Strategic Planning in the Airport Industry (2009)

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Introduction and Definition of Strategic Planning P A R T 1

ACRP Report 20: Strategic Planning in the Airport Industry (hereafter referred to as the Guide- book) guides readers through a step-by-step process for developing a strategic approach to air- port planning. The Guidebook provides information, tools, and techniques that can be used by airport professionals, airport policymakers, and related industry associations to develop or understand strategic plans that guide airport-related decisions and actions. The key content of the Guidebook is set forth in Exhibit 1-1. This Guidebook is based on the knowledge, expertise, opinions, and recommendations of air- port executives and other airport industry professionals gained through focus group discussions, an online survey, one-on-one interviews, and workshops. As with other subject areas, the body of knowledge regarding strategic planning rests with the practitioners who apply and advance it. The Guidebook includes proven traditional techniques and tools that have been effectively applied by some airport executives, as well as innovative practices that are emerging in the air- port and other industries. For example, the Guidebook addresses the concepts of strategic agility and acuity, which define how an organization can remain strategically adaptable to an ever- changing environment and, to the extent possible, be proactive in identifying opportunities, unforeseen events, and changing conditions. The Guidebook also draws on a number of articles, reports, research efforts, books, and studies that address strategic planning and/or airport planning. 1.1 Purpose of the Guidebook The primary purpose of this Guidebook is to provide a comprehensive, user-friendly manage- ment tool that can be used by airport professionals, airport policymakers, and related industry associations to implement or understand the strategic planning process leading to the develop- ment of an airport strategic plan. Nearly three-quarters of respondents to the online survey con- ducted as part of the research for this Guidebook viewed the development of a strategic plan as “a necessity” for their airport organization. The Guidebook sets forth a common process and key considerations for applying strategic planning in an airport setting. 1.1.1 Historical Context for the Guidebook The perspectives, priorities, and strategic planning techniques contained in the Guidebook are a reflection of the U.S. airport industry as it exists at the time of this research effort (2007 to 2009)—an environment in which airports are independent of national control and are typically owned and operated by local municipalities or regional/state authorities. However, other North 3 C H A P T E R 1 Introduction

American airports with operational structures similar to those airports in the United States, such as Vancouver International Airport in Canada, are also represented in the Guidebook. 1.1.2 Intended Audience for the Guidebook The Guidebook is intended to present the airport strategic planning process, related context, and facilitating tools and techniques to a variety of readers. In preparing the Guidebook, every effort was made to present the material in a simple and easy-to-follow style, while focusing on important and sometimes complex elements of the strategic planning process that are commonly overlooked in the day-to-day management of airports. The Guidebook provides a foundational reference for readers, who are expected to include, but not be limited to the following: • Airport board members • Airport directors • Airport department leaders • Airport employees • Aviation industry associations • Airport stakeholders • Consultants and other specialists in strategic planning, airport planning, and related fields • Educators in airport planning and related subjects • Individuals facilitating strategic planning sessions 4 Strategic Planning in the Airport Industry ACRP Report 20: Strategic Planning in the Airport Industry Best Practices For conducting the strategic planning process and assessing the organization’s internal resources and external situation. Includes best practices from corporations, nonprofit organizations, and public entities. Provides Information about: Benchmarking Practices Used in the airport and other industries. Presents recommendations for obtaining meaningful benchmarking comparisons with other airports. Includes: Sample Tools and Techniques For assessing strengths, weaknesses, opportunities, and threats (SWOT); creating a Balanced Scorecard; etc. Integrates: Online Survey Findings Into each Guidebook section. Outlines: The Definition of Strategic Planning Defines strategic planning. The Strategic Planning Framework Defines the framework for strategic planning in an airport setting. The Key Benefits of Strategic Planning Highlights the benefits of strategic planning. The Airport Planning Process Provides a comparative analysis of the procedural similarities and differences between airport strategic planning and other forms of airport planning. Exhibit 1-1. ACRP Report 20: Strategic Planning in the Airport Industry—key content.

