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68 Strategic Planning in the Airport Industry Methods commonly used to conduct internal audits may include interviews with senior man- agement, detailed reviews of financial records, reviews of federal and local regulations govern- ing airport operations, reviews of leases between the organization and its tenants, analyses of airport rates and charges, reviews of the organization's capital improvement program (may include one or several airports), reviews of local agreements, and project management and per- formance practices, among others. 6.2 External Environment Scan Airports must function in an external environment over which they have little control. The purpose of the external assessment is to identify and assess external changes and trends, includ- ing economic, technological, demographic, social, and political trends that are likely to have an effect on the airport organization. This assessment includes a scan of the current operating envi- ronment, including identification of potential changes in the future environment that may hold opportunities or constraints/threats for the organization. Several analytical tools are available to scan an organization's environment. This Guide- book focuses on a description of competitive benchmarking and a scan of the external macro- environment in which the organization operates. As no two airports are alike, the input required for completion of these analyses will vary. Airport organizations should tailor their analyses based on the environment in which they operate, their stakeholders, their internal organizational structure, and factors that can affect the organization positively or negatively. 6.2.1 Assessing the Competition As part of the review of the airport organization's external environment, the planning team should benchmark other organizations to determine whether or not its systems are in alignment with those at peer organizations. This type of review provides a means to identify an organiza- tion's strengths and weaknesses by comparing the organization's current practices with practices at other organizations. The comparison of an airport's performance with performance at other airports or other modes of transportation (e.g., rail) that directly compete with the airport is gen- erally referred to as "competitive benchmarking." Competitive benchmarking targets operating procedures or characteristics used by direct competitors or peer airports. The chief objective is to identify specific information about competitors' products (e.g., concession variety), processes (e.g., number of employees per enplaned passenger), and business results (e.g., cost per enplaned passenger), and then to make comparisons with the products, processes, and business results of the planning team's organization. Other industries or organizations can also be benchmarked for comparison of a similar func- tion (e.g., customer satisfaction). This type of benchmarking is generally referred to as "func- tional benchmarking." However, only 9 percent of airport organizations responding to the online survey indicated that data from a different industry sector were used for a similar func- tion (functional benchmarking). In this phase of the strategic planning process, benchmarking is an effective way to identify best practices. Benchmarking allows the planning team to assess the organization's position rel- ative to its peers regarding a specific factor. Later in the process, however, benchmarking can be used as a tool to set the organization's key performance indicators and targets. Benchmarking is also used to link the organization's strategic initiatives to a measurable set of metrics, which can be used to assess the organization's progress toward achieving its vision. In this later phase, benchmarking is a continuous process in which the organization's key performance indicators

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Scanning the Environment and Predicting Developments 69 are compared with those of competitor or peer airports. Benchmarking can be a valuable tool for airport organizations looking to create a continuous performance improvement process. Worksheet 6.02, "Competitor Benchmarking Analysis," provides guidance for identifying comparable peer airports and undertaking the benchmarking analysis. 6.2.1.1 Purpose As part of the assessment of the external environment, benchmarking allows airport organi- zations to do the following: Identify the organization's weaknesses (in comparison to other airports) and practices that can be improved or eliminated. A reason to benchmark, for instance, may be to identify organ- izations that may be more efficient or more capable of satisfying passenger needs. Identify the organization's strengths or other airports' best practices that could be integrated into the organization. Benchmarking allows the identification of trends in the industry that the organization may decide to respond to, take advantage of, or adopt. Define peer airports that are similar in terms of characteristics such as number of enplaned passengers, types of passengers (i.e., international versus domestic and leisure versus busi- ness), types of traffic (i.e., origin and destination versus connecting), and governing entity (i.e., an authority versus a city government). Define the airport's competitors. The definition of an organization as a competitor will depend on the process/activity being reviewed. For instance, an organization could be defined as a competitor based on its geographic location and the number of potential passengers it can attract, while other organizations may be defined as competitors based on the volume of cargo handled at their airports. Although this Guidebook focuses on airports, competitors may also include other transportation modes, such as rail and ground transportation. Collect data that will be used later in the process when defining key performance indicators and targets. As part of the review of the external environment, benchmarking can provide other benefits as well, including the following: A better knowledge of peer/competitor airport performance A deeper understanding of the organization's processes Assistance in identifying new technologies and practices that may have been implemented at other airports An impetus for the organization to look outward 6.2.1.2 Limitations Airport operators should be aware of some challenges they may face when conducting bench- marking analyses: Availability and quality of data. As publicly owned airports are required to report their finan- cial activities, financial metrics are generally available. However, the majority of airport organ- izations do not keep track of other performance measures. The issues of data quality and data consistency also make benchmarking analyses challenging. Operating expenses per employee, for instance, may be skewed due to the percentage of work at an airport that is contracted out. Number of variables. Airports are very difficult to compare due to their differences and the number of variables that must be taken into consideration. The operating expenses of an air- port located in southern Florida cannot be compared to the operating expenses of an airport

