandemic, and in particular the scope for substitution with online meetings and events, means that adopting such a business focus, at least in the near future, must be seen as quite a risky strategy for airports. At the other extreme, LCCs have traditionally concentrated on regional or secondary airports, and many such airports have focused most of their marketing activity on trying to attract such airlines. The LCCs were attracted to such airports because of the simple terminals and processes such as no transfer facilities, no airline lounges, no airbridges and no passenger buses so that costs could be reduced, and a short turnaround time maintained. However, some LCCs have now moved into primary airports as their models evolve. This is mainly because they are attracted to the larger markets, higher passenger yields, business passengers and the chance to provide connecting services – even if the costs are higher and rapid turnarounds are more difficult to achieve. As a result, for some primary airports, the market share of LCC seats is now quite significant, for instance, in 2019 at London Gatwick it was 62 per cent, Kuala Lumpur (53), Delhi (46), Mexico City (46), Paris Orly (35), Copenhagen (33), Singapore (31), GRU Airport – São Paulo (30), Johannesburg (27), Riyadh (25), Amsterdam (22), Madrid (21) and Sydney (20) (CAPA, 2019).

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PRODUCT, BRAND AND EXPERIENCE A popular way in which airports tried to cope with the demands of both FSCs and LCCs was to develop dedicated LCTs (Njoya and Niemeier, 2011; and also discussed briefly in Chapter 5), for instance, at the airports of Bordeaux, Lyon and Marseilles in France. However, as the LCC industry becomes more mature with a certain amount of hybridisation or blurring between the LCC and FSC model, the popularity of LCTs seems to be declining (CAPA, 2015). This also may reflect some of the shortcomings with LCTs, such as limited non-aeronautical facilities and passenger spending, which was one reason for why the LCTs in Kuala Lumpur and Singapore were demolished and replaced with more flexible terminals. Moreover, whilst such terminals may have lower costs, they may overall prove more expensive as essential processes such as check-in, security and border control have to be duplicated. In essence, building terminals for specific business models may not be an optimum or cost-efficient way to maximise airport resource use. Thus, airports are tending to move away from building dedicated terminals to incorporating LCC operations into their main terminals or building new terminals that are able to effectively handle both FSCs and LCCs. This may be achieved by having terminals with different service standards for the LCCs, for instance, Terminal 3 at Dubai, Terminal 1 at Mumbai, Terminal 1 at Tel Aviv, Terminal 3 at Paris Charles de Gaulle and Terminal 4 at Melbourne. Other airports have shifted LCCs into older terminals as has happened at Madrid, Milan Malpensa and Munich. At some airports, specialist LCC piers may be constructed such as at Copenhagen with CPH Go, which has a requirement that 90 per cent of the passengers must check-in online, via mobile phone or at the self-service kiosks. Frankfurt Airport is also building a new pier G to accommodate LCC traffic. In this way, the airport remains more suitable to cater for different models and to offer the flexibility to allow airlines to choose, and only pay for, facilities that they want to use. Whilst there are some new LCTs being developed or planned (particularly in Asia), for instance, in Japan where an LCT was opened at Chubu Centrair International Airport in 2019, following the opening of similar facilities in Narita International Airport in 2015, and Kansai International Airport in 2017, there has certainly been a slowdown with such developments. In general, each individual airport needs to decide how to weigh up the costs involved with developing new dedicated facilities as opposed to having a standard offer; the flexibility that this affords the airport given the increasingly volatile airline market; and implications for the passenger experience and commercial revenue generation. Interestingly ACI (2017) found that passengers using LCTs were significantly less satisfied with their experience than with those using conventional terminals. Finally, an alternative approach to the airport managing all terminals is to get different companies to run the terminals, while still maintaining control over the airfield activities and gaining financially from property rents and fees from the other companies. This could introduce more competition and allow each terminal to be more focused on the needs of different market segments. However, problems may also arise in terms of coordinating operations and long-term planning at the airport. There has been little experience of this practice to date, the most notable exception being in the US, such as at John F. Kennedy International Airport, where airlines have their own terminals.

6.5.2 Passenger customers As discussed in Chapter 3, there are many ways to segment the passenger market, but a key distinction normally has to be made between the business and leisure markets. Generally, business

PRODUCT, BRAND AND EXPERIENCE travellers want to get through airports as efficiently as possible with a degree of comfort. While the same can hold true for certain groups of leisure passengers, others may look at the airport in a different way as being part of their leisure experience. Business travellers tend to have a greater need to get through the processes quickly. For this reason, dedicated security (and sometimes immigration and customs) processes or fast-track lanes are often available for such passengers. If an airport is confident of delivering a fast service, it can enhance the product by adding a guarantee, for instance, Copenhagen Airport’s fast-track system CPH Express guarantees that 99 per cent of passengers will get through the security process in less than five minutes. It is common at some airports, particularly in the Middle East, to have a totally segregated area for check-in, security, immigration and other processes for premium passengers, especially those travelling on major airlines based at the airport. For instance, at Hamad International Airport, there are dedicated kerbside entrances to the departures hall that are reserved for first and business class passengers. Passengers are welcomed by a concierge, taken to dedicated check-in desks, and then escorted to an exclusive area with its own passport control counters, e-gates and security check lanes. Another area where processes can be speeded up is car parking. For this reason, many airports have dedicated spaces that can be reserved in advance close to the terminal and provide additional services such as valet parking and fuelling for premium passengers. The most extreme offer for premium passengers is the ‘very important person’ (VIP) service. Originally this was just operated as a protocol service for government officials and VIPs, but now this new end-to-end experience has been commercialised and opened up for use by passengers willing to pay extra. Such a service will typically have a separate entrance to the airport, a private terminal building, which includes premium parking, private and discreet fast-track check-in and security screening with luxury individual lounges (with exclusive F&B services), and finally a chauffeur-driven limousine to the aircraft. An example is the PS (formerly Private Suite) Lax product at Los Angeles International Airport, which was the first such facility to be introduced in the US in 2017 (Table 6.6). This is a one-off service or passengers can sign up Table 6.6 Price and product features of PS Lax service at Los Angeles International Airport

Normal reservation

Price (USD)

Product

One-way for up to four travellers: 4,150

Private security screening, dedicated customs and immigration services on arrival, drivers trained on the airfeld to take guests directly to their aircraft, access to private suites, garden, chef-prepared food and drink

Each additional traveller: 800 Extra services: Manicure: 120 Chair or table massage: 150 Haircut or barber service: 100 Valet parking: 60 per vehicle per day Vehicle detailing: 80 per vehicle

Annual Individual membership: 4,500 membership Reduced per-use fees: One-way for up to four travellers: 3,150 Each additional traveller: 500 Source: Adapted from PS (2021)

As above and complimentary manicures, massages, barber service, valet parking and vehicle detailing

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PRODUCT, BRAND AND EXPERIENCE for a year’s membership. A similar service exists at London Heathrow Airport, and this also includes a chauffeur service to/from the passenger’s home or destination (free up to 25 miles) and a personal shopper at the airport, with prices starting from around GBP 3,500. Dublin Airport has a comparable platinum service at a somewhat lower price that was launched in 2015 and after three years had handled 35,000 passengers a year (Ellis et al., 2019). At most airports business travellers have access to airline or airline alliance lounges or frequent flyer card-holder lounges. However, at an increasing number of airports, it has been recognised that there are passengers, who are not travelling business class or first class, that would welcome the opportunity of paying extra to have lounge access or some other product enhancements. In essence what is happening is that the airport product is being unbundled and passengers are choosing their own airport journey experience, depending on their preferences and what they want to pay more for. Paying for a lounge is quite common. For instance, at Kuala Lumpur International Airport, the Plaza Premium Lounge has facilities such as high-speed workstations, showers, spa/massage and beauty services and a variety of refreshments on offer. This can be used for one, two, five and ten-hour periods. The Plaza Premium company offers similar facilities at 17 other airports around the world. Other popular paid-for lounges include the Marhaba Lounges (e.g. at airports in Dubai, Los Angeles, Melbourne, Rome), No 1 Lounges (Birmingham, Edinburgh, Gatwick and Heathrow), Aspire Lounges (mostly in Europe) and The Club Lounges (in the US). Additionally, there is the option of offering a special lounge for a certain type of customer. For instance, at Amsterdam Airport Schiphol the Baby Care lounge, aimed at passengers with babies and children, has semi-transparent cubicles, each with a little bed where the baby can sleep, seating for the rest of the family and baby baths, baby changing tables, play areas and microwaves. Many of the paid-for lounges may also provide children’s facilities – for instance at London Gatwick Airport the No 1 Lounge has a mini cinema room and games room, whereas the Aspire Lounge has a ‘fun zone’ area with soft play, games and toys. At certain airports, there may also be the choice of paying to go through a fast-track security queue, which is becoming increasingly popular, for instance at Málaga–Costa del Sol Airport at a cost of 5.50 Euros (EUR), and it is very common, for instance, at UK airports. Quite often access to all these add-on services is provided by the membership to a loyalty scheme – this is further discussed in Chapter 8. The same is true of car parking services where a range of different options now typically exist, both within and outside loyalty schemes. For instance, at Helsinki Airport there is parking in indoor halls and outside rooftops, outside parking, premium inside parking, indoor drop-off and pick-up parking, car wash spaces, charging spaces for electric cars and disabled parking. There is also a premium lane security check access which includes a parking reservation. Many airports are increasingly using sophisticated revenue management systems for parking, as have been used by other sectors such as airlines and hotels for years, by adjusting the price depending on the length of stay, day of the week, time and pace of bookings, seasonality and special events. As car parking is usually the first commercial facility used by passengers, the digital platforms that they use can link to further e-commerce opportunities within the terminal. London Gatwick Airport even has a so-called ‘rent and earn’ scheme where passengers can rent their car out for up to GBP 160 per week whilst it is parked at the airport. Other related developments include Amsterdam Airport Schiphol which collaborates with the ride-sharing company Uber, and which also has a parking hub for Share Now, a free-floating electric car-sharing service. ‘Park and bark’ services may even be available, offering passengers the opportunity to leave their pets in a convenient kennel (run by a third party) nearby while they are away, for instance at Denver International Airport,

PRODUCT, BRAND AND EXPERIENCE Jacksonville International Airport and Orlando International Airport in the US, and at Melbourne Airport and Sydney Airport in Australia. As discussed earlier in this section, large hub airports serving major FSCs and airline alliances focus much of their attention on providing enhanced products for transfer passengers, as this is a relatively footloose market. However, a growing number of other airports, without a major airline/alliance offering connections, have recognised that there may be opportunities in encouraging self-connection or so-called ‘self-help’ hubbing, particularly for LCC passengers (Voltes-Dorta and Martín, 2019). This is when passengers buy two separate tickets and build their own connection, instead of it being arranged by the airlines. For this to happen, airport services and physical infrastructure may need to be adapted to make it easier for passengers to change flights. Ideally, this should allow for the passengers to be kept airside and for their bags to be automatically transferred, as with conventional connections so that the transfer process is as streamlined as possible. The airports provide hosted transfers that offer self-connecting passengers a level of support which they would not get if they self-connected on their own. Airports that offer such services include Budapest, London Gatwick, Milan, Nice and Venice. There is usually the opportunity of booking the connecting flights through dedicated flight booking services provided by travel search engines such as Dohop or Kiwi.com which, for an insurance fee absorbed into the booking cost, will provide a protected connection (e.g. another flight, food, overnight accommodation) if the flight is missed. Since its launch in 2015, the seats per annum sold through the GatwickConnects service at London Gatwick Airport have increased from 2,000 to 214,000 in 2018/19. Budapest Airport also has its concept bud:connects. This airport suffered from the collapse of its hub carrier (Malev) in 2012. In 2019 there were 110,000 self-connections. Factors that could potentially make such a concept a success include a breadth of network, strong LCC presence and some long-haul services, available capacity to handle more passengers, competitive airport charges, favourable aviation taxes and a geographic advantage for connecting relatively underserved markets. A business case has to be put forward considering the additional revenues from aeronautical and non-aeronautical sources against the required infrastructure and staff investment (Cserep, 2017). Apart from the essential services and processes, the airport, with its commercial partners, needs to ensure that the terminal is appropriately designed to encourage passenger satisfaction with the airport experience (National Academies, 2014). Its commercial offer also must meet the needs of its target markets. For instance, luxury and exclusive brands in duty-free shops, offering something that is not available elsewhere, is attractive to the growing number of Chinese and Indian middle-class tourists. It is the passenger mix that should drive the brand mix both in terms of whether it is predominately local, regional or global and whether it is luxury/exclusive, mid-market or budget. Changes in passenger mix, for instance, because of new airlines or destinations, can often have a greater impact on commercial revenue than changes to the commercial layout and mix. This is a lot harder for commercial teams to influence. Different age groups of passengers will also have different reasons for visiting duty-free shops with younger segments typically being more focused on the price and looking for a promotion (Figure 6.12). Whilst conventional retail sales per passenger at many airports in developed areas have not been growing substantially or in some cases have been declining (due to a number of factors such as internet competition and a mature market), a major growth area of airport commercial revenues is F&B which traditionally was given much less attention than shops. This has prompted Groot and Scholvinck (2017: 10) to state that “eating is the new shopping” at airports. This is partly in reaction to the airline trend to serve less free F&B on board but also

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PRODUCT, BRAND AND EXPERIENCE

Age 18-35 1. Price 2. Browsing 3. Looking for promotions 4. Killing time 5. Looking for a gift

