Research paper informations:

Authors: Mandić Ante, MA, Marijana Teklić, MA, prof. Lidija Petrić PhD

 

Title: „THE EFFECTS OF THE LOW COST CARRIERS’ PRESENCE ON AIRPORT PERFORMANCE: EVIDENCE FROM CROATIA”

Publication name: Tourism and Hospitality Management, Vol. 23, No. 1, pp. 17-34, 2017

Editor: Dora Smolčić Jurdana, Sandra Janković

Publisher: Sveučilište u Rijeci, Fakultet za menadžment u turizmu i ugostiteljstvu, Opatija

ISSN: 1330-7533 (Tisak)

ISSN: 1847-3377 (Online)

DOI: 10.20867/thm.23.1.4

 

Abstract:

Purpose – Although Low Cost Carriers (LCCs) expansion coincided with the growth of tourism demand in Croatia (and worldwide), their arrival on Croatian airports has happened just recently. As data related to their impact on airport business performance is scarce, the following research is done for the purpose of filling up a small portion of this knowledge gap.
Design – Besides the theoretical framework on the issue of the LCCs impacts on airports business performance, the paper also gives empirical insights into the matter on the Croatian international airports.
Methodology – Information were collected by using both available secondary data as well as the results of a semi structured questionnaire filled in by the officials from the Croatian international airports, in the period from January to May 2014.
Findings – The empirical research has showed that respondents had positive opinion on the LCCs presence and their overall impact on the airports business performance. Related to the findings some strategic directions for the policy makers have been given.
Originality – This article is one of the very few dealing with the LCCs presence on Croatian airline market and definitely the only one discussing LCCs impacts on Croatian airport performance from the airports’ managers point of view.

Conclusion

It is evident that changes in every day’s life, reinforced with globalization processes have effected, and have been effected by the development of LCCs. As Ramamurti and Sarathy (1997) have noted, the airline industry “has shrunk the world physically”, and LCCs have made significant contribution to that. This “new service” has made even more accessible many distant destinations to increasing travel population. Not only that it was possible now to travel to even more places than ever, but more important the travel cost was lower than ever before. Soon LCCs have become important solution for many international airports who were dealing with two complementary problems: (1) how to increase airport performances, and (2) how to increase number of tourist arrivals in a destination. In this way, LCCs were recognised as significant stakeholder influencing both, airport operations and local population. Based on the analysis of the LCCs business strategies it is possible to conclude that the original low-cost model was based on cost leadership, while the newer breed of LCCs tends to follow the differentiation strategy (Alamdari and Fagan, 2005). The logic of differentiation strategy requires that a firm chooses attributes in which to differentiate itself from its rivals. In the case of the LCCs those attributes are lover flight ticket price, and recently number of flights and destinations. Therefore, it could be possible to conclude that LCCs will choose only those airports that could fit in their business model, which is absolutely profit oriented. They are searching for those airports that can provide them with optimal annual increase in number of passengers, and provide them with stabile fiscal policies and airport fees and costs. It is mostly those airports situated near popular and emerging tourist destinations that can provide these conditions. Considering constant growth of the number of visitors in Croatia recently, it is to expect that LCCs will be interested in doing business in Croatia at an ever growing rate.
As explained before this research was focused on the effects of the LCCs entry on performance of Croatian international airports. Based on the responses obtained by the questionnaires filled in by the Croatian airport managers representatives of the 6 international airports, it is possible to conclude that LCCs have overall positive effects on their business performances. Thereby, it is important to emphasize two major conclusions: (1) LCCs income account for significant part of the total income in analysed airports, especially in the coastal ones; (2) considering the trend of the number of visitors growth in observed Croatian destinations, and the number of passengers in the airports as well as data collected through the empirical research, it is possible to conclude that arrival of the LCCs to the Croatian airports has also contributed to the sharpening of seasonality, that should be considered in future development strategies of Croatian tourist destinations.
Several other conclusions can be made based on data collected through this research: (3) In most of the airports, especially coastal ones, LCCs revenues account for moderate to large share of total revenue, and the effect of LCCs on airport operations is perceived positively, even in those airports (like Osijek), where LCCs revenue is not significant proportion. (4) In all airports except for Dubrovnik, managers highly agree that LCCs are essential for successful business operations; however there is also highly expressed fear that airports may become too dependent on them. (5) In Zagreb, Zadar and Osijek airports, managers have perceived increase in competitiveness. Zadar has recorded strongest increase in the number of employees, and in non-aeronautical revenues.
It is possible to conclude that this research may have suffered from potential subjectivity as it is based on individual expert’s opinion. Therefore any future research should, if possible, focus on more exact data on financial indicators. However despite this limitation the research may be useful for understanding the effects of the LCCs’ presence on the overall airports’ performance. Based on the above conclusions following strategic decisions may be recommended to the airport professionals: to attract as many LCCs throughout a year as possible; to offer a whole range of non-aeronautical services as possible not only for the reason of improving overall airports’ business operations but also to increase entire destination’s competitiveness. For the purpose of diminishing possible sharpening of seasonality due to the arrival of many LCCs, they should also consider the idea of implementing a set of measures aimed at attracting their arrival out of the peak season (such as airport fees reduction, subsidies and other possible measures that may make them interested to extend the flying season, including the ones that are aiming at local destination’s supply enhancement).

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  THE EFFECTS OF THE LOW COST CARRIERS’ PRESENCE ON AIRPORT PERFORMANCE: EVIDENCE FROM CROATIA

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