Airports represent the last industry to discover marketing. So says Mike Howarth of Airport Strategy and Marketing which, along with Airline Business, organised Route 96, the first annual route development conference, in Cannes at the end of September.
While some airports have engaged in marketing activities for years, most are only just beginning to discover the benefits of a proper marketing programme aimed at airlines. Often airports are being spurred on by new commercial pressures - either because they are now privately owned, or because they are being run as commercial entities despite remaining under local government control. Furthermore, a good airport is an essential requirement for international business. 'I know of no successful economic region that does not have good air links,' says ASM's managing director Clive Barron.
More competitive
Deregulation has made the airport business much more competitive. Since they already have a presence on the major trunk routes, major airlines are looking for opportunities to expand their networks profitably by finding new spokes for their hubs, or high yield point-to-point hub bypass routes. At the same time, the majors' competitors, both new entrants and established medium-sized carriers, are looking for opportunities in two ways - to compete with the majors directly by offering lower fares or better service, or to find niche routes. Airports can play an import-ant role in airline route development by helping carriers to discover these opportunities. Route 96 represented the first opportunity for airport marketeers to meet airline route planners through a combination of conference sessions, workshops and prearranged one-to-one meetings. While the emphasis was on Europe, the meeting was attended by airlines and airports from North America, Asia and the Middle East.
Marketing principles
At one of the workshops, ASM's Mike Howarth and Ronnie Macaulay described four principles of airport marketing. First, in marketing terms, the airport's customers are the airlines, not the passengers. Clearly, once they are using the airport, passengers have to be satisfied with the service they receive but they will only begin to use the airport if the airlines are serving it.
Second, all airports are in competition with one another. 'In the last few months Sabena, Alitalia, Swissair and Lufthansa have ordered 70 regional jets between them,' says Howarth. 'Every one of these jets is going to be feeding hubs, and every airport in Europe is competing for one, two or three jets. In the next year, those jets are going to be allocated across Europe. You are not just competing with the airport 50-100km away; you are actually competing with airports elsewhere for that aircraft.' ASM's third maxim is that a small or medium-sized airport has to decide whether it can be a hub or whether its role should be as a feeder point into other hubs, and then pursue its chosen strategy relentlessly.
Fourth, market access is more important to an airline than facilities. 'It is the ability of an airport to tap a new market that excites the airline.' The more sophisticated airports use branding techniques to emphasise their role. Examples include Manchester Connect and Birmingham's Euro-hub. 'One airport even uses different brands for the scheduled and charter markets.'
Correct strategy
The issue of an airport's role is a complex one for many medium-sized airports. Aside from hubbing or feeding, Basle-Mulhouse, the self-styled Euro-airport, sees a third option - origin and destination flights between smaller airports, bypassing hubs. 'This is where our chance lies to position ourselves,' says director of development Eric Parlebas. In his view, feeding other hubs kills the market for direct routes.
Bristol airport's managing director Les Wilson and Dusseldorf's senior market research analyst Rolf Ewald suggest that the correct strategy is to start as a hub feeder airport, and then build up direct origin and destination markets once the traffic is there. 'You start first with a route to a hub, then two more hubs, then evaluate where the passengers are going and look at direct O&D,' said Ewald.
Feeding hubs has other complications. Yields on feeder flights are very different to those on O&D flights. Introducing a feeder flight to a new hub can kill the traffic on a feeder flight to an existing hub, putting the airport in conflict with different airlines. The volatility of the transfer market can mean local O&D traffic needs to account for more than half of the traffic on any route. Yet a small airport can sometimes steal passengers away from a nearby hub by introducing a spoke to a second hub, particularly if the local hub provides local passengers with a poor service or has scheduling weaknesses. 'An efficient spoke can beat a weak hub,' says Howarth.
Some airports are having to rethink their strategies because of codesharing. Several European airports, from Munich to Budapest, have lost direct service by US carriers as a result of codesharing. Yet for others codesharing represents an opportunity. Robert Hancik, director of aviation at Springfield-Branson regional airport in Missouri, came to Route 96 to encourage more European carriers to introduce codeshare flights to his airport - Branson has been named the country music capital of the world and hosts 6 million visitors a year. 'We already have BA/USAir and KLM/ Northwest codesharing to Branson, and we're looking for more.'