• Researchers analyzing airport planning or strategic planning in the airport industry • Regulatory agencies • Other aviation professionals 1.2 The Guidebook Structure The Guidebook is organized into two main parts: Part 1: Introduction and Definition of Strategic Planning (Chapters 1 and 2) and Part 2: The Strategic Planning Sequence (Chapters 3 through 10). The eight chapters in Part II (highlighted in Exhibit 1-2) are as follows: • Chapter 3: Creating a Process Plan and Road Map • Chapter 4: Evaluating and Understanding the Organization • Chapter 5: Defining and Articulating the Organization’s Mission, Vision, and Values • Chapter 6: Scanning the Environment and Predicting Developments • Chapter 7: Identifying Strategic Issues, Strategies, and Long-Term Objectives • Chapter 8: Formulating Short-Term Objectives and Creating Action Plans • Chapter 9: Writing, Communicating, and Executing the Plan • Chapter 10: Monitoring, Evaluating, and Modifying the Plan These chapters cover steps that airport operators are recommended to follow when develop- ing a strategic plan. The steps were designed based on a literature review, the research team’s experience in strategic planning, and feedback from airport executives. These steps are recom- mended, but do not represent the only approach to developing a strategic plan. Other sources for strategic planning may recommend slightly different steps or variations of these steps. The chapters were developed to enable airport operators and aviation industry professionals to tai- lor their approach to strategic planning according to their specific organizational needs. Note that in Chapters 3 through 10 readers will encounter three icons: the worksheet icon, the question mark icon, and the exclamation point icon (icons are displayed in Exhibit 1-3). The worksheet icon refers readers to a numbered worksheet designed to assist them in the steps under discussion in each chapter. The worksheets are available on the CD-ROM that is bound into the Guidebook. Readers should insert this CD-ROM in their computer and click on the appropriate worksheet. The question mark indicates important questions that need to be asked and answered at par- ticular points in the strategic planning process. The exclamation point icon indicates a tip about the information being given. Throughout the Guidebook, brief case studies provide real-world examples of how managers of airports of different sizes and characteristics are dealing with chal- lenges presented by the strategic planning process. Following Chapter 10 are Appendices A and B. Appendix A is a glossary of terms and concepts referenced in Parts 1 and 2 of the Guidebook. These definitions are only applicable to the terms and concepts as they are used in the Guidebook. These terms and concepts may have different meanings in other contexts. Appendix B lists contributors to the focus groups and online survey conducted as part of the research reported herein. Introduction 5 Creating a Process Plan and Road Map (Chapter 3) Evaluating and Understanding the Organization (Chapter 4) Defining and Articulating the Organization’s Mission, Vision, and Values (Chapter 5) Scanning the Environment and Predicting Developments (Chapter 6) Identifying Strategic Issues, Strategies, and Long-Term Objectives (Chapter 7) Formulating Short-Term Objectives and Creating Action Plans (Chapter 8) Writing, Communicating, and Executing the Plan (Chapter 9) Monitoring, Evaluating, and Modifying the Plan (Chapter 10) Exhibit 1-2. The strategic planning sequence as defined in Part 2. Worksheet Exclamation Point Question Mark Exhibit 1-3. Guidebook icons.

62.1 Definition In general terms, strategic planning is defined as the process undertaken by an organization to define its future and formulate a road map to guide the organization from its current state to its vision for the future.1 Strategic planning is based on the fundamental concept that aspects of an organization’s future can be influenced by actions taken in the present. Strategic planning requires a review of existing and potential challenges that an organization is, or may be, facing; develop- ment of a vision for how the organization will look in the future; and definition of the steps and actions that must be executed to achieve the organization’s vision. Exhibit 2-1 illustrates some key questions that need to be answered during the strategic planning process. The strategic planning framework includes the following key elements: • A mission statement that identifies the organization’s purpose and its core values (a separate values statement may also be created); • A vision statement that portrays the organization’s future goal(s); • Identification of the organization’s strengths, weaknesses, and opportunities, as well as threats that may affect the organization; • Definition of strategic issues that must be addressed over the course of the strategic plan; • A set of generic and grand strategies, long- and short-term objectives, and action plans that provide a road map for addressing the gaps between the organization’s current state and its vision; and • Definition of key performance indicators (measures and targets) to evaluate the progress made toward achieving long- and short-term objectives. 2.2 The Airport Strategic Planning Framework Over the years, corporations, nonprofit organizations, academic institutions, and governmen- tal entities have tailored the strategic planning framework to fit their specific needs. While certain publications have addressed airport strategic planning at a conceptual level, no “how-to” guide- book has been developed specifically to assist airport operators with the strategic planning process. In light of this deficiency, the research team has reviewed the models developed by others and con- ducted focus groups and an online survey to gather input from airport executives and industry professionals. This information was used to develop a process that is specifically applicable to an airport setting. C H A P T E R 2 What Is Strategic Planning? 1 This preferred definition of strategic planning was corroborated by respondents to the online survey conducted as part of this research.

