Integrated Business Project

Part B
Braj Raj Sharma
Jatinderbir Singh
Keld Conradsen
Trevor Schumm
Gaurav Golash

Outline of Presentation
Overview of ASA
Core Competencies of ASA
Market Analysis India
Market Analysis China
ASA and Airport Value Chain Analysis
Recommendations
Strategy # 1
Strategy # 2
Strategy # 3

Methodology

Capabilities Analysis

Market Analysis

Competencies

China

India

ASA and Airport Value Chain Analysis

Strategy (existing competencies)

Strategy (possible competencies)

Final Recommendation

Overview of ASA
Government Business Enterprise
Engaged in aviation related services (ICAO and Air
Services Act, 1995)
Airspace management
Air traffic control
Traffic and flight information
Navigation services
Aeronautical information
Aviation rescue and fire fighting
Environmental regulation and monitoring

Manages Australian Flight Information Region 11%

of the worlds airspace

Core Competencies of ASA

Strategic

Staffing

Learning

Competencies

Capabilities

Partnership

Training &
Consultancy

Aviation
rescue and
firefighting
Air traffic
control

Air Traffic
Management

Air traffic
system

Organisational

TAATS

Core Competencies of ASA

Air Traffic Management

Aviation related training and consultancy

Aviation rescue and firefighting
Air traffic control
Air traffic system

Market Analysis India

India Economic Scenario

Encouraging forecast on GDP growth
Infrastructure development as one of the five major
priorities of economic development
Massive thrust on exports
Cargo by air accounts for 35% of the total value of
exports
Tourism is Indias second largest foreign exchange
earner. 97% of the countrys foreign tourists arrive
by air
Singapore plans to invest USD1 billion in airport and
port infrastructure in India

India Present Aviation Scenario

449 airports/airstrips in the country
The Airports Authority of India (AAI) owns and
manages 92 airports and 28 civil enclaves at defence
airfields
Top 5 international airports account for 74% of cargo
and passenger traffic
The AAI provides air traffic services over the entire
Indian airspace and adjoining oceanic areas

India Imperatives of Privatisation

Congestion in the international as well as domestic
airports
Limited terminal and apron capacity
Bunching of flights
Large element of sunk cost and long gestation period
Scarce resources with the government

India Market Forecast

ICAO forecasts predict worldwide growth in air traffic at
5% a year or doubling in the volume of traffic once in 14
years
The Asia Pacific region is set for higher than average
growth. According to an AUTC study, it might account for
more than 50% of the world air traffic by the year 2010
Domestic and international passenger traffic in India is
projected to grow annually at 12.5% and 7% respectively
over the next decade
By

2005,

the

Indian

airports

will

handle

60

million

international passengers, 300,000 tonnes of domestic and

1.2 million tonnes of international cargo annually

India Market Opportunities

The AAI has drawn up a USD1 billion dollar plan to
upgrade ATM and CNS systems
The

AAI

has

announced

airport

upgrades

at

combined investment of USD4 billion in gateway

airports at Delhi, Mumbai, Chennai and Kolkata
Aircraft handling capabilities at 22 airports being
upgraded/expanded

India Market Opportunities

Taj International Airport Approval of the new Taj
International

Airport

located

72

km

from

Delhi

International Airport. Cost is estimated to be USD1

billion
New airports at Goa, Chackai, Ajmer
Privatisation of non-gateway airports at Ahmedabad,
Amritsar, Khajuraho, Gaya, Varanasi, Aurangabad,
Thiruvanthapuram,

Kozhikode,

Tiruchirapalli, Madurai and Coimbatore

Lucknow,

India Competition: Existing Players

Bangalore

International

Airport

taken

up

for

construction by a consortium comprising the Siemens

consortium, Karnataka State Industrial Investments
and Development Corporation and the AAI
Hyderabad Airport project taken up for construction
by a consortium comprising of Malaysia Airports
Holding Berhad, GMR, Andhra Pradesh Government
and the AAI

