Suvarnabhumi Airport - Stakeholders, Risk and Uncertainty Management - Report Example

Suvarnabhumi Airport Contents Introduction 3 Discussion 4 Stakeholder Management 4 Risk and Uncertainty Management 4 Critical Analysis of Suvarnabhumi Airport Project 4 Project S Curve 11 Project Life Cycle 12 Project Scope Management 13 Gantt Chart 14 Conclusion 14 Reference List 15 Appendix 17 Introduction The report will present a post-project review of Suvarnabhumi Airport, Thailand. As the extent of communication and commercialization between nations have increased, demand for airport facilities have notably heightened in major nations. As efficient allocation of resources is the most important aspect of any investment, it is highly rational to judge quality of a project in terms of specific project evaluation and management theories. Suvarnabhumi Airport, the new international airport of Bangkok was opened in 2006. The name of the airport meant “The Golden Land” in Thai language. It was a big challenge to build an airport in the “boggy” location, which is 30 kilometres away from the Bangkok city centre. The project was contracted by the Werner Sobek Engineers and ACT Consultants (Thailand) (Chaichalearmmongkol, 2014). Under the project, the airport is constructed with two runways (each of 60 metres width and approximately over or equal to 3700 metres in length). There are numerous taxiways constructed around the airport. The airport has five contact gates, each large enough for accommodating the new Airbus 380 (Kable, 2014). Moreover, the airport apron accommodates approximately 12 parked aircrafts. The airport covers an area of 3100 hectares and has a facility to house 45 million passengers (Sika Organization, 2009). It has 2 satellite buildings that can hold approximately 6.4 million tonnes of cargos and 100 million passengers. The airport basement is largest in the world (500000 square metres) and primary passenger terminal is of 7 storeys (Kable, 2014). The efficiency of the project was analyzed through an Iron Triangle framework. The report will critically evaluate the project through aspects of stakeholder’s management and cost management. The influence of stakeholders is an extensively important consideration in the contemporary era. The success of a project will be empirically judged by organizations and entities in the external environment that are similarly influenced. However, efficiency of any investment can only be evaluated on the basis of its risk and uncertainty management system. The present business scenario is highly dynamic in nature and a project can only be successful with the help of efficient risk management system (Heldman, 2011). Discussion Stakeholder Management The individuals or group of individuals, who are affected by actions, policies and objectives of an organization are known as the stakeholders. Some primary stakeholders of a business concern are consumers, employees, government agencies, business support groups and shareholders. The impact of each group of shareholders on an organizational operation is different. Several individuals or concerns are affected by the final output of a project. Stakeholder management is the process under which different values and interests of the stakeholders of a project undertaken by an organization is considered or addressed for enhancing their utilities (Chinyio and Olomolaiye, 2009). Risk and Uncertainty Management The economic and non-economic returns of a project are significantly affected by external market uncertainties and risks. The extent of business complexity in modern world has substantially increased. Organizations must formulate projects on the basis of adaptive strategies, which would help to lower the risks associated with negative uncertainties in the market (Knight, 2012). Critical Analysis of Suvarnabhumi Airport Project The three main stakeholders of Suvarnabhumi Airport project are: Consumers (passengers) and common public Employees Government authorities of Thailand Shareholders Positive and Negative Impacts on public and passengers The authorities of the airport claim that they aim to improve quality of environment and public living around them. The airport management authorities assure that quality of water, noise and air around the airport will not degrade. Several trees have also been planted by the airport authorities for enhancing environmental sustainability around the airport area. Apart from that, the airport authorities provide special donations for social welfare maximization of the country. It claims to promote Thai culture and tradition around the world. The project has improved transportation facilities in the country. The flights that land and take off from the airport can accommodate 45 million passengers per year (Morris, 2013). Furthermore, Suvarnabhumi airport can support cargo facilities up to 3 million tonnes every year. It is able to provide special bus and taxi services to travellers. The airport also houses CIP rooms, restaurants, play grounds and shops for passengers. Certain customized services offered by the airport establishments to passengers are prayer rooms, postal services, smoking rooms, luggage storage services, bank & currency exchange facilities and special mobile phone services. Apart from that, airport management authorities also provide few free services to the visitors. All visitors of the airport are able to utilize free Wi-Fi, internet and passenger luggage services. The elder and disabled passengers or visitors are also