Exploring the prospect of operating low cost carriers and legacy carriers from the same main airport terminal - a service quality perspective.

EXPLORING THE PROSPECT OF OPERATING
LOW COST AND LEGACY CARRIERS FROM THE
SAME MAIN AIRPORT TERMINAL
A service quality perspective
Nikhil Menon
Dissertation submitted for obtaining the degree of
Master in Complex Transport Infrastructure Systems
Jury
President: Prof. Luis Guilherme Picado Santos
Supervisor: Prof. Maria do Rosário Mauricio Ribeiro Macário
Member: Prof. Vasco Domingos Moreira Lopes Miranda dos Reis
December 2012

i
This thesis was completed to obtain a
Master of Science Degree
In
Complex Transport Infrastructure Systems
A part of the MIT Portugal Program

ii
ACKNOWLEDGMENTS
I would like to express my deepest gratitude to my family – amma and achan, back home in
India, who have given me the opportunity to undertake the master degree program in Complex
Transport Infrastructure Systems, as part of the MIT Portugal Program. Their constant support
and encouragement is the main reason I am here.
To the MIT Portugal Program - for giving me the opportunity to be part of it through the provision
of the corporate fellowship, thereby enabling me to pursue my education. Many thanks to
supervisor Prof. Maria do Rosário Mauricio Ribeiro Macário, for her encouraging words of
advice and wisdom during the course of the master dissertation. I am sure that the expert
guidance obtained on the various aspects of the airlines/ airports theme, not just on matters
pertaining to the dissertation shall go a long way in broadening my horizon on the field.
This dissertation would be incomplete if not for the passenger questionnaire survey conducted
as part of the research. My sincere thanks to all the respondents, from across the world who
have put in their time and effort in answering the questionnaire, thereby contributing their bit in
being part of this work. I am ever – so – indebted to you for making this dissertation, a success.
The role of the MIT Portugal Program would be incomplete without the mention of a few people
who have made my stay in Lisbon, a very amazing experience. First of all, my colleagues in the
program – especially Joao, Minas, Shant, Andrej and Aivin – for the vast amounts of time spent
together in discussions, sharing amazing insights (academic and otherwise) and for the
constant source of encouragement and assistance during the course of the dissertation. Next,
to Teresa, Elaine, Liliana, Prof. Viegas, Prof. Vasco, Prof. Filipe Moura, Alex, Ryan, Dimitris and
everyone else, part and parcel of the program in Lisbon for being such wonderful hosts and
making my stay, a very enjoyable and enchanting experience. I am glad to have met some
amazing people here, some of whose friendships I shall definitely be able to nurture for the
future.
Mata, pita, guru and next in line is dev (the almighty) for making everything work without any
hindrances and giving me the strength and will to excel in strive for knowledge.

iii
ABSTRACT
The world has been witness to a spurt in the global airline passenger throughputs mainly
through the burgeoning of low cost aviation since the airline deregulation of the 70s. Low Cost
Carriers (LCCs) - with the initial push from Southwest Airlines in the USA, through smart
business models have realized that they can not only make the legacy carriers (LC) customers
shift towards flying low cost, but also that they could create a new niche segment of passengers
who would not have flown otherwise.
This dissertation strives to explore the prospect of operating low cost carriers and the legacy
carriers out of the same main airport terminal, from a service quality point of view. Service
quality delivered in the airport terminals would be the main focus of the dissertation. Analysis
will be made to determine the service attributes which will impact the overall quality perceived
by the passengers inside an airport terminal. Focus would then shift towards establishing quality
criteria. It is the endeavour of the dissertation to define service levels for establishing quality
criteria in airport terminals and later set up a service quality level matrix, which shall give a state
of all possible scenarios in the service quality jargon, concerning the airport terminal.
The impact of service attributes in defining the overall quality of service perceived by the
passenger in an airport is analyzed by means of an Important Performance Analysis, which
gives an insight into the customer’s understanding of the product or service that is being offered
to them. Subsequently, an effort is made into establishing quality criteria for airport terminals.
The various approaches that look into establishing service quality are analyzed and one of the
methods (The 4 Q’s method) is chosen to work on the current dissertation. The customer needs
are analyzed by means of the Expected and Perceived quality scores. Minimum performance
thresholds are analyzed as part of being in a level of service, ranging from the best (A) to the
worst (D), finally leading into a matrix of all possible scenarios arising out of the service
attributes.
To conclude, this is then modelled into a synergy conflict analysis to analyze whether there is a
synergy effect or a conflicting effect on the prospect of operating low cost carriers (LCCs) and
legacy carriers (LCs) from the same main airport terminal, on the basis of each service attribute.
It is seen that 10 of the 12 service attributes have a synergy effect and 4 of the 12 seem to have
a conflicting effect on the objective of the dissertation. There is an overlap in two instances,
where it is strongly felt that the policies of the airport might play a great role in determining the
possibility or not of operating the low cost carriers and legacy carriers from the same main
airport terminal.
Keywords: Airport Terminals, Low Cost Carriers, Service Quality, Importance Performance
Analysis, The 4 Q’s Method.

iv
INDEX
ACKNOWLEDGMENTS............................................................................................................ii
ABSTRACT.............................................................................................................................. iii
INDEX ..................................................................................................................................... iv
LIST OF FIGURES.................................................................................................................. vii
LIST OF TABLES................................................................................................................... viii
ACRONYMS AND DEFINITIONS..............................................................................................x
1. INTRODUCTION................................................................................................................1
1.1 INTRODUCTORY NOTE ...........................................................................................1
1.2 OBJECTIVE...............................................................................................................1
1.3 STRUCTURE AND METHODOLOGICAL APPROACH OF THE DISSERTATION......2
2. LOW COST AND LEGACY CARRIERS .............................................................................4
2.1 IMPACT OF DEREGULATION IN THE AVIATION SECTOR......................................4
2.2 BUSINESS MODEL ANALYSIS.................................................................................6
2.3 LCC IMPACT ON AVIATION ...................................................................................11
3. AIRPORT TERMINALS....................................................................................................14
3.1 INTRODUCTION .....................................................................................................14
3.2 LOW COST AIRLINE REQUIREMENTS FROM THE AIRPORT TERMINALS..........15
3.3 TERMINAL ACTIVITIES, COSTS AND REVENUES ................................................18
3.3.1 TERMINAL ACTIVITIES AND COSTS .................................................................18
3.3.2 REVENUES.........................................................................................................20
3.4 PROCESS ANALYSIS.............................................................................................26
3.4.1 INTRODUCTION .................................................................................................26
3.4.2 DEPARTURE.......................................................................................................26
3.4.3 ARRIVAL.............................................................................................................27
3.4.4 TRANSFER .........................................................................................................28
3.4.5 BAGGAGE HANDLING........................................................................................29
3.4.6 TURNAROUND PROCESS .................................................................................29
4. IMPORTANCE PERFORMANCE ANALYSIS...................................................................36

v
4.1 INTRODUCTION .....................................................................................................36
4.2 PASSENGER QUESTIONNAIRE SURVEY .............................................................38
4.3 ADEQUACY OF THE SAMPLE SIZE.......................................................................38
4.3.1 SAMPLE SIZE CRITERIA....................................................................................39
4.3.2 STRATEGIES FOR DETERMINING SAMPLE SIZE.............................................40
4.3.3 SAMPLE SIZE ESTIMATION...............................................................................41
4.3.4 OTHER SAMPLE SIZE DETERMINATION CONSIDERATIONS ..........................42
4.4 FINDINGS ...............................................................................................................42
4.4.1 IMPORTANCE VERSUS PERFORMANCE OF ATTRIBUTES .............................42
4.5 INTERPRETATION OF THE RESULTS...................................................................48
4.5.1 IPA (SCALE-CENTERED APPROACH)...............................................................48
4.5.2 IPA (DATA-CENTERED APPROACH) .................................................................48
4.5.3 IPA (MEDIAN – CENTRED APPROACH) ............................................................50
4.5.4 ATTRIBURE DISTRIBUTION BASED ON THE DIFFERENT APPROACHES.......50
4.6 SENSITIVITY ANALYSIS.........................................................................................51
5. ESTABLISHING QUALITY CRITERIA FOR AIRPORT TERMINALS ................................52
5.1 INTRODUCTION .....................................................................................................52
5.2 APPROACHES THAT LOOK INTO ESTABLISHING QUALITY CRITERIA...............52
5.2.1 IMPORTANCE PERFORMANCE ANALYSIS (IPA)..............................................52
5.2.2 SERVQUAL.........................................................................................................53
5.2.3 SERVICE QUALITY INDEX (SQI)........................................................................54
5.2.4 THE 4 Q’s METHOD............................................................................................54
5.3 CHOICE OF METHODLOGY...................................................................................55
5.4 THE 4 Q’s METHOD................................................................................................55
5.5 ANALYSIS OF CUSTOMER NEEDS AND FUTURE TRENDS.................................58
5.6 SETTING UP MINIMUM PERFORMANCE THRESHOLDS......................................59
5.7 HARMONIZATION OF SERVICE ATTRIBUTES ......................................................64
5.8 ASSESSMENT OF CUSTOMER SATISFACTION ...................................................65

vi
5.9 SYNERGY CONFLICT ANALYSIS...........................................................................74
5.9.1 SYNOPSIS ..........................................................................................................81
6. CONCLUSION AND DIRECTIONS FOR FURTHER RESEARCH ....................................83
6.1 CONCLUSION.........................................................................................................83
6.2 DIRECTIONS FOR FURTHER RESEARCH ............................................................84
BIBILIOGRAPHY ....................................................................................................................85
ANNEXE.................................................................................................................................89
QUESTIONNAIRE ..............................................................................................................89

