Lois Larson
Airlines and airports work together in a complex relationship that involves multiple stakeholders, including passengers, investors, service providers, and local and federal governments. Airports are often landlords for airlines, and they can attract airlines by offering incentives, providing necessary resources, and negotiating use and lease agreements. Airlines, on the other hand, make decisions based on route profitability, demand, and airport costs, considering factors such as landing fees, airport rental fees, and labour markets. The relationship between airlines and airports can vary by country, with airports in the United States acting more as service coordinators and landlords, while in countries like France and the United Kingdom, a blend of public and private ownership influences the dynamic.
| Characteristics | Values |
|---|---|
| Airport ownership | Public, private, or a blend of both |
| Airport as a landlord | Negotiates use and lease agreements with airlines |
| Airport as a service coordinator | Provides services such as baggage handling, security, and aircraft support |
| Airport revenue sources | Aeronautical (rents, landing fees, passenger service fees), non-aeronautical (retail, parking, advertising), and non-operating |
| Airport costs | Operational costs, including equipment and labour |
| Airport size | Larger airports have paved runways of 2,000 m (6,600 ft) or longer |
| Airport role | Connector for international travel, tourism hub, and transit centre |
| Airport operations | Complex, involving aircraft support, passenger services, and aircraft control |
| Airport regulations | Safety, environmental, and government-imposed regulations |
| Airport-airline relationship | Influenced by demand, airport costs, and local connections |
| Airport incentives | Lower costs, incentives on marketing and landing fees |
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What You'll Learn
- Airports can act as landlords for airlines, charging them rent for gates and other facilities
- Airports can negotiate with airlines to balance their interests with those of other stakeholders
- Airports can stimulate demand for international airlines by helping them establish credibility
- Airports can attract airlines by reducing costs per turn, which include landing fees and airport rental fees
- Airports can offer incentives on marketing and landing fees to woo airline expansion
Airports can act as landlords for airlines, charging them rent for gates and other facilities
Airports, in addition to being major employers and transit hubs, also play the role of landlords for airlines, charging them rent for gates and other facilities. This dynamic is particularly evident in the United States, where airports act as both service coordinators and landlords. Airports generate revenue through aeronautical and non-aeronautical sources. Aeronautical revenue includes airline rents, landing fees, passenger service charges, and hangar fees. Landing fees, for instance, are calculated based on the landing weight and size of the aircraft, with additional charges for extra weight. Aircraft parking, which is essential for airlines, is another significant source of aeronautical revenue for airports.
Non-aeronautical revenue, on the other hand, encompasses lease revenue from compatible land-use development, building leases, retail and concession sales, car rental operations, parking, and advertising. Airports can attract airlines by offering incentives and showcasing the benefits of adding new routes. They can also work with local businesses and stakeholders to present a compelling business case for airlines to expand their services to that airport.
The relationship between airports and airlines is influenced by factors such as country-specific variations and government regulations. For instance, in France and the United Kingdom, airports are owned by a blend of public and private companies, positioning the airline as a customer of the airport. On the other hand, in the United States, where airports have more negotiating power, the relationship is more collaborative, with airports acting as service coordinators and landlords.
To maintain a harmonious relationship, airports must balance their interests with those of the airlines and other stakeholders, such as passengers, investors, service providers, and government entities. This balance can be achieved through practices such as integrated sales channels, joint loyalty programs, and improving the overall customer experience. By partnering with airlines, airports can increase customer purchases and make the travel experience more convenient and efficient for passengers.
Additionally, airports can attract more airline services by keeping their operating costs low. Airlines consider the "cost per turn," which includes all the expenses paid to the airport and for equipment and personnel. Airports with high costs per turn, such as New York's JFK, may be less attractive to airlines due to high landing fees, rental fees, and labour costs. Therefore, airports that can offer competitive rates and provide efficient facilities and resources are more likely to attract airlines seeking to expand their operations.
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Airports can negotiate with airlines to balance their interests with those of other stakeholders
Airports and airlines have a complex relationship, with each entity in the relationship having specific and differing goals. Airports can help airlines by acting as a connector, stimulating demand and ensuring the airline continues to plan routes to that airport. Airlines, on the other hand, need airports to provide the resources necessary to care for a fleet of commercial aircraft, including space, facilities, fuel, and passenger amenities.
The nature of the relationship between airports and airlines varies by country. For example, in the United States, an airport acts more as a services coordinator and landlord, whereas in France and the United Kingdom, a blend of public and private companies own the airport, positioning the airline as more of a customer. Public versus private ownership can dictate the relationship between airports and airlines, and government regulation, including regulations related to passenger service charges, landing charges, and development, can also impact this relationship.
To balance these differing interests and demands, airports and airlines can negotiate to strike a compromise that satisfies both parties. This negotiation process typically involves three phases: planning, airline engagement, and execution and transition. During the planning phase, the airport establishes its goals and translates them into ranges and options, which are used to develop a term sheet. In the airline engagement phase, airports refine the term sheet and draft and negotiate the lease with the airlines. Finally, during the execution and transition phase, the airport transitions to executing the agreement and becoming operational.
Additionally, airports and airlines can work together to benefit stakeholders and increase customer purchases. For example, they can partner to ensure that passengers have access to integrated sales channels, such as allowing passengers to pick up inflight purchases at their gate or delivering purchases between planes. They can also combine loyalty programs to boost sales and cut costs, such as by offering free parking, retail discounts, or flyer miles.
Another way airports and airlines can negotiate to balance their interests is by involving airline stakeholders in airport development and infrastructure decisions. By doing so, airports can ensure that their investments will offer improvements and efficiencies for the airlines. Safety and security are also critical areas where airports and airlines can partner to establish global standards and improve processes for passengers.