Age +35-55 1. Price 2. Browsing 3. Looking for a gift 4. Looking for promotions 5. Killing time

Age +55 1. Browsing 2. Price 3. Looking for a gift 4. Purchase in mind 5. Looking for promotions

Figure 6.12 Top fve reasons to visit duty-free shops by passenger age Source: Adapted from Turner (2020)

because the F&B offer is becoming more sophisticated and responsive to passenger needs. This fits in with the general trend for consumers to desire experiences over personal possessions. Airports are more than ever looking at consumer trends and lifestyle choices in selecting the correct mix of types of F&B, and in deciding which factors such as fast and convenient, local, fresh, authentic, healthy, globally branded, exclusive or good value are most important. Some have followed general trends by introducing celebrity chef bars and restaurant products which can make F&B services more experiential. The offer of healthy foods is also a particularly important trend which goes hand-in-hand with travellers seeking a wellbeing experience at the airport. The retail and F&B offer can also have a local identity to give a sense of space and to reduce retail brand fatigue, which occurs when passengers find airport shopping dull and boring because of the widespread existence of common brands. Airports need to find the correct mix of famous and recognised brand outlets, which satisfy known expectations by giving some familiarity, with local outlets, which can give the airport some kind of identity and sense of place. The actual goods sold can also reflect the character and culture of the destination by using local merchandise, handcrafted goods or gourmet products such as maple syrup from Canada, cheese from Switzerland, salmon from Norway, or rum from Jamaica. By successfully engaging the passenger in the airport brand it is likely that this will enhance the volume of commercial sales made. The actual mix of brands will again depend on the mix of passengers and their sentiment towards the different types of brands. Most airports are increasingly bringing a sense of place or community into their F&B offer by partnering with local brands selling local authentic merchandise or gourmet products with locally themed outlets (Assies, 2014). Numerous examples exist, sometimes when airports try to provide a unique local service, such as a micro-brewery at Munich Airport, or a gin distillery at London Gatwick Airport. An interesting case is Amsterdam Airport Schiphol that has a joint initiative with The Surplus Food Factory which sells soups made of ‘lost’ vegetables (vegetables that would otherwise simply be thrown away), made by people who have limited access to the job market. This trend for healthy and local products also links with the need for airports to be more sustainable to satisfy more socially conscious consumers and to promote more responsible consumption (Chapter 11) by, for instance, using locally sourced and fresh food, using local employment, and limiting harmful and polluting processes in F&B production and delivery. However, many airports have now gone much further than just providing retail and F&B services and now offer various leisure, fitness and wellbeing services as well, to reinforce the

PRODUCT, BRAND AND EXPERIENCE notion of an airport providing an experience, rather than just being a shopping mall. For instance, numerous airports now provide spa, massage and yoga facilities, or experiences such as beauty care testing. Narita International Airport even has an oxygen bar. Hong Kong International, Minneapolis-St. Paul International, Portland International, Seoul Incheon International and Singapore Changi have cinemas. Minneapolis-St. Paul International also has a golf driving range. Punta Cana International Airport offers a swimming pool within its premium lounge and there are also swimming pools in the airport transit hotels in Singapore Changi, Hamad International and Dubai International. Moreover, Frankfurt Airport has a huge medical clinic and dental care is available at GRU Airport – São Paulo. Many of these facilities are particularly aimed at transfer passengers who have more time at airports. Some airports go further than this, by offering free bus tours downtown (in collaboration with tourism authorities) if transfer passengers are staying over a certain period of time. Examples include Hamad International Airport, Incheon International Airport, Narita International Airport, Salt Lake City International Airport, Singapore Changi Airport and Taoyuan International Airport. Whilst these will not generate revenue directly for the airport, they may enhance the passenger experience, give the airport a competitive edge, and encourage visitors back to the country. Indeed, in research undertaken by Tang et al. (2017) at Singapore Changi Airport, the free city tour with five other airport features (souvenir shop, local interest section in bookstore, themed exhibition/display, butterfly garden, sunflower and light garden) – combined with three airline features – were found to have particularly stimulated the transfer passenger’s interest to revisit Singapore. Traditionally most purchases at airports were done on impulse but e-commerce is leading to many passengers researching online beforehand and making planned purchases. As a consequence, airports are using many digital strategies to stimulate commercial sales and compete with other digital channels, with the coronavirus pandemic accelerating this digital use due to the need for contactless or minimum touch-point transactions. Digital engagement opportunities actually exist before the passenger’s trip by aiding pre-planning, and also by providing e-commerce services for buying and selling over the internet, and m-commerce services for buying and selling via a mobile device, to allow pre-ordering of products, especially car parking, foreign currency and increasingly retail, to take place. Then during the actual airport journey, with the use of smartphones, airport mobile applications and sensors, there are ample opportunities to use proximity marketing and provide personalised real-time information and offers with content based on the specific location of the passenger. Finally, after the trip, there are further opportunities for engagement to re-enforce loyalty with the commercial facilities. Proximity marketing is discussed in more detail in Chapter 10, while distribution channels and engagement with passengers at each stage of their journey are discussed in more detail in Chapter 8. Digital developments have meant that airports are now enhancing their omnichannel (multiple channels) capabilities to remain competitive. London Heathrow Airport with the ‘Heathrow Boutique’ concept, Auckland International Airport and Frankfurt Airport are all good examples (Gould, 2019). The omnichannel concept involves simplifying seamless online and offline shopping for passengers and the airport evolving into a digital marketplace provider by collaborating with other stakeholders. It does this with the cross-linking of travel information, services and shopping along the airport journey, by linking together business intelligence, inventory management and personalisation to provide relevant information and services at the right time and place, taking into account shopping experience, commerce options, fulfilment and integration (Figure 6.13). Passengers therefore have many options to buy, pay and pick up products or

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Shopping experience Before travel During the flight (During the transfer) After the flight During the return journey

Fulfillment Delivery time Pick-up points Pick-up during return journey Gate, lounge and home delivery

Commerce options Product information Product reservation Online shopping In-store shopping F&B packages

Integration Airport mobile application Airport website Loyalty program Logistics IT systems

Figure 6.13 Key features of an omnichannel airport system Source: Adapted from AOE (2020)

get them delivered (e.g. click and collect, tap and pay and home delivery) with all of this being integrated into one single e-commerce marketplace. Since the coronavirus pandemic, airports have been upping the promotion of their omnichannel products to offset the loss of more traditional sales, and also focusing on providing safe, and especially contactless or minimum touch-point transactions, to their passengers. For instance, at Dallas Love Field Airport in 2021 a new Hudson Nonstop store was opened, using Amazon’s Just Walk Out technology which allows passengers to enter the store with a swipe of their credit card or using ‘tap to pay’, and they can then take the products they want and walk out of the store. This technology has also been used for some express F&B outlets at Newark and LaGuardia New York airports. Sales in certain areas, for instance, foreign exchange, as well as cosmetics and fragrances and other more experiential areas, however, are very challenging in a coronavirus environment, even though quick response (QR) codes, augmented reality and VR technology can help here to replace the more physical aspects of such sales. In fact, some believe that there will be a need for more non-passenger revenues (Correa, 2020) which is discussed in the next section.

6.5.3 The airport as a destination Normally, an airport plays the role of facilitating access to a city or tourist resort. However, it is possible, by adding certain facilities to the product, for the airport actually to take on the role of the final destination. A number of airports, for instance serving Amsterdam, Frankfurt, Munich, Prague, Vienna and Zurich provide airport tours for aviation enthusiasts and visitors. At Zurich Airport there is the possibility of having a two-hour walking tour of the airport,

PRODUCT, BRAND AND EXPERIENCE followed by dinner in the historic control tower, accompanied by a pilot who talks about an airline captain’s working life. Others provide various aviation-related activities for visitors, for instance, Manchester Airport’s Runway Visitor Park, or Munich Airport’s Visitor Park that offers an adventure playground, a visitors’ hill to watch the aircraft from, an interactive aviation exhibition and some old aircraft to explore. Jewel Changi Airport is one of the most notable ‘destination’ developments that have been built in recent years. It is a large nature-themed entertainment and retail complex linked to three of the passenger terminals, with its centrepiece being the world’s tallest indoor waterfall (the Rain Vortex), which is surrounded by a terraced forest setting (Figure 6.14). It has a hotel, around 300 retail and F&B outlets, and early check-in for passengers. Its attractions include an indoor garden spanning five storeys (the Shiseido Forest Valley) and the Canopy Park that has gardens and leisure facilities. It opened in 2019 and is a joint venture between Changi Airport Group and CapitaLand Limited, which is a Singaporean asset management company. It attracted 50 million visitors in its first six months of opening, dramatically exceeding the initial annual target of 40–50 million visitors (Wei, 2019). An airport can also provide conferences and meeting facilities and event spaces with these being shared by passengers, local businesses and other customers (Halpern et al., 2011). Conference and exhibition facilities tend to be most successful at and around large hub airports (e.g. Amsterdam Schiphol, Atlanta, Chicago O’Hare, Frankfurt and Hong Kong), but there are also some mid-size airports, for instance serving the cities of Helsinki, Munich, Oslo and Stockholm that have developed as successful conference and exhibition venues. Some airports may hold events related to aviation such as air shows, or unrelated events such as car races or

Figure 6.14 Jewel Changi Airport – Forest Valley Source: Courtesy of Changi Airport Group

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PRODUCT, BRAND AND EXPERIENCE shows (National Academies, 2013). Notable events include weddings that are offered at airports including Frankfurt, Manchester, New Orleans Lakefront, St. Louis Lambert International and Stockholm Arlanda. At George Bush Intercontinental Airport in Houston, the old art-deco terminal building has been transferred into the 1940 Air Terminal Museum, where weddings are offered. Zurich Airport also offers weddings and children’s parties, and Dusseldorf Airport has its open airport cinema concept where visitors can watch certain films in the open air in the summer months. Elsewhere at Munich Airport, every autumn a huge stationary surfing installation is set up for public use and it is where the European championships in stationary wave riding are held. Munich Airport has also hosted skateboarding championships and in the winter has a Christmas market and ice skating. Denver International Airport and Seoul Incheon Airport have also offered ice skating. If sufficient land is available outside the terminal, there may be the option of expanding beyond the boundaries of the traditional airport product in the terminal and diversifying, developing facilities such as office complexes, business parks and free trade zones; distribution and logistics centres; sport, cultural and entertainment amenities; shopping centres; and medical services (Kasarda, 2013). The aim of such product development would primarily be to exploit the commercial opportunities of the land and to target some of the additional groups of customers such as residents, visitors, airport employees and companies from the region (as discussed in Chapter 3). As a result of this product expansion and diversification, airports can potentially become multi-modal and multifunctional businesses; these are often called airport cities. These can act as regional and national competitive tools for economic development. If the airport city continues to develop outwards, the boundaries between the airport and its surrounding urban area may become increasingly blurred and a new urban form, known as an aerotropolis, can emerge. This development, similar to a traditional metropolis, consists of a central city core (the airport city) surrounded by rings or clusters of business and residential suburbs extending as far as 30 kilometres outwards from the airport, connected with corridors of transport links and efficient communications systems. Airport cities and aerotropoli now exist in many parts of the world, although there are a significant number of countries that have stated that they have ambitions to develop airport cities at their primary air gateways and aerotropolises around them, but these have never really materialised. Airport cities are particularly popular in Asia where there tend to be newer airports surrounded by a large amount of open land. Examples exist in mainland China at the airports of Beijing Capital, Shanghai Hongqiao, Guangzhou Baiyun, and Zhengzhou Xinzheng and also in Hong Kong (SkyCity), Incheon (Air City) and Kuala Lumpur (KLIA Aeropolis). Hyderabad International Airport has plans for a GMR Hyderabad Airport City which will consist of six major commercial clusters: aerospace, business services, education, entertainment, health, and logistics. Dubai South Airport (also known as Al Maktoum International Airport) has a purpose-built aerotropolis – originally it was envisioned to be the world’s largest. The airport is designed to drive surrounding aerotropolis districts focusing on the aviation industry, logistics, residential, golf, commercial, humanitarian, and exhibition functions, plus a Dubai business park, However, with the recent slowdown in Emirates Airline’s growth, plans to shift much of Dubai International Airport’s passenger traffic to Dubai South Airport have stalled and so the aerotropolis development has been slowed down. Elsewhere there are many other examples of varying sizes and stages of development. In Europe, Amsterdam Airport Schiphol was one of the original airports to develop the airport city concept back in the 1990s, but other examples include Airport City Manchester, Airport City Stockholm, Helsinki Aviapolis, Istanbul Airport City, Oslo Airport City and Warsaw Chopin

PRODUCT, BRAND AND EXPERIENCE Airport City. In the US, six gateway airports have driven airport city and aerotropolis development (Atlanta, Dallas Fort Worth, Denver, Detroit, Memphis and Orlando) whereas airports in Alberta, Edmonton and Vancouver have been at the forefront of such development in Canada. In South Africa, two key aerotropolis projects are underway in Durban and Johannesburg regions (Kasarda, 2020a, 2020b). An airport city or aerotropolis is such a vast and complex product that it goes beyond the normal consideration of the airport product because of the substantial number of different organisations and services that will each play important roles in providing such infrastructure and services. Nevertheless, the relevance of such developments in terms of airport marketing cannot be overlooked because of their function in increasing the attraction of the airport and bringing customers to the airport who might otherwise not have visited.

