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Emerging Operational Challenges in Airport Management

Emerging Operational Challenges in Airport Management PROJECT REPORT ON “EMERGING OPERTIONAL CHALLENGES IN AIRPORT MANAGEMENT” Submitted for the Post Graduate Diploma in Aviation Law and Air Transport Management (PGDALATM-2) Submitted by VINAY SHANKAR September 2011 Delhi Centre Emerging Operational Challenges in Airport Management 2 TABEL OF CONTENTS: Contents INTRODUCTION OVERVIEW DRIVERS AFFECTING TRAFFIC CHANGING FACES OF TE AIRORT WORLD MANAGEMENT TECHNIQUES TO ENHANCE AIRPORT OPERATIONAL EFFICIENCY CONCLUSION ANNEXTURE BIBLIOGRAPHY Page No. 4 5 7 8 11 17 17 18

Emerging Operational Challenges in Airport Management 3 Introduction Initially, airports in India were government and state owned, but they had undergone many changes since1990’s, Aviation sector has been one of the rapidly growing segments of the Indian economy and one of the fastest growing industries in the international aviation circuit. The technological, infrastructural, institutional, economic and human challenges have prompted those in charge of airlines and aviation-related agencies to affect a shift in their policies and approaches pursued for years, to which India is not an xception. The altitude of the Government and Aviation Industry towards the regulation of Air transport has undergone a profound change over the past few years in India in almost all spheres. New concepts of ownership, financing, management and operation of air transport are the emerging trends in India. Different mix of ownerships and management rights may result in diverse business models. Although each model may have pros and cons, the model of privatization is relatively more conducive to enhancing operation efficiency and profitability for airports.

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On the financing front, airports in India range from100% government funded to airports that have limited state government stakes. The control structure depends on the equity bought in by various partners and hence varies with the financing. With increasing demand for better facilities and expansion of runways because of growing volume of air-traffic, there is an urgent need for airport expansion as well as more sophisticated equipments. Going for latest technology needs sound financial base. Resource mobilization is the key to future expansion and development.

In developing countries a major problem faced by airport management is how to generate resources. Lack of funding results in inadequate operational safety, poor facilitation levels and dependence on old technology. Emerging Operational Challenges in Airport Management 4 Non- commercial handling of financial management, unwanted bureaucratic approach and lack of professionalism in marketing and promotion are mainly responsible for financial constraints faced by the airport business. Technological update is crucial to compete with others in airport business.

Unfortunately because of various constraints the developing countries cannot afford to pay for advanced technology. As a result of this old equipments and outdated techniques are used in airport services. Airports Management concept is changing and airports are expected to carry their primary function in most effective way. Airports are also diverging their business in managing all operational activities. Airports are therefore challenged to reorganize themselves and cope up with the change. SHIFTING TREND Overview

Aviation – Road Ahead Passenger traffic growth in the Indian domestic market is expected to continue high per year with domestic airlines being expected to operate almost 30 per cent more flights as compared with last year levels, marking the largest year-on-year increase in flights. The winter schedule will reportedly see 14,750 weekly domestic services as airlines expand their domestic networks and schedules, especially in the southern part of the country. Emerging Operational Challenges in Airport Management 5 The tier-II and tier-III market is a vast untapped market for domestic airlines,” according to a SpiceJet official.

The low-cost carrier recently announced its regional service with Hyderabad as hub. Government incentives could motivate more airlines to enter into regional routes. The AAI has already mooted various proposals to increase connectivity across the smaller towns. The AAI has recently been on a modernization drive to set up around 35 non-metro airports and two major airports in Kolkata and Chennai. The company manages a string of 125 airports in the country. The Indian aviation sector is a major economic driver for prosperity, development and employment.

Massive investments in airport infrastructure have led to world class airports which have become the symbol of India’s growth story. The Vision 2020 announced by the Ministry of Civil Aviation conceives of building infrastructure to support 280 million customers. Emerging Operational Challenges in Airport Management 6 Drivers Affecting Traffic Market Size India’s domestic aviation market expansion has been the strongest in the world – tripling in the past five years, according to the International Air Transport Association’s (IATA) report. India is currently the ninth largest aviation market in the world, according to a RNCOS report.

The Government’s open sky policy has attracted many foreign players to enter the market and the industry is growing in terms of both players and the number of aircrafts. Given the strong market fundamentals, it is expected that the civil aviation market will register a compound annual growth rate (CAGR) of more than 16 per cent in the coming next 5 years. India’s domestic air traffic grew at a rate, which is the second highest after Brazil, according to global figures for June 2011, compiled by IATA. The country’s domestic traffic grew by 14 per cent in the same period as against Brazil’s 15. 1 per cent.

