ACI World has recently launched its annual Airport Economics Report and Key Performance Indicators (KPIs), providing the first in-depth global breakdown of airports’ financial activities during the first year of the pandemic.
The annual ACI Airport Economics Report presents an in-depth global analysis of airport industry revenues by source, costs, and related trends across the globe and over time, while the Airport Key Performance Indicators (KPIs) provide insight into areas such as financial and employee performance, fixed-asset productivity, and airport operations through detailed statistics.
Below is a glimpse into these authoritative resources.
Airports are multifaceted businesses, engaging in commercial relationships with airlines, passengers and concessionaires among others, making air traffic the lifeblood of the airport business. The COVID-19-related travel restrictions, lockdowns and other adverse effects led to the collapse of air transport demand and placed the airport business in a precarious state. Total revenue declined by 43.4% in 2020.
Airports receive their revenues from two primary sources, aeronautical activities, and non-aeronautical activities. Though the balance between aeronautical and non-aeronautical revenues has remained stable over the years, the pandemic—especially the related decline in traffic—modified this balance, with revenue coming from aeronautical activities declining more than revenue from non-aeronautical activities. This is mainly due to fact that aeronautical revenue is more reliant and thus affected by passenger volume than non-aeronautical revenue.
In 2020, aeronautical revenue continued to be the most important source of income for airports, representing 47.8% of the total (down 6. percentage points from 2019), whereas non-aeronautical revenues made up 38.8% (down 1.4 percentage points from 2019) and non-operating revenue represented a smaller proportion of the total at 13.5% (up 7.8 percentage points from 2019). During the pandemic, several jurisdictions also saw airports receiving grants, subsidies and other pandemic-related help packages that increased the share of non-operating revenue.
Aeronautical revenues are generated from an array of charges and fees that are levied on users and passengers of airport facilities and services. These revenues are a vital component in the sustainability of airport operations and development as they enable operators to manage, and plan for, infrastructure development to meet existing and future demand for air transport.
When looking at individual aeronautical revenue sources, not surprisingly passenger charges and security charges suffered the biggest decline, with a -65.0% and -61.0% change year-over-year. See Chart 1 for more details.
Non-aeronautical revenues constitute a vital component of an airport’s income and resulting bottom line. Such sources of revenue also tend to generate higher net profit margins than aeronautical revenues. Not only do non-aeronautical sources of revenue provide diversification of airport income streams but they also serve as an additional cushion during economic downturns. This is true for most shocks, but the scale of the COVID-19 pandemic and resultant travel restrictions made the crisis unlike any other.
All sources of non-aeronautical revenues understandably decreased in 2020 compared with 2019. Sources directly affected by passenger volume suffered the most. Retail concessions saw the most severe declines in revenues in 2020, down 65.2% compared to 2019. Meanwhile, Property and real estate revenues, which decreased by 12.0%.
The airport industry is asset intensive. As a result, the airport cost structure is characterized by predominantly high fixed costs necessary for maintaining and operating the infrastructure components of the airport, such as runways, taxiways, aprons, parking stands and terminal buildings. The expansion of existing facilities and the construction of new infrastructure inevitably increases personnel expenses, maintenance costs, utilities and capital costs related to operating these fixed assets. In 2020, total airport costs decreased 9.0%.
Total airport costs can be divided between operating expenses and capital costs. Operating expenses made up 59.5% of total costs in 2020, compared with 65.4% in 2019. The remaining 40.5% was allocated to capital costs, up from 34.6% in 2019. Depreciation, which is the cost of a fixed asset allocated over time, makes up 65.7% of capital costs and more than one quarter of all costs and expenses incurred by a typical airport.
Even though total airport costs dropped in absolute terms, costs on a per-passenger basis increased 89.6% as the decrease in passenger traffic is significantly larger than the decrease in costs.
Prior to the pandemic, both unit revenues and unit costs would move in tandem with each other. In 2020, the average cost per passenger has significantly exceeded the average revenue per passenger despite the decrease in total costs (see Chart 2). In fact, many airport operators provided relief measures to their tenants and users of infrastructure despite the shortfall. Results from on a survey sent to ACI member airports on their response to COVID-19 in terms of their aeronautical charges indicate that a vast majority of airports (68%) have implemented some form of discount or incentive to their airport charges specifically to address the COVID-19 impacts and recovery.