Strategic Management In The Aviation Industry - Research Paper Example

Strategic Management In The Aviation Industry Executive summary Istanbul Ataturk airport is the largest airport in Turkey. It has become European’s fastest growing major airport. Istanbul Ataturk Airport has direct flight connection to over 200 destinations. The air port is estimated to have around 48% market share due to its constant innovation. Nevertheless, Istanbul Ataturk Airport has encountered some limitations in its endeavours. One of the most notable has been the failure by the airline to handle the ever increasing number of passengers. The favor of turkey’s special characteristics offers both Atatürk & Sabiha Gokçen airports a great opportunity to offer the best services. For instance, due to geographical and strategic position of turkey, the airports have been able to utilize the positioning of the country to offer competitive airport services to Turkish airlines. The airports have been able to modernize its operations in order to cater for both domestic and international services. Customer service has also been cited as another important strategy that the two airports have used. Information desks are available twenty four hours a day. This helps in offering direction to clients. For Ataturk, the airport has vast mobile phones services that allow both domestic and international arrivals to connect with their recipients. In addition, the airports have adopted a culture of diversifying customer service that serves the interest of various travellers from different cultural backgrounds Assessment of Istanbul Ataturk Airport Physical Design & Capacity Limitations Istanbul Ataturk airport is the largest airport in Turkey having experienced the largest growth figures of the country’s major airports between 2010 and 2011. In addition, a better growth was realised in 2012 when it further increased by 20% , which translated to a total of 45 million passengers. At present, Turkey has 40 civil and 27 military airports where the number of actively used airports has increased from 25 to 46 between 2002 and 2010. Apparently, 12 of the airports are used for international and domestic operations, as well as, domestic services. Due to this, Istanbul Ataturk has become Europe’s fastest growing major airport. Besides, the airport is also privileged to be one among many airports that offer free wireless internet access to its client. This facilitates fast and easy communication in and around the port (Janić 2007). Figure 1: Internet use in Turkey Airports Source: (Euromonitor, 2011) - Compiled by the author Airlines Share Istanbul Ataturk Airport has direct flight connection to over 200 destinations. This had been facilitated by the fact that the airport is located at the middle of Middle East, Europe, and Africa. As of now, the airport is continually expanding its network in three more continents; Asia, Africa and North America. Through this, the airport has been able to facilitate a substantial number of airlines. Some of the major airlines serving Istanbul Ataturk include Emirates, British Airways, Air France, KLM and Aero flat. Figure 2: Number of Destination from Turkey and the Frequency Airlines Domestic Europe M.East Asia Africa Americas Australia Total Dest. Freq. Dest. Freq. Dest. Freq. Dest. Freq. Dest. Freq. Dest. Freq. Dest. Freq. Dest. Freq. LH 14 546 78 1,406 13 110 21 122 12 65 24 202 0 0 162 2,599 TK 30 814 71 843 23 245 19 121 11 75 6 37 0 0 160 2,265 AF 12 335 59 1,257 9 79 13 113 28 208 26 267 0 0 147 2,394 KL 0 0 63 801 8 58 15 97 10 59 22 145 0 0 118 1,278 BA 5 251 41 1,160 9 87 12 105 13 80 27 324 0 0 107 2,109 EK 0 0 23 286 16 227 28 408 16 142 6 59 5 49 94 1,265 QR 0 0 21 199 18 339 31 276 11 89 5 31 2 14 88 1,036 SQ 0 0 12 89 3 22 26 362 1 7 2 12 9 179 53 724 Source: (OAG, 2011) – Compiled by the author Additionally, there are new airlines that were created in 2011, such as Heinan Airlines, China Southern Airlines Carpatair among others. The corporation between Istanbul Ataturk and all the airlines affiliated to it has continuously offered many convenient connection opportunities especially with the Turkish Airline as one of the widest network in the region. Figure 3: The Share of Airport in Turkey Turkish Air Share Source: Eurocontrol (2009) Market Share According to Turkish DHMI( General Directorate of States Airport), Istanbul Ataturk has been handling around 11 million passengers in 2002, but has from then experienced a double digit growth especially in the last five years. This growth entails a 16 % in 2011, which culminated it over 37 million passengers. Through this airport, the country was able to record 75% of all the flights and 76% of all seats as of November, 2012. It is worth mentioning that market share consists of both domestic and international passengers. Essentially, the airport is estimated to have around 48% market share due to its constant innovation (Jarach 2005). Figure 4: Comparison of Market Share between Domestic and International Passengers Source: T.K, 2002 to 2010- Compelled by the author Population Share Apparently, population growth of Turkey the home of Istanbul Ataturk has continuously increased especially between 2009 and 2010 when there was a noted increase of 5. 