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Airports can stimulate demand for international airlines by helping them establish credibility
As international travel continues to expand, airports play an increasingly important role in connecting airlines with their destinations. While airlines may have robust local networks, their international connections are often much weaker or non-existent. This is where destination airports can step in to help stimulate demand for international airlines. By establishing a local relationship, the airline gains credibility in the new market and is incentivized to continue planning routes to that airport.
Airports can help airlines establish credibility in several ways. Firstly, airports can act as a landlord, leasing out gates and facilities to airlines. This not only provides the airline with the necessary infrastructure but also allows them to customize their space to meet their specific needs. Airports can also partner with airlines to establish global standards for ground operations, improving efficiency and safety for all stakeholders. Additionally, airports can work with airlines to develop and market their routes effectively. This can include providing data and insights on market trends, helping to forge connections with third parties, and offering guidance on dynamic pricing.
Another way airports can help establish credibility is by providing the resources and facilities needed to care for a fleet of aircraft and their passengers. This includes providing space for aircraft parking, maintenance, and fueling, as well as accommodating flight crews and passengers while they are on the ground. Efficient baggage handling and cargo loading services also contribute to the overall credibility and smooth operation of the airline.
Furthermore, airports can facilitate the establishment of hub-and-spoke systems, where an airline uses a hub airport as a transfer point to concentrate passenger traffic and flight operations. This system allows airlines to serve city pairs that would otherwise be economically challenging to serve through non-stop flights. By utilizing hub airports, airlines can increase their geographic reach and better serve spoke-to-spoke markets by offering itineraries with connections at different hubs.
Finally, airports can assist in raising the profile of airlines and ensuring they are seen by the right audiences. Airports can leverage their relationships and partnerships to promote their airline tenants, helping them gain recognition and credibility in the aviation industry. This can include utilizing events, websites, and manuals to showcase the airline's presence at the airport. By working together and forging strong partnerships, airports can play a crucial role in helping international airlines establish credibility and succeed in new markets.
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Airports can attract airlines by reducing costs per turn, which include landing fees and airport rental fees
Airports can attract airlines by reducing their costs per turn. Costs per turn refer to the costs an airline pays to an airport, including landing fees, airport rental fees, and labour costs. Airports can reduce these costs in several ways.
Firstly, airports can waive landing fees and terminal rental rates for new or existing carriers for a certain period. For example, under an air service incentive program, an airport may waive these fees for up to two years for a new entrant or one year for existing carriers. Additionally, some airports offer a discount on landing fees for airlines opening new routes, which can incentivise airlines to expand their operations at specific airports.
Airports can also reduce costs per turn by negotiating lease agreements with airlines. In the United States, airlines traditionally lease terminal space on a preferential or exclusive basis, with rent based on square footage. However, this model may not work for low-cost carriers (LCCs) operating less than daily flights. Therefore, LCCs may demand a lower total cost per enplaned passenger (CPE) before committing to an airport. Airports can attract these carriers by offering competitive CPEs or per-turn fees, which are charged for each operation or turn.
Furthermore, airports can work with airlines to improve operational efficiency and reduce costs. For instance, consulting firm Strategy& suggests that airports and airlines partner to ensure that passengers have easy access to purchases, such as allowing passengers to pick up inflight purchases at their gate or offering joint loyalty programs with rewards like free parking or retail discounts. These strategies can increase customer purchases and cut costs for both airports and airlines.
By implementing these measures, airports can make their facilities more attractive to airlines by reducing their costs per turn. This can lead to lower fares for passengers, stimulating demand and benefiting both the airport and the airline.
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Airports can offer incentives on marketing and landing fees to woo airline expansion
Airports and airlines have a symbiotic relationship, and both parties must work together to benefit each other. Airports can offer incentives to airlines to encourage expansion, and these incentives can be funded by the airport itself ("airport-sponsored incentives") or by the local community ("community-sponsored incentives").
Airports can offer waivers or reductions on landing fees and other airport fees as an incentive to airlines. This is a common strategy used by airports to attract new airlines and routes. Medford Airport, for example, offers incentives on marketing and landing fees to woo airline expansion. Similarly, Kansas City International Airport offers waivers for a limited period on landing fees and ticket-counter fees to sweeten the deal for airlines. Landing fees are a significant expense for airlines, and waiving or reducing these fees can make a route more profitable for airlines.
Airports can also contribute to marketing programs as an incentive, although the marketing must focus on the airport rather than destination marketing. For instance, direct cash payments can be made to carriers for marketing costs under a joint marketing program. Airports can also highlight local businesses that are committed to a particular route to demonstrate demand and profitability to airlines.
In addition to these financial incentives, airports can also improve the overall customer experience through integrated sales channels and joint loyalty programs. Consulting firm Strategy& advises airports and airlines to partner together to increase customer purchases by ensuring that passengers have accessibility to products when they have the time. This could include allowing passengers to pick up in-flight purchases at the gate or offering rewards such as free parking, retail discounts, or flier miles. By sharing the burden of supporting these programs logistically, airports and airlines can boost sales and cut costs.
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Frequently asked questions
An airline hub is an airport used by one or more airlines to concentrate passenger traffic and flight operations. Hubs serve as transfer points to help get passengers to their final destination.
Airports can attract airlines by keeping their operating costs low, offering incentives on marketing and landing fees, and showcasing the best attributes of the city and its airport.
Airports and airlines work together to benefit stakeholders, increase customer purchases, and improve the customer experience. Airports act as landlords for airlines and can negotiate for the best prices for their services.
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