LEARNING UNIT 9:

Issues facing the airport industry

Review
The purpose of learning unit 9 is to enable you to comprehensively understand the
issues facing the airport industry. It highlights the industry from a South African and
global markets perspective.

Unit Outcomes
On completion of this unit, you should be able to

• understand the airport infrastructure

• describe the technological changes in airports
• describe South African airport ownership structures

9.1 Introduction

The aviation industry is an extremely competitive and volatile industry. As we

discussed in previous learning units, airlines face fierce competition from their
domestic and international rivals, and the same is true for airports. On a very basic
level, an airport is a place where aircraft land and take off and where there are buildings
for passengers to wait in and for aircraft to be sheltered (Merriam-Webster 2015).
However, airports are much more complex than this simple definition would suggest
and are influenced by a host of factors. Within domestic and international passenger
transport, airports provide their customers (airlines and passengers) with two types of
products: the airport buildings and terminals, and the services needed in order to
facilitate airline operations – such as security checkpoints and check-in and baggage
services. In this learning unit, we discuss airport infrastructure and buildings with
reference to the changing airline industry and the prevalence of airline alliances and
low-cost carriers. We then look at how security, check-in and baggage services have
forced airports to adapt their service offering. Finally, we look at the ownership
structure of airports globally and within South Africa.

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9.2 Airport infrastructure

9.2.1 General airport infrastructure

Airports vary considerably around the world, depending on their geographical location,
their commercial activities and their capacity. Major international airports such as OR
Tambo International operate mainly within the passenger air transport space, whereas
smaller regional airports such as Sishen Airport focus on freight transportation
(Flightstats 2016). Within these commercial activities, airports need to be capable of
providing efficient operations to their customers (Pearson 2012). In order to do so, they
need to ensure that operations are in line with safety and security regulations, that
aircraft are able to operate efficiently, that passenger inconvenience is minimised, that
they manage their revenue streams effectively and that they have sufficient capacity
for increases in traffic (Pearson 2012). Figure 1 shows a generic airport layout. Below
figure 1, we have listed the basic infrastructure components and their functions. Take
some time to look closely at the diagram and the list and familiarise yourself with the
basic infrastructure of an airport.

Source: https://commons.wikimedia.org/wiki/File:KCMH_Airport_Diagram.svg

FIGURE 1: Airport layout

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• Runway: area on which a plane takes off and lands.

• Taxiway: Taxi” is the term used to describe the movement of a plane when it travels
along the ground. A taxiway is the area in which planes taxi between the runway
and the aircraft stands and apron.
• Apron: The apron is essentially the parking bay for the planes. It is where the plane
parks whilst it is loaded or unloaded, refuelled, or boarded (US Department of
Transport 1996).
• Ramp: A ramp is the physical structure that connects the terminal to the plane. It
contains the passenger gates.
• Terminal: This is the building in which all passenger activities occur. It includes
baggage systems, airport lounges, arrival and departure halls, security checkpoints
and the like.
• Hangars: These are essentially garages for planes – planes are kept in hangars in
order to be protected from the elements. Sometimes, maintenance is performed on
planes whilst they are inside the hangar.

9.2.2 Airline alliances – what they demand from airports

In learning unit 4, we discussed the dominance of airline alliances and how they help
individual airlines to maintain a competitive advantage. These alliances use economies
of scale to reduce costs and increase revenues and efficiencies (Amankwah-Amoah &
Debrah 2011). In order to do so, they require shared airport facilities such as lounges
and check-in counters as well as shared flight codes. Airports have therefore been
forced to change the products that they offer and adapt to these requirements (Williams
2012). For example, they need to make sure that signage and branding is correct at
check-in counters and that it informs passengers that they can check in at the counters
belonging to airline alliance members. In addition, they need to allocate space at
check-in desks and boarding gates for priority passengers (as a perk, many alliances
allow frequent flyer members to skip queues for check-in or to board before the rest of
the passengers). In some instances, fulfilling the needs of the alliances means
redesigning the actual airport itself with regards to the location of lounges, the size of
lounges and the number of lounges (Williams 2012). Some airports have gone as far

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as creating separate terminals for the exclusive use of premium passengers (Williams
2012).

