In the spotlight: Economics & finance

Airport report: Denver International

IT innovation: Improving the bottom line
Plus: People matters & Project watch

Investing in airports

FebruaryMarch 2015
Volume 20 Issue 1
www.aci.aero

OPINION
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Airport World
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Joe Bates +44 (0) 20 8831 7507
joe@airport-world.com
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Airport World is published six times a year

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In it for the
long-haul

Editor, Joe Bates, reflects on Airport Worlds 20th anniversary,

healthy investor interest in airports across the globe and looks
forward to the Airport Economics & Finance Conference in London.

hen I first walked into the

Airport World office in the
autumn of 2000, I would have
laughed out loud if youd told
me Id still be here more than 15 years later
and celebrating the 20th anniversary of the
magazine with everyone this year!
It wasnt that I didnt plan sticking around
publisher, Jonathan Lee, is my only other
colleague to remain from that day I just
didnt think that the airport industry was
exciting enough to keep me in the job that
long. I was clearly wrong as aviation remains
one of the most dynamic, ever evolving and
talked about industries in the world today,
and I am truly glad to be part of it.
Im also happy to say that the content of
Airport World continues to deliver the same
winning mix of analysis and discussion.
Indeed, this economics & finance
themed issue contains outstanding
articles on airport business models,
privatisation projects and the A to Z of
global airport operators.
Other quality features include an
in-depth focus on developments at Denver
International Airport, delivering value
through IT, airport leadership and Mexico
Citys planned new gateway.
Looking to the future, I hope you will help
us continue to raise the bar in 2015 by
becoming more involved with your favourite
airport magazine. After all, we want to
deliver the content you want most, so dont
be shy in coming forward with feedback and
suggestions for future articles.

Id also like to hear from you if you

have any particular favourite Airport
World story from the past that we could
possibly re-visit in our special 20th
anniversary issue later this year. I know
I have mine!
And dont forget that Airport World
is a great way to deliver your message
to the market as we are the only ACI
magazine with a truly global readership
5,000 copies are mailed to nearly 600
members operating 1,860 airports across
the planet every other month while our
bi-weekly newsletter is mailed to more
than 10,000 subscribers.
We value your interest in Airport World
as much as we do your input and support.
As you will discover in this issue,
interest in investing in airports either
through buying an equity stake in the
existing airport operator, completing a
PPP transaction or winning a new operating
concession or management contract
appears to be on the rise again.
Indeed, a consortium spearheaded
by Frances Aroports de Paris (ADP)
and VINCI Airports was awarded the
concession to operate Santiagos Arturo
Merino Bentez International Airport as
Airport World went to press!
All in perfect timing for ACIs Airport
Economics & Finance Conference in
London (25-27 February), which
promises to be bigger and better than
ever before.
I look forward to seeing you there. AW

AIRPORT WORLD/FEBRUARY-MARCH 2015

CONTENTS

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Issue 1
Volume 20

In this issue
3 Opinion
Editor, Joe Bates, reflects on Airport Worlds 20th anniversary, healthy investor interest
in airports across the globe and looks forward to the Airport Economics & Finance
Conference in London.

8 ACI news
11 View from the top
ACI Worlds director general, Angela Gittens, discusses the trend toward public-private
partnerships and the resultant need for key performance indicators and benchmarks.

12 Hitting new heights

Denver International Airport has been winning friends and influencing people for 20 years
now and its ambition to do better shows no sign of slowing down, writes Graham Newton.

17 Big business
The 2014 ACI Airport Economics Report shows that airport revenues remained stable
despite the fragile state of the global economy, writes economics director, Rafael Echevarne.

20 The buying game

Mark Weighell and Simon Morris provide their thoughts on some of the key
airport transactions of 2014 and speculate what the year ahead might hold for sales
and acquisitions.

AIRPORT WORLD/FEBRUARY-MARCH 2015

CONTENTS

Director General
Angela Gittens
Chair
Fredrick J Piccolo (Sarasota, USA)
Vice Chair
Declan Collier (London, UK)
Immediate Past Chair
Yiannis Paraschis (Athens, Greece)
Treasurer
Stefan Schulte (Frankfurt, Germany)
ACI WORLD GOVERNING BOARD
DIRECTORS
Africa (3)
Pascal Komla (Lom, Togo)
Bongani Maseko (Johannesburg, South Africa)
Robinson Misitala (Livingstone, Zambia)

22 The A-Z of global airport operators

Who owns and operates the worlds airports? Joe Bates investigates and talks to some
of the key players involved.

37 Business resilience
Airports need to develop business models that plan for uncertainty and prepare for
change to succeed in todays operating environment, writes LeighFishers
Andy Carlisle.

40 Delivering value through IT

Constantly evolving technology presents new opportunities for airports to improve the
bottom-line, writes Amadeus Julien Dersy.

