“Ryans and Tigers and Bears, Oh My!”
– Can Airports Learn from the Low-cost Carrier Model?
By Siobhan Boyle, Product Marketing
To capture a slice of the surging low cost carrier market, many airport operators are turning to a low risk, unified digital platform to meet the demand for fast aircraft turnaround on a lean operational budget.
Low cost carriers and smaller airports a win-win
The explosion of budget travel in recent years has resulted in significant growth in airline destinations, with many airports now operating to serve the low cost carrier (LCC) market.
LCCs offer attractive, lucrative opportunities for smaller or secondary airports – creating jobs and tourism opportunities and driving future development. Equally, such airports play a vital role in the highly efficient approach to flying by budget carriers. Less-congested airports allow for faster turnaround times, maximising the carrier’s time in the air, improving their bottom line and allowing for savings to be passed on to passengers.
The rise and rise of budget airlines
Between 2010 and 2016, a massive 76% of all growth at European airports came from disruptive, no-frills carriers. Today, LCCs such as RyanAir, Tiger Air, EasyJet, and AirAsia account for over 30% of air traffic worldwide.
In the USA, emerging new ultra-low-cost carriers are also set to shake the market up. Although these airlines currently represent about 7% of all US departing seats, this is expected to rise to over 12% in the next 18 months.
1 Source: anna.aero/OAG as reported in the-possible.com
Competing for the LCC dollar
While the passenger growth and revenue potential of new LCC routes are alluring to airports, it is far from a given. With airlines regularly moving their assets in search of best market conditions, mid-sized and smaller regional airports are in continual competition with each other. In this low-margin market, airports not only need to build compelling charge structures to attract low cost airlines, but also have the operational efficiency to retainthem and stay profitable.
Minimising risk in a fickle market
To optimise their limited capacity, many bigger airports have begun large-scale digital transformation projects that touch every aspect of their organisation. However, for airports with limited financial and technical resources, such a major investment often doesn’t sit well with their low-risk appetites.
Therein lies the challenge: How do airports stand out to win LCC loyalty, without a major infrastructure development or technology upheaval spanning several years and still turn a profitable dollar?
1. Smarter aeronautical revenue management
One of the fastest, easiest and most affordable ways smaller airports can attract more budget airlines is by offering compelling and tailored tariff structures, with tiered discounts and incentives that encourage longevity and route expansion.
Revenue management systems that integrate directly with operations management software allow airports to offer a smorgasbord of granular and differentiated tariffs, from the use of stairs versus air bridge to fixed check-in or self-serve kiosks. They also allow airports to track resource usage, prevent revenue leakage, and automatically link to invoicing.
Brisbane Airport, one of Australia’s fastest-growing airports, has leaned heavily on aero charge rebates and discounts to pursue Asian low-cost carriers. In the last three years, for example, Asian seat capacity has expanded by more than 40%. BNE now accommodates 14 Asian airlines, up from six in 2016, while aero revenue per passenger has increased 15.4%.
2. Situational clarity for all partners
Meeting an LCC’s requirement for rapid turnaround performance and low operating costs depends heavily on the airport’s ability to provide real-time situational clarity to all aviation partners while stripping out manual processes where possible.
Belfast International Airport recently replaced many ageing legacy operational and billing systems with one integrated platform, enabling them to aggregate airline and air traffic data feeds, and automate many operational and billing processes. The airport’s staff and partners now have one consistent view of daily operations, improving performance and resilience. Teams also experienced an immediate efficiency boost, thanks to the elimination of over five hours a day of manual tasks.
3. Boosting non-aero income
While airports work hard at attracting LCCs to set up shop, ensuring they can maximise their non-aero retail revenues is critical to financial stability. Moreover, while LCC passengers typically don’t like paying high rates for airline seats, they are happy to spend in airport shops, providing they have enough time to do so.
New Zealand’s Queenstown Airport, which handles just over two million PAX per year, has most of its retail concessionaires located landside. Passengers, anxious about security and border queues, were heading to their airside gates too early, impacting retail spend. By investing in passenger flow management software, the airport now gives passengers accurate queue wait-time information, leading to increased time spent shopping. The system also improved passenger predictability, enabling the airport to anticipate congestion and flex staffing resources more effectively and affordably.
Queenstown Airport’s focus on commercial growth, passenger experience and operational efficiency is paying off. In 2018, the airport’s non-aero revenue was up 21%, and profitability increased by 24%, against a PAX growth of 13%.
Not just for the world’s largest airports
To win and retain Low Cost Carriers, airports need to learn from them by adopting a lean operating model and a digital-first approach, while growing incremental commercial revenue.
Data-driven platforms that unify revenue, operations and passenger-flow management are not just for the world’s largest airports. Smaller airports can also use tools, increasingly available on the cloud, to simplify and automate ecosystem connectivity, predict bottlenecks, optimise operational processes, and maximise income.
With best practices from the world’s largest airports baked in, and a library of standard data connectors, these platforms are a low-risk way to attract LCCs and improve airport efficiency with a rapid return on investment. What’s more, they provide the flexibility to add greater automation and predictive insight to meet the ever-growing, ever-shifting demands of the aviation world.
To see how Veovo’s technology can help your airport run leaner operations and create the innovative charge structures needed to attract new airlines, schedule a demo now.
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