vii
LIST OF FIGURES
Figure 1.1 – Structure and the Methodological approach of the dissertation...............................3
Figure 2.1 – Comparison between LCC and Legacy carriers [Source: (Esplugas 2008)] ............7
Figure 2.2 – Operational Characteristics of LCC and legacy carriers [Source: (Civil Aviation
Section 2002) & (Alderighi et al. 2004)] .....................................................................................8
Figure 2.3 – Scope of the current hub and spoke model [Source:(Franke 2004)] .......................8
Figure 2.4 – Distinction between the LCC and legacy carrier business models [Source:(Bieger
et al. 2002)].............................................................................................................................11
Figure 2.5 – Impact of LCCs on the aviation scenario in the UK [Source:(Airways British 2004)]
...............................................................................................................................................11
Figure 3.1 – Terminal Configurations [Source:(Wikipedia 2012b) ]...........................................15
Figure 3.2 – Traditional Airport Airline relationship [Source: (Francis et al. 2004)] ....................17
Figure 3.3 – Modern airline – airport relationship [Source: (Francis et al. 2004)] ......................17
Figure 3.4 – Non – Aeronautical revenues [Source: (ANA Aeroportos de Portugal 2011b)] ......21
Figure 3.5 – Share of non – aeronautical revenue in ANA airports [Source: (ANA Aeroportos de
Portugal 2011b)] .....................................................................................................................22
Figure 3.6 – Growing Importance of Non – Aeronautical revenues [Source: (Airports Company
South Africa 2012)] .................................................................................................................25
Figure 3.7 – Typical Departure process [Source: (DLR EU 2008)] ...........................................26
Figure 3.8 – Typical Arrival process [Source:(DLR EU 2008)] ..................................................27
Figure 3.9 – Arrival process analysis [Source: (DLR EU 2008)]................................................28
Figure 3.10 – Transfer Passenger handling process [Source: (DLR EU 2008)] ........................28
Figure 3.11 – Baggage handling process [Source: (DLR EU 2008)].........................................29
Figure 3.12 – Typical turnaround times observed in a B 777 [Source: (DLR EU 2008)] ............34
Figure 3.13 – Typical turnaround times observed in a B 737 [Source:(DLR EU 2008)] .............34
Figure 4.1 – Importance Analysis ............................................................................................43
Figure 4.2 – Performance Analysis..........................................................................................44

viii
Figure 4.3 – Distribution of the mean scores of the Importance Analysis..................................46
Figure 4.4 – Distribution of the mean scores of the Performance Analysis ...............................47
Figure 4.5 – IPA Scale Centred Approach ...............................................................................49
Figure 4.6 – IPA Data Centred Approach.................................................................................49
Figure 4.7 – IPA Median Centred Approach ............................................................................49
Figure 4.8 – Results of the Sensitivity Analysis........................................................................52
Figure 5.1 – Importance Performance Analysis .......................................................................53
Figure 5.2 – The 4 Q’s method................................................................................................55
Figure 5.3 – Decoupled version of the quality definition (The 4 Q’s method) ............................56
Figure 5.4 – Quality gaps in definition of service quality...........................................................57
Figure 5.5 – Congestion Level of Service A.............................................................................60
Figure 5.6 – Congestion Level of Service B.............................................................................61
Figure 5.7 – Congestion Level of Service C.............................................................................61
Figure 5.8 – Congestion Level of Service C, Queuing..............................................................61
Figure 5.9 – Congestion Level of Service D.............................................................................62
LIST OF TABLES
Table 3-1 – Sources of Airport Revenue [Source:(Francis et al. 2003)] ....................................23
Table 3-2 – Sources of Airport Revenue [Source: (Odoni 2007)]..............................................23
Table 3-3 – Sources of Airport Revenue [Source: (Odoni 2007)].............................................23
Table 3-4 – Sources of Airport Revenue [Source: (Graham 2007)] ..........................................24
Table 3-5 – Turnaround processes for low cost and legacy carriers.........................................32
Table 4-1 – Demographic information (IPA).............................................................................37
Table 4-2 – Mean scores of the Importance Analysis...............................................................45

ix
Table 4-3 – Mean scores of the Performance Analysis ............................................................46
Table 4-4 – Mean scores of the Importance and Performance Analysis ...................................47
Table 4-5 – Quadrant wise distribution of service attributes (Importance Performance Analysis)
...............................................................................................................................................51
Table 4-6 – Sensitivity Analysis on the level of precision..........................................................51
Table 5-1 – Expected Quality scores.......................................................................................59
Table 5-2 – Perceived Quality scores ......................................................................................66
Table 5-3 – Satisfaction Gap scores........................................................................................72
Table 5-4 – Service Quality Level Matrix .................................................................................73
Table 5-5 – Availability of transport modes for commute from the terminal...............................75
Table 5-6 – Time taken to do check – in..................................................................................75
Table 5-7 – Level of Congestion (Crowding)............................................................................76
Table 5-8 – Number of working check – in counters.................................................................76
Table 5-9 – Walking distances inside the terminal ...................................................................77
Table 5-10 – Accessibility to food and beverages ....................................................................78
Table 5-11 – thermal comfort (Temperature Control) ...............................................................78
Table 5-12 – Seat Availability inside the terminal.....................................................................79
Table 5-13 – Visual impact of the terminal (cleanliness and design).........................................79
Table 5-14 – Availability of choices in food or retail..................................................................80
Table 5-15 – Availability of trolleys ..........................................................................................80
Table 5-16 – Accessibility to retail and concessions.................................................................81
Table 5-17 – Synergy Conflict Analysis ...................................................................................82

x
ACRONYMS AND DEFINITIONS
ANA Aeroportos de Portugal
ATC Air traffic Control
BA British Airways
bmi British Midland International
EC European Commission
ETDS Explosive Trace Detection Systems
EU European Union
FIS Federal Inspection Services
HCM Highway Capacity Manual
IPA Importance Performance Analysis
LC Legacy Carriers
LCC Low Cost Carriers
LOS Level of Service
NC Network Carrier
NLR National Aeronautics Laboratory
P2P Point to Point
QD Delivered Quality
QE Expected Quality
QP Perceived Quality
QT Targetted Quality
SQI Service Quality Index
UK United Kingdom
USA United States of America

1
1. INTRODUCTION
1.1 INTRODUCTORY NOTE
The tremendous growth experienced by the airline/ aviation sector is the main source of interest
for the current study. The spurt in the global airline passenger throughputs mainly through the
burgeoning of low cost aviation has been the single largest contributor on this aspect. Low cost
carriers (LCCs), with the initial push from Southwest Airlines in the USA, through smart
business models have realized that they can not only make the legacy carriers (LC) customers
shift towards flying low cost, but also that they could create a new niche segment of passengers
who would not have flown otherwise. This realization was further strengthened when Ryanair
started operations in Europe, quickly followed by easyJet during the 90s. And thus the wave
spread over to Asia and subsequently all other parts the world.
In the due process, the airlines had to constantly innovate in order to keep their cost advantage
intact. Those who failed to do so eventually disappeared from the scene, while the lucky few
flourished and took up a huge market share. When the LCC business model started to gain
prominence, they started to realize the need to operate from smaller airfields, secondary
airports in order to reduce the costs and also to achieve time advantages. This use of using the
secondary airports came with need to have a trade-off between costs and quality of service.
The passengers flying LCCs sure had lesser costs on the airline tickets, but had the service
quality compromised. Sometimes the secondary airports was so far off that additional costs
needed to be required for commute into the main city (as is the case of Girona (Barcelona) and
Hahn (Frankfurt) amongst others). A recent study showed that over 57% of the Southwest
customers would recommend the airline to their friends over the aspect of its cost advantage,
despite the lower quality of service they receive when compared to a legacy airline passenger.
It is the endeavour of this dissertation to study in detail, the service quality aspect delivered to
the LCC passengers in the airport terminals, to understand their requirements and set up
service quality levels that look into the aspect of quality delivered in airport terminals.
1.2 OBJECTIVE
This dissertation strives to explore the prospect of operating low cost carriers and the legacy
carriers out of the same main airport terminal, from a service quality point of view. In doing so, it
aims to achieve the situation where the low cost carriers, which now operate from the low cost
airports or the secondary airports/ terminals would be taken off service from there and started
operating from the main airport terminal purely looking at it from the point of view of service
quality.

2
1.3 STRUCTURE AND METHODOLOGICAL APPROACH OF THE
DISSERTATION
Methodologically speaking, in terms of data collection, the main tool used for the course of this
dissertation would be a passenger questionnaire survey. The survey is to be floated amongst a
target audience which shall consist of airline passengers, with special reference to low cost
passengers. The main task entrusted with the target group during the survey would be to
identify and illustrate the set of service attributes, which in their opinion shall hold forte in
defining service quality in an airport terminal. The target group would be advised to give scores
on each of the service attributes in two main aspects – importance and performance.
The service attributes, a total of 12 in number have been chosen after extensive literature
reviews on the aspect of defining service quality in various industries including airports. Based
on the results of the survey, Importance Performance Analysis (IPA) would be resorted to, in
order to place the service attributes on the IPA grid. Once the IPA grid is established, the results
interpreted, the next stage of this dissertation would focus on the establishment of quality
criteria for setting up service quality parameters in an airport terminal. And the final parts of this
dissertation would focus on the setting up of a service quality level matrix and eventually on the
aspect of addressing the main objective, having all these results in hand.
On the structural point of view of the report, this dissertation would begin with an attempt to
understand low cost carriers and legacy carriers. Main aspects of interest would be to examine
the impact that the deregulation of the 70s had on global aviation. The main focus of the said
low cost and legacy carriers would be to understand the business models of the respective
class of airlines. This will be followed by the impact of LCC on aviation.
Section 3 starts with a thorough exploration of the airport passenger terminals that are in use,
the world over. Airport passenger terminals henceforth referred to as Terminals in this work are
generally divided into categories on the basis of major airport activities such as commercial
services, primary, cargo services, reliever and general aviation airports. For the course of this
study, only commercial service airports with more than 2500 enplaning or deplaning passengers
per year for any calendar year has been found to be relevant. A thorough analysis of the
different kinds of airport terminals – based on their design featuring their main characteristics,
would be detailed during the course of this dissertation. The LCC requirement from airport
terminals is the next topic of discussion here.
Next focus will be on the revenues generated by the airport – namely the aeronautical and the
non – aeronautical revenues. The terminal activities, costs and revenues are another area of
exploration as far as this dissertation is concerned. It is the endeavour of the current
dissertation to look into the growing importance of the non – aeronautical revenue in airports
and similar attempts shall be made on this regard.