What Is Strategic Planning? 7 Strategic planning for airports consists of more than just ensuring the safety and security of the traveling public and achieving a strong financial performance. In the case of either a single airport or a multiple-airport system, strategic planning for airports projects a future vision for the airport orga- nization, determines strategies and objectives for the growth or prosperity of the organization (includ- ing the type of products and services it should provide), and defines how the vision and objectives can be accomplished. 2.2.1 Elements That Influence the Process The primary product offered by all airports is an infrastructure system and transportation hub that facilitates the safe and efficient movement of people and goods traveling from “Point A” to “Point B.” The product evolves over time, but its purpose essentially remains the same. Similarly, airlines offer a comparable product (i.e., they transport passengers from their origin [Point A] to their destination [Point B]). But airlines such as Southwest Airlines and JetBlue Air- ways have proven that product differentiation is possible, even for companies that offer a compa- rable product. Southwest Airlines, which typically focuses on point-to-point service to midsize cities and secondary airports in larger metropolitan areas, offers limited amenities and few addi- tional service fees and primarily serves price-sensitive travelers. JetBlue Airways has placed itself in a different strategic position by offering upscale amenities (including assigned seating, real-time television, and a choice of snacks) and a somewhat more hub-and-spoke-focused route network while also serving price-sensitive travelers. Over the years, airport organizations have also sought product differentiation. Vancouver International Airport, for instance, has been reinvented from a regional airport serving the local community to a gateway airport connecting the Asia-Pacific Region, North America, Europe, and Latin America. This transformation occurred following the 1992 transfer of airport management and operational authority from the Canadian government (Transport Canada) to a not-for-profit corporation (Vancouver International Airport Authority). The airport’s simple strategic planning “formula” for product differentiation is: “Low Cost × High Service = Excellent Customer Value.”2 Exhibit 2-1. Strategic planning process—key questions. Ho w Do We Wan t Our Organization to Look in the Future? Present Organization’s Mission Organization’s Vision Future Wha t is Our Chartered Mission? W ha t A re th e Un iqu e Ch ar ac ter isti cs of O ur Or ganizatio n, Our Competition, and the Environm ent in Which W e Operate? W ha t N ee ds to Be D one to Accomplish O ur Visio n? What Challenges Might We Face? 2 Vancouver International Airport Authority, Strategic Plan, http://www.yvr.ca/pdf/authority/yvr_strategicplan.pdf (accessed May 28, 2009).

8 Strategic Planning in the Airport Industry Other airport operators differentiate their airports by focusing on unique products and ser- vices that competing airports do not provide. General aviation airports have offered services ranging from low-cost hangars to full-service fixed base operations. Diverse service offerings ranging from wine bars and day spas to flexible gate use policies have been developed at com- mercial service airports. Thus, strategic planning in an airport setting is possible, but many factors, including product differentiation, influence the process. Some of these factors are similar to those that apply to cor- porations and nonprofit organizations, while others are specific to the airport industry. When planning strategically, airport management solicits the opinions of a diverse group of stakeholders. Stakeholder roles in the process are generally diverse as well. Corporations and non- profit organizations also involve a variety of stakeholders in executing their strategic plans, but the airport strategic planning process includes added representation from the local community, such as local government, business and community leaders, and local public interest organiza- tions. This stakeholder diversity is highlighted in Exhibit 2-2. Airports serve a broad and diverse group of customers that consists of two key categories: air- port tenants (airlines, concessionaires, fixed base operators [FBOs], air cargo operators, and other airport business owners) and passengers (meeters/greeters and well-wishers, and other businesses or individuals that are users of, or dependent on, the airport). Governing entities must account for the needs and priorities of these customers when defining a vision for their airports. In contrast to corporations, airports serve the community at large and generally are economic development engines for the communities they serve. Airport operators must be responsive to the needs of both their customers and communities. While the management team of a corporation or nonprofit organization can decide what type of customers it wants to serve, the same cannot typi- cally be said for airports. Furthermore, local entities may be able to make operational and devel- opment decisions based on local needs and priorities that affect an airport’s future. In contrast, communities typically have less control over a corporation’s operations. The competitive environment in which airports operate is not consistent. In some instances, competition comes from other airports located in close proximity or from an airport that offers better service or pricing options. In other instances, more applicable to connecting hub airports, an airline’s consolidation strategies may result in competition for new service opportunities among the airports in the airline’s hub network. In addition, other modes of transportation and economic factors, such as the cost of fuel, affect the competitive environment for airports. Strategic planning in the airport industry is challenging because the aviation industry is contin- ually changing. Engaging in structured and thoughtful speculation about what the future may hold is complex. Events such as airline bankruptcies and restructuring, economic slowdowns, the intro- duction of new regulatory requirements, the emergence of low-cost carriers, or the consolidation of airlines through mergers force airport governing entities to constantly rethink how they do busi- ness and how to maintain flexibility and adaptability. Almost two-thirds of the respondents to the online survey conducted in this research stated that they try to account for the myriad of events that may influence their organization’s future as part of the strategic planning process. Strategic planning also requires consideration of the airport regulatory environment. While planning for the future, trying to match capacity with the demand for airline service, and meeting the needs of airport tenants and users and the public at large, airport operators must ensure that they satisfy the regulatory requirements imposed by federal, state, and local agencies. Agencies of particular relevance to the airport industry are the Federal Aviation Administration (FAA) and the Department of Homeland Security (DHS), including both the Transportation Security Adminis- tration (TSA) and U.S. Customs and Border Protection (CBP). In addition, airports are required

