Impact of Airline Alliance Terminal Co-location on Airport Operations by Andy Lee A Masters Thesis Submitted in Fulfilment of the Requirements for the Award of Masters of Aviation Management (by Research) at The University of New South Wales March 2012 Supervisor: Dr. Cheng-Lung Wu Co-supervisor: Mr. Rodger Robertson School of Aviation THE UNIVERSITY OF NEW SOUTH WALES Thesis/Dissertation Sheet Surname or Family name: Lee First name: Andy Other name/s: Abbreviation for degree as given in the University calendar: MSc School: Aviation Faculty: Science Title: Impact of Airline Alliance Terminal Co-location on Airport Operations Many airports worldwide have co-located or are in the process of reallocating alliance aligned carriers to their designated terminal areas, to promote flight connectivity, common user facilities and airport-airline relationships. While operational and financial benefits on the part of the airlines have been made clear by existing literatures on airline alliances, the tangible benefits to be derived for airport operators are less obvious. In order to better understand why airport operators have supported “alliance terminal co-location” in the first place, this paper considers the cases of London Heathrow, Paris Charles de Gaulle and Tokyo Narita airports. These airports are selected primarily because of the relevance of their operating environment as alliance network hubs, and their early implementation of the concept. The qualitative case analysis on these sample airports indicates operational improvements over the utilisation of aeronautical and passenger processing resources. This in turn has positively impacted property and retail revenue. Contrary to the initial assumption, it is found that the airport operators of all three sample airports have shown just as much enthusiasm in facilitating alliance terminal co-location as their airline counterparts. In fact, it has been regarded as a long-term strategy to reinforce these airports’ status as network hubs. Nevertheless, the fluidity of airline alliances often complicates the implementation and continuity of alliance terminal co-location at these airports. A quantitative case study on Sydney Airport – representing an airport without the implementation of the concept – reiterates that alliance terminal co-location could yield operational and financial merits for the airport operator similar to those observed at the sample airports. However, in absence of additional capacities as enjoyed by the sample airports, the concept is instead strategised to ease existing capacity constraints experienced at Sydney Airport’s International Terminal, rather than re-distributing demands to achieve more balanced asset utilisations across multiple terminals. This concludes that the implementation of this concept should not be done through a one-size-fits-all approach considering the hard-to-replicate combinations of diverse resources and stakeholders at various airports. While airline alliances remain fluid in membership, airport operators need to ensure that their facilities and services are capable of adapting to change. 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ABSTRACT Many airports around the world have co-located or are in the process of reallocating alliance aligned carriers to their designated terminals or terminal areas, to promote flight connectivity, common user facilities and airport-airline relationships. While operational and financial benefits on the part of the airlines have been made clear by existing literatures on airline alliances and alliance-hubbing, the tangible benefits to be derived for airport operators are less obvious. In order to better understand why airport operators have supported “alliance terminal co-location” in the first place, this paper considers the cases of London Heathrow Airport, Paris Charles de Gaulle Airport and Tokyo Narita Airport. These airports are selected primarily because of the relevance of their operating environment as alliance network hubs, and their early implementation of alliance terminal co-location. The qualitative case analysis on these sample airports indicates operational improvements over the utilisation of aeronautical and passenger processing resources. This in turn has positively impacted property and retail revenue. Contrary to the initial assumption, it is found that the airport operators of all three sample airports have shown just as much enthusiasm in facilitating alliance terminal co-location as their airline counterparts. In fact, it has been regarded as a long-term strategy to reinforce these airports’ status as network hubs. Nevertheless, the fluidity of airline alliances often complicates the implementation and continuity of alliance terminal co-location at these sample airports. A quantitative case study on Sydney Airport – representing an airport without the implementation of the concept – reiterates that alliance terminal co-location could yield operational and financial merits for the airport operator similar to those observed at the i sample airports. However, in absence of additional capacities as enjoyed by the sample airports, the concept is instead strategised to ease existing capacity constraints experienced at Sydney Airport’s International Terminal – T1, rather than re-distributing demands to achieve more balanced asset utilisations across multiple terminals. This concludes that the implementation of this concept should not be done through a one-size-fits-all approach considering the hard-to-replicate combinations of diverse resources and stakeholders at various airports. After all, airline alliances remain fluid in membership, and airport operators need to ensure that their facilities and services are capable of adapting to change. ii Table of Contents Chapter Page 1. Introduction 1 1.1 Background and Significance 1 1.2 Aims and Hypothesis 2 1.2.1 Aims 2 1.2.2 Hypothesis 2 1.3 Structure of Thesis 3 2. Literature Review 5 2.1 Airline Networking Behaviours vs. Airport Operations 5 2.1.1 Airline Traffic Types and Patterns 5 2.1.2 Airline Connectivity