Managing Airports

Butterworth-Heinemann An imprint of Elsevier Linacre House, Jordan Hill, Oxford OX2 8DP 200 Wheeler Road, Burlington MA 01803 First published 2001 Reprinted 2002 Second edition 2003 Copyright © 2001, 2003, Dr Anne Graham. All rights reserved The right of Dr Anne Graham to be identified as the author of this work has been asserted in accordance with the Copyright, Designs and Patents Act 1988. No part of this publication may be reproduced in any material form (including photocopying or storing in any medium by electronic means and whether or not transiently or incidentally to some other use of this publication) without the written permission of the copyright holder except in accordance with the provisions of the Copyright, Designs and Patents Act 1988 or under the terms of a licence issued by the Copyright Licensing Agency Ltd, 90 Tottenham Court Road, London, England W1T 4LP. Applications for the copyright holder’s written permission to reproduce any part of this publication should be addressed to the publisher Permissions may be sought directly from Elsevier’s Science and Technology Rights Department in Oxford, UK: phone: (+44) (0) 1865 843830; fax: (+44) (0) 1865 853333; e-mail: permissions@elsevier.co.uk. You may also complete your request on-line via the Elsevier homepage (http://www.elsevier.com), by selecting ‘Customer Support’ and then ‘Obtaining Permissions’ British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloguing in Publication Data A catalogue record for this book is available from the Library of Congress ISBN 0 7506 5917 3 For information on all Butterworth-Heinemann publications visit our website at www.bh.com

Typeset by Newgen Imaging Systems (P) Ltd, Chennai, India Printed and bound in Great Britain

Managing Airports
An international perspective
Second edition Anne Graham

AMSTERDAM BOSTON HEIDELBERG LONDON NEW YORK OXFORD PARIS SAN DIEGO SAN FRANCISCO SINGAPORE SYDNEY TOKYO

Contents

List of figures List of tables Preface Acknowledgements Abbreviations 1 2 Introduction The changing nature of airports Traditional airport ownership and management Moves towards commercialization Why privatization? The privatization timetable Types of privatization The globalization of the airport industry Impact of airport globalization on users Airport economics and performance benchmarking Industry profit levels Revenue and cost structures Factors influencing costs and revenues Measuring economic performance Service quality and its measurement Increasing emphasis on quality Measuring the quality of service Service level agreements Level of delays Quality management at airports

vii ix xii xiii xv 1 8 8 10 12 17 18 37 48 54 54 56 59 61 74 74 76 82 85 91

3

4

Contents 5 The airport–airline relationship The structure of aeronautical charges The level of aeronautical charges The impact of aeronautical charges on airline operations The airport regulatory environment Regulation of privatized airports Slot allocation Ground handling issues The US experience A new airport–airline relationship The provision of commercial facilities The importance of commercial facilities The market for commercial facilities Approaches to the provision of commercial facilities The commercial contract and tender process The ending of EU duty.and tax-free sales The impact of 11 September 2001 The role of airport marketing The birth of airport marketing The nature of airport competition Marketing concepts Airport marketing techniques Norwich airport The economic impact of airports The wider picture Airports as generators of economic activity Measuring the direct. indirect. and induced impacts Airports and economic development The environmental impact of airports Growing concerns for the environment The main impacts The role of other transport modes The social consequences Environmental management Sustainability and environmental capacity The impact of 11 September 2001 and future prospects Overall effect on the air transport industry Airport traffic levels Airport financial performance Security issues The insurance problem Future prospects Index 98 98 104 104 111 112 120 126 129 132 140 140 142 149 153 158 163 178 178 180 182 188 199 203 203 204 206 212 219 219 220 229 236 237 245 251 251 253 255 259 264 265 272 6 7 8 9 10 vi .

2001 The world’s 20 largest airports by total passengers.4 2.6 4.9 2.1 1.1 3.7 2.14 3. 1996–7 External capital funding at large US hub airports. 2001 Airport cargo tonnes by world region.11 2.4 3.1 2.6 1.7 2. 2001 Airport aircraft movement by world region. 2000 External capital funding at small US hub airports. 2001 Revenue per WLU for European airports.1 Airport passengers by world region.5 1. 2000 Ownership of Vienna airport until 1992 Ownership of Vienna airport after IPO in 1992 Ownership of Vienna airport after secondary offering in 1995 Ownership of Vienna airport after changes in 2001 Total passengers at Vienna airport. 2000 Total passengers at Amsterdam airport. 2001 Revenue per employee for world airports.2 2.5 2. 2001 WLU per employee for European airports. 2001–02 2 3 3 4 4 4 5 15 15 15 16 16 16 32 32 35 35 38 38 40 44 57 67 67 68 69 70 90 . 2001 The world’s 20 largest airports by air transport movements. 2001 The world’s 20 largest airports by international terminal passengers.6 2. 1989–2001 Organizational structure within the Schiphol Group. 1979–2001 Traffic at Australian airports. 1979–2001 Total revenues – Vienna Airport Group.4 1.Figures 1. 2001 The world’s 20 largest airports by cargo tonnes.10 2.2 1.8 2.12 2. 1996–7 Profitability at Australian airports.5 3. 2000–01 Total factor productivity for world airports. 1989–2001 Profitability – Schiphol Group.2 3. 2002 Financial results of TBI. 1999 Passenger survey results at Brisbane airport.3 1.13 2. 2001 Cost per WLU for European airports.3 2.3 3. 1994–2002 Percentage share of aeronautical revenue at ACI airports by world region.

