Tretheway: Airport Ownership and Management
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to pursue. Pricing too high could result in loss of sales to less expensive products which are reasonable substitutes. For example, if a burger chain prices too high, it may lose sales to other lower price burger chains, to alternative products (e.g., sub sandwiches) or lead to a substitution to meals at home. Promotion, the third area, deals with creating awareness of the product and price with potential consumers. Some claim that promotion itself can create “image” value, such as the image created by advertisements for certain sports cars. The last “P”, physical distribution has to do with getting the product to the consumer. A manufacturer may have a great product, at a great price, have succeeded in creating awareness in the consumer, and gets the consumer to commit to a purchase, but if the product cannot be delivered where and when the consumer wants it, the sale will be lost. Traditionally this has been thought of as “place” value, but today the time value must also be considered. Physical distribution is relevant not only to manufacturing industries, but also to service industries. For example, in the airline industry, the product is made available to the consumer where and when he/she wants it via computer reservation systems.
6.3 Airports and the Four P’s Airports must apply the four P’s to their commercial business, just as any other enterprise would. Whether or not there is significant runway capacity affects the product the airport has to offer, as does the design, capacity and expandability of the terminal. Prices charged by airports affect the level of their traffic. High landing fee tourism destinations find that in low seasons carriers have a stronger incentive to cut back services than to low landing fee airports, such as Bermuda. The well know promotion of Schiphol airport as a connecting point, business meeting centre, shopping centre, etc., has had very positive impacts on its level of traffic over time.
6.4 Airport Network Complementarity Having discussed how airports are subject to competition and compete with each other, let us now consider network complementarity. Airports are nodes in networks -- logistical networks for moving people and goods in geographic space. A node cannot function without other nodes in the network. Thus airports are mutually dependent. However, this complementarity and dependence may not be symmetric. This is because of airport competition. A specific example may be useful. Fort St. John and Dawson Creek B.C. are communities in the beautiful Peace River region with separate airports, roughly one hour driving time apart. 38 A major market for each is Vancouver. Each of Fort St. John and Dawson Creek require access to Vancouver to be of full service to their respective (and 38 These are not the only two airports in Canada with overlapping catchment areas. There are many other
examples in all regions of Canada. As one former Deputy Minister of Transport once said, the airport system was built for an era when both aircraft and automobiles had limited range.
Draft: 14 March 2001