Opportunities and limitations to vertical alliance partnerships between airports and airlines 6th Conference on Applied Infrastructure Research (“INFRADAY”) Berlin, October 6th, 2007 Dr. Benjamin Koch
Agenda I. Introduction I. Introduction II. Airport-Airline-Alliance partnerships from different viewpoints I. Resources and environment II. Political aspects III. Technological aspects III. Conclusion INFRADAY Berlin - Airline-Airport-Alliances 2 October 6th, 2007
Airline-Airport-Partnerships – Where do we come from? The traditional air travel chain Desti- Ground Origin Ground Desti- Origin Airline nation transp. airport transp. nation airport Level of integration with other value chain parties none none none none none Traditional perspective on the airline-airport-relation � Traditional value chain perspective: customer / supplier � No integration throughout the value chain between any � partners INFRADAY Berlin - Airline-Airport-Alliances 3 October 6th, 2007
Alliances are only one possible approach for establishing partnerships Partnerships allow to (besides other factors) � Optimize the functioning and cooperation of the value chain � Reduce risks (increasing stability) � The choice of the partnership approach depends on � many factors, esp. including the willingness to realize financial investments � the expectation on steadiness and duration � Alliances Other Partnership (Horizontal / M & A Joint ventures cooperation options Vertical agreements / diagonal) Finance medium None to none high invest to high medium Steadiness medium high high low & duration INFRADAY Berlin - Airline-Airport-Alliances 4 October 6th, 2007
Airport and airlines can choose between three potential models for partnerships Cooperation Airline Value Chain Airport Value Chain matrix Marketing- Capacity- Security- oriented oriented oriented Marketing Expansion Security Processes Air Service Development Process Re-Design Passenger Well-Being Process Innovation Resources and Political and Technology environment regulatory aspects INFRADAY Berlin - Airline-Airport-Alliances 5 October 6th, 2007
Agenda I. Introduction II. Airport- -Airline Airline- -Alliance partnerships from Alliance partnerships from II. Airport different viewpoints different viewpoints I. Resources and environment I. Resources and environment II. Political aspects III. Technological aspects III. Conclusion INFRADAY Berlin - Airline-Airport-Alliances 6 October 6th, 2007
Perspective 1: Thoughts on the resources and environment perspective Infrastructure and capacity issues as most crucial impacts Problems � Congestion leading to � Constrained air space partnership � Limited growth opportunities (neighborhood, ecological approaches factors) � Fundamentally different business characteristics Limitations � Different planning horizons and development durations to � Immobility versus mobility of resources partnership � Different reactionary flexibility � Increased reliability Partnership � Risk and cost sharing benefits � Better economic conditions for the alliance partner � Common approach towards external parties BUT: � Cost savings usually only for one partner � Increasing reliability usually means losing diversity and � flexibility for at least one partner INFRADAY Berlin - Airline-Airport-Alliances 7 October 6th, 2007
Agenda I. Introduction II. Airport- -Airline Airline- -Alliance partnerships from Alliance partnerships from II. Airport different viewpoints different viewpoints I. Resources and environment II. Political aspects II. Political aspects III. Technological aspects III. Conclusion INFRADAY Berlin - Airline-Airport-Alliances 8 October 6th, 2007
Perspective 2: Thoughts on political aspects Problems Deregulation and liberalization leading to � New markets, but also new competitors partnership � New opportunities and limitations at the same time approaches � Still significant degree of regulation, e.g. cross-border Limitations consolidation to � New regulations, e.g. EU2320 partnership � Anti-trust rules, anti-discrimination � Improvement of own competitive position Partnership � Improvement of resource utilization (e.g. CDM) benefits � Risk reduction BUT: � Often strict rules with limiting effect � Traditional approaches in aviation as limiting factor � Scepticism about investment of airlines in airports et v.v. � INFRADAY Berlin - Airline-Airport-Alliances 9 October 6th, 2007
Agenda I. Introduction II. Airport- -Airline Airline- -Alliance partnerships from Alliance partnerships from II. Airport different viewpoints different viewpoints I. Resources and environment II. Political aspects III. III. Technological aspects Technological aspects III. Conclusion INFRADAY Berlin - Airline-Airport-Alliances 10 October 6th, 2007
Perspective 3: Thoughts on technological aspects � New technological developments Problems � Need for capacity increase without expanding leading to infrastructure, additional environmental impacts etc. partnership � Need of increasing efficiency, reducing costs etc. approaches � New regulations etc. � Distribution of costs and benefits Limitations � First mover vs. benefits to � Different needs and interests partnership � Contradictions between theory and practice (e.g. CDM) � Improvement of entire travel chain and processes Partnership � Adapting to new challenges benefits � Improvement of economic position BUT: � Technological developments often need multiple partners on � a global scale (e.g. RFID) Costs and benefits cannot be evenly distributed � INFRADAY Berlin - Airline-Airport-Alliances 11 October 6th, 2007
Various alliance partnerships can be observed in the real life Despite the limitations airports and airlines find joint � ways to bring alliance partnerships to life Air Service Development � „System Partnership“ � Process innovation (mainly on basis of local try-outs) � … � … but what about global initiatives, investments, exclusivity etc.? INFRADAY Berlin - Airline-Airport-Alliances 12 October 6th, 2007
Agenda I. Introduction II. Airport-Airline-Alliance partnerships from different viewpoints I. Resources and environment II. Political aspects III. Technological aspects III. Conclusion III. Conclusion INFRADAY Berlin - Airline-Airport-Alliances 13 October 6th, 2007
So where to go with vertical airline-airport alliance partnerships? Many fields for cooperation can be identified and � offer substantial potentials A general problem remains the allocation of benefits � and costs between uneven partners Regulative aspects limit the potentials for cooperative � approaches Consequently reality will need more time to follow � theoretical opportunities INFRADAY Berlin - Airline-Airport-Alliances 14 October 6th, 2007
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