As alliances grow and develop, airports will need to keep up with their needs and
demands. Constant communication and negotiation is needed between airports and
airlines to ensure that the best levels of service are offered

ACTIVITY 9.1

After studying about airport infrastructure, head to Discussion Forum 9.1 and discuss
with your fellow students why major airports usually have large terminals. Also provide
reasonable examples to back up your statements.

9.2.3 Low-cost carriers – changing more than just the airlines

As much as alliances have their requirements and demands, so too do low-cost

carriers (LCCs). We explored LCCs and their characteristics and effects on the airline
industry in depth in learning unit 2. One of the key factors that we discussed was LCCs’
need for quick turn-around times so as to minimise their time on the ground and
maximise the utilisation of their fleet and crew. For this reason, LCCs do not like large
airport terminals that require buses or air bridges (Williams 2012).

NOTE:

Many large international airports have extremely large terminals and many of them
require buses and train systems to transport passengers and crew between them.
South Africa’s airports are much smaller in size and are therefore easy to navigate on
foot. Bear this in mind when considering terminals and airports and how they might
differ depending on their physical size.

Similarly, LCCs do not require airport lounges or transfer terminals, as they do not offer
connecting tickets (Williams 2012). In response to this, some airports have developed
terminals that are specifically designed for LCCs (Williams 2012) while, in some parts
of the world, entire airports have been built to cater specifically to LCCs (Harbison
2008:85). These terminals generally charge LCCs the same landing charges but
reduce their services to such a level that levies per passenger are greatly reduced
(Williams 2012). These reduced services include the terminal building itself, the ground

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handling services offered and the services available to passengers. Let’s take a look
at how these services differ in an LCC airport and terminal and how they help LCCs
and airports to reduce costs.

Cost cutting begins from the first stages of construction of the terminal building with the
use of the most inexpensive materials and design elements available (Harbison
2008:98). For example, many buildings have low ceilings, simplified light fittings (that
are commercially available), minimal use of glass (to keep the building cool and
therefore requiring less air-conditioning), and concrete floors instead of carpeting
(Harbison 2008:98–140). Passenger seating areas are created with minimum comfort
in mind, using basic equipment (Harbison 2008:91). Stairs are provided for accessing
different levels and no elevators or escalators are available (Harbison 2008:91). No
office space, sales outlets or tour operator desks are available to airlines (Harbison
2008:98). Often, the terminals offer a single shared baggage and sales desk, reducing
space and staff requirements (Harbison 2008:98).

The operational services offered to airlines are also kept to a minimum. In line with
LCC point-to-point network structures, no transit areas are available and often only one
ground handling service option is available (Harbison 2008:8). Passengers are also
offered limited services – for example, they might access the aircraft directly from the
apron with no bus services offered (Harbison 2008:91). In addition, there are limited
restaurants and shops within these terminals (Harbison 2008:76), fewer check-in
desks and many more self-service check-in kiosks (Harbison 2008:140), and
passengers are sometimes required to carry their baggage directly from the hold when
disembarking (Harbison 2008:8–253).

The equipment and service offerings described above are the most simplified that a
terminal or airport can implement, and many real-life examples will have only some of
the features listed. Airports need to choose which elements have the largest effect on
their cost base (allowing them to reduce the airport levies per passenger to LCCs) and
which will result in the greatest reduction on turnaround time. These two main changes
will make them more competitive in the LCC market, and increase their competitive
advantage overall.

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ACTIVITY 9.2

Read the case study below and then go to myUnisa Discussion Forum 9.2 and
participate in a discussion of this case study.

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 Case Study 1: Warsaw Frederick Chopin Airport – operating a dedicated
lowcost terminal in a former furniture shop

Please note: the order of text has been altered slightly to make it better suited as a
learning resource.

Like Hungary, Poland joined the EU in May 2004 and it also witnessed rapid
development of its air transport network, as Western businessmen seeking new
investment opportunities, and tourists alike, headed to the country and its capital,
Warsaw. This demand for inward flights was matched by an exodus of hundreds of
thousands of Poles heading west, often to the UK or Ireland, seeking employment.
Most of them are from regional cities rather than the capital. Most recently, the latest
band of travellers has been property owners and developers seeking to take
advantage of low property prices and abundant properties for sale in the main cities.

