You are on page 1of 14


- The Curious Case



Zurich-Noch Airport is situated in Switzerland within Europe but is outside the Euro zone. By 1989 the airport was handling 500,000 passengers per year. The airport mainly serves holidaymakers flying to destinations within Europe and only 5% of the passengers who use the airport are business travellers. A group of four local state governments, which are all in easy reach of the airport (hereafter referred to as the LSGs), took over the running of the airport in 1961. The four LSGs are named North (NLSG), South (SLSG), East (ELSG) and West (WLSG). These names place their geographical location in relation to the airport. In the early 1970s flights from the airport to European holiday destinations commenced with charter flights operated by holiday companies. In 1986, the first transatlantic flight was established and the airport terminal building was extended in 1987. Zurich-Noch Airport was converted into a company in 1990 and the four LSGs became the shareholders, each with an equal share.

The zurich-noch airport have to bring a major change in their outlook so that they can progress and match up with the upcoming major airports in its vicinity.The objectives which have to be fulfilled are as follows:1. It is forecast to increase to 3.5 million for both incoming and outgoing passengers in the current financial year to 30 June 2011. 2.The Board proposed that future development of the airport will be phased and gradual in order to avoid unexpected consequences for the local communities and industry. 3. By the year ending 30 June 2015, Zurich-Noch Airport is expected to support about 3,000 local jobs and have a throughput of 5 million passengers per year, an increase of 1.5 million from the 3.5 million passengers forecast for the current financial year ending 30 June 2011. The main question is that how would we go about bringing these changes and amendments so that we can see zurich-noch as a self sufficient airport,able to compete well with the competitors i.e.TU airport. We will be looking at bringing these plans with a two way path which will include 1.strategic plans plans


We as the owners have classified the strategic development of the zurich-noch airport in the following sectors.We will start with the development of the air route and reaching the expected passengers flying per year to above 5 million. Our main strategic aim would be to make our airport reach a new height by keeping in mind the environmental constraints as well as the development of the localities nearby so that they can benefit maximum from us. The main strategic development sectors we will be looking at are as given below:1.Air service and route developmnent 2.Facility and service excellence 3.Regional economic development 4.Planning for future 5. Planning a new business model for the Airport 6. Planning the next major phase of terminal area redevelopment What will we exactly do to fulfill our strategic goals: Increasing our share of passenger and cargo traffic Adding competitive fares Increasing the number of domestic destinations we serve Operating a state-of-the-art terminal Ensuring excellence in service and maximum convenience to all of our customers and tenants Operating as a good neighbor to the surrounding communities Operating a financially self-sustaining entity

External factors which can impact success include: We know that zurich-noch has a well estabilished competitor Tomlinson Universal Airport.It is located about 100 kilometres away from Zurich-Noch Airport and serves a highly populated industrial city.It has already acquired one airport in its vicinity to decrease the competitive threat to the airport.Keeping TU airport we have go about bring a sense of competition keeping the given factors in mind.

Economic and Global Conditions Aviation Security Concerns Financial Health of the Airline Industry Airline Service and Routes Airline Competition and Airfares Airline Consolidation and Alliances Availability and Price of Aviation Fuel Capacity of National Air Traffic Control System Capacity of the Airport World Health Issues To increase the airport traffic and make it self sufficient we have to increase the number of airlines landing to our airport which will not only increase the airport traffic but also help us link with more destinations and serve the people better.

RELATIONS WITH THE AIRLINES Today, more and more leases reflect a partnership arrangement rather than a landlord/tenant relationship. Although airport and airline management quite often disagree about issues, as well as the need and timing for various facilities at an airport, their shared goal is to serve the traveling public. To do so they need to work together both operationally and financially. The overall goal of airport management should be to secure a positive working relationship with its airline partner(s) that is good for the airline, the airport, and the community in which it serves. In addition to an operational plan that provides for the timely needs of the respective airlines, a mechanism is needed that defines the financial arrangement between the parties. Many variations exist in the types of services and facilities that are included in the cost assessment. The most common financial mechanisms used to obtain a revenue stream from airlines are a square footage charge for rented space and a landing fee based on aircraft weight. Airports have traditionally used a compensatory or a residual ratemaking methodology, or a combination of both, to cover different financial aspects of the relationship. These rates may be calculated to (1) recover the airports specific costs for providing facilities to the airlines. (2) balance the airports overall budget after revenues from non-airline sources are subtracted from the total expense (residual approach).

