Introduction
Airport Vodochody is an international private airport in the Czech Republic. The airlines’ current major customers are private jets and air schools. A joint stock company Letiste Vodochody, established in 2007, operates the airport and the only shareholder in the airport is AERO Vodochody, which is the largest aircraft manufacturer in the Czech Republic with over 90 years-long history. Until the end of 2006, AERO Vodochody was a state-owned enterprise.
However, the beginning of 2007 witnessed a change of ownership when a private equity group Penta became a sole shareholder of AERO Vodochody. In 2009, the airport had 9 thousand aircraft movements, which was a 100% increase to the year 2008 (Vodochody Airport).
The airports development plan, first publicly communicated in the summer of 2007, is to enlarge the infrastructure of the existing airport so that it becomes a modern public civil international airport, second of its kind in the Prague’s metropolitan region only after Prague Airport, which is the major hub in the region.
The airport wants to reach low-cost airlines, charters and private jets. In 2008, Letiste Vodochody had received all necessary licenses to operate the Vodochody Airport, e.g. from the Czech Air Navigation Services, custom authorities etc.
In 2009, the company updated the documentation of the project following the commemorations received from the ministry of environment and this was approved in the first half of 2010.
After the Environmental Impact Assessment (EIA) was approved, Airport Vodochody applied for cadastral change and construction permission, which is yet to be approved. Operations for low-cost carries should be launched at the end of next year by the earliest, more pragmatically in 2013 (Vodochody Airport).
Key facts about the project of expansion of the Vodochody Airport are summarized in the table below
Table 1.1 Project Facts Source: Vodochody Airport
After construction adjustments to the current runway system, the airport will have the capacity to accommodate up to 15 medium-haul aircrafts with wingspan of 36 meters. A new modern terminal with capacity of up to 3.5 million passengers per year should be erected in the place where the administrative buildings of Aero Vodochody currently stand.
The concept of the terminal is expected to correspond with the needs of low-cost and charter airlines. Once completed, the terminal will have two floors with the first floor being the departure hall while the second floor will be the arrival hall with a restaurant and security facilities, shopping mall and entrance into the two departure areas, one assigned for Schengen area travelers and the other for passengers destined for other regions outside Schengen.
There will be both classical check-in facilities as well as self-service check-in counters. After the airports expansion and once operating as a public international airport, the airport charges are expected to be half of what the Prague Airport’s charges are (Prague Airport).
Currently, the airport is negotiating with low-cost airlines with the most up to date information showing that Wizz Air, easyJet, Ryanair, Air Berlin and flyNiki will be flying to the Airport on regular basis. At the moment, the airport operates non-stop but for the future it is planned that the operating hours will be fixed and there will be no traffic between 10 pm and 6 am, which is a compromise as a rejoinder to the opposition of the areas in the airports proximity (Vodochody Airport).
Challenges
Apart from the official documentation that yet has to be approved, the biggest challenge the airport is facing is the disapproval that the project has elicited from neighboring villages. There has been a lot of negative response and rather a firm opposition towards the airport’s expansion project from neighboring villages, who have created an initiative dubbed Stop the Vodochody Airport to fight against the development project of the airport.
The neighboring communities fear especially increased noise exposure and emissions due to increased traffic both on air and on the roads leading to the airport. Additionally, the residents are worried that in case of aircraft crash, there would be an ecological catastrophe because of a refinery, which is located nearby (in Kralupy nad Vltavou). However, aircrafts fly over the refinery also when landing/taking-off at the Prague Airport, only 300 meters higher (Prague Airport).
In the middle of last year, a local referendum was held in the villages, in which the majority of the affected areas who participated in the referendum were against the project. Results are known for seven neighboring villages, where approximately 59% of the inhabitants participated in the referendum and 90% were against the expansion of the airport.
On the other hand, countrywide research from March 2010 regarding the Vodochody Airport has showed that 72% of citizens of Prague and other cities in the central Bohenia support the planned development of the airport as proposed by the investor (Vodochody Airport). However, these citizens will not be affected by the negative side effects of the airport operations. The citizens of Prague have also showed increased interest in development of air transport in the Czech Republic, thus are likely to become the airports’ customers.