Warsaw Frederic Chopin Airport (previously Okęcie International Airport and still
referred to by that name) handles about 50% of the air passenger traffic in the
country, down from 75% in 2003, from 100 scheduled destinations. In 2006, the
airport handled approximately eight million passengers, an increase of 57% since
2003 – much the same size as Budapest – with the figures indicating the shift
towards regional services. Warsaw Airport is located 10 km southwest of the city
centre and is situated on approximately 500 hectares of land.

Warsaw’s low-cost terminal is called Etiuda. It was opened at the end of Mar 2004
to supplement the existing Terminal 1 and is situated in the southern part of the
airport, away from the main buildings. Etiuda began life as a new arrival’s hall – the
so-called Finnish Hall – which operated as an arrivals terminal until mid-1992, when
the new Terminal 1 was put into operation. Later, the facility was re-organised and
used as a supermarket, furniture shop and storage space until the comprehensive
redevelopment [to a LCT] in early 2004.

The useable floor space of the terminal is 2 281 square metres, including 677 square
metres for departing passengers and 456 square metres for arrivals. There are eight

check-in stands.

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 At present, the Etiuda Terminal handles passengers from easyJet, Germanwings,
Norwegian Air Shuttle, Ryanair, SkyEurope and Wizz Air.

The Etiuda terminal lacks bars, restaurants or retail opportunities, but basic facilities
such as a newsagent, coffee bar/snack shop and drinks machines have been
provided. Owing to the fact that Etiuda offers customs clearance only for passengers
travelling to the European Union countries, it does not offer a duty-free zone. The
management admits the terminal is less comfortable than Terminal 1 whilst stressing
its safety/security features. It does not have a designated car park of its own.
(Harbison 2008:106–108)

9.3 Airport operations and technological changes in fourth industrial

revolution (4IR)

Although structural changes in airlines and the introduction of LCCs have had a
substantial influence on airports, some of the most significant and perhaps the most
interesting changes have resulted from improvements in modern technology.
Technology has advanced at such great speed that it seems ludicrous to think that in
2002, just 14 years ago, only 30% of South African’s owned a cellular phone (Pew
Research Center 2015). By 2014 that figure was up to 89% (Pew Research Center
2015). This means that almost nine out of every 10 people in South Africa have a
mobile device. Between 2013 and 2014, a median of 42% across countries said they
accessed the internet at least occasionally or owned a smartphone(Pew research
center 2018). The increased access of individuals to information and tools has
changed the world and, of course, the way we travel. Let’s take a look at specific
technological changes in airports.

9.3.1 Growing security culture

In learning unit 1, we discussed the international and local aviation sectors. Within this
learning unit, we learnt about the history of aviation and how certain historical events
impacted the industry. A crucial event was the hijacking of aircraft on 11 September
2001, which has changed airport and airline security standards and processes
substantially. This has had a major impact on security checkpoints in airports. From a
practical perspective, airports have had to increase the size of their checkpoints,

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increase the number of security personnel manning the checkpoints, and enforce more
stringent aviation safety and security measures (Williams 2012). These changes have
meant that more space is required for the increased number of checkpoints and that
the process of checking passengers and their baggage has become longer (Williams
2012). More staff, more processes and more time mean that security procedure costs
have increased, increasing the airport’s overall cost base. Please see the example of
heist that happen at the OR international airport by watching the video at
https://www.youtube.com/results?search_query=There+was+heist+at+the+OR+Inter
national+airport%2C+

In addition to a direct increase in costs, increased security procedures and

requirements have had an impact in reducing non-aeronautical revenue streams for
airports (Williams 2012).In 2008, ACSA spent around R80 million to upgrade perimeter
security at a number of South African airports. By spending more time getting through
security checkpoints, passengers have less time to shop or visit restaurants whilst
waiting to board their flights (Williams 2012). The restrictions on liquids carried in cabin
baggage have also reduced the range items that passengers are able to purchase
before check-in (Williams 2012).