7% to reach 73.7 million people. Of importance to note is that, Turkey is known to be the 18th most populated court in the world and the 3rd in Europe. With this rate of population growth, it is estimated that by 2025, the country will have a population of more than 85 million people. The country has 19 provinces sharing a population of more than one million. In relation to this, Istanbul is the biggest city in Turkey, and one of the most populated citied in the world. As such, Istanbul Ataturk Airport being situated in Istanbul city gives privilege of the highest population in the country, with most of them being in a position to afford air transport to various destinations all over the world. In fact, it is estimated that around 37.5 million people are passengers who frequently travel through the airport. Moreover, there are over 103, 000 passengers who are served by the airport daily. Consequently, around 25,000 passengers are served daily in more than distinct food and beverage outlets that are situated at the airport. Basically, the airport has various businesses, which are frequented by passengers who use the airline for different destination at different times. Figure 5: Annual Report on Turkish Airlines Sources: Turkish Airlines Annual Report Presentations (2012) and Flight Global (2012) Economic Share It is obvious that the economy of Turkey is one of the fastest growing in the world. In essence, it has consistently improved in the last decade. Moreover, the economy of the country in reference to macroeconomic strategy together with policies that are fiscal and major structural reforms have positively impacted on the economy (Forsyth 2005). As such, the country is willing to merge its economy with that of the whole world facilitated by foreign direct investment. To achieve this, the Turkish government has put emphasis on the role of private sector contributing on the economy thus increasing the effectiveness and solidity of the financial sector. Due to this effort, the Turkish government was able to achieve and further maintain a strong economic growth just before the global recession. It is worth mentioning that in 2010, the GDP increased thrice as the country attained a 16th position in the world and a 6th position as the largest economy in Europe respectively. Never the less, the turkey economy has been facilitated from different quarters such as tourism, which has slowly been incorporated with air transport making the economy stable especially with the increase in population growth, and the steady growth of Istanbul Ataturk and its associates. Notably, Turkey is among the world’s 10 tourist destination with regard to international tourist arrival and receipts (O'Connor 2001). Figure 6: GDP and GDP per capita in Turkey Source: (IMF, 2011) –Complied by the author. Limitations Similar to any other business, Istanbul Ataturk Airport has encountered some limitations in its endeavours. In regard to capacity, Istanbul Ataturk has found it challenging to handle the ever increasing number of passengers to and from Istanbul city and the metropolitan area. This is because part of the airport is specifically reserved for military activities making the other part difficult to expand. In fact, the location of Istanbul Ataturk Airport does not give a chance for the airport to accommodate an extra run way. Moreover, the capacity of passengers who require services are overwhelming daily as the population increase bearing in mind that the largest population is made up of young people with the average being 29.9 years. This means that the country is made up of people who are energetic and financial stable, thus being able to use such facilities (Knippenberger, U.et al., 2010). Figure 7: The appearance of Turkish Airlines in 2010 relation to others. Source: Google Images (2013) Assessment for the strategy of Istanbul Two airports: Atatürk & Sabiha Gokçen In order for any business to remain relevant in a highly competitive market, it is indispensable for the business to develop a strategy through which it can develop and maintain competitive advantage. For this to happen, the organization has to apply strategic plan that is diligently designed in regard to organizations mission and vision statements (Afuah 2009). In light with this, a clear understanding of how an airline can strategically develop, there a certain considerations that have to be put in place in order to thrive in the industry. One of the most notable factors to be considered is the airport through which the airline operates. For Ataturk & Sabiha Gokçen, it is evident that the airports have been very instrumental in support of turkey’s aviation business. In a broader sense, it is correct to argue that the two airports have applied various strategies that make them the best airports in turkey. Nevertheless, the favor of turkey’s special characteristics offers the two airports a great opportunity to offer the best services. Due to geographical and strategic position of turkey, the airports have been able to utilize the positioning of the country to offer competitive airport services to Turkish airlines (Coogan et al 2002). The fact that turkey is bordered by eight countries, it is apparent that there is an opportunity for the airports to enjoy steady demand for airport services due to large volumes of passengers traversing these countries. In another dimension, being the biggest city in turkey, Istanbul becomes the most suitable city for airport operations. For Ataturk, the airport has adopted several strategies in order to maximise the opportunity provided by the city. In addition, since Ataturk offers both local and international services, the airport has been able to modernize its operations in order to cater for both domestic and international services. Delfmann et al. argues that is apparent in regard to modernizing