References ACI (Airports Council International). (2016). Does passenger satisfaction increase airport nonaeronautical revenues. Montreal: ACI. ACI (Airports Council International). (2017). Low cost and conventional airlines: passenger expectations for departure airports. Montreal: ACI. ACI Europe (Airports Council International Europe). (2018). Guidelines for passenger services at European airports, 2nd ed. Brussels: ACI Europe. ACI Europe (Airports Council International Europe). (2020). Guidelines for a healthy passenger experience at airports. Brussels: ACI Europe. AOE. (2020). Case study Frankfurt Airport: From airport to global omnichannel travel and shopping hub. [online] AOE. Available at: https://www.aoe.com/fileadmin/AOE.com/documents/en/ case_studies/cs_fraport_en_2020.pdf [Accessed 15 April 2021]. Assies, H. (2014). Local heroes on the move: How a growing number of local brands are gaining presence at airports. Journal of Airport Management, 8(4), 305–307. Bates, J. (2019). London City Airport unveils new dynamic brand identity. [online] Airport World. Available at: https://airport-world.com/london-city-airport-unveils-new-dynamic-brandidentity/ [Accessed 15 April 2021]. BCG (Boston Consulting Group). (2016). The connected airport: the time is now. [online] BCG. Available at: https://www.bcg.com/publications/2016/technology-digital-transformationconnected-airport-the-time-is-now [Accessed 15 April 2021]. Bogicevic, V., Yang, W., Bilgihan, A. and Bujisic, M. (2013). Airport service quality drivers of passenger satisfaction. Tourism Review, 68(4), 3–18. CAPA (Centre for Aviation). (2015). Low-cost airports and terminals are changing shape. [online] CAPA. Available at: https://centreforaviation.com/analysis/airline-leader/low-cost-airportsand-terminals-are-changing-shape-208789 [Accessed 15 April 2021]. CAPA (Centre for Aviation). (2019). LCCs increasingly attracted to primary airports. [online] CAPA. Available at: https://centreforaviation.com/analysis/reports/lccs-increasingly-attracted-toprimary-airports-459531 [Accessed 15 April 2021]. Correa, C. (2020). The function of an airport will need to change. [online] International Airport Review. Available at: https://www.internationalairportreview.com/article/139955/functionairport-change-future/ [Accessed 15 April 2021]. Cserep, K. (2017). Win or lose: the airport opportunity in the growing self-connecting passenger market. London: ICF. Dibb, S., Simkin, L., Pride, W. and Ferrell, O. (2019). Marketing: concepts and strategies, 8th ed. Andover: Cengage. Ellis, D., Morrison, G. and Hardiman, T. (2019). The VIP experience: An untapped revenue opportunity within airports. [online] International Airport Review. Available at: https://www.international airportreview.com/article/89672/vip-experience-increasing-revenues/ [accessed 21 April 2021].

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PRODUCT, BRAND AND EXPERIENCE Engle, B. and Ryan, D. P. (2020). Expanding the ‘Orlando experience’. Journal of Airport Management, 14(4), 403–419. Gitto, S. and Mancuso, P. (2017). Improving airport services using sentiment analysis of the websites. Tourism Management Perspectives, 22, 132–136. Gould, K. T. (2019). Meeting today’s challenges in travel retail with digital commerce marketplaces. Journal of Airport Management, 13(3), 245–253. Graham, A. (2019). Aerotropolis: London’s airports as experiences and destinations. In: A. Smith and A. Graham, eds., Destination London: the expansion of the visitor economy. London: University of Westminster Press. Groot, M. and Scholvinck, J. (2017). Trends in airport non-aviation business. International Airport Business, May, 9–12. Halpern, N. (2008). Lapland’s airports: facilitating the development of international tourism in a peripheral region. Scandinavian Journal of Hospitality and Tourism, 8(1), 25–47. Halpern, N. and Mwesiumo, D. (2021). Airport service quality and passenger satisfaction: the impact of service failure on the likelihood of promoting an airport online. Research in Transportation Business & Management, June, 100667, in press. Halpern, N. and Regmi, U. K. (2011). What’s in a name? Analysis of airport brand names and slogans. Journal of Airport Management, 6(1), 63–79. Halpern, N., Graham, A. and Davidson, R. (2011). Meeting facilities at airports. Journal of Air Transport Management, 18(1), 54–58. Heathrow Airport Limited. (2020). H7 revised business plan. Hounslow: Heathrow Airport Limited. Holland, J. (2017). Sense of place now a key part of the airport experience, says latest m1nd-set report. [online] The Moodie Davitt Report. Available at: https://www.moodiedavittreport.com/sense-of-place-now-a-key-part-of-the-airport-experience-says-latest-m1nd-set-report/ [Accessed 15 April 2021]. Holmes, R. (2018). Strategically positioning London Luton Airport for growth. [online] International Airport Review. Available at: https://www.internationalairportreview.com/article/77136/london-luton-airport-growth/ [Accessed 15 April 2021]. Jarach, D. (2005). Airport marketing: strategies to cope with the new millennium environment. Farnham: Ashgate. Kasarda, J. (2013). Airport cities: the evolution. Airport World, April-May, 24–27. Kasarda, J. (2020a). Aerotropolis business magnets. Airport World, 1, 36–38. Kasarda, J. (2020b). Aerotropolis engines beyond Asia. Airport World, 2, 28–30. Kotler, P., Armstrong, G., Harris, L. and He, H. (2020). Principles of marketing, 8th ed. Harlow: Pearson Education Limited. Lee, K. and Yu, C. (2018). Assessment of airport service quality: a complementary approach to measure perceived service quality based on Google reviews. Journal of Air Transport Management, 71, 28–44. Martilla, J. and James, J. (1977). Importance–performance analysis. Journal of Marketing, 41(1), 13–17. Martin-Cejas, R. (2006). Tourism service quality begins at the airport. Tourism Management, 27(5), 874–877. Martin-Domingo, L., Martín, J. C. and Mandsberg, G. (2019). Social media as a resource for sentiment analysis of Airport Service Quality (ASQ). Journal of Air Transport Management, 78, 106–115. Masjutina, S. (2016). Airport branding. How to create a sense of place in airports. [online] The Place Brand Observer. Available at: https://placebrandobserver.com/how-to-create-sense-ofplace-airports [Accessed 15 April 2021]. National Academies (National Academies of Sciences, Engineering, and Medicine). (2011). Wayfinding and signing guidelines for airport terminals and landside. Washington D. C: The National Academies Press.

PRODUCT, BRAND AND EXPERIENCE National Academies (National Academies of Sciences, Engineering, and Medicine). (2013). Conducting aeronautical special events at airports. Washington D. C: The National Academies Press. National Academies (National Academies of Sciences, Engineering, and Medicine). (2014). Improving terminal design to increase revenue generation related to customer satisfaction. Washington D. C: The National Academies Press. National Academies (National Academies of Sciences, Engineering, and Medicine). (2016). Improving the airport customer experience. Washington D. C: The National Academies Press. Nghiêm-Phú, B. and Suter, J. R. (2018). Airport image: an exploratory study of McCarran international airport. Journal of Air Transport Management, 67, 72–84. Njoya, E. and Niemeier, H.-M. (2011). Do dedicated low cost passenger terminals create competitive advantages for airports? Research in Transportation Business and Management, 1(1), 55–61. OAG. (2019). OAG flight guide worldwide. Luton: OAG. Paternoster, J. (2008). Excellent airport customer service meets successful branding strategy. Journal of Airport Management, 2(3), 218–226. Popovic, V., Kraal, B. and Kirk, P. (2009). Passenger experience in an airport: an activity-centred approach. International Association of Societies of Design Research (IASDR) 2009 Proceedings: Rigor and Relevance in Design. IASDR. Pride, W. and Ferrell, O. (2020). Marketing, 20th ed. Boston, MA: Cengage. PS. (2021). The Private Suite is now PS. [online] PS. Available at https://reserveps.com/theprivate-suite/ [Accessed 15 April 2021]. SITA. (2021). Air transport IT insights 2020. Geneva: SITA. Tang, C., Weaver, D. and Lawton, L. (2017). Can stopovers be induced to revisit transit hubs as stayovers? A new perspective on the relationship between air transportation and tourism. Journal of Air Transport Management, 62, 54–64. Tseng, C. C. (2020). An IPA-Kano model for classifying and diagnosing airport service attributes. Research in Transportation Business and Management, 37, 100499. Turner, C. (2020). Millennials still highly motivated by price advantage in duty free shops. [online] TRBusiness. Available at: https://www.trbusiness.com/regional-news/international/millennialsstill-highly-motivated-by-price-advantage-in-duty-free-says-m1nd-set/183415 [Accessed 15 April 2021]. Urfer, B. and Weinert, R. (2011). Managing airport infrastructure. In: A. Wittmer, T. Bieger and R. Muller, eds., Aviation systems: management of the integrated aviation value chain. Heidelberg: Springer. Voltes-Dorta, A. and Martín, J. C. (2019). The option of self-connection. In: A. Smith and A. Graham, eds., Destination London: the expansion of the visitor economy. London: University of Westminster Press. Vujicic, S. and Wickelgren, M. (2011). Destination branding in relation to airports: the case of the City of Valencia. European Journal of Transport and Infrastructure Research, 11(3), 334–345. Wattanacharoensil, W. (2019). The airport experience. In: A. Graham and F. Dobruszkes, eds., Air transport: a tourism perspective. Amsterdam: Elsevier. Wattanacharoensil, W., Schuckert, M., Graham, A. and Dean, A. (2017). An analysis of the airport experience from an air traveler perspective. Journal of Hospitality and Tourism Management, 32, 124–135. Wei, T. T. (2019). Jewel Changi Airport sees 50m visitors since opening six months ago. [online] The Straits Times. Available at: https://www.straitstimes.com/singapore/transport/jewelchangi-airport-sees-50m-visitors-since-opening-six-months-ago [Accessed 15 April 2021]. Yamamoto, B. and Paternoster, J. (2017). Aligning the airport community to improve LAX guest satisfaction: every journey begins with a very important first step. Journal of Airport Management, 11(3), 243–257.

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Airport pricing and incentives This chapter looks at airport pricing. It introduces factors that can affect airport pricing decisions before considering the cost and revenue structure of airports, types of airport user charge, economic regulation of airport charges and incentive mechanisms used by airports.

7.1 Factors that can affect airport pricing decisions As shown in Chapter 3, the overall cost of using an airport is not always the main determinant for customer choice. However, price does play an important role in airport marketing. It is the only element of the marketing mix that contributes revenue (product, distribution and promotion represent costs) and it can therefore influence the overall success and financial viability of an airport. Airport pricing decisions are often guided by the need to cover costs and raise money for investment, especially at airports where cost-based principles are used to set and/or regulate aeronautical charges. Nevertheless, pricing should also be customer-value orientated because the perceived value of a product or service is arguably more important to customers than price (Kotler et al., 2020). Perceived value is particularly important for service companies such as airports because of the intangible nature of what is being sold. It is difficult for customers to see and feel airport products or services or to compare the value of one airport product or service to another, unlike with consumer goods that can be felt, tested and in some cases tasted. Price is the easiest element of the marketing mix to change quickly. It is not so easy to make quick changes to products or services, or to channels used to distribute or promote the product or service (Kotler et al., 2020). Airports should therefore monitor the effect of pricing decisions and make changes where necessary (e.g. in response to changes in demand, emerging trends or changes they make to other elements of the marketing mix). Airports should also vary prices to reflect the value and needs of different products or services and market segments.

DOI: 10.4324/9781003039563-7

PRICING AND INCENTIVES

• Demand

• Market

Cost and revenue structure

Ownership, operation and organisation

Marketing objectives

Marketing mix

• Competition

• Business environment

Figure 7.1 Factors affecting airport pricing decisions Source: Compiled by the authors

As with any business, airport pricing decisions are affected by a range of factors. Some are internal to the airport such as its cost and revenue structure, the way it is owned and operated, its marketing objectives, and the decisions it makes relating to its marketing mix. Other factors are external to the airport such as the market and nature of demand, and the competitive and business environment within which it operates (Figure 7.1).

7.1.1 Internal factors The cost of operating the airport is likely to affect the price because the revenue generated from pricing will determine the net benefit to the airport. Airports tend to have high fixed costs (e.g. in terms of labour, maintenance and utilities), and for airports with spare capacity, the marginal cost of accommodating additional business such as new air services or concessions is likely to be low, while the revenue gained from increased passenger throughput and spending (e.g. on car parking, retail and F&B) can be significant. Marketing objectives affect pricing decisions because they determine whether an airport is seeking to expand or simply to be better at what it does. For instance, marketing objectives for airports with low traffic volume may be focused on developing air services, while busy, capacity-constrained airports may be more focused on retaining existing customers, generating added value (e.g. from an improved retail offer) or concentrating on public relations. Airport pricing decisions cannot be taken in isolation. They need to fit in with the overall marketing mix strategy of the airport, including decisions about airport products and services and the channels used to distribute and promote them. Similarly, airport pricing decisions are likely to involve input from the full range of departments within an airport’s organisational structure such as marketing, finance and corporate strategy. In addition, airports operated as part of a group may lack the autonomy to make decisions on pricing that reflect their own market, and privately owned or operated airports may have different marketing objectives from those that are publicly owned or operated, which subsequently affect the pricing decisions they make.