All in all, an increased focus on security adds to the airport’s cost base and takes away
from its revenue streams. Below is a case study that describes how airports,
particularly in developed countries, deal with security issues at their airports.

The markets for airport management and ownership, and ground handling provision
have undergone significant changes in recent decades. Ownership and management
of airports across the globe have moved away from the public sector, with around 500
commercial airports worldwide now having some form of private sector participation in
their management or ownership. Key drivers of these changes are to provide receipts
for the public budget, to facilitate large infrastructure investment through private
sources of finance and to utilise management experience and techniques from
international airport operators in local markets. In the ground handling sector, services
are increasingly provided by specialised companies operating across a large number
of airports either in the European Union (EU) or globally. Traditionally, these services
have been provided by airports or airlines themselves, but the opening up of the ground
handling markets (in the EU, under Directive 96/67/EC) has resulted in a greater range

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of specialised companies taking advantage of these opportunities. The European
Commission has commissioned this case study to increase its understanding of the
international market for airport services and ground handling, and, in the context of the
large volume of airport transactions, improve their understanding of this market and
how it works. In this context, particular attention is given to the access that EU
companies have to non-EU markets for airport ownership and management and the
ground handling sector.

9.3.1.1 Fourth industrial revolution (4IR)

The fourth industrial revolution refers to the marriage of physical assets and advanced
digital technologies such as the internet of things (IoT), artificial intelligence (AI),
robots, drones, autonomous vehicles, 3D printing, cloud computing, nanotechnology,
and more, which communicate, analyse, and act upon information, enabling
organisations, consumers and society to be more flexible and responsive and make
more intelligent, data-driven decisions.

9.3.2 Check-in procedures

One of the most significant improvements to airport efficiency resulting from technology
has been the introduction of self-service check-in facilities (Williams 2012). In South
Africa, there has been a rapid move away from using airport check-in desks as,
increasingly, passengers are checking in remotely (SITA 2015:4). Three main types of
remote self-service check-in facilities exist in modern airports:

• self-service kiosks
• online check-in
• mobile check-in
Please follow this link to see how check-ins are performed in airports, more especially
during the Covid-19 pandemic:
https://www.youtube.com/results?search_query=How+check+in+are+performed+in+s
outh+african+air+ports+

Self-service kiosks are physical kiosks that are placed in departure terminals at which
passengers can check in using their online booking reference codes. The kiosk
confirms their booking and prints their boarding pass. Online check-in facilities allow
passengers to check in on the airline’s website up to a few hours before the flight is

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scheduled to take off. Boarding passes are generally either printed by the passenger,
collected at the airport, or scanned directly from a mobile device. Mobile check-in is
similar to online check in, but instead of the airline’s website, the passenger checks in
via a mobile application (commonly referred to as an app). In this case, the boarding
pass is saved to the phone and is scanned directly from the mobile device.

South African travellers have embraced these methods and self-service check-in
methods have surpassed traditional methods, with 57% of passengers checking in
using either a kiosk, online or mobile check-in facilities (SITA 2015:4). During COVID19
this service provided to more effective to limit increasing infections than traditional
counter check-in.

In learning unit 2, we discussed the cost benefits for LCCs who sell tickets online and
reduce their ticketing distribution costs as well as the physical printing and staff costs.
The same applies here. Self-service check-in reduces the staff required to issue
boarding passes, it reduces the number of check-in desks required (which reduces
space requirements), and it reduces the cost to airlines and airports of printing
boarding passes (Williams 2012). All of these factors make check-in a cheaper
component of an airline and airport’s operations (Williams 2012). In addition, it is also
a more convenient process for passengers who avoid long queues.

These advances have increased the efficiency of airports. For example, less time spent
queuing to check in means that the flow of passengers through the airport terminal is
swifter, reducing the space requirements, allowing increased time for shopping and
eating before flights (which increases airport’s non-aeronautical revenues), and it
increases passenger satisfaction levels. It also means that airports can facilitate more
check-ins, increasing their capacity without the need to increase staff and equipment
as much as it would have had to before these devices existed. It has greatly influenced
the structure of airports. Airports need to make sure that they are up to date with
technological advancements and are using them to serve their customers as best as
they can.