provided cost free wheelchair services. Thus, from the above context, it can be claimed that Suvarnabhumi airport project has generated several positive effects for travellers as well as common mass of Thailand. Nevertheless, there were few problems faced by passengers in the airport. It is claimed by many travellers that luggage claim facilities of Suvarnabhumi airport is often slow. There are also some problems with cargo computer system of the airport authorities. It is also found that information listed on the departure board is often inaccurate. Certain problems have surfaced concerning structure of the taxiways. Positive and Negative Impacts on Employees The Thailand Airport authorities are trying to achieve a higher income through Suvarnabhumi airport project. However, they have recognized that higher efficiency and returns from services offered can be attained with the help of effective work done by workers. So, employees are recruited on the basis of their skill set and are kept highly motivated at work. The management structure of the Suvarnabhumi airport is democratic and participatory in nature. The workers are provided with special incentives and rewards for working proficiently. Special training sessions are introduced for improving skill set of the employees. The management authorities ensure that each worker in the airport finds lucrative professional growth prospects by working in the concern. Special healthcare benefits are also given to workers. Such facilities provided by managers lower the attrition rate and enhance productivity of airport employees and staff (Gladden, 2013). The public owning authorities of Suvarnabhumi airport is facing certain problems with ITF-affiliated Thai Airways International Union (TGU) (IftGlobal.Org, 2014). The conflicts between these entities have emerged due to problems regarding basic pay of the workers. Positive and Negative Impacts on the Government The project has generated many benefits for the government of Thailand. The Suvarnabhumi airport has been constructed for replacing the existing airport (airport of Don Muang). Since its inception, the airport has become the primary hub of popular airline companies like, Thai Airways International, Bangkok Airways and Thai AirAsia. The facilities and flights offered from the Suvarnabhumi airport is more than that done from the existing one. This has helped to increase business of domestic Thai airline companies and in turn enhanced corporate taxable revenue of the Thai government. It is expected that by 2035, the project will generate approximately 340000 direct and indirect employment opportunities in the country. This will also prove to be highly beneficial for the Thai government in terms of enhancing overall level of per capita income and domestic product of the nation. It has improved transportation and communication facilities and to some extent, has also boosted the tourism industry of Thailand. Nonetheless, there are a few problems faced by the government concerning the project. The airport often becomes overcrowded and high traffic congestion occurs between the flights. The Irish government has brought charges against the airport shop authorities of the Suvarnabhumi airport. It was claimed by the Irish political authorities that some visitors of Ireland were blamed of theft in these shops, when in reality, they were not guilty. Similar claims have also been made by online advisories of Denmark and Britain (Randolph, 2012). The tourists often suffer from robbery related problems around the airport premises due to predatory irregularities in these regions like, the Pattaya Mafia. In addition, the airport is constructed on an old cemetery, which has created discomfort among the staff. Some workers had claimed to have seen ghosts in empty premises of the airport. All above issues have dwindled stability of the government of Thailand. Even so, it should be noted that shareholders of the project are enjoying increasing income over time. Figure 1: Primary Shareholders (Source: Airport of Thailand Public Company Limited, 2010) The above chart shows that majority shares of the company are owned by Ministry of Finance, Thailand. According to dividend policy of the organization, shareholders acquire equal or more than 25% of the total income generated by the airport authorities annually (Thailand Public Company Limited, 2010). The construction of Suvarnabhumi airport has generated significant benefits to its business stakeholders. Yet, there are some problems faced by stakeholders. The airport authorities should implement ways through which such problems can be lowered. From the above context, it can be stated that stakeholder management of Suvarnabhumi airport is fairly moderate. It can function efficiently, only by rectifying the stakeholder related issues. The stakeholder’s management system of airport authorities should concentrate on an integrated and systematic method of management as well as building better relationships. The focus should be directed at generating mutual benefits and opportunities. The stakeholder’s management process should be aligned with the long-term commercial goals (Bourne, 2012). Figure 1: Improving Stakeholder Management (Source: Sinclair, 2012) The above circular flow diagram shows ways through which Suvarnabhumi airport authorities can enhance their stakeholder’s management process (Sinclair, 2012). It is believed by the airline authorities of Thailand that risk and uncertainty management is an important segment