Heathrow and Gatwick Essay

These results show that 70% of businesses believe the expansion will allow them to expand, even if it is only slightly. This will most likely be due to the increase in demand enabling them to expand due to higher profits, or expanding out of necessity to access the larger market and cope with it. For instance computerising the system they work on so the business managers can cope with the increase in customers, and employing people to look after it. The 40% of businesses who claimed a great amount of expansion is possible are most likely directly involved with the airport and only catering for customers ad employees using it. Those businesses that expansion will not be an option open to them as a result of the expansion; will be again those businesses whose customer base is not linked to that of the airport. Evaluation of Primary Research To summarise, it is important to notice that all businesses are going to be affected one way or another by the expansion on the airport, and therefore all have a vested interest in it. This effect may be one of a beneficial or problematic nature. With the huge increase of passengers and employees using the airport, demand for many of the businesses will be set to rise. However this increase in demand could be less favourable to profits because of the possible increase in competition, which will lead to an inevitable raise in human resource and marketing costs, to maintain their competitiveness. Also, the expansion of the airport itself is likely to result giving businesses the option to expand themselves, to cater for the increase in demand, and the new needs of consumers that the expansion will produce. I received answers from 10 businesses in and around the area of Stansted Airport. The range of businesses with which I made contact was varying in both type of business and location, however it is unlikely the situation of all business is represented in these results, and therefore the primary research is not something I can completely rely on when coming to a conclusion. Secondary Research This graph shows a clear rise in the amount of passengers for the next two decades, with actual numbers in 2005 reaching 228million. The growth rate is very steady with only a slight slump in the later 2020’s, however the rate of increase is still good. This is an obvious good sign as the increase in the size of the market through continuous market growth gives airlines a much larger customer base. This following graph goes back further and takes pinpoints reasons for more dramatic slumps that have occurred: The only noticeable declines or slowing down of growth are the results of specific crises, similar to and including the attack on the World Trade Centre. However the most noticeable point in decline, with the slowest return to the earlier rate of growth, is the Oil Crisis in 1973, which essentially resulted in huge inflation within the oil industry. With the evident effect that the oil industry has on the Air Travel industry it will be important to consider its current state and future prospects. This graph clearly shows a continuous increase in the price of oil for the next decade, with no apparent evidence that it will slow down. With this increase in oil prices the Airlines variable costs are bound to increase because of their oil usage. This increase in variable costs will most likely be covered by an increase in the airlines flight prices. This table shows the price elasticity of demand for both ‘business’ and ‘leisure’ flights and overall measure. From the results we can determine that the demand for flights overall is certainly price elastic, therefore the increase in price of flights will affect the airline’s sales, specifically in leisure travel. This is backed up also by the results of a poll stating that 78% of people consider the cost of travelling plays a part in how often they are able to visit close friends and family members abroad. However, business flights are inelastic, although sales will go down, they will not go down at a rate that would be too effective to their profits if prices were raised. Therefore Stansted should try and attract as much of the business market as possible. Another factor of cost increase to consider is the taxes put on air travel. The Government is trying the counter the current environmental problem by placing higher taxes on air travel therefore attempting to reduce the amount of flights. This tax is set to rise soon and again almost double in 2010, and probably carry on rising. This increase in tax is likely to be passed on to passengers, therefore adding even more onto the price, on top of the oil increases. The director of the Gatwick Diamond Business Association (GDBA) stated that â€Å"This expansion is looking at increasing capacity by 10m passengers a year and that is going to bring substantial changes, meaning they could attract more business trade. † This is obvious great news for Stansted, with the apparent price in elasticity of the business flights, and the increasing oil prices. He then went on to say the expansion will increase Stansted’s capacity by 10m a year and will therefore increase its competitiveness with Gatwick. For customers this will be beneficial as the airports and airlines may then drop their prices in order to be more competitive, and try to develop a strong sense of brand loyalty. This chart shows the distribution of passengers flying from different airports: It clearly shows that the London airports have a large majority of the market share and with the expansion of Stansted this is very likely to become even higher, with the increased amount of destinations. Evaluation of Secondary Research This research shows clearly that passenger numbers are expected to increase and that Stansted Airport’s market share is very likely to rise within the growing market for air travel, specifically with the South Eastern Airports having a large majority of the market share. This increase in passengers will bring a large increase of the amount of people going to and from the airport and requiring the different services to do so and be comfortable, therefore increasing demand for many different types of business in and around the Airport, specifically from passengers flying for business purposes. Expansion at Stansted will however only have these desired effects if the airlines manage to keep their prices down, as this is evidently a price elastic business within leisure fliers who make up a large proportion of their customers, and with the impending taxation and oil price rises they must find a way to avoid the rise in variable costs affecting their product prices too much. This is especially important as there is a lot of competition from rival airports in the same area, Heathrow and Gatwick.