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70 Strategic Planning in the Airport Industry located in northern Michigan, where cold climates and snowfalls require a large allocation of funds for snow removal and deicing. Financial benchmarks, such as cost per enplaned passenger, are also difficult to compare on an "apples to apples" basis because each airport organization allo- cates costs to different cost centers and these may or may not be part of the airline rate base. Factors that generally affect the benchmarking of peer or competitor airports include, but are not limited to, the following: Weather Form of governance Degree of contracting out Traffic mix (international versus domestic) and passenger types (leisure versus business) Capacity constraints (e.g., slot allocation, hourly traffic caps, and curfews) Currency exchange (when comparing foreign airports) Services provided to the airlines by the airport organization Local regulations or regulatory environment Business relationships with tenants 6.2.1.3 Key Airport Benchmarking Measures The scope of the benchmarking analysis will vary based on the organization's complexity, resources available to conduct the analysis, the number of measures the planning team decides to benchmark, and the type of data to be measured. As airports differ in type, interrelationships with local government, business, and internal and external stakeholders, no two airport bench- marking analyses are alike. A medium or large hub airport operator, for instance, may conduct a detailed benchmarking analysis of its terminal processes (baggage delivery and reclaim, passenger security screening, ticketing, and so forth). Conversely, general aviation airport operators would likely gather per- tinent information about their organizational performance by benchmarking broader metrics (numbers of aircraft operations, number of FBOs, aeronautical versus non-aeronautical rev- enues, and so forth). Benchmarking of operating procedures or characteristics generally includes, but is not lim- ited to, aircraft/passenger activity, aircraft operations and safety, facilities, internal processes (organizational structure, productivity, and efficiency), service quality and customer satisfac- tion, retail concessions, and finance and rates and charges. These areas and sub-areas within them are listed below: Aircraft/passenger activity Numbers of enplaned passengers and aircraft operations Cargo volume (handled and processed) Passenger types (business versus leisure and origin and destination versus connecting) Operation types (military, air carrier, general aviation, cargo, and local versus itinerant) Based aircraft (number and type) Aircraft operations and safety Security performance measures (customer satisfaction and complaints at security screen- ing checkpoints, security breaches and violations, and number of citations and warnings issued) Safety performance measures (runway incursion, aircraft accidents and incidents, and employee accidents and incidents) Environmental performance measures (noise exposure levels and complaints, air quality, stormwater runoff contamination levels, energy and water consumption, and utility cost per enplaned passenger)

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Scanning the Environment and Predicting Developments 71 Facilities Airport characteristics (number of runways, terminals, gates, parking spaces, and so forth) Performance of existing processes (aircraft delays, passenger processing times at security screening checkpoints, average passenger wait times at baggage claim, Customs clearance processing times, walking/travel distances, and remote parking shuttle transfer times) Constraints to airport growth (terminal space available for concessionaires, number of gates available, and airport operatorowned property available for development) Internal processes (organizational structure, productivity, and efficiency) Operating efficiency (enplaned passengers per direct employee, total terminal complex maintenance costs per enplaned passenger, ground maintenance costs per acre, and time to respond to comment cards/complaints) Personnel costs (salaries and benefits for airport employees per enplaned passenger, over- time as a percentage of total wages, and training hours per full-time equivalent employees) Outsourcing (percent of contract employees and cost of contract employees as a percent of total operating costs) Diversity (percent of female, minority, and disabled employees) Personnel satisfaction (absenteeism percentage and annual turnover percentage) Service quality and customer satisfaction Air service diversity (number of direct destinations and average airfares) Satisfaction with processing times Satisfaction with retail concessions (concession diversity and variety and value for money for food and beverage concessions) Satisfaction with facilities (cleanliness, number of restrooms, availability and cost of air- port parking, and complaints per enplaned passenger) Retail concessions Revenue sharing agreements Quality of services provided (courtesy and appearance of staff, speed and quality of cashier service, availability of wireless Internet access and Internet stations, and availability of elec- trical outlets or charging stations) Diversity of concessions (services versus food/beverage, food, and retail offerings) Finance and rates and charges Leasing and subleasing philosophies/structures Revenue sharing agreements Revenue sources (aviation-related, non-aviation-related, and other) Capital expenditures and costs Budgetary cost control measures Cash flow and liquidity Debt level Return on equity and assets 6.2.1.4 Steps Required to Conduct a Meaningful Benchmarking Analysis This section provides a brief overview of the steps required to complete a competitive bench- marking analysis that focuses on similar organizations (i.e., airports). The best model for bench- marking is whichever model best fits the specific organization, but, as indicated in Exhibit 6-1, this process generally involves determining what to benchmark, which airports and/or organi- zations to benchmark, defining competitors' best practices and comparing the organization's performance against that of its competitors by collecting and analyzing benchmarking informa- tion, and taking actions based on the results of the analysis. Deciding What to Benchmark. Before collecting data, the planning team must choose what measures to compare. It is of little value to benchmark irrelevant processes or activities or processes or activities for which key performance indicators do not exist. The measures the organization