2001 6. 2001 9. 1990–2002 8.7 Retail space at BAA UK airports.1 Total passengers at Southampton airport.1 105 107 147 147 148 159 163 167 169 171 172 199 201 205 207 210 231 232 233 233 254 268 viii . 2001 6. 1990–2002 6.2 Landing and passenger charges as a share of total costs for UK airlines.5 Non-aeronautical revenue share (%) at European airports.2 Employment at European airports in 1996 8.3 Mode of surface transport used by passengers at London Heathrow airport in 2001 9. 2002–21 5.1 Existing and planned rail links to airports 9.2 Total passengers at Norwich airport.9 Profitability – BAA. 2000 6. 2001 6.1 Non-aeronautical revenue per passenger at ACI airports by world region.2 Concession revenue: Brussels airport.3 Concession revenue: Washington airports.2 Average annual pax-km forecasts of main regional flows.4 Mode of surface transport used by employees at London Heathrow airport in 1999 10. 1992–2000 6.2 Public transport usage by passengers to and from the airport.4 Airport retail revenue per square metre in 2000/2001 6. 1999–2002 6. 1990–2002 7.1 Airport passenger growth by world region since 11 September 2001 10.1 The economic impact of airports 8.Figures Aeronautical charges and taxes for an international B737–800 turnaround in 2002 at world airports 5.3 Employment at Gatwick airport in 1997 9.8 Revenue sources for BAA. 1998–2001 6.6 Profitability – Aer Rianta. 1999–2001 7.

5 2.7 2.1 2. 2002 6 20 22 24 25 29 31 33 44 50 55 56 58 58 64 76 79 80 81 83 84 86 87 .4 2.3 3.4 4.2 2.1 3. 1987–2001 Privatization details of Australian airports TBI’s expansion into the airport business. 1999 GSSs agreed at Manchester airport in 2002 Increasing scheduled journey times at congested airports Delays at major European airports on intra-European scheduled services.8 Growth in passenger numbers at the world’s 20 largest airports Airport privatization through share flotations Airport privatization through trade sales Airport privatization through concession agreements Airport privatization through project finance Ownership patterns at main UK airports.4 3. 1983–2001 Revenue and cost structures at a selection of European airports.6 4.1 2.6 2.5 4.2 3. 2001–02 Airport operating revenue sources Average revenue and cost structures at European airports.Tables 1.2 4.3 2.5 4.1 4.7 4. 1995–2002 PlaneStation airports operated by Wiggins in 2003 Profitability for 30 major airport operators. 2003 Traffic and profitability growth at main UK airports.8 2.3 4. 2001 Performance indicators commonly used to assess economic performance Service standards used by Manchester airport Criteria most frequently used to measure quality of service at ACI airports Summary of QSM scores 2001–02 at BAA London airports Overall passenger satisfaction levels: best performing airports from IATA’s 2001 global airport monitor by size of airport BAA London airport ‘best endeavours’ service level targets.9 3.

2000 Passenger profile at Norwich airport. 2002 Key developments in BAA’s retail strategy in the 1990–2000s Number employed in airport marketing at selected regional airports Alternative low-cost airports within Europe The airport’s customers Factors affecting the choice of airports Passengers reasons for choice of UK airport in 1998/99 Airline and tour operators marketing support costs at Manchester airport.6 7. 1998–2001 New route discounts available at Aer Rianta Airports 2001–03 on passenger.11 5.8 5.2 9.Tables 4.9 5. 2002 Key environmental performance indicators at airports Environmental.7 Proposed service quality elements to be included in the regulation of BAA London airports Survey results of seven major airlines at Brisbane airport.4: 5.2 9. and social expenditure and savings at Heathrow airport. Brisbane. 2001–02 Static quality indicators at Brisbane airport. 2002 Passenger profile at Southampton airport.1 6.and tax-free sales on airport revenues Changes in non-aeronautical revenue at UK airports. Geneva.3: 5. landing.8 7.2 7.7 5. 1998–2001 Aer Rianta’s involvement in international retailing activities.5 5.5 7.10 8.10 4.7 7.5 6.6 7. 2001/2002 Key events in the development of Manchester airport’s second runway Manchester airport’s ‘green charter’ Main environmental indicators used by Copenhagen airport A/S 88 90 91 103 109 109 110 116 117 119 122 123 128 146 157 161 164 166 171 179 181 183 184 185 190 192 197 198 200 211 216 226 234 238 239 241 242 244 x .6 9. 1998–2003 Elements of agreement between Ryanair and BSCA Main catchment areas of London City airport.1 7.9 7. 2000–01 Short-term impact of the loss of intra-EU duty. economic. and parking fees IATA’s criteria for airport economic regulation The ‘X’ value used for the UK airport price caps The ‘X’ value used for the Australian airport price cap for 5 years after privatization in 1997–8 Slot co-ordination status of major airports in the EU Key features of the 1993 EU slot allocation regulation Key features of the 1996 EU ground handling directive The different markets for commercial facilities at airports Concession income at BAA London airports.1 9. and Vienna airports Emission charges at Swedish airports in 2002 Targets and commitments – Heathrow airport surface access strategy.4 6.6 5.3 9.3 7. 1994–9 on airport fees Discounts given to each airline at Aer Rianta airports.2 6.10 6.2 5.5 9. 2001–02 Main aeronautical charges at airports New growth and new route discounts available at Aer Rianta airports.4 7.1 5.9 4.3 6.4 9.1 8. 1999 Employment impacts at European and North American airports Economic impacts at Washington.

2002 IATA forecasts of international scheduled passengers Long-term forecasts of global traffic growth 247 255 257 258 258 260 262 267 267 xi .Tables 9.5 10.8 The impacts of different options for optimizing noise capacity at Amsterdam airport Change in passenger numbers at major European airports since 11 September 2001 Change in financial performance of the US airport industry since 11 September 2001 Change in financial performance at major European airports since 11 September 2001 Share prices of airport companies since 11 September 2001 Important dates for new security measures in the United States.1 10.8 10.4 10. 2001–02 Funding of security at European airports.3 10.2 10.6 10.7 10.