43 Project watch
New Mexico City International Airport.

45 ACIs World Business Partners

46 People matters
Dr Richard Plenty and Terri Morrissey provide their thoughts on: The psychology
of risk management.

Asia-Pacific (8)
Dennis Chant (Gold Coast, Australia)
Kenichi Fukaya (Tokyo, Japan)
Saud AR Hashem (Jeddah, Saudi Arabia)
Seow Hiang Lee (Singapore)
Kerrie Mather (Sydney, Australia)
Emmanuel Menanteau (Phnom Penh, Cambodia)
PS Nair (Delhi, India)
New appointment pending
Europe (7)
Declan Collier (London, UK)
Arnaud Feist (Brussels, Belgium)
Michael Kerkloh (Munich, Germany)
Tonci Peovic (Bol, Croatia)
Stefan Schulte (Frankfurt, Germany)
Sani Sener (Istanbul, Turkey)
Jos-Manuel Vargas (Madrid, Spain)
Latin America & Caribbean (3)
Fernando Bosque (Guadalajara, Mexico)
Martin Eurnekian (Buenos Aires, Argentina)
Hctor Navarrete Muoz (Merida, Mexico)
North America (7)
Thella Bowens (San Diego, USA)
James Cherry (Montral, Canada)
Fredrick J Piccolo (Sarasota, USA)
Mark Reis (Seattle, USA)
Maureen Riley (Salt Lake City, USA)
Tom Ruth (Edmonton, Canada)
William Vanecek (Buffalo, USA)
Regional Advisers to the
World Governing Board (8)
Aaron Adderley (Hamilton, Bermuda)
Haluk Bilgi (Tunis, Tunisia)
Howard Eng (Toronto, Canada)
Deborah Ale Flint (Oakland, USA)
Tan Sri Bashir Ahmad Abdul Majid (Kuala
Lumpur, Malaysia)
Andrew OBrian (Quito, Ecuador)
Zouhair Mohamed El Oufir (Rabat, Morocco)
1 vacancy (Europe)
Observer
World Business Partner Board Chairperson
Greg Fordham (Airbiz)
Correct as of February 13, 2015

CELEBRATING 20 YEARS OF AIRPORT WORLD

ACI WORLD NEWS

World in motion
ACI reaffirms its commitment to excellence in airport operations and passenger satisfaction.

CI started 2015 with a re-launch of its Airport Service Quality

(ASQ) programme, a passenger service benchmarking tool for
airports worldwide.
To date, ASQ has helped over 300 airports from around the world
benchmark and improve their passenger experience.
This exciting new phase of the programme will see ACI co-operate with
a new service provider, TNS Canada, part of the Kantar Group, one of the
worlds biggest market research providers.
Across the globe, passengers are demanding higher levels of service.
Likewise, regulators are paying closer attention to airport service provision
and quality of service delivery. Competition among airports has reached new
heights as structural and ownership changes bring new stakeholders and
business models into the industry.

The backbone of the programme is the ASQ Survey. Each year, some
550,000 passengers worldwide participate in the survey. Passengers at
ACI member airports participating in the ASQ programme are surveyed
about their on-the-day experience for a minimum of 1,400 passenger
surveys per year.
The ASQ Survey covers 34 key service areas and includes eight major
categories such as access, check-in, security, airport facilities, food and
beverage, retail and more.
All participating airports use the same survey questions, creating an
industry standard set of responses that allows participants to track and
analyse their performance, as well as benchmark results against airports
across the globe. All participating airports can view the ASQ survey results
of all other participating airports on a confidential basis.

More than ever, ASQ is a programme designed with member and

passenger needs in mind. Im looking forward to seeing the
positive change the initiative continues to make in the passenger
experience over the coming months and years

Angela Gittens, ACI director general
Gone are the days when airports were merely points of departure and
arrival. Today, airports are complex, multi-functional travel centres offering
a wide range of services. Indeed, many have non-aeronautical revenues
reaching 50% of total revenues.
Airports have become key drivers of social and economic progress in
cities, regions and countries the world over.
In this fast-changing landscape, ASQ is the key to understanding how
to increase passenger satisfaction and improve business performance.
ASQ research is in place in airports that serve more than half the worlds
6.6 billion annual passengers and provides unique insight into:
which services passengers are demanding;
how passengers rate an airports delivery of those services;
how passengers demands are changing over time; and
how airports compare to each other in a specific market or around
the world.
To make the ASQ programme fully responsive to member needs, ACI
has formed an ASQ Steering Group to guide the rollout and an Advisory
Group to generate new ideas and best practices for passenger service
research and benchmarking.
The revamped programme now features new interactive online
deliverables, including a sample plan management tool; quarterly
sample plans; an online reporting portal to deliver tailored and
dynamic analyses; enhanced static reports; better data quality
control and audit processes; and increased programme transparency
and reliability.