3
This will be followed by an overall process analysis in an airport terminal. Ground Handling
Processes, especially the turnaround process assumes a very big importance in achieving
economy, especially in the case of low cost carriers. As for the dissertation, it is believed that
the turnaround times (ground handling operations) will end up being one of the most premier
constraints in operating both classes of airlines from the same airport terminal into reality.
Taking this view into regard, a complete analysis of the turnaround process will be explored in
the subsequent session and it will be modelled on the operations happening on the ground for a
low cost as well as a legacy carrier. Analysis, when done this way will aid in understanding the
turnaround process in greater detail, emphasizing the possible advantages that one airline class
stands to receive against the other – something which has been seen to be inherent of their
respective business models.
The final part of the dissertation will involve the analysis of the importance and performance of
the service attributes, subsequent establishment of quality criteria and setting up of a service
quality level matrix addressing the prospect of operating low cost and legacy carriers out of the
same main airport terminal.
The structure of the dissertation can be explained by the flow chart described below:
Figure 1.1 – Structure and the Methodological approach of the dissertation
CONCLUSION AND DIRECTIONS FOR FURTHER RESEARCH
CONCLUSION DIRECTIONS FOR FURTHER RESEARCH
ESTABLISHING QUALITY CRITERIA
INTRODUCTION
APPRAOCHES
THAT LOOK
INTO
ESTABLISHING
QUALITY
CRITERIA
CHOICE OF
METHODOLOGY
THE 4Q's
METHOD
ANALYSIS OF
CISTOMER
NEEDS AND
FUTURE
TRENDS
SETTING UP
MINIMUM
PERFORMANCE
THRESHOLDS
HARMONIZATIO
N OF SERVICE
ATTRIBUTES
ASSESSMENT
OF CUSTOMER
SATISFACTION
SYNERGY
CONFLICT
ANALYSIS
IMPORTANCE PERFORMANCE ANALYSIS
INTRODUCTION
ADEQUACY OF THE SAMPLE
SIZE
FINDINGS
INTERPRETATION OF THE
ANALYSIS
SENSITIVITY ANALYSIS
AIRPORT TERMINALS
INTRODUCTION
LOW COST AIRLINE REQUIREMENTS
FROM THE AIRPORT TERMINALS
TERMINAL ACTIVITIES, COSTS AND
REVENUES
PROCESS ANALYSIS
LOW COST AND LEGACY CARRIERS
IMPACT OF DEREGULATION IN THE AVIATION SECTOR BUSINESS MODEL ANALYSIS LCC IMPACT ON AVIATION

4
2. LOW COST AND LEGACY CARRIERS
2.1 IMPACT OF DEREGULATION IN THE AVIATION SECTOR
The airline/airport industry, which is collectively referred to as the aviation industry has
witnessed widespread changes in the way it has been operating, since the turn of the
millennium. A large contribution to this change has been attributed to the diverse patterns of
travel that have resulted due to the numerous needs of the passengers. Gone are the days
when flying used to be a businessman’s thing or confined even to the upper strata of the
society. The deregulation in 1978 played a great role in realizing this dream. With the advent of
the low cost phenomenon, flying has turned from being a niche segment into a completely
global character, cutting across regional and monetary lines. Passenger movement has
increased over the turn of the millennium, fuelled by the low cost phenomenon which made it
accessible to more and more people all across the world. But as every phenomenon, it came
with its own drawbacks.
More passengers would mean that the main airports were getting more and more congested.
The airport terminals which host the passengers before enplaning and after deplaning became
the major sources of bottleneck, unable to encapsulate the growing demand. This is majorly due
to the fact that most airports which were built during the 1960s to the 1980s did not account for
this unprecedented growth in air travel. Forecasting techniques were seldom employed during
those days and if at all they were, it turned out to be always wrong in estimating the future state
of affairs. Thus it became evident that the existing airports had two options in front of them: i)
expansion to meet the needs of the present and account for the future. ii) pave way for the
construction of new airports (and impending possibility of shutting down or not, depending on a
case by case basis) because of capacity constraints in the existing airports.
By the turn of the 90s, this was realized by almost all the major airports existing and efforts were
on to either expand facilities or to build new airports which would have larger capacities than the
existing ones. Huge facilities with gargantuan designs for terminals were built by the turn of the
millennium and this meant that millions of dollars were spent by the respective countries in
getting the airports, up and ready for meeting newer challenges. This was about the time, when
the low cost revolution had kicked up in most parts of the world, succeeding the South West
revolution which had taken place in the United States of America, much earlier. The Southwest
model was copied blatantly by most of the airlines of that time, which later modified a few
aspects from their business models in order to stand out in the crowd.
The low cost revolution meant that airlines were now looking in a new direction altogether. They
operated differently from the existing legacy carriers. Simple measures included recruiting
younger, non-union staff, having uniform fleets among other innovative measures as a means to
cut costs. A major portion of their success involved a very innovative business model which was
built around the idea of cutting costs wherever permissible. This did not mean that they had bad

5
seats or used old aircraft with lesser safety measures; it just was an innovative outlook towards
making air travel accessible to everyone. In order to do this, they explored the various avenues
of costs incurred to the airlines and figured out, that a large portion of it was concentrated on the
aspect of airport charges that the airports used to levy on the airlines.
From the point of view of the airline, the airport charges composed of all activities related to
aviation activities, called the aeronautical charges. The aeronautical charges encompassed all
the aviation – related activities that the airline will undergo at the airports like the landing fees,
the air traffic control (ATC) fees, the passengers and cargo boarding fees, the handling charges
among others. And logically speaking, the airports which experienced greater traffic (the main
airports) had higher airport charges than the small/ secondary/medium sized airports. This fact
was realized by the low cost airlines at a very nascent stage and most of the pioneers in that
segment like Southwest, Ryanair etc. had made it clear that they would not like to fly to the main
airports in view of their higher landing charges. And fortunately for them, most of the areas
around Europe and North America had multi airport systems already existing. The most
frequent type is a multi-airport system with one primary airport and one secondary airport (like in
the case of Frankfurt, Dallas, Melbourne) and in some cases with more than one primary and
more than one secondary airport in the vicinity (like in Paris, London, New York etc.).
The secondary airports were largely unused military bases which were suffering from little or no
traffic due to the fact that they did not boast of the kind of facilities, which their counterparts (the
main airports) had amongst them. This turned out to be the perfect solution for the low cost
airlines that were looking at the aspect of cutting costs. Secondary Airports were cheaper to use
for the low cost airlines because they just had the bare minimum infrastructure required for the
airport to function and the air travel to become a reality. Most of these airports consisted of
single terminals where arrival and departure would take place at the same level. They were
devoid of ornamental facilities like the air bridge for which costs were incurred from the airline,
upon their usage. There were good facilities for ground transport existing in these airports and a
majority of the low cost airlines preferred to make their passengers walk to the aircraft from the
terminal. Another major factor attracting the low cost carriers to the secondary airports was on
the aspect of the turnaround times. The turnaround time is defined as the total amount of time
spent by the aircraft, right from landing at a particular airport to the time when it takes off from
the airport for its next flight. Low cost airlines commanded a turnaround time of 25-30 mins
which was impossible to achieve in the main airports mainly due to the high traffic that these
airports experienced. This was very much possible to achieve in the secondary airports since
the terminals were usually very closely located to the ends of the runway owing to the small size
of these airports.
Thus the low cost revolution kicked off and air travel turned very global in character with more
airports, and more choices for the passengers to travel to, with lesser fares. This was a big blow
to the legacy carriers. The low cost carriers not only managed to create a new segment of air

6
travellers but also ended up taking a share of the passengers who used to earlier fly by the
legacy carriers. So much so that Southwest currently accounts for half of the total domestic
passengers travelling across the United States of America. Similar ripples were observed in
Europe with the advent of Ryanair and easyJet which took a huge chunk of the market share
from the legacy carriers as well. The legacy carriers were no facing mounting losses. Some of
them were forced into bankruptcies (like Delta, US Airways, Spanair, Malev, Swiss Air) while a
few others were forced into mergers in order to avoid bankruptcies themselves (like KLM
brought by Air France, Austrian Air and Swiss Air brought by Lufthansa, and US being brought
by America West). The passenger share of the legacy carriers decreased, which also meant
further cancellations of routes, non – utilization of facilities at main airports among others.
The main airports which had built enormous facilities for the legacy carriers are now facing
surging losses, because of the events that transpired within the legacy carrier industry. Add to
that, cases of some secondary airports which had turned out to become hubs of the low cost
airlines (like Brussels Charleroi) which are giving the main airports, very stiff competition for
handling aircrafts and passengers.
2.2 BUSINESS MODEL ANALYSIS
To assess the achievement of any business model one needs criterion to set it against;
essentially some form of matrix and a benchmark. Success in business can be assessed on
several dimensions. In terms of the business community it may relate to profits, the standard
neo-classical rent seeking criteria, but business success may also be seen in relation to market
share or in terms of sales revenues (Baumol 1962). The LC model is essentially one based on a
differentiation strategy, in contrast to the LCC approach based on cost leadership or cost
minimisation (Alamdari & Fagan 2005) within each model companies will seek competitive
advantage through some variation in their operational vision, business routines, architecture
and practice
The business models of low cost airlines and legacy carriers vary widely. Low cost airlines are
built up on two key words, “efficiency” and “effectiveness”. And in order to reach these goals,
they start off by optimizing their processes in order to bring minimal loses. Cost reduction is
another mantra practiced very much by the low cost airlines, to good effect. The changes in the
business model have impacted not just the airlines and the passengers themselves, but also the
airports and every other party involved in the flying business.
What the low cost aviation did was to widen the horizons of flying from being an elitist aspect to
making it affordable for the masses. Although this came at a price of not having any frills on-
board, flying has definitely become more accessible to people from various economic strata.
The emphasis is on cost reduction and the service is defined by cost cuts rather than
passengers’ perception of level of service.

