|SEAPLANE Home > SEAPLANE Activities > Activity 2||Page last updated: Jan 04, 2005|
SEAPLANE Activity 2: Airport Quality Improvement and Development Strategies
Activity 2 - "Airport Quality Improvement and Development Strategies" consisted of the following five sub-activities:
All sub-activities under Activity 2 have the objective to support the airport managers including their public stakeholders by providing information, data, business contacts and results of analysis activities. The aim is to develop - in trans-national co-operation with airport's and regional authority's representatives - the quality, functionality and economic sustainability of the involved SEAPLANE airports.
The airports participating in SEAPLANE have been clustered according to their 2002 work load units (see Fig. 1):
Fig 1: Airports analysed in SEAPLANE (3 clusters)
*) G stands for "Majority of the Airport is owned/administrated by the Central Government or Governmental Institution". In fact, with the exception of Inverness, all Airports marked with G are 100-percent centrally owned/administrated. In Inverness, the terminal building is owned and operated by a private investor.
R stands for "Majority of the Airport is owned/administrated by regional or municipal Government". Some Airports like Hanover and Braunschweig also have private (minority) shareholders.
Analysis of indicators
The development and regular use of measures suitable for comparing airports helps
For the comparative analysis, three different types of indicators were defined:
The following charts show some of the results of the analysis across SEAPLANE airports.
Work load units (WLU) per employee 2002. Work Load Units per Airport Employee is a labour productivity measure indicating the capability of an airport to allocate labour to productive work processes. While there is roughly a correlation of airport size and WLU per Airport Employee, outsourced activities can reduce the input side (Employee) of this indicator.
Fig. 2: Work load units (WLU) per employee 2002
Share of total cost covered by aeronautical revenues 2002. This indicator provides information on in how far the single airport is able to recover its cost from the classical airport business, i.e. from aeronautical revenues (landing fees, passenger handling fees etc.).
Fig. 3: Share of total cost covered by aeronautical revenues 2002
Aeronautical vs. non-aeronautical revenues per work load unit 2002 (in €). This indicator allows comparison of the contribution of both major revenue generating airport activities between airports.
Fig. 4: Aeronautical vs. non-aeronautical revenues per work load unit 2002 (in €)
The analysis of three types of indicators reveals that for the investigated SEAPLANE airports in 2002 operating and financial performance seems to be closely related to airport size in terms of handling volumes. The issue of economies of scale obviously has a significant influence. However, some smaller airports, managed to outplay medium sized airports in some criteria (e.g. Kortrijk in terms of WLU per employee or reducing financial losses).
The investigation of employment related indicators (e.g. having number of staff as input factor) suggested that a deeper analysis into the level of outsourcing of airport services is necessary to validate our results, especially when the indicator relates total airport output to airport company staff, whose tasks are limited to mainly airport management, only.
Indicators related to financial figures showed that especially the centrally administrated Norwegian airports performed extremely well. However it cannot be ruled out that financial data are somewhat difficult to compare as Norwegian unified airport tariffs reflect system cost of the central AVINOR management system rather than the individual cost situation of an airport. Moreover, Norwegian financial data may not necessarily include (cost-based) fees for services of the central AVINOR administration.
Also, airport profitability is clearly related to size. Small airports operate at a relatively high level of losses (per WLU); for many airports revenues aren't even sufficient to cover staff cost. Handling volumes above 650 thousand work load units increase the possibility of overall cost coverage and even making some profits. However, even for (some) airports where revenues exceed costs the achieved profit margin leaves room for improvement.
Concerning the role of ownership (central administration and ownership versus regional/local administration and ownership) as influencing factor for an airport's performance the analysis has demonstrated that none of the indicators analysed support the hypothesis that regionally/locally owned and administrated airports perform better than Government-owned airports. For many indicators we find centrally administrated airports among the very top performers as well as among the "backbenchers".
The aim of this sub-activity was to develop recommendations for the SEAPLANE project partners on what constellation of airport ownership (national, regional, private, or a mixture) best serves the needs of the North Sea region's spatial, social and economic development.
The recommendations are derived from experiences of other countries (based on desk top research, technical literature and information from the Seaplane project partners), from the needs and ideas of regional stakeholders in Norway, and from views of national airport authorities like AVINOR.
The ownership issue involves two aspects:
In practice, aspects of both questions intermingle in the variety of solutions chosen and implemented around the world. In addition, regardless of ownership, models of sub-contracting, concessioning or other agreements may invite private parties to engage in the operations of an airport.