the Iraq War. . in the airport sector. Attitudes towards airports have changed dramatically as their role has shifted from that of public utility to that of a dynamic. By necessity the scope has to be very farreaching and so it cannot offer an in-depth treatment of every issue. The aim of this book is to provide a comprehensive appreciation of the key management issues facing modern-day airport operators. The emphasis here is on the economic. Airport operators are no longer just operating within the scope of their national boundaries. The book uses material from a wide range of airports and has a very practical focus. In addition to facing these important challenges airports have had to cope with the unparalleled consequences of the events of 11 September 2001. or is already working. commercially oriented business. which has witnessed the fastest pace of change. rather than on the detailed operational and technical aspects. An international approach has been adopted reflecting the increasingly international nature of the industry. The book provides an overview of all the key management challenges facing airports. and the whole industry is becoming global. commercial and planning areas at a strategic level. The first edition of this book was published before these developments – hence the reason for this second edition. While most of the case studies are from the developed world. they nevertheless have relevance to airport operators throughout the world. At the same time there is a growing recognition of the need to balance the wider economic benefits that airport expansion can bring with the increased environmental costs. Airports are now complex businesses requiring a range of business competencies and skills.Preface In most of the published literature the airport industry has received relatively little attention and has traditionally been very much overshadowed by the airline sector. the outbreak of SARS and the continuing threat of terrorism. Instead it is intended that the book should enable the reader to acquire a broad and up-to-date insight into the workings of the industry which will meet the needs of anyone who wishes to work.

as I struggled to write the book with numerous other deadlines approaching. During this time I have been very fortunate in meeting a large number of industry professionals who have provided me with invaluable insights into the management of airports. Stan Abrahams formerly from the UK Civil Aviation Authority. and with participants from airport management training programmes organized by the University. Over the years at ACI-Europe. Thanks are also due to Paul Behnke at ACI. I am particularly grateful to Dr Nigel Dennis for his guidance and constructive advice.Acknowledgements I am indebted to many individuals and organizations for helping this book come to fruition and for co-operating with the writing of this book. I have spent over 15 years undertaking research into airports and teaching about airport-related topics. Amongst the many other airport experts who have helped with this book I must give a special thanks to Wendy O’Connor. I have learned much from their presentations and informal discussions. Nigel Mason from York Consulting. Edward Clayton from Hochtief Airport. I particularly want to express my appreciation to the following individuals who have always willingly given up their valuable time to contribute on our industry seminars: Sigi Gangl formerly from Vienna Airport. I would like to begin by thanking my colleagues at the University of Westminster for their continual support and encouragement. she spent much time and effort replying to my endless questions and searching out relevant documents. as well as tolerance and patience. John Riordan from the Bank of Ireland International Finance. Stan Maiden and Mike Toms from BAA plc. So many people have helped me over the years that it is difficult to name them all. Jan Veldhuis from Amsterdam Aviation Economics and John Twigg from Manchester Airport. Special thanks must go to Professor Rigas Doganis who was largely responsible for introducing me to the world of airports and who has remained supportive of my airport work ever since. I wish to express my . I have also benefited enormously from discussions with my own students. This book draws heavily upon these experiences. Thanks are due to all these people. Hartmut-Ruediger Simon and Rolf Ewald from Dusseldorf Airport. Professor Brian Graham from the University of Ulster.

and from the rest of the Miller family. Special mention must go to Jason Vallint. and to the Daswani family for their help and encouragement. for always being there to look after my children when I tried to juggle writing and family life. who have tirelessly responded to my frequent requests for data over the years. Richard Lewin from Wiggins. have been very patient with my preoccupation with this book – although they still do not understand why anyone would want to write or read about airports! They have tolerated my unreasonable behaviour and brought me quickly back to reality whenever the writing threatened to take over my life. I am very much indebted to many other airport financial professionals. and Ewan. and Peter Mackenzie-Williams. In addition. who has shown a keen interest in my work and has provided an invaluable press-cutting service. Finally. Above all. I owe a special debt of gratitude to Sandra Bollard. A special thanks must go to Ian from the public library in Brighton. Callum. my children. xiv . Trevor Eady from Norwich Airport. I am very appreciative of the support from my mother Barbara Miller. I must thank my family and friends for putting up with the disruption to their lives while I have been writing this book.Heinemann. I also very much appreciate the help given by Patrick Alexander from Southampton Airport. both of the Transport Research Laboratory. I must thank all the staff at Butterworth. too numerous to mention individually. with whom I spent long hours debating about the WLU concept. Dr Brigitte Bolech from Vienna Airport.Acknowledgements gratitude to Ian Stockman and Dr Romano Pagliari at Cranfield University who have always been most supportive and helpful in sharing their knowledge and expertise and very willing to provide research material. I am a novice at book writing and they have given me much helpful advice and assistance. Professor Tae Oum from the University of British Columbia and Hans-Arthur Vogel from Fraport. Lorna. I am grateful as well to Dr Ian Humphreys at Loughborough University. Ivo Favotto from URS Corporation.

Abbreviations ACCC Australian Competition and Consumer Commission ACI Airports Council International ACSA Airports Company South Africa AdP Aeroports de Paris AEA Association of European Airlines AENA Aeropuertos Espanoles y Navegacion Aerea AGI Airports Group International AIA Athens International Airport SA AIP Airport Improvement Program ANSconf Conference on the Economics of Airports and Air Navigation Services ARI Aer Rianta International ASAS airport surface access strategy ATC air traffic control ATF airport transport forum ATM air transport movement ATU airport throughput unit BA British Airways BCIA Beijing Capital International Airport BOOT build–own–operate–transfer BOT build–operate–transfer BRT build–rent–transfer BT build–transfer CAA Civil Aviation Authority Capex capital expenditure CDG Charles de Gaulle CIPFA Chartered Institute of Public Finance and Accountancy carbon dioxide CO2 CPH Copenhagen Airport A/S CRI Centre for Regulated Industries dB decibel DCMF design–construct–manage–finance .

preferred noise route passenger opinion survey passengers per annum quality of survey monitor return on capital employed rate of return rehabilitate–own–transfer Severe acute respiratory syndrome service level agreement strategic partnership agreement total-day-evening-night-level total factor productivity Tera Joule total quality management value added tax work load unit Vancouver Airport Services . tax. depreciation and amortization environmental impact assessment environmental impact statement Eco Management and Audit Scheme Establishing a Network for European Airports European Travel Research Foundation European Union enterprise value Federal Aviation Administration Federal Airports Corporation general aviation gross domestic product International Air Transport Association International Civil Aviation Organization International Duty Free Confederation initial public offering International Standards Organization Los Angeles International landing and take-off Manchester Airport plc maximum authorized weight minimum connect time majority in interest management information system million passengers per annum maximum take-off weight nitrogen oxide Official Airline Guide passenger facility charge Philippine International Air Terminals Co.Abbreviations DDF EBIT EBITDA EIA EIS EMAS ENEA ETRF EU EV FAA FAC GA GDP IATA ICAO IDFC IPO ISO LAX LTO MA MAW MCT MII MIS mppa MTOW NOx OAG PFC PIATCO PNR POS ppa QSM ROCE ROR ROT SARS SLA SPA TDENL TFP TJ TQM VAT WLU YVRAS xvi Dubai Duty Free earnings before interest and tax earnings before interest.