7
Figure 2.1 – Comparison between LCC and Legacy carriers [Source: (Esplugas 2008)]
As can be seen from the figure above, the business models of the low cost and legacy carriers
vary leaps and bounds. There are some intermediaries which have tried to inculcate the best
parts of both realms like jetBlue, Aerlingus etc. These airlines have tried to balance the spheres
of cost reductions, not compromising a lot on the customer perception of the level of service.
(CESUR & TPR 2007) classify the low cost business models into 5 types and they are as
follows: 1) Southwest copycats; 2) Subsidiaries; 3) Cost cutters; 4) Diversified – charter carriers;
and 5) State subsidized companies competing on price.
The legacy carrier business model is essentially one based on a differentiation strategy, in
contrast to the low cost carrier approach based on cost leadership or cost minimisation
(Alamdari & Fagan 2005) within each model companies will seek competitive advantage
through some variation in their operational vision, business routines, architecture and practice.
Thus, there is room for heterogeneity within sectors and between sectors as well. A ‘typical’
profile of a legacy carrier and low cost carrier model organization is as follows:
Another perspective onto the varying business model situation is described by (Franke 2004) in
his work. Starting with the legacy carriers, he observes the most common patterns and
according to him, major airlines capitalized on the progress of computer technology and
optimization models, developing the concept of “legacy management” in the 90s. This was
encouraged by the deregulation and liberalisation, major carriers built up global legacies around
large hubs. Maximum hub connectivity is typically reached by waved traffic patterns in the hubs,
increasing the probability of reaching a variety of outbound flights from any inbound flight. The
negative aspects of this strategy are a loss of convenience for the passengers, and a
considerable cost penalty for the airline on the operational side. Waved traffic means massive
peaks in hub operation leading to congestion during peak hours, time – critical connections and
strongly fluctuating utilization of ground handling facilities.

8
Figure 2.2 – Operational Characteristics of LCC and legacy carriers [Source: (Civil Aviation Section
2002) & (Alderighi et al. 2004)]
With no alternative business model, airline clients had no choice but to comply with the
operational model the legacy carriers had created, paying for this inherent complexity. The
product differentiation they received in return was – and still is – rather poor on continental
routes. The main focus of product differentiation is on booking restrictions (eg: rebooking
flexibility) and on in – flight product; landside processes are seldom reassessed. In effect, the
carriers had built their complex operational model around the needs of their least valuable
clients (low – yield connecting passengers) whom they forced to connect at hubs in order to
maximize their overall destination portfolio; a situation paid for by their own premium clients. A
crisis soon developed during the second half of the 2000s when faced with the economic
downturn, these high – value passengers, showed a growing reluctance to pay premium prices.
Figure 2.3 – Scope of the current hub and spoke model [Source:(Franke 2004)]

9
Major legacy carriers became trapped in a vicious cycle; as long as their competitors optimized
their destination portfolio and hub connectivity at the expense of productivity ad client
convenience, they were forced to act likewise. Any deviation from this could prove fatal. The
only remaining business innovations open to legacy airlines were alliances and partnerships
which boomed in the second half of the 90s. Major carriers organized themselves in a variety of
partnerships, and three main global alliances developed. A certain value for the client (eg:
seamless global travel) as well as some low hanging fruits for the carriers (eg: scale effects in
procurement, aligned IT systems) made these alliances quite successful. However the
deregulation efforts of the last 20 years have failed to change restrictive ownership clauses and
bilateral traffic right arrangements thus making them not ready to face competition from their low
– cost counterparts. (Franke 2004)
He further goes on to explore the low – cost business model.
After the “invention” of the low – cost business model by Southwest in the early 70s, it took
more than 15 years in the US and 20 years in Europe before major legacy carriers began to
take the challenge of this new business model. The network carrier executives perceived this
low cost model as restricted to a niche market sector, luring low - low – yield passengers who
would have never flown otherwise (and whom the network carriers would not like to attract
anyhow), by offering the lowest service standards possible. Even at the beginning of the crisis,
this perspective remained largely unchanged.
Studies of the low – cost phenomenon have challenged this very thought. It has become
obvious that LCCs have not merely expanded from their original niche in times of crisis, but
have established an alternative business model that is better prepared to adapt to the changes
in demand for continental travel than that of the legacy carriers’. Studies by (Doganis 2001)
show that LCC business model can operate sustainably at a 40 – 50% of the unit cost of the
average legacy carrier. This cost gap can be only explained by the assumption of lower wages
and a ‘no frills’ approach to business. For example, point – to – point (P2P) service is offered
only in continental traffic with a homogeneous fleet of cost efficient aircraft (B737 or A320/319).
This cost gap can be explained by lower number of flights between major destinations, resulting
in a considerably higher productivity of aircraft and crew. Other success factors are: lower
maintenance costs due to homogeneous fleets and lower landing/ ground handling fees, being
negotiated with secondary airport without congestion problems.
He further goes on to say
Airline strategists from NCs have identified at least three major errors in their initial perceptions
of the LCC model:
 The LCC service level is focussed, not poor. In most cases, the LCC product is highly
reliable and convenient for passengers; the LCC product can, in fact even be more

10
convenient than that of NCs who force their clients into congested off – site mega
airports. They offer what most clients value at least in continental travel; direct
connections with minimum interaction at the airport.
 LCCs do attract low – low – yield passengers and heavy bargainers who would not have
flown otherwise, but they also alienate “regular” coach travellers and even price –
sensitive business class clients from the NCs.
 While the LCC model started in a niche, it can thrive equally well in significant parts of
continental air traffic markets. With the exception of highly served hub connections, LCC
could – at least in theory – enter all local markets that provide enough demand for at
least one direct flight with a B 737 per day. This segment accounts for some 70% of the
European continental market and more than 70% market in the US.
All said, there are for sure a set of experts who are obviously not thrilled to play party to the low
cost model. They maximize the use of their factors of production. Aircraft turnaround times are
kept short because there is no-belly-hold cargo to unload/unload, there are no window shades
to open, there are no seat-back pockets to be emptied, less congested airports are favoured,
planes are only cleaned once a day, there are no on-line passengers to worry about, etc.
Another approach of comparing the low cost carriers and the legacy carrier business models
arises from the work by (Bieger et al. 2002). The work summarises the business model
differentiations from eight dimensions. It can be summarised as given in the figure below.

11
Figure 2.4 – Distinction between the LCC and legacy carrier business models [Source:(Bieger et al.
2002)]
2.3 LCC IMPACT ON AVIATION
This section will delve into the details regarding the impacts that the low cost revolution had on
the aviation sector. Focus will be given on the various steps that were taken by the legacy
carriers as a counter – measure to the spiralling low cost phenomenon.
Low-cost airlines have continued to grow and increase their share of the market, especially in
recent years. Europe’s LCCs are growing at annual rates of 20–40%. They have won a 10%
market share (24 million passengers) of the total intra-European market. This figure is predicted
to grow to 33% (or 148.5 million passengers) by 2010 (Aviation Strategy, 2002). The figure
below shares the growth story of the low cost airlines in the United Kingdom. This illustration
gives a very good picture into the impact of the LCCs on the aviation scene in the United
Kingdom. Values are the percentage share of passengers on board all UK short-haul inbound,
outbound and domestic scheduled flights of Ryanair, Buzz, easyJet and Go. (Alamdari & Fagan
2005)
Figure 2.5 – Impact of LCCs on the aviation scenario in the UK [Source:(Airways British 2004)]