Exhibit 2-2. Stakeholders in the strategic planning process. INTERNAL EXTERNAL BOARD OF DIRECTORS/POLICY MAKERS SENIOR MANAGEMENT TEAM DEPARTMENT LEADERS AIRPORT STAFF AIRLINES OTHER AIRPORT TENANTS PASSENGERS VENDORS FEDERAL/STATE/REGIONAL/LOCAL GOVERNMENT REPRESENTATIVES FEDERAL AVIATION ADMINISTRATION (FAA) & U.S. DEPARTMENT OF TRANSPORTATION (U.S. DOT) DEPARTMENT OF HOMELAND SECURITY (DHS) STATE AND LOCAL REGULATORY AGENCIES NON-GOVERNMENTAL/PUBLIC INTEREST ORGANIZATIONS LOCAL BUSINESS/COMMUNITY LEADERS STRATEGIC PLANNING PROCESS STAKEHOLDERS Note: Stakeholders that should actively participate in the strategic planning process should be differentiated from those that will be consulted as part of the process on a case-by-case basis. What Is Strategic Planning? 9

10 Strategic Planning in the Airport Industry to comply with various state and local regulations that protect airports and the surrounding com- munities from incompatible development, define airport design and construction standards, and provide environmental guidelines. Respondents to the online survey indicated that the reporting and regulatory environment of airports is what most differentiates formulating a strategic plan for an airport from formulating a strategic plan in other industries. In addition, strategic planning in an airport setting is influenced by the “uniqueness” of airports, with the operation of each airport differing from that of any other. Airports vary in size, location, type of operations and passengers that they accommodate, and governing structure, among other factors. Each airport organization also has its own values and culture. Such uniqueness makes it difficult to benchmark airport organizations.3 Because of this uniqueness, the airport strategic plan- ning process must be tailored to each airport to account for its individual characteristics. 2.2.2 The Airport Strategic Planning Process The airport strategic planning process begins with preplanning activities. The strategic plan- ning process then proceeds to assessment and development of (1) the organization’s historical context, mission, vision, and core values; (2) the internal and external environment in which the organization operates; (3) the organization’s strategic issues and strategies for creating competi- tive advantage; (4) specific long- and short-term objectives and action plans that must be imple- mented for the organization’s vision to be successfully achieved; and (5) an evaluation plan using key performance indicators and targets. The framework of the strategic planning process is high- lighted in Exhibit 2-3. The airport strategic planning process can also be segmented into four main phases: (1) pre- planning, (2) analysis/evaluation, (3) implementation/execution, and (4) monitoring. Many of the steps within these phases are common to all airport strategic plans irrespective of airport size or the type of airport being considered. However, the amount of data to be collected, reviewed, and analyzed, as well as the outcomes of the process, will vary depending on the airport organi- zation’s size and complexity, the amount of time and the level of effort invested in the strategic planning process, and the number of stakeholders involved in the process. MI SS ION , VIS ION, VA LUES, AND ENVIRONMENT ST RA TE GIC ISSU ES AND LEADING STRATEGIES P E R FO RM ANC E AND EVALUATIO N SP EC IFI C O BJE CTIVES AND ACTION PLANS PREP LANNING ACTIVITIES STRATEGIC PLANNING FRAMEWORK Exhibit 2-3. The airport strategic planning process framework. 3 Despite the difficulty of benchmarking, 68 percent of respondents to the online survey stated that their organization was engaged in some form of benchmarking.