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7.1.2 External factors The nature of the market and demand for air services will affect airport pricing decisions. For instance, airports that serve a small market with relatively low traffic volume represent a fairly high degree of risk to any airline considering operating at the airport, especially airlines seeking to operate a frequent year-round service as opposed to an infrequent and seasonal service. In such circumstances, there is an incentive for airports to adopt a pricing policy that shares in the risk. The same principle applies to any commercial, non-aviation-related activities at an airport. Competition affects airport pricing decisions. Competition may be particularly high at airports seeking to compete for LCCs or inbound services such as those supporting the development of tourism because these airlines will have a number of airports and destinations to choose from; unlike some FSCs and regional airlines, they are generally more footloose and less obliged to serve particular airports because of public service obligations or network considerations. Airports are also exposed to competition on the commercial side of their business (e.g. from off-site car parks, downtown or internet shopping and other providers of real estate or airport consulting services) and will need to take into account the nature and intensity of competition when making decisions about pricing. Issues relating to the wider business environment also influence airport pricing decisions. Fuel prices and the state of the economy tend to have a significant impact on airport customers, especially airlines that are under increased pressure to reduce or contain costs and may be inclined to reduce capacity or drop routes at certain airports during times of hardship, moving their assets to airports in regions that are performing better. Airports are less able to move their assets and may therefore need to respond to changes taking place in their wider business environment by altering their prices. One of the main factors affecting airport pricing decisions, especially on the aeronautical side of their business, is the extent to which they have control over pricing. Aeronautical charges are set and controlled at many airports, especially those that are owned and operated by governments and/or are part of a national or regional airport system where charges may be the same for all airports. Specific forms of economic regulation may be imposed on airports, especially larger and main airports that have the potential to abuse their market power and charge airlines high prices unless controls over pricing are in place. Finally, airports are not always responsible for the services provided at their airport, which can also affect their ability to control and compete on price. This is often the case with ground handling services or any government taxes or ATC charges that might be levied for flying to and from their airport.

7.2 Sources of airport cost and revenue Airports provide essential infrastructure for the movement of aircraft, passengers and cargo, and in order to facilitate continued long-term growth in demand, they need to invest vast amounts of capital. For instance, in 2019 (prior to the coronavirus pandemic), it was estimated that USD 205 billion in capital expenditure was being invested in new airport projects worldwide, together with 634 billion on upgrades or expansions of existing infrastructure. This investment in airport infrastructure projects was dominated by airports in the Asia-Pacific region (CAPA, 2019). Operating airport infrastructure also comes at a cost. Worldwide, airports incurred operating expenses (excluding depreciation) of USD 87 billion in 2018 (ACI, 2020). The two main cost

PRICING AND INCENTIVES Table 7.1 Worldwide airport operating costs, 2018 Cost item

%

Personnel

33.9

Contracted services

24.9

Communication, utilities, energy, waste

6.6

Lease, rent, concession fees

5.7

Maintenance

5.6

General and administration

4.0

Materials, equipment, supplies

3.3

Insurance, claims, settlements

1.2

Other

14.8

Data source: ACI (2020)

items are personnel (34 per cent of total operating cost) and contracted services, which include outsourcing costs to third parties (25 per cent) (Table 7.1). Airports need to generate revenue to cover their costs and contribute to future investment. Worldwide, airports generated a total income of USD 178 billion in 2018 (ACI, 2020). There are two main sources of airport income: aeronautical revenue directly related to the processing of aircraft, passengers and cargo, and non-aeronautical revenue from commercial facilities and services. Historically, airport income has been derived largely from aeronautical activities. By 1990, nonaeronautical revenue contributed about 30 per cent of total airport income (ACI, 2007) while by 2005 its contribution had increased to 43 per cent (ACI, 2017). Non-aeronautical revenue has therefore become a vital part of the airport business, however, it is becoming increasingly difficult for airports to generate additional revenue on the non-aeronautical side, and growth in the proportion of non-aeronautical to total revenue has stagnated at many airports in recent years, fluctuating between 43 per cent and 39 per cent since 2005. The share in 2018 was 39 per cent (ACI, 2020). Differences exist between world regions (Figure 7.2): 48 per cent of total revenue is non-aeronautical at airports in Asia-Pacific, 40 per cent in North America, 39 per cent in Europe, 30 per cent in Latin America/Caribbean and 27 per cent in Africa. Airport revenue by item is shown in Figure 7.3. The black segments represent aeronautical sources of revenue, while the dark grey segments represent non-aeronautical sources (the very light grey is the small non-operating/non-aviation income item). The two largest sources of revenue are from passenger- and aircraft-related charges. Traditionally, aircraft-related charges were the main source of revenue, but there has been a trend in recent years for airports to place more emphasis on passenger-related charges – except in North America, where terminal rental fees contribute a high proportion of revenue. For instance, in 2018, aircraft-related charges represented around 25 per cent of all aeronautical charges, compared to 34 per cent in 2010. The rationale behind focusing more on charging per passenger is that airports and airlines share the risk of changes to volume, which does not necessarily happen when charging according to aircraft movements or size. This change in focus or the so-called rebalancing of the scale between aircraft and passengers is also reflected, to some extent, by changes to airline business

195

PRICING AND INCENTIVES 60,000 50,000 40,000 30,000 20,000 10,000

ic a or th

A

m

er

Ea st N

ic La t

in

A

m

er

M

Ca a/

sia A

id dl e

rib be an

pe Eu ro

-P

ac

fri ca

ifi c

0

A

Total income (USD million)

196

Aeronautical

Non-aeronautical

Figure 7.2 Total airport revenue by region and source, 2018 Data source: ACI (2020) Note: The fgure excludes non-operating/non-aviation revenues that worldwide represent fve per cent of total revenues

Other nonaeronautical 9%

Non-operating income 5%

F&B 2%

Passenger-related 28%

Advertising 1% Car rental 2% Real estate 6%

Car parking 8% Retail 11%

Aircraft-related 14%

Other aeronautical 7%

Figure 7.3 Worldwide airport revenue by item, 2018 Data source: ACI (2020)

Terminal rental (NA) 7%

PRICING AND INCENTIVES models (especially of LCCs that seek to reduce aircraft-related charges to a minimum and shift responsibility for charges to the passenger) and the overall more competitive environment. The non-aeronautical side of the airport business is also important. It often generates higher profit margins than aeronautical activities and allows airports to develop a diversified business. Depending on the specific regulatory system, which is discussed later in this chapter, it may also help airports to keep their charges down. According to IATA (2020), user charges represent about six per cent of airline operating cost, although this varies by airline and is likely to be much higher for many LCCs (that do not belong to IATA). A successful non-aeronautical business can allow airports to generate higher profits, meaning that they may well be a more attractive option for investment and encourage a lower cost of borrowing. Retail concessions are the main source of non-aeronautical revenue at airports, contributing 29 per cent of non-aeronautical revenue worldwide in 2018. Property income/rent and car parking are also important sources. Differences exist between world regions, especially North America, where retail concessions only contribute 8 per cent of non-aeronautical revenue, while car parking contributes 41 per cent and rental car concessions contribute 17 per cent (Table 7.2).

7.3 Types of airport user charge Income, whether aeronautical or non-aeronautical, comes from charges levied to users of airport facilities and services. Global cost-based principles for determining standards for airport charges are recommended by ICAO (Table 7.3). Further guidance is provided by ICAO (2012) on how individual charges should be determined, and a summary of the ICAO guidelines is provided later in this chapter, along with examples from airports. Some of the examples reflect ICAO guidance; others do not. This is because individual states are not required to comply with the standards and tend to have their own guidelines and regulations regarding the setting of airport charges. For instance, in Europe, individual states and their airports should comply with the EC directive on airport charges (see EC, 2009).

Table 7.2 Proportion of non-aeronautical revenue at airports worldwide by source, 2018 Rental car Property Advertising F&B concession income/ rent

Other

Region

Retail concession

Car parking

Africa

35

10

4

14

2

2

33

Asia-Pacifc

47

7

1

22

4

4

15

Europe

31

17

2

16

2

5

27

Latin America/ Caribbean

27

10

4

11

4

8

36

Middle East

41

7

1

27

1

4

19

8

41

17

7

1

8

18

29

20

6

15

2

6

22

North America Worldwide

Data source: ACI (2020)

197

198

PRICING AND INCENTIVES Table 7.3 Cost-based principles for determining airport charges Principles • The cost to be allocated is the full cost of providing the airport and its essential services including the appropriate cost of capital and asset depreciation, maintenance, operation, management and administration. These costs may be offset by nonaeronautical revenues • Aircraft operators and other airport users, including end-users, should not be charged for facilities and services they do not use, other than those provided under the regional air navigation plan • Only the cost of facilities and services in general use by international air services should be included, not the cost of those that are exclusively leased or occupied and charged separately • Airports should maintain cost data to facilitate consultation, transparency and economic oversight • An allocation of costs should be considered for space or facilities used by government authorities • Proportionate allocation of costs to various categories of users should be determined equitably • Costs related to the provision of approach and aerodrome control should be separately identifed • Airports may produce suffcient revenues to exceed all direct and indirect operating costs, provide a reasonable return on assets, and where relevant, remunerate adequately holders of airport equity • Capacity of users to pay should not be taken into account until all costs are fully assessed and distributed on an objective basis. At that stage the contributing capability of states and communities concerned should be taken into consideration • Costs directly related to oversight functions (safety, security and economic oversight) for airport services may be included in the airport’s cost basis, at the state’s discretion Source: Adapted from ICAO (2012)

7.3.1 Passenger service charge Airports charge passengers to use their facilities and services through what is generally known as a passenger service charge (PSC) or sometimes just the passenger charge. The PSC should be collected on behalf of the airport by aircraft operators (e.g. at the point of sale for a flight ticket) because collection directly from passengers at an airport may be problematic and result in queues and delays at the airport. Airports should normally levy a charge per departing passenger. Many airports vary the PSC according to whether the passenger is taking a domestic or international flight. The charge is likely to be higher for international than domestic passengers due to the additional facilities and services needed to process international passengers. Many airports also have a lower charge for transfer passengers or waive the fee completely, primarily to encourage this type of traffic that tends to be more footloose, to their airports. There may also be lower costs associated with transfer passengers (because they do not require landside facilities) but also higher costs related to more complex baggage systems and passenger guid-

PRICING AND INCENTIVES ance needed for transfer passengers. Some airports may have different charges for the winter and summer season (e.g. East Midlands Airport) or peak and off-peak charges. Frankfurt Airport is an interesting case where there is a fee cap related to PSCs, which means that a refunded amount is provided for all passengers when the seat load factor (SLF) exceeds 83 per cent – the refund is higher when the SLF exceeds 90 per cent (Table 7.4). PSC charges may be the same across all airports belonging to an airport group (as with other charges). For instance, Avinor charges the same for its 44 airports in Norway (differentiating between terminal and transfer passengers), whilst Finavia charges the same for its 21 airports in Finland. However, this is not always the case. In neighbouring Sweden, Swedavia which operates the ten largest airports in this country, has different charges for different airports, with Stockholm having the most expensive charge (Table 7.5). Airports in the US are not legally permitted to charge for passenger services, largely because of fears that such revenues will be used by airports for non-aeronautical activities

Table 7.4 Frankfurt Airport passenger service charges, 2021 Traffc type

Passenger charge (EUR)

Domestic, EU, Iceland, Liechtenstein, Norway, Switzerland fights

18.16

Other non-EU fights

22.84

Intercontinental fights

25.16

Transfer passengers

12.93

Refund (SLF > 83–89.9%) for passengers exceeding SLF

−9.50

Refund (SLF > 90%) for passengers exceeding SLF

−11.50

Data source: Fraport (2021)

Table 7.5 Passenger service charges at Finnish, Norwegian and Swedish airports, 2021 Charge (EUR) Operator

Airports

Terminal

Transfer

Finavia

21 airports

9.20

4.35

Avinor

44 airports

4.74

3.29

Swedavia

Stockholm Arlanda

9.02

5.45

Swedavia

Göteborg Landvetter

6.64

3.96

Swedavia

Bromma Stockholm

7.83

4.66

Swedavia

Malmö

5.55

3.37

Swedavia

Umeå; Luleå

6.24

–

Swedavia

Åre Östersund; Visby; Kiruna; Ronneby

5.85

–

Data sources: Finavia (2021); Avinor (2021a); Swedavia (2021)

199

200

PRICING AND INCENTIVES (Graham, 2018). Instead, the US has a passenger facility charge (PFC) programme, which allows commercial airports controlled by public agencies to collect a fee of up to USD 4.50 for every boarded passenger. Money earned from the fee must be used by airports to fund FAA-approved projects such as those that enhance safety, security or capacity; reduce noise; or increase air carrier competition (FAA, 2021).

7.3.2 Landing (or movement) charges Landing (or movement) charges should be calculated according to the certified maximum takeoff weight (MTOW) of the aircraft, or the maximum authorised weight. Flight stage length (the average distance flown, measured in kilometres or miles, per aircraft departure) should not be used. There may be a lower fee for all-cargo aircraft, as at Amsterdam Airport Schiphol or a higher charge, as at Belfast International Airport. A range of different methods are used. Sometimes there can be quite a few different charges for different weights, as at Nairobi Jomo Kenyatta International Airport (Table 7.6). At night-time, landings are charged one-fifth of this for take-off and four-fifths of this for landing. This is very different from Europe where charges at night tend to be more expensive because of the noise nuisance potentially disturbing sleep patterns. At US airports, landing charges are normally based on a fixed rate per aircraft takeoff weight, although the so-called signatory airlines (passenger airlines occupying parts of a terminal under short-term leases or as subtenants, and cargo airlines with direct agreements or as subtenants to develop and use cargo facilities) may pay less. A more unusual example is at Casablanca Mohammed V International Airport where there are separate much cheaper landing charges for tourism flights and also the charge per tonne reduces slightly for aircraft above 200 tonnes after increasing with weight before then (Table 7.7).

