AIR TRANSPORT MANAGEMENT

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					 AIR TRANSPORT MANAGEMENT

    (SECOND ASSIGNMENT)

“EMERGING OPERATIONAL
CHALLENGES IN AIRPORT
    MANAGEMENT”




       SUBMITTED BY

     ZILLELLAMUDI SUNIL

          2011-2012
      Post Graduate Diploma In Aviation Law And Air Transport Management
                                  (PGDALATM)




                                ACKNOWLEDGEMENT

I hereby express my regards and extend my gratitude to NALSAR UNIVERSITY and
INSTITUTE OF APPLIED AVIATION MANAGEMENT for giving me this opportunity
to explore my knowledge in the emerging challenges in airport management. my sincere
thanks to all the professors for Imparting the valuable knowledge on the subject.




                                   ABSTRACT

    This paper consists of emerging operational challenges in the field of Airport Management
and different measures to meet the challenges. This describes mainly about the air transport
economics, interdependence of airline – airport – aerospace sectors in the global aviation
market development, changing faces of the airport world, strategic options and management
techniques to enhance airport operational efficiency, thrust areas for successful airport
management.




              Emerging Operational Challenges in Airport Management

                                            -1-
Post Graduate Diploma In Aviation Law And Air Transport Management
                            (PGDALATM)


                            CONTENTS


TOPICS                                                 PAGES



1. Introduction                                             3



2. Overview                                                 4



3. Identified Challenges                                    6



4. Compacting Strategies                                    11



5. Conclusion                                               14



6. Reference/Bibliography                                   15




        Emerging Operational Challenges in Airport Management

                                 -2-
       Post Graduate Diploma In Aviation Law And Air Transport Management
                                   (PGDALATM)

INTRODUCTION

                The air transport system is an important contributor to the quality of life of
people and an essential part of world business globalization. Airport Development is essential
part of airport management. Airport has been traditionally viewed as a strategic entity of nation
and therefore they have been traditionally operated to meet the just needs from that perspective.

               The concept of “Airport Management” as a discipline is a new adoption borne
out of the progressive traffic growth, both of passengers and cargo during the past few years.
Airport management concept is rapidly changing, and airports today are expected to carry out
their primary functions in a most cost efficient and cost effective manner while maintaining a
high standard of safety and service. Economics regulations must be supportive of these aspects
as the airports are natural monopolies.
               Airports have also been diversifying their business direct operation in ground
handling, management contract at other airports, providing training or consulting services, airline
partnership and diversification into aviation activities. Airports are an anomaly in the air
transportation industry. The planning, design, and Management of airports are largely local
affairs, whereas the rest of the industry is global. To meet the ever-increasing growth of air
traffic, airports need to expand as and when needed especially for handling larger aircraft
carrying more passengers than before. The result is that airport administrations are faced with a
heavy financial investment programme for improvement and development to meet these needs in
the most efficient manner possible. The rapidly changing economic scenario has led to the view
that divestment of airports and air traffic services would bring in the much needed funds while
facilitating the State to focus on development of other socially important sectors. Nevertheless,
the need to ensure safety of operations at all times remains as the most important objective. To
this end, the responsibilities of States for ensuring safety cannot be over emphasized.

               India is at the threshold of emerging as an economic power. However, it is
recognized that infrastructure holds the key to this transformation. The infrastructure gap in India
is obvious to all Government has dedicated itself to address this on a war footing. The task is
huge. It involves not only harnessing financial resources but also technology and know-how.
private participation is felt necessary and therefore the Government has opened up this sector to
the Public Private Participation (PPP) route.
               Emerging Operational Challenges in Airport Management

                                                -3-
       Post Graduate Diploma In Aviation Law And Air Transport Management
                                   (PGDALATM)

OVERVIEW




                 “1 Mile of runway takes you to the world” is the role of the airport
                              which is the most challenging aspects.


               Airport is an essential component of an ever expanding air transport industry. The
aviation industry has become a major economic activity. Economic activity means competition
between airlines and between airports. Airports are vital for economic development of the region
and the country they service. The environment within which the airports are managed is
changing at rapid pace. The changes results in technology, globalization, de-regulation, strategic
alliance of airlines, and privatization are causing new demands on airport management. Airports
once viewed as public entities are rapidly evolving into prominent commercial enterprises.



The economic importance of the industry can be estimated by the following facts & figures:

      The total value of goods transported by air represents 35% of all international trade,
       accounting for 7.5% of the world's gross domestic product

      2.2 billion Passengers use air transport every year.

      The air transport industry generates a total of 32 million jobs Aviation’s global economic
       impact (direct, indirect, induced and catalytic) is estimated at USD 3,560 billion,
       equivalent to 7.5% of world Gross Domestic Product.

