ACI Media Press Release Archives (2010)

A sustainable airport-airline partnership – working within airport business boundaries - 21/09/2010

Vancouver, 21 September 2010 ― Angela Gittens, Director General of ACI World, urges airlines to refresh their understanding of airport business requirements in the interest of greater future cooperation and long-term industry stability. Speaking on Monday at the Global Aviation Strategy Session in Vancouver hosted jointly by ICAO, the World Bank and Routes, Gittens highlighted three fundamental characteristics of airport business – infrastructure overhead and maintenance, long-term financial commitments and new capacity building in a growth market.

Gittens observes that today’s airport business environment is characterized 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 explains, “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 points 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 USD 40 billion per year, and carry about USD 250 billion in debt as compared to airport industry gross revenues of USD 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. Gittens remarks, “It takes two airports to accommodate one airline passenger, so our numbers are always double those published by airline associations. And each end must provide adequate facilities and qualified staff to deliver the services that airlines need and expect. ACI will soon publish its new 20-year traffic forecast, which estimates annual average growth at about 4.1 percent per annum, which means that by 2029 airports worldwide will provide services for 11 billion departing and arriving passengers – compared to 4.4 billion in 2009.”

The challenge for airports is how to balance intensive airport long-term investment requirements with the short-term business model of airlines. One solution has been the diversification of revenue streams. The majority of airport revenue is based on charges on passengers and income from goods and services sold to passengers, as the chart below illustrates.

Gittens concludes, “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.”