The development of the Non Aviation-Related Value Proposition
Towards an Evolution of the ‘Traditional Airport’ Business Model
In the past, the airport business looked to be quite simple to manage. In the airports, the most important figure was traffic increase, either on the passenger or on the cargo side, to be matched with IATA average industry forecasts. In the short term, achieving this goal meant more revenues, in the form of increased passenger taxes as well as landing and handling fees from the core aviation- related business. In a longer-view perspective a wider level of activity would create a chance for the airport infrastructure to be ungraded.
Airports didn’t have to worry too much about controlling their own operating costs. Spatial upgrades to cope with primary demand increases were almost completely financed by the state or regional/local entities in the form of huge subsidies, with the aim of improving the effectiveness of the country’s overall infrastructural package.
New Evolutionary Patterns for Airport Enterprises
The traditional airport managerial approach had previously underestimated the relevance of a vast category of secondary activities within their own airport boundaries. These may, infract, play a significant role in complementing and supporting the primary service of the airport infrastructure and become a major source of airport revenue.
A proactive and visionary airport management may gain a significant degree of entrepreneurial freedom when aiming to increase its overall revenue and profits by focusing on its non-aviation business side.
The ‘Commercial ‘Airport’ exhibits critical differences both in its strategic mission and in its inherent marketing implementation, when compared to the ‘Traditional Airport’ concept.
This new market formula sees airport infrastructure evolving from pure mono or multimodal logistical medium into more sophisticated market entities that may be described as a ‘multipoint service-provider firms’
Thus apart from its conservative, traditional air-side business, airports also tend to become commercial hubs, in which a bundle of diversified service proposition and products are offered to an enlarged of target customers. This new set of potential customers includes not only a) air passengers and b) air transportation employees, but also c) local-communities d) residents, e) firms and f) firms’ employees operating inside the airport’s catchment area, g) tourists and aviation enthusiasts.
The enriched service package offered by a modern airport enterprise
The recent increase in competition between airports in the aviation-related business, especially when dealing with primary hubs, plays an important role in the development of the ‘Commercial Airport’. According to this approach, five new areas of activity may be identified, as a complement of the traditional core business, when dealing with the ‘Commercial Airport’ approach.
i) Commercial service;
ii) Tourist services;
iii) Conference services;
iv) Logistic and property management services;
v) Consulting services’
Commercial services (Airport Retailing)
In this broad micro-category, practitioners usually include all airport retailing activities. These are the vast package of commercial ventures offering products and services aimed at satisfying customer needs, mainly impulse ones.
A) From as demand side, we may identify five major target-demand clusters for commercial services;
1. A basically captive audience, consisting of traditional; origin, destination and transit passengers; this cluster is mainly driven to shop for primary needs’ items or to purchase a gift for family or friends;
2. The so called ‘meters and greeters’. Coming to airports to accompany or pick-up Visiting Friends and relatives (VFR), travelers or job-related contacts. These could be attracted to send some of their own spare time at the airport shopping or eating;
3. An airport enterprise’s airlines’ and other service providers’ employees within the air transport value chain; they are typically purchasers of commercial services either for their work or private needs;
4. Local residents around the airport or close to it;
5. Companies within the airport’s catchment area; they are potentially a
target of B2B services in the logistic and property management.
B) From the offer side:
*Commercial services in a strict, which include those services that are closely linked to the more traditional and conservative airport-retailing offer. Major examples are provided by fashion boutiques, jewelers, tobacco retailers, newsstands, car rentals, money changes;
* Food and beverage services, like traditional restaurants, fast foods, bars and snack-bars;
* Complementary services, this category deals with services not historically included in an airport retailing mix and, thus, representing a major source of differentiation. For instance, ATMs religious services, local gourmet shops, miscellaneous corners, Internet cafes, pharmacies, florists, fitness and wellness centers, pharmacies, hairdressers, hotel and info points, merchandising kiosks;
* Advertising services, linked to the commercial exploitation of spaces within the terminal boundaries to promote sales of various products and brands.