of corporate management. The framework of risk management considered by Suvarnabhumi airport authorities is divided in terms of three components: Risk Governance Risk governance a crucial decision making process in business. Risk is governed in an organization through the principals of participation, cooperation, mitigation and sustainability. It also allies the principles of good governance in business. In order to reap the benefits of new opportunities in business, companies must undertake risks. However, the feasibility of undertaking a risk is predetermined by the officials of the risk governance team of a company. The matters of risk and uncertainty relating to the Suvarnabhumi airport project are tackled by Risk Management Committee of the organization. Chairman of the committee is an elected representative from broad of directors of the concern (Alghalith, 2007). The Swarnabhumi project involves large financial investments of Thailand. Thus, any loss from the project would significantly affect the economy of the country. The risk governance team of the project helps to forecast its upcoming commercial risks and hence increases the efficiency of the project. Infrastructure of Risk Management The Risk Management Committee formulates risk and uncertainty related policies on the basis of risk maps, manual management rules, risk management tools and database. Figure 2: Risk Map (Source: FEMA, 2010) The risk Mapping Assessment and Planning (MAP) helps to enhance the scope of technologies and tools used in a project. It makes a project efficient enough to strengthen the capabilities and lifestyle of local and state individuals. The above figure shows the benefits and outcome generated from the risk map. Process of Risk Management Nonetheless, it should be noted that each action in the process is executed through a predefined mechanism. The steps are: Framing objectives Identification of risk Assessment and analysis of risk Risk responsing Measuring and controlling the identified risks Finally, reporting and monitoring The political, social and economic aspects have considerably changed in Asian countries and are estimated to generate more intense competition to airports worldwide. The risk management authorities of Suvarnabhumi airport have decided to lower the costs of its airline services. This would in turn help in enhancing aeronautical and non-aeronautical revenues of the concern (Blocher, et al., 2008). The committee has decided to revise the Aviation Marketing Incentive Program for making it more appropriate according to the competitive environment (Thailand Public Company Limited, 2010). At the same time, the body has established commercial relationships with rich corporate entrepreneurs (Blomquist, et al., 2010). These commercial contracts have been introduced for acquiring greater finances for its expansion projects. Hence, in order to ensure greater competitiveness, Suvarnabhumi airport authorities have launched the new Aviation Incentive Program. This programme desires to encourage passengers to avail its services by conducting marketing and promotional activities through ways of direct marketing, online websites, telemarketing and alliance with Tourism Authority of Thailand. From the above context, it would be correct to claim that the risk and uncertainty management system of Suvarnabhumi airport project is highly organized. The risk management committee of the concern have undertaken several initiatives to augment competitiveness of the project. Even so, there are few problems faced by the airport’s risk management system. It is estimated that outdoor business activities of the Suvarnabhumi airport authorities will not yield appropriate revenue before completion of three years. Some of these commercial activities are lucrative joint venture projects with business entrepreneurs. The airport authorities are subjected to the risk of making a big payment as compensation in the near future owing to legal disputes faced in expansion of airport accommodation on an annual basis. Logistics of the airport encounter technical and engineering problems, which can generate certain risks in the long run in terms of revenue and loss of brand value in the market. Since the recession in 2008, state of economic affairs in major economies is highly volatile in nature (Todorovi, Mitrovié and Bjelica, 2013). The exchange and currency rates of countries appear to fluctuate at a faster pace in the present scenario. This has increased profit and loss related risks of the Suvarnabhumi project. While constructing Phase I of the project, authorities of the airport had taken loans from Japan International Cooperation Agency (Fang, et al., 2009). Fluctuation of Japanese Yen has heightened the uncertainty regarding debt burden of the airport authorities. In order to lower such risks, risk management authorities of the airport have introduced the cross-currency swapping agreement. Therefore, risk and uncertainty management system of the project is quite sound. Nevertheless, there are some aspects of risk that cannot be estimated through any monitoring process. For instance, Ramond Mark Campbell, a 64 year old man had recently died in the airport premises due to a fatal fall from fourth floor of the main building (Thai PBS, 2014). This had created high commotion in the airport. Project S Curve The figure below shows estimated S curve of the project. Figure 3: Project S Curve (Source: Author’s Creation) The returns from the project in initial years of investment