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ECONOMICS Last modified on March 10, 2015

Big business

The 2014 ACI Airport Economics Report shows that airport revenues remained stable despite the fragile state of the global economy, writes economics director, Rafael Echevarne.

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Despite economic uncertainties and the downside risks that have persisted across the world’s markets, global airport revenues have remained “largely unperturbed” based on results for the 2013 financial year. 

Indeed, aeronautical income, non-aeronautical income and non-operating income – the threecomponents of a typical airport’s income stream – all experienced sound growth ratesin 2013 compared to the previous year. 

In essence, growth in key emerging market airports has circumvented the slowdown in the Eurozone and other more mature markets.

Industry income as a whole grew by 5.4% over 2012, reaching $131 billion in 2013 (See table below). On a regional basis, European airports hold the greatest proportion of global airport income (38%). This is followed by Asia-Pacific (28%) and North America (22%). 

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Although Europe occupies a significant proportion of the world’s airport revenues, it has experienced the weakest growth in overall revenues at 2.3% year-over-year. In particular, with the Euro-area downturn, non-aeronautical revenues decreased by 3.5%. Notwithstanding, the region also experienced a decrease in total costs by 3.2%. 

As expected, the regions with the highest growth in revenues also have the highest growth in passenger traffic. Asia-Pacific, the Middle East and Latin America-Caribbean saw overall revenues increase by 11.8%, 11.6% and 6.8% respectively. 

However, the growth in costs varies markedly from one region to the next. The Latin America-Caribbean region recorded the greatest gains in total costs from 2012 to 2013.

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Aeronautical revenue

The ratio of aircraft versus passenger-based income by region varies significantly across the regions, with airports in Europe, Latin-America-Caribbean and the Middle East gaining a high proportion of their revenues from passenger-related charges, while North America has a more equal ratio of one income source versus the other. 

On the whole, there is greater reliance on passenger-based revenues, which accounted for 66% of the two types of aeronautical revenues in 2013, down slightly from
69% the previous year. 

The pie chart on the previous page provides a detailed breakdown of aeronautical income at a global level beyond passenger and aircraft-related charges, although these
charges represent a combined 63% of all aeronautical revenues. 

Terminal rentals paid by airlines for space utilisation account for almost 12% of global aeronautical income and are mainly limited to North America.

 

 

Non-aeronautical revenues

Non-aeronautical sources of income, of course, not only provide diversification in an airport’s income portfolio but also serve as an additional cushion during economic downturns. 

And because aeronautical revenues do not always cover the costs of running an airport, non-aeronautical revenues are a vital component of the airport’s income statement and, ultimately, its bottom line.

Retail concessions remain the leading source of non-aeronautical income for airports, representing 27% of non-aeronautical income. Car parking income and property income/rent, follow retail concessions as the leading secondary sources of income at 20% and 18% respectively (See pie chart right). 

The table above provides the regional breakdown of non-aeronautical income by source. The Middle East has the highest proportion of non-aeronautical income attributed to the leasing of or revenue-sharing from retail concessions. 

North America continues to be the world leader in generating revenue from car parking services at 39%, whereas Asia-Pacific has the highest proportion of real estate income or rent, representing 23% of the region’s non-aeronautical revenues.

 

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Airport costs

In 2013, the world’s airports incurred estimated total costs of around $106.5 billion. Operating expenses form 62% of total costs and capital costs account for 38%, which is not suprising considering the infrastructure intensive nature of the aviation industry. The largest expense item reported was personnel cost – accounting for 35% of operating expenses – followed by contracted services (23%), communications, utilities, energy and waste (8%), administration (7%) and maintenance (5%).

Depreciation on infrastructure accounts for 60% of capital costs, with interest expenses representing 36%. 

Total costs have increased at a lower rate than overall revenues. This is favourable for an airport operator’s bottom line, as a slight increase in overall margins is achieved for the industry. 

On aggregate, the latest global results on airport income and costs suggest that a certain level of resilience is present within the industry, particularly among the world’s major airport operators.

The survey generated responses from 652 airports for the 2013 financial year. Together, these airports handled 4.36 billion passengers or about 70% of the world’s passenger traffic.

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