Recommendations. The following recommendations are derived from above experiences and issues raised:
The model of regional ownership combined with private minority owners gives the best incentives for airport development.
Regions consider airports as nucleus for regional development, looking also at employment and income effects stimulated by increased airport activity. Contribution of local private capital may ensure that the interest of the users is satisfied and lead to more professional airport operation.
A 100 % private airport may lead to exertion of monopoly power or under investment. Besides there is no need for full privatisation of ownership since all sorts of operations may be privatised regardless of type of ownership.
Transfer of ownership is a complex and lengthy process. Use of experiences from other airports that have undergone a transfer process is vital.
Develop a sustainable base for non-aeronautical income and activities around the airport.
Studies have shown that airports with a diversified business focus and larger share of non-aeronautical revenues also operate more profitable. Thus, one should establish a market development department if possible (depending on size of airport and the potential).
Developing activities around the airport is not only about searching for new opportunities. It may also strengthen the commitment of the region to its airport. Reservation of available space round the airport is essential.
Plans with respect to business and land use development may have bearings on which partners one would like to invite as owners because of their competence, capital or decision power.
Accept that airports need a handling volume of about 650 thousand WLU to reach profitabillity.
Looking at UK and Norwegian data there seems to be a critical threshold of somewhat less than one million passengers p.a. to be profitable. Airports below this threshold may need support until the limit is reached.
Try to develop long-term deals with the airlines.
Long-term deals make the airlines more committed to the airport. The deals could include start up discounts, marketing support, access to facilities etc. However, because of the risk that the airline might go bankrupt it is recommended that the commitment of too large sums in advance is avoided.
There are different types of privatisation (share floatation, trade sale, concession, project finance privatisation and management contracts). The benefits of privatisation are assumed to be:
Some countries like Norway, Sweden, Finland and Spain have developed a public national system and see the following benefits:
Most countries rely on regional ownership, either public or a combination of public and private. The main arguments for regional ownership are:
The recommendation for airports in the North Sea Region is to apply the model of regional ownership combined with private minority owners achieving the best incentives for airport development. Regions consider airports as nucleus for regional development, looking also at employment and income effects stimulated by increased airport activity. Contribution of local private capital may ensure that the interest of the users is satisfied and lead to more professional airport operation. There is no need for full privatisation of ownership since all sorts of operations may be privatised regardless of type of ownership.
For a limited number of three airports, the existing regional public transport system services have been analysed in order to contribute to an improvemnet of the modal split to the benefit of public transport. The airports of Groningen, Hanover and Bremen have been chosen for this analysis under consideration of current developments and future plans of the airports. A concept has been devised together with the airports involved as to how to increase the modal split in favour of public transport systems serving the airport. Limited funds were available to finance infrastructure measures such as passenger electronic information or guiding systems.
The objective of sub-activity D was to identify possible business activities in and around the airport which might generate additional income as well as economic and social opportunities for the airport and its region, supporting the regional airport's sustainable existence. The analysis was carried out for five different regions, respectively airports: Bremerhaven, Braunschweig, Cuxhaven, Ljungbyhed, and Växjö.
Information was gathered through intensive desk research concerning geographic, socio-economic and economic data, including information on particular regional characteristics relevant for the airport. These data formwed the basis for a comprehensive SWOT-analysis (Strengths / Weaknesses / Opportunities / Threats).
As an example, Table 1 shows SWOT results for Växjö Airport.
Table 1: SWOT analysis results for Växjö Airport
After analysis of available data, concrete and realistic development options could be identified for only two out of the five airports:
In order to compensate for low population density or lack of tourist attractions in the catchment area of a regional airport, airport management often tries to market their airport as air freight hub or at least as feeder airport for such a hub.
For two participating airports, Cuxhaven-Nordholz and Oostende, potential trade and cargo handling volumes under specific frame conditions have been investigated. The airports have been selected to best cover the broad range of different conditions with which the SEAPLANE airports are confronted. Therefore, the identified general trends in air cargo industry as well as at least part of the results for the investigated two airports can be applied also to other small and medium-sized regional airports.
It needs to be stressed that centrality and accessibility to major conurbations play a decisive role in the decision making of air freight operators and forwarders. Therefore, it seems difficult for remote airports to find a specific niche sufficiently large to generate significant revenues.
Webmaster email address: "webmaster" followed by the "@" sign and "seaplane-project.net"