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72 Strategic Planning in the Airport Industry 4) Take Action 1) Determine What to Benchmark The Benchmarking Process 3) Collect and 2) Identify Peer Analyze Airports or Benchmarking Organizations Information Source: Derived from Michael J. Spendolini, The Benchmarking Book (New York: ANACOM,1992). Exhibit 6-1. Benchmarking Process. should benchmark should have the potential to provide a real, sustainable, competitive advan- tage. By answering the following questions, the planning team should be able to determine the measures to benchmark: Is there a specific area where frequent complaints arise? Which functions contribute most to our organization's favorable or unfavorable image? What function has the most impact on achieving strategic goals and objectives? What is the most critical factor to our organization's success? What factors are causing the most trouble? What are some of our organization's weakest points? What key factors do passengers generally refer to in terms of satisfaction/dissatisfaction? Which functions have the greatest potential for differentiating our organization from its competitors in the marketplace? What does our organization need to learn more about? What is critical to our organization's ability to positively serve the community/region? After answering these questions, the planning team should develop and categorize a final list of measures to be benchmarked. Each airport operator should decide upon a few key measures that are critical to its benchmarking assessment. Potential focus areas that can be used to categorize benchmarking metrics include, but are not limited to, the following: Airport operations and safety Facilities Productivity and efficiency Service quality and customer satisfaction Retail concessions Finance and rates and charges Other comprehensive, non-airport specific, frameworks for measuring organizational per- formance include the Malcolm Baldrige criteria and the Kaplan and Norton criteria.

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Scanning the Environment and Predicting Developments 73 Organization Profile: Environment, Relationships, and Challenges 2 5 Strategic Workforce Planning Focus 1 7 Leadership Results 3 6 Customer and Process Market Focus Management 4 Measurement, Analysis, and Knowledge Management Source: Baldrige National Quality Program, Criteria for Performance Excellence, www.quality.nist.gov/Business_Criteria.htm (accessed May 10, 2008). Exhibit 6-2. Baldrige National Quality Program--criteria for performance excellence. Malcolm Baldrige Criteria. The Malcolm Baldrige National Quality Award was created by the U.S. Congress in 1987 to enhance U.S. competitiveness with regard to quality and produc- tivity by doing the following: Helping to stimulate American companies to improve quality and productivity for the pride of recognition while obtaining a competitive edge through increased profits; Recognizing the achievements of those companies that improve the quality of their goods and services and providing an example to others; Establishing guidelines and criteria that can be used by business, industrial, governmental, and other organizations in evaluating their own quality improvement efforts; and Providing specific guidance for other American organizations that wish to learn how to man- age for high quality by making available detailed information on how winning organizations were able to change their cultures and achieve eminence.47 The program promotes quality awareness, recognizes quality achievements of U.S. organiza- tions, and provides a vehicle for sharing successful strategies. The Baldrige criteria focus on results and continuous improvement. They provide a framework for designing, implementing, and assessing a process for managing all business operations. The Baldrige performance excellence criteria provide a framework that any organization can use to improve its overall performance. As illustrated on Exhibit 6-2, seven categories make up the award criteria, including leadership; strategic planning; customer and market focus; mea- surement, analysis, and knowledge management; workforce focus; process management; and results. These criteria are briefly described below: Leadership: This category relates to how senior executives guide the organization and how the organization addresses its responsibilities to the public and practices good citizenship through ethical, legal, and community responsibilities. 47 Malcolm Baldrige National Quality Improvement Act of 1987, Public Law 107, 100th Cong., 1st sess. (August 20, 1987). Avail- able at www.quality.nist.gov/Improvement_Act.htm (accessed May 28, 2009).

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74 Strategic Planning in the Airport Industry This category is used to examine how leaders set and communicate the organization's vision and values and how they practice these values. It focuses on leaders' actions to create a sus- tainable, high-performance organization with a business and customer focus. In addition, it focuses on leaders setting values and direction, communicating, creating value for all stake- holders, and creating an organizational bias for action. Typical questions to address as part of this category include the following: How do leaders set organizational vision and values? How do leaders deploy organizational vision and values? How do leaders encourage frank, two-way communication throughout the organization? Strategic Planning: This category relates to how the organization sets strategic direction and how it determines key action plans. It is also used to examine how organizational strate- gic objectives and action plans are implemented, measured, and changed if circumstances require. The Strategic Planning category encourages strategic thinking and acting in order to develop a basis for competitive position in the marketplace. This category is used to examine how organizations optimize the use of resources; determine strengths, weaknesses, opportunities, and threats; and execute the overall strategy. Customer and Market Focus: This category is used to examine how the organization deter- mines requirements and expectations of customers and markets; builds relationships with cus- tomers; and acquires, satisfies, and retains customers. The Customer and Market Focus category focuses on gaining knowledge about the need and desires of current and future customers and markets, with the aim of offering relevant products and services; understanding emerging customer requirements, needs, and expecta- tions; keeping pace with market changes; and reacting to those changes. Typical questions to address as part of this category include the following: How does the organization identify customers and market segments? How does the organization determine key customer requirements, needs, and changing expectations? How does the organization keep customer and market listening and learning methods current with business needs and direction? Measurement, Analysis, and Knowledge Management: This category focuses on gathering information about measuring, analyzing, and improving performance and managing organi- zational knowledge to drive improvement and organizational competitiveness. Applicants for the Malcolm Baldrige National Quality Award must answer, among other questions, how the organization selects, collects, aligns, and integrates data and information for tracking daily operations and overall performance and how the organization keeps the per- formance measurement system current with business needs and direction. Workforce Focus: This category is used to examine how the organization enables its work- force to develop its full potential and how the workforce is aligned with the organization's overall mission, strategy, and action plan. This category is also used to examine the organi- zation's ability to assess workforce capability and capacity needs in order to build a high- performance workforce environment. Typical questions to address as part of this category include the following: How does the organization's workforce development and learning system address the needs and desires for learning and development identified in the workforce? How does the development and learn- ing system develop personal leadership attributes? Process Management: This category is used to examine how key production/delivery and sup- port processes are designed, managed, and improved. The Process Management focus con- sists of the identification and management of core competencies to achieve efficient and effective work process management. Typical questions to address as part of this category include the following: How does the organization determine its core competencies? What are the core competencies of the organization?