India Regulatory Framework

The Airports Authority of India Act, 1994 amended
Airport Restructuring Committee established to identify
airports for privatisation
Foreign equity participation permitted upto 74% with
automatic approvals and 100% with special permission
Fiscal incentives available for promoting investment in
airport development infrastructure
New civil aviation policy in pipeline
The AAI will continue to provide security and air traffic
control services, but approach and aerodrome control
services can be given to airport operators

Market Analysis China

China Economic Scenario

Government

spending,

continuing

strong

inflows

of

foreign investment, gains in exports and growth in

private consumption will jointly sustain GDP growth
between 7.5% and 8%
As the world emerges from a global travel slowdown,
China is emerging as a driving force for tourism growth
For aviation and tourism purposes, significantly, all 10
ASEAN Member States have Approved Destination Status
(ADS) with China, meaning that Chinese citizens can
travel reasonably freely for non-business purposes
Negotiations

soon

due

countries such as France

with

other

large

European

China Privatisation and Foreign

Investment
The Civil Aviation Authority of China (CAAC) has revised the
national airport charges structure, effective 1 September
2002, which will lead to an overall increase in airport
revenues
The CAAC is increasingly seeking outside investment to
fund Chinas massive airport requirement
Airport reform will gather pace in 2003 following the recent
establishment of the countrys first airport group, China
Capital Airport Group
Non-government investment will be encouraged by way of
airport leases and the build-operate-transfer method
Just under 90% of Chinas 143 airports reported losses
totalling RMB800 million system wide in 2001

China Market Overview Aviation

The Chinese aviation industry is recording doubledigit growth in nearly every category
Increase in domestic passenger is most significant
and highlights the expansion into the west and the
increase of trade throughout the country

China Airport Sector

Airport Sector Profile

Total Airports
4E (B747)
4D (B767, B757)
4C (B737)
3C (Regional jets)
2C (General aviation)
International Airports
Airports Managed by CAAC
Airports managed by local governments/airlines, etc.
Military/Civil operations
Airports with scheduled domestic services
Cities with 2 airports
Airports used by China United Airlines only
Loss Making Airports
Loss Making Airports%
Total Losses (CNY millions)
Current construction projects
Investment in Construction (CNY billions)
Investment by CAAC (CNY billions)
Investment by Local Departments (CNY billions)

2000

Centre for Asia Pacific Aviation, 2002, The Essential China Book 2002: Airports, Airlines & Tourism

133
23
34
43
43
12
7
18
106
79.7
900
19
9.9
9.1

2001

143
23
34
41
41
18
31
86
57
125
133
9
18
127
88.8
800
22
15
11.4
3.6

China Airport Rankings

Airport

PO

Beijing Municipality

Luoyang Beijao

78

74

Guangzhou Baiyun International

Shanghai Hongqiao International

Shenzhen Huangtian International

Shanghai Pudong

Kunming Wujiaba International

Chengdu Shuangliu International

Xian Xianyang International

12

Haikou Meilan International

10

13

Centre for Asia Pacific Aviation, 2002, The Essential China Book 2002:
Airports, Airlines & Tourism
Legend: Aircraft movements (M), Passengers (P), Freight (F), Privately
Operated (PO)

China New Projects and Market

Development
A policy priority is to stimulate expansion of regional
hubs in order to disseminate the benefits of aviation
around the country as well as to achieve a range of
political goals
The CAAC plans investment in airport infrastructure in
China of approximately CNY110 billion during the 5-year
plan period
The CAAC investment will be used in the development of
Chinas three main hubs, two trunkline airports will be
built, and 10 trunkline airports will be upgraded. 33 new
regional airports will be added to the system by 2005

China New Projects and Market

Development
The most pressing issue for Chinas airports in 2003 is
funding

airport

expansion,

particularly

in

the

remote

western provinces
By 2005, the number of airports will rise from 143 in 2001
to 172 in 2003, and to 237 by 2010