However, when looking at the responses of the citizens of the villages neighboring to the airport, the agency’s research showed that the majority is against, but it was less (two thirds of the population) than what the referendums have revealed. On the other hand, the research has revealed that the inhabitants of the neighboring villages have lower factual knowledge of the airport’s development project as compared to the citizens of Prague and the Central Bohenia Region (Forsyth & Gillen 100).
So far, Airport Vodochody has agreed to reduce the noise exposure by adjusting the take-off/landing trajectories and there will be no night traffic. Furthermore, the investor expects that there will be numerous benefits that the airport will bring.
Overall, it is estimated that the airport will create 3000 new permanent jobs in the region, both direct and indirect, new traveling option for the Czech citizens, new destinations, lower price for air tickets, higher level of air transport services and further development of the capital city and its region. Furthermore, the infrastructure of the road transport has also been considered in the development plan, which will help the current situation. However, there are still a lot of negotiations ahead (Forsyth & Gillen 101).
SW (Strength and Weakness) Analysis
The analysis of strengths and weaknesses of the Vodochody Airport will allow answering the question, what is the airports strategic position of the Airport at the Czech market.
Strengths
The main strength of the Vodochody Airport is its location and the low-cost concept. From global experience, it shows that secondary low-cost airports increasingly emerge in metropolitan areas, following the emergence of Low Cost Carriers (LCCs) because the legacy airports do not meet the demands of LCCs and are too expensive for them.
The Prague Airport belongs to the most expensive in Europe, for example, the LCC Wizz Air is not capable of generating profit on routes to and from Prague due to the high airport charges (Forsyth & Gillen 102).
As indicated earlier in this paper, airport charges are a significant cost factor for LCCs, thus with the airport charges being half of what the Prague Airport’s charges are, Vodochody Airport has a clear advantage in attracting LCCs. Airport Vodochody will potentially also be able to offer better slot times. Hence, Vodochody Airport will offer facilities that the LCCs are seeking and which are not available in the Prague metropolitan area at the moment. Vodochody Airport is the answer to a global trend as well as to the regional demand.
Furthermore, the strength of the project of the Vodochody Airport is its timing. Prague Airport is reaching its capacity limits and is attempting to expand. The demand for air transport is growing and the LCCs do not have an equivalent to what Vodochody Airport will be at the moment. However, to retain this advantage, the Vodochody Airport needs to act fast (Gillen & Lall 41).
Weaknesses
The project of expansion of the Vodochody Airport was first introduced in the summer of 2007, a few months after the current investor took over the airport. The original plan was to start operations of the public international Vodochody Airport earlier than it is proposed now (2013).
Basically, the project is still on paper, even though negotiations with low-cost airlines, the future airport’s customers, are in full speed. The process is lengthy as it includes negotiations with several government institutions, approvals of the project documentation etc. Furthermore, the airport’s management has not been able to reach agreement with the representatives of the neighboring villages whose fight against the airport has rather been fierce and is widely promoted by the media.
The negative environmental side effects need to be balanced out by positive side effect. Even though the investor states what the benefits for the region will be, the neighboring villages do not support the airports development. Communication and relations with the neighboring villages need to be improved (Gillen & Lall 42).
Actor Characteristics
Considering the challenges and weaknesses discussed earlier, Vodochody Airport will have to take some actions in order to remain relevant in a fast changing global environment. In the Czech context, the Vodochody Airport wants to become a secondary airport in the Prague metropolitan area (strategy) and plans to accommodate 3.5 million passengers, which corresponds with the size of a small regional airport. Traditionally, a small airport is known to be at a worse negotiation position.
On the other hand, the Vodochody Airport’s strength is the powerful catchments area, which is sought after by the low-cost airlines but their needs are not accommodated at the hub airport (Prague Airport) at the moment. However, Vodochody Airport should not only rely on this fact since LCCs are known to be hard negotiators and the LCCs in question (Rynair, easyJet, Wizz Air) are large powerful companies.
Additionally, the nature of LCCs indicates that these airlines are flexible in switching destination airports, which has a direct impact on the level of interdependence between the airport and the airline. For these reasons, the investor should do everything to make Vodochody Airport a sought after, busy airport since its only then that the bargaining power of the company will increase (Gillen & Lall 43).