12
After deregulation, the airlines quickly moved to a hub-and-spoke system, whereby an airline
selected some airport, the hub, as the destination point for flights from a number of origination
cities, the spokes. Because the size of the planes used varied according to the travel on that
spoke, and since hubs allowed passenger travel to be consolidated in “transfer stations”,
capacity utilization increased allowing fare reduction. The hub-and-spoke model survives
among the legacy carriers, but the low-cost carriers (LCCs), now 30 percent of the market,
typically fly point to point. The legacy hubs model offers consumers more convenience for
routes, but point-to-point routes have proven less costly for airlines to implement. Over time, the
legacy carriers and the LCCs will likely use some combination of point to point and legacy hubs
to capture both economies of scope and pricing advantages. (Wikipedia 2012a)
The success and the constant competition from the low cost carriers had made it imperative on
the part of the legacy carriers to go for a re – think on their business model and the strategies
implemented on the ground. The strategies implemented by major airlines in reaction to the
competitive threat from the low – cost carriers include means of reducing labour costs or
increasing productivity within the mainline airline operation. There is also the possibility of
transferring services to regional partners, franchises or alliances and even setting up a low –
cost carrier subsidiary. (Dennis 2007)
Some of the largest changes have been achieved by selling off whole departments (eg. ground
handling at bmi). Low cost airlines have sought to achieve dramatic growths in productivity by
taking on the bare minimum number of extra flight and cabin crew to support their vastly
expanded operations. And unlike the low cost carriers, the major airlines have not generally
tried to shift any flight and cabin crew to lower cost economies. (Dennis 2007) Support services
such as catering, cleaning and ground handling have come under much more severe pressure
(David & Michaels 2003). An example of the above situation is elucidated by the drop in
revenue of Gate Gourmet by 30% despite a growth in passenger numbers. (Ott 2005)
British Airways (BA) is generally accredited with having the most realistic strategy for dealing
with the low – cost airlines, perhaps alongside Aer Lingus who are the only real example of a
traditional legacy airline converting much of the way into a low – cost carrier. (Aviation Strategy
2004) Others have done with minimum by changing strategy only where head – to – head with
either a low cost airline or BA. Some have adopted aggressive tactics through legal procedures
or control of slots, facilities or capacity to keep new entrants out. (Dennis 2007)
The adoption of differentiation strategies by airlines is also a result of the impact of the low cost
airlines in the aviation sector. And this is not just reserved for the legacy carriers alone. There
have been instances where LCCs have departed from the conventional low cosy business
models to enable differentiation strategies into their models. (Alamdari & Fagan 2005) studied
this in detail with respect to ten low cost carriers and their conclusions are summarised as
below. For the purpose of the study, they identified ten LCCs with special regard to 17 of their

13
operational and product features of their low – cost business models. This was later utilized to
study departures from convention.
Overall, the selected carriers, in pursuit of their differentiation strategy, deviated slightly more
from the product features of the original model (40%) than from the operational features (36%).
The evidence also suggests that European carriers tend to adhere to the original model more
than their counterparts in the USA. However, this could change in the future as more low-cost
airlines enter the European market and the legacy carriers react by offering low fares as well as
service frills.
Nevertheless, the main change in airport management is that airlines are no longer their primary
customers. Rather, passengers become a significant source of revenue. Airport managers had
to reduce aeronautical revenues (in charges) to increase attractiveness, and had to develop and
become more dependent on non-aeronautical activities such as retail, parking and advertising.
“(…) the airport has better use of its facility, can attract new entrants, and is better equipped to
manage growth and expansion. But there’s risk as well. Unlike a residual agreement that
requires the airlines to help cover airport debt and operational expenses, in this scenario the
airport is solely responsible for potential revenue shortfalls.” (Lennane, A. 2010)
Although the LCCs in all continents have continued to experience traffic growth, such growth
can be adversely affected by factors including a lack of access to suitable slots at airports, an
increase in airport costs when start-up tariffs are removed, lower credit card and Internet
penetration in some targeted markets, reaction by legacy carriers offering low fares, as well as
service frills and increased rivalry amongst the growing number of LCCs. (Alamdari & Fagan
2005)
And finally, as efficiency and cost cutting were the two main features the low cost revolution
brought onto the table, efforts were made to optimize the ground handling processes taking
these two above given factors into consideration. Positive steps in this direction included self-
check – in kiosks, web/ mobile check – in, electronic display, common use check – in counters
amongst others.

14
3. AIRPORT TERMINALS
3.1 INTRODUCTION
The simplest definition of airport terminal is as follows:
An airport terminal is a building at an airport where passengers transfer between ground
transportation and the facilities that allow them to board and disembark from the aircraft.
The terminal is the area within which the passengers purchase tickets, transfer their luggage
and go through the security processes. The term terminal is synonymously used with the word
concourse, which are defined as the buildings that provide access to the airplanes (via gates) –
depending on the configuration of the airport. Smaller airports have one terminal while larger
airports have several terminals and/or concourses. The design philosophy of terminals has
evolved over the years into a matter of intricacy and extreme importance. While the number of
terminals in an airport is always defined by the passenger throughput and the demand that the
airport is handling, the configurations of these terminals have been the centre of attraction,
where they are altered on a case by case basis depending on the situation at hand.
At smaller airports which have only one terminal, the single terminal building typically serves all
of the functions of a terminal and a concourse. Some larger airports have one terminal that is
connected to multiple concourses via walkways, sky – bridges, or underground tunnels. Some
other large airports have more than one terminal, each with one or more concourses. Still, some
other airports have multiple terminals, each of which incorporates the functions of a concourse.
So, as can be seen there is a lot of scope for variety in the design of an airport terminal. The
next section will highlight in brief, the most common configurations of airport passenger
buildings. (Wikipedia 2012b)
The evolution in the design of airport terminals is an interesting story to explore. Due to the
rapid rise in popularity of passenger flight, many early terminals were built in the 1930s – 1940s
and reflected the popular art deco style architecture of the time. The earliest of the philosophies
involved every airport terminals directly opening onto the tarmac: passengers would walk or
take a bus to the aircraft. This design, however is still common among the smaller airports and
as will be seen later, is starting to take prominence in the designs of the modern day as well.
(Wikipedia 2012b)
Airport Passenger Buildings -- midfield concourses, finger piers or terminals -- now represent
the major capital expenses at airports worldwide. This is because they are expensive, easily
costing several hundred million dollars apiece at the largest airports (Suebsukcharoen 2000).
Airport managers and designers are increasingly under pressure to be efficient from an
economic perspective. In most cases, private companies have replaced the government owned
operators and therefore expect a high rate of return on investment. (Neufville & Belin n.d.) This

15
paradigm shift, from the once famous penchant for huge and gorgeous terminals into the
terminals which are more economically efficient, came about as a result of the low cost
revolution.
The most common airport terminal configurations are as described in the figure below:
Figure 3.1 – Terminal Configurations [Source:(Wikipedia 2012b) ]
Economic efficiency is a prime motive for the spread of shared – use, multi – functional facilities
in airport terminals. The low cost airlines look for operational efficiency ahead of passenger’s
perception of the level of service in choosing their terminals of operation. (Neufville & Belin n.d.)
This chapter will mainly deal with the airport terminal and associated aspects. Focus will be on
the requirements of the low cost airlines as the main aim of this study is to explore the prospect
of accommodating both low cost carriers and legacy carriers in the same terminal. An overall
review of the terminal activities, costs involved, revenues and airport systems will subsequently
follow, thus providing a complete insight into airport terminals.
3.2 LOW COST AIRLINE REQUIREMENTS FROM THE AIRPORT TERMINALS
The airport passenger terminal constitutes one of the main elements of the infrastructure cost of
an airport and can be deﬁned as a building which facilitates connectivity between airside and
landside access and where a complex interaction between airport operators, airline companies
and passengers takes place. The airport business has often been characterised by investments
in expensive facilities which appear to be unsuitable for the needs and speciﬁc requirements of
LCCs. Most modern airport terminals have been designed for maximum convenience and
comfort, whereby high standards, expensive materials and sometimes architectural monuments
are applied with the aim of delivering a prestigious image to represent the culture of the region
or country. Such developments are associated with higher costs such as capital investment,

16
operating and maintenance costs. Thus, some designs have little to do with the function the
terminal is intended to achieve. (Ashford, N., & Wright 1992)
The incentives for over-investment may be attributed to the method used to regulate airports. In
this sense, (Niemeier 2009) argues that cost-based regulation is a major cause of the poor
performance of airports, in that it results in incentives for gold-plating, high costs and high
charges for airlines and passengers.
In today's airport business, two main terminal types can be distinguished, namely, traditional
terminals and low-cost terminals. Whereas the traditional terminal can be defined as a terminal
designed to process the flights and passengers associated with the operation of NCs with full
service facilities, the low cost terminal can be thought of as an airport terminal that has been
developed with low capital investment cost and with the aim of reducing costs and increasing
efficiency
In choosing which airports and airport terminals to operate from, the low cost carriers bring into
consideration a lot of different factors before making a decision. Quite often, these decisions
differ from one airline to another, in line with their policies and preferences. For Ryanair, airport
choice factors include low airport charges, quick turnarounds, simple terminals, rapid check-in
facilities, good passenger facilities and accessibility. (Barrett 2004) Deregulation was a first
factor in determining the philosophy of low cost airlines to look at other options for starting
operations from secondary airports.
For example, the most mature route deregulation, Dublin–London, could not have happened at
a Heathrow monopoly in 1986.The new market entrant, Ryanair, did not have access to slots
there. Luton airport was thus an indispensable part of deregulation as was Stansted
subsequently. (Barrett 2004)
Before the discussion moves into the LCC requirements from airports, specifically airport
terminals, the relationship between the airlines and the airports deserves a special mention.
Traditionally, the contract between airlines and airport stated the conditions of use of airport
facilities and services in exchange for the aeronautical fees paid by the airlines. (Graham 2003)
A simple buyer-seller relationship existed. (Albers et al. 2005) As shown in Figure, airports
viewed airlines as their primary customers (Francis et al. 2004); (Graham 2003) The intention of
obtaining revenues from the passengers was almost non – existent as the idea was still very
nascent and also due to the initial thought process of including the passengers as part of the
airline business. (Francis et al. 2004) As a result, airports relied heavily on aeronautical
revenues.