CELEBRATING 20 YEARS OF AIRPORT WORLD

Benchmarking allows participants to compare their airports performance

against industry best practices. Through the use of key performance
indicators, participants see where their airport under and over performs;
where improvements are required; and where investment is most likely to
deliver the biggest return.
Benchmarking offers a broad range of benefits, allowing participants to:
get an independent perspective on performance;
identify areas of opportunity;
understand passengers needs, priorities and expectations;
prioritize improvement opportunities;
set and monitor performance expectations; and
manage change effectivly
Benchmarking is one of the most powerful tools available to give airports an
understanding of their current situation, and to point the way to
improvements. Indeed, the ASQ Survey is the leading passenger satisfaction
benchmarking programme in the airport industry today.
ACIs commitment to representing our members best interests
underscores everything we do, and the improved ASQ programme is an
excellent example, enthuses ACI Worlds director general, Angela Gittens.
More than ever, this is a programme designed with member and passenger
needs in mind. Im looking forward to seeing the positive change the initiative
continues to make in the passenger experience over the coming months and years.
The enhanced ASQ programme has already been rolled out at airports
around the world, with more expected to participate in the weeks and
months ahead.

ACI WORLD NEWS

ACIevents

2015
February 25-27
ACI Airport Economics
& Finance Conference
& Exhibition
London,
United Kingdom

2015
August 31-Sept 2

ACI World and Latin
America & Caribbean
Annual Conference &
Exhibition
Panama City, Panama

2015

2015

2015

April 27-29

June 24-26

September 16-18

ACI Asia-Pacific
Assembly, Conference
& Exhibition
Amman, Jordan

ACI Europe General

Assembly, Congress &
Exhibition
Prague, Czech Republic

The Trinity Forum

Hong Kong,
China

ACIoffices
ACI World
Angela Gittens
Director General
PO Box 302
800 Rue du Square Victoria
Montral, Quebec H4Z 1G8
Canada
Tel: +1 514 373 1200
Fax: +1 514 373 1201
aci@aci.aero
www.aci.aero

ACI Fund for Developing

Nations Airports
Angela Gittens
Managing Director
Tel: + 1 514 373 1200
Fax: +1 514 373 1201
acifund@aci.aero

ACI Africa
Ali Tounsi
Secretary General
Casablanca, Morocco
Tel: +212 660 156 916
atounsi@aci-africa.aero
www.aci-africa.aero

ACI Latin America & Caribbean

Javier Martinez Botacio
Director General
Panama City, Panama
Tel: +507 238 2691
jmartinez@aci-lac.aero
www.aci-lac.aero

ACI Asia-Pacific
Patti Chau
Regional Director
Hong Kong SAR, China
Tel: +852 2180 9449
Fax: +852 2180 9462
info@aci-asiapac.aero
www.aci-asiapac.aero

ACI Europe
Olivier Jankovec
Director General
Brussels, Belgium
Tel: +32 (2) 552 0978
Fax: +32 (2) 502 5637
danielle.michel@aci-europe.org
www.aci-europe.org

ACI North America

Kevin Burke
President & CEO
Washington DC, USA
Tel: +1 202 293 8500
Fax: +1 202 331 1362
postmaster@aci-na.org
www.aci-na.org

As of January 2015, ACI accounts for 590 regular members operating 1,850 airports in 173 countries. In 2014, airports worldwide welcomed 6.6 billion
passengers and handled 100 million metric tonnes of cargo and 83 million aircraft movements. ACI is a non-profit organisation whose prime purpose is
to advance the interests of airports and to promote professional excellence in airport management and operations.

AIRPORT WORLD/FEBRUARY-MARCH 2015

ACI VIEWPOINT

View
from the top
ACI Worlds director general, Angela Gittens, discusses the trend toward public-private
partnerships and the resultant need for key performance indicators and benchmarks.

ver the past 20 years, airports have evolved from being

simply public-sector infrastructure providers into
sophisticated, business-oriented service providers.
This transformation has occurred mainly as a result of
the realisation by governments around the world that airports are
major engines of socio-economic growth for the territories they serve
and that with the right management in place, airports can be run
efficiently and in many instances be self-sufficient.
An increasing number of countries are calling on the private
sector for the development of aeronautical infrastructure, be it in the
form of outright privatisations or public-private partnerships (PPPs).
In order to attract this much needed investment, economic
regulatory interventions should be minimal; moreover, the right
economic regulatory incentives should be in place to ensure
investment in airport infrastructure.
The direct and indirect costs associated with airport regulation
can be considerable, particularly when regulation is applied to
already competitive markets.
The regulatory format applied should seek to minimise the costs
to all parties while maximising the potential benefits. This can be
achieved by the regulator standing back and allowing the market
participants to determine an acceptable outcome for themselves.
The regulator has the power to step in to avoid any abuses, but
otherwise has an oversight role.
Markets can change rapidly and future requirements are unknown.
Airport regulation should not be locked in to one approach but rather
be flexible to changing market and economic conditions. Finally, the
ultimate purpose of economic regulation is to protect the interests of
the end user, the consumer that is passengers and shippers.