Table 7.6 Nairobi Jomo Kenyatta International Airport landing charges, 2021 Aircraft MTOW (in tonnes)

Landing charge (USD)

0–1.5

10

1.6–2.5

20

2.6–5.0

25

5.1–10.0

40

10.1–20.0

65

20.1–40.0

102

40.1–80.0

223

80.1–120.0

585

120.1–180.0

820

180.1–300.0

1,345

300.1 +

1,750

Data source: Kenya Airports Authority (2021)

PRICING AND INCENTIVES Table 7.7 Casablanca Mohammed V International Airport landing charges, 2021 Traffc type

Aircraft MTOW (in tonnes)

International commercial traffc

1–25

Landing charge per tonne (MAD) 42

26–50

85

51–75

122

76–125

152

126–200

174

> 200

160

1–25

14

26–50

22

51–75

45

76–125

57

126–200

65

> 200

60

International tourism traffc

1–2

25

>2

6

National tourism traffc

1–2

25

>2

2

National commercial traffc

Data source: Moroccan Airports Authority (2021) Note: MAD = Moroccan Dirham

At congested airports, a fixed charge per aircraft can be used although this is very rare. A notable example is London Heathrow Airport. Whilst such a charge may be justifiable in relation to airport economics and congestion costs, it has been criticised by operators of small aircraft and others who have argued that this approach has had an adverse effect on regional development which often relies on smaller aircraft. At some airports (such as Tokyo Narita or Frankfurt), there may instead be a minimum landing charge which is again aimed at discouraging smaller aircraft. Elsewhere, charges may vary depending on whether they are levied for peak or off-peak periods (e.g. Manchester Airport and Rome Fiumicino Airport). Brussels South Charleroi Airport, an airport popular with LCCs, has a landing charge per passenger instead of by aircraft weight, which reflects the trend towards passenger-related charges mentioned earlier in this chapter. The airport charges EUR 2.47 per departing passenger, but there is also a discount for airlines according to the number of departing passengers (Table 7.8). No additional PSC is levied by the airport. At a number of other airports serving LCCs there may be a single aeronautical charge levied on a passenger basis if the airport enters into more long-term agreements with such airlines. At Sydney Airport and some of the larger Australian airports, there is also a single PSC charge which includes an element for the landing charge. An interesting approach is at Frankfurt Airport where in addition to a charge per tonne, the landing charge also includes a variable charge based on passengers (EUR 1.36) and 100 kilogrammes of cargo (EUR 0.06). Charges for approach and aerodrome navigation (e.g. ATC) may be levied by airports as part of the landing charge or as a separate charge. The charge should be consistent with policies

201

202

PRICING AND INCENTIVES Table 7.8 Brussels South Charleroi Airport landing charge discounts, 2020 Annual discount (%)

Annual number of departing passengers

0

0–15,000

5

15,001–35,000

10

35,001–50,000

25

50,001–100,000

35

100,001–200,000

50

200,001+

Data source: Brussels South Charleroi Airport (2020)

Table 7.9 Macau International Airport aircraft parking fees, 2020/2021 Landings per month per airline (free to one hour after landing and one hour before take-off) Aircraft MTOW (tonnes)

Up to 60 landings Charge per hour (MOP)

Over 60 landings Charge per hour (MOP)

Up to 9

51

41

10 to 50

129

103

51 to 150

180

144

151 to 250

232

185

More than 250

283

227

Data source: Macau International Airport (2021) Note: MOP = Macanese Pataca

on charges for air navigation services. There is a trend towards more airports having separate terminal navigation charges to provide greater transparency to the airlines.

7.3.3 Parking and hangar charges Parking and hangar charges should be levied according to the MTOW of the aircraft and should take into account the aircraft’s dimensions and length of stay. Airports should offer a period of free parking for aircraft after landing, which should be determined according to factors such as aircraft scheduling and space availability at the airport. Charges may differentiate between contact (e.g. with an airbridge) and remote parking. For instance, Brussels South Charleroi Airport levies an aircraft parking fee of EUR 2.22 per 24-hour day and per tonne, but the first 12 hours of parking are free. Macau International Airport charges according to the MTOW of the aircraft and the number of times the airline lands at the airport per month (Table 7.9) – the landing charge also depends on the number of times the airline lands. The free period is one hour after landing and one hour before take-off. Singapore Changi Airport charges according to aircraft square metres (m2), which is the wingspan multiplied by the maximum length of the aircraft (Table 7.10). Other airports such as Miami International Airport have a separate

PRICING AND INCENTIVES Table 7.10 Singapore Changi Airport aircraft parking fees, 2020/2021 Aircraft m2

Charge per 24 hours or part thereof after the frst three hours of free parking (SGD)

Up to 1,000

50.50

1,101 to 1,500

75.10

1,501 to 2,000

100.00

> 2,000

100.00 + 4.95 per 100 m2 or part in excess of 2,000 m2

Data source: Changi Airport Group (2019) Note: SGD = Singapore Dollar

parking fee structure for cargo aircraft, which is dependent on the landed weight of the aircraft and duration of stay.

7.3.4 Security charges Airports often charge for the provision of security functions. This does not include general security functions performed by states such as policing, intelligence gathering and national security, although some airports do include such charges (e.g. for policing) in the PSC. Responsibility for airport security will be delegated by individual states (e.g. to the airport, the aircraft operator, a private company, the military or the police). The cost may then be met by the state or the organisation responsible. The charge is discretionary and should be levied per passenger and/or be related to aircraft weight. Airport tenants may also be required to pay security charges, and these should be recovered through rentals or other charges. Airports should identify and cost security charges separately, even though they may be levied in addition to other charges such as the landing charge. As with PSCs, security charges should be collected by airlines (at the point of sale for a flight ticket) and passed on to the airport for re-distribution to the relevant provider of airport security, if it is not themselves. Riga International Airport provides an interesting case study. Historically, security functions at the airport have been financed by the state through taxpayers’ money. A government regulation was introduced, which stipulated that the security charge would be collected from passengers departing Riga International Airport as of 1 January 2012. The airlines were asked to collect the charge when selling flight tickets. LCC Ryanair did not agree to do so; as a result, Riga International Airport collected the charge from Ryanair passengers instead of the airline. Owing to the inconvenience caused, the security charge was EUR 7.0 for Ryanair passengers compared to 6.5 for passengers paying via their airline. However, in 2015 Ryanair agreed that they would include the security charge into the ticket price.

7.3.5 Noise and emissions charges As discussed in detail in Chapter 11, environmental concerns are becoming increasingly important for airports. Hence many have taken this into account in their charging policies. Most commonly, noise-related charges may be levied at airports that experience noise problems. Many airports apply noise charges to their landing charges by using noise categories of different aircraft and whether the flights are during the day or night. Similarly, states that experience local air quality problems at or around airports may apply an emissions charge to address such problems,

203

204

PRICING AND INCENTIVES ­Table 7.11  London Heathrow Airport landing charges (­differentiated by noise) and emission charges, 2021 Charge

Chapter 3

Chapter 4 High

Chapter 4 Base

Chapter 14 High

Chapter 14 Base

Chapter 14 Low

Landing/­noise charge (­per movement) (­GBP) MTOW 16 tonnes or less

 1,363.35

 1,363.35

1,363.35 1,363.35

MTOW >16 tonnes (­day)

 5,972.46

 2,209.81

1,692.20 1,124.81

MTOW >16 tonnes (­night)

29,862.30 11,049.05 8,461.00 5,624.05

1,363.35 1,363.35 802.30

481.78

4,011.50 2,408.90

Emission charge (­per kilogramme of NOx) (­GBP) Aircraft MTOW > 8.6 tonnes

20.99

20.99

20.99

20.99

20.99

20.99

Data source: Heathrow Airport Limited (­2021)

although such charges are less popular and very rare outside of Europe. These are usually based on a charge related to the amount of NOx emitted. T ­ able 7.11 shows the environmental charges at London Heathrow Airport and also illustrates the m ­ ovement-​­based landing charge at this airport.

7.3.6  Ground handling charges Ground handling services may be provided by airports, independent handlers or airlines (­some airlines ­self-​­handle). Charges will obviously vary according to the method used. Charges levied for ground handling by airports are complex because there is a wide range of services that can be provided. In addition, the size and scale of the airline’s operation will play a major role in determining the charges to be levied (­­Table 7.12). Airports that allow ­self-​­handling or offer a licence to one or more independent handlers by concession will typically charge a fee for access to airport installations. This is in addition to any charges for ­cost-​­related services such as issuing airside passes, or for centralised infrastructure (­e.g. baggage transportation systems, fixed power installations and water). Manchester Airport charges GBP 267.32 per annum for a new ground handling licence. The fee contributes towards the costs incurred by the airport in administering the licence and monitoring the performance of ground handlers. Ground handlers also pay GBP 30.84 for each item of airside equipment and each vehicle permit for motorised vehicles operating airside at the airport, and GBP 2.00 per unit loading device per day in excess of the number agreed between the airport, airline, operator or handling agent (­MAG, 2020). In Europe, Article 16 of the directive on access to the ground handling market at community airports requires member states to determine fees for access to airport installations according to relevant, objective, transparent and n ­ on-​­discriminatory criteria, so ­self-​­handling airlines and independent handlers are generally treated the same way (­see EC, 1996). In some countries, the directive has been implemented into state law and is overseen by a designated regulator, as is the case in Ireland, where the designated regulator is the Commission for Aviation Regulation (­CAR). When an airport authority decides to charge a fee for access to airport installations, they need to submit a request for approval to CAR. As of November 2019, the following access

PRICING AND INCENTIVES Table 7.12 Tallinn Airport ground handling charges, 2021 Service

Category

Unit

EUR

Basic ground handling service

Up to 10 MTOW

Each tonne

10.00

Over 10–20 MTOW

Each tonne

8.50

Over 20–40 MTOW

Each tonne

6.50

Over 40–70 MTOW

Each tonne

5.50

Over 70–100 MTOW

Each tonne

4.00

Over 100 MTOW

Each tonne

3.50

Weight & balance calculation

–

Per turnaround

60.00

Passenger & baggage service

Departing/arriving

Each passenger

3.80/3.10

Manpower

–

Hour/call

50.00

Aircraft cleaning

up to 50 seats

Call

30.00/50.00

up to 100 seats

Call

35.00/56.00

up to 150 seats

Call

45.00/65.00

up to 200 seats

Call

55.00/75.00

up to 300 seats

Call

80.00/100.00

up to 360 seats

Call

100.00/120.00

up to 440 seats

Call

110.00/130.00

up to 500 seats

Call

120.00/140.00

Litter dispose

–

Each tonne

0.40

Power/ground power unit

–

Hour/call

5.00/65.00

Push-back

–

Call

85.00

Passenger stairs/airbridge

–

Hour/call

55.00

Toilet service (full)

1–50/51+ MTOW

Call

60.00/80.00

Toilet service (empty or fll)

1–50/51+ MTOW

Call

40.00/50.00

Water supply

1–50/51+ MTOW

Call

100.00/120.00

Draining water tanks

1–50/51+ MTOW

Call

40.00/50.00

Heater

–

Hour/call

40.00

Air start unit

–

Hour/call

270.00

Additional platform for CRJ

–

Call

40.00

Transporter/cargo highloader

–

Hour/call

100.00/250.00 (Continued)

205

206

PRICING AND INCENTIVES Table 7.12 Continued Service

Category

Unit

EUR

Escort/crew transport on ramp

–

Hour/call

35.00/25.00

Crew city transport

1–7/8–18/19+ seats

Hour/call

35.00/75.00/120.00

Hotel booking

–

1 booking

15.00

Cargo loading

–

1 kilogramme

0.07

Terminal porter service

1–6/7–30/31+ passengers

Total/each/each

30.00/3.00/3.50

Equipment rent – towbar

–

Hour/call

25.00

Forklift/forklift slave pallet

–

Hour/call

35.00/20.00

1/2/3 container dolly

–

Hour/call

15.00

96´ × 125´ cargo pallet dolly

–

Hour/call

15.00

Baggage tractor/baggage cart

–

Hour/call

25.00/15.00

Belt-loader

–

Hour/call

35.00

Hangar rent

–

Depends on MTOW

To be agreed

De-/anti-icing

Wing span up to 23 metres

Call

250.00

Wing span 24-metres Call

360.00

Wing span 36–51 metres

Call

385.00

Wing span 52–65 metres

Call

430.00

Type 1 (mixture)

Liter

3.40

Type 2

Liter

4.40

–

Call

100.00

Manual snow removal Data source: Tallinn Airport (2021)

Note: CRJ = Bombardier Canadair Regional Jet aircraft

fees were approved (CAR, 2021): annual check-in desk fee at Dublin Airport of 26,214 per desk; flexible hourly rental fee for additional check-in desk at Dublin Airport of 31.46 per desk; annual check-in desk fee at Shannon Airport of EUR 9,345 per desk per annum, EUR 23.36 per hour (or part thereof); common user terminal equipment (CUTE) fees at Shannon Airport of EUR 0.30 per embarking passenger; annual check-in desk fee at Cork Airport of EUR 13,632 per desk per annum; half-hourly rental fee for additional check-in desk at Cork Airport of EUR 5.46 per desk; common use passenger processing systems (CUPPS) fees at Cork Airport of EUR 0.13 per embarking passenger.