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Scanning the Environment and Predicting Developments 75 Results: This category focuses on the organization's performance and improvement in its key business areas. This category is also used to examine how the organization performs relative to its competitors.48 Kaplan and Norton Criteria (Balanced Scorecard). The Kaplan and Norton criteria refer to a strategic approach that enables organizations to translate their vision and strategy into implementation from four perspectives: (1) the financial perspective, (2) the customer perspec- tive, (3) the internal (business process) perspective, and (4) the organizational learning and growth perspective. These four perspectives provide a comprehensive view of an organization's performance from different viewpoints. The financial perspective measures the ultimate results that the business provides to its shareholders, including profitability, revenue growth, return on investment, economic value added, and shareholder value. The customer perspective focuses on customer needs and satisfaction, as well as market share, including service levels, satisfaction ratings, and repeat business. The internal (business process) perspective focuses attention on the performance of the key internal processes that drive the business, including quality levels, productivity, cycle time, and cost. The organizational learning and growth perspective focuses on the organization's people and infrastructure. Key measures might include intellectual assets, employee satisfaction, market innovation, and skills development. For each of the four perspec- tives that are part of the Kaplan and Norton Criteria, objectives, measures, targets, and initiatives shall be monitored and scored. Objectives shall include major objectives to be achieved to trans- late the organization's strategy into implementation. Objectives have to be defined for each of the four perspectives defined by Norton and Kaplan. Measures relates to the observable parame- ters that will be used to measure progress towards reaching the objectives. Targets specify the spe- cific target values for the measures, and initiatives include all projects or programs to be initiated in order to meet the objective. The Kaplan and Norton framework and the Baldrige Award criteria are similar: "In both mod- els, the focus is on a set of measures that provides a comprehensive perspective on organizational performance, and any measure an organization might use can be assigned to an appropriate cat- egory in either framework."49 Additional information on the balanced scorecard can be found on the Balanced Scorecard Institute's website at www.balancedscorecard.org. Deciding Which Organizations to Benchmark. Direct competitor and peer airports are prime candidates for benchmarking, but for certain functions and processes, an organization may decide to benchmark the best airports or business functions regardless of their location or type. As indicated in Worksheet 6.02, "Competitor Benchmarking Analysis," criteria to be consid- ered when deciding which airports to benchmark will depend on the area/measure being bench- marked and the different set of airports that may be associated with each area/measure to be benchmarked. Typical criteria that airport organizations account for when deciding which airports to bench- mark include the following: Location Numbers of enplaned passengers 48 Baldrige National Quality Program, 20092010 Criteria for Performance Excellence (also referred to as the "Business/ Nonprofit Criteria") and available at www.quality.nist.gov/Business_Criteria.htm [accessed May 28, 2009]. This report describes in detail the Baldrige National Quality Program, including the criteria used by the Board of Overseers for evaluating applicants for the Malcolm Baldrige National Quality Award. 49 James R. Evans and Eric P. Jack, "Validating Key Results Linkages in the Baldrige Performance Excellence Model," Quality Management Journal 10, no. 2 (2003): 724.

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76 Strategic Planning in the Airport Industry Airport type Governing entity type Degree of contracting/outsourcing Weather (cold versus warm climates) Passenger type (leisure versus business) Traffic type (origin and destination versus connecting) Traffic type (domestic versus international) Level of congestion Metropolitan area population Dominant airlines Airport activity focus (general aviation, cargo, or commercial) Functional benchmarking of other industries may be useful, particularly where it relates to customer satisfaction. For example, as a low-end benchmark, an airport organization may want to compare its customer satisfaction rate with that of public transit agencies, and, as a high-end benchmark, the organization may want to compare its customer satisfaction rate with that of leading hotels. Deciding How to Collect the Data. There is no one way to conduct a benchmarking analy- sis. Benchmarking is a process used to derive quantifiable goals and targets, but, more impor- tantly, it is also used to investigate and document best industry practices, which can help an organization achieve its goals and targets. The benchmarking analysis must involve a careful understanding of the organization's cur- rent processes and practices, as well as those of the organizations being benchmarked. What is desired is an understanding of internal performance on which to assess the organization's strengths and weaknesses. Publicly Available Benchmarking Studies. Airport industry organizations and consulting firms have initiated several studies designed to collect information relative to airport perform- ance. Airport organizations participate in these collaborative studies on a voluntary basis, and the results of the related surveys are generally made available to the public. These studies pres- ent a review of a wide range of performance measures that generally fall within the categories of activity and operations, facilities, productivity and efficiency, customer satisfaction, retail con- cessions, and finance. A large majority of airport operators will find data relative to the performances they want to benchmark in these studies. To assess which study would be the most appropriate for a particular benchmarking analysis, complete Worksheet 6.02, "Competitor Benchmarking Analysis." Two related Airport Cooperative Research Program projects, ACRP Project 01-06 "Guide- book for Developing an Airport Performance-Measurement System," and ACRP Project 01-09 "Airport Performance Indicators," are also focused on providing detailed information about available sources of airport benchmarking data. A brief description of benchmarking studies conducted by government agencies, industry associations (such as ACI and AAAE), and other organizations that the planning team should review when assessing the operational procedures and characteristics of peer airports and com- petitors is provided below. This list is broken down into seven categories: aircraft/passenger activity, aircraft operations and safety, facilities, productivity and efficiency, service quality and customer satisfaction, retail concessions, and finance and rates and charges.

