ACI’s Airport Economics Report is a benchmark for measuring the industry performance in post-COVID recovery

Ilia Lioutov by Ilia Lioutov | May 14, 2021

ACI has always represented the interests of the industry in an evidence-based manner, and, from the creation of ACI World more than 30 years ago to today, several recurrent data collection efforts have been of fundamental importance in this effort.

From an economic perspective, these are related primarily to airport throughput, measured in terms of passenger and cargo volumes handled together with aircraft movements, and the economic performance of airports, based predominantly on the classical accounting categories such as revenues, costs, capital expenditure, and balance sheet items.

Measuring performance of the industry – then and now

The early efforts to collect member airports’ economic information date back to 1995. From 1997, ACI has been regularly publishing its then-called Airport Economics Survey, which had gradually evolved into what is known as Airport Economics Report, based on Airport Key Performance Indicators (KPIs).

A decade ago, the questionnaire used to collect economic data of airports underwent a conceptual overhaul—it was restructured into a global survey compatible with the predominant accounting standards and airport-specific accounting nomenclature. Since then, coupled with a growing sample of airports, the Airport Economics Report and the associated KPIs evolved into an authoritative and globally recognized source of information on the economic performance of airports.

From stability and predictability to COVID-19 uncertainty

To give some brief background, in the last 25 years, the airport industry faced several shocks of various magnitude impacting its economic performance, but the two most noticeable events were the September 11 attacks of 2001 and the Global Financial Crisis of 2007-2008.

After the financial crisis, the industry recovered swiftly and experienced a golden decade of robust growth, measured in terms of traffic development, financial performance, capital projects, and other less obvious aspects such as innovation and service quality, among others.

Year after year, ACI had been reporting stability in the majority of the airport economic indicators: after careful accounting for traffic variations, inflation and exchange rates, both revenues and costs demonstrated consistency. It was perceived as a sign of industry maturity on one hand, but also a sign of various constraints and market forces shaping airport performance on the other hand.

The COVID-19 pandemic and the associated full-scale global transportation crisis, however, profoundly disrupted the normal picture of things. In this regard, the 2021 ACI World Airport Economics Report based on the financial year 2019, with data from over 950 airports of all sizes and business models in all the world’s regions, representing 81% of worldwide air traffic, is a truly pre-COVID-19 representative picture of the industry. This report will serve as a landmark reference manual offering the last pre-COVID-19 portrait of the industry and will be used as a the most authoritative benchmark to assess the recovery – and transformation – of the airport business.

Economic fundamentals of the industry remain strong

According to all recent issues of the Airport Economics Report and the 2021 Edition of the Airport Economics Report in particular, the airport industry demonstrates strong economic fundamentals. On the aggregate level, the industry generates sufficient revenues to cover its operating expenses and capital costs, thanks to the non-aeronautical side of the business and a wide range of diversified commercial activities. With EBITDA hovering around 50%, net profit margin at 18.5%, all liquidity and solvency measures meeting the covenants, the industry generates 6.6% return on invested capital, in line with its cost of capital.

The key performance highlights of the airport industry before the COVID-19 crisis are as follows:

  • Global industry revenue year-over-year growth (2019/2018): 1.4%
  • Global industry revenue: US$180.9 billion
  • Revenue per passenger year-over-year growth (2019/2018): –1.1%
  • Distribution of global revenues: aeronautical (54%), non-aeronautical (40.2%) and non-operating (5.7%)
  • Global airport revenue per passenger: US$18.49
  • Global aeronautical revenue per passenger: US$9.99
  • Global non-aeronautical revenue per passenger: US$7.44
  • Total cost per passenger: US$14.11
  • Ratio of aircraft-related to passenger-related charges: 37:63
  • Distribution of non-aeronautical revenue by key source: retail concessions (26.4%), car parking (20.9%) and property and real estate income or rent (15.2%)
  • Operating expenses to capital costs ratio: 65.4% to 34.6%
  • Largest operating expense categories: personnel expenses (34.5%) and contracted services (26%) – the combination of labor costs gives 60% in the operating expenses structure.
  • Global debt-to-EBITDA ratio: 4.39
  • Global return on invested capital (ROIC): 6.6%

As airport competition has intensified, aeronautical revenue generated from airport charges per passenger remained stable, increasing at the same pace as global air transport demand which is a clear demonstration that the calls for tighter and rigid economic regulation of airport charges are unfounded.

The industry remains committed to a sustainable recovery

The impact of the COVID-19 crisis removed more than 1 billion passengers for the whole year 2020 compared to the projected baseline (pre-COVID-19 forecast for 2020), representing a decline of 64.6% of global passenger traffic. Compared to 2019 level, the decline is recorded at 63.3%. In other words, just for the year 2020, the pandemic erased about two-thirds of traffic and the same level of revenues, equivalent to 125 billion USD.

The outlook for the year 2021 is not bright either: the impact of the COVID-19 crisis is forecast to remove additional 4.7 billion passengers by year end 2021 compared to the projected baseline (pre-COVID-19 forecast for 2021), representing a decline of 47.5% of global passenger traffic.

The impact of the COVID-19 crisis on airport revenues will still be deeply felt in 2021. It is estimated that globally, airports will suffer the loss of more than $94 billion (figures in US Dollars) of revenues by year end of 2021 cutting in half airport revenue expectations (-50.0%) compared to the projected baseline (-48.1% compared to 2019 level).

Considering this, the airport industry is being derailed from its business-as-usual direction. It will take several years to come back to its equilibrium. As the financial sustainability of the airport industry is under threat, it is important that airports get additional flexibility in terms of implementing commercial agreements and economic incentives with their airline partners.

Nevertheless, the airport community is cognizant of the indispensable role of airports in the recovery of air transport and the broader global economy. Equally important, airports are committed to the United Nations Sustainable Development Goals (UN SDGs), and the sustainable recovery of the industry.

Drawing on a combination of measures including cost containment, state aid, cost-effective innovative solutions and enhanced dialogue and coordination between all players of the aviation ecosystem, the industry aspires to recover to its normal state as soon as feasible.

ACI will continue collecting and analyzing the economic data of airports, track the recovery trajectory of the industry and inform the aviation community accordingly.

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Ilia Lioutov

Ilia Lioutov

Director, Economics and Policy, ACI World
Ilia Lioutov is an air transport economist with in-depth expertise in economic and financial performance of airports. Lioutov is instrumental in developing ACI World policies in the domains of economic regulation and aeronautical charges, privatization and public-private partnerships, taxation, capacity development and slot allocation. His core responsibilities include formulating advocacy strategies at national and international level and representing the airport industry interests within political, economic and regulatory institutions. In addition to advocacy, industry representation and stakeholder management, Lioutov has an extensive analytical background and is a contributor to the flagship ACI publications including the Airport Economics Report, World Airport Traffic Report and the series of policy briefs on various topics including private sector participation, airport networks, economic impact assessments, taxation and industry crisis management.
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