PRICING AND INCENTIVES Ground handlers also need to obtain approval from CAR before engaging in ground handling activities. Applicants must complete an application form and meet a number of requirements, including minimum levels of insurance cover. New applicants need to pay an application fee of EUR 1,826. Ground handling approvals are issued for a period of five years and are subject to meeting certain minimum requirements throughout that period. A fee of EUR 1,826 must be paid to CAR each year to cover administrative expenses. Ground handlers can apply to renew their licence after five years through a specific renewal process.

7.3.7 Fuel and oil charges Unless an airport buys fuel and oil itself to sell to its airlines, it will typically offer concessions to private companies to supply fuel and oil. Concessionaires will normally pay a fee to the airport and/or a proportion of turnover. ICAO guidance on charges for the supply of fuel and oil is limited, recommending that charges – either direct or indirect – for both suppliers (e.g. concessionaires) and aircraft operators should not discriminate or become an obstacle to the progress of civil aviation. Whilst related to airline activities, these revenues tend to actually get treated as non-aeronautical revenues (in ‘other’ in Figure 7.3) and accounted for around just one per cent of total revenue in 2018.

7.3.8 Other aeronautical charges There are a number of other aeronautical charges that an airport may levy. For instance, there may be an airport development or facility fee to cover the costs of certain developments at the airport. Examples include the Airport Development Fund charge at Athens International Airport (EUR 12.00 per departing passenger) and at Hong Kong International Airport there is the Airport Construction Fee related to a new third runway. For first and business-class passengers (both terminal and transfer) the charge is 180 Hong Kong Dollars (HKD) per passenger for long-haul flights and 160 for short-haul flights. For economy passengers, the charges are HKD 160 for long-haul flights (both terminal and transfer), 90 for short-haul terminal passengers and 70 for short-haul transfer passengers. There may be a charge for handling PRM and occasionally there may be cargo charges based on the weight of loaded or unloaded cargo, similar to the passenger charge, as at Rome Fiumicino Airport and Zurich Airport. There may also be a movement-based (or less commonly passenger-based) infrastructure charge which will cover the use of infrastructure handling facilities such as check-in areas, baggage sorting and airbridges (e.g. at Frankfurt Airport and Vienna International Airport). Alternatively, these charges may be more specific, relating to separate facilities, for instance, an airbridge charge as at Bangkok Suvarnabhumi Airport, Mexico City International Airport and Chhatrapati Shivaji Maharaj International Airport. Another important aeronautical charge to mention is the terminal rental charge (e.g. for airlines and handling companies), which contributes a significant proportion of revenue at airports in North America (Figure 7.3). This is partly because passenger-related charges at US airports are capped, so the proportion of revenue from the terminal rental is much higher at airports in North America than in other world regions. Terminal rental rates are usually based on a cost-recovery approach and calculated using a weighted rate based on the type of space that is rented. Miami International Airport calculates an average rental rate based on general terminal costs divided by the weighted average rentable area (square feet) for a class III space. The average rental rate is then multiplied by different weightings for other classes of space

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PRICING AND INCENTIVES (ranging from 0.25 for class V and 1.50 for class II) (see Miami-Dade Aviation Department, 2020). Terminal rental may, of course, alternatively be considered a non-aeronautical source of revenue. Airport users are likely to encounter other costs which are not actually levied by the airport, most notably government taxes. These are increasingly being used in Europe with examples being the Austrian Air Transport Levy, the French Air Passenger Solidarity Tax, the German Air Transport Tax, the Italian Embarkation Tax, the Swedish Air Travel Tax, the Norwegian Air Passenger Tax and the UK’s Air Passenger Duty (APD). Examples also exist outside of Europe with departure taxes, for instance, in Australia, Bahrain, Brazil, Hong Kong, Kuwait, Mexico, Oman, Qatar, Singapore, Thailand and the UAE. These taxes vary from less than one Euro in Thailand to around EUR 40 for some international passengers in France, Germany, Sweden, Australia and Mexico. The UK’s APD is the highest tax being around EUR 87 for economy class passengers and 173 for business class passengers on flights longer than 2,000 miles (CE Delft, 2019) These taxes do not go to the airport (and so are not an aeronautical revenue for them) and are collected from passengers by airlines when they sell a flight ticket. Nevertheless, such taxes can have a major impact on the overall airline cost of operating at an airport, and so they often cause controversy between the air transport industry and governments around the world. The US has the largest number of taxes such as the Airport and Airways Trust Fund which provides some finance for investment and additional taxes relating to fuel, security, agriculture and health inspection, and customs and immigration services. The overall cost to airlines operating out of an airport is the result of combining all these different charges. Worldwide the level of total charges varies considerably. This can be illustrated by considering an airport charges index (Figure 7.4). The costs at Kuala Lumpur, Oslo and Delhi airports are only a fifth of those at London Heathrow. However, this index does not include ground handling and fuel costs, and any government taxes that are levied.

7.3.9 Non-aeronautical charges ICAO guidelines on charges for non-aeronautical activities are fairly limited, stating that: Income derived from such sources as concessions, rental of premises, and ‘free zones’ is important to airports. It is recommended that, with the exception of concessions that are directly associated with the operation of air transport services, such as fuel, in-flight catering and ground handling, non-aeronautical revenues be fully developed, while keeping in mind the interests and needs of passengers and the public, and ensuring terminal efficiency. (ICAO, 2012: 22) As shown in Table 7.2, retail concessions are particularly important to airports, although in North America it is revenues from car parking and rental car concessions that are most important. Charging practices for concessions vary by airport, as do approaches to concession contracting (Chapter 8). Typically, airports charge concessionaires a fixed rent or minimum annual guaranteed (MAG) rent (or licence fee) for the space provided and a percentage of the turnover. The percentage of turnover can vary dramatically depending on the size and scale of activity, location, products and services, and expected profit margins. It may range from as little as 5 per cent for concessions with lower profit margins to as much as 60 per cent for those with higher profit margins. A minimum level of capital investment (e.g. per m2) may also be required from the concessionaire. In addition, charges will vary according to the type and length of the concession contract (Chapter 8).

PRICING AND INCENTIVES Index (0 -100)

Note: The index sets London Heathrow Airport (London-LHR) at 100

100

Data source: Jacobs UK (2020)

90

Figure 7.4 Airport charges index, 2020

80

70

60

50

40

30

20

10

0 London-LHR New Jersey-EWR New York-JFK Sydney Zurich Frankfurt Auckland Moscow Toronto Mexico City Rome Fiumicino Budapest Osaka Kansai Paris-CDG Vancouver Vienna Tokyo Narita Athens Brussels Milan Malpensa Miami Stockholm Berlin Tegel Amsterdam Madrid Lisbon Hong Kong Singapore Prague Dusseldorf Los Angeles London-LGW Bangkok Copenhagen San Francisco Washington Cancun Sao Paulo Dubai Beijing Seoul Incheon Jakarta Warsaw Helsinki Mumbai Johannesburg Dublin Kuala Lumpur Oslo Delhi

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PRICING AND INCENTIVES Table 7.13 Minimum acceptable offers for retail concession at Cochin International Airport, 2019 Type of outlet (four-year period)

Minimum monthly license fee (INR 000)

% of turnover

Space (m2)

Cosmetic/skin care

200

12

16

Handicraft and souvenirs

300

28

37.5

Gold jewellery

250

5

37.5

Convenience store

300

22

37.5

Men’s fashion apparel

250

25

37.5

Branded leggings

150

25

12

Non leather footwear

250

25

20

Toys

250

20

40

Home décor

400

25

48

Eye wear shop

200

25

9

Cosmetics

200

12

9

Under garment/sportswear

150

25

15

Source: Adapted from Turner (2019) Note: INR = Indian Rupees

Tables 7.13 and 7.14 illustrate the typical minimum financial payments stated in the requests for proposals (RFPs) for retail concessions at Cochin International Airport and at San Francisco International Airport. There are different payments for different outlets and at San Francisco International Airport the turnover percentage varies depending on the amount of turnover. The RFPs will also contain technical details, for instance, relating to the experience of the retailers, marketing, merchandising and pricing, the management and operations plan, and the design and construction plan. As regards experience in the two airport examples, it is stipulated that there must be a minimum of two years (Cochin) or three years (San Francisco) in the specialist areas.

7.4 Economic regulatory environment Airports often dominate their local geographic market, and at many of the world’s larger airports, demand exceeds supply, especially during peak periods. In these circumstances, airports may experience monopoly or near-monopoly conditions that allow them to set high prices for use of their facilities and services. As a result, many governments limit the ability of airports to abuse their market power by restricting prices, especially for aeronautical facilities and services needed to facilitate the movement of aircraft and their passengers and cargo. This is especially the case if the airports have been privatised and direct intervention by the state is no longer possible. When airport charges are regulated, a decision will need to be made on how to treat the respective sources of aeronautical and non-aeronautical revenue. There are two main approaches (ACI, 2013). The ‘dual till’ approach splits the aeronautical and non-aeronautical sides of the

PRICING AND INCENTIVES Table  7.14 Minimum acceptable offers for retail concession at San Francisco International Airport, 2019 Type of outlet

MAG (USD 000)

% of turnover (USD 000)

Newstand, beauty speciality store, gourmet market in Terminal 3 (7 years)

1,100

10% ≤ $500 12% > $500–$1,000 14% >$1,000

Sunglasses retail unit in Terminal 3 (7 years)

145

12% ≤ $500 14% > $500–$1,000 16% >$1,000

Sports apparel or candy speciality shop in Terminal 3 (7 years)

150

12% ≤ $500 14% > $500–$1,000 16% >$1,000

Apparel store in Terminal 2 (12 years)

365

12% ≤ $1,000 14% > $1,100–$2,000 16% >$2,000

Bookstore in Terminal 2 (12 years)

230

8% ≤ $2,000 10% > $2,000

Data sources: Barras-Hill (2018, 2019)

airport business into two distinct parts. Revenue from the aeronautical side of the business (such as from the PSC, landing charges and security charges) is used for aeronautical expenditure (such as on runway maintenance and terminal development), and it is only the aeronautical side of the airport business that is regulated. Non-aeronautical revenue (such as from concessions) is then used for non-aeronautical expenditure (such as developing retail space or car parks) and contributes to company profits. The non-aeronautical side of the airport business is then allowed to operate under normal market conditions. The ‘single till’ approach does not distinguish between aeronautical and non-aeronautical revenue, meaning that all airport revenue is considered for the purpose of setting airport charges. There are also hybrid approaches that fall between a single and dual till approach. Under a single till, aeronautical charges are likely to be lower because non-aeronautical activities – which are often more profitable than aeronautical activities – will help to reduce the charges. This is why the single till is generally favoured by airlines. Their argument is that passenger expenditure on non-aeronautical activities is a by-product of airline operations and should therefore be considered for the purpose of setting airport charges. The dual till is likely to result in higher aeronautical charges. It is generally favoured by airports because they are able to generate and retain higher profits from their non-aeronautical activities. Airports argue for the dual till on the basis that their non-aeronautical activities are a separate part of their business and should not be used to subsidise charges for aeronautical activities. Comparative approaches to the single and dual till are known as ‘residual’ and ‘compensatory’ in the US and are discussed below. The economic regulatory environment varies and although a range of mechanisms for regulating airport charges are used worldwide, they can generally be grouped according to three broad types (Figure 7.5).

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Cost-recovery/approval of charges

Heavy-handed economic regulation

Set by the airport, normally on a costrecovery basis

Two main types (rate-of-return/costbased, incentive)

Charges may require government or regulator approval

Regulator sets controls on charges

Light-handed economic regulation

Negoitated with commercial agreements between the airport and its users

Government or regulator may monitor or review charges

Figure 7.5 Main mechanisms for regulating airport charges Source: Compiled by the authors

Many publicly owned and operated airports set their charges on a cost-recovery basis. This method is common in the US where many airports are owned and operated by the local or national government. Airports set charges following consultation with airport users. The federal government may intervene if necessary. Airports in the US may take one of two main approaches; residual (e.g. at Chicago O’Hare, Miami and San Francisco) or compensatory (e.g. at Boston Logan, Houston and Tampa). With the residual approach, airlines pay charges related to the net costs of running the airport (including non-aeronautical activities). This is similar to the single till approach taken by airports outside the US, but there is one key difference: the airlines need to guarantee that the level of charges will always allow the airport to break even. The airport may levy lower charges as a result of including revenue from non-aeronautical activities but will have lower risk as it is largely passed onto the airlines. With the compensatory approach, airlines pay agreed charges related to the costs of facilities and services they use. This is similar to the dual till approach taken by airports outside the US. Airports may be able to levy higher charges but will assume a greater degree of risk. There are also a number of airports in the US that use a hybrid approach, combining elements of the residual and compensatory approaches (e.g. at Denver, Washington Dulles and Reagan National). In other countries, charges are set – or need to be approved – by the government or regulatory body. For instance, charges in Japan are set by the government, which takes into consideration the overall cost of the airports under its control. Other airports in Japan (Chubu Centrair, Kansai, Narita and the smaller airports controlled by local governments) are also required to obtain approval from the government when setting charges. Most apply the same landing charges, except for Chubu Centrair, Kansai and Narita. In China, the government sets identical charges for three different classes of airport namely: class one airports (with passenger numbers greater than four per cent of total passengers); class two airports (with passenger numbers between one to four per cent of total); and class three airports (with less than one per cent). Heavy-handed economic regulation represents the most formal approach to setting airport charges. With this mechanism, the government or an independent regulator has an active role in setting airport charges. There are two broad approaches to this type of economic regulation: rate-of-return/cost-based or incentive.