      Some 2,000 airlines around the world operate a total fleet of 23,000 aircraft. They serve
       some 3,750 airports through a route network of several million kilometers managed by
       around 160 air navigation service providers.

      25% of all companies’ sales are dependent on air transport. 70%of businesses report that
       serving a bigger market is a key benefit of using air services.



              Emerging Operational Challenges in Airport Management

                                               -4-
       Post Graduate Diploma In Aviation Law And Air Transport Management
                                   (PGDALATM)

                 Major functional domains of an airport are landside, terminal complex and air
side. Each of the functional domains has a focus, a set of key functions and the primary service
considerations. All domains must work together in a highly integrated and interdependent
manner for an effective and efficient management of the airport system.

                 The challenges faced by the airports are enormous .Airport and Airspace
congestion is already a burning problem in many parts of the world. Increased security measures
and environmental pressures are among the most important issues facing airports .Airport is the
meeting point between airlines, air navigation services (ANS) and customers(passengers and
airport users.

.                There are three main potential economic gains obtained from privatization,
namely improvements in operating efficiency (the private for-profit business model more often
leads to a further exploration for means to cut costs and boost revenues than public
management), the introduction of new management styles and marketing skills directed to serve
users with a more consumer-oriented approach, and better investment decisions.




                 Emerging Operational Challenges in Airport Management

                                              -5-
       Post Graduate Diploma In Aviation Law And Air Transport Management
                                   (PGDALATM)

IDENTIFIED CHALLENGES

               Today our Airport Management faces lots of challenges. Some of the important
identified challenges of Airport Management are as follows:

      Airport and Airspace congestion

      Implementation of Communication, Navigation, Surveillance(CNS) & Air Traffic
       Management (ATM) system for a seamless air traffic flow

      Introduction of New Large Air craft (NLA)

      Growing Airline Alliances

      Changes in the Airport Ownership

      Increased security Concerns

      Environmental Pressures

      Changing faces of Airport Leadership

THRUST AREAS FOR SUCCESSFUL AIRPORT MANAGEMENT

               Transformation is needed, though it been a complex process if not put into
practice management will not achieve the desired result. the goals of transformation should have
consistency throughout the organization .in sense the transformational process is about managing
the transition gap between the current position and desired future .it is a perfect blend of
managing ,planning and controlling the change , so ,a clear strategy is required to reach to the
desired objectives it will include :

   1. EMPLOYEE EFFECT
       Efficiency Impact
       Competency Impact
       Innovation Impact
   2. CUSTOMER EFFECT
   3. EXCELLENCE EFFECT
               Emerging Operational Challenges in Airport Management

                                              -6-
       Post Graduate Diploma In Aviation Law And Air Transport Management
                                   (PGDALATM)


   CHANGING FACES OF AIRPORT

      PRIVATISATION OF AIRLINES
      LOW-COST AIRLINES
      CAPACITY CONSTRAINS
      CONSUMER INTERESTS
      CHANGE OF AIRPORT OWNERSHIP
      CHANGE MANAGEMENT – CHALLENGES




PRIVATISATION OF AIRLINES

               Privatisation of state owned airline has been one of the prominent transformations
in international air transport, where airlines in all but a handful of States had been government
owned until recent times. The motives for privatisation have been highly discussed, ranging from
few purely economic considerations to improve operating effectively and competitiveness, to a
more pragmatic desire to reduce the heavy financial burden for governments for financing capital
investment in new equipment.

       ADVANTAGES OF PRIVATISATION OF AIRLINES

       1. Improves operating efficiency.
       2. Reduces financial risk to the government.
       3. Improves competitiveness.
       4. Help in expanding business




LOW COST AIRLINES

               Another recent development in the airline sector is the introduction of ‘Low Cost
Business Model’. Low cost carrier also known as no- frills or discount carries is an airline that
offers low fares but eliminates most traditional passenger services. The common features of this
business model are, a single type of aircraft reducing training and servicing costs, point to point
               Emerging Operational Challenges in Airport Management

                                               -7-
      Post Graduate Diploma In Aviation Law And Air Transport Management
                                  (PGDALATM)

network focusing on short haul routes, high frequencies, simple low fare structures, high density
single class with no seat assignment, simple in- flight services, staffing flexibility and minimal
overheads and intense use of electronic commerce for marketing and distribution. They also use
less congested cheaper secondary airports to ensure short turn rounds and high on time
performance. The low cost model provides immense opportunities for regional airports and
medium sized airports including military bases for growth.




