Sydney Airport models passenger value

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Sydney Airport models passenger value

Sydney Airport can now calculate how much passengers spend on airport services each month and the most profitable segments after ‘systematising’ a model developed by management consultancy LEK earlier this year.

The Airport Corporation (SACL) engaged LEK in early February to develop a new customer segmentation model that would provide an end-to-end view of the value of different customer segments.

The project came out of negotiations for new pricing agreements with the airlines that use Sydney Airport, according to SACL CFO Simon Bligh.

“Sydney Airport handles more than 33 million passengers a year,” said Bligh.

“Regardless of whether they were going to Bali on holiday or to the U.S. for business, we had always thought of them as either international or domestic passengers.”

LEK created a model that brought together revenue from airport services including car parking, duty free and retail shops, and aeronautical charges (such as airline check-in fees and runway charges). This revenue was then linked to passengers to calculate the overall value of each customer segment.

The model actually showed that there were six readily identifiable customer segments rather than the two outlined by Bligh, and that factors such as destination heavily influenced the services they would expect while at the airport.

Armed with this knowledge, SACL then made the decision to extend the model’s useful life by using it as the basis for a new monthly reporting system.

“One of the absolute clear guiding principles of the project was that we were not going to pay management consultants a bunch of money for a one-off report,” said Bligh.

“What we came up with had to live and breathe within the business once the consultants had left. So once the project team came up with the analysis, it was absolutely crucial that we turn it into something that would be repeatable on a monthly basis.”

Altis Consulting was retained to map, spec and build the technology system to make this happen. Altis' brief was to develop a way of ‘systematising’ the customer segmentation model so that the analysis would remain an integral part of the Airport's thinking.

“The main challenge was to get it done in a timely manner because we had limited access to the management consultants [LEK],” said Stuart Rattray, project manager at SACL.

“We wanted to use their intelligence within the build but we couldn't keep them around forever, so it had to be a quick project - get in, do the job, make sure it works and finish.”

Altis kicked off the project with a feasibility study and what it called a ‘series of terminology confirmation [meetings]’ with LEK to translate the model into a technology system.

This included writing a series of complex business rules to map data to specific customer segments described by LEK.

The new system takes information from SACL’s existing data warehouse using the business rules and surfaces it via an IBM-Cognos reporting solution.

“A lot of the business rules are around the complex splicing of data – for example, there’s no easy way to map carpark transactions to a particular flight,” said Glen Wiblin, senior consultant at Altis Consulting.

“The [LEK] management consulting team developed a series of relationships in the data, and these relationships yielded business rules on how to take the aggregate total of data and allocate it across specific customer segments.”

SACL is currently using a Microsoft spreadsheet to capture the business rules; however Wilbin said the corporation may move to a more sophisticated system down the track once stage one of the project is complete.

Additional phases for the project are expected to kick off next year, Wilbin said.

Wilbin said the project’s success to date had been the ‘partnership approach’ the two firms had taken to implement the system.
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