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Scanning the Environment and Predicting Developments 77 Studies focused on aircraft/passenger activity (to be used to determine peer airports) include the following: ACI's Monthly Worldwide Airport Traffic Statistics Report:50 This report features detailed data on member airports participating in the monthly data collection. The report provides data on passengers, cargo, and aircraft movements for the reporting month and for the year-to-date period. Based on a review of this report, the planning team can seek airports of comparable size and with similar aircraft operations and enplanement levels. FAA Terminal Area Forecast:51 This document contains historical aviation activity data and FAA forecasts for active airports in the NPIAS. Forecasts are provided for air carriers, com- muters/air taxis, general aviation, and military operations as well as enplaned passengers. This document provides relevant statistical information that can help an airport organization determine airports of similar size/profile. FAA National Plan of Integrated Airport Systems, Appendix A:52 This appendix lists all active airports in the NPIAS and includes projected development costs (not including planning costs) for a 5-year period (for airport improvements that are eligible for federal development grants under the Airport Improvement Program [AIP]). This appendix is useful for identify- ing airports of comparable size and similar geographic region. FAA Passenger Boarding and All-Cargo Data:53 Enplaned passenger and cargo data are extracted from the Air Carrier Activity Information System (ACAIS), a database that contains revenue passenger boarding and all-cargo aircraft data. The database supports the FAA's AIP apportion- ment formula calculations. Passenger boarding and all-cargo data are collected for a full cal- endar year and are used to determine entitlements for the next full fiscal year (i.e., Calendar Year 2007 data determine Fiscal Year 2009 entitlement funds). This database is useful in iden- tifying airports that have similar passenger and cargo traffic. Studies focused on aircraft operations and safety include the following: FAA Runway Safety Report:54 The FAA Runway Safety Report presents data related to runway safety in the United States. The report is updated every four fiscal years and highlights runway safety initiatives intended to reduce the severity, number, and rate of runway incursions. NTSB Accident Database and Synopses:55 The NTSB aviation accident database contains infor- mation beginning in 1962 about civil aviation accidents and selected incidents within the United States, its territories and possessions, and in international waters. FAA Accident/Incident Data System:56 The FAA, in an attempt to promote the open exchange of safety information in order to continuously improve aviation safety, developed the Avia- tion Safety Information Analysis and Sharing (ASIAS) system. The ASIAS system enables users to perform integrated queries across multiple databases, search an extensive warehouse of safety data, and display pertinent elements in an array of useful formats. Bureau of Transportation Statistics (BTS), Airline On-Time Statistics:57 Each month, the domestic carriers that account for at least 1 percent of total domestic scheduled-service pas- senger revenues, plus two other carriers that report voluntarily, report their on-time data to the BTS. The data include nonstop scheduled-service flights between points within the United States, including territories. Data are available from January 1995 forward. 50 Available online at www.aci.aero/cda/aci_common/display/main/aci_content07_cjsp?zn=aci&cp=1-6-435732^2003_666_2__. 51 Available online at http://aspm.faa.gov/main/taf.asp. 52 Available online is www.faa.gov/airports/planning_capacity/npias/reports/. 53 Available online at www.faa.gov/airports/planning_capacity/passenger_allcargo_stats/passenger/. 54 Available online at www.faa.gov/airports/runway_safety/media/pdf/RSReport08.pdf. 55 Available online at www.ntsb.gov/ntsb/query.asp. 56 Available online at www.faa.gov/data_research/accident_incident/. 57 Available online at www.bts.gov/xml/ontimesummarystatistics/src/index.xml.

