Birmingham Airport: An Analysis of the Air Transport Market

This report provides a comprehensive analysis of the air transport market, focusing on Birmingham Airport. It examines the airport's market position, passenger trends, and the impact of the COVID-19 pandemic. The report delves into key demand drivers, including price, income, and consumer expectations, and analyzes air traffic trends using data from the Department of Transport. It also explores forecasting models, considering factors such as income elasticity and fuel costs, to predict future growth. A SWOT analysis of Birmingham Airport highlights its strengths, weaknesses, opportunities, and threats. The report also references supporting documents like the Birmingham Airport Master Plan 2018 and articles on passenger volume estimation and economic value of Birmingham Airport. Overall, this report provides a detailed overview of the air transport market and its dynamics, particularly in the context of Birmingham Airport.

Running head: AIRT TRANSPORT MARKET ANALYSIS
AIR TRANSPORT MARKET ANALYSIS
Name of Students
Name of University
Author’s Note

1
AIR TRANSPORT MARKET ANALYSIS

2
AIR TRANSPORT MARKET ANALYSIS

3
AIR TRANSPORT MARKET ANALYSIS
INTRODUCTION:
Birmingham Airport is the third largest airport of United Kingdom and second largest
airport in England. The airport saw a steep rise in passenger number over the last five years. As
per annual report of Birmingham Airport, the airport saw 13% rise in last five years. The airport
has recovered strongly after global recession. The whole Midland region heavily depends on
Birmingham Airport as a source for generating economy. In order to maintain a status as a
leading global aviation hub, the demand forecasting on the availability of the passengers and
connectivity of the passengers needs to be done. The change in demand in the aviation industry
depends on the demand drivers. In order to improve the demand profile in the aviation industry,
the demand drivers should be considered. In order to search the demand of Birmingham Airport,
the share price of the Airport is being analysed. Both Qatar Airways and Emirates are two prime
flights that operate from Birmingham Airport. The most important factors that determine the
market share of these two airlines are frequency and fares. This report also reflects the demand in
aviation industry before COVIT-19 outbreak and after COVIT-19 outbreak. The report also
provides the steps that Birmingham Airport took against the COVIT-19 outbreak.
DEMAND PROFILE AND COMPETITION:
After 2007 financial recession, the most affected industry was the aviation industry. The
market shares of aviation industry decreased by considerable percentage. The decrease in the
market share of aviation industry resulted in the increase of attrition rate and decrease in the
overall revenue of the industry (Pien et al 2015).

4
AIR TRANSPORT MARKET ANALYSIS
This situation changed within ten years after recession. Within a decade the aviation
industry again rose up to its helm. As a matter of fact the aviation industry became one of the
most revenue generating industry.
As per the present market analysis, the demand for the service in aviation industry
decreases by considerable means within 5 months period. The main reason behind such decrease
is the recent outbreak of COVIT-19. The effect of pandemic in aviation industry is immense.
This was not the case, post the outbreak. Before the outbreak, the whole aviation industry was
moving up, as the number of passengers was increasing. Over the last five years the aviation
industry saw a steep rise in revenue. The rise was also notable in Birmingham Airport. As per the
annual report there is a 13% increase in passengers over last five years.
The market size of aviation industry is increasing day by day. The increasing in market
size also welcomes high competition. The rivalry in aviation industry of United Kingdom is
limited to nationals only. Sometimes this magnitude increases due to the entry of multinational
companies like Qatar Airways, Emirates, British Airways, etc. In United Kingdom, the market
leader of aviation industry is Emirates. In recent decade the use of airlines has increased by
considerable percentage. This led to the rise in the market share of the aviation industry.
After the outbreak of COVIT-19 the market share has decreased by considerable means.
This affected the market share of the aviation industry. In fact, whole economy of United
Kingdom has been affected.

5
AIR TRANSPORT MARKET ANALYSIS
KEY DRIVERS OF DEMAND:
Demand is the main driver for the economic growth. The increase in demand means that
the business entity can attain high amount of profit. High percentage of demand can even
mitigate the problems of the recessions in a country. The demand mainly slows down when the
country is going through business cycle. There are actually five key factors that affect demand
directly. These key factors are as follows:
 Price:
The price of any product or service is directly related with the demand. When the
prices of any product or service increases then it is being observed that the demand for
that product or service decreased by considerable means. These are true even in the
aviation industry. When the price of the flights increases, then it is normally seen that the
passengers uses different methods of transport to travel. The rise in price mainly occurs
due to the rise in inflation in the country. The vice versa is also possible. Sometimes it is

6
AIR TRANSPORT MARKET ANALYSIS
seen that the demand of the services reduces without the change in price or low price. In
recent period the change in demand occurs due to COVIT-19 outbreak. After the
outbreak occurred the demand for the services reduced by considerable means. This
affected the financial health of the companies that works in the aviation industry.
 Income:
The change in income directly affects the demand. The rise in income directly
affects the demand. This increases the purchasing power of the entity. The change in
income led to the change in demand of an individual. It was also visible in the case of
aviation industry downfall. As per the recent data, the demand for the services that are
provided by the aviation industry decreased by considerable means. One of the main
reasons behind such decrease is the decrease in the income of the company. Due to the
outbreak the world stops generating same kind of revenue that the business entity are
expected to get. This resulted in the decrease of income and hence the demand for the
service also decreased.
 Prices of Related Goods:
It is being observed that the change in the price of the related goods or services
directly affects the demand of related goods or services. In case of aviation industry the
related goods or services is below average. Due to the pandemic the demand for related
goods or services decreases by considerable means. Thus, this factor of demand does not
affect the overall demand for the services that are provided by the aviation industry.

