Opportunities and limitations to vertical alliance partnerships - - PowerPoint PPT Presentation

Opportunities and limitations to vertical alliance partnerships between airports and airlines

6th Conference on Applied Infrastructure Research (“INFRADAY”) Berlin, October 6th, 2007

• Dr. Benjamin Koch

INFRADAY Berlin - October 6th, 2007 Airline-Airport-Alliances 2

Agenda

I. I. Introduction Introduction II. Airport-Airline-Alliance partnerships from different viewpoints

I. Resources and environment II. Political aspects III. Technological aspects

III. Conclusion

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Airline-Airport-Partnerships – Where do we come from?

• Traditional perspective on the airline-airport-relation
• Traditional value chain perspective: customer / supplier
• No integration throughout the value chain between any

partners

Origin Ground transp. Origin airport Airline Desti- nation airport Ground transp. Desti- nation

The traditional air travel chain Level of integration with other value chain parties

none none none none none

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Alliances are only one possible approach for establishing partnerships

• Partnerships allow to (besides other factors)
• Optimize the functioning and cooperation of the value chain
• Reduce risks (increasing stability)
• The choice of the partnership approach depends on

many factors, esp. including

• the willingness to realize financial investments
• the expectation on steadiness and duration

Partnership

• ptions

Alliances (Horizontal / Vertical / diagonal) M & A Joint ventures Other cooperation agreements Finance invest Steadiness & duration none medium high high medium to high high None to medium low

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Airport and airlines can choose between three potential models for partnerships

Airline Value Chain Airport Value Chain Security-

• riented

Capacity-

• riented

Marketing-

• riented

Marketing Air Service Development Passenger Well-Being Expansion Process Re-Design Process Innovation Security Processes

Cooperation matrix

Technology Political and regulatory aspects Resources and environment

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Agenda

I. Introduction II. II. Airport Airport-

• Airline

Airline-

• Alliance partnerships from

Alliance partnerships from different viewpoints different viewpoints

I. I. Resources and environment Resources and environment II. Political aspects III. Technological aspects

III. Conclusion

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Perspective 1: Thoughts on the resources and environment perspective

Problems leading to partnership approaches Infrastructure and capacity issues as most crucial impacts

Congestion Constrained air space Limited growth opportunities (neighborhood, ecological

factors) Limitations to partnership

Fundamentally different business characteristics Different planning horizons and development durations Immobility versus mobility of resources Different reactionary flexibility

Partnership benefits

Increased reliability Risk and cost sharing Better economic conditions for the alliance partner Common approach towards external parties

• BUT:
• Cost savings usually only for one partner
• Increasing reliability usually means losing diversity and

flexibility for at least one partner

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Agenda

I. Introduction II. II. Airport Airport-

• Airline

Airline-

• Alliance partnerships from

Alliance partnerships from different viewpoints different viewpoints

I. Resources and environment II. II. Political aspects Political aspects III. Technological aspects

III. Conclusion

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Perspective 2: Thoughts on political aspects

Problems leading to partnership approaches Deregulation and liberalization

New markets, but also new competitors New opportunities and limitations at the same time

Limitations to partnership

Still significant degree of regulation, e.g. cross-border

consolidation

New regulations, e.g. EU2320 Anti-trust rules, anti-discrimination

Partnership benefits

Improvement of own competitive position Improvement of resource utilization (e.g. CDM) Risk reduction

• BUT:
• Often strict rules with limiting effect
• Traditional approaches in aviation as limiting factor
• Scepticism about investment of airlines in airports et v.v.

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Agenda

I. Introduction II. II. Airport Airport-

• Airline

Airline-

• Alliance partnerships from

Alliance partnerships from different viewpoints different viewpoints

I. Resources and environment II. Political aspects III. III. Technological aspects Technological aspects

III. Conclusion

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Perspective 3: Thoughts on technological aspects

Problems leading to partnership approaches

New technological developments Need for capacity increase without expanding

infrastructure, additional environmental impacts etc.

Need of increasing efficiency, reducing costs etc. New regulations etc.

Limitations to partnership

Distribution of costs and benefits First mover vs. benefits Different needs and interests Contradictions between theory and practice (e.g. CDM)

Partnership benefits

Improvement of entire travel chain and processes Adapting to new challenges Improvement of economic position

• BUT:
• Technological developments often need multiple partners on

a global scale (e.g. RFID)

• Costs and benefits cannot be evenly distributed

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Various alliance partnerships can be

• bserved in the real life
• Despite the limitations airports and airlines find joint

ways to bring alliance partnerships to life

• Air Service Development
• „System Partnership“
• Process innovation (mainly on basis of local try-outs)
• …

… but what about global initiatives, investments, exclusivity etc.?

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Agenda

I. Introduction II. Airport-Airline-Alliance partnerships from different viewpoints

I. Resources and environment II. Political aspects III. Technological aspects

III. III. Conclusion Conclusion

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So where to go with vertical airline-airport alliance partnerships?

• Many fields for cooperation can be identified and
• ffer substantial potentials
• A general problem remains the allocation of benefits

and costs between uneven partners

• Regulative aspects limit the potentials for cooperative

approaches

• Consequently reality will need more time to follow

theoretical opportunities