17
Figure 3.2 – Traditional Airport Airline relationship [Source: (Francis et al. 2004)]
Figure 3.3 – Modern airline – airport relationship [Source: (Francis et al. 2004)]
(Francis et al. 2004) slowly realized and argued that the airline-airport relationship was
gradually becoming more complex as airlines are increasingly cost minded for the sake of their
own financial performance, as a result, aeronautical charges are under increasing scrutiny from
airlines. (Graham 2003) This situation is more prevalent in the case of LCC. Many LCCs are
attempting to negotiate a better deal in aeronautical charges from airports. Some airports,
particularly those that are not utilized to its full extent, are willing to offer discounts to LCCs
(Barrett 2004) or even waive their landing fee for the first few years. (Graham 2003) Now in
order to compensate the loss of aeronautical charges, airports must find new source of income,
while non-aeronautical incomes from concessions, tenants and visitors are the most readily
available source of revenues to airports. (Francis et al. 2004)
As for the LCC requirements from the airports and airport terminals, there has been enough
research done on this aspect to give a good indication of where things stand at the moment.
That includes requirements such as -
I. low airport charges [(Barbot 2006);(Barrett 2004);(Graham 2003);(Francis et al.
2004);(Warnock-Smith & Potter 2005)];
II. quick turnaround time [(Barrett 2004);(Gillen & Lall 2004); (Warnock-Smith & Potter
2005)];

18
III. spare airport capacity [(Warnock-Smith & Potter 2005)];
IV. convenient slot times [(Warnock-Smith & Potter 2005)];
V. single storey airport terminals [(Barrett 2004); (Francis et al. 2004)]
VI. quick check-in [(Barrett 2004)]
VII. good catering at airport [(Barrett 2004)]
VIII. good shopping at airport [(Barrett 2004)]
IX. good facilities for ground transport high potential demand for LCC services and
no gold-plating facility [(Barrett 2004)]
So, as can be seen the traditional way of negotiations with the airports for an LCC is very
straightforward and basic.
LCCs usually avoid expenditures on services that are not strictly necessary for the provision of
the core air transport product, such as the use of air bridges or escalators, the need for transfer
and complex systems of the NCs. (Njoya & Niemeier 2011)
With regard to the implications for airports, (Barrett 2004) is of the opinion that low cost and
smaller secondary airports (i.e. those accommodating 0.5–5 million annual passengers) have
been greatest beneﬁciaries of low-cost carriers' growth over the last two decades. LCCs
triggered new demand and even shifted traffic away from congested airports to regional
airports.
3.3 TERMINAL ACTIVITIES, COSTS AND REVENUES
3.3.1 TERMINAL ACTIVITIES AND COSTS
The Airport Terminal consists of both airside and landside segments, which deem it necessary
to perform a whole range of activities apart from the conventional airport operations. As is
obvious, most of the activities taking place in an airport terminal are on the landside, less so on
the airside.
The airport landside is controlled by a variety of agents such as airport users and government
agencies. In addition to these two are the airlines, with whom the airport operators co-operate
for the smooth operations. An attempt is made here to enlist all the components of the Airport
Terminal landside system based on (TRB 1987)
Terminal Building
 General Configuration
o Pier; Satellite; Linear; Transporter
 Terminal Kerb
o Departures; Arrivals

19
 Terminal Transition
o Entry ways and foyers; Lobby area
 Airline Facilities
o Office; Ticket counter, Baggage check/ claim
 Circulation
o Corridors; Stairs; Escalators; Security Screening
 Passenger amenities
o Food/ beverage; news/ tobacco; Drugs; Gifts; Clothing;
o Florists; Barber and shoeshine;
o Car rental and flight insurance;
o Public lockers and telephones;
o Post office’ Amusement arcades; Vending machines;
o Restrooms and nurseries’ Showers and health club;
o Chapels; VIP waiting areas
 Departure lounges (Passenger waiting areas)
 International facilities/ Federal Inspection Services (FIS)
o Immigration and naturalisation; Customs;
o Plant and animal health (Agriculture);
o Public health
 Airline Operations
o Flight operations/ crew ready rooms’
o Valuable/ outsized baggage storage, Air freight and mail;
o Administrative offices
 Airport Operations and Services
o Offices; Police Medical and first aids;
o Fire fighting; Building maintenance;
 Building Mechanical Systems
 Communication Facilities
 Electrical Equipment
 Government Offices
o Air traffic control; Weather; FIS and public health
 Conference and press facilities
The airport passenger terminal constitutes one of the principal elements of the infrastructure
cost at the airport. (Ashford, N., & Wright 1992) It forms the zone of transition around which
passengers’ transit providing the link between the ground and air transport. The rate at which
aircrafts are handled, the overall ground access provided, the capacity of the airside – all are
dependent on the design and operation of the terminal. (Wells A I 1992) A specific order and
procedure are maintained, under which airport terminals perform several functions

20
simultaneously in accordance with the practices adopted, which tow in line to the airport
regulations. (Mumayiz 1985)
Three main functions are performed by the airport terminals and have been described by
(Ashford, N., & Wright 1992) as follows:
Change of Mode: Few air trips are made direct from origin to destination. By their nature, "air"
trips are mixed-mode trips, with surface access trips linked at either end to the line haul air trips.
In changing from one mode to the other, the passenger physically moves through the airport
terminal according to a prescribed pattern of movement. These movement patterns are
accommodated by passenger circulation areas.
Processing: The terminal is a convenient point to carry out certain processes associated with
the air trip. These may include ticketing and checking in the passengers, separating them from
and reuniting them with their baggage, and canying out security checks and governmental
controls. This function of the terminal requires passenger
Change of Movement Type: Although aircraft move passengers in discrete groups in what is
termed "batch movements", the same passengers access the airport on an almost continuous
basis, arriving and departing in small groups mainly by bus, auto, taxi, and limousine. The
terminal, therefore, functions on the departure side as a reservoir that collects passengers
continuously and processes them in batches. On the arrivals side, the pattern is reversed. To
perform this function, the terminal must provide passenger holding space.
(Ashford et al. 1984) discussed in good detail the individual terminal facilities based on the
airport operational standing. Terminal activities were classified into five principal component
groups: (1) direct passenger services; (2) airline – related passenger services; (3) governmental
services; (4) non – passenger related airport authority functions; (5) airline – related operational
functions.
A rising challenge at present for airport managers is to ensure the optimization of the air side
and also the terminal facilities available to the users of the airlines. This has gained more
prominence in the era of the surging LCC ridership, the accompanying change from the
conventional hub and spoke model to point – to – point services of the LCCs and change in
passenger ridership structures experienced across the various airports and airlines.
3.3.2 REVENUES
An airport receives revenue both from aeronautical as well as non – aeronautical sources.
Aeronautical revenues are those which are the revenues that are obtained from the airport by

21
activities that are relating to the air transport. Non – Aeronautical revenues are those which are
obtained by the airport through activities that are not related to air transport.
3.3.2.1 AERONAUTICAL REVENUES
Aeronautical revenues are essentially the charges that the airlines will have to pay for using the
airport space including some additional services
In Europe, all airlines, with no exceptions, have to pay the same aeronautical charges despite
following different business models. These charges are listed next:
 Taking off and landing charges based on the planes’ maximum weight specified for
take-offs;
 Parking charges which can be divided in traffic and maintenance areas depending on
time spent on platforms, (which again can depend varying on the situation – as for
traffic operation and maintenance);
 Aircraft shelter charges;
 Passenger service charges (depending on destination – Schengen, non – Schengen
and International);
 Passenger security charges.
(ANA Aeroportos de Portugal 2011a)
Based on the method of boarding, there are additional charges to be paid. For instance, the use
of air bridges represents a higher cost structure than the bus and walking gates. Low cost
companies do not prefer to use the air bridges as they use the two door boarding policy as a
means to reduce the boarding time.
3.3.2.2 NON – AERONAUTICAL REVENUES
Non – Aeronautical revenues are said to be consisting of six main sources in the (ANA
Aeroportos de Portugal 2011a). It is as given below:
Figure 3.4 – Non – Aeronautical revenues [Source: (ANA Aeroportos de Portugal 2011b)]
Rents and concessions form the two major parts of the commercial revenues. (Doganis 1992)
Rental income is obtained by leasing the airport space to the users of the airport – among who
are airliners, freight forwarders, travel agents, tour operators and warehouses and other major

22
beneficiaries from airport space, such as hotels, banks, and caterers and so on. (Parappallil
2007) It is usually determined by the amount of space taken up by the user and also on the
amount of facilities used by the tenants such as check in kiosks, lounges etc.
Concessions on the other hand are charges levied by the airport authorities from various
service providers for letting them use the apace in the airport to sell their products. This is
usually a variable, dependent on the amount of turnover of the concessionaires and not on the
space provided, calculated as a percentage of the total turnover. (Parappallil 2007)
Some airports have also marketed themselves in innovative ways paving way for more revenue
from these activities. Unlike rents and concessions, these incomes go directly into the account
of the airport. However these direct sales activities carry a certain amount of risk due to the high
capital investment, labour costs and possible inexperience on the part of the airport in dealing
with such business deals. (Freathy, P. & O’Connell 1998) Other examples of innovative revenue
generating schemes include operating taxi services, sightseeing tours amongst others.
The graphic below gives the share of the non – aeronautical revenues at the ANA airports in
Portugal –
Figure 3.5 – Share of non – aeronautical revenue in ANA airports [Source: (ANA Aeroportos de
Portugal 2011b)]
As can be seen from the above graphic, it is clear that of the 26% of total non – aeronautical
revenue obtained by the ANA airports, more than half is obtained through retail. Real Estate,
car park and Rent – a – car follow suit, finally culminating with Advertising and other measures.

