Airport mamagement research


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Airport mamagement research

  1. 1. AIRPORT MAMAGEMENT RESEARCH: BEIJING CAPITAL INTERNATIONAL AIRPORT (CHINA) Delegate: Haoyan Wang Toulouse Business School Aerospace MBA 2009 Module Leader: Dr Rafael Echevarne Elective: Airport Management April 2010
  2. 2. Beijing Capital International Airport 1. Overview of Beijing Capital International Airport (BCIA) Beijing Capital International Airport (BCIA) is located 32 km northeast of Beijing's city center. The airport is owned and operated by the Beijing Capital International Airport Company Limited, a state-controlled company, which was incorporated as a joint stock company with limited liability in the People’s Republic of China on 15 October 1999. As approved by the Ministry of Commerce of the PRC, the Company became a foreign invested joint stock limited company. BCIA has rapidly ascended in rankings of the world's busiest airports in the past decade. It had become the busiest airport in Asia in terms of passenger traffic and total traffic movements by 2009. BCIA is also the 3rd busiest airport in the world with 65,329,851 passengers passing through the airport in 2009. BCIA is the main hub for Air China, the flag carrier of China, which flies to around 120 destinations (excluding cargo) from Beijing. Hainan and China Southern Airlines also use the airport as their hub. To accommodate the growing traffic volume, BCIA added the enormous Terminal 3 in 2008, the second largest airport terminal in the world. Thus, three runways and three terminals in BCIA were being operated at the same time. Accordingly, the designed passenger handling capacity of BCIA has been expanded from 35 million to 78 million per year. The available commercial area in the terminals has also been expanded by more than two times than before. Elective: Airport Management page 1
  3. 3. 2. Financial and Operation Situation of BCIA 2.1 Air Traffic Volume: In 2009, driven by strong domestic demand and the increase in capacity caused by Terminal Three’s operation, the air traffic volumes at the Beijing Capital Airport maintained a double-digit rapid growth, details of which are set out as follows: BCIA keeps fast growing during last decade. Even in the globe economic downturn, there were 488.5 k-flights, 65.4 Million passengers and 1475.6 k-tons freight in 2009. Comparing to 2008, the increasing numbers are 13.2%, 16.9%, and 15.1% respectively. Freight Year Flights Increase Pax. Increase Increase (ton) 1999 164,945 18,190,852 462,338 2000 187,190 14.0% 21,691,077 14.2% 557,366 20.4% 2001 221,850 18.5% 24,176,495 11.5% 591,195 6.1% 2002 242,338 9.2% 27,159,665 12.3% 669,347 13.2% 2003 235,861 -2.7% 24,363,860 -10.3% 662,142 -1.1% 2004 304,778 29.2% 34,883,190 43.2% 668,690 1.0% 2005 341,681 12.1% 41,004,008 17.55% 782,066 16.9% 2006 376,643 10.2% 48,654,770 18.7 % 1,028,909 31.6% 2007 399,697 6.1% 53,583,664 10.1% 1,192,554 15.9% 2008 431,670 8.0% 55,937,287 4.4% 1,281,000 7.4% 2009 488,495 13.2% 65,372,012 16.9% 1,475,649 15.1% Elective: Airport Management page 2
  4. 4. 2.2 Financial Summary: In 2009, the total income was 4964.8M RMB, EBIT was 403.4M RMB and net profit was 300.8 M RMB. Comparing to 2008, the increasing were 7.4%, 484%, 252% respectively. Unit: Thousand RMB Year Revenue Increase EBIT Increase Profit Increase 2004 3,133,630 1,126,079 760,692 2005 3,094,332 -1,3% 1,342,440 19,2% 915,501 20,4% 2006 3,159,863 2,1% 1,625,472 21,1% 1,092,899 19,4% 2007 3,516,125 11,3% 1,675,743 3,1% 1,129,487 3,3% 2008 4,624,438 31,5% 68,987 -95,9% 85,331 -92,4% 2009 4,964,869 7,4% 403,357 484,7% 300,800 252,5% 2.3 Revenue by category: In 2009, the aeronautical revenue was 3130.3M RMB, the non-aeronautical revenue was 1834.5M RMB. Comparing to 2008, the increasing were 11.3%, and 1.3% respectively. Elective: Airport Management page 3
  5. 5. Unit: Thousand RMB Non- Year Revenue Increase Aeronautical Increase Increase aeronautical 2004 3,133,630 1,781,368 1,352,262 2005 3,094,332 -1,3% 2,046,269 14,9% 1,048,063 -22,5% 2006 3,159,863 2,1% 2,296,099 12,2% 863,764 -17,6% 2007 3,516,125 11,3% 2,490,494 8,5% 1,025,631 18,7% 2008 4,624,438 31,5% 2,813,722 13,0% 1,810,716 76,5% 2009 4,964,869 7,4% 3,130,319 11,3% 1,834,550 1,3% 3. Financial and Operation Problems Analysis 3.1 The decrease of profit: According the financial summary, BCIA has got a long-term stable development and business performance growth since 1999. With the Terminal 3 being put into use, the air traffic volumes growing steadily, and the revenue of BCIA reached 4,624 M RMB for the year 2008. Meanwhile, the launch of Terminal 3 also largely raised the operating expenses. The annual operating profit decreased of 90.4% from the previous year. Since the growth in air traffic volumes results in smooth and stable growth in the revenues in airport industry, this industry is characterized by periodic occurrence of capital expenditure due Elective: Airport Management page 4
  6. 6. to capacity expansion demands. BCIA acquired Terminal 3 in 2008, so that the capital expenditure increased significantly. This is the main reason for the substantial decrease in the net profit since 2008. It is believed that such decrease in the net profit happens within a short period of time only. From medium and long-term point of view, the air traffic volumes at the Beijing Capital Airport will keep the trend of increasing and the business results will be increased steadily. 3.2 Revenue structure: The revenue of BCIA consists of aeronautical revenue and non-aeronautical revenue. As the total revenue grows, the aeronautical revenue is growing smoothly. But the non-aeronautical revenue is not stable. The average percentage of non-aeronautical revenue is about 35% in recent years. As the follow table, in 50 of the world’s leading airports, BCIA has been ranked 2nd airport which has higher aeronautical revenue. It is means that BCIA is still at an early stage in commercial development. Elective: Airport Management page 5