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9.3.3 Self-service baggage drop

At traditional check-in desks, passengers receive their boarding passes and check in
their baggage (luggage). With self-service check-in, passengers require an alternative
baggage drop option. In South Africa, the norm is to have a separate counter at which
a ground staff member will check your boarding pass, label your baggage and send it
through to baggage services. This reduces the time spent at the counter and the length
of queues and has the same economic benefits as self-service check-in does.

However, new technologies exist that remove the need for a staff member altogether,
with baggage being checked in by the passenger himself/herself, just as is the case
for the self-service check-in options. For example, Qantas Airlines in Australia has
implemented automated bag drop facilities for all of its domestic flights – that is in all
of the airports in which it operates in Australia (ICM 2016). The ICM Airport Technics
website (2016) explains the process as follows:

Baggage is checked in at the Auto Bag Drop systems. By scanning the barcode
on the boarding card, the passenger’s flight and boarding details are checked.
The system then prompts passengers to place their luggage onto the scale
conveyor. Dimensions and weight are checked automatically. If the baggage
exceeds the free baggage allowance, the system gives the passenger the
opportunity to repack or to purchase an excess baggage ticket. The additional
cost is also calculated and billed directly at the self-service kiosk. The system
also prints a ‘heavy’ sticker as needed to identify the luggage as overweight.
The conveyor then transports the luggage to the airport’s internal baggage
handling system.

A facility such as this dramatically reduces the human resources needed at airport
check-in counters. In addition, it reduces the time that passengers spend in queues,
which reduces the space that the airport needs to provide for such queues. It also
increases the time that passengers can spend shopping or eating before flights,
increasing the non-aeronautical revenue generating opportunities for the airport.

Technology offers streamlined processes that can help airports to increase passenger
convenience, increase operational efficiency and ultimately reduce costs and increase
revenues. However, these technologies come at a price. Costs of purchase and

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implementation can be great and need to be considered in relation to the marginal
revenues achieved.

ACTIVITY 9.3

Using the knowledge you obtained in this section, go to Discussion Forum 9.3 and
explain whether you believe that the fourth industrial revolution (4IR) has reduced
passenger discomfort by introducing self-service facilities at most of the larger air
terminals.

9.4 South African airport ownership structures

In recent years, airport ownership structures have started to change – much like those
of airlines themselves (Williams 2012). Historically, as with many national carriers,
airports are owned by the government. However, many airports are moving towards
privatisation in order to benefit from the financial investments and increased
commercial focus offered by private partners or shareholders (Williams 2012).
Lanseria International Airport is an example of a privately owned airport in South Africa
that has experienced rapid growth over the past ten years (South Africa 2015:7). The
private airport industry, however, is still a new and immature industry, and the benefits
of privatisation are yet to be confirmed as substantial historical data remains
unavailable.

9.4.1 Benefits of using private airports ownership

• Implementation of Just in Time (JIT)

• Safety
• Value
• Privacy and security
• First-class service

The most common type of airport ownership globally is government ownership, as

airports still hold a sense of national pride (Williams 2012). South Africa is a good
example of such a structure. Airports Company South Africa (ACSA) owns and
operates the majority of airports in South Africa. ACSA is considered by legislation to
be a Schedule 2 public entity (ACSA 2016). ACSA’s ownership structure is as follows:

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 • 74.6% government
• 20% public investment company
• 4.21% empowerment investment
• 1.19% staff share incentive scheme (ACSA 2016)

ACSA is accountable to the Minister of Transport on behalf of the South African

Government (ACSA 2016).

ACSA owns and operates nine airports in South Africa, namely OR Tambo
International (Johannesburg), Cape Town International (Cape Town), King Shaka
International (Durban), and the regional airports in Port Elizabeth, Upington, East
London, George, Kimberley, and Bloemfontein (Bram Fischer International) (ACSA
2016). Please follow the link below to see the financial cost of owing and maintaining
SA airports:
https://www.youtube.com/results?search_query=ACSA+Annual+reports+I%E2%80%
99m+sure+they+might+have+this+type+of+data

ACTIVITY 9.4

After studying the benefits of using private airports, head to Discussion Forum 9.4

and discuss with your fellow students the benefits of using private airports, and give
practical examples.

