ACI has developed a Policy Brief on airport ownership, economic regulation and financial performance, which will be available in early 2017.
Until relatively recently, most major commercial airports were government-owned and government-operated, primarily on a cost-recovery basis.
Initially, deregulation in the aviation sector predominantly focused on airlines, although many countries have also divested their airports and air traffic control services. Deregulation of the aviation industry in many parts of the world was followed by a shift in the way airports were operated.
Now, airports no longer operate as a homogeneous group of public utilities but as a heterogeneous group with ownership structures ranging from government-owned to partially or fully privatised, that in many cases compete with each other to be the gateway to cities, regions and even entire continents.
As with any other business, airports continuously seek to increase operational profitability and efficiency. As competition increases and partners and stakeholders shift their business model to meet new market trends, some airports face many economic challenges.
Airports are asset-intensive businesses, which require a critical mass of revenue generating traffic volume to start recovering their large operating costs and infrastructure investments.
In an economic climate where States are increasingly cutting government expenditures, government financing and ownership of airports is not always a viable and sustainable option. For this reason, the involvement of private sector participation has grown significantly over the last couple of decades.
Today, more than 40% of global airport traffic is held by airports that are managed and/or financed by private stakeholders. Airports have become more commercially focused and the result has been a more competitive and dynamic airport market.
Airports have thus diversified their sources of revenue, relying not only on the traditional aeronautical revenues made up of airport charges, but also increasingly on a variety of other revenues including retail, parking, real estate, and other commercial activities.
These sources of commercial revenues, known as non-aeronautical revenues, are a key contributor to the financial success of airports. They not only provide diversification in an airport’s income portfolio, but also serve as additional cushion during economic downturns.
According to the 2015 ACI Economics Report, non-aeronautical revenues represented over 40% of total income as an average for world airports.
To meet this increasing reality, ACI Global Training offers a course titled ‘Airport Non-Aeronautical Revenues’, that focuses on the opportunities available to airport managers to enhance non-aeronautical revenues through third-party services.
The course also addresses best practices in cultivating relationships between airport management, its primary customers (airlines, passengers and cargo operators, for example), concession providers and suppliers such as retail brands.
In fact, retail concessions remain the leading source of non-aeronautical revenue for airports worldwide, representing 28% of total non-aeronautical revenue. Car parking revenue and property revenue/rent follow retail concessions as the second-and third-largest sources of revenue.
There is a close correlation between non-aeronautical revenue performance and airport customer service excellence. In the fall of 2016, ACI released Does passenger satisfaction increase airport non-aeronautical revenue? A comprehensive assessment research report, analysing the influence of customer service quality on airports’ non-aeronautical revenue.
Based on the ASQ annual global survey, the analysis found that an increase of 1% in the global passenger satisfaction average generates an average growth of 1.5% in non-aeronautical revenue.
However for airport revenue to thrive, economic regulation and the oversight function must evolve in step with the industry. The regulatory model and accounting for non-aeronautical revenue not only determines an airport’s business in terms of the structure and magnitude of its revenues, but also the resulting economic health and performance of its operator.
For this reason, ACI has successfully produced the second annual Investing in Airport Conference organised in co-operation with the International Civil Aviation Organization and the International Transport Forum at the Organization for Economic Cooperation and Development.
Together with governments, regulators, airport operators, airlines and investors, we have taken one step closer to ensuring that regulatory oversight evolves in step with the realities of the industry so that it can be sustained to accommodate growth in the demand for air service, now so vital to the economic and social well-being of the world’s communities.