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NEWS Last modified on September 24, 2014

Blog: What is your business model?

Nuno Brilha offers his thoughts on the evolving airport business models.

By the end of the decade we’ll see the emergence of a new airport business model. Don’t fight it, embrace it!

Indeed, we shouldn’t be afraid of change as the airport business model has effectively been involving since 1987 when the former British Airports Authority was privatised by public flotation under the Airports Act (1986), becoming the UK’s largest private airport manager, operating seven airports in a regulated market.

Suddenly airports had a broader scope. They were no longer just operators of infrastructure but businesses in their own right with a portfolio of business ventures.

It’s only natural that this decade will see the emergence of a new airport business model. Let’s call it airport 3.0: the ‘airport as a consumer brand’ and it will arise from the natural evolution of the airport business model, once again expanding in scale and scope.

And it will be the airport industry’s answer to three key global challenges – increased globalisation, entrepreneurial management and the consumer-centric technological revolution.

Realising the globalisation opportunity, the new organisational culture will shun the traditional passive airport presence on the air transport value system, assertively assessing and capturing the value of the airport’s strategic positioning.

The cultural and organisational shift of the modern airport company also encompasses the entrepreneurial management concept, based on the dialectic contradiction between entrepreneurial freedom and rationalised management.

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The outcomes are likely to be new corporate entrepreneurial opportunities, staff alignment to the detection of value and overall wider risk management practices.

However, the amplified scale and scope of the new airport business model will swiftly lead to its unbundling.

While new to the airport industry, unbundling the airport business model is not original, since it feeds on the knowledge and natural evolution of the business models from other industries, namely telecoms or banking.

Let’s face it, operating like a telco or a bank is a long way from most airport’s frame of mind.

More often than not, airports follow the traditional siloed view of the industry. As a matter of fact, the current strategic challenge in any industry lies not on the classic dichotomy between differentiation or cost, but focuses on value innovation, reconstructing market boundaries and identifying new market areas that hold value for clients.

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What is my potential customer base and how can I increase my ‘share of wallet’?

Why a consumer brand? Because in today’s global economy, organisations reach the market via brands and the archetype of the market is the consumer.

But, contrary to common belief, the ultimate goal of a brand is not identifying or generating emotional appeal but the assertive ability to shift market demand.

Following the value creation logic, the brand’s impact must be measured by the ability to drive a higher price or the capacity to generate greater demand.

On the other hand, the global communication platform that is the worldwide web and the resulting explosion of digital media – web, mobile and social – greatly empowers consumers, transforming their relationships with brands, with a new set of rules and a new marketplace.

Therefore, 21century brands require a holistic brand vision that seamlessly connects the digital and physical experiences, creating value through simplicity and convenience.

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Such an approach to this relationship is no longer top-down – from the organisation to the market – but achieved in a new horizontal and collaborative fashion where consumers and brands are both co-producers of a permanent, fragmented and multichannel relationship that organisations no longer control.

This new collaborative correlation actually turns the traditional B2B or B2C into business & business (B&B) or business and consumer (B&C) or, ultimately, peer to peer (P2P).

Every brand strategy must create simplicity and convenience in increasingly complex online and offline environments.

However, most airports still relate brand management to advertising and promotion. This vision, whilst frequent, remains incomplete and limited by not focusing on the main goal of the brand.

When the ultimate goal of the brand lays on its capability to shift demand, effectiveness isn’t achieved via increased advertising and promotion but by making sure its core value proposition is delivered to clients, each and every time.

Brand value propositions are solutions instead of products, simplicity instead of complexity and dialog instead of monologue.

Anything less than that is deemed irrelevant by today’s discerning consumer.

In this context, brand means business performance. The new airport business model leverages the airports’ privileged competitive position to maximise shareholder value, endorsing concentric diversification and flexible corporate strategy.

This approach, widely replicated on diverse industries from telecoms to banking to airlines, commands the comprehension that each strategic vector:

a) has a unique business focus

b) requires distinctive competencies and skills

c) develops different relationships.

Hence, the airport 3.0 model focuses the airport company on three strategic business vectors.

– The first vector, Aviation, corroborates the airport’s core function as a facilitator of air transport operations.

However, the paradigm changes in a number of ways, namely the expectations concerning operational performance, process innovation and route network development.

Airside performance is achieved via maximum capacity utilisation in terms of airlines, passengers and cargo, using own or outsourced resources.

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– The second strategic vector, Airport City, pushes the airport role as a catalyst for regional development, proactively searching for commercial development opportunities, generating new relationships with public and private entities.

Landside performance is measured by the monetisation of the airport perimeter as well as increased passenger revenue.

– The third vector, Consumer Brand, changes the paradigm of the traditional airport relationship with consumers by planning and monetising client touch points, offering convenience solutions and process simplification.

For decades, airport/airline rapport has led airports away from consumers, approached via airlines, travel services and concessionaires.

However, the airport’s natural position in the air transport value chain, reveals a privileged value capturing opportunity just by extending the airport’s value proposition to overlapping areas.

A successful consumer strategy requires three critical blocks: data, creativity and technology.

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All are accessible to all players in the value chain but only airports hold the unique position to bottleneck all data and all access to all consumers.

Now, that is a competitive advantage.

This vector’s performance is measured by passenger revenue, introducing the ‘share of wallet’ and the lifetime customer value concept to effectively measure this new relationships, directly, via alliances or joint ventures.

So why should airports become consumer brands?

Because brands mean business performance and the archetype of the market is the consumer.

Airports have a privileged competitive position, raising the interest of large number of investor profiles captivated by a moderately protected investment with sustainable long-term growth and return.

Nevertheless,  a conformist perspective of this positioning does not apprehend all the value capture opportunities available to the modern airport company.

 

Nuno Brilha developed non-aviation businesses at international airports for over a decade. He is currently CMO of Realtime Corp and WebSpectator Corp and Associate Consultant for Strateg Consulting. He can be can be contacted at

 

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