Airport Business Management Reprot

8/9/2019 Airport Business Management Reprot

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LONDON METROPOLITAN UNIVERSITY

CA2E72C Airport Business Management Page 1

COURSEWORK

(REPORT)

By

Nikola Georgiev

Student ID: 07059973

EMAIL: [email protected]


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INTRODUCTION:

Airport ownership structure

MARKETING POSITION:

Key facts

Airport location

Aeronautical position

Catchment area

Passenger traffic statistics

Services for Airlines and Passengers

CUSTOMER MARKETING:

Key attractions for airlines

Key factors for airlines

Demographics

Human resources

Education and science

Economics

Sectoral Structure

Infrastructure

Investment Environment

Marketing Mix

Product Positioning

Airport Management activities structure / Business proposal

Current Competitors/Targeted Business

Marketing

Benefits


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I. Airport Ownership Structure

Varna Airportis the second largest airport in Bulgaria located in the northern part of

Black Sea coast. It is State owned airport, although after long public discussions involving

the Ministry of Transport and Communications back in 2006, a decision has been made that

the so called holiday airports Varna and Bourgas, will be lend on concession for a

maximum period of 35 (thirty five) years (www.mtitc.government.bg). At the end of year 2006

the German-Bulgarian consortium of the world-famous airport operator Fraport AG and the

Bulgarian logistic company BM Star won the competition for the concession of Varna and

Bourgas airports the air gateway to the popular Bulgarian Black Sea tourist region. During

the 35-year concession period Fraport Twin Star Airport Management will operate and invest

in the development of both costal airports.

MARKETING POSITION

II. Key Facts

Varna Airport is the second largest and oldest airport in Bulgaria. It is State owned, but

since 2006 has been operated by Fraport Twin Star Airport Management AD Germany as

concessionaire. It has one runway with length of 2 500m. The airport operates on a 24 hour

basis, 7 days a week, 365 days a year (virtually non stop operations). There is one main

terminal building, separated by international arrivals lounge, international departures lounge,

VIP lounge, and domestic departures/arrivals lounge (www.varna-airport.com). Since 2007,

the airport management constructed second terminal building which operates only during the

summer period, when there is high demand of incoming/ongoing charter passengers. The

official statistics shows, that in 2008, the airport has serviced over 1.43 m passengers with

total of 15 129 ATM (www.caa.bg). Airlines servicing the airport were numbering more than75 (seventy five) flying to more than 95 (ninety five) destinations in 36 (thirty six) countries.


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III. Airport Location

Source: www.varna-airport.com

Varna Airportis located at the northern Bulgarian Black Sea coast, just 7 km awayfrom the city of Varna the Summer Capital of Bulgaria. Varna is the second largest city inBulgaria and it is at the heart of a highly developed business community, close to leadingBulgarian summer resorts and transport facilities.


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IV. Aeronautical Position


Varna airport has a strategic geographic position located on the Black Sea coast of

Bulgaria (Eastern Europe), it is only 2 (two) flight hours to main destinations, such asFrankfurt, Moscow and Tel Aviv.


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V. Catchment Area


Varna Airportis accessible within 1(one) hour by market of 1.2 million passengers.

Another 1.6 million can access Varna within 2(two) hours. The attractiveness of the airport

lies in the fact that, it is also easily accessible by passengers from the border countries, i.e.

within 2.5 hours drive to the east border of Romania Constanca and within 4.5 hours drive

to the NE border of Turkey.

VI. Passenger Traffic Statistics

Official BG CAA Data report shows that during year 2008, Varna Airporthas served total of

1, 432, 703 m. passengers (www.caa.bg) 1, 313, 244 on international flights and another

119 459 on domestic scheduled/non-scheduled flights. There are total of 15 129 ATM.

(For further information, please refer to Appendix 1).


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VII. Services for Airlines and Passengers

Fraport Twin Star Airport Management AD provides quality services for ground handling

of aircrafts with highly trained personnel in accordance with the IATA standards (www.varna-

airport.com) . Some of the services include:

Representation, Administration and Supervision

Passenger Services

Ramp services

Load Control, Communications and Flight Operations Cargo and Mail Services

Support Services

Security

Aircraft Fuelling

Fraport TSAM offers the following passenger services:

An automated check-in system for passenger and luggage handling

Fast and certain luggage tracing with World Trace

A cosy business lounge, which is now also available for clients of Priority Pass

A comfortable VIP lounge

Professional service for passengers with reduced mobility

Shops, restaurants/fast food area, duty free, etc.