WHAT WE SHOULD DO TO ATTRACT AIRLINES We talk to airlines on a regular basis and provide information. The first and most important thing airlines care about is passenger numbers. How many people use the airport and what do the trends show? We make airlines aware of our incentive program: A) marketing incentive: maximum of available for additional or new service. B) We routinely waive landing fees, gate fees and common use rental fees for new airlines entering the market. The waiver of fees is temporary, but long enough to let the airline establish service. C) Ground services. We are one of a handful of airports in the country to offer ground services to the airlines and its at least part of the reason why we have service to five of our 12 destinations: Atlanta, Cincinnati, Orlando, Las Vegas and Tampa/St. Petersburg. Besides courting the airlines, we court people (potential passengers) living within 70 miles of the airport. We try to make them aware of the airport and what it offers. We do this through speaking engagements and advertising. The goal is to get more people to use the airport rememberairlines care about passenger numbers. The more the better.

Our aim is not just to increase our profit but we have to take the locality we are working in further . We not only have to serve as Businessmen but also as Industrialists. We need to provide maximum employment oppurtunities to the people of in the vicinity of the airport and take their development as our development. The first step to start with it is to increase the employment oppurtunities for them. Airports are constantly bustling with people purchasing tickets, waiting to board their flights, and exiting terminals after they land. Dozens of different types of workers are needed to ensure safety and efficiency at an airport. Some airport jobs involve conducting security screenings, loading and unloading baggage, and monitoring arrivals and departures. Customer services employees work at ticket counters, restaurants, bookstores, and gift shops. Most airports also staff administrative professionals, mechanics, and technicians to handle behind-the-scenes duties. Small Scale jobs: Many airport jobs involve customer service duties, such as selling tickets and confirming reservations. Ticket agents help customers make reservations over the phone, on the Internet, and in person. They help passengers check in for their flights and direct them to their appropriate terminals. Ticket agents provide boarding passes and baggage claim slips, and answer any questions that customers may have about their flights. Bookstores, gift shops, restaurants, and parking structures are common sights at most large airports. Airport jobs in retail and food service are typically very similar to such positions in other settings. Workers are needed to sell goods, prepare and serve food, and maintain a

clean, friendly environment. Parking enforcement professionals provide security in short- and long-term parking structures and collect payment from people when they leave in their vehicles. The authorities should look for providing such jobs to the people of the nearby locality so that it leads to the development of the society as well as increase the employment oppurtunities in that area. Major and Technical jobs Other airport jobs are held by airplane mechanics, equipment technicians, and administrative workers. Mechanics and technicians perform repairs and preventive maintenance to ensure that machinery is kept in safe working order. Administrative personnel, including human resources workers, accountants, and executives, perform business-related duties at an airport. They manage finances and make managerial decisions to improve profits and efficiency. The H.R. department should not only hire the people of the nearby locality but also recruit the best engineers and technicians so that they can give an excellent service.


1. NOISE POLLUTION Noise pollution which is the major impact through which the airplanes are harming the envirnment.It has to be taken care of .We have our techniques ready so that we can reduce the pollution to a great extent.This directive aims to promote the sustainable development of air transport through the reduction of noise pollution from aircraft at airports. The use of aircraft with a better environmental performance can contribute to a more effective use of the available airport capacity and facilitate the development of airport infrastructure in line with market requirements. HUSHKITS This new directive allows airports with a noise problem to introduce a series of operating restrictions, including the gradual withdrawal of the noisiest aircraft. The 'Hushkit Regulation' had maintained the status quo and did not provide for the withdrawal of aircraft fitted with noise-muffling systems already operating in many parts of the world. Hushkits are devices fitted to the engines of older designs of aircraft in order to reduce their noise levels. In the directive, noise management is structured around a balanced approach. It is an approach that involves solving noise problems on an airport -by-airport basis and requires careful assessment of four key elements:

reduction of aeroplane noise at source;

land-use planning and management measures; noise abatement operational procedures; local operating restrictions relating to noise problem.