  7. 7. 3.3 Low level stuff productivity: Stuff Productivity of airport is very important in the competition market. Some indicators are popular measures among airports. In following tables, there are 2 indicators (Revenue per Employee and Passenger per Employee), which can be used to demonstrate the stuff productivity. Compare with other leading airports in the word, BCIA show a relatively small number of passengers per employee and revenue per employee. These indicators directly reflect that the staff productivity of BCIA is not good, and should be improved in the future. ……… 3.4 Operation problem: Although BCIA has got very good financial result, it also has been subject to a degree of criticism regarding the number of delays to departing flights. According to the Forbes magazine, the BCIA has been voted the The World's Most Delayed Airports. According to a "sampling of the airport's flights", only 38.3% of its take-offs were on schedule. Good thing those delays aren’t usually too long. FlightStats’ sampling of the airport’s passenger flights in 2009 shows that 53% of delayed departures got off the ground less than 30 minutes late. It is clear that most Elective: Airport Management page 6
  8. 8. of the short time delay, less than 30 minutes, was caused by management problem and staff ability. 4. Recommendation China’s aviation boom is one of the great commercial tales of our time. From 1985 to 2008 air traffic grew at an annual rate of 17%. But under globally severe and complicated economic conditions with impact of financial crisis spreading, Air traffic, especially the international air traffic, will predictably be slower in growth. It will be a challenge that BCIA maintain double- digit growth over the next 10 years. In order to counteract the adverse effects of economic fluctuation, BCIA should take multiple measures to reduce cost and improve competitiveness. 4.1 Increase the percentage of non-aeronautical revenue The requirement for passengers to spend money while inside the terminal is now vital for airport sustainability. The average percentage of non-aeronautical revenue in the word leading airports is about 45%, BCIA is still at an early stage in commercial development. Now, BCIA has very good opportunity to improve its non-aeronautical revenue due to two reasons. First, since BCIA launched Terminal 3, its non-aeronautical resources increased significantly. Second, the purchasing power is very strong in Beijing; huge consumption demand from both the local residents and tourists has made Beijing one of the biggest consumer markets in China. In 2008, the tourist market received 3.8 million overseas tourists, bringing foreign exchange revenue of US$4.5billion; 142 million local tourists were received, bringing revenue of RMB191 billion. With the growth of the city economic reforms, Beijing has evolved as the most important transportation hub in China. But travel is a stressful experience, BCIA should make passenger less stressed and more comfortable, the passengers will have more enjoyable experience and have time to spend more money inside the terminal. BCIA should redesign the commercial facility inside the terminal in order to make passengers past shops as much as possible while still meeting all functional demands. 4.2 Implement sustainable development and reduce operation cost Since the Terminal 3 has been used in 2008, the operation cost of BCIA is very heavy. So the company should do the best to reduce the cost. The huge Airport just like a city, sustainable development and environment friendly is more and more important. An environmentally friendly management approach not only can protect environment, but reduce the operation cost. BCIA should implement sustainable development strategy, stronger management on budget and strict cost control, reduce operating expenses. There are many approaches to reduce cost. Judicious use of daylight can reduce lighting and cooling needs. Displacement ventilation- supplying conditioned air low in a space – can save energy and enhance air quality. Using alternative energy sources such as geothermal and photovoltaic can generate substantial savings. Elective: Airport Management page 7
  9. 9. 4.3 Enhance staff training The low level staff productivity and the major reason of high delay rate are due to the less competence of staff. The high level service is offered by the airport staff, not the modern facility. In passenger service, BCIA should establish high level service standards, enhance staff training to improve the overall management level and service quality. Although BCIA has the best facility and technology in the world, Staff must be trained to understand the capabilities of the new facility and technology. For example, if new technology is installed to save energy and costs but staff do not know how to use it properly, an airport will not get the advantages of that technology and subsequent savings. 4.4 Develop self-service check-in systems It is a trend in those huge and busy airports to develop self-service check-in systems, which can help passenger save time and reduce the airport operation stress. For example, in the world’s busiest airport, Hartsfield-Jackson Atlanta, 83.8% passengers use self-service check in systems. It is also a solution to increase the stuff productivity and reduce the high delay rate of BCIA. The company should use more self-service technologies and functionalities such as internet, self- service kiosks, passport scanning and bag-tag printing. 4.5 Pay more attention to on domestic market Due to the economic downturn, Chinese international traffic was down by 17% in the first half of 2009. But the figure is overshadowed by the domestic travelling boom taking place in China. During the same period 100 million passengers travelled domestically, up almost 20% on 2008. So the domestic market is very important in short term. BCIA should pay more attention to analyzing the requirements and demands from domestic customers, offer more convenience and flexible service. Reference: 1. 2. 3. AIRPORT PERFORMANCE INDICATORS 2009, Copyright Jacobs Consultancy UK Ltd. October 2009. 4. Worldwide airport traffic statistics, International Airports council, December 2009 Elective: Airport Management page 8