Now more than ever airport operators need to focus on their key capabilities or risk being left behind

London, February 17, 2015 – Today’s airports are coming under increasing pressure to deliver profit in spite of growing complexity across their business, according to a report released today by global management consulting firm Strategy&, a member of the PwC network of firms.

Airport operators are juggling increasing service expectations from both passengers and airlines; regulator-imposed constraints on aeronautical charges; and the need to fulfil a national, regional, or municipal development role. They now need to focus their operating expenses and investments on the capability areas that matter most — those that cannot navigate a clear path through the complexity and concentrate on their defining capabilities face an uncertain future as leaner airports win more customers and business.

John Potter, Strategy& Partner and report co-author, notes: “While we continue to do business in a challenging economic environment and deal with increasing complexity across the aviation sector, operators need to accept that they cannot be everything to everyone. It is crucial for airport operators to identify what they themselves do well and double down on delivering those things better than their competitors. The market will be unforgiving for those who do not focus on a few capabilities that create value for passengers and customers.”

The report recommends that capabilities that are necessary to keep the airport running but that don’t make a big difference to airlines or passengers should be handled as efficiently as possible. The capabilities needed to “keep the lights on.” Finally, activities and capabilities that don’t provide a significant operational benefit and that aren’t differentiating from an airline or passenger point of view should be cut back or eliminated.

Andre Medeiros, Strategy& Principal and report co-author, adds: “It is difficult to apply a one size fits all approach to helping airports achieve operational efficiencies. Executives battle challenges unique to their operating environments. For instance, local labour costs can vary across comparator airports, and a terminal infrastructure design can give some airports inherent operating cost advantages (or disadvantages) over the short and medium terms.

“The good news is that once these differences are accounted for, cost benchmarking can be very valuable, providing perspective and illuminating areas of the operations that are ripe for improvement. Airport executives just need to identify and take advantage of these opportunities.”.

The report acknowledges that successfully meeting service expectations of regulators, airlines, passengers, and other stakeholders — while optimizing operating costs and delivering positive financial returns to increasingly demanding private shareholders — is no easy task. To succeed, operators need to develop a clear understanding of an airport’s essential capabilities and of the costs that are within their control. By doing both these things, they are able to create more sustainable, competitive, and profitable operations that deliver on their strategic objectives.

About Strategy&

Strategy& is a global team of practical strategists committed to helping you seize essential advantage. We do that by working alongside you to solve your toughest problems and helping you capture your greatest opportunities. We bring 100 years of strategy consulting experience and the unrivaled industry and functional capabilities of the PwC network to the task. We are part of the PwC network of firms in 157 countries with more than 223,000 people committed to delivering quality in assurance, tax, and advisory services.

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