The aviation business has experienced rapid evolution patterns and intense rivalry recently. On the one hand, the profitability of the airline business is declining as airline competition increases. On the other hand, privatization processes present new managerial difficulties to airports. These trends affect not only international airports but also regional airports. This unsettling climate is forcing the aviation sector to pursue new strategic avenues to compete in the new market. One of these avenues is the cooperative strategy, which was developed to lessen uncertainty by sharing risks and expenses. As people wait for their flights, airport businesses and stores are crowded with customers, mainly because of airline partnerships. Airports are equally crucial to airlines because they offer the infrastructure—such as a runway, handling facilities, and cargo facilities—needed for them to operate.
Through partnerships, airlines and airports are connected, and as anybody who has tried to catch a flight knows, the carrier must be present at the airport. While the passengers are waiting for their flights, airport businesses and stores are crowded with customers because of airline partnerships. According to Hou et al., airports are equally crucial to airlines because they offer the infrastructure—such as a runway, handling facilities, and cargo facilities—needed for them to operate (2022). Airlines and airports work together in a symbiotic connection to succeed. Ultimately, passengers are the same clientele that airports and airlines service (Graham, 2020). They remain distinct legal companies, subject to agreements regulating airspace and calling for ethical commercial practices, and occasionally have different objectives. Through partnerships, airlines and airports are connected, and as anybody who has tried to catch a flight knows, the carrier must be present at the airport. As people wait for their flights, airport businesses and stores are crowded with customers thanks to airline partnerships. Airports are equally crucial to airlines because they offer the infrastructure—such as a runway, handling facilities, and cargo facilities—needed for them to operate.
Airports are becoming a more critical hub as international travel has grown. Airlines may have robust local networks for marketing and sales, but when they travel abroad, those ties sometimes need to be stronger, if they even exist. Destination airports can assist increase demand for international flights, which benefits the airline because the local connection gives it credibility and ensures the company keeps planning its route to that airport’s destination (Papatheodorou et al., 2019). The ties that develop between airports and airlines generally fall into one of three categories:
- Negotiated agreements, frequently involving concessions. The benefits of negotiating preferred agreements are ongoing since a business will get savings based on current spending, and the capacity to increase the volume can result in more savings. Depending on the airline, several lengths are given; increasingly, three-year agreements are being offered in place of the more common two-year arrangements.
- Rates by resolution are decided upon after consultation and frequently include laws, rules, and licenses. Residual agreements are typically used to describe contracts that allow aeronautical users to get a cross-credit of nonaeronautical revenues. In a residual agreement, the airport uses extra non-aeronautical revenue to offset airfield expenses and lower air carrier prices. In return, the air carriers promise to make up any deficits that may occur if the non-aeronautical revenue is inadequate to meet airport expenses. Under a residual agreement, aeronautical users may take on all or part of the responsibility for non-aeronautical costs.
- Hybrid. In some circumstances, airports may have revenue sharing combined with rate resolution. Sponsors commonly implement rate-setting procedures that include aspects of compensatory and residual strategies. In exchange for a portion of non-aeronautical earnings that offset aeronautical costs, such agreements may charge aeronautical users for the use of aeronautical facilities and require aeronautical users to bear additional airport expenditures.
Each nation will have different relationships between airlines and airports. Whereas in France and the UK, a mix of public and private enterprises own the airport, presenting the airline as more of an airport client, an airport acts more as a services coordinator and landlord in the United States (Bottasso et al., 2017). The connection between airports and airlines can be influenced by government regulation, including rules about passenger service fees, landing fees, and growth, in addition to public versus private ownership (Cheung et al., 2020). Airports will engage in use and lease negotiation to balance these many needs and reach an acceptable settlement for both parties, according to the American Association for Airport Executives (AAAE). Typically, the procedure is carried out in three stages:
- Planning. The airport will develop its objectives and turn them into alternatives and ranges during this phase. Executives will create a term sheet after that.
- Engagement of airlines. Airports will work with airlines to develop the concept, hone the term sheet, and create and further improve the lease during this phase.
- Transition and execution. Finally, they will move on to carrying out the deal and start operations once the airport is ready.
In conclusion, keeping these best practices in mind can make for a smoother procedure as airports attempt to strike a balance between their interests and numerous airlines’ frequently divergent goals. First, it is crucial to boost sales and combine loyalty schemes. Joining forces to give more advantages, such as free parking, store discounts, or frequent flier miles, would increase sales and save expenses since airports and airlines could then split the cost of logistically sustaining these programs. Second, to work together to ensure safety. Together, airports and airlines can create a global standard for ground operations and work to make runways safer. It is simple to develop cost-effectiveness collectively. A better strategy to resolve this issue is to collaborate on formulating capital expenditures, open consultation, service level agreements as part of longer-term agreements, and novel risk-sharing strategies.
References
American Association for Airport Executives. (2021). Home. Www.aaae.org. Web.
Bottasso, A., Bruno, M., Conti, M., & Piga, C. (2017). Competition, vertical relationship and countervailing power in the UK airport industry. Journal of Regulatory Economics, 52(1), 37-62. Web.
Cheung, T. K. Y., Wong, W., Zhang, A., & Wu, Y. (2020). Spatial panel model for examining airport relationships within multi-airport regions. Transportation Research Part A: Policy and Practice, 133, 148-163. Web.
Graham, A. (2020). The airport-airline relationship. In Air Transport Management (pp. 115–128). Routledge.
Hou, M., Wang, K., Yang, H., & Zhang, A. (2022). Airport-airline Relationship, Competition and Welfare in a Multi-airport System: The Case of New Beijing Daxing Airport. Journal of Transport Economics and Policy (JTEP), 56(2), 156–189. Web.
Papatheodorou, A., Vlassi, E., Gaki, D., Papadopoulou-Kelidou, L., Efthymiou, M., Pappas, D., & Paraschi, P. (2019). The airline–airport–destination authority relationship: The case of Greece. In Tourist Destination Management (pp. 27–41). Springer, Cham. Web.