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78 Strategic Planning in the Airport Industry Studies focused on facilities include the following: ACI-North America (NA), Airport General Information Survey:58 ACI-NA's General Informa- tion Survey is a comprehensive survey of general characteristics for approximately 130 North American airports. The survey provides detailed information on airport ownership and gover- nance, physical characteristics, activity statistics, airport/airline use and lease agreements, and financial and economic characteristics. Airport operators have found the survey results to be invaluable in comparing their facilities and charges with those at other airports. The database is ideal for general fact finding and informal airport benchmarking and is an important resource for airport planning, assessments, research, and background information for papers and articles. ACI-NA, Airport Parking Study:59 This study is a comprehensive analysis of airport parking facility rates and charges. Review of this study can assist the planning team in identifying best practices with regard to parking facilities and associated rates and charges. ACI-NA, Air Cargo Facilities Survey:60 This survey provides a comprehensive analysis of air cargo facilities in the United States. International Facility Management Association, Benchmarks V:61 This survey, which includes data from airports, is designed to collect facility data that will easily allow comparison of costs and practices across various types of facilities. A study focused on productivity and efficiency is the Air Transportation Research Society's Airport Benchmarking Report: Global Standards for Airport Excellence:62 The annual global Air- port Benchmarking Report is an unbiased and comprehensive assessment of airport performance that includes three volumes of productivity, efficiency, and unit cost competitiveness data. Released every summer, the report provides over 30 performance measures identifying effects of the oper- ating environments of airports, business diversification efforts, outsourcing, and service quality. Peer airports are benchmarked within geographical boundaries, which currently span three regions: North America, Europe, and Asia Pacific and Oceania. Studies focused on service quality and customer satisfaction include the following: J. D. Power, Global Airport Satisfaction Index Study:63 This study measures airport satisfaction in three segments: large (30 million or more passengers per year), medium (10 million pas- sengers to fewer than 30 million passengers per year), and small (less than 10 million passen- gers per year). The survey considers the following as key measures of airport satisfaction: airport accessibility, the check-in process, security processing, terminal facilities, baggage claim, and overall airport satisfaction. Transportation Research Laboratory, Airport Service Quality Monitor (ASQM):64 The ASQM assesses actual airport services by comparing the processes and practices at airports. The ASQM includes more than 500 measurements to cover all service areas experienced by pas- sengers. Performance metrics included in the ASQM database include the average passen- ger wait time at the ticket counter, the average time for the first bag to arrive on baggage claim devices, the distance to the furthest gate, the frequency of trains between airports and city centers, and the information presented on flight information display screens. ACI Airport Service Quality (ASQ) Programme:65 The ASQ Programme is a comprehensive ACI initiative to help airport operators in their continuing efforts to improve the quality of 58 Available online at www.aci-na.org/. 59 Ibid. 60 Ibid. 61 Available online at www.ifma.org/tools/index.cfm. 62 Available online at www.atrsworld.org/airportawards.html. 63 Available online at www.jdpower.com/. 64 Available online at www.trl.co.uk/consultancy/aviation/. 65 Available online at www.airportservicequality.aero/.

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Scanning the Environment and Predicting Developments 79 service experienced by passengers. The ASQ Programme identifies and disseminates best prac- tices from top-performing airports around the world. The ASQ rankings are based on the results of questionnaires completed by passengers. The surveys capture the passengers' imme- diate appraisals of 34 airport service factors, from check-in through departure at the gate. A study focused on retail concessions is the Airport Revenue News (ARN) Fact Book:66 The 2008 edition of the ARN Fact Book contains comprehensive data on food and beverage, specialty retail, news and gift, duty free, advertising, parking, and rental car concessions at 95 major airports. Data included in the Fact Book include concessionaire company details, concession sales, planned expansions, lists of terminal/concourses, management contacts and structure, passenger traffic, gross sales per enplaned passenger, rent revenue to the airport operator and current square footages broken down by category (food/beverage, specialty retail, and so forth), revenues from passenger services, revenues from parking and rental cars, ratio of pre- versus post-security con- cession locations, and tenant details. Studies focused on finance and rates and charges include the following: Airport Financial Reports (FAA Forms 5100-126 and 5100-127):67 Each year, the operators of U.S. commercial airports must file with the FAA a Financial Governmental Payment Report (FAA Form 5100-126) reporting the payments made to governmental entities, the services the airport provides for governmental entities, and the land and facilities the airport provides to governmental entities as well as an Operating and Financial Summary (FAA Form 5100-127) reporting airport revenues, expenses, and other financial information. ACI Airport Economics Survey:68 The ACI Airport Economics Survey provides an overview of airport business activity and an analysis of economic performance based on data collected from a sample of airports representing global passenger traffic. ACI-NA, Airport Macro-Benchmarking Survey:69 ACI-NA and the airlines developed a small set of highly defined macro-benchmarks to ensure accurate measurement and comparison of key, high-visibility industry benchmarks. Clearly defined statistics are used as the base, and subcomponents that vary significantly across airports because of institutional and manage- ment practice differences are added or subtracted to derive net macro-benchmarks that more accurately reflect relative performance. ACI-NA, Airport Initiatives in Measurement (AIM) Benchmarking Study:70 The AIM study attempts to benchmark various components of an airport's operation and to use this infor- mation to develop best practices. Additionally, ACI-NA is developing an ongoing airport per- formance measurement group to chronicle the differences among the participating airports, identify possible peer airports, define a common measurement methodology, and agree on compilation practices to ensure data comparability. AAAE Rates and Charges Survey Report:71 This survey provides a broad range of information on airport revenue sources, fee structures, and physical characteristics. The survey contains data from over 200 airports ranging from large air carrier airports to small general aviation airports. The survey includes airport activity statistics, airport positions/staffing, airline agree- ments, landing and apron fees and the methodology used to calculate them, revenues, con- cessions, and financial statements. Rating Agency Reports: Reports on the airport industry and specific airports from Fitch Rat- ings, Moody's Investors Service, and Standard & Poor's provide a broad range of financial metrics that can be used for benchmarking. 66 Available online at www.airportrevenuenews.com/subscribe/subscribe.php. 67 Available online at www.faa.gov/airports/airport_compliance/airport_financial_reporting_program/index. cfm?print=go. 68 Available online at www.aci-na.org/. 69 Ibid. 70 Ibid. 71 Available online at www.aaae.org/federal_affairs/regulatory_affairs/rates_and_charges_survey/.