2. AIRPORT AIR POLLUTION Major Sources of Air Pollutants Emitted at Airports

Vehicles that run on fossil fuels and are used to access and operate airports are the major sources of pollution generated by airports. These include: aircraft; ground access vehicles (GAVs) vehicles such as cars, shuttles, and public transit that transport people and goods to and from airports; and, ground support equipment (GSE) used in the airport, such as for aircraft towing. Various solutions were provided for airport air polluton which contributes a major share to the air pollution of the world.Various solutions which will be provided are discussed as under:-

1. Regulating Aircraft Engine Emissions

There should be tougher emmision standards should be set for aircraft engines.Airports should be made such that they provide aircraft with electricity and preconditioned air reduces fuel use and aircraft engine emissions.
2. Aircraft Engine Fuel Efficiency The newest, most sophisticated commercial engines have very high combustion temperatures, which results in lower carbon emissions, but higher nitrogen oxide emissions. As engine performance improves, abating nitrogen emissions, the primary issue related to aircraft air emissions, especially as air travel expands in coming years, will be fuel consumption. 3.

Ground Service Equipment (GSE)

States can establish hours-of-use limits, daily mass emissions limits, and other regulations that do not prohibit GSE fleet operators from having options available that do not require equipment modification. If the state is the proprietor of an airport, they must build a GSE fleet run on alternative fuels. 4.

Ground Access Vehicles (GAVs)

States have authority to regulate traffic flow at airports they run. This is key, because airportrelated car and shuttle traffic are significant, if not the largest, sources of airport air pollution.

The other strategies we need to look at are the financial strategies so that we can not only have the self-sufficiency but also earn profits from our organisation.

Revenue Strategies at Airports

Sustainable revenue to finance airports operations and capital expenditures is the priority Excess of revenue over expenses should sustain a capital reserve fund for future projects

Operating Revenues

Major Revenue Groups: Airport Improvement Fees (AIF) Aiviation income Terminal Area Concessions Parking Leased/Rental Areas Other Operating Revenue

Other Operating Fees

Loading Bridge Fee Flat Rate Customs Pre -clearance Fee Rate per passenger Aircraft Plug in Fee: Flat Rate Flight Information Display Fee: Flat Rate per line Police and Security Fee: Based on maximum seating capacity of aircraft

Airport Improvement Fee

The concept of airport improvement fee can be introduced, which will pay a major contribution in the development of the airport.Fee imposed by the airport and are paid by departing passengers as part of their airline ticket fee. These fees go directly to the airport and are designed to fund capital improvements at the airport.

AirportImproveme nt Fee
Edmonton, Alta Halifax, N.S. Hamilton, Ont. Lethbridge, Alta London, Ont. Moncton, N.B. Montreal, Que. Ottawa, Ont. Quebec City, Que. Regina, Sask. St. John's, N.L. Sydney, N.S. $20 $15 $20 $12 $15 $15 $25 $15 $25 $15 $15 $25

1 Swiss franc = 1.10448 U.S. dollars

We need to set up a proper standard so that it can be profitable for our airport.The above values can be seen as an example so that we can realise better how to set up the improvement fee.So we can start with 10 swiss francs per passenger which will go on increasing with the

increasing expenditure of the airport.


Through the given case study we have worked on a linear programing diagrams to make the targets look easier for the company so the predicted figures have been worked out in a way that we can work towards its positive and negative deviation and make our work uncomplicated. 5 million passengers = 1.43 times of 3 million passengers Therefore the revenue must also go atleast 1.43 times to about 33.462million SFr 48% is aviation income i.e.around 16 million


Income per day: 44000 SFr Passengers per day: 13700 Assuming that the capacity of a medium plane is 300 and that a large plane is 800, we have: 300(x) + 800(y) = 13700 (x=medium plane and y=large plane) Also, Let the no. of passengers arriving be a and departing passengers be d (per day), then According to Case Study: Charges for security = 1.2(a+d) Charges European Holiday = 1.6*0.95*d eq(1)

Charges for Business = 4*(0.05)*d (considering 5% people are going out of Europe for Business) Landing Charges for large plane = 300*y Landing Charges for a Medium plane = 170*x Parking Charges for Large Planes = 200*2*y Parking Charges for Medium Planes = 250*0.1*x + 500*0.9*x

