LOG357 Port & Terminal Management

Study Unit 2
The Airport Industry
Dr. YAP WEI YIM
 Objectives

• At the end of this study unit, you are expected to:

– Show the importance of the airport in global trade and transport.

– Illustrate the demand for air travel for various passenger segments.
– Discuss the main areas of concern in airport-airline relationships.
– Analyse the competitive dynamics faced by airports.
– Examine the various strategies used by airports to gain a competitive
advantage.

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 Objectives

• At the end of this study unit, you are expected to:

Self study
– Show the importance of the airport in global trade and transport.
– Illustrate the demand for air travel for various passenger segments.
– Discuss the main areas of concern in airport-airline relationships.
– Analyse the competitive dynamics faced by airports.
– Examine the various strategies used by airports to gain a competitive
advantage.

Prepared by WY Yap for SUSS

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 Objectives

• At the end of this study unit, you are expected to:

– Show the importance of the airport in global trade and transport.

– Illustrate the demand for air travel for various passenger segments.
– Discuss the main areas of concern in airport-airline relationships.
– Analyse the competitive dynamics faced by airports.
– Examine the various strategies used by airports to gain a competitive
advantage.

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 Demand for air travel

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 Demand for air travel

• Passengers handled at the airport are largely derived from airline passenger traffic.

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 Demand for air travel

• Airlines have very little control over demand which is highly cyclical, highly
segmented and where brand loyalty is soft.

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 Demand for air travel

• Full-service airlines have a long legacy, most were set up by governments

and continue today to be the flag carriers of their respective countries.

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 Demand for air travel

• Full-service airlines offer:

– Large networks
– Interconnectivity via partner airlines
– Wide array of sales and marketing channels
– Wide spectrum of business amenities
(e.g. airport lounges, fast track security, limousine service)
– Flexible tickets for business passengers
– Vast portfolio of in-flight products
(e.g. flat beds, quality food and beverage, advanced in-flight
entertainment systems, internet and mobile phone connectivity)
– Convenient airports
– Frequent flyer programmes

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 Demand for air travel

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 Demand for air travel

• Low-Cost Carriers (LCCs) operate on a very different platform from full-service

airlines by enshrining the concept of ‘low-cost’ into their organisational culture
and offering low fares in exchange for eliminating many of the traditional
passenger service.

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 Demand for air travel

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 Demand for air travel

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 Demand for air travel

• Regional airlines

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 Demand for air travel

• Charter airlines

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 Objectives

• At the end of this study unit, you are expected to:

– Show the importance of the airport in global trade and transport.

– Illustrate the demand for air travel for various passenger segments.
– Discuss the main areas of concern in airport-airline relationships.
– Analyse the competitive dynamics faced by airports.
– Examine the various strategies used by airports to gain a competitive
advantage.

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 Airport-airline relationships

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 Airport-airline relationships

• Airport capacity

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 Airport-airline relationships

• Environmental impact

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 Objectives

• At the end of this study unit, you are expected to:

– Show the importance of the airport in global trade and transport.

– Illustrate the demand for air travel for various passenger segments.
– Discuss the main areas of concern in airport-airline relationships.
– Analyse the competitive dynamics faced by airports.
– Examine the various strategies used by airports to gain a competitive
advantage.

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 Airport competitive dynamics

• Compete to serve a shared local market

• Compete for connecting traffic
• Compete for cargo traffic
• Compete for destination traffic
• Compete for non-aeronautical services (retail, food and beverage etc.)

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 Airport competitive dynamics

 Compete to serve a
shared local market

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 Airport competitive dynamics

 Compete to
serve a shared
local market

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 Airport competitive dynamics
 Compete for connecting traffic

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 Airport competitive dynamics

1200

• Compete for cargo traffic 2010

900
Top 15 cities by GDP Per Capita

City's Total GDP (US$ Billion)

600

Seoul
Mumbai Shanghai
300
Hong Kong
Delhi Taipei Beijing
Manila Singapore
Jakarta Shenzhen
Bangalore
Guangzhou
Chennai Kuala Lumpur
0 Hyderabad HCM City
US$15,000
0 25,000 50,000 75,000 100,000
City's GDP Per Capita (US$)

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 Airport competitive dynamics

1200
Top 15 cities by GDP Per Capita

• Compete for cargo traffic

Mumbai Shanghai
2030
900 Beijing

City's Total GDP (US$ Billion)

Income and Delhi
economic disparities Guangzhou

between Asia’s cities Tianjin

600
expected to widen Chongqing
Taipei
Seoul

even further Wuhan Chengdu Shenzhen

Bangalore Singapore
Suzhou
Jakarta Manila Dalian
Nanjing Hong Kong
Shenyang Chennai Wuxi
300
Qingdao Hangzhou
Xian
Hyderabad HCM City Ningbo
Jinan
Zhengzhou Kuala Lumpur
Kunming
Xiamen
0
US$34,000 US$63,900
0 25,000 50,000 75,000 100,000
City's GDP Per Capita (US$)

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 Airport competitive dynamics

• Compete for destination traffic

• Changi International Airport

• Expo Convention Centre
• Marina Bay Cruise Centre
• Harbour Front Cruise Centre
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 Airport competitive dynamics

• Compete for non-aeronautical services (retail, food and beverage etc.)

Source: Verdict Research

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 Airport competitive dynamics

• Subsidies and competition

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 Objectives

• At the end of this study unit, you are expected to:

– Show the importance of the airport in global trade and transport.

– Illustrate the demand for air travel for various passenger segments.
– Discuss the main areas of concern in airport-airline relationships.
– Analyse the competitive dynamics faced by airports.
– Examine the various strategies used by airports to gain a competitive
advantage.
Self study

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 Activity 2.1

• Consider PEK, HKG and SIN. What are the factors that affect the level and growth of
passenger traffic for these airports? Which of these are most important?

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 Activity 2.2

• How would you describe the business models of Singapore Airlines and Air Asia?
• What distinct competitive advantages is each party likely to possess in the post-
COVID-19 world?

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 Activity 2.3

• Looking at the major airports in Southeast Asia, who are their main customers and
likely sources of competitive advantage in the post COVID-19 world?

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 Activity 2.4 – Reflect on this

• Changi International Airport has received many awards ranking it among the best
airport in the world. Can you describe the retail experience you had had at Changi? In
your opinion, which of the terminals offer the best retail experience?

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Thank you for your attention.
Contact details:
wyyap@suss.edu.sg
+65 9642 1971