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80 Strategic Planning in the Airport Industry Benchmarking Partners. The information to be collected for the benchmarking analysis is not always proprietary and airport organizations may agree to mutually exchange information beneficial to all parties in a benchmarking group and share the results within the group. At Tampa International Airport, for instance, the Hillsborough County Aviation Authority initiated an AIM benchmarking program. This program, which was initiated in 2003, allowed a small group of airports to submit data for comparative purposes. AIM was later expanded to other airports and, eventually, ACI took over the program (see Airport Initiatives in Measure- ment (AIM) Benchmarking Study above). 6.2.2 Assessing External Opportunities and Threats External opportunities and threats should be analyzed as part of the external environment scan. Opportunities are outside factors that the organization can take advantage of to better ful- fill its mission, meet its mandates, achieve its strategic initiatives (vision), or provide public value. As Ziegenfuss has indicated, "achieving a vision for the future requires a readiness to exploit opportunities that appear as the organization moves towards its vision."72 Conversely, threats are outside factors that might hinder pursuit of the organization's vision. Opportuni- ties and threats are the external components of the SWOT analysis. The planning team can choose to review external opportunities and threats before they examine internal strengths and weaknesses. Use of Kepner-Tregoe73 situational analysis techniques allows the potential impact of par- ticular opportunities or threats to be assessed according to three criteria: (1) seriousness, (2) urgency, and (3) growth potential. If the opportunity is critical to the future success of the organization, it is highly serious. If the opportunity must be acted upon immediately for it to be effectively taken advantage of, it is highly urgent. If the seriousness is expected to increase dramatically over time, the opportunity has high growth potential. Similarly, if a threat is expected to have a significant negative impact on the future success of the organization, it is highly serious. If the threat must be resolved immediately for the resolution to be effective, it is highly urgent. If the seriousness of the threat is expected to increase dramatically over time, the threat has high growth potential. According to the online survey data, the identification of uncertainties as part of the strategic planning process was extremely important to 68 percent of the respondents and somewhat important for 26 percent of respondents. Only 6 percent of respondents indicated that the iden- tification of uncertainties is not important. Further, a majority of online survey respondents (89 percent) account for or somewhat account for outside factors, uncertainties, and extreme events as part of the strategic planning process and integrate these factors into their organization's strategic plan. They develop contingencies for identified potential vulnerabilities and implement projects that reduce the level of risk over time through the use of sensitivity analysis or through specific operational, budgetary, and capital improvement plans. The driving forces that create momentum or pressure for change in the airport industry and result in the creation of opportunities or threats include the macro-level economic environment, the population and economic base, technological development/trends, regulatory changes, com- 72 James T. Ziegenfuss, Jr., Strategic Planning, Cases, Concepts, and Lessons, 2d ed. (Lanham, MD: University Press of America/Rowan Littlefield, 2006). 73 Charles H. Kepner and Benjamin B. Tregoe, The Rational Manager: A Systematic Approach to Problem Solving and Decision Making (Princeton, NJ: Kepner-Tregoe, 1976).

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Scanning the Environment and Predicting Developments 81 CASE STUDY Assessing Opportunities and Threats--Houston Airport System This case study provides a tangible example of external assessment findings for an airport organization. The Houston Airport System (the System)--encompassing George Bush Intercontinental Air- port, William P. Hobby Airport, and Ellington Airport--constantly scans its external environment as part of its Destination 2020 program. The three-airport system served more than 50 million passengers in 2008, including more than 7.9 million international travelers. The aim of the Destination 2020 program is to ensure the airports maintain optimal efficiency while determining how to best handle 80 million passengers by 2020. The main participants in the Destination 2020 program are a strategic leadership team (SLT) composed of the aviation director and five deputy directors, an implementation team (IT) composed of 10 upper middle man- agers, and various deployment teams (DT) composed of individuals from various areas of the organization. The SLT is responsible for developing the mission and vision statements, reading the organization's internal and external environment (both presently and with a 10- to 20-year horizon) and setting broad objectives that are then refined by the IT and DT. The SLT meets monthly and the IT meets weekly. The SLT has concluded that the most immediate threat to the System is the current economic recession and its impact on the System's existing capital development program and bond ratings. With the potential for more airline bankruptcies and mergers, it is a challenge to determine what particular capital projects should be implemented now. This is made particularly difficult by the fact that both Intercontinental and Hobby airports have one air carrier with a dominant market share (Continental and Southwest, respectively). Future activities and capital projects at competing airports (e.g., Dallas/Fort Worth International Airport, Hartsfield-Jackson Atlanta International Airport, and Miami International Airport) that make them a more attractive connecting point for transfer traffic are also a potential threat. The relative economic strength and rapid population growth of the Houston area, when combined with the network effects from the dominant hub carriers at each airport, present an opportunity for growth in the num- ber of nonstop destinations served from Houston. To fully leverage this opportunity, the SLT is focused on cost (e.g., cost per enplaned passenger) and customer service issues. The IT also plays an important role in identifying opportunities and threats, particularly those that are immedi- ate. Since these managers have day-to-day responsibility for functional areas, they are particularly good at identifying opportunities and threats on a real-time basis and proposing activities or programs to address them to the SLT. petition, the airline industry, public support, and catastrophic events. These forces are listed and explained in further detail below: Macro-level economic environment. This category includes the macro-level economic fac- tors that are likely to affect airport growth. The following global economic and commodities indicators should be considered when assessing the external environment: Inflation Consumer confidence index Consumer spending and income Employment Housing and construction markets Manufacturing and industrial markets Commodities data, including data on oil demand and supply trends

