Airport Competitive Index – A barometer of airport success and competitiveness

There is a perception that airports are merely a facility that is made of terminal buildings, runways, taxiways, some stores, food & beverage outlets, and some service-related entities.

But forward-looking airports, which have aggressive growth rates, compete with other airports just like any other industry. As in any competitive market, evaluation is important. When I decided to write this article, I had to ask myself two questions: How do you evaluate airport competitiveness, and why would you want to??

The first and foremost reason is that a lot of airports are seeing the positive economic impacts of having strong hubs and how they contribute towards the economy, so a lot of airports have aspirations and are investing resources to create hubs. So, a competitive-minded airport always has to ensure that their hub is at the leading edge compared to other airports in the region.

Second, as new aircraft have higher range and payload capabilities, airlines can bypass the hubs and operate instead at secondary airports, so it is essential that each hub is offering efficiencies and attractive pricing structures so that airlines don’t have the motivations to bypass hubs.

Third is that consumer preferences are always changing, and new generation is very demanding, so hubs have to ensure that they align their new products and services with changing expectations. These may be cashier-less stores, contactless experiences, or mobile check-in and boarding to meet the ever-growing needs of the customer base.?

Airports compete on many metrics, including the number of airlines operating to the airport, number of direct routes, number of originating and transfer passengers, turn-around times of aircraft, on-time performance, passenger convenience in terms of queue times at check-in counters/security, boarding gates, and so much more.

Succeeding in all of the above metrics means more flights attracted, which means more income, more retail sales, and more duty-free revenue, more parking fees, and so on. Hence, more revenue and more potential for profits.

So, when there are so many measures of competitiveness, and as competitiveness is a serious factor in sustainable growth, there is a need to have a scientific and analytical approach to evaluate airport competitiveness, and that’s where the airport competitive index (ACI) comes in. Additionally, it doesn’t hurt to have a little back-up when bragging about how good your airport is.

ACI is a scientific and analytical tool that can be used do an apple-to-apple comparison between airport competitors by looking at various factors. The following diagram shows the five key factors that make up the airport competitive index.?

These five indicators (market potential, infrastructure, charges, traffic insights, and safety) help us to understand the strengths and weaknesses of our airport in relation to our competitors and identifies what steps need to be taken for sustainable growth and to be ahead of the curve. These indicators also help create a competitive index of all competing airports, so that we can have an apple-to-apple comparison of industry players.?

Let’s take a closer look at what these five factors are made of.

Market potential relates to components like GDP, population, destination attractiveness, and several other components that speak to the strength of the market. This is a very important group of indicators, as it determines the available growth market for airlines.

The second category is infrastructure, and good infrastructure is one of the most important factors of any transportation network. For airports, the two components of infrastructure are airport infrastructure and ground infrastructure. Airport infrastructure includes runways, taxiways, ramps, terminals, and other facilities in direct control of the airport. Ground infrastructure consists of road and rail networks connecting the airport to the metropolitan areas in the region.?

An important factor when considering airport competitiveness are airport charges. As airport charges mean costs for airlines and revenue for airports, their amount has to be carefully considered and balanced. According to general rules of market economy, economic subjects normally search for the lowest price for comparable level of services. The same principle is more-or-less valid in the air transportation market. Airlines, especially low-cost airlines, exercise high pressure to keep airport charges low.?

Now moving on to the traffic insights. Any analysis of competitiveness would be incomplete without adding the factor of achieved results into the model.?

With this in mind, three different indicators need to be evaluated. The first indicator is looking at the total number of passengers passing through the airport and looking at annual growth rates.

The second indicator is looking at the number of airlines operating at the airport, as each airline brings certain new destinations and connections into other regional hubs. Last and not the least is the number of direct destinations from the hub, as that offers unique city pairs and will attract a higher number of both O&D and connecting passengers.

The final, and perhaps most important category is the safety coefficient. The first component is the host country’s safety and is derived from the fragile state index. This is a competitive metric because passengers will be less motivated to travel through countries which have various security alerts or deemed unsafe to travel. The second component is the airport safety itself, which relates to number of incidents or accidents that happened at the airport.

In conclusion, the first step to creating your own ACI is to decide which components are most relevant to you and will be used. Once this is done, then the hard part comes and that is collecting data that is from a proper source and validating it. Once these two steps are completed, then an index model can be created, populated with data from competitor airports, and evaluated. The index provides great insights in the areas of strengths, weaknesses, competitive standing, and where improvements are needed.

I hope that this article and framework will help your airport in evaluating its competitiveness, and if you need any help developing a unique model for your needs, please feel free to contact me.

Thank you.