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CUSTOMER MARKETING

VIII. Key attractions for airlines

Varna Airportoperates on a virtually non-stop basis: 24/7/365 (www.caa.bg). The main

advantage of the airport is not only its year round operations, but the fact, that the airport

has no slots constraints. Never the less, its strategic geographical position guarantees a

good amount of charter passenger traffic during the summer season. There is high

demand for tourist travellers, with potential for development of transport networks,

tourism and trade between partners from East and West. Varna airport is a reliable

partner for development of regular routes, based on catchment area of 2, 8 m.

passengers. Its location within highly developed business community, close proximity to

leading Bulgarian summer resorts and transport facilities, as well as master plan for

future development makes the airport attractive spot (destination) for business

partnership.

IX. Key Factors for Airlines

Statistical Data and Information

a) Demographic characteristics:

The population of Varna region is over 1.6m citizens, of which 976 thousand men

and 665 thousand women (57/43% ratio). For the period 1997-2007 the population of the

municipality of Varna has increased by 4.6 percent, while that of Bulgaria has decreased by

5.8% (www.nsi.bg). Population distribution by age is:

ensioners

working age

Source: www.varna.bg


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b) Human Resources

From 2000 to 2004 the number of economically active persons has increased by 7%while the unemployment rate has dropped 2 times (from 11.7% in 2000 to 5.26% in 2004).64% of unemployed are women (www.varna.bg).

c) Education and science

Varna has highly trained personnel who speak foreign languages, thus only thestudents completing language schools are 600 per year. There are 5 000 students whograduates every year in Varna. 25% of the working population are university graduates, 50%

of the working age population have completed secondary education(www.minedu.government.bg).There are 12 (twelve) vocational schools that teach 8 (eight) thousand students at 72

(seventy) majors, 5 (five) private vocational high schools, 53 (fifty three) comprehensiveschools. 3 (three) special schools, 2 (two) technical Schools, 18 (eighteen)technical colleges, vocational schools and Art schools, 8 (eight)universities, special institutes,colleges, including University of Economics, University of Medicine, Technical University,Varna Free University, the Naval Academy (the biggest on the Balkans), Institute forInternational Tourism, Institute of Hydrodynamics Center, Institute of Oceanology, Institute ofMetal Science, BAS, Institute in waterways, Institute for Fisheries and Aquaculture. Thereare total of - 28 thousand students and 2100 teachers (www.minedu.government.bg).

d) Economics

1. Sectoral structure

The Economy in Varna region is well represented at the national level produced by gross

domestic product, representing 5.4% of the national. The District ranks third in the country

invested in foreign investments per capita. Equity ratio in the economy of the area: 25%

industry, 20% transport, tourism 35%, 10% trade, 10% construction (www.varna.bg).

Leading to the regional economy sectors are agriculture, tourism, chemicals production,

shipbuilding and repair, food processing and manufacturing of electrical appliances.

Municipality of Varna has significant economic potential and its related infrastructure is welldeveloped. Structure in the economy is highly diversified.


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The following Graph shows the distribution of the net revenue on sales by industry

61%16%

14%

6%3%

Trade & Tourism Industry Transport Construction Others


The two most developed clusters in Varna are marine and tourism industries. The

municipality also has businesses in sub-metallurgy and machine building, food processing,

clothing industry, electronics, footwear industry, production of building materials and

construction, furniture manufacturing.

Maritime Industry:

During the past 90 (ninety) years in Varna shipyard were built over 800 ships.

Odessos Ship Repair Plant JSC is the largest and best equipped plant in Bulgaria Ship

suitable for dry-dock vessels of up to 35 000 dwt and repair of ships sailing to 150 000 dwt;

1000 people own personnel, subcontractors - 500(www.varna.bg).