9.5 Conclusion

As global aviation changes, so too do airline requirements. Airports need to make sure
that they keep up to date with such changes and provide airlines with the type of
products that they need in order to service their passengers adequately. These
changes include technological equipment and facilities as well as terminal structures
and layout. Airports need to remain at the forefront of technology and customer service
in order to maintain a competitive advantage. As a transport economist, it is important
for you to consider airports and their services as products – products that are subject
to the same economic forces as traditional goods and services and that need the same
attention in order to fulfil customer needs.

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 HOW MUCH DO YOU KNOW?

Go to the Self-Assessment tool on myUnisa and do the self-assessments for

learning unit 9. This will give you an indication of whether you understand the content
of this unit.

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9.6 Bibliography

9.6.1 Recommended Reading

Sita (2015) The Passenger Trends Survey. [Online] Available at:

http://www.aero2b.ru/download/SITA%20Passenger_IT_Trends_Survey%2020
15_5.pdf [19 July 2021].

9.6.2 References

AIRPORTS COMPANY SOUTH AFRICA (2016) Our Structures. [Online] Available at:
http://www.airports.co.za/about-us/airports-company/our-structures [4 April
2021].

Amankwah-Amoah, J., Debrah, Y.A. (2011) The Evolution of Alliances in the Global
Airline Industry: A review of the African experience. Thunderbird International
Business Review. Vol 53 (1) pp. 37–50 [Online] Available at:
http://onlinelibrary.wiley.com/doi/10.1002/tie.20388/epdf [22 March 2021].

FLIGHTSTATS.COM (2016) Sishen Airport Overview. [Online] Available at:

http://www.flightstats.com/go/Airport/airportDetails.do?airport=SIS [4 April 2021].

Harbison, P. (ed.) (2008) Low Cost Terminals Report. Australia: Centre for Asia Pacific
Aviation.

ICM AIRPORT TECHNICS (2016). Automated Baggage Check-in at Qantas. [Online]

Available at: http://autobagdrop.com.au/case-studies/qantas/ [4 April 2021].

Merriam-Webster (2015) Dictionary. [Online] Available at:

http://www.merriamwebster.com/dictionary/airport [4 April 2021.

Pearson (2012) Edexcel BTEC Level 3 Nationals specification in Aviation Operations

(Issue 1). [Online] Available at:
https://qualifications.pearson.com/content/dam/pdf/BTEC-
Nationals/AviationOperations/2010/Specification/U14-AACO.pdf [4 April 2016].

Pew research center (2015) Cell Phones in Africa: Communication Lifeline. [Online]
Available at: http://www.pewglobal.org/2015/04/15/cell-phones-in-
africacommunication-lifeline/ [4 April 2021].

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Pew research center (2015) Cell Phones in Africa: Communication Lifeline. [Online]
Available at : https://medienorge.uib.no/files/Eksterne_pub/Pew-Research-
Center_Global-Tech-Social-Media-Use_2018.06.19.pdf [ 08 Novemeber 2021].

Postorino, M.N., 2010. Development of regional airports: theoretical analyses and

case studies (Vol. 47). WIT press.

SOUTH AFRICA. DEPARTMENT OF TRANSPORT (2015) White Paper on National

Civil Aviation Policy. [Online] Available at:
http://www.transport.gov.za/Portals/0/Aviation/NewFolder/NCAP%20draft%20fin
al%203%20Sept_2015.pdf [19 March 2021].

U.S. DEPARTMENT OF TRANSPORTATION (1996) Advisory Circular. [Online]

Available at:
http://www.faa.gov/documentLibrary/media/Advisory_Circular/AC%20120-
57A.pdf
[4 April 2021].

Williams, G, Dr. (2012) Air Transport in the 21st Century: Key Strategic
Developments. [Online] Available at:
https://bookshelf.vitalsource.com/3/books/9781409486732/ [19
March 2021].

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