Similar to the strategic planning process for other types of organizations, the airport strategic planning process is dynamic and continuous. Airport strategic planning is a classic example of a “wicked problem,” or a “problem that has innumerable causes, morphs constantly and has no cor- rect answer.”4 Wicked problems require (1) broader participation of parties affected either directly or indirectly by planned outcomes and (2) gathering a broad spectrum of data from a large and diverse range of sources.5 It should be noted that, in an airport setting, the strategic planning process typically incorporates elements of a “bottom-up” approach, in which stakeholder needs and wishes are considered and consensus among different interest groups is achieved to the extent possible. A change in the environment in which an airport operates may necessitate a change in various elements of the strategic plan. The process is perpetual, and the organization’s strategic plan is fre- quently updated to align its key objectives, performance measures, and targets with the environ- ment and uncertainties that arise. A flow chart of the steps to be taken in each of the four main phases of the airport strategic planning process is presented in Exhibit 2-4. The first, or preplanning, phase establishes the pur- pose and method for undertaking the strategic planning process. This phase includes identifica- tion of the need and reasons for developing the strategic plan, an assessment of the organization’s readiness to participate in strategic planning activities, development of the scope and schedule for the planning process, identification of planning team members and the roles that other stake- holders should play in the process, and determination of whether there is a need to select an external facilitator. The analysis/evaluation phase develops the airport organization’s mission, vision, and values statements. This phase also includes an evaluation of the historical context and culture of the orga- nization and a scan of the environment in which the organization operates, including a review of the organization’s internal strengths and weaknesses and external threats and opportunities. The findings of these evaluations and reviews provide a means for the organization to assess and ana- lyze critical gaps between current performance and established vision. The review of the critical gaps may also lead the organization to reassess its vision so that it is harmonized with the organi- zation’s internal strengths and weaknesses and is adaptable to a range of future environments in which the organization may operate. The implementation/execution phase provides the vital link between an organization’s mission and vision, resulting in the formulation and communication of strategies and objectives that must be implemented for the vision to become reality. In this phase, strategic issues are identified, generic and grand strategies are developed, and long- and short-term objectives are set, prioritized, assigned, and implemented throughout the entity’s organizational structure. The process for formulating objectives includes weighing resource requirements (e.g., capital and personnel) against the poten- tial benefits that may result from achievement of the objective. Formulation of an action plan for each short-term objective guides the day-to-day activities of staff at the departmental level. The implementation/execution phase also includes determining how to best communicate the content of the strategic plan to stakeholders and developing key performance measures and tar- gets for each of the objectives set in the strategic planning process. Key performance indicators are used to measure and evaluate incremental performance improvement and the achievement of objectives established through the strategic planning process. This phase also includes imple- mentation of an incentives/rewards program to ensure that individual performance is linked to 4 John C. Camillus, “Strategy as a Wicked Problem,” Harvard Business Review, 86 (2008): 98–101. 5 Harry T. Dimitriou and Robin Thompson, Strategic Planning for Regional Development in the UK (Abingdon, UK: Routledge/ Taylor & Francis Group, 2007). What Is Strategic Planning? 11

12 Strategic Planning in the Airport Industry organizational performance and creation of training and development programs to ensure proper implementation of the plan. Monitoring, although listed as the final phase in the planning process, needs to occur through- out the process. In this phase, the key performance indicators defined during the implementation/ execution phase are monitored to assess the effectiveness of the strategic plan and the need for any adjustments. The steps and considerations required to complete these four phases are the subject of this Guidebook and are discussed in detail in the remaining chapters. The definition and development • Evaluate and Understand the Organization • Articulate Mission, Vision, and Values • Scan the Environment and Predict Developments • Analyze Critical Gaps and Reassess the Vision • Identify the Need and Reasons for Developing a Strategic Plan • Assess the Organization’s Readiness for Strategic Planning • Define the Scope of the Process and a Schedule for Planning Activities • Identify the Planning Team • Determine the Stakeholders That Should Participate in the Process and Their Roles • Decide Who Should Be Responsible for Monitoring Implementation • Determine How Frequently Implementation Status Should Be Monitored and How Results Should Be Reported • Establish a Process for Conducting Periodic Reviews of Implementation of the Strategic Plan Objectives and for Modifying the Strategic Plan When Necessary • Identify Strategic Issues • Determine Generic and Grand Strategies • Set Long-term Objectives, Formulate Short-term Objectives, and Create Action Plans • Determine How to Communicate the Strategic Plan to Stakeholders • Define Deadlines and Responsibilities • Select Key Performance Measures and Targets • Implement Incentives/Rewards Programs • Create Training and Development Programs ANALYSIS/EVALUATION PREPLANNING MONITORING IMPLEMENTATION/ EXECUTION Exhibit 2-4. Four phases of the airport strategic planning process.

