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The airport transport industry
The air transport industry is the global network of commercial aircraft operators, airports, air navigation
service providers and manufacturers of aircraft and their components. It is responsible for connecting
the global economy, providing millions of jobs and making the modern, internationally connected
quality of life possible.

Global Aviation Industry Segments

Air transportation has been defined as ‘the carriage by aircraft of persons or property as a “common
carrier” for compensation or hire’ (Dempsey & Gesell 1997, p. 6).

A “common carrier” is a firm that transports people and goods and makes its services readily available to
the general public (Beatty & Samuelson 2010, p. 487).

Commercial airlines may operate services on a scheduled or nonscheduled basis. Airlines may operate
over local, regional, national or international routes.

Airlines may also focus their business on the carriage of passengers, air cargo transportation, or a
combination of both.

1.2
Factors influencing the industry

Economic and social benefits

Air transport is a major contributor to global economic prosperity
Air transport is a major global employer

Air transport invests substantially in vital infrastructure

Air transport provides significant social benefits

Air transport is working to mitigate its environmental impact

Global economic prosperity

Aviation provides the only rapid worldwide transportation network, which makes it essential for global
business and tourism.

It plays a vital role in facilitating economic growth, particularly in developing countries.

Airlines transport over four billion passengers annually, with revenue passenger kilometres totalling
nearly eight trillion in 2017

Global employment

Employment opportunities contribute to the social welfare of citizens at a local, regional and federal
level, improving life styles and the standard of living.

Improves living standards and alleviates poverty through tourism

The air transport industry supports 62.7 million jobs globally

Vital infrastructure
Unlike other transport modes, the air transport industry pays for a vast majority of its infrastructure
costs (runways, airport terminals, air traffic control), rather than being financed through taxation and
public investment or subsidy (as is typically the case for road and railways).

In 2016, airports invested nearly $64 billion in construction projects, creating jobs and building new
infrastructure.

Social benefits
Aviation broadens people’s leisure and cultural experiences via wide choice/ affordable access to
destinations across the globe

Improves living standards and alleviates poverty through tourism

Often serves as the only means of transportation to remote areas promoting social inclusion

Contributes to sustainable development by:

Facilitating tourism and trade

Generating economic growth

Creating jobs o Increasing tax revenues

Facilitates the delivery of emergency and humanitarian aid relief

Swift delivery of medical supplies, organs for transplantation

Social Development

Environmental benefits
Companies across the sector are collaborating to reduce emissions

Modern jet aircraft are 75% quieter than the models that first entered service, and each new generation
of aircraft continues this downward trend.

By 2020, it is expected that a million passenger flights operating partially on sustainable aviation biofuels
(SAF) will have taken place.

It is also expected that shifting to alternative aviation fuels could reduce CO2 as much as 80% compared
with traditional jet fuel.

Environmental responsibility
1.3
The Air Transport Industry Value Chain

Upstream sector
The upstream sector of the aviation value chain consists of:

• Aircraft and aircraft component manufacturers

• Leasing firms and other sources of capital

• Aviation infrastructure providers

• Airports

• air navigation service providers (ANSPs)

• aviation communication providers (air-to-air, between ground stations, etc.)

• Other suppliers

• caterers

• fuel suppliers

• insurance providers

• ground services providers

Downstream sector
The downstream sector of the aviation value chain consists of:

• Distribution of the airline product – passengers

• Global distribution systems (GDS), formerly computerised reservation systems (CRS)

• Travel agents (online and brick & mortar)

• Travel integrators (tour operators packaging air ticket with hotel and/or other travel
service)

• Distribution of the airline product – cargo

• Freight forwarders

• Cargo integrators (companies packaging air lift with trucking pick-up and delivery, and/or
customs services, etc.)

Manufacturers
Airbus & Boeing Commercial Airplanes extremely high capital requirements, dynamic economies of
scale, a high R&D Generally quite long periods between initial investment and returning cash flows from
aircraft sales

How can industry affect Value Chain

• What event has recently occurred that will have a major impact on the value change, and the way the
industry was heading?

• What else happened in 2019????

