INTERNATIONAL. ACI World Director General Angela Gittens has called for greater airport-airline industry cooperation, and underlined the vital importance of diversified revenues streams to airports, at a major aviation event in Vancouver.
Speaking on Monday at the Global Aviation Strategy Session hosted jointly by ICAO, the World Bank and Routes, Gittens urged airlines to better understand airports’ business requirements “in the interest of future cooperation and long-term industry stability”.
She also underlined how airports are seeking to diversify their revenues away from traditional airline-related charges. Today, she noted, 45% of global airport revenues come from non-aeronautical sources. Of total income, 10% relates to retail concessions, 2% comes from food & beverage, 1% from advertising and 7% from car parking, she said.
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Gittens highlighted three fundamental challenges for the airport business – infrastructure overhead and maintenance, long-term financial commitments and new capacity building in a growth market.
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“Airports invest heavily, to the tune of US$40 billion per year, and carry about US$250 billion in debt as compared to airport industry gross revenues of US$95 billion“ |
Angela Gittens Director General ACI World |
She observed that today’s airport business environment is characterised by volatility – shifts in demand imposed by external market factors, as well as rapid adjustments to routes and services made by financially strapped airline customers.
“Rapid adjustments are difficult for airports,” Gittens explained. “Airports carry high fixed operating costs and have scant opportunity to streamline their operations and reduce costs operationally. An airport can’t maintain half a runway because it is used less often. Rarely can an airport consolidate facilities, and it can never pick up and move to a better market.”
She pointed out a second constraint: “Airports are also under pressure to continuously revamp their facilities to the latest regulatory and technological standards as well as respond to the business changes of their airline customers, be that growth or retraction.
“It means that airports invest heavily, to the tune of US$40 billion per year, and carry about US$250 billion in debt as compared to airport industry gross revenues of US$95 billion. Those investments have to be made even during a downturn in order to finance the assets that must be ready in time for the upturn.”
The third consideration is the forecast for renewed industry growth. “It takes two airports to accommodate one airline passenger, so our numbers are always double those published by airline associations,” Gittens remarked. “And each end must provide adequate facilities and qualified staff to deliver the services that airlines and passengers need and expect.
“ACI will soon publish its new 20-year traffic forecast, which estimates annual average growth at about +4.1% per annum. This means that by 2029 airports worldwide will provide services for 11 billion departing and arriving passengers – compared to 4.8 billion in 2009.”
A big challenge for airports, she noted, is how to balance intensive airport long-term investment requirements with the short-term business model of airlines. One solution, as noted above, is to diversify into new revenue streams.
Gittens concluded: “The reality is that airports are no longer public utilities that serve a fixed market and established carriers. Their customer base will continue to change. They have new service and facility requirements, new aircraft and operational requirements, and of course new security and environmental objectives. By gaining better understanding of these parameters and their implications, airlines can hopefully work with airports more smoothly for the future sustainability of the industry as a whole.”
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