What Is Strategic Planning? 13 of these steps is based on a review of relevant literature, research conducted for this project, pub- lished practical guidance, and previously implemented techniques. The strategic planning process generally results in the development of one key document, the strategic plan, which can be accompanied by a communications plan and a monitoring plan. Key inputs to the process include internal and external stakeholder views, information relative to the organization’s competition and internal strengths and weaknesses, key industry trends, and exist- ing constraints that are likely to impact the organization’s future. Exhibit 2-5 graphically depicts the inputs and outputs of the strategic planning process. The strategic plan, the communications plan, and the monitoring plan constitute the main outputs of the process. A comparison of the con- tents included in the interrelated plans is provided below: • A strategic plan provides a high-level statement of strategic directions and priorities. The strate- gic plan generally includes generic and grand strategies, long- and short-term objectives, an action plan that defines what needs to be accomplished and who is responsible for each action, and corresponding expected results or performance targets. The strategic plan serves as the basis of comparison for the monitoring plan. • A communications plan establishes the processes for (1) gathering feedback/input from stake- holders and informing all stakeholders of the progress of the strategic planning process and (2) distributing the strategic plan to stakeholders. The first part of the communications plan is developed during the preplanning (first) phase of the strategic planning process and the second part is developed during the implementation/execution (third) phase. A communications plan sets the rules to ensure that communication is maintained among the various individuals or enti- ties involved in the planning process and maximizes opportunities to engage all stakeholders. Development of a communications plan as part of the strategic planning process is particularly relevant for organizations that interact and collaborate with many stakeholders. • A monitoring plan details how to evaluate implementation of the strategic plan and helps ensure that the organization is following the action plan established during the strategic planning process. Management generally benefits from the monitoring process by learning how its orga- nization reacts to specific events. The process helps “trigger” needed adjustments to the strate- gic plan to effectively respond to unanticipated events or business opportunities. Monitoring of strategic plan implementation also allows management to document the evolution of the orga- Exhibit 2-5. Inputs and outputs of the strategic planning process. Strategic Plan Mission and Vision Statements Strategic and Objectives Action Plans and Responsibility Assignments Key Performance Indicators and Targets Communications Plan Monitoring Plan Internal and External Stakeholder Views Competition Information Internal Performance Industry Trends Existing Constraints (environmental, operational, financial) STRATEGIC PLANNING PROCESS INPUTS OUTPUTS

14 Strategic Planning in the Airport Industry nization’s historical performance, which can generally be used to predict how future risks and uncertainties could affect the organization’s future performance. 2.3 The Key Benefits of Strategic Planning The feedback received by the research team from airport executives and aviation industry pro- fessionals through three focus group sessions indicates that a variety of benefits are achieved from engaging in the strategic planning process. These benefits range from increased efficiency result- ing from the establishment of airport performance metrics to gaining stakeholder buy-in for the management team or board of directors’ vision for the airport. Corporate strategic planning activities tend to be more quantitatively focused and are directed toward modification of the organization’s internal and external environment through asset acqui- sition and disposal, market share, and growth. Public sector (e.g., airports) strategic planning activ- ities tend to be more qualitatively focused and are directed toward improving internal operating efficiency, setting and achieving objectives, and financial performance. Several strategic planning benefits were specifically mentioned by participants in each of the three focus groups: the Large Hub/Gateway International Airports Focus Group; the Medium Hub, Small Hub, and Non-Hub Airports Focus Group; and the Corporate/General Aviation Airports Focus Group. Exhibit 2-6 shows these benefits and groups them into four categories: organizational ben- efits, operational/managerial benefits, community/stakeholder benefits, and economic benefits. Organizational benefits of strategic planning mentioned by the focus groups were the following: • Codifying a set of minimum standards or guiding policies that will be supported by the gov- erning body of the airport • Bringing order and a long-term focus to a chaotic business • Allowing management to tie performance evaluations at all organizational levels to a common set of strategic objectives • Providing an important motivational tool to enable employees at all organizational levels and in all departments to understand the mission and vision of the organization Operational/managerial benefits of strategic planning mentioned by the focus groups were the following: • Facilitating the development of metrics to help measure airport performance, leading to increased efficiency • Creating a blueprint for prioritizing the projects that should move forward • Enabling airport management to examine, in a more comprehensive manner, bold initiatives, strategies, and alternatives more easily than during the master planning process Community/stakeholder benefits of strategic planning mentioned by the focus groups were the following: • Helping to diffuse tensions between an airport’s public policy priorities and tenants’ economic development priorities (e.g., an increase in rates and charges to offset the costs associated with construction of a new passenger terminal or automobile parking garage) • Helping to build community support and explain to elected officials how the airport con- tributes to the community’s economic development • Being a tool for soliciting input and buy-in from stakeholders on a particular course of development • Preventing future conflicts by building consensus for a future action that needs to be initiated at the present time (e.g., the acquisition of land parcels that will allow for the long-term devel- opment of airport facilities)