Navigation Maritime is the largest national maritime carrier state property. Have

tankers, container vessels, mass and general cargo, ferries with a total tonnage of 1 810 000

dwt. Provides about half of revenue in the region, and 90% of revenues from the transport

sector in the region and implements 20% of imports and exports to Bulgaria. Marine

engineering SA - manufactures marine equipment. Deck has produced equipment for over190 ships and 75 000 tonnes of steel structures.Tourism Industry:

Tourism is one of the major industries in the economic structure of Varna Municipality.

Resorts "Golden Sands", "St. Constantine and Helena "," Riviera " and " Sunny Day are

world famous, and three of them have won the Blue Flag award for best beach

(www.mi.government.bg). The resorts offer numerous opportunities for sports, spa and

entertainment. The potential of this sector of the municipality is characterized as unique

combination of natural resources (beaches, mineral waters) and cultural heritage and

traditions.


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The prices of tourist services in Bulgaria are competitive compared with those in

Croatia, Greece and Spain. There is an increased demand for Wellness and Spa services

and high demand in the months outside the active season. There are prerequisites for the

development of health, cultural and ecotourism. The municipality has over 485 hotels, whichhave over 149 thousand beds capacity (www.mi.government.bg).

2. Infrastructure

Municipality of Varna occupies a key position in the trans-European networks as a port and

center as part of the current and future transportation corridors. A major competitor of Varna

and Bourgas ports is Constanta (Romania). In the territory of the North East region undergo

three pan-European transport corridors: 7 (Danube waterway), 8 (Durres - Skopje -Sofia - Bourgas - Varna), 9 Helsinki - Kiev - Ruse Alexandroupolis

(www.mrrb.government.bg).

Road infrastructure is relatively well developed (density 709 km/1000 square km). Its

total length is 144.2 km. 12% of the roads within the municipality are highways, 41 percent

are first-class roads. 90% of the road network is in good condition.

The density of railway network exploited in the Municipality of Varna is 5.14 km/100

square meters and formed three railway stations. Topoli railway station is specialized in port

activity. Railway station Varna - West is intended as a freight station and engine house, a

railway station Varna - East - primarily as a passenger terminal. Very important is the railwayline Karnobat - Sindel - Varna, since it is included in the Corridor 8

(www.mrrb.government.bg).

Varna Airport is the second largest airport in Bulgaria. It is a civil airport for domestic

and international transport. Its development is in direct relation to tourism and it is typically

seasonal. Mainly charter flights are international - 89% of the total number of passengers

was on international routes. Its area is 2 414 ha. It is linked to international road E-70 and F-

87 and has modern navigation equipment. First in importance to the f inancial results were

passenger charters, the second - international scheduled flights to a third - internal

scheduled flights to Sofia and Bourgas, on the fourth - cargo charter flights, and the fifth -

general aviation. Liaise with the airport 36 countries and 101 cities (www.caa.bg).

Varna port connects directly to Russia, Ukraine and Georgia by ferry and ro-ro

connection through a railway line Rousse - Varna and the European Corridor Rhine - Main -

Danube. Trade and port activities are directed mainly towards the countries of Europe, the

Middle East and South Africa. Varna port handles all types of cargo - liquid, bulk, number,

containers and ro-ro. It is the most important seaport for North East region. It passes through

a quarter of the turnover of goods. Port clock mode of work and has very good relation with

the national rail network and good relationship with the national road network. It covers a

territory of 30 km. and has 35 berths, 76 142 sq. . covered storage area, 458 870 sq. .

open storage area, 66 pcs. quay cranes and other specialized machinery(www.mtitc.government.bg).


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Pass through the port mainly containers, grain, cement, clinker, fertilizers, calcium

soda. Servicing of vessels is carried out by agents, brokers, drivers, suppliers, freight

forwarders. The total number of services provided are over 25 000. Freight on the waterway

is mainly undertaken by the Bulgarian maritime fleet, and a minor share of some privatecompanies. Cargo handling is carried out by Port Complex Varna. Port of Varna consists of -

East, dry port, oil terminal, port poplar, timber port and naval base

(www.mtitc.government.bg).

Binding of Varna and the sea with Beloslavsko Lake and the building of Varna West port

and ferry terminal allows the water to penetrate deep, thus ensuring better interaction

between the four modes of transport, unloading port of Varna - East removal of cargo activity

and environmental contamination in the resort town.

