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Al Maktoum International Airport in UAE and Incheon International Airport in Korea

Strategic management plays an important role in the maintenance of the business environment. It is difficult to ignore that a company needs particular objectives and guiding rules, which are indispensable for business promotion. Besides, the problem of corporate governance, organization and performance are regarded to be the central issues for achieving long-term success. It is worth admitting that the prosperity of such a commercially-oriented business as an airport industry heavily depends upon efficient management. It is essential to place an emphasis on the performance of an airport business, which gives an understanding of the situation of a company in the market. Thus, in the current paper, it is necessary to provide an insight into the experience of Al Maktoum International Airport in UAE and Incheon International Airport in Korea and to give a critical comparison in order to elaborate a proper management solution.

Description: Background/History

It is an undeniable fact that Al Maktoum and Incheon International Airports are planned to be one of the largest airports in the world in terms of passengers and cargo traffic. In fact, both airports claim to be the most pretentious in the world. Moreover, the airports function as the branches of the government and contribute significantly to the national economy. However, it should be noted that primarily the airports differ substantially in their missions and visions. While the Incheon Airport is focused upon exploring innovative air transport facilities and oriented predominately on the national economy, Al Maktoum Airport strives for international superiority to gain a good reputation of Dubai in the world (Incheon Airport 2014). As for the vision, Korean airport is aimed at obtaining leading positions in the airport industry, whereas Al Maktoum emphasizes the importance of technological breakthroughs for creating the next generation airport (Dubai Airports 2014).

Regarding that Al Maktoum Airport’s construction has not been completed and, currently, only some airlines are activated, the social context has not been formed yet. However, the concrete values have become fundamental for planning future thriving performance. Namely, the employees, business partners, and stakeholders leverage their professional skills to enhance the prosperity of the airport by means of creating a dynamic environment (Sadler 2003). What is more, the airport’s employees endeavor to make a significant change in the rendering services to the passengers. Needless to say, that the implementation of the mentioned above program is possible due to the cross-functional work of the employees towards the airport’s leadership (Dubai Airports 2014).

It is worth noting that, initially, Incheon International Airport faced numerous problems, but due to employees’ commitment and consistent deliverance, technical issues were eventually resolved. For instance, at the outset, it became increasingly apparent that little was done to fix the problem with the baggage-handling. Later on, the airport’s staff reduced the mishandling baggage rate to 0, 0001%. Such drastic change resulted in the competitive advantage of the airport, which made the company one of the leading in the airport industry. Moreover, the superior service includes the hospital constructed near the airport to serve the local residents (Incheon Airport 2014).

Main Body of Argument/Key Points

First of all, it is important to linger upon the business environment to gain a clear understanding of external and internal factors that affect airport business. To be more precise, such an external issue as a political factor influences airport business to a great extent. For example, Al Maktoum International Airport remains under the government’s ownership, though with greater freedom, which allows performing commercial activities as an independent enterprise. In fact, the airport is aimed at reducing the need for the government’s financial assistance by means of generating substantial profits. On the contrary, the Incheon International Airport maintains a strong link with the government and makes a positive change in the national economy. On the whole, the airport increases its capacity due to the government’s investments (Wells & Young 2004).

Furthermore, it is necessary to consider the technological factors in the airport companies, as it is one of the major issues, which should be taken into account in the airport business. As was mentioned earlier, Al Maktoum Airport benefits from cutting-edge technologies, as they recoup the costs and increase the profit margins of the company. The vision explicitly emphasizes the necessity of change, so that the customers pay more in order to experience the innovative technologies. It is obvious that iris and palm scans and RFID boarding cards will simplify the registration procedure, increase the security rate and reduce clients’ time spent in the lines (Dubai Airports 2014). Incheon Airport is also oriented on the contribution to air transport. However, the company does not own such state-of-the-art technologies as in Al Maktoum Airport. Regarding that, the airport operates successfully due to efficient team-work.

With respect to corporate governance, both airports constantly develop strategic plans for operations. However, the systems and procedures are fundamentally different. It is worth admitting that Incheon Airport recognizes the importance of its internal stakeholders and, consequently, motivates them. Hence, efficient motivation results in such a competitive advantage as the fastest custom processing. Moreover, the company adopts social corporate responsibility, which aims at reducing the negative impact upon the environment (Incheon Airport 2014). As for Al Maktoum Airport, the main goal is to keep the business in accordance with ethical matters. In essence, the authority encourages the external and internal stakeholders to provide business practices with regard to the company’s values (Calder 2008).

