Thursday, November 1, 2012

The love-hate relationship between airport operator and hub carrier

There are mutual dependencies between an airport operator and a hub carrier. Both companies contribute to the overall product "Airport". In many subject areas, the interests of both parties are therefore identical. Different interests can occur in subject areas in which the airport operator represents the interests of all airport users and they do not meet the interests of the hub carrier, or where the airport is representing their own interests.


Different Roles

The airport operator is holding the concession to operate the airport and is therefore responsible that the infrastructure is used efficiently and suffices to accommodate future growth. The planning and the day-by-day management of infrastructural resources should therefore stay where the financial responsibility is located i.e. with the airport. Airports leaving the management of infrastructure to airlines will be faced with inefficiency and continuous demands for more and better infrastructure which produces higher costs (for example inefficient resource allocation and lack of control of slot adherence). A hub carrier is planning their network and schedule in order to satisfy the demand of passenger and cargo transportation and in doing so, to make as much profit as possible. For an airline, the planning of resources like aircraft and crews is their core competence and should not be handed over to an airport as the financial responsibility to shareholders lies exclusively with the airline.

Different Businesses

There is a big difference of the cost structure between airline and airport. An airline has 70-80% variable costs. In case of an economic downturn it will reduce costs by eliminating flights with a low profitability and can so reduce their main expenditures substantially and quickly. The planning horizon is usually 2 flight seasons except for fleet planning which is covering 2 to maximum 5 years. An airport has 70-80% fixed costs. The main cost factor, infrastructure, cannot be reduced quickly if revenues drop because airlines cut their flight schedule. Airports therefore tend to build functional infrastructure which is cheap to build and maintain. The planning horizon (master plan) covers often the best part of the concession period and can be as long as 30 to 50 years.

Conflict 

Though the relationship between hub carrier and the airport is a symbiotic one there are conflicts in the one between hub carrier and hub airport. From the airport’s view, the hub carrier presents with its big market share a cluster risk and a danger to its independence. To attract other airlines is the sensible thing to do in order to mitigate those risks, at least from an economical and entrepreneurial point of view. This is a balancing act though, because the airport has to be careful not to cause a too competitive environment in order to prevent an adverse effect on its main customer. The hub carrier in turn expects from the airport a better and more exclusive infrastructure than the other airlines to get a competitive advantage. All this of course offered at costs which should lie considerably below the prices paid by competitors for less suitable facilities. And there should be no competition, even to destinations presently not served by the hub carrier.

Conclusion

This conflict exists at most of the hubs of this world. It should be addressed by airport and hub carrier in order to find a cooperation model without intruding into the partners business or responsibility. It should not be lopsided but serving both partners even if it means compromising. It should allow both, airport and hub carrier to grow and to conduct its business within limits to be agreed on in a memorandum of understanding, without interference of the partner.

Tuesday, October 16, 2012

The problem with early flight arrivals

Some of the most common of the aggravations affecting air travelers is a flight delay or a cancellation. An early arrival of the inbound aircraft of their respective outbound flight is good news. It increases their chances of a timely departure. Not so good for the arriving passengers though if the ground staff is not ready yet. Which happened quite often to me - no one there to operate the air bridge or no one there to open the door from the air bridge to the terminal.

Not so good news for the airport as well, because early arrivals can be a disruption just like late arrivals.


Usually, airports plan for 15 minute buffers in their resource allocation (stands, gates). Fifteen minutes before Scheduled Time of Arrival (STA) and after. Sure, an early arrival helps when the airport endeavors short turnaround times. But if a flight arrives earlier then the planned buffer, it means that the airport has to cater for costly reserve capacities. Furthermore, there will be many changes affecting the operation.

What can an airport do against this? They can demand slot adherence, or the airline(s) will loose that slot and/or tell them that there will be no stand available. In a collaborative manner, of course, the airport will first approach them, raise the problem and discuss joint measures.


Wednesday, October 10, 2012

Why it is counterproductive to let passengers know how long waiting lines are

People say that knowledge is power. The more knowledge, the more power. Suppose you knew the winning numbers for the lottery?  What would you do? You would run to the store and mark those numbers on the play card. And you would win.

Same for airports? Suppose you knew the waiting time at checkpoints like at Dulles International Airport. What would you do? Experience shows that when there is not much waiting time passengers tend to dwell and get to the checkpoint later. Which may create a problem later. It also shows that when there is long waiting time passengers tend to go to the checkpoint immediately. Which increases the problem now.



I think that airports should endeavor to steer the passengers indirectly based on the information they have. They may wait to announce gates until they see that there is capacity at checkpoints. They may change gates of arriving flights or bring passengers to other arrival halls.

Airport business is full of decisions and judgements and guesses, and also looking outside of the box.