CAPACITY CONSTRAINTS

               Airport capacity constrain is one of the bottle necks in Air transport growth.
Airport capacity means runway and terminal capacity. The runway capacity is determined by
the regulatory bodies. Whereas, terminal capacity is the amount of passengers and cargo which
the airport can accommodate in a given period of time sometimes referred to as passenger or
cargo throughput. Aircraft size is another factor that can affect terminal capacity. Airport
capacity can also be adversely affected by external factors such as environmental restriction
and air traffic control capabilities. When the carrier demand at an airport exceeds the
availability of slots, the airport can then be considered capacity constrained. To a great extend
capacity constraints are eased out through IATA schedule coordination conference, in which
well over 260 airlines participated and schedules are adjusted through bilateral discussion.
Capacity is essentially controlled through regulatory framework within slot allocation
mechanisms are employed at global, regional and at national levels.




CHANGE OF AIRPORT OWNERSHIP

               Majority of airports world over were constructed pre-post World War ll and in
any case prior to mid 1960’s. Airport ownership then was reviewed as strategically important
and as such most of them came under government ownership. A further shift in ownership began
in early 1970’s when a number of countries created airport corporations under public ownership

              Emerging Operational Challenges in Airport Management

                                               -8-
       Post Graduate Diploma In Aviation Law And Air Transport Management
                                   (PGDALATM)

and it provided access to private/ external capital market. A second shift occurred in the mid
1980’s and a number of countries began to turn the private sector for direct financing of airport
investment and to further improve the managerial efficiency. A large number of publicly owned
and operated airports are generally not rated well equipped due to limited government funding.
The privatisation model included outright sale of asset through stock market, long-term leases,
joint ventures/ equity flotation etc. Private sector participation in Asia has revealed primarily
around green field projects. Therefore, there is an increasing trend in the airport ownership by
way of leasing and private participation.

               Airports have been moving away from the government ownership to commercial
and private ownership. British Airport Authority (BAA) was among the first to privatize and it
remains a paradigm for airport management. New airports in Asia including India is based on the
concept of Public-Private Partnership (PPP), instituted through a special purpose vehicle (SPV).
All the Greenfield airports in India are based on this model.

               Traditionally, governments were cautious to take part in airport privatization.
Investment of local authorities, concession for the management, Inter-airport shareholdings are
encouraging trend in airport ownership. Common technique for private participation involves
Build-Own-Transfer (BOT), Build-Own-Operate-Transfer(BOOT), Lease-Develop-Operate-
Management Contract (LDC),. The limited past experiences of airport privatization, however,
does not confirm to any single model with a single definition as yet. Financing of airport projects
however continues to be the critical constraint and a major challenge for the airport sector.




CHANGE MANAGEMENT CHALLENGES

               The first risk for the airport management therefore, is to cope with the
transformation from being largely state owned/ supported entities to more and more commercial
and competitive entities with private participation. Airports are therefore challenged to re0-
organise themselves and cope with the organisational stress in the wake of this ownership
changes.



               Emerging Operational Challenges in Airport Management

                                                -9-
       Post Graduate Diploma In Aviation Law And Air Transport Management
                                   (PGDALATM)

                Regional and local planning authorities expect increased social and economic
activity in the form of employment and new business opportunities. From the technological point
of view, airports are beginning to face the waves of advanced Information Communication
Technology (ICT) and it certainly calls for a comprehensive airport management system.

                Additionally airports will have to face the conflicting demands from airlines for
increased capacity due to the changes in their own business models and high service expectation
of customers and shareholders, at the same time there is a mountain pressure from
environmentalist seeking to ensure that progress will not be made at the expense of environment.

                There is another area that is likely to involve airport operations and that is the on-
going efforts to form air traffic alliances. Nevertheless, airports have to be on board in all new
ventures. In order to achieve financial viability, airports have also been diversifying their
business direct operation in ground handling, management involvement at other airports
providing training or consulting services, airport partnerships and diversification into non-
aviation activities .

                Faced the emerging changes, airports in most parts of the world have been forced
to re-examine their operational capability and managerial style.




                Emerging Operational Challenges in Airport Management

                                                - 10 -
      Post Graduate Diploma In Aviation Law And Air Transport Management
                                  (PGDALATM)


COMPACTING STRATEGIES


Organization and Regulation of International Air Transport
   • International air transport stakeholders
     – Airports, airlines and others
   • Role, function and structure of the
     International Civil Aviation Organization (ICAO),
     Airports Council    International (ACI), the
     International Air Transport Association (IATA) and
     The Civil Air Navigation Services Organization (CANSO),
     Chicago Convention and      Annexes (ICAO recommended standards and practices)
   • Aviation safety, security and economic Regulation at the national level
   • Role of transport ministries and civil Aviation authorities (CAAs) Relationship
     Between Airports and Airlines
   • Airlines as partners, team players and friends
   • Operations, plans and problems
   • Recognizing perennial challenges
   • Route development




Low Cost Carriers
  • Background and of low cost Carrier operations
   • Challenges for airport operators




Principles of Airport Management
  • Functions of CAAs
  • Airport management – key principles and policies