They provide all the infrastructure needed to enable passengers and freight to transfer from surface to air modes of transport and to allow airlines to take off and land. fire and rescue in the airfield. conference services and business parks. gates. Growing awareness of general environmental issues has heightened the environmental concerns about airports. and processed within the terminal. their baggage. As well as playing a crucial role within the air transport sector. Airports also offer a wide variety of commercial facilities ranging from shops and restaurants to hotels. provide substantial employment opportunities and encourage economic development – and can be a lifeline to isolated communities. and freight can be successfully transferred between aircraft and terminals. both on the environment in which they are located and on the quality of life of residents living nearby. apron space. and ground transport interchanges. . they do have a very significant effect. In a number of countries they are increasingly becoming integrated within the overall transport system by establishing links to highspeed rail and key road networks. airports have a strategic importance to the regions they serve. The basic airport infrastructure consists of runways. taxiways.1 Introduction Airports are an essential part of the air transport system. Airports can bring greater wealth. Airports bring together a wide range of facilities and services in order to be able to fulfil their role within the air transport industry. Handling facilities are provided so that passengers. passenger and freight terminals. However. security. These services include air traffic control.

Asian/Pacific airports have the second highest volume of cargo with a global share of 27 per cent. the development of a good relationship with the airlines will be critical.Managing Airports The focus of this book is on management issues facing airport operators. There were 994 million passengers in Europe.1 Airport passengers by world region. These operators vary considerably in their ownership. degree of autonomy. 2 . environmental lobbyists. As regards cargo. government bodies. The rest of these activities will be undertaken by airlines. and government bodies. the airport industry is dominated by North America and Europe (Figures 1. Others include shareholders. clearly. reflecting the importance of this area in the global economy. employees.1–1. out of the 20 largest global airports. North America has a larger share of the total 60 million aircraft movements (56 per cent) since the average size of aircraft tends to be smaller due to competitive pressures and the dominance of domestic traffic. Globally. For example. North America 43% Africa 2% Asia/Pacific 17% Middle East 2% Latin America 5% Europe 31% Figure 1. Each will be faced with the challenging task of co-ordinating all the services to enable the airport system to work efficiently. Each airport operator will thus have a unique identity – but all have to assume overall control and responsibility at the airport. 2001 Source: ACI. and other specialist organizations. as ultimately this will largely determine the air services on offer at the airport. handling agents. airport users. North America is again the largest market with 26 million tonnes of the global 62 million tonnes – again with a market share of 43 per cent.3). management structure and style. local residents. concessionaires. All the stakeholder relationships will be important but. and funding. The way in which operators choose to provide the diverse range of airport facilities can have a major impact on their economic and operational performance and on their relationship with their customers. the actual airport operators themselves only provide a small proportion of an airport’s facilities and services. According to the Airports Council International (ACI). The importance of the North American region is reflected in the individual traffic figures of the various airports. Typically. The providers of services are just some of the airport stakeholders which operators need to consider. North American airports handled 1 354 million passengers in 2001 which represented 43 per cent of the total 3 212 million passengers. accounting for a further 31 per cent of the total traffic. A complex situation exists with many of these groups having different interests and possibly holding conflicting views about the strategic role of the airport.

North America 56% Africa Asia/ Pacific 2% 9% Europe 27% Latin America 5% Middle East 1% Figure 1. when just international traffic is being examined. In the longerturn. whether measured in passengers. Europe.6). The cargo market is more widespread with six of the important cargo airports situated in Asia. cargo or movements are in North America. 2001 Source: ACI. Similarly. and Los Angeles have the largest passenger throughput.2 Airport cargo tonnes by world region. growth will return and so the subsequent need for additional airport capacity 3 . The largest passenger airport in Asia is Toyko Haneda. nine with cargo and 17 when air transport movements are being considered (Figures 1. or Asia/Pacific.4–1. Chicago.Introduction Africa 1% North America 43% Asia/ Pacific 27% Middle East Latin America 4% 4% Europe 21% Figure 1. The larger than average aircraft size in Asia means than none of the busiest airports in terms of movements are situated in this region. the European region’s significance becomes much more important (Figure 1. with none in any other global region. while Atlanta. The aviation industry has been growing virtually continuously since the Second World War but this growth was dramatically halted recently due to the events of 11 September 2001. 2001 Source: ACI. However. Memphis is the world’s largest cargo airport because Federal Express is based here. 13 are US airports in terms of passenger numbers. All the 20 busiest airports.7). Not all the major cargo airports coincide with the major passenger airports. Heathrow has the most international traffic. UPS has its base at Louisville.3 Airport aircraft movement by world region. which is dominated by domestic traffic. combined with a global economic downturn.

2001 Source: ACI. 1 000 900 800 700 600 500 400 300 200 100 0 k ar ew N rk Yo ew gh N r bu tts Pi n o st Bo furt k an w Fr tte hro rlo eat ha C nH o nd hia Lo elp d ila Ph on st ou H i m ia M is u Lo St r ve s en D ega V lis s La apo ne in M it ro G et D CD ris Pa ix n oe les h Ph nge ort A tW s r Lo Fo s la al re D C At c hi la a a nt ’H O o ag North America Europe Figure 1.6 The world’s 20 largest airports by aircraft movements.Managing Airports 80 000 Terminal passengers (thousands) 70 000 60 000 50 000 40 000 30 000 20 000 10 000 0 North America Europe Asia Pacific Pa Am D L At C Lo Lo To D Fr P M H Sa M H D M L a en ho as h o o e G o in a i a la st ne us n F dri ng tro am at ndo nt ica s A ndo yko llas nk ris ve en V e w n i go ng a Ko it ap ton ra d n ix eg H Fo furt CD rda r ic nc as k ol ng O ele He an G m is is ’H e rt at co ar s hr da Wo e rth ow Figure 1. 4 Air transport movements (thousands) . 3 000 Cargo (in thousand tonnes) 2 500 2 000 1 500 1 000 500 0 North America Europe Asia / Pacific M Ta In P Lo Am In C L S N M O Ba N Fr T A L H h e on nc oy s ia em os c d an ing ew ari ou is ica ndo ste he ipe ian aka ngk w Y s a kf ph An g K hor ko mi i go ap n rd on ur po Yor CD vill or ge Ka ok is on ag Na re t k k ol O He am G e le rit e ns g JF N is ’H a s a ew ai ar thr K e ar ow k Figure 1.4 The world’s 20 largest airports by total passengers. 2001 Source: ACI. 2001 Source: ACI.5 The world’s 20 largest airports by cargo tonnes.