For the owner, the challenge is to transparently determine that

those interests are indeed being protected through the use of key
performance indicators (KPIs) and benchmarks. This is not simple
since airports are such specific, local entities, even while they serve
the global marketplace.
As we say, when youve seen one airport, you have seen one airport.
Nonetheless, governments must know how asset holders perform.
For its part, ACI continues to provide member airports with KPIs
through an exhaustive statistical analysis of the data it collects.
Given that airports are complex businesses which operate in unique
and evolving physical, financial and regulatory environments, the
use of international benchmarks provides quantifiable barometers
of industry activity.
As we look toward to the seventh Annual ACI Airport Economics
& Finance Conference & Exhibition organised this year in
co-operation with the World Bank ACI World is working hard
on this years edition of its Airport Economics Report.
As always, the report covers indicators across many areas, ranging
from financial performance and employee and fixed asset productivity
to airport operations, as a means of giving airports the edge they need
to compete in a highly complex and fast-changing industry.
By the same token, this issue of Airport World contains its own
range of useful information, from an A to Z report on global airport
operators and an article on changing airport business models
written by LeighFishers Andy Carlisle to a round-up of the latest
privatisation deals across the globe and much more.
I hope you enjoy the business intelligence contained herein and
I look forward to seeing you at the ACI Airport Economics and Finance
Conference & Exhibition.
AW

AIRPORT WORLD/FEBRUARY-MARCH 2015

11
11

AIRPORT REPORT: DENVER

Hitting new heights

Denver International Airport has been winning friends and influencing people for 20 years
now and its ambition to do better shows no sign of slowing down, writes Graham Newton.

hen Denver International Airport (DIA) opened in February

1995 its Fentress-designed peaked roof reminiscent of
the surrounding snow-capped mountains drew admiring
glances from passengers and aviation insiders alike.
The aesthetic appreciation soon gave way to more practical matters
but again DIA hit its mark. Airline clients talked openly of the most
efficient airport in the US system.
Twenty years on, DIA is intent on maintaining the feel-good factor.
CEO, Kim Day, admits that the iconic facility brings with it a
responsibility to plan wisely and build to a quality and design that
complements and enhances the existing architecture.
Denver International Airport was built with growth in mind, she
says. The airport has 53 square miles of land, making it the second
largest physical airport in the world. At full build-out the airport can
grow from its current six-runway design, serving 53 million passengers
a year to 12 runways, serving 100 million passengers a year.
A stepping stone on the path to this ultimate build-out is the Hotel
and Transit Center Program. Part of the original vision for the airport,
this includes three independent, yet physically integrated, projects:

12

CELEBRATING 20 YEARS OF AIRPORT WORLD

The 519-room Westin Denver International Airport Hotel, which

will include a 26,000 square foot conference centre for up to
2,500 people. It opens at the end of 2015.
A public transit centre serving the regional bus system and the new
commuter rail line connecting Denver International Airport to
downtown Denver in about 35 minutes. Service begins in early 2016.
A 82,000 square foot open air public plaza, an urban space at the
airport, which will be a venue for performances and exhibits as
well as a location for relaxation and dining.

The design of the Hotel and Transit Center provides wonderful new
amenities for passengers and a great location for corporate meetings,
enthuses Day.
The hotel is designed to create a dynamic, urban feel that
maximises views of the city, the Rocky Mountains, the airfield and
Jeppesen Terminal while providing connectivity to the airport.
Meanwhile, the downtown rail connection has been described as
a game-changer and recaptures the convenience more associated
with Denvers former airport, Stapleton.

AIRPORT REPORT: DENVER

Our location makes us appealing for companies that may
want to distribute products throughout the US and the world,
says Day. Our sheer size provides the ability for corporations to
scale their operations as they grow. And our non-stop access
to more than 180 locations around the world allows businesses
to extend their reach around the globe.
Together, this region can serve the needs of any business
that wants to take advantage of the connectivity of metro Denvers
air and ground transportation system, highly motivated and
well-educated workforce, and business-friendly environment.

The passenger experience

As for the public plaza, that will add to the ever-improving

passenger experience. It is designed to be an accessible and welcoming
venue for arts and entertainment, integrating DIA into the community
like never before and providing a true city experience at the airport.

Land of opportunity
DIA is taking that city experience concept seriously. The airport has
more land for commercial development than any other airport in
North America. This gives us a big competitive advantage and
opportunities for sustainable economic growth that most airports in
the world envy, Day notes.
In the near-term, about 10% of this land contains the infrastructure
needed for aviation-centric, mixed-use development that might include
hotels, logistic centres, training facilities, office, retail and industrial
projects. We also have two additional commuter rail stations under
construction that are ideal for true transit-oriented development.
Until now, this potential development has been referred to as Airport
City Denver. But the terminology is changing and the airports land
development programme will in future be known as DEN Real Estate.
The focus remains the same though leveraging the airports
extensive land, geographic location, global connectivity and regional
assets for economic development and aeronautical growth.

At the heart of DIAs appeal is the passenger experience.