Atatürk’s operations have been innovation and various advancements in technology. This comes in terms of instilling various technological systems that oversees smooth running of the airport operations. For instance, the airport has designed and put in place automation system that connects the world’s airlines to each other. This is aided by the use of common software, which helps in checking in baggage at various terminals. Figure 8: Main airports in Turkey by passenger throughput in 2011 (blue bars) and % growth between 2010 and 011 Source: DHMI (2011) In addition, it is also apparent that, for any organization or business to thrive in the contemporary world, it is indispensable for the organization to have strategies through which customer service is prioritized. For Ataturk, information desks are available twenty four hours a day. This helps in offering direction to clients. They also act as advice and announcement services. Information desks have been put in place so as to offer such services to both domestic and international arrivals (Doganis 1992). Studies have documented that an organization that prioritizes on customer services tends to thrive and maintain its competitive advantage over organizations that concentrate much on maximizing profits. Additionally, the airport has vast mobile phones services that allow both domestic and international arrivals to connect with their recipients. The airport has also a visa office which is located at the transit area. With such services, travellers are more comfortable to use airlines served by such an airline. With this in mind, it is correct to argue that Ataturk has been able to capture the loyalty of many travellers both domestic and international travellers. For international travellers, one does not need to carry goods from other countries. On arrival at the airport, one can buy duty free goods. According to Fleming 2011, the strategies that have potential of attracting international travellers to use airlines served by the airport because. The hustles of carrying goods from local country can become bothersome. In fact, it adds cost on ones ticket since such goods have to be paid for alongside traveller’s air ticket. On the other hand, Sabiha Gokçen is strategically positioned just 5 kilometres from Istanbul city and adjacent to the Asian market. One of the notable strategies by Sabiha Gokçen has been on advancing in technological systems that facilitate airport operations. In fact, Sabiha Gokçen has advanced technology in industrial project (Malighetti et al .,2008). The project serves the country in different capacities such as transportation and aviation and technology. In addition, the airport acts as a key player in foreign trade. The airport has also strategically been expanding its operations by constructing new terminal space. This can be attributed to the faster growing rate of the airport. In addition, the airport has several airport lounges and airline clubs, which are comfortable for travellers awaiting their fright (Graham 2012). With such deliberations, it is apparent that one of the outstanding strategies the two airports use is the utilization of the accessibility characteristic. Given that the airports are strategically positioned, these airports stand a chance of serving as many airlines as possible. For instance, with Gokçen being adjacent to the Asian market, the airport has utilized that opportunity to serve many travellers in that region. This is evidenced by the expansion strategy of Gokçen’s terminals. Nevertheless, it is worth noting that the ever-growing rate of the two airports is not solely dependent of their strategic positioning. This means that the airports have been able to improve on their quality of operations. Since the two airlines deals with vast cultures that they serve, it is apparent that airlines have adopted a culture of diversifying customer service that serves the interest of various travelers from different cultural backgrounds (Jarach 2005). For example, the airlines have been able to have information desk that serves travellers from the Asian market and the European market. This strategy has a magic of encouraging many travellers to use the airports. Strategy & Feasibility of Adding a New Airport in Istanbul with Its Current Existing Two Airports The feasibility of having three airports in Istanbul In regard to the current limitations that are facing the Istanbul Ataturk Airport, such as limited space for additional run ways that must be created in relation to curbing the present under strain due to air traffic, over and above, the presence of military activities as occupants of part of the airport. Consequently, there is feasibility of constructing a new airport as it is obvious that air transport demand is high in Turkey (Scott 2010). Project Third Airport in Istanbul The Turkish government in making arrangement in coming up with a new airport which will be situated in Istanbul city just like the previous two airports. This third airport is expected to be the largest in the world in a bid to come up with a solution for the current air traffic. As such, the airport must be within the city of Istanbul, which is the country’s biggest city with an estimation of 15 million people. At present, the largest airport is Istanbul Ataturk Airport, which has been estimated to handle about 45 million passengers with 20% increase in the population on the previous years (Kramer 2000). Figure 9: Number o f Passengers Served By the Turkey Airports Source: Google Images (2013) Capacity Strain