According to statistics from the Air Transport Action Group, of which ACI is a founding member, aviation contributed $2.4 trillion to the global economy in 2012.
Airports have evolved from their former role as infrastructure providers to become businesses in their own right.
Many have moved from the public sector to the private sector, and we have seen a full range of ownership and governance models shifting with the interests and wishes of their original owners and the challenges posed by changes in airline business models. These ownership and governance decisions matter because airports are major employers.
Worldwide some 470,000 people work directly for airport operators. When on-site workers at airlines, ground handlers, retail outlets, restaurants, hotels, government agencies and other employers are included, this number balloons to 4.6 million – and it is set to continue growing.
The ability to accommodate the growth their local, regional or national economies need is partially reliant upon airports’ ability to forecast demand, in many cases decades in advance, and adjust capacity accordingly. This they do at considerable risk since the airport can rarely move to a more lucrative market when its airline customers move away in search of better profits, nor can they usually put their assets to an alternate use.
Indeed, the threat of airline switching provides a direct and powerful competitive constraint on airports.
If an airport loses an airline customer to a competitor, it can incur both a loss of aeronautical revenue and of non-aeronautical revenue as fewer passengers visit the shops and other retail facilities or use car parks at the airport.
In turn, this negatively impacts airports’ ability to plan for future demand since airports subsidize the considerable cost of developing new infrastructure with non-aeronautical revenue.
These challenges are magnified for smaller airports. While the airport industry as a whole is profitable, with airports posting net profit margins in the realm of 16% in 2013, 69% of airports globally operate at a net loss, with 93% of those being airports serving fewer than a million passengers.
Some 80% of airports with fewer than a million passengers lose money, meaning that industry profitability is primarily driven by the 20% of airports that carry the bulk of passenger and cargo traffic.
Given the not insignificant risks associated with building new infrastructure, it’s no surprise that airports have become experts at anticipating the future needs of passengers and the innumerable businesses that operate on airport grounds.
I invite you to peruse this issue of Airport World, dedicated to master planning, an art that positions airports, and indeed the industry at large, for future growth.