Benchmarking of aeronautical studies and what can we learn from benchmarking? Plamena Ivanova Berlin, April 10 2008

1. Benchmarking of aeronautical studies and what can we learn from benchmarking? Plamena Ivanova Berlin, April 10 2008

2. Motivation The increasing significance of airport charges for the European Airline Market: • stronger competition • minimising cost components to airlines • important revenue source to airport operators

3. Main aspects • Examination of the structure and level of airport charges • Current methodologies for benchmarking airport charges • Optimal pricing theories for airport infrastructure • How to link the two?

4. Review of benchmarking airport charges Review the methodologies of: • Hague Consulting Group (2003) • SEO Study Schiphol (2000) • TRL („Transport Research Laboratory“) – (2005) • University of Cranfield (1998) • Vienna airport plc in coop with Consulting Group Aptean (2004) • BIPE (1998) • ATRS

5. Review of benchmarking airport charges Common patterns: • Collection of data from public airport charges tariff schedules and interviews with the airports • Determination of: • special fleet mix • load factor • Accumulation of all airport charges for one turnaround of the fleet mix at all included airports with weighting factors • Comparison and analysis of the results • Mainly empirical

6. Review of benchmarking airport charges Differences: • Selected number and types of airports • Aim of the study: • Universal validity of the comparison (typical fleet-mix) • valid only for one airport e.g. Schiphol (specific fleet-mix) • Point of view: airport or airline • Choice of airport charges: • Aeronautical charges with public interest (SEO) • Governmental charges (Hague Consulting) • Ground Handling charges (Cranfield) • Consideration of: • Special discounts e.g. higher flight frequency, the expansion of destinations (Vienna Airport) • Peak/Offpeak • Used currency ($, €, SDR*) *SDR = basket of currencies calculated from the trade- weighted values of four G8 nation currencies (Euro, US Dollar, Sterling, Yen

7. Misleading ranking… [1] the Vienna study offers only the software for airport charges comparisons

8. Review of benchmarking airport charges General Criticism: • comparison of “unlike with unlike” - number of necessary adjustments • only published charges are used • discounts within the comparisons are ignored • international comparisons affected by exchange rate fluctuations, especially for longer time periods • theoretical link to optimal pricing missing

9. Review of benchmarking airport charges • Charges included: • Basic landing charges • Terminal navigation aid charges • Noise-related landing charges • Emission related landing charges • Passenger charges • Security service charges • Runway lighting charges • Aircraft parking charges • Air bridge charges • Cargo charges

10. Hague Consulting Group 2000 • Adjustments: • Load factor of 70% • Transfer PAX = 20% (all international-international transfers) • Parking time depends on flight destination for passenger flights • Intercontinental 3h; Europe/Continental 1h • Charges at US airports which are not found elsewhere, are calculated per PAX • Uses middle rate for landing charges which varies according to the frequency

11. Review of benchmarking airport charges • Steps of Benchmarking: • Calculation of one turnaround for every aircraft at each airport • Analysis by the type of airport charge • Design of four variants to show relative competitiveness of airports • Selection of airports and aircraft types for each of the variants • Calculation of total airport charges during daytime or nighttime for each variant • Comparison with the average total airport charges of all airports • Comparison between 1997 and 1999 average levels of airport charges by variant

12. Review of benchmarking airport charges

13. Review of benchmarking airport charges Criticism: • Calculate all airport charges in terms of Guilders, fluctuations can be misleading • Schiphol fleet mix may not be representative for fleet mixes at other airports • Only based on published prices, does not consider direct or indirect discounts or subsidies

14. Conclusions • Review of different studies: - get a better overall picture - assess the different studies - advantages and disadvantages of the methods chosen • Generally a very simplistic approach • Theoretical considerations about optimal pricing issues

15. Conclusions • Results form the studies cannot be generalized often singular orientation (one airport's view) • Time periods and observations differ, so no comparisons accross studies • Abstractions from reality - lots of adjustments to consider the varied nature of charging structures at different airports types of charges included aircraft mix volume discounts etc

16. Conclusions • methodological shortcomings • not possible to include discounts in the benchmark studies (only access to data on published charges)

17. Conclusions • Further cooperation with airport operators is necessary to understand charging practices • More research on benchmarking methodologies that are guided by the optimal pricing principles • Try to find out how can it be done

18. Thank you for your attention!www.gap-projekt.de