3. Investment Environment

a) Institutional environment

Bulgaria has the most stable and predictable political situation in the Balkans. The country is

member of NATO since March 29, 2004 and EU State member since January 1, 2007.

Bulgaria is attractive for investors due to factors such as rapid growth (4.5% GDP per

annum), low inflation (2.3 percent for 2007), low interest rates, stable prices and wages, low

taxes, low budget deficit. To pay the costs of labor in Bulgaria amounted to less than 10% of

EU average. Investments are low risk and high return. Bulgaria has adopted international

accounting standards. There are no income tax or capital tax rates. Bulgaria is a country of52 international agreements on protection and investment promotion on the basis of

reciprocity and on 55 agreements on avoidance of double taxation (www.mi.government.bg).

b) Legislation

According to the law - investment worth over 50 million Euros receive Free State or

municipal land and administrative support. In all other respects, foreign investors are equal

to the Bulgarian. When international treaties of Bulgaria provide more favourable conditions,

they take precedence over national law. The legislation also offers protection against

expropriation. Law on Obligations and Contracts allows lenders to require obligations to

them and compensation for non-payment of duties. Civil Procedure Code allows theresolution of disputes in a foreign court, if one party is resident in another country. Bulgarian

legislation on international commercial arbitration allows the resolution of civil disputes over

ownership of an international arbitration if they occurred in international economic relations,

and if one party is resident in a foreign country (www.mjeli.government.bg). There is an

option to purchase land from a foreign company in full if it is registered in Bulgaria.

Foreigners may not directly acquire proprietary rights over land, but this limitation does not

affect Bulgarian companies with foreign participation, irrespective of the size of the partition

in which they participate. Thus, foreign companies can acquire ownership over land,

including farmland and other. There is a liberal regime for the export of profits abroad after

taxation.


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c) Prerequisites for investment

Creating a favourable business environment for attracting investment and employment of

the population is among the strategic objectives of the municipality. Among the mainpriorities is the development of public-private partnerships between local government and

businesses using:

- Finance lease

- Contractual funding

- Vacant land conversion, manufacturing, warehouse and commercial premises for the

development of alternative activities on preferential terms.

Varna Municipality has a strategic location with Trans meaning. Black Sea as a key

geographic factor is a prerequisite for the development of maritime and tourism/transport

industry. Municipality of Varna has a well developed tourist industry and potential fordevelopment of new forms of tourism, Spa and Wellness, cultural and ecotourism.

There are territory and infrastructural conditions for building of free zone. Transport

infrastructure is a local, national and international significance. There is high scientific and

technical potential. Developed are all levels of education to university in the fields of

economy, management, engineering and technology, medicine and tourism.

Municipality of Varna attracts workers from neighbouring regions and across the country.

There are developed advanced communication links and rich information environment, as

well as well-developed network of financial institutions for credit support for small and

medium businesses. Opportunities exist in active international cooperation and participation

in EU projects. There are several cultural institutions of national and international importance.Varna Municipality is famous with rich cultural heritage. Varna region has multi diverse

organisations structure, such as NGOs, civic movements, associations, chambers of

commerce (www.varna.bg)

.


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Marketing Mix

Destination Potential History

LGW 150 000 BA, Bulgaria Air (Disc. Ops. Sep 09)

LTN 95 000 Wizz Air (Started Ops. Jun 09

Berlin 125 130 000 No Direct Service

Rome 52 000 No Direct Service

Madrid 68 000 No Direct Service

Athens 50 000 No Direct Service

Source: www.caa.bg



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Product Positioning for Leisure Markets/ Low Cost Airlines

In order to adapt to growing demand for low cost market, the opportunity to construct

a low cost terminal can boost enormous benefit for Varna Airport. The following table shows

an overview of such an investment.