Winning customers hearts and minds means listening to what
they want and continuing to seek innovative ways to engage
with them.
The airport has already responded to an array of desires.
Developments at DIA range from improved Wi-Fi coverage to a
five-gate expansion on Concourse C for Southwest Airlines.
The new Southwest space features integrated technology iPads
can be used to order beverages, receive concierge service, check
e-mail and review flight status. Improved seating includes electrical
outlets, cup holders and individual tables.
Another element in enhancing the customer experience is the
transformation of the airports shopping and dining options. In
September and early October 2014, DIA hosted a Beer Garden at the
heart of the Jeppesen terminal, allowing travellers and airport patrons
to sample local draft beer. The plan is to repeat this annually.
A total of 21 new shopping or dining locations opened last year.
The food options range from a table awarding-winning restaurant,
Root Down, to Steves Snappin Dogs, a family-owned local favourite
offering a wide variety of hotdogs and burgers. Other new venues
include Elways, a fine dining establishment, Cru food and wine bar
and a health food option in Etais Bakery Caf.
Our food offerings have not only got better, they have got
better for you, Day enthuses. What used to be a smattering of fast
food options has transformed into a wide range of dining destinations
that offer new local tastes alongside established national brands.
We earned the number one ranking for healthiest airport food in the
country from the Physicians Committee for Responsible Medicine.
Improved nutrition may gave give customers renewed energy for
shopping. Recent retail additions include MAC Cosmetics, TulehRuche,
ExpressSpa, the Tattered Cover bookstores and Final Approach. The
latter facility has reimagined the cell phone waiting lot by offering
food, fuel, a childrens area, flight information boards and free Wi-Fi.

Traffic trends
Passenger traffic at DIA hit an all-time high in 2014 when a record
53.4 million (+1.7%) people passed through its facilities. Indeed, the
airport set new monthly records for passenger throughput in January,
February, April, May, September and October and saw the launch of
new services to destinations such as Tokyo and Panama City.
Days enthuses: We will continue to build on this momentum as we
work to add new destinations, better customer amenities and services
that ensures Denver International Airports place on the world map.
The total cements its status among the top five busiest airports in
the US and top 20 globally for passenger traffic.

AIRPORT WORLD/FEBRUARY-MARCH 2015

13

AIRPORT REPORT: DENVER

Face of the future: Denvers new HTC. Image courtesy of Gensler/Ryan Gobuty.

14

On the right track

Healthy finances

DIAs planned new $544 million Hotel and Transit Center (HTC) is often
referred to as being the new front door for the Jeppesen Terminal.
According to lead designer Gensler, when the HTC opens, visitors
will enter the terminal through a partly covered outdoor public plaza
that will attract locals as well as passengers as it hosts a variety of
facilities and special events.
Among the possibilities are farmers markets, concerts, and even
small sporting events, all of them designed to draw people, including
the people who live in the city and region, out to the airport, says
Genslers Denver based design director, Brent Mather.
Surrounding and rising above the plaza will be a 519-key Westin
Hotel and Conference Center offering spectacular views of the Rocky
Mountains, a rooftop pool and two restaurants, both of which will have
a distinct Denver feel.
Mather reveals that beneath the plaza via a four-story escalator is
the nerve centre of the whole development the terminus of the new
East Rail Line connecting DIA to downtown Denver. That rail line will
open in 2016.
A soaring glass-and-steel train canopy establishes a sense of place
and engages the hotel conference centre. Adjacent to the train hall is a
pick-up and drop-off for regional and local buses, enthuses Mather.
While any one of those elements is impressive, the sum total
and bigger picture is more potent: Denver is now bringing its airport
into the urban fold.
The vision and concept for the new HTC has always been one:
to melt those 20 miles between city centre and airport and create
a terminal that is a springboard to downtown Denver and a travel
destination unto itself, albeit one that is very much of Denver.
Gensler is the lead designer on the HTC project, which is being
managed by Parsons, and involves the participation of more than
116 different companies.
They include Anderson Mason Dale Architects (associate architect);
Iron Horse Architects (associate architects), SA Miro (structural
engineers) and Mortensen (hotel construction) as well as a vast team
of consultants such as Gresham Smith & Partners (graphic signage
design), URS Corporation (special systems), Hughes Engineering
(fire protection) and Ambient Energy (sustainability).