Aiming to maximize profit generation by means of royalties, airport enterprises will have to place each concessionaire in the right location to facilitate the offer demand matching in a consistent way.
Los Angeles into airport: encounters, pub restaurant dashy corporation
London Gatwick venue 10% Donald garfuabel Hair dressers- Vienna into airport
Ideal placement of outlets and services within a terminal: airside vs. landside areas
| Departure hall Landside | Departure hall Airside | Arrival hall |
| Gourmet shop | Duty-free shops | Pharmacy |
| Bars/restaurants/foods Court | Bars/restaurants | Bars/restaurants |
| hairdresser | Last minute duty-free shop | Info point |
| Thematic shops (related to the distinctive products of the catchment area) | Jeweler | Hotel point |
| Fashion stories | Money changer | Bank |
| News-stand | | Miscellaneous |
| | | Florist |
| | | Car rental |
Airport retailing, in fact, is just one of the many ingredients that can permit the ‘commercial airport’ business concept to succeed in the market. Non-aviation practices must now deal with all those forms of revenue generation that come from the exploitation of airport platforms for purposes not correlated with technical support of aircraft and passengers.
Tourist Services
The ‘airport as a tourism and leisure destination’ concept provides the need for creative marking strategies to attract additional influxes of demand, not just those who have airline tickets. In other world, airport-enterprises may also sell a new form of entertainment, capable of generating autonomous interest in a broad audience. Spotters and aviation have become ‘event organizer’s to stimulate complementary demand in daily or yearly off-peak periods. This goal has been achieved through radical innovation in the value proposition. Frankfurt airport opened a discotheque inside the Terminal building, this best-practice being rapidly benchmarked and imitated by Munich airport; too, Amsterdam Schiphol has launched a casino in the transit area, as have Frankfurt and Munich airports, while Milan Malpensa airport, has hosted music concerts inside the New Terminal 1 on an ad-hoc basis. Many airports have built golf courses inside or close to their boundaries, targeting this highly – affluent cluster. Dallas-Forth Worth and Auckland airports have a golf course just outside their boundaries and organize dedicated caddy transfers for golf lovers. But the best example comes from Thailand, where Bangkok airport hosts a golf course between its two operating runways!
Art exhibitions are being organized by many airports too not necessarily only primary hubs.
Conference Services
Other areas of market interest for commercially – minded airports may arise from the conference market. This potentially high-yield cluster is looking for the availability of large and spacious areas in which to host delegates and plan meetings with the support of state-of-the –art technological devices, throughout the year.
Developing congressional facilities can be implemented by means of three different approaches;
1. In-terminal facilities directly managed by the airport enterprise itself.
2. In-terminal facilities outsourced and then managed by a concessionaire. General London with Rome
3. Partnership with hotel chain. Which can be implemented through the building of hotels within or close to airport boundaries? – Paris
Logistics Services and Property Management:
Historically, airports have played a modest role as partners to their related industries. In other words, the airport infrastructure has not been deeply integrated in firms’ logistic chains, but simply used as an ‘external’ medium as well as transfer point for goods, with a role of facilitating material contacts between the spokes of the chain itself.
Today, however, on the basis of significant experiences, mainly in the maritime industry, even airport enterprises are starting to develop an enriched cargo portfolio offer for firms in their own catchment area.
Another possibility is lending spare space in airport cargo facilities to host fairs and exhibitions, especially technical ones. In this case, a magnitude of synergies can be exploited with both the conference business, and also hotel chains.
The airport enterprise, can also promote the renting of all spares – either built or planned – that are located within its own boundaries. This activity is referred to as property management; Opportunities for sound economic exploitations of the property management business also exist in the case of regional airports. However, airports will have to face stiffer competition from both companies who specialized in temporary rents, as well as from hotels.
Consulting Services
Best-in-class airport operators may, eventually, implement another form of upgrade of their service package offered to the market. On the one hand, the consoling approach is consistent with the technical activities of project engineering and financial management; on the other hand, the consulting activity will mainly deal with the implementation of management contracts. In this case,. The most innovative component of the ‘commercial airport’ format will be exported.
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