7
AIR TRANSPORT MARKET ANALYSIS
 Tastes:
Taste is one of the major factors that determine the demand of any goods and
services. If the taste for any product or services changes then the demand for that product
or services also changes. In case of aviation industry the demand changed not because of
change in taste rather consumers changed their views for nit using any kind of public
transport.
 Consumer Expectations:
Consumer expectations are also one of the major factors that determine the
demand for any company. In this case the value or demand of any product or services
increases when the customer expects that there will be rise in the price of the product in
future. In case of aviation industry, the customer expectations do affect the demand of the
services provided by the aviation industry. This is not the case for recent downfall of
demand. The recent downfall is due to the outbreak and not the customer expectation.
AIR TRAFFIC TRENDS IN BIRMINGHAM AIRPORT:
The data of air traffic in Britain are mainly controlled and produced by Department of
Transport. This institution mainly deals with data related with United Kingdom air traffic for
both international airlines and national airlines (Birminghamairport.co.uk. 2020). The data
regarding the air accidents and incident are also produced by this department of the United
Kingdom.

8
AIR TRANSPORT MARKET ANALYSIS
As per the data produced by Department of Transport of the United Kingdom on the air
traffic, it can be observed that the air transport movements aircraft landings and take-offs has
remained almost same over the last decade. The total passengers over the last decade have also
increased by considerable percentage. The increase in the passenger states that the dependencies
of the nationals of United Kingdom are heavily depends on the air route. The freight handling
part of the United Kingdom also increased in numbers. After the world recession in 2007, the
freight of the United Kingdom had decreased, but over the last decade it again get back to its
peak.
As per the data provided by the Department of Transport of the United Kingdom, it can
be observed that air transport movements in 2008 were 2295 thousands. This number changed by
considerable percentage over the last decade, as the number decreased to 2215 thousands in
2018. The reason behind such decrease is due to the rise in recession in the aviation industry. On
the other hand, the availability of passengers has increased over the last 10 years. As per the data,
in 2008 the total number of passengers used the flight for arrival or departure was 234,972

9
AIR TRANSPORT MARKET ANALYSIS
thousands. This number increased over the last 10 years. In 2018 the total number of passengers
used the flight for arrival or departure was 292,065 thousands. The main reason behind such
increase is due to the dependencies of the passengers on the aviation industry increased. In case
of freight, 2282 thousands was the total freight handling in n2008. This number increased
dramatically and reached to 2631 thousands in 2018. The reason behind such increase is due to
the rise in the import and export in Europe. Overall the data states that the business market in the
United Kingdom has increased by considerable percentage and it can also be stated that the rise
will continue even for next few years.
FORECASTING:
In order to make the forecasting of the growth of the aviation industry in the United
Kingdom, National Air Passengers Demand Model has been used. As per this model the market

10
AIR TRANSPORT MARKET ANALYSIS
maturity assumptions are being considered. The key demand driver for this model is income,
economic activity and air fares. The market is being split in order to implement this model.
Long-term Forecasts: As per the analysis it can be determined that the income elasticity of the
United Kingdom business in 2016 was 1.2, but it will decrease to 0.9 by 2050. The same
percentage of decrease can be seen in the case of the United Kingdom leisure where the value
will decrease from 1.4 in 2016 to 1 in 2050. Due to the Brixit, COVIT-19 and other problems,
the foreign business in the United Kingdom will also decrease. It is predicated that the foreign
business will decrease by 0.2 by 2050. The domestic availability of the passengers will also
decrease by 0.3 base points by 2050. Overall the total decrease of income elasticity in the
aviation industry by 2050 will be 0.3 (Gudmundsson, Paleari and Redondi 2014). The increase in
the fuel costs may also hamper the airline fares. By 2050 the airline fares will also increase due
to the rise in the fuel costs. There is other possibility also regarding the increase in the fares of
the airlines in the United Kingdom. If the whole aviation industry shifts its use of fuel from
normal fuel to Bio-fuel then there is a chance of reduction in fuel price.
Medium-term: As per the analysis it can be determined that the airline industry will see a rise
within a 5 years. The main reason behind such increase is the demand. With the increase in the
globalization, the use of the airline industry will also rise within 5 years.
Short-term: As per the analysis it can be determined that airline industry will see a reduction in
the demand. The reduction in demand will occur due to various matters like COVIT-19 outbreak,
falling economy and Brexit.
There are other factors also that determine the change in the aviation industry of the
United Kingdom. One of the most notable factors is the choice of the airport by the consumer.

11
AIR TRANSPORT MARKET ANALYSIS
The choice of airport also depends on different factors. The initial origin, final destination,
location of the airport, availability of flights, travel time and cost are some of the few factors that
determine the change in the aviation industry.
SWOT ANALYSIS OF BIRMINGHAM AIRPORT:
STRENGTHS
 Birmingham Airport has excellent
transport infrastructure.
 Birmingham Airport is considered as
one of the most important airport in the
United Kingdom.
WEAKNESS
 The airport is not large as it required.
OPPURTUNITY
 There are six sister cities that are
commented with Birmingham city.
THREATS
 Lack of service sector in the city
decreases the demand of the airlines in
the city.