Provides Airport Blueprint and Guiding Policies Brings Order to the Organization and a Long-term Focus Assists in the Creation of Performance Metrics Integrates Performance Evaluations with a Common Set of Objectives Helps Communicate Mission and Goals Creates a Blueprint for Prioritizing Projects Helps Obtain Stakeholder Buy-In on Specific Development and Other Airport Improvement Initiatives Helps Nurture Community Support Builds Consensus Organizational Benefits Operational/Managerial Benefits Community/Stakeholder Benefits Economic Benefits Helps Maintain Financial Stability Helps Diffuse Tensions Between Entities with Different Set of Priorities Enables Airport Management to Examine Bold Initiatives, Strategies, and Alternatives Facilitates Decision Making Leads to Efficiency BENEFITS OF STRATEGIC PLANNING IN THE AIRPORT INDUSTRY Exhibit 2-6. Key benefits of strategic planning in the airport industry. What Is Strategic Planning? 15

16 Strategic Planning in the Airport Industry • Helping to build consensus on core business issues before proceeding with the master plan- ning process The main economic benefit of strategic planning cited by the focus groups was that it allows airport management to shape its strategic response to structural changes in the business envi- ronment (e.g., change in traffic mix from general aviation to corporate) to maintain financial stability A common benefit of the strategic planning process in both airport and corporate settings is that the process is useful for establishing metrics to measure performance. Another common benefit is the usefulness of the process for communicating the mission and vision of the orga- nization to employees. Participants in the three airport focus groups formed by the research team consistently men- tioned the benefits of using the strategic planning process as a tool for reconciling the compet- ing demands of policymakers, the community, and airport tenants and users.6 The usefulness of the strategic planning process for building community support and explaining to elected offi- cials how the airport contributes to the community’s economic development, for instance, was mentioned by participants in more than one focus group. During the focus group discussions, airport executives also stressed the importance of strate- gic planning as a motivational tool to help employees at all operating levels and in all depart- ments to understand the vision for the organization. They also indicated that the airport strategic planning process is oriented toward empowering stakeholders and addressing their needs. The academic literature on corporate strategic planning highlights the usefulness of the strate- gic planning process in enabling corporations to develop strategies for building a competitive advantage that leads to sustained growth in profits. The public utility nature of airports makes airport management less likely to focus on the economic benefits of the strategic planning process. Airport management has limited control over its customer base, and the emphasis for airport organizations is on financial stability (i.e., revenues offsetting costs and a lower rate struc- ture), not profitability. 2.4 The Airport Planning Processes The differences and similarities between airport strategic planning and other forms of airport planning are discussed in this section. An overview of the correlations between these airport planning processes and how their combination provides an essential, if not required, tool for air- port management and planning is also provided. As illustrated in Exhibit 2-7, the airport strategic plan should guide all other airport planning analyses (input from the focus group participants also supported this view). The airport strate- gic plan sets forth the foundation for planning initiatives and defines the road map that the organization should follow to achieve its vision. All other planning analyses should be aligned with and support the strategic plan. Strategic planning differs from long-term planning. In long-term planning, it is generally assumed that the environment in which the organization operates will remain unchanged over time or that trends and patterns from the past will continue in the future. Goals and objectives defined as part of the long-term planning process are based on an extrapolation of current busi- ness trends. Strategic planning, on the other hand, enables an organization to react to a dynamic 6 These benefits were echoed by respondents to the online survey.