Atmosphere
Contrary to the proposal of Graham (100) to only use airport charges as an incentive mechanism in an airport (airline relationship characterized by a high level of interdependence), it is likely that the Vodochody Airport will use introductory incentives (similarly to other Czech Airports) to attract the airlines in the first place, before any interdependence comes to existence. There will also be no relationship history with the airlines.
The level of commitment and trust between the Vodochody Airport and the airline will depend on the long-term contracts between the parties. Even though the long-term contracts decrease the level of uncertainty, the environment uncertainty as indicated above hinders the willingness to engage into long-term relationships in the first place. Furthermore, the already mentioned nature of the LCCs is not exactly supportive of long-term contracts.
As the model indicates, the level of commitment is boosted also by joint actions. At this moment, it is not yet known if Vodochody Airport is planning to engage into joint actions with any of the LCCs and this is something that the airport will have to do in order to gain a competitive edge in the region (Graham 101).
Interaction Process
The level of interaction between the Vodochody Airport and the airlines will depend on the joint actions (cooperation) between the airport and the airlines. As already stated, no such planned cooperation is known at the moment. If the Vodochody Airport should plan any kind of joint action with the airline(s), the degree of interaction, institutionalization and communication would increase.
With joint actions, there would be a need for comprehensive mechanisms and it is likely that the project teams with members from both actors (the Vodochody Airport as well as the airline) would be established. This would increase the commitment and trust between the airport and the airline (Graham 103).
Strategic Outcome
As the airport-airline relationship model suggests, there can be profits resulting from the interdependence between the two parties. The strategic outcome from the relationship between the Vodochody Airport and the airline will be defined by the dependencies and interactions as described above.
While trying to achieve this, Vodochody airport must be prepared to employ more staff to deal with the expected air traffic flow and this will definitely plough into the company’s revenue. Additionally, the airport must be prepared to go through the process of change, which is described by experts as the hardest thing for a business to do (Barrett 33).
Conclusion
Having analyzed the current regional trends and the situation at the Czech air transport market, it can be concluded that the Vodochody Airport is an answer to a global trend as well as to the regional demand. From global experience, it shows that secondary low-cost airports increasingly emerge in metropolitan areas following the emergence of LCCs because the legacy airports do not meet the demands of LCCs and are too expensive for them.
The Prague Airport belongs to the most expensive in Europe. On the other hand, Vodochody Airport offers facilities that the LCCs are seeking and which are not available in the Prague metropolitan area at the moment. Moreover, there are valid expectations that the demand for air transport will increase in the future as well as it is expected that the LCCs share at the Czech market will grow and so reflect the development
The strengths and weaknesses (SW) analysis has allowed identification of the main strengths and weaknesses of the Vodochody Airport. The main strength is the airport’s low cost concept and location in the metropolitan area by which it responds to a market niche at the Czech market as well as mirrors a global trend of emergence of secondary airports in metropolitan areas.
Furthermore, the major hub in the Prague metropolitan area is reaching its capacity, while the perspective is that the demand for air transport will increase in the Czech Republic, hence the timing of launching Vodochody is an advantage too. Since the Vodochody Airport will be targeting LCCs, it is likely to benefit from these proposed trends.
Vodochody airport could attract new/more passengers by more affordable airfares offered by the carriers operating at the airport. The main weakness of the project is closely connected to the external threats. Currently, the airport is facing fierce opposition from the neighboring villages that will be directly affected by the airport’s operations and the project of the airport’s development is still undergoing the approval process. Hence, there is a threat that the project might be delayed.
Works Cited
Barrett, Sean. How do the Demands for Airport Services Differ between Full-Service Carriers and Low-cost Carriers? Journal of Air Transport Management 10.2 (2004): 33-39. Print.
Forsyth, Peter & Gillen, David. Airport Competition: The European Experience. Ashgate Publishing Ltd, 2010. 100-112. Print.
Gillen, David, & Lall, Albert. Competitive Advantage of Low-cost Carriers: Some Implications for Airports. Journal of Air Transport Management 10.1 (2004): 41-50. Print.
Graham, Anne. Managing Airports: An International Perspective. Burlington: Butterwoth-Heinemann, 2008. 100-105. Print.
Prague Airport. Company Profile 2008. Web.
Vodochody Airport. Company Profile 2011. Web.