which did not become fully operational until 1997. as has occurred on a number of the North Atlantic and Pacific routes. This European deregulation has allowed a new low-cost airline industry to develop. 1990. deregulation has been achieved with a multilateral policy which has evolved over a number of years with the introduction of the three deregulation packages. with the notable exception of those in the United States. It may been seen that most airports experienced a decline in traffic in 2001 with the largest decreases being in the United States. The average annual growth was 6 per cent in the 1980s and 5 per cent in 1990s. In the European Union (EU). In some places this has been the result of the adoption of more liberal bilateral air service agreements. The other most significant development within the airline industry. Most airlines. too. 2000 Source: BAA.7 The world’s 20 largest airports by international terminal passengers. The 1993 package. Initially most change was experienced within the airline sector as a consequence of airline deregulation. Moreover. The trend towards airline deregulation began in 1978 with the deregulation of the US domestic market. However. and 1993.Introduction 60 000 Terminal passengers (thousands) 50 000 40 000 30 000 20 000 10 000 0 North America Europe Asia/Pacific Figure 1. airline ownership patterns have changed. but now this sector. Many more markets subsequently have been liberalized or deregulated.1 shows the growth at the major international airports of the world for the last 20 years. is the globalization of the industry and the 5 r te es ch an M i m ia M d n ri ad ge M ha en op C to n ro To i e es ip l Ta ge An s Lo l FK ou k J r Se Yo ew N ok k ng Ba h ric Zu ls se ita r us Br Na o yk e To por ick a w ng at Si n G o nd ng Lo Ko g m on H rda e st Am urt kf an G w Fr CD hro t ris ea Pa n H o nd Lo . traditionally were state owned and often subsidized by their government owners. primarily to reduce the burden on public sector expenditure and to encourage greater operating efficiency. which has had major consequences for certain airports. since the 1970s there have been major regulatory and structural developments. this situation has substantially changed as an increasing number of governments have opted for partial or totally private sector airline ownership. Table 1. The growth in demand for air transport has had very significant economic and environmental consequences for both the airline and airport industries. partly due to deregulation and privatization trends. At the same time. The pace of change was slower in the airport industry. was the most significant package and has had the most farreaching impact. in 1987. which have affected dramatically the way in which the two industries operate. privatization and globalization trends. will undoubtedly be one of the major influences on the airport business. is developing into a fundamentally different business.

2 6.1 Growth in passenger numbers at the world’s 20 largest airports 1980 1990 2000 2001 % average annual change 1990/80 2000/1990 2001/00 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Atlanta Chicago O’Hare Los Angeles London Heathrow Toyko Haneda Dallas Fort Worth Frankfurt Paris CDG Amsterdam Denver Phoenix Las Vegas Minneapolis/ St Paul Houston San Francisco Madrid Hong Kong Detroit Miami London Gatwick 40 180 44 425 33 038 27 472 20 810 21 951 16 873 10 091 9 401 20 849 6 586 10 302 9 252 10 695 21 338 10 146 6 829 9 883 20 505 9 707 48 015 60 118 45 810 42 647 40 188 48 515 28 862 22 506 16 178 27 433 21 718 18 833 20 381 17 438 30 388 15 869 18 688 21 942 25 837 21 047 80 162 72 144 66 425 64 607 56 402 60 687 49 361 48 246 39 607 38 752 36 040 36 866 36 752 35 251 41 041 32 893 32 752 35 535 33 621 32 066 75 849 66 805 61 025 60 743 58 693 55 151 48 560 47 996 39 538 36 087 35 482 35 196 35 171 34 795 34 627 33 984 32 553 32 294 31 668 31 182 1. 3 Airport globalization. The airports have now found themselves being caught up in this environment of change.1 7.3 8.4 8.0 3. and ‘Wings’.3 4.4 2.5 8.3 3. have emerged with global networks. franchising.8 4.1 6.4 3.8 3.3 5.8 8.Managing Airports Table 1. the adoption of strategic partnerships or the introduction of private management contracts.6 2. many other airlines are aligning themselves to these groupings with code-sharing.5 5.1 3.6 4.0 4. The emergence of a few global airport companies who are operating at an increasing number of airports around the world.5 4.6 5.5 7.6 0. Radical restructuring has occurred.9 1.3 1. Three key developments have been witnessed within the airport sector: 1 Airport commercialization. namely Star.1 1. The transfer of the management of an airport.5 0.1 5.8 4.2 3.2 8.2 Average Sources: ACI.2 5.4 7.0 5. or other co-operative arrangements. Four major alliance groupings.9 2.0 5.1 9.4 5.3 15.6 10.8 2. which in many ways mirrors that which has fundamentally changed the airline industry. Moreover.3 5.8 3.1 7. oneworld.7 6. The transformation of an airport from a public utility to a commercial enterprise and the adoption of a more businesslike management philosophy. emergence of transnational airlines.6 8.3 2.3 1. and in many cases the ownership as well.9 6.2 6.3 5.9 9.5 6. BAA and annual accounts. These include share flotations. These are dominating the airline business – accounting for two-thirds of all traffic. 2 Airport privatization.3 0.0 6.8 12.8 4. Sky Team. to the private sector by a variety of methods. Some of these 6 .6 9.7 4.5 4.6 3.