and continually changing environment. Strategic planning is about proactively thinking about and mapping the future and developing a creative plan that will enable the organization to reach its objectives in a non-static environment. A review of the external environment to determine whether emerging issues may pose threats or opportunities to the organization is a key compo- nent of strategic planning. Often, many other airport planning analyses are developed prior to development of a strate- gic plan and provide critical inputs to the airport strategic planning process. However, once an airport strategic plan is developed, these planning analyses must be adjusted to align with the strategic plan objectives. The airport business plan and strategic plan are closely related and may even be prepared simul- taneously. An airport strategic plan sets the direction for the airport in the medium- to long-term future, defines generic and grand strategies and long- and short-term objectives, and defines the specific steps necessary for implementing those strategies and objectives. The business plan iden- tifies the short- to medium-term steps that must be implemented to move the organization toward realizing its vision. The business plan should be the department-level action plan that guides the day-to-day implementation of the strategic plan’s specific objectives (i.e., the action plan section of the strategic plan should be consistent with, and integrated into, the department-level business plan). Results of the online survey indicated that there may be a lack of clarity about the relation- ship between an airport’s business and strategic plans. Results of the online survey indicated that Business/Finance Planning and Development Administration RISK IDENTIFICATION OPPORTUNITIES AIRPORT STRATEGIC PLAN BUSINESS PLAN RESOURCE AND STAFFING PLAN TRAINING AND DEVELOPMENT PLAN RISK MANAGEMENT PLAN MARKETING PLAN MASTER PLAN FACILITIES ACQUISITIONSAIR SERVICEINSURANCE CONTRACTS LAND USE PLAN Exhibit 2-7. Interrelationship of airport planning processes. What Is Strategic Planning? 17

18 Strategic Planning in the Airport Industry there may be a lack of clarity about the relationship between an airport’s business and strategic plans, as 44 percent of respondents to the online survey stated that they consider their business and strategic plans to be the same. Airport marketing plans should also reflect the goals set during the strategic planning process. For example, if the goal of the strategic plan for a non-hub airport is to attract a total of 500,000 passengers by 2012, the marketing plan should detail the air service development strategies that will lead to accomplishment of that goal. The master planning process typically defines the airport facilities needed and when they will be needed. Master planning is primarily focused on facilities, while strategic planning has a much broader scope. The master plan relies on the strategic planning process for definition of the air- port’s vision, its customer base (e.g., business aircraft operators vs. general aviation pilots flying for leisure), and services to be provided (e.g., general aviation vs. cargo). On the basis of that infor- mation, the master planning process leads to review and evaluation of several development alter- natives. These alternatives are then ranked and a preferred development alternative is identified. The master plan provides a means to ensure that the facilities required to meet the vision for the airport are identified and that space is reserved for the siting of those facilities, if needed. Over three-quarters of respondents to the online survey indicated that their master plan is linked to their strategic plan. The long-term strategies contained in an airport’s strategic plan are also reinforced and pro- moted in more detailed land use or environmental plans. For example, the most recent strategic plan for Bradley International Airport states that “[t]he Board has identified ‘being an excellent neighbor to the Airport’s surrounding communities through consistent communication and responsiveness’ as a primary supporting element to the Airport’s mission.”7 In support of this objective, airport management will “[i]nclude, inform and request feedback from surrounding communities regarding future development activities on and off the Airport.” Additionally, air- port management will “[a]cquire state-of-the-art noise monitoring equipment, and implement the findings of the FAR Part 150 Study.” The strategic planning process is a useful tool for identifying business risks that may need to be further managed or mitigated through implementation of an enterprise risk management plan. In its Strategic Plan 2007–2011, the Metropolitan Airports Commission (operator of Minneapolis- St. Paul International Airport) identified one of its five most critical issues as the need to address its exposure to the financial risks presented by the rapidly changing economic health of the airlines.8 An action item under this issue is to “develop financial and operational contingency plans.” An airport’s resource and staffing plan and training and development plan are often indirectly tied to the strategic plan through the business plan. As described above, the business plan should include specific department-level objectives that are based on the strategic plan. By measuring each department’s progress toward achieving these objectives, airport management is able to determine the appropriate number of staff needed and their training requirements. An airport’s strategic plan may also establish goals that directly affect the airport’s human resources plans. For example, the Metropolitan Airports Commission’s strategic plan identified one of its 5-year strategies as “match[ing] employee talent with key business needs.” Specific ini- tiatives supporting this strategy were to ensure that employee wages and benefits remained com- petitive and to expand employee training programs. The majority (70 percent) of online survey respondents indicated that their training and development plan is linked to their strategic plan. 7 Connecticut Department of Transportation, Bradley International Airport, Strategic Plan 2009, www.bradleyairport.com/docs/ StrategicPlan2009.doc (accessed May 28, 2009). 8 The most recent version of this airport’s strategic plan is available online at www.metroairports.org/mac/docs/2009- 2013_Strategic_Plan.pdf (accessed May 28, 2009).