23
3.3.2.3 LITERATURE ON AIRPORT REVENUES
(Francis et al. 2003) sums up a list of activities that generate revenue to the airport, both from
an aeronautical as well as a non – aeronautical perspective. It is as enlisted below:
Table 3-1 – Sources of Airport Revenue [Source:(Francis et al. 2003)]
(Odoni 2007) defines the revenues generated by airports tabulating them as follows:
Table 3-2 – Sources of Airport Revenue [Source: (Odoni 2007)]
He further goes on to define another class of revenues which could be generated by the airport,
naming them off airport revenues – revenues which are derived from activities that are not
related to the movement of aircraft, passengers or cargo through the subject airport. The
revenue generated from these sources could be defined under non – aeronautical revenues in
any other classification system but he chooses to segregate them into a separate class. Given
below is the list of off airport revenues enlisted –
Table 3-3 – Sources of Airport Revenue [Source: (Odoni 2007)]
Aeronautical Non - Aeronautical
Landing, departure and parking fees Direct sales (duty free shop/ duty paid)
Passenger fees Royalties
Freight charges Concessions (Rentals)
Apron services and aircraft handling Advertising
Other non - aeronautical
Car Park
Recharges
Airport Revenue
Aeronautical Non - Aeronautical
Landing (and/ or take off) Concession fees for aviation fuel and oil
Terminal area - air navigation Concession fees from commercial activities
Passenger service (terminals) Revenues from car parking and car rentals
Cargo service Rentals for airport land, space in buildings and equipment
Aircraft parking and hangars Fees charged for tours, admissions etc
Security Fees derived from the provision of engineering services, utlities etc, by the airport operator
Airport Noise
Noxious emissions (air pollution)
Ground (ramp and traffic) handling
En route air navigation
Airport Revenue
Off Airport Revenue
Consulting services
Education and training services
Management contracts at other airports
Management contracts for other activities
Equity investments in travel related or other ventures
Equity investments in other airports

24
(Graham 2007), in her book on Managing Airports presents another perspective on the aspect
of airport revenues. It is as given below –
Table 3-4 – Sources of Airport Revenue [Source: (Graham 2007)]
(Wells & Young 2003) made a more elaborate classification into the various revenue generated
by the airport, to give a five group classification as follows:
I. Airfield area (landing fees, aircraft parking charges, fuel flowage fees etc);
II. Terminal area concessions (food and beverage concessions, travel services and
facilities, specialty stores and shops, personal services, amusement, display
advertising, outside terminal concessions – auto parking, hotel, motels etc);
III. Airline leased areas (ground equipment rentals, cargo terminals, office rentals, ticket
counters, hangars, operations and maintenance facilities);
IV. Other leased areas ( freight forwarders, fixed – base operators, governmental units and
businesses in the airport industrial area);
V. Other operating revenue (distribution systems for public utilities – electricity and steam
contract performed for tenants)
3.3.2.4 GROWING IMPORTANCE OF NON – AERONAUTICAL REVENUES
In the last two decades, the importance of non – aeronautical revenue has been widely
recognised as being of concern for airports since it opened up as being an opportunity for the
airports to generate some extra income from activities that were not related to aviation. The
transition of the airports from being candidates of traditional models of business to business
models that are trending to the current times (commercialization, privatization, increased role for
the airport manager in enhancing the commercial viability of the airport) should be one of the
main reasons for the recognition of the importance of the non – aeronautical revenues.
Four broad reasons have been identified as possible precursors to this phenomenon:
I. Increasing competition, along with falling yields and erratic world events have led
airlines to bargain for cheaper landing charges at airports. This has led to the airport
looking elsewhere in order to remain profitable and also as a means of increasing
revenues. The main airports have mainly reacted to this situation by trying to expand
their commercial activities in an endeavour to be more profitable.
Aeronautical Non- Aeronautical
Landingfees Concessions
Passengerfees Rents
Aircraftparkingfees DirectSales (shops, cateringand otherservices provided by the airportoperator)
Handlingfees (if handlingis provided by the operator) CarPark (if provided by the airportoperator)
Otheraeronautical fees (airtrafficcontrol, lighting, airbridges etc) Recharges (forgas, water, electricity etc)
Othernon - aeronautical revenues (consultancy, visitorand business services etc)
AirportRevenue

25
Figure 3.6 – Growing Importance of Non – Aeronautical revenues [Source: (Airports Company South
Africa 2012)]
II. Changing travel patterns of the air passengers is another reason why there is a need for
airports to focus on non – aeronautical revenues. Gone are the days when only when
the elite class used to fly. Air travel has become much more accessible and due to the
advent of the LCCs, a niche segment called the leisure class of passengers has
emerged, who are focussing their attention on the commercial activities at these
airports.
III. Increasing competition between hub airports is another major contributing factor. While
passengers who fly from point – to – point might fly from airports which offer better
convenience of flights for them, the transfer passengers’ decisions can be altered by
airports which can offer a variety of commercial services.
IV. Stricter environmental regulations have meant that most airports have restrictions on
night flights (after 2300) until 0600, resulting in the airport having to be shut technically
during this period of time. This has led many an airport manager to rethink on the
aspect of shifting focus from generating slot revenues towards non – aeronautical
revenues to compensate for the loss of revenue due to the new restrictions.
(Parappallil 2007)

26
3.4 PROCESS ANALYSIS
3.4.1 INTRODUCTION
In this section, a detailed analysis on the various processes involved on the landside and the
airside of the airport are explored:
This starts from the very point of initiating the idea of travel to the actual check in process for
departure, finally culminating in being seated inside the aircraft and getting ready for the flight.
Similarly, certain number of processes are involved during the arrivals as well – starting from
disembarking the aircraft to baggage retrieval, passing the customs inside the terminal,
eventually leading to exiting the airport for the onward journey/ activity. All these can be handled
in a variety of ways.
3.4.2 DEPARTURE
The departure processes can be explained through the graphic below. Note that the colour blue
is representative of all the processes which are mandatory inside the airport, right from checking
in to boarding the aircraft.
Although, not all the processes mentioned above are mandatory. For example: Border Control
is an issue which does not come into the picture if the passenger is travelling inside the country
or even in the European Union, for that matter. Similarly, passengers may choose to travel with
or without baggage to be dropped off.
Figure 3.7 – Typical Departure process [Source: (DLR EU 2008)]
A better understanding of the above processes has been initiated through the report of the
(IATA 1989) which goes into the depths of the passenger process analysis during the departure.
To go through the process steps the passenger and staff have to do the following:
 Registration, seat allocation and confirmation passenger details (e.g. passenger with
reduced mobility, special meals, unaccompanied minor, etc.)
 Passenger ID verification
 Travel document verification (including payment verification)
 Baggage suitability (size, weight/pieces, security questions)
 Baggage labelling and drop-off
 Boarding Pass Control

27
 Required security search processes include the use of metal detectors and X Ray
systems
 Existing security processes are sometimes augmented by explosive trace detection
systems (ETDS) as well as random hand search
 Border Control
 Passenger boarding (registration passenger on board)
The sequence of events is explained by the following graphic.
3.4.3 ARRIVAL
The arrival process is less complicated than the departure process and can be explained by the
following graphic:
Figure 3.8 – Typical Arrival process [Source:(DLR EU 2008)]
As explained in the departure process, not all steps are necessary here too. For example,
passengers travelling inside a country or even the European country need not go through the
border and/ or customs control. Same is the case with passengers travelling only with cabin
baggage, as they do not have to go through the step of Baggage claim.
For the correct implementation of these steps, the airport authority or the government has to
provide the airport with the following:
 Border Control by the government authority
 Checking passport
 Checking travel document (Visa, Immigration documents, etc.)
 Collect baggage from baggage claim, bulk luggage return
 Customs control by the government authority
 Further transportation

28
Figure 3.9 – Arrival process analysis [Source: (DLR EU 2008)]
3.4.4 TRANSFER
For purposes of transfer, the most important factor to consider is the origin and the destination
of the passenger. For example inside Europe, countries who have signed the Schengen
Agreement permits free and hassle free transfer of passengers within the member nations
without the need to go through border and/or customs control. Whereas, passengers from a
country like Great Britain, for example are treated as Internationals as they have not signed the
Schengen Agreement. The process analysis for a transfer passenger can be depicted as
follows:
Figure 3.10 – Transfer Passenger handling process [Source: (DLR EU 2008)]

29
3.4.5 BAGGAGE HANDLING
The whole baggage processes involves three main tasks:
 Move bags from the check-in area to the departure gate
 Move bags from one gate to another during transfers
 Move bags from the arrival gate to the baggage-claim area
It can be explained by the following process diagram:
Figure 3.11 – Baggage handling process [Source: (DLR EU 2008)]
3.4.6 TURNAROUND PROCESS
In order to assess the possibility of operating low cost and legacy carriers out of the same main
airport terminal, an analysis of the airport turnaround process needs to be done. The National
Aeronautics Laboratory NLR, which has done extensive work on modelling the turn-around
process, defines it as an encompassment of all ground handling activities that has to be
performed at an aircraft when parked at a stand. These activities have to be performed between
in – block, when the aircraft arrives at the stand, and off block, when the aircraft leaves the
stand. Ground Handling services include baggage and cargo (un)loading, passenger and crew
(de)boarding, cleaning, catering, fuelling and other associated activities.
Basically, the turnaround process has been divided into three sub processes namely:
 Passenger Processes
 Baggage Processes
 Airline Processes
A high level of planning has to be ensured in order to make sure that these processes do not
clash with each other, thus leading to loss of time. Certain processes of ground handling are
such that they cannot happen at the same time. So, one process has to be over to ensure the
smooth continuation of the subsequent one. For example: it is well known that baggage

30
(un)loading and fuelling cannot take place at the same time because the area of concentration
is close to each other and thus, there is a good chance that a loss of time can be experienced
during this situation.
The processes involved in a typical turnaround are as explained as below:
I. Docking: Docking is the arrival at the exact location for arranging the handling
processes. As pilots are not able to see the location of their wheels, a flagger is
necessary to signal the crew how to move and where exactly to stop. At many airports,
the flagger is replaced by an automated docking system where on the wall in front of the
aircraft, electronic signals indicate the pilot what to do.
II. De-boarding: De-boarding starts with bringing an aerobridge or stairs to the aircraft. In
case passengers and crew de-board via stairs, additional airport personnel are
necessary to guide them to the building. This can be a brief walk over the airport’s
surface or through a bus connection. The crew gets a special treatment as they will
leave after the passengers and need more time for final checks.
III. Baggage and cargo unloading: Baggage unloading can typically start immediately
after the aircraft has come to a stop. A dedicated company will take out the baggage
and bring this to the terminal building. Cargo, if not too voluminous, is unloaded at the
aircraft’s stand. More commonly, cargo from combined – aircraft is unloaded at the
airport’s cargo area, in which case the aircraft will be towed to that position with a tow
vehicle.
IV. Security: Aircraft with passengers from certain countries need a security check when
they arrive at the airport.
V. Cleaning: Cleaning concerns the interior of the aircraft, which is prepared for the
following flight.
VI. Fuelling: Fuelling is performed with pump vehicles which take the kerosene from
hydrant wells, which are located at the gates. Alternatively, tank vehicles bring the fuel
to the aircraft.
VII. Catering: Catering delivers the necessary food to the aircraft. Depending on the
destination of the flight, certain types of food are not allowed. Some airlines allow
passengers to indicate special wishes (like vegetarian meals) beforehand. Several
airlines, do not serve food to every passenger; instead they provide food and drinks at a
cost. In this case, fewer catering items will be required.
VIII. Baggage and cargo loading: Like cargo unloading, if necessary, cargo loading is
performed at the cargo area. Specific rules exist concerning livestock and cooling.