Airports can no longer see their role simply as providers of infrastructure but. Chapter 8 discusses the economic impacts of airports and how airports can act as a catalyst for business and tourism development. is now a firmly accepted management practice at airports. This role needs to be clearly understood if future growth in the airport industry is to continue. Chapter 2 describes the privatization and globalization processes that are taking place. The sweeping changes. Airports are now complex enterprises that require a wide range of business competencies and skills – just as with any other industry. Finally.Introduction global players are traditional airport operators whereas others are new to airport management. Marketing. into a new era of airport management which is dominated by the private sector and global players. which for so long has been a basic business competence in most other industries but ignored by many airports. Chapter 5 looks at this. as providing facilities to meet the needs of their users. hardly considered to be a relevant issue by many airports just a few years ago. The concept of sustainability and environmental capacity is introduced. Chapter 10 looks specifically at the impact of 11 September 2001 and then brings together the key issues of each chapter in order to make predictions for the coming years and to assess the future prospects for the industry. Chapter 6 looks in detail at this area of operation. Chapter 9 goes on to consider the environmental impacts and ways in which airports are attempting to minimize the adverse effects. This is considered in Chapters 3 and 4. is also becoming increasingly important. and slots issues. occurring concurrently within both the airline and airport industries mean that the traditional airline–airport relationship has been irreversibly changed. focusing primarily on airport charging. These developments are having a major impact on both economic performance and service provision. Airport competition. A major consequence of airport commercialization and privatization trends is that airport operators are devoting much more time and effort to building up the non-aeronautical or commercial areas of the business. The remaining chapters of the book take a broader view of the airport business and consider the role that airports play on the environment and surrounding community. which is moving from an industry characterized by public sector ownership and national requirements. 7 . Chapter 7 considers airport marketing. regulation. instead. This book discusses the implications of the development of the airport sector.

Singapore. either at a regional or municipal level. Sydney. local governments. for example. Düsseldorf airport was jointly owned by the governments of North Rhine Westfalia state and the city of . European airports serving major cities such as Paris. Virtually all airports traditionally were owned by the public sector. London. Elsewhere. and the passengers. Manchester airport. as were many other airports outside Europe such as those in Tokyo. the airlines. were the airport owners. and Johannesburg. The impact of such fundamental changes will be assessed from the point of view of the airport industry itself. was owned by a consortium of local authorities with 55 per cent ownership resting with Manchester City Council and the remaining 45 per cent split evenly among eight councils of other nearby towns. Regional airports in the United Kingdom also followed this pattern. Stockholm. Dublin. Bangkok. In Germany.2 The changing nature of airports Traditional airport ownership and management It is the aim of this chapter to discuss the development of the airport sector as it moves from an industry characterized by public sector ownership and national requirements into a new era of airport management which is beginning to be dominated by the private sector and global players. Copenhagen. and Geneva were all owned by national governments. Madrid. This was the situation with most US airports.

was responsible for the planning and overall operation of the airport and the airfield infrastructure. and the city of Vienna (25 per cent). the way in which the government owners chose to operate or manage the airports varied quite significantly and had a major impact on the airport’s degree of independence and autonomy. but still under public ownership. which operated other transport facilities as well as airports. In Canada. Frankfurt airport was jointly owned by the state of Hesse (45 per cent). The concession could cover management of the total airport and handling services (e. and the federal government (26 per cent). the city of Frankfurt (29 per cent). Similarly. in a few cases. operated the airports. the state department Transport Canada directly operated the 150 commercial Canadian airports. the military. Venice. In some instances. the Middle East. the concessions were given to the local chambers of commerce with the national government retaining some control over the airfield facilities. managed and constructed the terminal infrastructure. The strictest form of control existed when the airport was operated directly by a government department. There were also airport authorities or companies that operated just one major airport. In other cases. Turin) or just some of the services such as terminal management and handling (e.The changing nature of airports Düsseldorf. At the larger Italian airports (e. There were also a few examples of airports being operated on a concession basis for central government. these organizations managed more than one airport. At Zürich airport. as was the situation in Europe with the British Airports Authority (BAA) and Aer Rianta Irish Airports. or partially privately. typically the Civil Aviation Authority (CAA). airport authorities also existed for some of the airports. the province of Lower Austria (25 per cent). The only privately owned airports traditionally.g. was a rather unique airport being jointly owned by the national governments of both Switzerland and France. there may have been both local and national government interest. owned airports. 9 . Palermo). Thus. semi-autonomous bodies or companies. Ministry of Transport or. while the joint owners of Hanover airport were the governments of the state of Lower Saxony and the city of Hanover. Vienna airport was another example. such as 60 years at Milan airport. such as the Port Authority of New York and New Jersey or Massport in Boston. while a mixed public private company. situated on the border between Switzerland and France. Basel-Mulhouse or EuroAirport. However. such as the Minneapolis-Saint Paul Metropolitan Airports Commission. which was owned by the Canton of Zürich.g. the Zürich Airport Authority. Amsterdam was owned by the national government (76 per cent) and the municipalities of Amsterdam (22 per cent) and Rotterdam (2 per cent). In a few cases there were multipurpose transport authorities. Within Europe. It was only in the 1990s that there was a significant presence of privately. owned by the republic of Austria (50 per cent). Milan). Africa. and South America. In the United States. companies with public (usually local) shareholdings and perhaps some private shareholdings as well held the operating concession for a long-term period. FIG. tended to be the very small general aviation or aeroclub airports and so the influence of the private sector on the airport industry was very limited. This was the common practice for airports in areas such as Asia. At French regional airports also. With a number of airports. This was the case at Amsterdam airport and many of the German airports. public ownership – either at a local and/or national level – used to be the norm.g. For example. Milan. Greece was a good example of a country where airports were effectively run by the CAA.