China Regulatory Framework

The

regulation

of

foreign

investment

in

Chinas

civil

aviation industry is designed to further expand the opening

up of the industry, to promote reform and development of
the industry and to protect the legal rights and interests of
foreign investors
The spectrum of foreign investment in Chinas civil aviation
industry

includes

civil

airports,

public

air

transport

industries, general aviation enterprises and other items

related to the air transport industry, but excludes the air
traffic control system
Foreign investors who invest in and construct civil airports
in China have first choice of investing in the operation of
items related to the air transport industry

China Summary
China has experienced average growth of 20% in
passenger and cargo transport every year since 1980
The CAAC estimates that mainland passenger and
cargo during the 10th 5-year plan (2001-2005) will
grow at 8% and 13% annually respectively
Furthermore, an additional 65 airports are planned
for construction between 2005 and 2010
Despite

Chinas

attractiveness,

ASA

is

severely

limited by regulations set out by the CAAC, which

prevents foreign firms from providing ATM both
enroute and within aerodrome

China Conclusion
Thus ASA will have to take up either training and
consultancy

in

the

aviation

related

services

or

develop new competencies and skills so as to be able

to penetrate the Chinese market

ASA and Airport Value Chain

A ir p o r t V a lu e C h a in

A ir s id e

L a n d s id e
T e rm in a l

Functions
Vertical

Facilities

Process

D e p a r tu re s
T a k e o ff

T axi

Push-out

T axi

P a rk

E m b a rk

Lo unge

Im m ig ra tio n

Local
T ra n s p o rt

A r r iv a ls
L a n d in g

Tow er

Runw ay

T a x iw a y s

A ir T ra ffic C o n tro l

A p ro n

D is e m b a rk

A irb rid g e

G ro u n d H a n d lin g

Im m ig ra tio n

Baggage
C o lle c tio n

C u s to m s
Q u a ra n tin e

Lo unge

Baggage
H a ll

C u s to m s
A re a

G re e te rs

D e p a rtu re ,
A rriv a ls
H a lls

P a s s e n g e r P ro c e s s in g

C a te rin g

R e ta il & R e la te d S e rv ic e s
G ro u n d T ra n s p o rt
M a in te n a n c e

Activities
Horizontal

C h e c k -in

C o m m u n ic a t io n
S e c u r ity
E m e rg e n cy M an ag e m e n t
E n v ir o n m e n t a l M a n a g e m e n t

Local
T ra n s p o rt

P u b lic
T ra n s p o rt,
C a r P a rk s

ASA and Airport Value Chain

ASA
Airport
Value Chain
Air Traffic Control

Air Traffic
Management

Airport Services

Infrastructure
Support Services

Airspace management;
Air Traffic Control and
navigation services; Air
traffic control training;
Aeronautical information

Tower Air Traffic Control

Aviation Systems

Maintenance

Facilities management;
Information
management services

Communication

Communication systems

Emergency
Management

Environmental
Management

Aviation
Rescue
Firefighting

Environmental services

&

Recommendations
Strategy # 1 Existing Competencies
Training and Consultancy

Strategy # 2 Possible Competencies

Airport Certification Procedure

Strategy # 3 New Competencies

Passenger Management

Strategy # 1
Training & Consultancy
Consulting services in ATM
Consortia approach
India Bid for approach and aerodrome control
services
China Bid for airport development

Benefit Ease of entry based on existing

core competency
Risk Sporadic and inconsistent nature of
consultancy projects irregular revenue
stream

Strategy # 2
Airport Certification Procedure
Overview
ICAOs universal safety oversight audit programme
(USOAP) in the fields of personnel licensing, aircraft
operations and airworthiness
USOAP has been expanded to include airports and air
traffic services from the year 2004
ICAO has recommended certification of airports by
State authorities Airports Authority of India and
Civil Aviation Authority of China