Indian airlines reported a continuous growth trend and a strong domestic passenger growth rate of 22. 3 per cent in July 2011. Passenger traffic has grown at 18 per cent year on year (y-o-y) basis and the year 2010 closed at 90 million passengers both domestic and international. India is the fastest growing aviation market and expected to be within 4-5 big aviation markets by 2020 and 3rd in terms of domestic market after US and China. Traffic Year-on- Load year factor change (%) 79. 8% 78. 6% 66. 0% 68. 1% 71. 7% 72. 1% 78. 0% n/a Market share (%) 20. 0% 19. 7% 17. 5% 15. 4% 13. 6% 7. 3% 6. 4% 100% Kingfisher 934. +4. 0% Indigo 920. 2+39. 8% Jet Airways 817. 4+6. 7% Air India 719. 3-5. 6% SpiceJet 635. 3+20. 6% JetLite 341. 0+7. 2% GoAir 298. 9+21. 5% Total 4671 +11. 5% Source: Centre for Asia Pacific Aviation and DGCA Emerging Operational Challenges in Airport Management 7 In July 2011, airlines in India handled 5 million domestic passengers, according to data released by the Directorate General Civil Aviation (DGCA) on September 12, 2011, marking the 11th consecutive month of double-digit growth. India’s domestic market has witnessed passenger growth for 26 consecutive months now. In July 2011, India’s airlines handled 1. million international passengers, an increase of 8. 5 per cent y-o-y, according to DGCA. Passengers carried by domestic airlines during Jan-Aug 2011 were 39. 63 million as against 33. 41 million during the corresponding period of previous year thereby registering a growth of 18. 6 per cent, according to data released by DGCA. India is expected to cross the 450 million mark of domestic passengers by 2020. During the last two decades from a fleet of only about 100, the scheduled operators now have reached 435 aircrafts connecting the nation and the world. Changing Faces of The Airport World

Challenges Initializing privatization in the airport activities Modernization of the airlines fleet to handle the pressure of competition in the aviation industry Rapid expansion plans for the major airports for the increased flow of air traffic Development for the growing Regional Airports Waving of Tax Exemption on leasing from government Costs pressures (ATF Prices & Staff Cost) Upgrading Airport Infrastructure By 2020, Indian airports are estimated to handle: 100 million passengers Including 60 million domestic passengers Cargo in the range of 3. 4 million tonnes per annum Emerging Operational Challenges in Airport Management 8

FDI policy The Reserve Bank of India (RBI) announced that foreign institutional investors might have shareholdings more than the limited 49% in the domestic sector. Airports Foreign equity up to 100% is allowed by the means of automatic approvals pertaining to establishment of Greenfield airports Foreign equity up to 74% is allowed by the means of automatic approvals pertaining to the existing airports Foreign equity up to 100% is allowed by the means of special permission from Foreign Investment Promotion Board, Ministry of Finance, pertaining to the existing airports 100 per cent tax exemption for airport projects for a period of 10 years.

PPP In Airport Infrastructure Background ? Indian airports were managed by Civil Aviation Department, Government of India, till the creation of International Airports Authority of India (IAAI) in 1972 and National Airports Authority (NAA) in 1986. ? In 1995 Airports Authority of India (AAI) was established by merging both IAAI and NAA by an Act of Parliament – The Airports Authority of India Act in 1994 – for better and efficient management of all airports in India by a single Authority. At Present AAI manages 128 airports which include: 15 International airports – – Custom airports 8 8 Custom aircraft – 25 Civil Enclaves 15 International Airports 25 Civil Enclaves 80 Domestic Airports – 80 Domestic airports Emerging Operational Challenges in Airport Management 9 PPP In Indian Airports Need for Private Participation in Airport Infrastructure To bridge the resource gap for achieving the following objectives ? To build world-class airports with modern technology and efficient management practices. ? ? To make the airport user friendly and achieve higher level of customer satisfaction.

To lay special emphasis on the development of infrastructure for remote and inaccessible areas. ? ? To provide airport capacity ahead of demand. To encourage greater efficiency in Airport Operations. Airport Development Process has taken off in the country The process of development of airports through PPP in the country began with CIAL. Two new Green field airports were thereafter approved for Bangalore and Hyderabad. On 3rd May 2006 the Airports At Mumbai and Delhi were handed over to Joint Venture Companies.