A number of factors has helped Day manage the plethora of

developments at DIA. Arguably most important is the airports
strong financial position.
Our financial strength has benefitted from extensive
planning and the strong passenger growth we have seen over
the past four years, which has helped us to outperform the
objectives we established in our 10-year financial strategy,
Day informs.
Our long-term plan focuses on balancing three primary
metrics (cost per enplaned passenger, cash on hand and debt
coverage) while funding ongoing maintenance and facility
upgrades. We work hard to maintain competitive operating
costs for our airline partners.
Our plan also supports the airports need to adapt to
changing markets and economic climates. We established targets
against which we can manage and measure performance.
She also places emphasis on the airport leadership team,
empowering and encouraging them to outperform their own
vision of their abilities.
According to Day, a key part of her job is to keep them
focused on the overall strategic vision of the city and the airport,
while providing them with the resources to accomplish their
individual strategic and tactical plans.
I try not to micro-manage, while keeping a pulse on the
details of individual initiatives, she says. That is a difficult
rope to walk, but I think it is vital. I also think personal touches
like handwritten notes, face-to-face conversations and birthday
cards sent to all employees homes help to create a culture of
caring and collaboration, and makes individuals at all levels
of the organisation feel a part of something bigger, inspiring
them to contribute.
Externally, Day notes the imperative to build a relationship
of transparency and trust with the Mayor (Days boss), the city council,
other elected officials and the overall business community.
As a public agency, it is important to maintain the public
trust, by making fair and ethical decisions in all that we do,
she concludes.
AW

CELEBRATING 20 YEARS OF AIRPORT WORLD

SPECIAL REPORT: ECONOMICS

SPECIAL REPORT:
& FINANCE
A-Z

Big

business
The 2014 ACI Airport Economics Report shows that airport revenues remained stable despite
the fragile state of the global economy, writes economics director, Rafael Echevarne.

espite economic uncertainties and the downside

risks that have persisted across the worlds markets,
global airport revenues have remained largely
unperturbed based on results for the 2013 financial year.
Indeed, aeronautical income, non-aeronautical income
and non-operating income the three components of a typical
airports income stream all experienced sound growth rates
in 2013 compared to the previous year.
In essence, growth in key emerging market airports
has circumvented the slowdown in the Eurozone and other
more mature markets.
Industry income as a whole grew by 5.4% over 2012,
reaching $131 billion in 2013 (See table below). On a regional
basis, European airports hold the greatest proportion of
global airport income (38%). This is followed by Asia-Pacific
(28%) and North America (22%).
Although Europe occupies a significant proportion of
the worlds airport revenues, it has experienced the weakest
growth in overall revenues at 2.3% year-over-year. In particular,
with the Euro-area downturn, non-aeronautical revenues
decreased by 3.5%. Notwithstanding, the region also experienced
a decrease in total costs by 3.2%.

As expected, the regions with the highest growth in revenues

also have the highest growth in passenger traffic. Asia-Pacific,
the Middle East and Latin America-Caribbean saw overall
revenues increase by 11.8%, 11.6% and 6.8% respectively.
However, the growth in costs varies markedly from one
region to the next. The Latin America-Caribbean region recorded
the greatest gains in total costs from 2012 to 2013.

Distribution of aeronautical income (2013)

Ground handling*
4%

Other*
13%
Passenger Charges
42%

Terminal rentals
12%
Landing charges
21%

Source: ACI Airport Economics Survey (2015).

Estimated industry revenues and costs (millions of US dollars)

Total revenue

2013/2012
% change

Aeronautical
revenue*

2013/2012
% change

Nonaeronautical
revenue**

2013/2012
% change

Total cost
(operating +
capital costs_

2013/2012
% change

Africa

2,900

3.9%

2,100

11.3%

800

-6.8%

2,100

-3.9%

Asia-Pacific

37,000

11.8%

18,800

12.9%

18,200

10.7%

25,800

6.2%

Europe

49,800

2.3%

30,100

6.1%

19,700

-3.2%

42,100

-2.5%

Latin AmericaCaribbean

7,000

6.8%

4,400

5.5%

2,600

9.3%

5,100

11.4%

Middle East

8,700

11.6%

4,400

5.7%

4,300

18.4%

7,400

6.4%

North America

25,500

4.4%

13,900

0.6%

11,600

9.6%

22,700

4.2%

130,900

5.4%

73,700

5.9%

57,200

4.9%

106,500

1.9%

World

*Includes ground handling income **Includes non-operating income

AIRPORT WORLD/FEBRUARY-MARCH 2015

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Distribution of non-aeronautical income by region (2013)

Africa

Retail
concessions

Car
parking

Real estate
Rental car
income or rent concession

44%

15%

18%

Food &
Beverage

Advertising

Utility
recharges

Fuel & oil

Aviation catering
service

Other

1%

8%

3.7%

1.3%

0.3%

5%

4%

Asia-Pacific

33%

8%

23%

1%

3%

4%

3.4%

1.4%

0.4%

22%

Europe

35%

15%

19%

2%

5%

2%

5.6%

0.8%

0.3%

16%

Latin AmericaCaribbean

25%

9%

14%

3%

6%

5%

1.7%

3.5%

0.5%

33%

Middle East

49%

8%

11%

2%

5%

3%

2.7%

7.0%

1.4%

12%

North America

World

8%

39%

13%

17%

7%

6%

0.0%

0.0%

0.0%

9%

27%

20%

18%

6%

5%

4%

3%

1%

0.3%

16%

*Includes car parking concessions revenue and revenue from airport-operated parking lots.

