By Mohammed Salem Awad - Consultant Most of aviation companies – airlines and civil aviation authorities looking for the right strategy to evaluate the competitive environment in the aviation industry, many tools and techniques are implements - while some of them use BCG matrix as effective tool to define and develop the right decision, as supporting, surviving or drawing out of the market, it is also use to define and reposition the companies / airports in the competitive market. In the beginning of 1970 BCG – Boston Consulting Group developed different patterns for working units or the bigger production lines, they developed BCG matrix addressing GROWTH RATE and MARKET SHARE for different working units as companies, airlines or airport authorities on a graphic scale, while airlines/airports try to compare their performance with the others, they implement open sky policy, facilitated procedures to improve its share in the region, and consequently it will be easy to compare, analysis and conclude for positioning the company in competitive environment, and accordingly decisions are hold and solution are delivered to support the right strategy to improve the service and performance. So in aviation industry these strategies reflects the competitive situation for regions and operating routes, usually for airlines activities in airports, such as Traffic of Dubai Airport that reported by ACI reports as shown in appendix 1. Introduction BCG matrix is the most effective and well known method and tool to manage and develop decision, it is established based on a production theory.

Taking The lead

Competitive Analysis Using BCG matrix

Case Study :

DUBAI Airport

At the beginning of seventies BC group developed and implement BCG matrix. ,this matrix can be used to find the priorities for doing a productivities of unit work. Beside that and to ensure a long term performance, company should secure all the productive units of high growth rate for the needs of the money while it is also for low growth rate of productive units for the needs of cash flow. BCG matrix is defined by two parameters: GROWTH RATE and MARKET SHARE, and its main concept is, if there is big market share or high growth rate, the market will develop fast. In Air transport and Airline industry, ICAO, IATA, and others world countries have to liberate the skies and offer facilities to attract the traffic to their countries and to their airports. Thus air transport industry acts as a catalyst for other development sector like education, Tourism, and hotel investment. It is a part of business sequence, business connected ring, mostly defined as package. Finally we have to define the main terms of BCG matrix. Market Share The number of passengers should not be necessary to reflect the company performance compared to other companies for competitive airports. Actually the change in number of passengers reflects change of market size or in the economic factors of the region. So the airport performance can be compared with competitors of neighborhood airports and can also be evaluated by market share, that airport gains, and it is defined as the market share of that airport in the region, calculated as follows: Market Share = (No. of Pax in airport / Total No. of Pax in the region) Growth Rate This is the second important factor for the analysis, as it is a significant element based on historical data of the passengers and same measured as: Growth Rate for Recent Year = (No. of Pax of Recent Year - No. of Pax of Previous Year) / No. of Pax of Previous Year And can be represented by the Latin letter λ as constant growth factor, which can fairly be represented by Exponential distribution, so for positive value of λ it means growth market, while for negative value of λ means declining market of airport passengers.

BCG Matrix As it is mentioned before, the out-come of passengers in terms of growth rates and market share can be located in four mapping matrix, to define the airport market situation which are: 1- STARS: High status growth , Bigger Market Share 2- CASH COW: Low status growth, Bigger Market Share. 3- DOGS: Low status growth, Small Market Share. 4- QUESTION MARK: High status growth, Small Market Share. DUBAI International Airports (Case Study) Any airport in the world always explore three main parameters to measure their performance, these area are traffic passengers, Cargo, and Aircraft Movements.

1- Traffic Passengers: According to the ACI Annual traffic passengers Ranking Report (2012-2013) for the top 30 leading airports in the world. Dubai airport ranking at 7th position in terms of serving number of passengers. But by applying the concept of BCG matrix, the result is different. Dubai is taking the lead in the competitive environments, yes there are many competitors but most them are followers. Based on the outcome of BCG graph, there is threats comes from the region of question mark ( ? ), That’s 6 airports ( ATL, PEK, LHR, LAX, HND, ORD.) positioning them self a head of Dubai Airport in terms of marketing share, so the right action for Dubai Airport is to invest and attract more business to the region this will create more traffic volume in region leading to positioning Dubai ahead and these airports will consequently become followers with the others. Only one airport that a head of Dubai airport in term of Growth, it is ( KUL ). This positioning Dubai airport as a Cash Caw airport with respect to KUL. As shown in figure. The final outcome of BCG matrix, that’s Dubai Airport is the leader airport in the competitive environment – no single airport position in the STAR region. That’s mean Dubai Airports is taking the lead in the global competitive environment.