were increasing at a declining rate. However, overtime, the project returns are rising in a multiplicative manner. So, it is expected that in the long run, benefits accrued from the project would greatly increase (Citrinot, 2012). Project Life Cycle The project life cycle is a model that represents the series of activities that a concern needs to undertake for accomplishing objectives and goals of the project. The stages of a project can be depicted through a general project life cycle, irrespective of complexity entailed or size. Figure 4: Project Life Cycle (Source: Ukron, 2014) The project life cycle can be segregated in four steps, namely: Project inception Project preparation and organization Project operation Closure of the project (Ukron, 2014). The Phase II of the project is still not completed. In 2011, authorities of the airport have declared the beginning of Phase II expansion to be in 2016. Phase II of the project will involve a fund of 62.5 billion. The project aims to increase passenger capacity of the airport to 65 million. There are also several other expansion programs queued till 2024 under the Suvarnabhumi project. Hence, Suvarnabhumi is in project performing or operational stage of the project life cycle (Benser and Hobbs, 2012). Project Scope Management Phase II of Suvarnabhumi airport project has still not started and is expected to commence from 2016. This project aims to increase passenger capacity of the airport up to 65 million as well as to construct a new domestic airline terminal. The new terminal would be able to handle 20 million passengers. The two plans collectively intend to increase capacity of the airport for 125 million passengers by 2024. The estimated cost of the two projects would be approximately $ 163 million. It is also planned that an additional runaway, new parking bays, car parks and airport infrastructure related facilities will be built in second phase of the project (Airports of Thailand Public Co Ltd, 2014). Gantt Chart The Gantt chart for Suvarnabhumi airport venture presents the time wise segregated pending activities of Airlines Authorities of Thailand regarding the project (Human and Steyn, 2013). Figure 3 in the Appendix shows Gannt chart for the Swarnabhumi project. Conclusion From context of the report, it would be correct to state that stakeholder’s management is a very important aspect of business because it helps to attain strategic objectives by making use of internal as well as external business environments. Stakeholder’s management assists in improving the relationship of an organisation with its stakeholders. Stakeholder’s management of an organization is conducted with the help of stakeholders’ identification, analysis, matrix, engagement, information and agreements (Kanda, 2011). The analysis of the paper has explained that stakeholder’s management of Suvarnabhumi project is fairly moderate. The paper also shows that project risk management helps in managing and understanding risks of a project in a proactive and optimizing manner. It helps in lowering uncertain threats and maximizing unknown business opportunities. Risk management can be effectively done through four primary strategies, namely risk avoidance, acceptance, transference and mitigation. The risk management of Suvarnabhumi project is moderate. However, the project has generated numerous benefits to Thailand and is still in operational stage of the project life cycle. If managerial authorities of the project undertake the set of activities stated in Gantt chart, then Airline Authorities of Thailand would surely be able to accrue higher brand value and competency in the long run. Apart from few problems, the airport has indeed provided a new dimension to air travelling in Thailand. This has not only helped to generate higher revenue for the government, but has also helped in improving quality of individuals’ lifestyle (Bittner and Gregorc, 2010). Reference List Airport of Thailand Public Company Limited, 2010. Annual report. [pdf] AiportThai. Available at: [Accessed 6 May 2014]. Airports of Thailand Public Co Ltd, 2014. Suvarnabhumi Airport Development Project Phase 2. [online] Available at: [Accessed 6 May 2014]. Alghalith, M., 2007. New economics of risk and uncertainty: Theory and applications. New York: Nova Publishers. Benser, C. and Hobbs, B., 2012. An empirical identification of project management toolsets and a comparison among project types. Project Management Journal, pp. 24-43. Bittner, E. and Gregorc, W., 2010. Experiencing project management: Projects, challenges and lessons learned. New York: John Wiley & Sons. Blocher, E. J., Stout, D. E., Cokins, G. and Chen, K. H., 2008. Cost management. [pdf] McGraw-Hill. Available at: [Accessed 6 May 2014]. 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Appendix Figure 3: Gantt chart Task Year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Rectifying the operational problems, as sluggish luggage claim, cargo computer problems and wrong flight information Negotiate worker wage related issues Acquiring adequate finances for Phase II of the project Licensing Agreement for the Phase II project Designing the Phase II project Site identification Engineering plans Prototype development Construction of the new domestic terminal and expansion of the existing international terminals Construction of the new runway Construction of the new car parking and other infrastructural facilities Monitoring the efficiency of the project (Source: Author’s Creation) Read More