Aeronautical revenue
The ratio of aircraft versus passenger-based income by
region varies significantly across the regions, with airports
in Europe, Latin-America-Caribbean and the Middle East
gaining a high proportion of their revenues from
passenger-related charges, while North America has a more
equal ratio of one income source versus the other.
On the whole, there is greater reliance on passenger-based
revenues, which accounted for 66% of the two types of
aeronautical revenues in 2013, down slightly from
69% the previous year.
The pie chart on the previous page provides a detailed
breakdown of aeronautical income at a global level beyond
passenger and aircraft-related charges, although these
charges represent a combined 63% of all aeronautical revenues.
Terminal rentals paid by airlines for space utilisation
account for almost 12% of global aeronautical income and
are mainly limited to North America.

Source: ACI Airport Economics Survey (2015).

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Retail concessions

Advertising

Car parking *

Utility recharges

Real estate income or rent

Fuel and oil

Rental car concession

Aviation catering service

Food and beverage

Other

* Includes car parking concessions revenue and revenue

from airport-operated parking lots.
Source: ACI Airport Economics Survey (2015).

Non-aeronautical revenues
Non-aeronautical sources of income, of course, not only
provide diversification in an airports income portfolio but
also serve as an additional cushion during economic downturns.
And because aeronautical revenues do not always cover the
costs of running an airport, non-aeronautical revenues are a
vital component of the airports income statement and,
ultimately, its bottom line.
Retail concessions remain the leading source of
non-aeronautical income for airports, representing 27% of
non-aeronautical income. Car parking income and property
income/rent, follow retail concessions as the leading secondary
sources of income at 20% and 18% respectively (See pie
chart right).
The table above provides the regional breakdown of nonaeronautical income by source. The Middle East has the highest
proportion of non-aeronautical income attributed to the leasing
of or revenue-sharing from retail concessions.
North America continues to be the world leader in
generating revenue from car parking services at 39%,
whereas Asia-Pacific has the highest proportion of real
estate income or rent, representing 23% of the regions
non-aeronautical revenues.

18

CELEBRATING 20 YEARS OF AIRPORT WORLD

Airport costs
In 2013, the worlds airports incurred estimated total costs
of around $106.5 billion. Operating expenses form 62% of
total costs and capital costs account for 38%, which is not
suprising considering the infrastructure intensive nature of
the aviation industry. The largest expense item reported was
personnel cost accounting for 35% of operating expenses
followed by contracted services (23%), communications,
utilities, energy and waste (8%), administration (7%) and
maintenance (5%).
Depreciation on infrastructure accounts for 60% of capital
costs, with interest expenses representing 36%.
Total costs have increased at a lower rate than overall
revenues. This is favourable for an airport operators bottom line,
as a slight increase in overall margins is achieved for the industry.
On aggregate, the latest global results on airport income
and costs suggest that a certain level of resilience is present
within the industry, particularly among the worlds major
airport operators.
The survey generated responses from 652 airports for the
2013 financial year. Together, these airports handled 4.36 billion
passengers or about 70% of the worlds passenger traffic.

AW

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The buying game

Mark Weighell and Simon Morris provide their thoughts on some of the key airport
transactions of 2014 and speculate what the year ahead might hold for sales and acquisitions.

nvesting in airports appears to be back in fashion. Multiples are

rising, deals continue to conclude successfully, and the global
economy continues to trend upwards. Everythings looking rosy.
It feels like 2007 again, right? Right?
Speaking for ICF Aviation, our transaction advisory business is
busier than it has been for more than five years. Expectations for
2015 are high. The drought of 2009-2012 seems to be behind us.
But, as ever, its not that simple. It is undeniable that investments
in airports are picking up and that should be viewed positively
but the road ahead looks rather bumpy.
The geopolitical situation in the Middle East and CIS remains tense
and uncertain; the BRICs are losing their former lustre; and the
European economy is stagnant and fragile. More about the future later,
first, lets look at some of the highlights of last year.

Hit and misses of 2014

There were a good number of airport transactions successfully
completed during the year, with one of the big success stories being the
sale of a 50% stake in ToulouseBlagnac Airport to the Chinese-led
Symbiose Consortium for a reported 308 million (16 times its EBITDA).
The consortium was widely reported as being solely a Chinese entity
but actually includes the Montral-based construction firm SNC-Lavalin.
Nevertheless, the sale caused some raised eyebrows among industry
watchers and some unease among the French establishment as it
had been widely expected that the asset would end up with either VINCI
or ADP, both bidding and both (possibly crucially) French.
Elsewhere, the contract to build a new terminal building at New
Yorks LaGuardia Airport was slated to be awarded during the summer.
Then the decision slipped to early autumn, then the end of the year.
A result is still awaited.