Apparently, the airport management dictates that airports are part of large transport network that should be able to cater for the needs of the clients. Any airport should be capable of satisfying its clients as an obligation. In fact, the choice of coming up with a third airport in the same city denotes that most people are conversant with Istanbul and would like to conduct their business through the city. Of most important to note in airport management in that there must be enough capacity to hold passengers who use the airport. However, Istanbul Ataturk Airport and Sabiha Gokçen have not being able to solve the issue of capacity mainly because of their locations. The fact that Sabiha Gokçen is located on the Asian side of the Istanbul city and Ataturk Airport is location on the European side does not assist in holding the overwhelming air traffic. As such, the management at these two airports must seek an alternative to over 90 million people who fall victim of air traffic. Hence, it is presumes that in case the project of another airport goes through, capacity strain in the current airport will drastically reduce and more passengers will be catered for. Geographical Potential Ideally, Turkey in one of the countries surrounded and easily connected to other countries that have economic potential to growth and support each other in different capacities. In fact, it had a unique geostrategic importance, as it is located at the crossroads of Europe and Asia. This means that Istanbul being the biggest city in the country, it automatically becomes the interconnection hub for all air transport especially in the neighbouring countries such as Syria, Iran, Iraq, Greece, Armenia, and Georgia. Additionally, the country had a coastline and islands such as Black Sea, Mediterranean Sea and the Aegean Sea and the Marmara Sea. Senguttuvan 2006 argues that with this potential, it is clear that the country can only continue investing in Istanbul as it is the most convenient place for air port. The most indispensible issue is coming up a specific place rather that the European and Asian side where the two current airports are location. This ensures that there is even distribution of the three airports in same city. Figure 10: The Istanbul City That Has The Two Airports and the Preferred the third One Source: Google Maps (2013) Competition Competition level in terms of business in Turkey is mostly concentrated in the air transport as it carries almost 50 % of the economy in the country. Notably, there has been immersive growth of the air transport in Turkey that has being facilitated by most of it subsidiaries and airlines that operate under Ataturk Airport and SabihaGokçen in most countries in the worlds with inclusion of Africa, Asia, Europe and Middle East. Similarly, there has been a connection between air transport and the tourism industry, which has led to increased competitive advantage (Kramer 2000). It is estimated that Turkey has the second busiest airport after Heathrow in London. In relation to this, the construction of another airport in Istanbul will maintain the competitive advantage that has being witnessed in the past decade. It is worth mentioning that the competitive advantage must emanate from proper management and customers satisfaction (Senguttuvan 2006). For instance, the management of these airports ought to have a comparison of airport charges between European, Asia and Gulf Regions. This provides the management with ample information on how to maintain a competitive advantage especially in terms of charges. Figure 11: Comparison between the main European, Asian and Gulf Region’s airport charges in 2010 Source: (IATA, 2008) - Compiled by the author. Modern Technology Fundamentally, construction of airport requires pure technology in order to come up with the expected final touch. As such, countries like Turkey are known to embrace technology due to their economic stand. In fact, the previous airport were build through the aid of technology although there might not have used modern technology at the time. The present technology will easily facilitate feasibility of another airport that should have more upgrades as compared to the rest. During the construction, there should be the prevalence of a better experience for potential passengers both functionally and aesthetically. Facilities lacking in the two airports in term of technology and limited space should be taken into consideration in case the project is implemented (Organisation for Economic Co-operation and Development 1997). Figure 12: Comparison of Technological Level in Turkey and Other Countries Source: Google Images(2013) Discussions There are several strategies that can be employed by organizations in order to maintain competitive advantage and ensure that the organization remains relevant in a highly competitive market. In this regard, it is crucial for organizations to have a clear understanding of the dynamics of the markets they operate (Loughnane 2005). For example, it is crucial to have a clear picture of how an organization can be able to accommodate both domestic and international clients. This, however, incorporates several concepts of marketing, management and economic operations. For the two airports, there has been a tremendous increase in terms of their profit margins and customer service. Although turkey has been able to record a double digit economic growth, it is not automatic that, aviation industry has to proportionally grow with countries economy. Good leadership and strategic planning acts