THE AIRPORT – TENANT RELATIONSHIP. Management Research Paper

The Airport-Tenant Relationship
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The Airport-Tenant Relationship
The exponential rise in human civilization has asserted its influence in the aviation industry thereby determining how several facets within this space are operated. To this end lies a myriad of changes that have been witnessed across various functions. For instance, there is a growing prominence in the relationships that exist between cargo tenants and airport operations including contractual ones. Onwards, there are a couple of stakeholders in the air cargo business whose contribution to the cause can never be disregarded. Airport management is tasked with the running of associated operations and in the course, they have to adhere to the tremendous public responsibility they hold and transcends tenants’ profit motives. Both parties may have a difference of opinion, but this does not eliminate the possibility of them collaborating to guarantee overall economic growth. This procedure is bent on the articulation of contracts that appeal to both sides of the divide. Besides contractual issues, the chapter continues to address important items such as airport fee structure as well as safety, oversight, and control at these organizations. The factors addressed in this chapter coupled with the author’s review from various experts and scholars in the field offer airport operators significant insight and much-needed confidence in ensuring that they attain optimal efficiency in their operations.
Air Cargo Stakeholders
The aviation industry and more so the air cargo is quite an expansive field implying that it has a couple of stakeholders with vested interests. Airports as stakeholders have major commercial interests (Lohmann & Vianna, 2016). Beyond the financial aspect, they own the public land and thus, ought to be the public guardian. In this regard, they should elicit optimal use of the resources and in the process guaranteeing sustainable environmental operations. Airlines are the actual service providers who are directly involved in the movement of cargo from one location to another. In this regard, their concerns will range from a route’s profitability to the aircraft’s carrying capacity. It is in the airport’s best interests to address an airline’s specific requirements for them to attract and maintain cargo operations. On the other hand, there are facilitators to the successful importation and exportation of commodities. Freight forwarders serve exporters. They will book space on airlines, prepare shipping documents, share related information and documents, and arrange insurance, customs brokerage as well as inland transportation (Lim, 2018). Customs brokers are keen on ensuring that importers’ needs are met in entirety.
Another category of stakeholders is shippers. This category is composed of manufacturers and distributors of commodities. Producers and suppliers are highly mindful of the logistics involved in the quest to observe the best lead-time possible as well as money-saving procedures such as crowd shopping (Szmelter-Jarosz & Rześny-Cieplińska, 2020). In this case, they will strive to have their facilities in appropriate locations and more so, near airports. Ground service providers (GSP) enable the movement of cargo by loading and off-loading between the aircraft and warehouse. Trucking present the final stakeholder in this operation as they serve and airlines.
Who Should Build? The Selection Process
This aspect presents another conundrum when airport management has to articulate on whom to plan, develop, construct as well as market air cargo facilities. It can be an in-house job only when airport management has adequate funds to accomplish the process as well as highly-skilled experts acquainted with the tasks thereof. This option tags with significant risk, but with more significant revenues and even better, heightened control over airside operations (Odling & Tafvander, 2017). Eventually, end-users could even receive better deals such as reduced rents from airports.
On the other hand, airport management has the option of outsourcing these services from a developer or the end user who could be GSP or an airline. Outsourcing is highly recommended when the parent organization lacks the necessary expertise to complete the task. In this case, the organization outsourcing poses major threats such as lack of customer focus, many hidden costs, and risk in sharing of game-changing elements such as technology with rivals (Somjai, 2017). Therefore, each side has its merits and demerits. It is upon the management to identify their strengths and weaknesses and thus, orchestrate the best path for them.
When contracting a third-party developer, airport management ought to establish a selection process that is clear, coordinated, and transparent. In this case, the governing authority bears the responsibility of identifying a qualified selection committee that will provide evaluation metrics, which guide the selection of the developer. Usually, although not at every chance, the governing authority will perform a Request for Proposal, which is meant to be an open competition among developers where the best lessee is selected.
Types of Agreements and Contracts
The current economic environment has strained airport operators’ resources compelling them to direct their investments towards more aircraft than real estate. Consequently, they have to hire third parties and carriers for related developments. There are a couple of elements that have been responsible for this change. Most of these factors are predicated upon the prevailing economic conditions.
First, fluctuations in fuel prices coupled with an overall economic slowdown have had a significant contribution to this cause. The two have complemented each other in the operating losses that many airlines have experienced in this industry coercing them to reconsider their fleet mix, route structure, and frequencies. The quest to maximize their revenues has seen them reduce cargo capacity and maximize passenger load. A keen observer will relate to the decreasing belly capacity in many carriers. Besides, security concerns are minimizing have capitulated bell capacities. These developments are orchestrating a shift to all-cargo freighters.
On the other hand, most airports lack the infrastructure to accommodate the all-cargo freighters. Lack of capital for necessary expansion is a problem taking into account the preceding operating losses. The wide-spread use of wide-body aircraft resulting in major abandonment of freighter acquisition strategies is posing other worthwhile dimensions to this saga. In response, airport management has to consider several factors before making a significant infrastructural investment.
Secondly, there is limited Airport Improvement Program (AIP) grant money, which is inadequate. Reduced federal funding invites the need for private developers. Finally, actions to stimulate the cargo activities, as well as increase airport revenues, are ineligible for federal grants meaning that the case for private partnership makes more sense. Nevertheless, the partnership should be based upon established rules and regulations that recognize the obligations and objectives of each party involved.
Bankruptcy Provisions and other Termination Scenarios
The aviation industry has witnessed a high number of airline bankruptcies arising because of airline deregulation, which is apparent in the astronomical number of mergers that have occurred even over the turn of the 21st Century. These occurrences provided unrivaled insight to airport operators on how to navigate these situations. In these circumstances, they are confident of sailing past them ensuring that their operations continue as usual through the implementation of provisions that guarantee this possibility. For instance, airlines acquiring bankrupt ones should at...