Airports
-Interface point between the air and surface-based modes making them both an infrastructure and
service provider for a highly specialized demand

-Airports have to satisfy the specific requirements of such diverse customers as airlines, ground
handling agents, flight catering firms and also passengers and air cargo shippers (Koch & Budde 2005).
-Airports such as Chicago’s O’Hare International Airport, London Heathrow Airport and Singapore Changi
-Airport are major international hubs (‘mega-hubs’), which concentrate both interregional and
international traffic, also serve as a commencing and finishing point for international long-haul
servicesAirports such as Chicago’s O’Hare International Airport, London Heathrow Airport and Singapore
-Changi Airport are major international hubs (‘mega-hubs’), which concentrate both interregional and
international traffic, also serve as a commencing and finishing point for international long-haul services

-The focus of regional airports is on the provision of feeder flights to international or regional hubs -
These airports are normally only served by smaller aircraft

-Airport income is generated from both aeronautical and from non-aeronautical or commercial sources.
-Aeronautical revenues include aircraft landing fees, aircraft parking and hangar fees, passenger service
charges and air traffic control charges

-Non-aeronautical are those generated by the airport from non-aircraft related commercial activities in
the terminal areas and on airport property

1.4
Business Models

A Business Model is “a description of the roles and relationships among a firm’s consumers, customers,

allies and suppliers that identifies the major flows of product, information, and money, and the major

benefits to participants” (Weill & Vitale 2001).

Regional Airlines

• Are also called commuter or feeder airlines; generally use smaller aircraft (20-100 seats) and restrict
their flights to a geographically defined area

• Some operate independently and focus on decentralised point-to-point flights between smaller
airports

• Some operate as feeder airlines for FSNCs and connect their partner airline’s hub with regional
airports
Holiday Airlines
• Airlines that focus on the transportation of tourists

• Many holiday flights are operated as scheduled, albeit often seasonal services

• Direct point-to-point services using a homogenous fleet of medium to large aircraft with high density
seating

• Offer full tourist class onboard services: meals, drinks, newspapers/IFE

Low Cost Airlines

• A “low cost carrier” is an airline that focuses on operating point-to-point, no frills, intra-regional
scheduled services with no interlining (Hanlon 2009, p. 59).

• Strong cost minimisation focus

• Single class service

• Most tickets sold via the internet

Full Service Airlines

• A “legacy” or “full service network carrier” (FSNC) is an airline that focuses on providing a wide range
of pre-flight and onboard services, including different classes of services, and connecting flights

• Most FSNCs operate a hub-and-spoke route network and are also often referred to as hub-and-spoke
airlines

Business Models
• The emergence of the Low Cost Carrier (LCC) has brought about a revolution in the passenger airline
industry and are challenging the traditional face of the industry and the established “Legacy Airline”

• Established by Southwest Airlines of Dallas in 1971, there are now over 100 LCC’s around the world

• Originally only an irritant to established airlines, rising fuel costs and growing competition have forced
competition.

• LCC’s are now evolving into Value Based Airlines (VBA’s)

• The VBA challenges the Legacy carrier more than the LCC and is likely to be the business model of the
future

FSC versus LCC Airlines

Jetstar follows basic LCC Principles

1.5
International Civil Aviation Organization
• ICAO

• Specialised agency of the United Nations (UN)

• Primary role is the development of international standards and recommendations for the safe and
efficient conduct of international air transport • 191 Member states (February 2014)

International Air Transport Association

• IATA

• Established 1945 in Havana, Cuba

• Represents airline interests

• 250 members (84% of world air traffic) (IATA 2015)

Global Aviation-Related Institutions

• Role is to provide services for safe and efficient air transport services

• Regulatory and monitoring function

• Examples, United States Federal Aviation Administration (FAA) & Civil Aviation Safety Authority of
Singapore (CAAS)

National Public Institutions

Regulatory and monitoring function

(Examples, Eurocontrol in Europe or Airservices Australia)

Private Institutions
• Airlines4America (previously Air Transport Association of America)

• Association of European Airlines (AEA)

• US Regional Airline Association

Airports Council International

• Formed in 1991, global body representing airport interests

• Works closely with ICAO on international air transport standards

• Advances/protects airport interests in airport policy changes (charges and regulation).