              Emerging Operational Challenges in Airport Management

                                                - 11 -
      Post Graduate Diploma In Aviation Law And Air Transport Management
                                  (PGDALATM)

Airport Management
  • Aerodrome certification and safety management system
  • Ground operations and passenger Facilitation
  • Terminal management
  • Apron management
  • Air cargo management
  • Airport security management (including NCASP and ASP)
  • Emergency crisis management
  • Estate management (aesthetics)




Airport Quality Service
  • Performance standards
  • Identifying the concept of quality Service
  • Service agreements
  • Understanding Changi Airport’s service values
  • Quality service management
  • Studying different quality service programs




Airport Marketing
  • Applying the four ‘P’s of marketing to airports
  • Areas for competitive edge
  • The role of airports in airline marketing Airport Planning and Terminal Design
  • Runway configuration
  • Taxiway configuration
  • Passenger terminal configurations
  • Major considerations in determining passenger terminal design




              Emerging Operational Challenges in Airport Management

                                                 - 12 -
      Post Graduate Diploma In Aviation Law And Air Transport Management
                                  (PGDALATM)

New Large Aircraft
  • Aircraft configuration
  • Infrastructure adaptation to accommodate New Large Aircraft
  • Future challenges




Airport Economics
  • Airport tariffs
  • Airport retail opportunities
  • Rentals and leases
  • Real estate development
  • Airport finance
  • Financing of airport developments




Airport Liabilities and Insurance
  • Understanding airport risks and liabilities
  • Risk management (airline and other stakeholder risks and liabilities)
  • Airport insurance (including war risk insurance)
  • Third-party liability limitation (Modernization of the Rome Convention of 1952)




               Emerging Operational Challenges in Airport Management

                                                  - 13 -
       Post Graduate Diploma In Aviation Law And Air Transport Management
                                   (PGDALATM)


CONCLUSION
Airport Sustainability, in effect is a holistic approach to managing an airport so as to ensure the
integrity of the Economic viability, Operational efficiency, Natural Resource Conservation and
Social responsibility (EONS) of the airport. Broadening this definition for the business of
managing an airport is particularly important because while not all airports can or need to build
new facilities, all have opportunities within the construct of their business model to leverage
their dollars in ways that promote sustainability. The EONS model defines “pay-back” through
proven business practices that pay benefits to our customers, our employees, our neighborhood,
our bottom line and our industry.
Airport Sustainability as a business strategy has both immediate and long-term benefits that can
be measured and when persistently managed, should be rewarded. A major success factor for
airports is the ability to identify those areas where efficiency can be increased and improved to
optimize the airport operation as a commercial business. This is based on:
• An integrated planning approach - the financial plan follows the operational plan, and the
operational plan follows the strategic plan
• A lean flat management and organizational structure that suits individual and local
requirements
• Developing human resources as a first priority through training and know-how transfers
Matching jobs and skills to attract the right people for the right job, while offering opportunities
and performance based rewards
• Maximizing operational productivity through training initiatives and the introduction of new
technology
• Improving profitability at management levels with proven business planning and profit
management processes
• Optimizing financial resources through extensive knowledge of project and company financing
• Optimizing available airside and landside spaces and capacities through well-structured
planning and development mechanisms
• Responsible just-in-time capital investments based on right-sizing principles and a phased
development concept
• Optimizing commercial activities to boost non-aeronautical revenues
• A targeted and tailored airport and airline marketing strategy for traffic growth
               Emerging Operational Challenges in Airport Management

                                                - 14 -
       Post Graduate Diploma In Aviation Law And Air Transport Management
                                   (PGDALATM)

• Fostering open communication channels with customers, concessionaires, stakeholders and
authorities
• Implementing a tailor made strategic development concept to position the airport as an
economic and tourism engine
• Maintaining quality, productivity and efficiency levels through regular monitoring and
benchmarking

•. To accept emerging challenges Airport Management have to make a strategic plan:

   1. Long term plan
   2. Forward thinking
   3. Opportunities
   4. Airport development plan
   5. Few new airports – Refurbishment/modification/expansion.
   6. Planning- a. National level integrated airport system
                  b. State level integrated airport system

                  c. . Regional integrated airport system

E – EFFECT = Employee Effect > Efficiency Effect > Customer Impact > Excellence Effect
= World Class.




REFERENCE/BIBLIOGRAPHY

Graham A, Managing Airports-An international perspective, Oxford
Richard de Neufville, Airport Systems, Mc Graw-Hill, 2007
Maheswari, Managerial Economics, PHI,2007
PCK Ravindran, Changing Faces of Air Transport World. Oxford, June 2008
PCK Ravindran: Airport Management-World Class and Beyond.




               Emerging Operational Challenges in Airport Management

                                              - 15 -

				
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