views about airport management began to change. and Aeropuertos Espanoles y Navegacion Aerea (AENA) in Spain and the Kenya Airports Authority. For example. such as with Copenhagen airport (1991) or the South African airports (1994). in charge of the airports in the east and west of the country. There had always been a number of airports. and sometimes opened the door to private sector investment and partnerships. Vancouver. which involved the setting up of an airport company with public sector shareholders. two organizations – Angkasa Pura I and II. respectively – became public enterprises in 1987 and limited liability companies in 1993. In Indonesia. The aim behind this was to improve efficiency and integrate each airport more closely with the local economy. and as the first steps towards airline privatization and deregulation took place. The pace of change varied considerably in different parts of the world. and often strictly controlled. in 1972 the International Airports Authority of India was established to manage the country’s four international airports. This was achieved with the establishment of more independent airport authorities or. in some cases. However. airports was historically that of a public utility with public service obligations (Doganis. the Federal Airport Corporation of Australia set up 1988. changing attitudes in the 1970s and 1980s led to many more airport authorities and companies being established. Many airports gradually started to be considered much more as commercial enterprises and a more businesslike management philosophy was adopted. such as Amsterdam and Frankfurt. Moves towards commercialization were reflected in a number of different interrelated developments. 1999). Greater attention began to be placed on the commercial aspects of running an airport such as financial management. By contrast airports in areas such as those in Africa and South America generally held on to more traditional attitudes towards airports and experienced less change. Such developments generally gave the airports more commercial and operational freedom. Other examples include the Polish Airport State Enterprise established in 1987. Thus ‘commercialization’ of the airport industry began to take place. In the 1970s and 1980s. control of over 100 Canadian airports had been transferred to local organizations (Caves and Gosling. Canada is an interesting example where the management of many of the country’s major airports. both formed in 1991. In some cases. and Edmonton in 1992. as the air transport industry grew and matured.Managing Airports Moves towards commercialization Attitudes towards these publicly owned. previously under the direct central control of Transport Canada. while in 1986 the domestic airports came under the control of the National Airports Authority. however. Calgary. As a consequence commercial and financial management practices were not given top priority. was passed over by way of long-term leases to individual non-profit-making authorities in the 1990s. which had been run by airport corporations or companies. First. These two authorities merged in 1995. By 2000. by corporatization. 1992). The first airport authorities were set up for Montreal’s two airports. non-aeronautical revenue generation and 10 . with Europe generally leading the way. the establishment of an airport corporation was primarily undertaken as an interim step towards airport privatization. various airports loosened their links with their government owners.

such as landing and passenger fees from the airlines. For instance. This meant that the airport’s costs and revenues were treated as just one item within the government department’s overall financial accounts and rarely were they matched together to assess the profitability of the airport. when Geneva airport became an independent authority in 1994 it began to show a balance sheet and asset values in its annual accounts. However. some of the airports were not considered as a separate accounting unit. This development was primarily the result of greater space being allocated to retail and other non-aeronautical facilities. such as airline or passenger services. One example of this was that for the first time they showed depreciation as a measure of cost of capital. 11 . An increasing number of airports started adopting more commercial accounting practices in the 1970s and 1980s. such as the benchmarking of financial performance and quality management techniques. the resources and staff numbers employed in these areas were expanded. also began to be accepted – albeit rather slowly at the start – by a growing number of airports as essential management tools. One of the most visible indications of moves towards commercialization and an increased focus on treating the airport as a business was greater reliance being placed on non-aeronautical or commercial revenues. this occurred at Amsterdam airport in 1984. and began to undertake market research (Humphreys. 1999). had been traditionally by far the most important source. non-aeronautical sources overtook aeronautical sources as being the most important revenue. many of the airports set up marketing departments. operations. This was often the direct result of the loosening of government links with the establishment of an airport authority or corporation. Similarly. because of government controls. In the past. Aeronautical revenues. For a number of airports. This meant that comparisons with other organizations could not easily be made. and so on was replaced with departments or business units more focused on customers’ needs. Relatively underused practices. encouraged airports to take a much more active and proactive role. In certain cases no separate balance sheet existed for the airport. In some airports the typical functional organization structure with different departments for finance. For instance. This meant that the airports adopted commercial private sector accounting procedures. for example. notably in Europe. which had previously been omitted. In the United Kingdom. it was sometimes very difficult to obtain financial accounts that gave a true indication of an airport’s financial and economic performance. A more businesslike approach to airport management. as a result. The airport industry historically had played a rather passive role towards marketing and only responded to customer needs when necessary. in the United Kingdom in 1987. Often an airport would adopt public accounting practices specific to the country and would use public sector rather than more standard commercial procedures. The operational aspects of the airport traditionally had overshadowed other areas and most airport directors and senior management were operational specialists. Moreover. coupled with a more commercially driven and competitive airline industry. administration.The changing nature of airports airport marketing. started to use pricing tactics and promotional campaigns to attract new customers. the quality being improved and the range of commercial activities being expanded. all the major regional airports became public limited companies. the commercial functions of an airport gradually were recognized as being equally important and.

2000a). but what is certain is that some additional infrastructure will have to be built. it is usually associated with the transfer of the management of an airport. namely public sector funds. Whether all this demand can or should be provided for is debatable. On the other hand. 1997. delivers poor standards of service. 1997). and in many cases the ownership as well. the changes within the airline industry have inevitably had a major impact on the airport sector. The transformation from a predominately publicly owned and state controlled airline industry to a global business with much more commercial freedom has forced many airports to have a much more customer-focused outlook when coping with their airline customers.g. Beesley. Within this context. There have been a number of developments in the 1980s and 1990s that occurred within the air transport industry which have specifically strengthened the case for airport privatization in some countries (Croes. greater competition and wider share ownership. Privatization will reduce the need for public sector investment and free access to commercial markets. From one viewpoint. At the same time. has become increasingly scarce in the modern-day global economic climate as governments have striven to reduce their public sector spending or to shift their focus onto non-revenue-earning activities which appear to be more worthy. In its broadest sense. But what is meant by ‘airport privatization’? It can have various meanings. 1994. such as health and education. First. Airports have evolved from public sector utilities to commercial enterprises and privatization can be considered as commercialization taken to its limits. invests inadequately and gives insufficient consideration to externalities such as controlling environmental impacts and maintaining social justice. 1998. particularly when a share flotation is being considered. Less favourable employment conditions may be adopted and redundancies may occur.Managing Airports Why privatization? While the 1970s and 1980s were dominated by airport commercialization. airport privatization can be seen as just an evolutionary stage of airport development. It will reduce government control and may increase an organization’s ability to diversify. The current airport capacity cannot cope with this growth. 12 . the 1990s were the decade when airport privatization became a reality. Increased commercialization has brought about healthy profits and market-oriented management. The theoretical arguments for and against privatization of publicly owned organizations. In some markets. see Jackson and Price. deregulation has encouraged growth. They have been fiercely debated over the years and are well documented (e. notably Europe and North America. to the private sector. The increasing number of airport privatizations which are taking place throughout the world demonstrate the growing acceptance of this process as a method of tackling some of the challenges which many airports face in the twenty-first century. airport privatization has been seen as a way of injecting additional finance into the airport system to pay for future investment. ICAO. the demand for air transport has continued to grow and is predicted to grow well into the future. Moreover. are well known. one of the major traditional sources of airport financing. It may bring about improved efficiency. Freathy and O’Connell. it may create a private monopoly which overcharges. Airports have shown that they have the proven ability to meet private sector requirements – albeit from a rather protected position in many cases.