as a good base for the aviation industry to grow. When it comes to serving international travellers, airports have to ensure that every aspect of customer service if up to date with the current international standards. For example, for some airports, some travellers are forced to carry goods from their countries since duties levied on such goods on the destination country makes them expensive. In this regard, an airport with acumen leadership would try to eliminate such barriers that would make travellers use airports that can support duty free goods for international travellers (Williams2006.) In addition, airports have to ensure that employment of innovations and new technological developments are put in place. Studies have documented that customers tend to be rational in consumption especially when subsidies, low prices or new technologies becomes evident in services or goods consumed. Such deliberations are crucial in ensuring that issues such as safety of the airport and faster clearance of travellers is addressed. With new technologies, airports can have effective check in processes that does not keep travellers waiting (Lord, 2010).Due to rampant cases terrorism and other unlawful deeds, it is crucial for airport authorities to ensure that all available technologies are put in place in order to curb such incidences. With many people travelling for various reasons, airports should be aware of different needs of travellers (Wright,et al. 2011) Conclusion At present, Turkey has 40 civil and 27 military airports where the number of actively used airports has increased from 25 to 46 between 2002 and 2010. Apparently, 12 of the airports are used for international and domestic operations, as well as, domestic services. Istanbul Ataturk Airport has direct flight connection to over 200 destinations. As of now, the airport is continually expanding its network in three more continents; Asia, Africa and North America. Some of the major airlines serving Istanbul Ataturk include Emirates, British Airways, Air France, KLM and Aero flat. Essentially, the air port is estimated to have around 48% market share due to its constant innovation. The country has 19 provinces sharing a population of more than one million. In relation to this, Istanbul is the biggest city in Turkey, and one of the most populated citied in the world. Due to this effort, the Turkish government was able to achieve and further maintain a strong economic growth just before the global recession. In contrast, Istanbul Ataturk Airport has encountered some limitations in its endeavours. In regard to capacity, Istanbul Ataturk has found it challenging to handle the ever increasing number of passengers to and from Istanbul city and the metropolitan area. Atatürk has been able to utilize innovation and technological advancements in order to meet modern demands for various travellers. Instillation of various technological systems that oversees smooth running of the airport operations have been put in place. In addition, Atatürk’s information desks are available twenty four hours a day. Additionally, the airport has vast mobile phones services that allow both domestic and international arrivals to connect with their recipients. For international travellers, one does not need to carry goods from other countries since on arrival at the airport; one can buy duty free goods. Equally, Sabiha Gokçen has been advancing technological systems that facilitate airport operations. In order for any business to remain relevant in a highly competitive market, it is indispensable for the business to develop a strategy through which it can develop and maintain competitive advantage. For Atatürk & Sabiha Gokçen, it is evident that the airports have been very instrumental in support of turkey’s aviation business. Due to geographical and strategic position of turkey, the airports have been able to utilize the positioning of the country to offer competitive airport services to Turkish airlines. Being the biggest city in turkey, Istanbul becomes the most suitable city for airport operations. Since Ataturk offers both local and international services, the airport has been able to modernize its operations in order to cater for both domestic and international services. Recommendations The need to focus on increasing terminals: in order for the two airports to maximize their profits. It is crucial to diversify their markets. This can be achieved by opening new terminals both in the turkey and in the international market. Technological advancements: although the two airports boast of their involvement in different technological advancements, it is indispensable to have every aspect of their operations up to date. Bibliography; Afuah, A., 2009. Strategic Innovation: New Game Strategies for Competitive Advantage. New York: Routledge. Coogan, M. et al., 2002. Strategies For Improving Public Transportation Access To Large Airports. Washington, D.C.: Transportation Research Board. Delfmann, W. et al. Strategic Management In The Aviation Industry. Aldershot [u.a.] : Ashgate. Doganis, R., 1992. The Airport Business. New York: Routledge. Fleming, S., 2011. Aviation Research: Airport Cooperative Research Program (ACRP) Addresses Many Needs But Could Enhance Transparency and Clarify Scope of Research Role. DIANE Publishing. Forsyth, P., 2005. Competition versus predation in aviation markets: a survey of experience in North America, Europe and Australia. Burlington: Ashgate. Graham, A., 2012. Managing Airports. 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