Cost

Simple one level terminal building with

no jetties

Equipment pooling

Reduced Ground Handling (no use of

airside buses)

Minimal services

Flexibility

Pre-boarding areas

Self check-in

Common security

Multi-functional staff

Speed

Minimize taxi, holding and delays

Short turnarounds /up to 20min/

Positioning of aircraft close to terminal

Access

Short walking distance to aircraft

Long opening hours

Close proximity to city (via bus, car)

INITIAL INVESTMENT THAT BRINGS

REDUCED SERVICE COSTS FOR FUTURE

BUSINESS

AIRPORT EFFICENCY, POTENTIAL FOR

HIGH GROWTH OF TRAFFIC AND COST

REDUCED OPERATIONS


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X. Airport Management Activities Structure/Business Strategy

Due to the nature of low cost airlines business and the current global trend for its growth, the

airport management have to adopt the so called aggressive business strategy in order to attract low

cost carriers into the airport, based on its competitor Constanta Airport, which already operate

flights of major low cost carriers. The following Tables show proposition for Varna Airport Pricing

Strategy and the Constanta Pricing Strategy currently in use.

Varna Airport

New route incentives

Discounted Charges:

1 year 80%, 2 year 60%, 3 year 40%,

cont.

Passenger Traffic Growth, Number of routes

developed, based aircrafts, etc.;

Flat (all in one) fee

Marketing Support

Based on projects (i.e. co-branding,

destination advertisement, local tourism authorities

involvement, etc.;

Usage of Airport office space Free or discounted

Mihail Kogalniceanu International Airport

Constanta(www.mk-airport.ro)

Number of Landings per month Discount

10 20 5%

21 40 7%

41 60 9%

Over 60 11%

Number of Passengers per month Discount

2 100 3 200 5%

3 201 4 200 7%

4 201 5 200 9%

Over 5 200 11%

Competitors Price Strategy


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XI. Current Competitors/ Business Targeted

Current Low Cost Carriers Operating at Varna Airport:


N.B. Wizz Air is operating year round services while others only operate during summer season

Based on the tourist inflow data by country (marketing mix stats as per preceding notes), the targetedbusiness marketing for low cost carries should be mainly focused towards the following airlines, that

could create regular routes and possibly base an aircraft (s) at the new terminal:


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XII. Marketing

Passengers Marketing Travel Agents Marketing

Local Press (newspapers, magazines, etc)

Radio & TV

Outdoor Advertising (Posters, Billboards,

etc ;)

Internet (Banners exchange, internet ads,through airport website, etc.)

PR activities

Workshops

Events

Website

Exhibitions

PR activities

XIII. Benefits

The creation of a low cost air terminal at Varna Airportcan bring not only benefits for

the airport itself, by generating more traffic, creating new routes and improving airport

productivity, but for the region as a whole - the tourism and business industry, local

economy, employment and development. Currently the main business of the airport is

during the summer season. By introducing low cost travel (attracting low cost carriers),

the airport can become major year round destination, as it has all the potential, based on

its location and close proximity to resorts, attractions, etc. Half of the Bulgarian

population is travelling to the main airport in the capital Sofia in order to fly to their

desired destination. By creating regular (year round) services (routes), the passenger

traffic can be drawn easily down to Varna Airport, which will create huge business forboth, the operating airlines and the airport itself. Another opportunity for the airport is to

pursue airlines to fly to destinations that will be attractive for the neighbouring countries

citizens (i.e. draw traffic from Constanta airport Romania).

Varna Airportone airport, infinite opportunities..


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REFERENCES:

1. Watkins, M. (2009), "How to market a regional airport?", in Graham, A. (ed.), LatestThinking in Airport Marketing: Gaining a competitive edge in today's changingindustry environment, The Marketing & Management Collection, Henry Stewart TalksLtd, London (online at http://0-www.hstalks.com.emu.londonmet.ac.uk/go)

2. Jarach, David (2005), Airport Marketing: strategies to cope with the new millenniumenvironment, Aldershot: Ashgate

WEBSITES:

Varna Airport:www.varna-airport.com

Varna Municipality:www.varna.bg

CAA BG:www.caa.bg

Constanta Airport: www.mk-airport.ro

Ministry of Justice:www.mjeli.government.bg

Ministry of Economy, Energy and Tourism:www.mi.government.bgMinistry of Education:www.minedu.government.bg

Ministry of Regional Development:www.mrrb.government.bg

National Statistical Institute:www.nsi.bg

Ministry of Transport, Information Technologies and Communications:

www.mtitc.government.bg

Total word count: 3367 words

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Airport Business Management Reprot