Summary:
- Two-thirds of all airports still losing money; and almost all those handling less than one million ppa;
- There is a clear narrowing of the gap between the income earned by aeronautical and non-aeronautical means;
- Total cost to the airport per passenger significantly exceeds global aeronautical revenues per passenger.
The findings are part of the soon to be launched latest edition of the ACI Airport Economics Report, global analyses relative to airport activity for the financial year 2017 based on responses from 900+ airports representing 78% of worldwide passenger traffic.
Interestingly, it shows the ratio of airports that host less than one million passengers each year is also very high, at 80%, and 94% of all loss-making airports handle traffic volumes below one million passengers per annum. There is undoubtedly a correlation between those statistics as conventional wisdom (i.e. representative bodies such as ACI World and academics) broadly agree that one million ppa is the minimum requirement for an airport to trade profitably, though there are exceptions to every rule.
Indeed, as ACI says: "The disparity between large and small airports is a serious challenge when it comes to questions directly impacted by the level of traffic - profitability, investor attractiveness and overall competitiveness in attracting resources. The challenge for our industry remains that 80% of airports in the world are small, with high traffic volumes concentrated in only a handful of locations."
There is a case in Brazil presently which appears to buck the trend, with the latest series of concessions there - of small airports in some cases handling only 100,000 ppa - attracting international big shot operators like Flughafen Zurich and AENA Internacional, and of those firms paying top dollar in concession fees and agreed investments.
What ACI says is broadly correct. If you are the municipal owner of a small airport looking for private investment these days you are in for a long wait (unless you can somehow bundle it with others, which has become the norm in these later Brazilian procedures). If you are a global hub though you can expect the leading operators and funds to be queuing up for your equity should it become available.
One matter that ACI will be pleased about is that there is a clear narrowing of the gap between the income earned by aeronautical means (typically landing, passenger and baggage fees) and non-aeronautical means (typically shops, restaurants, bars, car parking, advertising etc). The gap has narrowed to aeronautical revenue comprising 55.8%; non-aeronautical revenues 39.9%; and non-operating revenues 4.3%.
Years ago ACI pressed its members to achieve 50% of revenues from non-aeronautical sources and some actually achieve better than that. However, for most it is a bridge too far and the 50% figure is now just a "recommendation". Surprisingly, even very large organisations like AENA, still the world's biggest by passenger numbers, find it hard to match that target. The statistics for 2014 on which AENA was privatised in 2015 indicated non-aero revenue share down in the low 30% range, so almost 40% as an average across all airport sizes in 2017 is quite a leap.
The Airport KPIs show global aeronautical revenues per passenger of USD9.95; non-aeronautical revenues per passenger of USD7.08; total costs to the airport per passenger of USD13.69; and industry return on invested capital (ROIC) of 7.4%.
At a global level, total cost to the airport per passenger exceeded global aeronautical revenues per passenger and illustrates the importance of non-aeronautical revenues for airports' financial sustainability. Overall, global airport revenue has grown in tandem with passenger traffic, by 6.2%, but lagging the 7.5% growth in passenger traffic, to reach USD172.2 billion. The airport industry ROIC of 7.4% is lower than for the airline industry for the same year (2017: 9.0%).
ACI World also states that "The airport capacity crunch is no longer a figure of speech. The question of financing new infrastructure is becoming the most fundamental one for the industry." That is a moot point. Various The Blue Swan Daily articles and analysis on the CAPA - Centre for Aviation website suggest that capacity enhancements remain at a high level, supported by the growing propensity towards public-private-partnerships to deliver new terminals and associated infrastructure.
The airport body also says that "beyond physical capacity constraints, disproportionate regulatory regimes that hinder flexibility in setting the right level of charges represent an additional impediment to airport development and investment in infrastructure." The Blue Swan Daily has no argument with that assertion.