2- Cargo In cargo activities, the story is

different, so according to the ACI Annual Cargo Ranking Report (2012-2013) for the top 30 leading airports in the world. Dubai airport ranking at 5th position in terms of Cargo activity , so by applying the concept of BCG matrix, the result will be more clear and Dubai airport can reposition its situation and strategy to meet the new challenge in region ( AUH ) as Abu Dhabi airport has a rapid growth rate, but small market share. Here the result is different, HKG is in Star position, 3 airports in ( ? ) – MEM, PVG, and ICN while in Cash Caw, there are 3 airports as AUH, IND, and SZX, with respect to DXB, the remaining in the list are followers.

3- Aircraft Movements:

Amazing DXB, doesn’t appear in the list ! WHY ? There are many reasons that DXB doesn’t appear in the list : First : the location of DXB in the heart of the world. No domestic cities as in United States and Europe. Second : the major airlines strategy in the region (Emirates –Etihad) are concentrated on long-haul operation this leads to high cycle ratio. This factor acts to reduce the cost for operation. Third: the business of model for air-taxi is excessively used in United States and Europe, this add more frequencies for airports.

Summary: Three parameters can be define the performance of an airports, i.e Traffic Passengers, Cargo and Aircraft Movements, which mostly collected and monitored by ACI worldwide, so reading between the lines can describe this article, we have to look closely for the main factors, factors that expose the complete picture and define the right strategy to implemented for the top managements, if we follow the data collection approach by ranking of ACI, we will position Dubai airports at 7th position. But if we have analyzed the data, and implement BCG matrix, the result will be different. Dubai Airport is the only airport that lead all the airports for passengers while for cargo the picture is define completely.

Appendix :

Cargo Traffic 2013 FINAL (Annual)

Last Update: 22 December 2014

Cargo Volume

Loaded and unloaded freight and mail in metric tonnes

Rank City (Airport) Total cargo

2013

Total cargo

2012

%

Change

1 HONG KONG, HK (HKG) 4,166,303 4,066,738 2.4

2 MEMPHIS TN, US (MEM) 4,137,801 4,015,997 3.0

3 SHANGHAI, CN (PVG) 2,928,527 2,938,157 (0.3)

4 INCHEON, KR (ICN) 2,464,384 2,456,724 0.3

5 DUBAI, AE (DXB) 2,435,567 2,279,624 6.8

6 ANCHORAGE AK, US (ANC) 2,421,145 2,463,696 (1.7)

7 LOUISVILLE KY, US (SDF) 2,216,079 2,168,365 2.2

8 FRANKFURT, DE (FRA) 2,094,453 2,066,300 1.4

9 PARIS, FR (CDG) 2,069,200 2,150,950 (3.8)

10 TOKYO, JP (NRT) 2,019,844 2,006,173 0.7

11 MIAMI FL, US (MIA) 1,945,012 1,929,889 0.8

12 SINGAPORE, SG (SIN) 1,885,978 1,870,577 0.8

13 BEIJING, CN (PEK) 1,843,681 1,799,864 2.4

14 LOS ANGELES CA, US (LAX) 1,747,284 1,780,998 (1.9)

15 TAIPEI, TW (TPE) 1,571,814 1,577,730 (0.4)

16 AMSTERDAM, NL (AMS) 1,565,961 1,511,823 3.6

17 LONDON, GB (LHR) 1,515,056 1,556,154 (2.6)

18 GUANGZHOU, CN (CAN) 1,309,746 1,248,764 4.9

19 NEW YORK NY, US (JFK) 1,295,473 1,285,737 0.8

20 BANGKOK, TH (BKK) 1,236,223 1,345,490 (8.1)

21 CHICAGO IL, US (ORD) 1,228,791 1,254,183 (2.0)

22 INDIANAPOLIS IN, US (IND) 991,307 922,414 7.5

23 TOKYO, JP (HND) 954,446 909,588 4.9

24 SHENZHEN, CN (SZX) 913,472 854,902 6.9

25 DOHA, QA (DOH) 883,264 844,540 4.6

26 LEIPZIG, DE (LEJ) 878,024 846,093 3.8

27 COLOGNE, DE (CGN) 717,146 730,055 (1.8)

28 KUALA LUMPUR, MY (KUL) 713,254 702,226 1.6

29 ABU DHABI, AE (AUH) 712,488 574,012 24.1

30 OSAKA, JP (KIX) 682,338 723,147 (5.6)

Airports participating in the ACI Annual Traffic Statistics

Collection.