Of 35 non metro airports being taken up for modernization PPP has been approved for the city side development of 10 airports. Proposals for a number of green field airports have been received from various State Governments. Problem -Increased traffic and cargo growth has led to congestion at different airports Solution -expantion of capacity at existing airports -better management practices -introduction of technology for efficient handling od passenger and cargo -lack of employees -delay in getting luggage -lack of electronic display boards Emerging Operational Challenges in Airport Management 0 Management techniques to enhance airport Operational Efficiency Operations Analysis – Competitive Dimensions: 1. Operational Costs and Efficiency 2. Employee/Labor Relations 3. Customer Service 4. Technology Airport Director Team Leaders Fire Engineering RAMP -Marshall -Stand alloncation -Tumaraund audit -Runway Inspections -Fod clearance -Low visibility procedures -Baggage handling -Friction testing -Labouring -Snow clearing -Grass cutting -Work permits TERMINAL -Security -PRM -Cleaning -Pass office -Terminal sercives -Customer services -Car park -Escourting duties Fire marshalling -First aid -Fire prevention -Alarm testing -Training -Bird scaring -Snow clearing -Grass cutting -Work permits -MT-repair -Airfield groung lighting -Air traffic engineering Emerging Operational Challenges in Airport Management 11 1. Operational Costs And Efficiency The airline industry overall is in shambles. And the biggest challenge is how to stay profitable? Having the lowest costs and strongest balance sheet in its industry. The two biggest operating costs for any airline are – labor costs (approx 40%) followed by fuel costs (approx 18%).

Some other ways to keep operational costs low is – flying point-to-point routes, choosing secondary (smaller) airports, carrying consistent aircrafts, maintaining high aircraft utilization, encouraging e-ticketing etc. Labor Costs Perhaps the most critical element of the successful low-fare airline business model is achieving significantly higher labor productivity. The low-fare carrier labor advantage is in much more flexible work rules that allow cross-utilization of virtually all employees (except where disallowed by licensing and safety standards).

Such cross-utilization and a long-standing culture of cooperation among labor groups translate into lower unit labor costs. Carriers should have a tremendous cost advantage over network airlines simply because their workforce generates more output per employee. In a study in 2001, the productivity of Southwest employees was over 45% higher than at American and United, despite the substantially longer flight lengths and larger average aircraft size of these network carriers. Fuel Costs Fuel costs is the second-largest expense for airlines after labor and accounts for about 18 percent of the carrier’s operating costs.

Airlines that want to prevent huge swings in operating expenses and bottom line profitability choose to hedge fuel prices. If airlines can control the cost of fuel, they can more accurately estimate budgets and forecast earnings. With growing competition and air travel becoming a commodity business, being competitive on price was key to any airline’s survival and success. It became hard to pass higher fuel costs on to passengers by raising ticket prices due to the highly competitive nature of the industry.

Emerging Operational Challenges in Airport Management 12 Point-to-Point Service Airlines should operate their flight point-to-point service to maximize its operational efficiency and stay cost-effective. Most of the flights will be short hauls averaging about 590 miles. This strategy will keep flights in the air more often and therefore achieve better capacity utilization. Secondary Airports Flying to smaller airports in an effort to reduce travel delays and therefore provide excellent service to its customers. It has led the industry in on-time performance.

Consistent aircrafts The single aircraft strategy: having common fleet significantly simplifies scheduling, operations and flight maintenance. The training costs for pilots, ground crew and mechanics are lower, because there’s only a single aircraft to learn. Purchasing, provisioning, and other operations are also vastly simplified, thereby lowering costs. E-Ticketing The idea of ticketless travel has a major advantage because it can lower distribution costs. Customers who use credit cards are eligible for online transactions 2.

Employee and Labor Relations Maintaining a relentless focus on high-performance relationships and people-management practices can be the key to unparalleled success in the airline industry. With a strong commitment to its employees companies should give the same respect to its employees that it provides to its customers. Emerging Operational Challenges in Airport Management 13 Hiring Finding people with the right attitude is very important. Extensive procedures are employed to hire for positive attitude and dedication. Hiring is critical, because you cannot institutionalize behavior.

Instead, you must identify those people who already practice the behaviors you are looking for. Then you can allow Employees to be themselves and make decisions about Customer service based on common sense and their natural inclinations. 3. Customer Service Highest quality of customer service to be delivered with a sense of warmth and friendliness. From the top to bottom everyone should do whatever he or she can to satisfy the customer. It is through emphasizing the customer and employee at the same time. The customer service is supported through employee encouragement to do the extra to satisfy the customer.