Branson illustrates the challenge airports face in getting an airline's attention. Airports often have a wealth of research and data available, but this has to be tailored to an airline's specific needs and properly presented. 'A global airline has hundreds of routes it should be studying, but there may only be a handful that it actually looks at in detail,' says ASM's Clive Barron. 'Airports that can concisely and convincingly produce a detailed analysis of the markets they can access will rapidly achieve a high profile with the overworked airline planning people.'
Bristol's Les Wilson says that in creating a rationale for a Bristol-Zurich route, the airport relied on origin and destination surveys, the existence of business links between the cities in fields such as banking, and data on the transfer possibilities versus the time it takes to travel by road from western England to London/ Heathrow. However, in continental Europe this sort of analysis is much more difficult. O&D surveys are often not available, and inter-modal competition complicates the picture. For many airports, the mainstay of their marketing activity remains risk-sharing with the airlines. This can take many forms, from direct subsidies to joint advertising programmes. While most airports offer carriers incentives to launch new routes, they have to be careful. Irish airport authority Aer Rianta offers an 80 per cent discount for incremental traffic in the first year of a new service, recognising that the marginal effect is much higher for the airline than for the airport. 'But this is not sustainable in the long term, especially if the fares are based on these low operating costs,' said Aer Rianta's aviation analyst, John Riorden.
While no carrier will launch a long-haul route just because of discounted landing fees, on European short-haul services - where airport charges can account for 20-25 per cent of the average yield for a low fare airline - such an incentive can be valuable. Other marketing techniques being used by airports include lower fuel charges at Abu Dhabi and deals on parking and duty-free purchases for frequent users of Basle-Mulhouse.
In Europe, direct subsidies are likely to come under the scrutiny of the European Commission, especially since subsidies by government-owned airports could be seen as state aid. The Commission's stance on airport charges is that they should be consistent, transparent and cost related. 'It will be hard to justify subsidies,' says John Riorden of Aer Rianta. 'What makes this more difficult is a lack of understanding of costs, such as the marginal cost of processing a passenger.'
While very aggressive on rates, Scotland's recently privatised Prestwick airport has taken its marketing approach further, says business development manager Mark Hudson. Long a poor relation to Glasgow airport, Prestwick has adopted the slogan 'Scotland's Airport' and backed this assertion up with a deal under which air passengers can connect by rail to or from any point in Scotland for £5 ($7.50). As a result passenger traffic has risen from virtually nothing in 1992 to a projected 350,000 in 1995, and Ryanair has launched its first UK domestic route from Stansted to Prestwick - marketed as London-Scotland.
Attracting an airline to operate a single service to an airport can be quite a challenge, but getting it to establish a hub requires a marketing effort on a different scale. Howarth says most airports have hub potential, and groups them into four categories:
1 Major cities that are not hubs already, such as Berlin.
2 New airports near major cities, such as Munich and, when they open, Oslo and Milan.
3 Airports at secondary cities such as Manchester, Barcelona, Hamburg and Lyon.
4 Niche opportunities for smaller airports. Examples include Clermont Ferrand, where Regional Airlines has established a mini-hub bypassing Paris; and Bristol, where Brymon's early morning flight from Plymouth, originally a positioning flight, now connects to eight other flights.
While the ideal way of establishing a hub is through an airline champion, often the airport has to take the lead, either by attracting the champion in the first place, or by getting the ball rolling on an interline hubbing basis. Manchester started to call itself an interline hub in 1990 under the Manchester Connects moniker, but the potential was limited by airline competitive factors. However, an on-line hub is now emerging with Lufthansa and its partners, Business Air, Lauda Air and Luxair. Transfer passengers have risen from 2 per cent of Manchester's scheduled business in 1989 to 10 per cent today, and could reach 30 per cent by 2000.
Faster connections
In relation to the development of the mini-hub at Basle as an alternative to Zurich, Crossair's strategic route development manager, Ulf Weber, says that the carrier needs airports to help it find 'connecting niche opportunities.' The carrier is looking for markets with 1,000 to 2,000 passengers a year where passengers currently connect in Paris, often with a change of airport. A faster connection at a smaller airport could take an hour off the elapsed journey time, putting the connection at the top of the CRS display. Theo Ettema, KLM's head of commercial planning for Europe and Africa, supports this view: 'Every connection in the market attracts passengers - the numbers may be small, but they add up.'
Source: Airline Business
