We balance systems!

Airport Consulting Vienna (ACV) and airport design management (adm) expertly balance airport systems. Tried and tested, their unique approach speaks for itself.

Numerous projects have proven the two partners right: the increasing specialisation of airports often obstructs the growth of the business as a whole. It does little in the way of optimisation. Why? Some state-owned airports, for example, fully exhaust their budgets, while market (traffic) demand is barely adequate. In contrast, many privatised airports have to make do with only the funds provided by their investors. In both circumstances the airport business (and its strategic development) is ruled by limiting factors, albeit different in nature. A system imbalance is the result.

Experts will agree that each airport business is also a total system. A large number of intricately linked business units, departments, human resources, as well as internal and external factors affect its finely-tuned functionality. The sub-systems help run and grow the business as much as they affect smooth day-to-day operations. Adding one factor to one sub-system, removing or reducing another factor from another sub-system causes a system imbalance. Similarly, a lack of cooperation, communication or coordination between managers likewise causes a system imbalance. The answer sounds simple: "Act in concert!"

The reality: airports in a squeeze

Over and above the differentiation between the aviation and non-aviation business many airports are organised into functional business units, e.g.: operations, technical development, commercial department, financial department. Their functional interaction can take many forms:

A focussed technical development aims at balanced airport capacities - from airside areas to terminal spaces, right through to public accessibility. Once harmonised, these capacities are vital for smooth operations.

Providing balanced airport capacities automatically leads to the necessity of adequate funds. Available areas and spaces are then brought in line with operational requirements. Sounds like an ideal scenario.

But, in a quest to maximise revenue streams and counter-balance runaway-costs, many capacity enlargements have turned into in-vogue airport metropolis projects. As a key strategic factor to attract more traffic (and increase aviation revenues) such large-scale shopping centres with a runway are surely a good solution. Of course only there, where necessary land purchases are not a costly affair.

However, for the greater majority of airports around the world a capacity increase or optimisation program has to be borne by the airport's business activities. Most have to make do with restricted budgets.

The functional structure however, placed managers in a predicament. The optimisation of their individual business sector ever so often gives rise to power plays in a strive to attain preset targets. Individual departments may then be harmonised, but the system as a whole is far from having achieved its balance.

Proven approach to balance systems

To swiftly put the system back in sync, ACV and adm propose a "new" business model for airports. Based on a proven approach, the model guarantees optimised functionality. Simultaneously, it restores and boosts the strategic competitive advantage whilst taking available funds and resources for development into account.

In defining the "right system" for airports, experience has shown that the systems theory is, to a large extent, in the eye of the beholder. Hence, the airport business per se may be guided by different models, for example:

1. Airport system guided by operational functions
   As outlined above, the operational functions comprise the division of the airport system into functional business units. One of the most difficult tasks in balancing this system is to change deeply entrenched habits and mindsets.
2. Airport system guided by strategic business units
   This system divides the aviation (e.g. fuelling, ground handling, catering, cargo, terminal management, etc.) and non-aviation (e.g. terminal retail management, car parking, airport hotel, business centre, etc.)  business into profit and cost centres. Allocated to one or the other, each business unit is managed independently, with a certain degree of autonomy - a business within the business.
   In aiming at a system balance, one may find that successful business units may require more space to continue growing. Such (overly) positive development can however, inhibit the growth of other business units. To balance the system as a whole this must be taken into consideration.
3. Airport system guided by financial aspects
   Following a careful portfolio analysis, the sub-units of the airport business are ranked into financially driven aspects: the stars, cash cows, question marks and dogs. A system balance exists when the stars assure the future, the cash cows generate adequate funds to boost growth, and question marks can eventually be converted into stars with additional leverage for funds. But, are current growth areas also the best performing development areas? Do they have the right future potential?

Let's look at a scenario that many aviation experts have come across: a state-owned airport with some 700,000 total passengers undergoes development. The special "wish": a second runway. Needless to say that one would be reaching for the stars in calculating a return of investment. Rather, existing capacities, revenues and commercial aspects should be optimised, and a market driven development looked at. A right-sized development with phased, timely investments will ensure a self-sustaining airport business.

Each of the above system models is guided by the same notion: whichever model is selected, it has to be managed in such a way that the system as a whole is kept in sync.

The right way

To attain a balanced system in the long-term, ACV and adm recommend effective solutions:

Initial step – a strategic diagnosis, defining those shortcomings that hamper the balance of the airport system.

Second step – formulating and adopting a strategic concept based on the selected system model.

Third step – implementing a re-organisation and re-structuring of the airport business in terms the strategic concept and the selected system model.

Ultimately, sustainable profitability and efficiency for the entire airport business will only be realised when a balanced airport system is simultaneously aimed at. Otherwise, only a few individual business units may be efficient and profitable. The right way to reach this end however, can be approached from different angles.

Contact details:

Airport Consulting Vienna GmbH
Atelier Belvedere Top 8, Landstrasser Guertel 3, A-1030 Vienna, Austria
T: +43 1 236-7007
F: +43 1 253-3033-7399
E: office@a-c-v.aero
www.a-c-v.aero

Managing Directors: Wolfgang Edelmann, Johann Frank

airport design management GmbH
Atelier Belvedere Top 8, Landstrasser Guertel 3, A-1030 Vienna, Austria
T: +43 1 513-1040
F: +43 1 513-1040 - 11
E: office@ad-m.com
www.ad-m.com

Managing Directors: Dr. Lutz Weisser, Peter Koenigshofer