It needs to be mentioned that notable differences can be found between the business strategies of the airport companies. Initially, such a new company as Al Maktoum Airport faces numerous challenges, which is why its strategies cannot be used for more established Incheon International Airport. Thus, Al Maktoum Airport practices a price-skimming strategy to cover the costs spent on construction (Dubai Airports 2014). Nevertheless, it is a well-grounded strategy, as the airport is located in Dubai, where prosperous customers will pay excessive prices to acquire the best service. With regard to Incheon Airport, the main strategy is considered to be product differentiation (Incheon Airport 2014). Indeed, the airport has an advantage, which makes it stand apart from the key competitors. To be more concrete, it has such superior facilities as a golf course, spa saloon, best duty-free shopping mall, gardens, casinos and Korean Culture Museum (Federal Aviation Administration 2012).

It is important to outline the organization of the airports, as it is an essential aspect for the companies to function correctly. Hence, Incheon Airport has a complicated structure of the organization, which ensures the accomplishment of major objectives. The experts within different fields are grouped in accordance with their responsibilities. In such a way, Executive Vice President and Administration Division, ICT Strategy Division, Marketing Division, Airport Operations Division, Construction Division, Facilities and Security Division are assigned to perform particular tasks that are coordinated with each other (Incheon Airport 2014). As for Al Maktoum Airport, the organization predominately includes similar departments. However, special attention should be given to the great number of groups, which are also aimed at achieving the goals of the company (Dubai Airports 2014).

In terms of airports’ performance, it is necessary to compare actual results with the intended objectives. It is hard to deny the fact that Incheon Airport’s profit record is lower in comparison with one in the previous year. However, the revenue continues to increase, which is why one may conclude that the company started spending more money on innovative technologies. As regards the customer service, it is critical to note that Incheon Airport is considered to be the fastest airport for custom processing, as the average arrival time is nineteen minutes and only twelve minutes are required for the departure process (Incheon Airport 2014). The following advantage resulted in an increased number of passengers, namely, from forty to forty-one million. Speaking about Al Maktoum Airport’s performance, it was recorded that the number of passengers grew during the last year, as well, and, as a result, the aeronautical revenue increased by twelve percent (Dubai Airports 2014). In addition, commercial revenue increased by twenty-three percent due to upgraded concessions, which is eight percent bigger than that of Incheon Airport. Improvement of the non-aeronautical revenue category may be explained by the fact that it has more financial freedom from the government than Incheon International Airport (Cardy & Leonard 2011).

Issues/Problems

Airport managers face some economic issues in Incheon Airport and Al Maktoum Airport. As it was mentioned earlier, the strong performance may be observed in Al Maktoum Airport within the last year. Nevertheless, it is hard to compete with the ever-improving financial results of the key-competitors. Furthermore, the government of Korea needs to give more financial freedom, so that Incheon airport could be run as a commercial enterprise. Additionally, it is evident that the degree of involvement in the airport activities by airport owners varies substantially so that it affects the profitability of the airport companies. An example of such a problem is currently observed in Incheon Airport and Al Maktoum Airport (Federal Aviation Administration 2009).

Discussion

It is hard to argue that the airports separated form the government may generate a substantial profit. Mainly, the government pays a little attention to the airport industry and is predominately concentrated at the contribution to the national economy. However, it is essential to emphasize that whatever the airport ownership, the enterprise is to cover its full costs, providing that it is a successful company (Doganis 2005). In practice, it may be difficult to implement, as the government levies heavy charges on the airport companies. As in Incheon Airport the air traffic control services are provided by the government, the high taxation is observed. Regarding Al Maktoum Airport, the users of the air traffic and navigation services are not charged by the airport company, which is why the airport does not acquire any revenue from such activity. Besides that, a little involvement of the airport authorities in commercial outlets may be observed in Incheon Airport.

Way Forward

It is increasingly important to mention that Incheon and Al Maktoum Airports have to double their revenues in order to reduce the need for the government’s investments. Moreover, it is essential to give more financial autonomy to increase the involvement of the airport authorities in commercial activities, which presupposes collecting concession fees and thus, contributing to the airport profitability (Kourdi 2009). As Incheon and Al Maktoum Airports provide a great range of services within and outside the terminal buildings, it is crucial for the airport authorities to operate directly with the concessionaires. It is also recommendable for both airports to take a monopolistic supply position towards the airlines. Thus, the international airports may benefit from levying the high charges without risk of losing traffic (Doganis 2005).

Conclusion

On the whole, Incheon and Al Maktoum International Airports epitomize the fastest and the busiest airports in the world, while providing high-quality services. However, the companies differ widely in their strategic management approaches. The main reason for that is a discrepancy between the term of their functioning, their missions, visions and values. Though, the airports face similar problems and the ways of solving them should vary depending upon the business environment and the policy of corporate governance. A detailed analysis of the performance and organization quality is a strategic tool for generating an efficient solution to the economic difficulties. The external and internal factors, which contributed to the business development or the economic shortfall, were studied in the paper. Consequently, serious consideration was given to the ways forward in order to suggest the approaches for maximizing the revenues from aeronautical and commercial activities.