PRICING AND INCENTIVES With rate-of-return/cost-based regulation the basic principle is that airports can charge prices that will cover costs and earn a normal rate-of-return on capital. The rate-of-return method is used in the Netherlands to regulate charges at Amsterdam Schiphol Airport under a dual till approach, where the rate-of-return is determined by the regulator taking the weighted average cost of capital as the asset base. Other airports such as Brussels and German airports use this approach. The obvious issue with this approach is that there is little incentive to reduce costs because the rate of return is set, irrespective of efficiency. Airports may therefore be inclined to expand their asset base (e.g. by ‘gold-plating’ – inflating avoidable costs for a project, and then passing them on to end-users) in order to increase the cost of capital, and subsequently the prices that they can charge. Alternatively, regulators may use revenue or price caps to determine charges that can be levied by airports. A revenue cap limits the total revenue that can be earned in a given period while a price cap limits the price that can be charged within a given period. Both approaches subtract expected efficiency savings (X) from a measure of inflation such as the retail or consumer price index. Revenue caps offer airports stability in terms of total revenue. They also offer reduced risk to changes in demand because unit charges are inversely related to growth in demand. Price caps allow airports to retain profit; they offer an incentive to increase efficiency because when X is zero per cent or greater, airports can only improve financial performance through efficiency such as increased traffic or better productivity, and not through price increases. A problem with price caps is that they may also encourage too much cost-cutting and reduced service quality as a means of generating increased profit. Specific service quality targets can be used to discourage this from happening. Price caps are widely used to regulate airport charges. For instance, price caps are used in Argentina (Airports Argentina 2000s 35 airports), Ireland (Dublin), South Africa (Airports Company South Africa’s nine airports) and the UK (London Heathrow). India has also adopted a price cap regulation for its major airports (Bengaluru, Cochin, Delhi, Hyderabad and Mumbai). Five-year review periods for incentive regulation are fairly standard, although some regulators review after between three and four years. The price cap typically takes into account the fair rate-of-return in addition to other factors such as the regulatory asset base, capital investment plans, depreciation, traffic forecasts, and expected operation and maintenance expenditure. The regulator also takes into consideration the quality of service provided by airports, according to specific service parameters, when determining the price cap and may use a mechanism that reduces charges for under-performance by way of rebates to airport users. Light-handed regulation is a largely market-based mechanism, involving the negotiation of charges between airports and their users. Governments or regulatory bodies may play a passive role in the negotiations, monitoring or reviewing the prices that are set and relying on the threat of regulation as a deterrent for monopolistic pricing. This model is currently used at major airports in Australia (Adelaide, Brisbane, Melbourne, Perth and Sydney) where the Australian Competition and Consumer Commission monitor prices. This model is also used in New Zealand (Auckland, Christchurch and Wellington) although the government may ask for an ad-hoc review of prices by the Competition Commission. Copenhagen Airport also uses this approach and since 2014 it has been applied at London Gatwick Airport when a shift was made from the more heavy-handed incentive regulation. In this case, London Gatwick Airport negotiated a series of commitments with its airlines on price, service conditions and investment that is known as the Contracts and Commitments Initiative, which is monitored by the UK regulator, the Civil Aviation Authority (Graham, 2018).

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7.5 Incentive mechanisms 7.5.1 The need to share risk As discussed in Chapters 1 and 2, the airport business environment has changed dramatically over the last few decades. Demand for air transport has grown exponentially (excluding 2020 and subsequent years affected by the coronavirus pandemic); air transport markets have become increasingly deregulated, meaning that airlines are freer to choose where they fly to and from; and LCCs have emerged and offer considerable opportunities to grow new and existing markets, including to and from relatively small airports. Deregulation and LCCs have also had an impact on existing airline business models, encouraging increased competition and a focus on cost reduction. In parallel with these changes in the airline industry, the airport business has transformed from being considered a public utility to a commercial business, sometimes with corporatised or private owners or operators that want to see growth at their airports. In addition, airports are increasingly viewed as engines for regional economic development, meaning that there is a growing level of local support and desire for airport growth. Changes in the airport business environment offer opportunities for growth, especially at uncongested regional airports. However, in order to compete, airports increasingly need to demonstrate a willingness to share in the financial risk associated with establishing new routes or growing existing services at their airport by offering incentives to airlines, especially during the early stages of establishing a new route, because the start-up cost for an airline can be particularly high. One of the earliest and most significant examples of airport incentives was an agreement between Brussels South Charleroi Airport and LCC Ryanair. The airport is located 46 kilometres south of Brussels. It served around 50,000 passengers per year between 1990 and 1996, mainly on charter flights. Ryanair began to operate at the airport in 1997 and grew passenger demand to about 200,000 within one year. Ryanair then decided to create its first continental base at the airport in 2001 and had established 12 routes and 21 daily frequencies by 2004, serving almost 2 million passengers. Airport incentives were central to Ryanair’s expansion at the airport, and details of the financial agreement between the airport and Ryanair became public in 2001. After receiving complaints about the agreement between Brussels South Charleroi Airport and Ryanair, the EC launched an investigation and subsequently ruled that the airport owner – the Walloon regional government was not behaving in the same way a private operator would have behaved under the same circumstances. Some of the aid towards the start-up cost of the new routes was considered acceptable by the EC, but many of the payments made were not. In addition, the EC believed that the deal between the airport and Ryanair was not conducted in a transparent and non-discriminatory manner because the same deal was not made available to other airlines. As a result, Ryanair was ordered to repay some of the state aid it had received (see EC, 2004) although the EC decision on the Brussels South Charleroi Airport/Ryanair agreement was annulled by the European Court of First Instance (CFI) in 2008 (see CFI, 2008). As a result of its investigation into the Brussels South Charleroi/Ryanair agreement, as well as EC investigations into incentives offered by other public airports to airlines, the EC issued guidelines on the financing of regional airports and state aid that can be offered to airlines in 2005. The guidelines only applied to publicly owned airports – privately owned airports were free to offer any incentives they choose. These were subsequently revised in 2014 within the guidelines provided on state aid to airports and airlines (EC, 2014). They state that airlines will be able to receive aid covering 50 per cent of airport charges for new destinations during a

PRICING AND INCENTIVES three-year period. The aid can only be used for routes within the Common European Aviation Area and for airports with up to 3 million annual passengers, or 5 million passengers in exceptional circumstances. Aid for airports larger than 5 million passengers is not allowed. However, there are more flexible arrangements possible if the airports are located in a remote area, for instance, on an island or in a sparsely populated area, where aid can be given irrespective of the size of the airport and destination of the route. Similar issues outside Europe have resulted in states issuing their own guidance on how airport incentives can be offered. For instance, the US FAA has published an Air Carrier Incentive Program Guidebook: A Reference for Airport Sponsors (FAA, 2010). The guidance distinguishes between subsidies and incentives: subsidies, such as direct payments of airport revenue to a carrier or to any provider of goods or services to that carrier, in exchange for additional service by the carrier are not allowed; incentives, such as fee reductions, fee waivers, or use of airport revenue for acceptable promotional costs where the purpose is to encourage an air carrier to increase service at the airport, are allowed. In addition, the guidance distinguishes between airport and destination marketing, where airport revenue may be used to cover the full costs of activities directed at promoting competition at an airport; public and industry awareness of airport facilities and services; new air service and competition at the airport (other than direct subsidy); and a share of promotional expenses such as marketing, advertising and related activities designed to increase travel using the airport. Airport revenue may not be used to cover destination or tourism marketing; any activities, materials or expenses for general economic development and not related to the airport; or marketing or promotional activities unrelated to airports or airport systems (FAA, 2010). The use of incentive schemes by airports has increased dramatically in recent years and they are now fairly commonplace, especially where airline competition and the concentration of LCCs is particularly high. Malina et al. (2012) found that 63 per cent of Europe’s 200 largest airports offer incentives of some kind to airlines, whether through an official incentive scheme or through airport–airline or government–airline agreements. In 2018, ACI Europe claimed that 90 per cent of all European airports offered incentives and rebates (Jankovic, 2018) whilst in 2019 a survey of 46 European airport operators found that 38 had incentive schemes (Bilotkach and Bush, 2020). Similarly, Ryerson (2016) found that there were incentives at 63 per cent of 70 US airports that she studied. Objectives for incentive schemes vary and are likely to depend on an airport’s business strategy and economic situation. Fichert and Klophaus (2011) identify five main objectives: to minimise losses at underutilised airports by increasing traffic and revenues; to improve the traffic mix at capacity-constrained airports (e.g. by targeting business or long-haul passengers); to generate additional non-aeronautical revenue from increasing passenger numbers, especially at airports with regulated charges under a dual till regime; to enhance the attractiveness of the region and contribute to regional economic development; and to expand airport-based aircraft versus footloose services that might be easily moved to another airport. They also classify airport incentive schemes according to two main categories: those introduced within an established charging system, and separate schemes introduced in addition to an established scheme. Those set up within an established charging system focus largely on providing incentives through the way different elements of an established system are designed and weighted. For instance, the reduced PSC for transfer passengers has been discussed previously in this chapter. A number of airports (e.g. in the Middle East) offer a one-stop-shop approach that offers discounted charges to airlines agreeing to a single contract for all ground handling services, which is possible when all the facilities and services are provided by one company. Another example

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PRICING AND INCENTIVES mentioned earlier in this chapter is the trend to focus on passenger- versus aircraft-related charges. The main aim is to reduce the risk for the airport. It may also benefit airlines with a low load factor such as those focused on providing business-orientated services (Fichert and Klophaus, 2011). Some airports even give airlines a choice in how they want to be charged. Scheduled year-round traffic at Karlsruhe/Baden-Baden Airport can choose between two alternatives: a landing charge based on aircraft MTOW and a PSC per departing passenger; or a PSC per departing passenger and aircraft seat capacity. Some airports have gone further in terms of sharing the risk with their airline (especially LCCs) by entering into bilaterally negotiated agreements based on commercial medium- or long-term contracts (the Brussels South Charleroi/Ryanair agreement being one of the first). As well as offering charging incentives within these contracts, the airport may offer other incentives such as guaranteeing service levels, opening hours, and/or investing in airport infrastructure. In return, the airlines may guarantee a certain number of flights per period, a certain seat capacity offered, and/or a certain number of aircraft based at the airport. Some of these agreements have also been subject to investigations on state aid. Ryanair, for instance, had such bilateral agreements with Berlin Schönefeld, Bratislava, Brussels South Charleroi, London Stansted and Marseille (Steer Davies Gleave, 2017). Such agreements may often include most airlines that serve the airports, for instance, London Gatwick Airport’s Contracts and Commitments Initiative mentioned previously includes airlines that serve over 80 per cent of the airports total traffic. The main focus of the rest of this chapter is on separate incentives rather than those introduced within an established charging system. There are generally three main types: discounted user charges, risk-sharing arrangements (normally by way of guarantees from the local community to provide money or seats on a new or changed service for a limited period of time) or direct payments (e.g. to support the marketing of a new or changed route). The last of these is commonly referred to as marketing support. Airports also use RDFs, which were briefly mentioned in Chapter 2, and aim to develop routes that have wider economic benefits for a region.

