Airports Council International (ACI) has released the 20thedition of the Airport Economics Report and Key Performance Indicators for the financial year 2014. With comprehensive data coverage from a sample of over 800 commercial airports, in-depth analyses of air transport demand, airport revenues and costs continue to be the bedrock of the report. The main drivers of aeronautical and commercial revenues, and sources of airport costs, are analyzed over time and across various dimensions. The link between airport size and financial performance is also examined within this context.
"Airports are complex businesses that operate in specific physical, financial and regulatory environments. As an integral part of the air transport value chain, it is essential to monitor the economic aspects of this dynamic industry for evidence-based decision making," said Angela Gittens, Director General of ACI World. "ACI's Key Performance Indicators continue to be the industry reference for a thorough understanding of the financial health of the airport industry."
There are two forces at play in the global economy, which have pushed the pendulum in opposite directions. As advanced economies get back on course, the emerging market slowdown has resulted in overall moderate growth levels in global output. Regardless, passenger traffic remained resilient in the face of the global uncertainties that beleaguered many of these economies over several years. International tourism, in particular, was irrepressible in 2014 and 2015, even considering the geopolitical risks that persisted in certain parts of the world, such as Eastern Europe and the Middle East. The Ebola outbreak also presented significant challenges to the aviation sector. Notwithstanding, by and large, the international traveller appears to have discounted these risks.
Based on the 2014 financial year, airport revenues experienced strong growth compared to the previous year. Although there were regional variations in financial performance, the recovery in the Euro area and the United States, combined with the continued buoyancy of aviation in emerging markets, translated into gains in airport revenues. Industry revenues as a whole grew by 8.2% from 2013, reaching over US$142 billion in 2014. Many airports across the globe have moved towards a business model that charges the travelling end user for their services through passenger-based revenue schemes. On the aeronautical side of the business, over 55% of every dollar was generated from passenger-related charges as compared to other aeronautical sources of income such as aircraft-related revenues.
"The airport revenue model is becoming increasingly diversified and sophisticated," added Gittens. "Airport operators have moved beyond being mere infrastructure providers for aeronautical activities to varied and far-reaching enterprises. Commercial or non-aeronautical sources of income such as retail concessions and car parking contribute to the diversification in an airport's income portfolio and provide an additional cushion during adverse economic times.
"The combined revenues from commercial and non-operating activities account for 45% of the all revenue streams and grew by 7.2% in 2014," she continued. "While European airports hold the highest proportion of these revenues relative to other regions, much of the revenue growth is originating from airports located in the emerging markets of Asia-Pacific, the Middle East and Latin America-Caribbean, where the highest growth in commercial revenues in being posted.
"Nevertheless, certain realities persist that are related to the economics of airports and economies of scale," Gittens concluded. "The challenge remains that most airports in the world are small, with high traffic volumes concentrated in only a handful of airports. Therefore, the airport industry faces a conundrum; although the airport industry as a whole appears to be profitable on the aggregate level, with returns on invested capital in the realm of 6.3%, the majority of airports are actually in the red on their financial statements. Thus, developing the necessary strategy to enhance traffic growth is fundamental in generating a positive economic return. It is important for all stakeholders in the air transport value chain to work together to reap the benefits and the multiplier effects of increased trade and tourism." Key industry facts for the 2014 financial year:
Global industry revenue year-over-year growth (2014/2013): 8.2%
Global industry revenue: US$142.5 billion
Revenue per passenger year-over-year growth (2014/2013): 3.2%
Distribution of global revenues: aeronautical (55.5%), non-aeronautical (40.4%) and non-operating (4.1%)
Global airport revenue per passenger: US$21.22
Global aeronautical revenue per passenger: US$11.78
Global non-aeronautical revenue per passenger: US$8.58
Total cost per passenger: US$16.82
Ratio of aircraft-related charges (33.6%) to passenger-related charges (55.8%) and other aeronautical revenues (terminal rentals) (10.6%): 34:66
Distribution of non-aeronautical revenue by key source: retail concessions (28%), car parking (22%) and property and real estate income or rent (15%)
Labour cost share of operating expenses: 36%
Global debt-to-EBITDA ratio: 5.03
Industry net profit margin: 16%
Global return on invested capital (ROIC): 6.3%