Future Low Cost Terminal at

Future Low Cost Terminal at London South End London is considered to be one of the most congested air spaces in the world. To effectively deal with these issues, we will examine if the construction of a new low cost terminal at Southend Airport will address the problems. Once this occurs, is when we can determine the economic viability of this plan. Over the last several years, the air transportation sector around the world has been continually changing.

Part of the reason for this, is because of deregulation inside the industry has meant that low cost carriers (LCCs) are able to effectively compete. Their basic strategy was to focus on core markets that had the highest amounts of passenger traffic. This model was designed, to ensure they can offer lower fares in comparison with many of the traditional legacy carriers. This caused the total amounts of air traffic to increase in many different metropolitan areas around the world.

Once this occurred, is when there was a focus on developing the smaller, regional airports. This has changed from the traditions of the past, with many areas developing more than one airport because of a lack of runway space (i.e. New York, Rio de Janerio along with Taipei) or military purposes (i.e. Berlin, Bonn and Moscow). (Neufiville) As a result, the total number of metropolitan airports has increased exponentially.

Evidence of this can be seen by looking at the below table which is showing the busiest regions of the world for passenger traffic and if it has more than one primary airport.

Table 1: Total Amounts of Passenger Traffic and Cities with more than one Airport Region Traffic (in millions) More than One Airport London Yes Chicago 94 Yes New York / New Jersey 84 Yes Tokyo 84 Yes Los Angeles 75 Yes Atlanta 75 Yes Beijing 72 Yes Paris 72 Yes Houston 68 Yes Dallas Fort Worth 67 Yes (Neufiville) These different figures are important, because they are showing how some of the busiest regions in the world have more than one airport. The reason why, is due to the increased amounts of traffic in these metropolitan areas.

Once this occurs, is when many cities began to seek out other solutions in addressing congestion through building additional airports. In the case of London, it has some of the highest amounts of passenger traffic in world. The increasing dominance of many LCCs in these markets, is allowing carriers to compare landing fees with: different facilities (in order to maintain the lowest cost structure possible). As a result, airports such as: London Southend is receiving more prominence.

What has been happening is LCCs, are starting to utilize the facility to offer them with a viable low cost solution in comparison with Gatwick and Heathrow. A good example of this can be seen with the recent announcement from Easy Jet to make London Southend the main hub for all flights coming in and out of Europe. This is expected to result in an increase of 800 thousand passengers a year and the creation of 150 new jobs at the airport.

This is significant, because it is showing how the facility is being used as another viable option for many carriers. ("Easy Jet to Fly from London South End Airport") As a result, there has been a focus on updating the facility and the buildings at the location. One of the most ambitious proposals has been to create a terminal for low cost carriers.

To determine if this strategy is economically feasible requires examining: the current ownership structure of the airport, why the facility is ideal for development, how the new terminal will be marketed, the way management must adapt to the increasing numbers of LCCs and the future benefits of the airport. Together, these different elements will offer the greatest insights as to if expanding the airport will address the long-term transportation needs of the region.

Outline the current ownership structure of the airport Throughout the 20th century, the London Southend Airport has been playing a major part in the history of aviation. As the facility, dates back to 1915 when the first flights took off from this location during World War I. Since that time, it has continued to expand and grow by serving as an alternative for the larger airports in greater London. During the 1960's and 1970's is when the facility was considered be the third busiest in the United Kingdom.

However from this time onward, other facilities in the area were opened (which reduced the total number). Recently, there has been an effort to revitalize the London Southend Airport because of increased demand for lowest cost facilities. ("London South End Airport") Evidence of this can be seen with purchase of the airport by the Stobart Group in 2008. Their focus has been to modernize facility and begin directly competing against other locations in the area.

The firm is subdivided into different segment to include: transportation, airports, seaports, logistics and fuel processing just to name a few. The Southend Airport is just one of many different facilities that they are developing, which is similar to other projects they are working on. These include: Carlisle Lake District Airport and Mersey Multimodal Gateway in Widness. To manage the facility, the company has the Stobart Air segment controlling all operations.

As a result, the current ownership structure of airport is controlled through: Stobart Air, Stobart, the Board of Directors and the shareholders of the company. ("Air Operations") Why this location is ideal for low cost airport development including a regional perspective for this development (using the market position approach)? What makes London Southend such an ideal location is its close proximity to East London. This is where the 2012 Summer Olympics will be held, with the airport receiving tremendous amounts of focus for serving as hub in handling additional traffic.

To ensure that the facility is ready, there have been a series of major upgrades occurring to include: the resurfacing / expanding of the runways, adding a passenger train to the facility, improving the interior of existing terminals and modernizing the air traffic control system. (Prior) These different elements are important, because they are showing how the airport is quickly becoming a hub for excess traffic. If they are successful, this approach will help the facility to realize above average growth.

This is when the London Southend Airport, will begin to play a major role in addressing the transportations needs of the region well into the future. From a marketing perspective, these factors can be used to show how London Southend is a better facility. As the location has: modern equipment and is in close proximity to a host of destinations inside the city itself. These elements are important because once a new terminal is constructed it will become a hub for travelers inside Europe.

The events surrounding the Olympics are the perfect opportunity, to highlight how the facility is: cheaper, safer and less congested. This is when the image of the airport will improve, leading to more traffic. (Prior) As a result, this is showing how the construction of another terminal will achieve these objectives. What actions you intend to take with stakeholders for this development to succeed (use the customer marketing approach) For the development to succeed there must be collaboration between: the airlines, communities and management.

As far as the airlines are concerned, the facility needs to attract a large number of: LCCs and traditional carriers. The best way that this can be achieved is to keep the landing fees lower at London Southend in comparison with other airports throughout the region. This will allow the facility to attract more traffic by offering carriers low priced alternatives. As a result, this requires commitment from the airlines to support the facility over the long-term.

Local communities are playing a role in helping to ensure that there is low tax structure in place. This will allow businesses in the facility to increase their profit margins, while offering customers lower prices. Over the course of time, this kind of approach will help to make it very popular with travelers by: providing them with more value for their money. The management of the facility plays a vital role in ensuring that the airport is able to keep up with changes in the field of aviation.

This means that executives must be prepared to modernize and make change to the airport to remain competitive. While at the same time, they have to keep fees low and the total number of inbound flights increasing. To do this, executives must be aware of what airline passengers and executives demand. Once this occurs, is when there will be a change in how the facility is able to adjust with these transformations in the sector.

This is important, because it is showing how the development will succeed if: everyone is willing to work together and the cost structure can remain competitive. Once this occurs, it will mean that the completion of the new terminal will contribute to the airport's long-term growth. How the airport management activities will have to adapt to the low cost airline community (e.g. charges structure)? The management of London Southend will have to be more accommodating to LCCs.

This is because; these carriers have a choice of airports that they can fly into. To adapt to these new realities, executives will have to offer a superior product with lower costs. The way that this can be achieved is to have lower fees in comparison with other facilities. Then, implement a program of continually updating and improving upon the physical plant. Once this occurs, is when the airlines will see the economic benefits of using London Southend vs. others.

At the same time, the management structure will have to become more responsive. This means that there must be a clear channel of communication between: Stobart Air and Stobart. The way that this can be achieved is to offer select executives with the company, a position on the Board of Directors. This will allow them to see how the changes in the industry are impacting the airport. Once this takes place, is when everyone will be able to respond to the needs of LCCs before others.

This is the key in being able to remain competitive.