7.5.2 Types of incentives 7.5.2.1 Airport-based incentives Discounted user charges are arguably the most common form of incentive. These may be contained within the published charges or negotiated between airports and airlines, often within the long-term bilateral agreements. They typically aim to encourage new or existing airlines to enter new markets, to increase volume or value on new or existing routes (e.g. by improving frequency or capacity, the timing of flights, traffic mix or by enhanced promotional activities), or to promote greater use of airport infrastructure and services, which is sometimes encouraged using based aircraft incentives such as reduced parking charges for airlines that base their aircraft at the airport. In addition to increased use of airport facilities and services, this encourages loyalty as an airline may be more committed to developing air services at a base airport. The level of discount typically diminishes over a set period of time and as the new route – or change to a service or base – becomes more established. The key principle behind offering a discount is that it demonstrates the airport’s willingness to share in the high start-up costs and risks associated with the development of air services. Discounts are typically on aircraft-related charges (e.g. landing, parking or handling), passenger-related charges (e.g. PSC or security), or both. The duration of the discount varies, although they are normally for three to five years. The level of discount also varies, sometimes from as high as 100 per cent during the first year of

PRICING AND INCENTIVES the discount period to as low as 10 per cent during the last year. Discounts may also be offered as a rebate or bonus if they are focused on retrospective measures such as growth or increased transfer traffic relative to the previous year. Examples of airport incentive schemes offering discounted user charges are provided in Table 7.15. Some airports have much more complex schemes than others. Another way airports offer incentives is through providing marketing support. Market-specific advertising and promotion is central to creating awareness and generating demand for a new Table  7.15 Examples of airport incentive schemes (established before the coronavirus pandemic) Airport

Incentive and nature of the discount

Aruba

Waiver on landing and parking fee: new route for 12 months; existing route for 6 months; restart route (>1 year since operating) for 3 months

Avinor (44 airports)

Intercontinental new routes: 5-year discount 100%, 90%, 80%, 40%, 20% on take-off charges and 90%, 70%, 50%, 30%, 20% on passenger charges Europe new routes: 3-year discount 100%, 75%, 50% on take-off charges and 40%, 30%, 20% on passenger charges Cargo: 3-year discount 100%, 30%, 20% on take-off charges Growth: bonus of NOK 48 (intercontinental), 24 (Europe) and 12 (domestic) per passenger over the previous year

Budapest

Passenger services: New long-haul destinations: 5-year discount 100%, 100%, 75%, 50%, 25% on landing charge, 50% on PSC (year 1) Other destinations: 5-year discount 100%, 75%, 50%, 25%, 10% on landing charge New winter destinations (except long-haul): 1-year 50% discount on PSC New thin route incentive: 3-year 50% discount on PSC Incentive for route recovery: 2-year discount 100%, 50% on PSC New seasonal fights: 2-year discount 50%, 25% on landing charge, 25% on PSC (year 1) Frequency increase: 1-year discount 100% on landing charge Retention and growth incentive: PSC discount on 0.8–1.29mn departing passengers = EUR 2.60, 1.3–1.79mn = EUR 3.60, 1.8–2.29mn = EUR 4.60, 2.3–2.79mn = EUR 5.60, 2.8–3.29mn = EUR 6.60, 3.3–3.79mn = EUR 7.60, >3.8mn = EUR 8.60 LF incentive: PSC discount 90–92.4 LF = 10%, 92.5–100 LF = 20% TTE: PSC discount on TTE 3.1 = 4%, TTE 3.2 = 6%, TTE 3.3 = 8%, 3.4 = 10% Cargo services: New route: 4-year discount, aircraft = 5–100 T 50%, 40%, 30%, 20%, aircraft >100 T 80%, 60%, 40%, 20%, on landing charge Frequency increase: 3-year discount, aircraft = 5–100 T 40%, 30%, 20%, aircraft >100 T 4-year discount 80%, 60%, 40%, 20%, on landing charge (Continued)

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PRICING AND INCENTIVES Table 7.15 Continued Airport

Incentive and nature of the discount

Dublin

New long-haul year-round routes: 5-year discount 100%, 90%, 75%, 50%, 25% on PSC, parking, airbridge and movement fees New short-haul year-round routes: 3-year discount 100%, 75%, 50% on PSC, parking, airbridge and movement fees New short-haul seasonal routes: 3-year discount 60%, 40%, 20% on PSC, parking, airbridge and movement fees Additional capacity on existing routes: 2-year discount 50% on PSC parking, airbridge and movement fees Transfer: 3-year rebate, summer EUR 2 + average transfer PSC, winter EUR 6 + average transfer PSC, per transfer passenger

Katowice

Passenger scheduled fights: discount on landings in 15 days 71–80 = 5%, 81–90 = 10%, 91–100 = 12%, 101–110 = 15%, >110 = 18%, on landing charge and PSC. Passenger charter fights: discounts on annual landings 101–200 = 10%, >200 = 15% on landing and PSC Long-haul passenger fights: 50% discount on landing charge and PSC Cargo aircraft up to 55 T: discount on monthly landings 31–45 = 25%, 46–55 = 30%, >55 = 35% on landing charge Cargo aircraft: > 55 T: discount on annual landings 1–5 = 20%, 6–10 = 30%, >10 = 40% on landing charge Long-haul cargo fights: 50% discount on landing charge and PSC New connection: 4-year reductions, landing fee per T: PLN 25, PLN 27, PLN 29, PLN 29, PSC per passenger 22 PLN, 24 PLN, 26 PLN, 26 PLN

Mactan Cebu

Landing charges rebates (depends on aircraft size): International long-haul: up to 3 weekly fights = 30–50%, 4–6 fights = 50– 65%, 7 fights = 60–75% International short-haul: up to 3 weekly fights = 30–40%, 4–6 fights = 45– 55%, 7 fights = 50–65% Domestic: up to 3 weekly fights = 15–25%, 4–6 fights = 25–40%, 7 fights = 50–65% Applicability: 100% new routes, 50% existing routes. Does not cover >7 weekly fights

Niagra Falls

New routes: 12 to 36-month waiver of landing fee depending on the destination New airlines: 12-month waiver of landing, terminal use and apron parking fees

Source: Compiled by the authors from various sources Note: NOK = Norwegian Kroner; mn = million; LF = load factor; TTE = turnaround time effciency (passengers divided by minutes parking time); T = tonnes; PLN = Polish Zloty

PRICING AND INCENTIVES or changed service and, given the degree to which airlines are seeking to reduce costs, cooperation or direct payments of marketing support, along with discounted user charges during the start-up phase of a new or changed route, are likely to have the greatest impact on airline decision-making. For an airport, the costs associated with this support will often go through the marketing cost line of the airport accounts rather than relate to the aeronautical revenues. Such support may cover activities such as press conferences, inaugural flight promotion, purchase of advertising and promotional events and passenger databases. Table 7.16 details the marketing support Aena, the Spanish airport operator, offers to new airlines and routes. At Dublin Airport, a payment to cover marketing support is available when the airline submits a marketing campaign proposal that has to include a detailed market assessment, campaign objectives, campaign channels and budget plans. The support is available for up to three years, at three different levels for short-haul services (up to EUR 34,999; up to 99,000; 100,000 and over) and long-haul services (up to EUR 199,999; up to 299,999; 300,000 – decreasing after the first year). The levels are based on factors such as network, growth, commercial revenue and tourism potential and whether the service is seasonal, new or existing, and the operator Table 7.16 Marketing support offered by Aena Types of marketing

Details

Opening fight ceremony

Dedicated area at the airport for the opening fight ceremony Special treatment for the frst fight passengers Aena can provide the airline with contacts of relevant authorities and local press so that the airline can invite them to the event

Publicity at the airport

In the airport: publicity spaces and digital screens for publicity Online: promotional banner on the airport’s web page or at Infovuelos web page, and promotion of the new route through social media and other channels Offine: offcial press release with impact on major national media and in Aena’s magazine

Publicity outside the airport

Information in the travel agencies union (Unión de Agencias de Viaje) newsletter that includes 120 members with 1,500 sales points, and promotion of the route through eSIPA monitors – fight information platforms installed at various hotels, fairs, convention centres, and elsewhere

For starting up a base

Discount on the current offcial rate in the rental of check-in machines and/or check-in counters Discount on the current offcial rate in the rental of offces, premises and commercial counters Discount on the current offcial rate in the branding of the boarding gate area in line with the airline specifcations Special banner on the Infovuelos website with 1.4 million visits per month

For new long-haul routes

As with for starting up a base

Source: Adapted from Aena (2021)

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PRICING AND INCENTIVES commitment to Dublin Airport (DAA, 2021). Avinor also offers marketing support in connection with new routes or other special activities. The one-time grant must not exceed 50 per cent of the direct costs of the project, and the size of the grant is assessed in relation to the estimated effect on factors such as traffic volume, profit and other types of services (Avinor, 2021b). The unprecedented and dramatic impacts of the coronavirus pandemic meant that many airports had to reassess their policies towards airport charges (see Chapter 12). Forsyth et al. (2020) argued this should differ depending on whether the airport was private or publicly owned, and whether it was regulated or in a competitive situation whilst Villard (2020) claimed that market-based charging strategies and commercial agreements should have been the way forward. In reality, many airports introduced much more wide-reaching and generous incentives schemes to encourage airlines back to their airports and to encourage them to restart services. For instance, in Europe it was claimed that over 70 per cent of airports had introduced such measures (ACI Europe, 2020). These varied from not implementing proposed increases (as at Frankfurt Airport) to most commonly offering reductions or rebates on landing charges. These reductions ranged from 10 per cent at Zurich, many Chinese airports, and Changi; 25 per cent at Amsterdam; 50 per cent at many Egyptian airports; 100 per cent at Abu Dhabi, Seychelles, and Columbo. Kansai International Airport announced a new incentive scheme for airlines applicable from July 2020 to March 2021. This included a discount on landing charges (starting from 40 per cent for short-haul flights and 60 per cent for mid- and long-haul flights in July and August, and gradually decreased to 5 per cent and 10 per cent respectively by March 2021). Very often there were also substantial reductions or a total waiving of parking charges because of the aircraft being based there (IATA, 2021). Some airports designed more complex recovery incentive schemes. For instance, at Philadelphia International Airport, a two-year scheme was introduced in July 2020 based on landing charges (and some other aeronautical charges), which considered different types of routes, new entrant carriers and whether they were passenger or cargo services. Cooperative marking funds and access to outdoor advertising were also available in some cases (Table 7.17). The total incentive programme funding was capped at USD 6 million, based on a first-come-first-serve basis, until the cap was exhausted. Additional airport incentive schemes, launched during the coronavirus pandemic, are listed in Table 7.18. In some cases, landing charge discounts depended on the seat factor of the airline. For instance, Nuremberg Airport’s Lifeline Incentive scheme offered a discount on landing and infrastructure charges that ranged from 95 per cent if the seat factor was lower than 33 per cent, down to 65 per cent if the seat factor was greater than 66 per cent. Aena’s scheme aimed to promote the recovery of airline operations by defining base levels and stretch levels related to the previous year’s traffic, for instance, base climbed from 25 to 65 per cent between July 2020 and March 2021 and stretch from 35 to 75 per cent. Airlines were eligible for a 75 per cent landing charge rebate for operations between base and stretch levels and 100 per cent refund for operations above stretch levels. Elsewhere the Restart Package at Vienna Airport consisted of two parts. Firstly, a landing fee rebate to restart flights followed by a ramp-up incentive to rebuild capacity by offering discounts per passenger if the airline offered at least 65 per cent of the seats that were initially planned for 2020 before the coronavirus pandemic. Meanwhile, Swedavia introduced a Welcome Back package in June 2020. At Swedavia’s Stockholm Arlanda Airport, this covered both landing and passenger charges and differentiated between short-haul and long-haul services.

PRICING AND INCENTIVES Table  7.17 Philadelphia International Airport’s Covid-19 Air Service Recovery  & Incentive programme Discount on landing and other aeronautical charges1

Marketing support2

New and expanded international service incentives Unserved routes (not served on or after 1 January 2020): Level 1: named European destinations

50% frst 4 months

AOA up to 6 months

Level 2: international destinations except Caribbean and level 1/3 destinations

100% frst 12 months

CMF up to USD 1 million; AOA up to 6 months

Level 3 Central America, South America, India Subcontinent, East Asia destinations

100% frst 24 months

CMF up to USD 1.5 million; AOA up to 6 months

New entrant carriers (not serving PHL on 1 April 2020): Level 1a: served PHL within 24 months before, not less than 10 fights prior to 25 October 2020)

100% frst 6 months

AOA up to 6 months

Level 1b: served PHL within 24 months before, less than 10 fights prior to 25 October 2020 or commences after 25 October)

50% frst 6 months

AOA up to 6 months

Level 2: not served PHL within 24 months before)

100% frst 12 months

CMF up to USD 1 million; AOA up to 6 months

Unserved routes: not served on or after 1 January 2020 for any market in named states

100% frst 12 months

AOA up to 3 months

New entrant carriers: not serving PHL on 1 April 2020)

100% frst 12 months

CMF up to USD 50,000 per route; AOA up to 3 months

New domestic service incentives

New and expanded cargo service incentives Unserved domestic routes: not served within the prior 12 months

100% frst 12 months

Unserved international routes: not served within the prior 12 months

100% frst 12 months, 50% next 12 months

New entrant carriers: not operating within the prior 12 months

100% frst 12 months

100% frst 12 months Increased landed weight: monthly increase of 5% or more compared to the same month in the on the additional landing weight previous year Data source: Philadelphia International Airport (2020) Notes: 1 Other aeronautical charges include international common use enplaning and deplaning area fees, Federal Inspection Services (FIS) fees for passenger services, parking charges for cargo services; 2 AOA = Access to outdoor advertising at the airport, CMF = Cooperative marketing funds; PHL = Philadelphia International Airport

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PRICING AND INCENTIVES Table 7.18 Airport incentive schemes launched during the coronavirus pandemic Airport scheme (month/year)

Basis for incentive

Incentive details

Nuremberg Airport Lifeline Incentive (05/2020–03/2021)

Discount on landing 95% discount if ≤33% SF, 85% discount if ≤66% SF, 65% discount if >66% SF and infrastructure charge

Aena Extraordinary Incentive for the Recovery of Operations (07/2020– 03/2021)

Refund on landing charge

75% refund at base to stretch levels, 100% over stretch levels. Levels measure current operations as % of previous year. Base levels rise from 25% in 07/2020 to 65% in 03/2021, and stretch levels rise from 35% to 75%

1. Restart Flights (04–12/ 2020)

Landing charge refund (2020)

100% refund

2. Ramp -Up Incentive (01–12/2020)

PSC refund (2021)

PSC refund: EUR 2 (short-haul), EUR 3 (medium-haul), EUR 4 (long-haul). Only available if offering at least 65% of seats initially scheduled for 2020

Arlanda Airport Welcome Back (07–12/2020)

Rebates on landing and PSCs

Short-haul summer 2020 (landing 50%, PSC 50%); short-haul winter 2020 (landing 25%, PSC 50%); long-haul summer and winter 2020 (landing 100%, PSC 90%)

PSC refund (EUR 5) per additional origin and destination pax above defned level limits

Level 1: