This Article address BCG matrix, case study Sanaa Airport, for traffic, and other operators

1. study
Mohammed Salem Awad
PhD Candidature
Aviation Management - India
Strategic Direction For Sana’a Airport
Using B.C.G Matrix
M ost of aviation companies – airlines and civil aviation authorities looking for
the right strategy to evaluate the competitive environment in the aviation
industry, while some of them use BCG matrix as effective tool to define and
develop the right decision, as supporting, surviving or drawing out of the market.
In the beginning of 1970 BCG – Boston Consulting Group developed different
patterns for working units or the bigger production lines, they developed BCG-
matrix addressing GROWTH RATE and MARKET SHARE for different working
units as airlines or airport authorities on a graphic scale, while airlines/airports try
to compare their performance with the others, they implement open sky policy,
facilitated procedures to improve its share in the region, and consequently it will be
easy to compare, analysis and conclude for positioning the company in competitive
environment, and accordingly decisions are hold and solution are delivered to
support the right strategy to improve the service and performance. So in aviation
industry these strategies reflects the competitive situation for regions and operating
routes, usually for airlines activities in airports, such as Traffic of Sanna’a Airport.
Economy
Other Industries
Demographics
Technology
Customers Substitutes
Distributors Suppliers
Culture Competitors
Government
Prospects
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2. study
Introduction BCG Matrix
BCG matrix is the most effective and well known As it is mentioned before, the out come of
method and tool to manage and develop decision, passengers in terms of growth rates and market
it is established based on a production theory. At share can be located in four mapping matrix to
the beginning of seventies BC group developed and define the airport market situation which are:
implement BCG matrix, this matrix can be used to 1- STARS: High status growth , Bigger Market Share
find the priorities for doing a productivities of unit 2- CASH COW: Low status growth,
work. Beside to ensure a long term performance, Bigger Market Share.
company should secure all the productive units of 3- DOGS: Low status growth, Small Market Share.
high growth rate for the needs of the money while it 4- QUESTION MARK: High status
is also for low growth rate of productive units for the growth, Small Market Share.
needs of cash flow. BCG matrix is defined by two
parameters: GROWTH RATE and MARKET SHARE, SANA’A International Airports (Case Study)
and its main concept is, if there is big market share According to the statistical annual reports (2004-
or high growth rate, the market will develop fast. 2009) of Central Statistical Organization CSO for
In Air transport and Airline industry, the ICAO, the traffic of Yemen airports, SAH, ADE, TAI, HOD,
IATA, and others world countries have to liberate the RIY, and GXF as mentioned in the following table.
skies and offer facilities to attract the traffic to their As shown in the table below the share
countries and to their airports. Thus air transport percentage of domestic airports for 2009, SAH
industry acts as a catalyst for other development airport share is 72% of the total traffic.8
sector like education, Tourism, and hotel investment.
It is a part of business sequence business connected
ring, mostly defined as package. Finally we have
to define the main terms of BCG matrix.
Market Share
The number of passengers should not be necessary
to reflect the company performance compared to Relative Market Share
other companies for competitive airports. Actually
(Cash Generation)
the change in number of passengers reflects
change of market size or in the economic factors
of the region. So the airport performance can be High Low
compared with competitors of neighborhood airports
and can also be evaluated by market share, that
airport gains, and it is defined as the market share
High
of that airport in the region, calculated as follows:
Market Growth Rate
Market Share = (No. of Pax in airport /
Total No. of Pax in the region)
(Cash Usage)
Stars Question Marks
Growth Rate
This is the second important factor for the analysis,
as it is a significant element based on historical
data of the passengers and same measured as:
Growth Rate for Recent Year =
(No. of Pax of Recent Year - No. of Pax of
Low
Previous Year) / No. of Pax of Previous Year
And can be represented by the Latin letter λ as
constant growth factor, which can fairly be represented
by Exponential distribution, so for positive value of λ Cash Cows Dogs
it means growth market, while for negative value of
λ means declining market of airport passengers.
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3. study
Analysis total (passengers)
The analysis is done in to two directions. Airports sah ade tiz hod MUK gD
First: Traffic of SAH Airport with
2004 1061 190 29 20 108 40
other Domestic Airports:
By implementing BCG Matrix for 2005 1271 203 32 22 148 0
SAH Airport (as origin) for 2009, 2006 1404 204 33 24 127 28
with other domestic airports, the 2007 1570 225 29 24 129 46
results will be as follows: 2008 1734 247 38 28 143 50
1- Since the growth rate is negative factor
2009 1648 299 62 50 148 65
for SAH airport, so the other values of
domestic airports reflects the CASH
COW situation, as SAH airport captures
the highest market share of Yemen
traffic. So SAH Airport is the main stream
to direct cash money, but there is no
growth but recession in passengers.
Accordingly the need for improving
service, expansion is a must, i.e the plan
of opening new Sanaa airport soon will BCG Matrix (Sana’a Airport Case Study)
improve the growth rate and consequently Selecting the Right Strategy
will derive SAH airport to STAR situation
and as shown in the analysis, Yemenia Relative Market Share
(Cash Generation)
consider SAH airport as main Hub for High Low
their operation without giving the same
High
opportunity for other domestic airports.
Market Growth Rate
(Cash Usage)
Second: Airlines Competitive Stars Question Marks
Analysis of SAH Airport
For the Airlines competitive analysis
Low
Relative Growth Rate %
of SAH airport, the airlines operating Cash Cows Dogs
to SAH are RJ, ET, MS, QR, ET, SV
and off course IY. Using BCG Matrix SAH Airport
again, many tough situations have
arisen, as the competition between MUK
EK and IY for Yemen market and
the results of Matrix analysis are: gDH ADE
1- STAR situation:
In this situation, two routes
are analyzed CAI, and ADD,
showing IY is the leader. TIZ
2- CASH COW situation
Three routes are addressed AMM, HOD
JED, and RUH. These routes should
be continued and keep them active Relative Market Share %
in operation for their cash flow.
3- DOG Situation
Yemenia should reconsider the BCG Matrix (Sana’a Airport Case Study)
routes DOH, and DXB seriously, Selecting the Right Strategy
as the main competitors are EK,
and QR with a superior service. Relative Market Share
(Cash Generation)
4- QUESTION MARK situation High Low
Operation to BAH should be reviewed ET
High
Market Growth Rate
and supported by IY. unless there is a GF
(Cash Usage)
need either to support or withdraw.
Stars Question Marks
Summary
Relative Growth Rate %
Low
This study points out the use of BCG Cash Cows Dogs
Matrix in taking the strategic decisions MS
especially for the competitive markets, as IY
it reflects the actual picture of company
situation with the other competitors, RJ EK
SV-JED
then accordingly the policies and the
right decision are taken based on the
results of BCG matrix outcomes. It a QR
powerful tool for top management to
know the strengths and weakness points
and discrepancies in the company, to SV-RUH
take the right action on the right time,
finally this method can be implemented
on monthly, quarterly and annual bases
according to the company requirements.■ Relative Market Share %
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4. Civil Aviation & Meteorology Authority, October - December 2010, issue 9
AIR
TERRORISM
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