This approach inspires people who would ordinarily only on occasion go out of their way to help someone, to become consistent performers that offer exceptional service all the time. 4. Technology Security and Safety Since the attempted terror attack increasing on planes airport authorities around the world is in a race to find novel solutions to fight terror. Most airports around the world often lack measures as basic as video surveillance, and other security measures. But now new technologies have been improved and is being used at different airports so that these things can be stopped.

Among such things is the Trace-Safe – An alternative to body scans which is basically like a spray and it free particles from fabric and luggage for speedy detection and analysis. Suspect Detection System – Tracing the sweat of terror interrogation and background check technology for both travelers and airport employees. It’s like a polygraph machine for catching terrorists – an advanced and automated filtering tool that can identify potential suspects from among tens of thousands of people. Emerging Operational Challenges in Airport Management it is basically an automated 14 Biometric VIP” card flyers now will have biometric cards which will contain all data’s and information about the flyer and no one wants to arrive hours before a flight and have to contend with unpredictable periods of waiting in line. The biometric scanners are cards similar in size to credit cards that contain personal, biometric information about each traveler. Briefcam – Step back in time this technology that allows security personnel to quickly and effectively review and index surveillance footage and helps to identify individuals at border crossings, at airports, or in and around power plants.

Since fewer people are needed to review footage, the potential for human error is drastically reduced, as is the manpower needed to track events and uncover unusual occurrences. Bar codes in Boarding Passes Standardizing corporate and terminal operations through the bar code will gives more information to automatically reconcile the number of boarding passes with the number of passengers that actually board the plane through touch screen ticket readers.

The old process was manual and it involved finding the information, scrolling through several software screens from reservations to check-in to boarding. The technology will help Airlines remain efficient by consolidating passenger information for the company’s daily flights and now new technologies will provide them boarding pass on their mobiles and QR technology will give them a detail of their flight detail. Software Upgrades Software applications, like those used by clerks to check in passengers, are being replaced and upgraded to answer the present demands.

Also introducing new available technology like radio frequency identification technology, a favorable alternative to bar-coding for luggage identification, can become a new challenger and also new technologies where lazier beams can be used to scan a person without even knowing them and with no physical interference. Emerging Operational Challenges in Airport Management 15 Passenger Demand Pursuing customer relationship management techniques and ad providing applications to get insight into customer’s wants and dislikes focusing on improving in two areas – customer’s airport experience and in-flight experience.

In-Flight Entertainment In an overall effort to improve customer’s in-flight experience, in-flight entertainment is something that should be considered as a possibility in answering passenger demand and all his needs with comfort and luxury in combination with the latest technologies available. Emerging Operational Challenges in Airport Management 16 Conclusion Managing a major airport is like managing a small town. There is an extraordinary array of complexity and permutation that needs to be assessed, planned on a daily basis.

The major constrains can emerge any time with respect to adverse weather, loss of service due to problems at destination, dispatching airports, or security-related events and to tackle a back up force/manpower should always be ready with modern amenities and technologies. But airport management must also plan for more fundamental change as a result of constantly shifting business, environmental and socio-economic needs. If they can successfully identify the optimal strategies they should adopt in the face of these core issues, then they will be able to plan a future based on an effective ‘through-life vision’ of both design and management.

Now with regard to challenges the very first and most important is airspace congestion apart from it implementation of CNS/ATM system for a smooth air traffic flow, introduction of new large aircrafts, growing alliances, change in ownership, security concerns, environmental pressure. All these issues needs to be tackling down and should be taken with serious remarks for a better, smooth, safe and secure air transport. Annexture

ACAS – Airborne Collision Avoidance System ATAG – Air Transport Action Group ATS – Air Traffic Services DGCA – Director General of Civil Aviation IACA – International Air Carrier Association IATA – International Air Transport Organization WTO – World Tourism Organization Emerging Operational Challenges in Airport Management 17 Bibliography/References : 1)www. icao. int ; 2)www. aci. aero ; 3)www. iata. org ; 4)www. centreforaviation. com ; 5)www. airportbusiness. com ; 6)www. airports. org ; 7)www. cai. sg ; 8)www. airlinetrends. com ; 9)www. airport-world. om ; 10) Airport performance management, Neuropie solutions A. G. 11) James Ott (2011):”Airport performance should be regulated”, March 8, 2011, Aviation Daily, The McGraw Hill Companies. 12) ACRP (Airport Cooperative Research Program) Report 10, Innovations for Airport Terminal Facilities, Transportation Research Board. 13) Airport Economics Manual, Doc 9562, Second Edition – 2006, International Civil Aviation Organization. 14) Dr. P. C. K. Ravindran “Airport management: World Class and Beyond”, first edition,2010,Asia Law House. Emerging Operational Challenges in Airport Management 18


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