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82 Strategic Planning in the Airport Industry Population and economic base. Together with considering the economic environment at a macro level, the planning team should consider local and regional economies and identify trends that may affect their organization's operations. Local and regional economic indica- tors that should be considered include, but are not limited to, the following: Employment Per capita income Home sales Retail sales Poverty level Trade indicators, including gross national product (GNP), gross domestic product (GDP), and net foreign direct investment (FDI) per capita Cross-border air freight Technological development/trends. This category includes the technological factors that are likely to influence the organization's future. Examples of technological developments that have affected the airport industry in the past include introduction of the A380 aircraft (new large aircraft), introduction of e-tickets, and the emergence of self-service check-in kiosks. Regulatory changes. Regulatory factors that have influenced or will influence the airport industry include the runway safety area (RSA) compliance deadline set by the FAA for 2015 and the required screening of passengers and carry-on and checked baggage. Competition. Existing and potential competitors may include the following: Local/regional airports (e.g., airports that compete for the same passenger, cargo, or gen- eral aviation base) Organizations that fulfill the same customer needs (e.g., Amtrak provides an alternative for travel between Washington, D.C., and New York) Other airports marketing a specific product (e.g., airports seeking certification as space- ports capable of handling horizontal launches of reusable spacecraft, airports marketing aircraft maintenance repair, and overhaul companies) Other airports or organizations that offer facilities or processes similar to those offered by an organization (e.g., large hub airports generally define their competitors as other large hub airports attracting a large portion of connecting traffic; customer satisfaction programs from other industries, such as the hotel industry, may be considered) Airline industry. The current state of the airline industry should be assessed and potential trends should be identified. The following trends have affected the airline industry in the past: Airline bankruptcies Airline mergers and acquisitions Influence and effects of low-cost carriers Hub development and de-hubbing activities Major and regional airline partnerships New aircraft type introduction Rising fuel costs Public support. When conducting a review of the environment in which they operate, airport operators should identify any anticipated public support for or opposition to the airport. Catastrophic events. Catastrophic events include human-made accidents or attacks and natural events. Examples of catastrophic events that could affect airports and that should be considered when determining the effect of external factors on the organization include the following: Terrorist acts Major aircraft accidents Natural disasters (e.g., hurricanes)

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Scanning the Environment and Predicting Developments 83 Strengths Opportunities Sustainable Competitive Advantage Weaknesses Threats Source: Triant G. Flouris and Sharon L. Oswald, Designing and Executing Strategy in Aviation Management (Hampshire, UK: Ashgate, 2006). Exhibit 6-3. SWOT analysis. Worksheet 6.03, "External Opportunities and Threat Identification," will help the planning team identify the types of driving forces that could affect the organiza- tion's future, including opportunities and threats. 6.2.3 Developing the SWOT Matrix The SWOT matrix is a commonly used tool for developing a strategy that is a byproduct of the organization's internal resources and capabilities and the state of the industry. Using the out- comes of the internal assessment, competitor and peer group analysis, and external opportuni- ties and threats assessment, the planning team should develop a SWOT matrix. This matrix will help the planning team visualize the results of the previous analyses and provide the foundation for the definition of the organization's strategy. Ultimately, the SWOT matrix will help the organization build strategies (determine the best ways to achieve a competitive advantage), for- mulate objectives (identify specific improvements that should be made), and build in account- ability (identify key performance indicators to be used to measure improvements). "The premise of SWOT is that the goal of the strategy-making process is to produce a good fit between the company's internal capabilities and the environmental conditions."74 Exhibit 6-3 illustrates the SWOT analysis concept. As previously noted, the analysis of strengths, weaknesses, opportuni- ties, and threats faced or to be faced by the organization will help define or create the organiza- tion's competitive advantage. Examples of strengths, weaknesses, opportunities, and threats that airport organizations may identify while scanning the external environment include the following: Strengths The airport is well positioned to accommodate further air cargo traffic. Landing fee rates are the lowest in the region, the airfield facilities are rated in excellent to good condition, additional air cargo warehouse space is available to accommodate future demand, and the airport is cen- trally located in the region with easy access to interstate highways and seaports. The adjoin- ing Foreign Trade Zone (FTZ) provides an added incentive to potential air cargo tenants. The airport's balance sheet is very healthy, with 700 days of cash on hand as of September 30, 2008, and an operating ratio of 30 percent. Total debt service coverage and revenue 74 James T. Ziegenfuss, Jr., Strategic Planning, Cases, Concepts, and Lessons, 2d ed. (Lanham, MD: University Press of America/Rowan Littlefield, 2006).