Twelve Advantages Of National Airport Network: Lithuanian Experience

A year ago Lithuania merged three main national airports into an airport network managed by state-run enterprise Lietuvos oro uostai. Its CEO Gediminas Almantas wrote an exclusive column for the CFTS about advantages of Lithuanian airport network.
24 June 2015 13:38

Several European countries manage airports in an airport network following a joint approach – Sweden (Swedavia), Finland (Finavia), Norway (Avinor), Portugal (ANA), Spain (AENA) to name a few. This approach is stimulated by the number of historical, institutional, strategic or geographical reasons, reflecting the joint airport strategy of the country.

Lithuania has very fresh experience in this context – the merger of three main national airports into an airport network has been completed in July 2014. One year after the merger bunch of advantages are observed:

Finance

1. Financial stability and sustainability of smaller airports in the network

2. Economies of scales in the procurement process (goods, services, utilities) – cost optimization Infrastructure

3. Improved utilization of existing infrastructure of the airports

4. Improved utilization of equipment

5. Improved service level at the airports

Strategy

6. Synchronized strategy of the airports development on both, national and regional level

Commerce

7. Cross-selling and improvement in non-aeronautical revenues

8. Cooperation instead of competition and the improvement of aeronautical revenues – joint pricing strategy of the airports

9. Improved negotiation power and joint communication approach with airlines, business partners and other stakeholders

Organizational development

10. Reduced staff costs by sharing resource and knowledge between the airports (e.g. coordinated approach and shared resource on marketing and communication, safety, security, environment, project management, etc.)

11. Improved staff competence and skills by resources sharing and joint trainings

12. Motivation of the staff by adjusting working conditions and development of career planning in the Network

Establishment of Lithuanian airport network has been stimulated by an extensive analysis of the cases of other countries and negative experience on the national level caused by facilitating the competition between national airports. Statistical data is available about the advantages achieved, even the most solid benefits are expected on the mid and long term basis.

The skepticism about the establishment of the airport network has been quite high from the very beginning of the idea. In particular the stakeholders of smaller airports have been arguing about the threat of cannibalization of the traffic in favor of bigger airports to the disadvantage for the regional airports. The stakeholders – regional governments in particular – have been opposing the joint solution proposed, even the existence of the regional airports was endangered by the complicated financial situation and lack of the business case. Regional airports have been struggling in financing their operating costs, where the CAPEX has been excluded completely.

The results in fact exceeded expectations. Even the airports in the same catchment area benefited from the growth in traffic and connectivity. This model enables implementation of joint airport strategy on the national level by efficient management of state resources and enhancement of the connectivity of the country in line with the regional interests and needs.

Last but not least the merger has also caused a “side effect”, which is not less important – Lithuanian airports have been transformed from the outdated “infrastructure managers” begging for the financing and subsidies from the state budged into the modern and self-sustainable corporation with customer centricity and business approach to the airport management.

Gediminas Almantas

CEO of Lietuvos oro uostai (Lithuanian Airports)

Tags: airport, EU, Lithuania