1. Airport Strategies to Gain Competitive Advantages
Dr Anne Graham
University of Westminster
London

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

3. Porter’s Five Force Framework of Competitive Analysis
Threat of new
entrants
Power of
suppliers
Rivalry amongst
existing firms
Power of
buyers
Threat of
substitutes

4. Competitive Analysis: Airline Customers (I)
Threat of new entrants:
Large investment needed
Long/complex planning processes
Lack of available sites
Economies of scale?
Threat of substitutes:
High speed rail links
Improvements in road/rail infrastructure to major airports
But Lacks have changed economic balance between rail and air

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

6. Competitive Analysis: Airline Customers (III)
Rivalry amongst existing airports:
Small islands/remote regions
Major airports with concentration of short-haul and long-haul operations
Hub airports
Overlapping catchments area
Urban situation
Regions

7. Competitive Analysis: Passenger Customers
Many other retailers
Many passengers and other customers
Attractiveness of captive market and affluent customer
High street and internet shopping competition
Different competitive forces as regards aeronautical and commercial services – but both ultimately dependant on airline services

8. Controllability of the Sources of Competitive Advantage
Two main sources:
Price
Product
Airport has varying levels of control
Most control: non-aeronautical areas
Partial control: aeronautical areas
Least control: Location and catchment area

9. Porter’s Generic Competitive Strategies
COMPETITIVE ADVANTAGE
Uniqueness perceived
by the customer
Low cost
position
COMPETITIVE
SCOPE
DIFFERENTIATION
COST LEADERSHIP
FOCUS
Industry
wide
Particular
segment
only

10. Airport Strategies: Cost Leadership
Controllability of costs
Economies of scale
Price insensitivity of markets
Weak relationship between costs and prices in some cases
Not very relevant to airport industry

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

12. Airport Strategies: Focus or Niche
By type of airline (eg charter, LCC, freight operators)
By particular geographic area
Cost focus – LCCs
Differentiation focus:
Liege airport
London City airport

13. Ansoff’s Positioning Matrix
PRODUCTS
Present
New
MARKETS
MARKET PENETRATION
PRODUCT DEVELOPMENT
MARKET
DEVELOPMENT
DIVERSIFICATION
Present
New

14. Internal Growth (I) Market penetration: Market development:
New regional services
Loyalty cards
‘Niche’ airports
Market development:
New types of traffic (eg Vienna)
New commercial products (eg internet, travel value)
‘Differentiation’ airports

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

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

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

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

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

20. Competitive Strategies for LCC Customers
Small sized airports: Use spare capacity but what happens when investment is needed?
Medium sized airports: Do LCCs supplement or substitute conventional airlines
Strategic options:
Standardised product
Differentiated product
Low cost terminal
Two airports

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