Total Income perday from Aviation => 44000 = 1.2a + 2.92d + 700y + 645xeq(2) Also, a+d=13700eq(3) According to our research the minimum no. of planes that an airport (5 million capacity) handles = 32 So x+y = 32eq(4) From eq(1) and eq(4), we have:

X=24 and Y=8

From eq(2) we have= 1.2a+2.92d=22920 eq(5)

From eq(3) and eq(5), we have:

Arriving passengers (a) = 9925 An Departing Passengers (d) = 3775

These are to be the minimum requirements which Zurich-Noch should look to maintain to become self reliant.

Also, An increase in total no. of departing passengers per day should benefit the airport. Similarly, an increase in the large planes will also do the same. Now if we talk about the possitive and negative deviation from the graphs what exactly we get will be seen below.

POSITIVE DEVIATION - what we exactly we get if we get a positive deviation from the
LPP curve is that the passengers and the traffic coming to the airport will consequently increase so we need to have excellent facilities available so that we can manage them well.The management team will have too carry on the work at an increased rate so that they can get to the accomplishment of their goals as soon as possible.

Airport marketing team will work to: Retain and expand existing domestic air service Bring competition and carrier options to the market to provide competitive fares

Add service to key destinations Identify Cargo development opportunities Partner with airlines to support on-going passenger and cargo flights

NEGATIVE DEVIATION - It will take the company in losses and give it more
financial burden and increase the dependencies on the forign funds and the lendings.So the company needs to have some back up so that it can atleast have self sufficiency for the airport.the solutions which it can adopt are privitising some part of the airport so that it can get a regular flow for the airport.the solutions which it can adopt are privitising some part of the airport so that it can get a regular flow capital from atleast a particular part of the firm.

Keeping some aspects in mind if we are not able to reach self sufficency level.We are have some back up plans such as privatising the airport partially so that we can atleast generate enough capital to run the airport in worse situations. According to our study, Governments in both developed and developing countries are turning to the private sector for airport management and development. The benefits of a more entrepreneurial approach to running airports include increased operating efficiency, improved amenities, and more rapid and efficient expansion in capacity to reduce congestion. Airlines, passengers, private-plane owners, and taxpayers can all benefit from this new commercial approach to airport management. For existing state and local airports, the simplest form of privatization is to contract out management of the airport on a short-term basis. But long-term leases can shift much greater responsibility and entrepreneurial incentive to the airport company, while liberating much of the city's previous investment in the airport. To create new airport facilities, the private sector can be brought in as a partner and granted either a long-term or perpetual franchise to finance, design, own, and operate the new facility. Here are some examples of airport privatization reforms in recent years: France's Aeroports de Paris, which owns Charles de Gaulle and Orly airports, was partially privatized in 2006.

Most of Italy's larger airports have been privatized, including those in Rome, Florence, Naples, Parma, Pisa, and Venice.

Greece plans to sell part of the remaining share of the Athens airport that it retains, and it may privatize some of its larger regional airports. Spain's government announced in 2008 that it will sell major stakes in the 47 airports operated by state agency AENA. Mexico has privatized numerous airports, and the country boosts three successful airport operators that plan to expand abroad.

Airport Expenses Categorized as either:

1.Capital Expenses large, periodic expenses which contribute to significant airport infrastructure improvement or expansion. 2.Operation and Maintenance Expense (O&M) consist of those expenses that occur on a regular basis and are required to maintain the current operations of the airport. The approaches we need to apply to get our sustainable flow of cash in a planned manner are The residual-cost approach, under which the airlines collectively assume significant financial risk by agreeing to pay any costs of running the airport that are not allocated to other users or covered by nonairline sources of revenue. The compensatory approach, under which the airport operator assumes the major financial risk of running the airport and charges the airlines fees and rental rates set so as to recover the actual costs of the facilities and services that they use. These approaches need to be followed in a well sycronised manner so that we can get our aims fullfilled in the time we need them to be completed.these approaches will make us realise our goals in the specific time period and have our organisation estabilished at the end of the time period we need it to complete.these approaches will lead the managment to better ending to their future prospects.