Forget
what you think you know about air service development: a new era that will see
route development professionals being everything from marketers and social
media gurus to aerotropolis developers is upon us, writes David Stroud.
Over the
past 20 years we have seen our industry transform itself. Airport marketing,
business development, air service development, route development, whatever the
function has been called, has moved from being a fringe discipline, practised
by a handful of airports, to a role that is fundamental to the business and
where those airports that do not yet have a route development team are very
much in the minority.
If the
long-term forecasts from ICAO, which show 6.3 billion passengers being carried
by 2030, are correct, the future of route development for airports should be
straightforward.
I believe
these figures are far from the truth and that the challenge for airports in the
new era is going to be much more complex. This will see airports grappling with
seemingly impossible financial demands from airlines, and navigating a world
where the delivery of actual traffic will become the most important route
development skill there is. Through airport city and aerotropolis developments,
airport managers will also become market creators for their air routes.
Financing
air routes
I
recently took up the role of leading ASM into this new era, and the first thing
we did was to talk to airlines to get a better understanding of what currently
is, and what is going to be, important to them when it comes to airport route
development. This survey of 25 senior network planning managers across leading
global carriers provided a fascinating insight into what really matters to
airlines.
Perhaps
unsurprisingly, feedback about costs and financial agreements came out most
strongly. This was not unexpected, but it indicated airports cannot ignore the
financial pressures on airlines and the need for sustainable route viability
going forward. For many airports this is already a tough challenge, and it will
not become any easier in the next era.
According
to the research, airline network planners said airports “need to understand the
small profit margins airlines obtain and how these margins are placed under
severe pressure with a slight increase in costs”; they need to “identify
opportunities to reduce airport costs for airlines and customers”; show an
“increased willingness to participate in the financial risk of launching and
successfully maintaining a new route”; and perhaps more radically, “tourism
would fund 50% of route marketing, airport charges are abolished and instead
airports derive revenues from non-aeronautical sources”.
Many
airports will have heard these opinions before; however, the age we are
entering is one where instant route profitability will be a prerequisite
demanded by airlines. The days of generous maturity profiles of new routes are
over, as are route start-up incentives and discounts. Long-term, probably
lifetime, support partnership agreements will become the norm.
In Europe , new draft EU state aid guidelines for airports
and airlines will, if adopted, severely limit state funding of airport
infrastructure. This could well leave a gap between airports and airlines that
cannot be bridged. Airport operators will need to look again at their operating
models, look at driving down aeronautical charges, finding new revenue streams
to replace and support these reductions, and evolve new solutions for risk
sharing and route joint ventures.
While
financing will be a constant feature of the new era of route development, there
will be other factors, such as market creation and delivery of traffic, which
means the role of the airport as a consumer marketer is returning fast
Marketing to deliver traffic
One of the many advances airports have made is the ability to
process market data, undertake analytics and produce route traffic forecasts
using methodologies that reflect how airlines undertake this evaluation. While
this will remain an important skill, it will become a standard that all
airports offer. There is a shift of emphasis coming. In the world of securing
profitable, sustainable routes, those who can deliver traffic will be more
powerful and more successful than those who are good at analysis. What good is
strong technical forecasting if passengers don’t actually support a route?
Our airline research revealed the importance for airports of not
only having an in-depth understanding of their catchment but also effective
marketing at both origin and destination of the service. The days of trying to
impress an airline with an appreciation of route profit and loss are
over.
The new era for airports in this marketing field will be driven
by skills across two areas. Firstly, there is the harnessing of passenger “big data”,
primarily through the focused use of social media, and secondly, the engaging
of key stakeholders, particularly tourism authorities, to drive the attraction
of the catchment.
For years, airports did not truly have a customer-based
relationship with passengers, because they had limited opportunities to enter
into a meaningful direct dialogue with travellers. But more and more airports
are now setting up Facebook and Twitter accounts and slowly starting to use
these for route and traffic development. In the new era, the skilled use of
these channels will be essential for developing air services.
Many of you would have seen the recent postings of the
#ASMTwitterTracker and #ASMFacebookTracker. What started for us as a curious
look into how airports were using these channels for route and traffic
development has become a fascinating exercise in understanding the diversity of
airport social media activity.
While there is a long way to go before there are tried and
tested formulas for promoting routes, the creativity already on display shows
the potential of what airports can achieve. Our trackers are showing audience
reach of approaching five million currently, with China
Already, airports are starting to use Twitter, Facebook and
other channels to research route opportunities. For instance, London City
This leads us to the other buzzword, and the area where we
believe airports will be increasing their levels of investment – “big data”.
Through social media channels, we are learning more about our catchment and the
people who are currently using our airport. When we consider our other sources
of data collection, such as car park transactions and retail spend, there is an
opportunity to build powerful passenger marketing databases that airports can
use to ensure new and existing air services are well supported. At ASM, one of
the key services we are providing is this “big data” processing and social
media management to ensure air services are most effectively marketed.