Strategy # 2
Airport Certification Procedure
Opportunity
Growing number of airports may make it difficult for
AAI and CAAC to undertake airport certification
procedure all by themselves. They may outsource
Opportunity exists for ASA to undertake airport
certification procedure on behalf of AAI and CAAC
Opportunity to become an ICAO auditor, as and when
such position arises

Strategy # 2
Airport Certification Procedure
Constraints / Competition
Airport certification by a foreign organisation is an
uncommon practice
Competition from players who have experience in
building, owning and operating airports BAA (UK),
Alterra Partners (UK), Aena (Spain), etc.
Competition from aviation authorities in case of
absolute freedom to airport operators

Strategy # 2
Airport Certification Procedure
Costs / Benefits / Risks
Costs
Training of employees
Preparation / study of aerodrome manual

Benefits
Regular event, resulting in regular business
Large number of airports developed / developing in China
and India large market

Risks
High responsibility and accountability
Loss of employees trained for airport certification procedure

Strategy # 2
Airport Certification Procedure
Implementation
Set up separate division dedicated to guiding foreign
airports on complying with ICAO guidelines
Government Business Enterprise status leverage it
to deal with government bodies in India and China.
Alliance with AAI is already in place
Start with certification of smaller airports, and then
graduate to larger airports
Partner with big players to expand its range of
products and services

Strategy # 3
Passenger Management Systems
Rationale
Large Markets
Limited by Regulations
Need for Diversification
Need for Innovation
Analysis of Value Chain
Selection of Need

Strategy # 3
Passenger Management Systems
Market Research Check-ins
Minimum Time

35seconds

Maximum Time

9min 43seconds

Range

8min 58seconds

Average

3min 2seconds

# of times greater than 100sec

76 instances

# of times greater than 200sec

34 instances

Standard Deviation

1min 56seconds

Based on 103 customers, over 4 hours, across 4 service counters, 6 different employees, on a
Saturday afternoon.

Strategy # 3
Passenger Management Systems
Passenger Benefits
Check-ins

Security

+
+

Arrivals

Baggage

+
+

+
Departures

Boarding

Strategy # 3
Passenger Management Systems
Airports / Airlines Benefits
Efficiency

Staff

+
+

R&D

Customers

+
+

+
Revenues

Flights

Strategy # 3
Passenger Management Systems
Costs Example
Passengers Per Year
Time Saved (30sec/passenger)
Worker Days Saved (8hr/day)
Wages Saved ($20/hour)

148,700,000
1,239,167 hours
154,896 days
$24,783,340

Strategy # 3
Passenger Management Systems
Finding a Solution
Internal R&D
Airlines
Airport operators
Computer Consultants
Banks
Universities

Strategy # 3
Passenger Management Systems
How about Q-Less?
New Product
New Patent (Australia)
In Process of Applying for International Patent
Research Assistance
Government incentives
Proven performance
Looking for vehicle to Launch

Strategy # 3
Passenger Management Systems

allows excessive customer waiting to be preempted

and avoided

HOW?
By collecting true information on the current &
predicted state of the service system;

Rather than the state of the queue!

Strategy # 3
Passenger Management Systems

For each new transaction, tellers estimate

the time the transaction will take to
complete & flag this estimate interval
Individual

estimates

are

combined

to

understand the service state of the entire

system

Strategy # 3
Passenger Management Systems
Categorisation of Transactions
Service Times

Strategy # 3
Passenger Management Systems

Targets system management

Better management of current resources
No increase in staff or reduction in customer
service
Proven Performance:
34% - Before Q-Less 85% - With Q-Less
5.2mins - Before Q-Less 1.5mins - With Q-Less

Strategy # 3
Passenger Management Systems
Risks & Rewards
Risks

Rewards

R&D Investment

Mass market product

Outside core

Benefits for passengers,

competencies

airlines, and airports

Contractual Risk

Development of

Intellectual Property

technology related to

Dilution of ASA profits

landside operations

Final Recommendations
Portfolio Approach
ATC
Training and Consultancy
Airport Certification
Passenger Management
Potential rewards far outweigh immediate
risks
Call today!

Q&A