31
Those are not allowed to wait at the cargo area too long. Baggage loading is handled at
the stand.
IX. Passenger boarding: Passengers can board the way they de – board, either through
an aerobridge, through a short walk on the surface or through a bus connection.
X. Security: All passengers and their luggage have to pass a security check. If this is
performed at the gate, the process is included in the handling process. At some airports,
the security check is performed at a central area. In this case, the security check is not
included in the handling process.
XI. Aircraft check: The crew is responsible for the flight and will check the aircraft
thoroughly before each flight. Aircraft checks concern inspections on the outside of the
aircraft and proper functioning of the aircraft machinery and equipment (cockpit checks).
XII. Push – back: When all the boarding processes have been completed, the aircraft can
depart. Aircraft at gates need to be pushed – back using dedicated push – back
vehicles. Aircrafts at stands mostly require push – backs as well, depending on the
configuration of the stand. At some stands, aircraft can directly start up their engines
and start taxiing.
(Leeuwen 2007)
The section above depicted the typical turn around process that an aircraft goes through once it
reaches the stand to the moment it takes off for its next flight. For the purpose of this study, we
try to explore into more detail of the turnaround process. It is felt that the turnaround process is
one of the most processes to be explored due to the fact that ground handling is recognised as
one of the important sources of delay in the air transport system. And especially at a time when,
the current study explores the possibility to operate low cost and legacy carriers out of the same
main airport terminal, it is believed that the turnaround times become a major factor to be taken
into consideration.
The following table shows the specific turnaround processes usually involved in a low cost and
legacy carrier:

32
Table 3-5 – Turnaround processes for low cost and legacy carriers
Turnaround Process /
Airline Class
Legacy Carriers Low Cost Carriers
Docking Mixed fleets – so different
positions to stop the aircraft,
conveyed to the pilot by the
aid of a flagger or an
electronic signal on the
adjoining wall.
Single fleet – so same
position to stop the aircraft,
conveyed to the pilot by the
aid of a flagger or an
electronic signal on the
adjoining wall.
De-boarding Mostly through aerobridges –
so only through one door. If
through stairs – one or two
doors depending on the case.
Don’t use aerobridges even if
available, because they
increase time and cost. Use
stairs – usually one door
utilized, sometimes two.
Baggage and cargo
unloading
Medium to long haul flights –
considerable amount of
baggage stored in the
underbelly. Time taken to
unload is more.
Short hauls – stricter baggage
limits. Considerable amount
stored in the cabin. Therefore,
time taken to unload is less.
Security Same for low cost and legacy
carriers since its dependent
on the specific airport policies
and regulations.
Same for low cost and legacy
and regulations.
Cleaning Elaborate cleaning required
after each flight due to the
medium/ long haul nature of
flights and in – flight catering.
Elaborate cleaning not
required after each flight due
to the short haul nature of
flights and no in – flight
catering.
Fuelling Usually performed after each
flight because of the medium/
long haul nature. Takes 15 –
20 minutes.
Tankering technique adopted
- 1st flight in the morning is
filled upto full capacity and
can be used for multiple
number of flights due to the
short haul nature. Reduces

33
turnaround time.
Catering Presence of in – flight
catering, so requires loading
and unloading with each
flight.
No free in – flight catering, so
requires lesser time to load
and unload food due to the
lower demand.
Baggage and cargo loading Medium to long haul flights –
considerable amount of
baggage stored in the
underbelly. Time taken to load
is more.
Short hauls – stricter baggage
limits. Considerable amount
stored in the cabin. Therefore,
time taken to load is less.
Passenger boarding Mostly through aerobridges –
so only through one door. If
through stairs – one or two
doors depending on the case.
Don’t use aerobridges even if
available, because they
increase time and cost. Use
stairs – usually one door
utilized, sometimes two
Security Same for low cost and legacy
and regulations.
Same for low cost and legacy
and regulations.
Aircraft check Aircraft checks are conducted
for every carrier, irrespective
of whether it is a low cost or a
legacy carrier
Aircraft checks are conducted
for every carrier, irrespective
of whether it is a low cost or a
legacy carrier
Push – back When all the boarding
processes are completed, the
aircraft is ready to depart. The
push – back process is
initiated, irrespective of
whether it is a low cost or a
legacy carrier.
When all the boarding
processes are completed, the
aircraft is ready to depart. The
push – back process is
initiated, irrespective of
whether it is a low cost or a
legacy carrier.
On closer examination of the turnaround process, as has been done above it is seen that there
are several factors which differentiate the turnaround times achieved by the low cost as well as
the legacy carriers. This plays a key role in ensuring the lesser turnaround times for low cost
airlines in comparison with the turnaround times observed for the legacy carriers. The European
Commission project on the Aeronautic Study for seamless transport (DLR EU 2008) has been a

34
pioneer in process analysis studies and they have researched on the turnaround times
commonly observed for both long/ medium and short haul aircrafts. Their observations of the
turnaround timelines and critical paths are depicted in the following graphic:
Figure 3.12 – Typical turnaround times observed in a B 777 [Source: (DLR EU 2008)]
The graphic above shows the turnaround times observed for a medium/long haul aircraft, the
Boeing 777 – 300 ER. This is in line with the common turnaround times observed for legacy
carriers, which is around 60-75 minutes. As can be seen, this is in contrast to that of a low cost
airline which manages to do turnarounds in 20-30 minutes, even in the busiest of times. The
turnaround timeline and the critical path usually adopted are as depicted below. The graphic
below displays the turnaround time observed for a common short haul aircraft, the Boeing 737 –
900. One important thing to notice however is the inclusion of fuelling in the turnaround timeline.
It is usual for low cost airlines which are short haul to adopt the tinkering technique which will
reduce the need to refuel after every flight. Thus, the typical turnaround times observed are in
the range of 25-30 minutes, as can be elucidated from the graphic below.
Figure 3.13 – Typical turnaround times observed in a B 737 [Source:(DLR EU 2008)]
Thus, some of the main reasons of the low cost airlines achieving the said shorter turnaround
times are identified and are as given below:
 Single fleet, so personnel on the job are very well trained.
 No in-flight catering, which reduces the time to load and unload food.

35
 Minimal or no cargo loading/ unloading
 No refuelling done after every flight
 Boarding and de - boarding through both doors or alternating processes through each
doors.
 Close proximity of gates to the aircraft
 High employee morale to produce efficient results

36
4. IMPORTANCE PERFORMANCE ANALYSIS
4.1 INTRODUCTION
The Importance Performance Analysis (IPA) is a well-documented business research technique
developed by (Martilla & James 1977). It is a method to evaluate the attributes of a product or
service based on measures of importance and performance from the perceptual viewpoint of
the customers. (Chiang 2008)
According to (Bacon 2003)
The importance and performance measures give the management a richer
understanding of customer reactions to a product or service. From the IPA, the
management will not only know which attributes require immediate attention, but also
why they require immediate attention
Importance and Performance differences not only have consequences for the management as
they predict purchase behaviour, but also have a direct impact on repurchase intentions as they
aim to provide an asymmetric impact of negative and positive attribute level performance on
overall satisfaction as well.(Mittal et al. 1998) In today’s highly competitive world, high quality
and customer satisfaction are achieved only when the firm’s performance exceeds what the
customers expect from them.(Oliver 1997) The IPA is valuable in helping the service providers
to assess the quality of their efforts in satisfying the needs of the customers. (Chiang 2008)
Thus, there is always room for improvement in every sphere regardless of the conclusions that
the IPA analysis gives.
The IPA follows a systematic five-step approach as follows: (1) Identification of product/service
attributes; (2) Development of the data collection instrument; (3) Data collection; (4) Tabulation
of the Results; and (5) Interpretation of results. (Chiang 2008)
The list of attributes was first generated by a thorough review of existing literature and past
researches relevant to the particular industry being studied. A questionnaire survey with a
selection of users of this service, (in this case, the passengers flying in airlines with special
reference to low cost airlines) were then conducted in order to arrive at a more accurate list of
service factors, which played an important role in defining the quality inside an airport terminal.
According to (Chiang 2008),
The importance and performance of the attributes can be interpreted by examining which
quadrants each of these attributes fall into on the grid. The analyses regardless of the
positioning of the gridlines are similar.
 Quadrant A: Attributes that fall into this quadrant are deemed important to the
customers. However, the service provider falls short of customers’ expectations
with regards to the provision of these product or service attributes. Negative
performance on an attribute has a greater impact than a positive performance on

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