20

CELEBRATING 20 YEARS OF AIRPORT WORLD

Given recent history, and governor Cuomos recent announcement

of a new rail line to the airport, which would probably change the
economics of the deal, a swift conclusion looks unlikely at best.
The feeling remains that selecting a consortium to replace
LaGuardias outdated Central Terminal Building might (possibly,
hopefully) trigger a wave of privatisations in the United States.
In our view, the capital investment this could release would
renew and reinvigorate a slew of outdated and outmoded assets.
Indeed, it could be transformational: the benefits to strained
state and city finances are obvious; the benefits to the travelling
public though enhanced service levels and a more enjoyable
travelling experience perhaps less so, but in our opinion are
equally important.
Conversely, abandoning the deal, and leaving the bidding
parties with substantial costs, could send a powerful message that
it is simply too difficult to invest in a US airport.
Investors may, for example, view potential issues such as political
interference, sceptical and intransigent airlines and labour unions
and an unappealing regulatory framework as too big a risk to
undertake, especially given the expected upsurge in attractive
investment alternatives elsewhere in the world.
As you might imagine, our fingers remain firmly crossed for a
successful closure of the deal.
Other notable successes in 2014 include the keep-it-in-the-family
sales of Aberdeen, Glasgow and Southampton from Heathrow
Holdings to Ferrovial Aeropuertos.
Similarly, Macquaries Bristol Airport stake went to the airports
co-owner, Ontario Teachers Pension Plan, while Fraport acquired
14 regional airports in Greece, although it wont take over their
operation until later this year.

SPECIAL REPORT: ECONOMICS

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Elsewhere, F2i sold a 49% stake in its airport holding to Ardian

and Credit Agricole, and rumours persist that the new infusion of
capital will prompt a renewed focus from F2i to capture a further stake
in Milan airport operator SEA, currently majority owned by the City
of Milan. We will wait and see.
Multiples in 2014 continued their upward trend. While still below
the values reached during 2005 and 2007 BAA and then HOCHTIEF
must still be wondering how they ended up paying that much for
Budapest the transactions for which we have data had an average
EV/EBITDA of 18x, well above the nadir of 11x following the 2008
economic crisis.
Creeping into January 2015, the concession to operate Billy Bishop
Toronto City Airports passenger terminal was sold to a Canadian
consortium led by InstarAGF Asset Management.
Not an investment for the faint-hearted, the airport is dependent on
Porter, a regional turboprop carrier that was the previous owner of the
terminal building. Porter accounts for 75% of current traffic and the only
other significant operator Air Canada has, at best, an ambivalent
attitude to the airport.

What next in 2015?

In the UK, all eyes are on the Airports Commissions findings on which
of Londons airports should be permitted to build a new runway. After
being established just two short years ago, the recommendation will
be delivered to the UK government during the summer, in the wake
of an election in May.
While the new government would not be bound by the
recommendation, the Commissions independent report should,
we hope, provide sufficient political cover to finally address the
critical shortage of capacity in the south east of England.
Whether the Commission recommends Heathrow or Gatwick as
the recipient of a new runway, long-standing uncertainties would
be resolved and it seems plausible that Global Infrastructure Partners
(GIP) will look to exit one (or both) of their Gatwick and London City
airport investments.
GIP has had part-ownership of the latter since 2005, and currently
enjoys a 75% share. The airport is awaiting planning permission for an
additional pier and adjacent hotel, which should add substantial value
to the asset.

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Buoyed by the success of ToulouseBlagnac, the part-privatisation

of either or both of Nice Cte dAzur or LyonSaint Exupry
airports is a possibility. The relinquishment of the stake in
Toulouse to a foreign consortium should boost interest from
overseas investors.
Athens was a prime contender for the sale of a further tranche
of the governments holdings or for a concession extension. However,
the new government is likely to be firmly opposed to a sale.
The proposed sale of Kansai Airport near Osaka, Japan (pictured
on page 20), has attracted around 20 interested parties.
However, the bid requires significant Japanese equity and we
believe that potential equity providers are wary of aspects of the deal,
and are reluctant to engage seriously with the transaction.
As a result, we believe that the outlined deadlines will probably
be extended.
Elsewhere, transaction activity in India is expected with Chennai
International Airport looking the standout candidate. ManilaNinoy
Aquino International Airport is another strong contender, as are the
larger regional airports in The Philippines.
In Saudi Arabia, a Build-Operate-Transfer concession for a new
airport in Taif is expected to be launched later in the year, continuing
the privatisation programme embraced by the Saudi authorities.
While in the Caribbean, St Lucia and Kingston, Jamaica, are
seeking airport investment. Heading south to Brazil, the federal
government is expected to start a third round of airport privatisations
later this year, with Curitiba, Recife and Cuiab in the frame.
So, despite the economic and political travails in a number
of parts of the world not least the implications of the Greek
election results, and ongoing upheaval in the Middle East we
think the airport world once again looks an interesting and
promising place to invest.
If youre looking at the sector we wish you the best of luck,
AW
although youre unlikely to need it.

About the authors

Simon Morris and Mark Weighell have worked on a number of
privatisation projects over the years. Morris is currently head of ICFs
Airports Practice and can be contacted at simon.morris@icfi.com

AIRPORT WORLD/FEBRUARY-MARCH 2015

21