the airport authority went through a major organizational restructuring which meant that the airport began to be considered much more as a business enterprise. making losses and receiving subsidies from the public sector owners (Gangl. which is in effect the air transport ‘infrastructure’. During this time. The inherently monopolistic position of many airports will also continue to be of concern to politicians and airport users.8 million passengers. For many countries. Unlike the situation with the airlines. the privatization of airports. the city of Vienna (25 per cent) and province of Lower Austria (25 per cent). By 1985. transferring airports which are considered to be national or regional assets to the private sector remains a politically sensitive policy. It set up business units or customer divisions separately for airlines and passengers. that is. passenger terminal. maintenance and infrastructure services. safety and security. The business units were required to make profits while the service units were there to provide services in the most cost-effective manner. which are run on a very commercial basis but have no desire to become totally private organizations. 1995). In the late 1980s. In the next two decades. To some opponents. planning and construction. where competition can more easily be encouraged. and administration was set up.The changing nature of airports However. further commercialization took place with the replacement of the functional organization structure with a new system which allowed the airport authority to respond more effectively to its customers. communications and environment. airports have a greater tendency to be natural monopolies which cannot be duplicated. commercialization does by no means always have to lead to privatization and there are a number of examples of airports. does not make sense. New planning and management procedures were introduced and the airport began to proactively market itself to airlines. A new functional organization structure with main departments of airport traffic operation. Management practices with greater emphasis on 13 . airport ownership and control is always likely to be a controversial area. maintenance and technical service. The evolution of the airport business at Vienna airport Vienna airport authority was created in 1954 when the airport handled just 64 000 passengers annually. in different countries and even between local and central government bodies in individual countries. the authority was being run very much as a public utility. the airport embarked on major expansion projects of the runway. and supported these with service divisions (such as construction.9 million passengers and had begun to pay dividends to its three public sector shareholders. such as Manchester in the United Kingdom. Between 1978 and 1985. financial/accounting. the airport was handling 3. air transport ‘operators’. and finance and accounting) and central offices (such as legal affairs.The shareholders were the Federal Republic of Austria (50 per cent). As a result the airport made a profit for the first time in 1979 and has remained in profit ever since. and cargo facilities and by 1978 was handling 2. As a result. Views about privatization vary considerably in different regions of the world. The fear is that priority will be given to shareholders or investors and that user and community needs will be neglected. human resources).

5 per cent stake in the airport in a secondary offering in 1995 – this time retaining the AS2. marketing and service quality provision (Gangl. the Vienna stock market. 1994). In order to be floated on the stock exchange. The realistic options were either raising the money through loans/bonds or raising equity on the capital markets. Since the first year of profits in 1978.9 million passengers the same number as in 2000 due to the decline in traffic 14 . 1998). In 1990 it became apparent that a capital expenditure programme of AS8 billion was needed to extend the airport’s annual capacity from 6 to 12 million passengers.4). and increasing the share capital by 50 per cent.and long-term loans as well as bonds were high. the United Kingdom. This was primarily because it did not want the large loan servicing costs right through until the next capacity expansion. This included changing the corporate status from a limited liability company to a joint stock company. the airport authority had to implement a number of very significant changes. were set up.1–2. the public shareholding in the company was reduced to 40 per cent. which was used by the airport company to partly finance its expansion plans.6 per cent (Figure 2. Switzerland. such as retail and catering. Employee shareacquisition programmes and investor relations programmes were set up and sales support undertaken through marketing. airline and terminal services. and training programmes focused on customer orientation and effective business practices. Germany. and handling services) and non-aviation units (consumer services. and Taiwan. Eighty per cent of this capital was available through cash flow and retained profits but other sources were needed for the remaining 20 per cent. and then further debt requirements. This gave private shareholders 47 per cent of the airport. with aviation units (airside services. the airport handled 11. advertising. In 2001. However. Attention was also given to developing the nonaeronautical side of the business. Business appraisals for valuing the company were undertaken and consultations held with capital market analysts.The airport also had to ensure that it developed a private sector and market-oriented management approach with an appropriate corporate culture and image – a process which had begun in the 1980s and was further developed during the privatization process (Gangl.The organizational structure was further refined to be more customer focused. this arrangement was terminated in 1998 (Figures 2.The success of the flotation meant that the Austrian government opted to sell half its remaining 36. Budget constraints meant that increasing the equity of the public shareholders was out of the question. land development and real estate) both being supported by central services. In spite of the poor stock market conditions. passenger numbers have increased by an average annual growth of 6. In 1995.Managing Airports private sector practices in the area of business and strategic planning and cost control were introduced.The sale brought in AS1. the airport decided on a share flotation for 1992. which was planned in 2000. and road shows in areas such as Austria. On the other hand. Japan. the flotation or initial public offering (IPO) took place in June 1992 and was oversubscribed three times in Austria and five times internationally. Eventually. At that time Austrian interest rates for medium. In 2001.2 billion proceeds itself. Amsterdam airport also bought 1 per cent of the airport with the aim of establishing a strategic alliance to encourage commercial and technical co-operation. was in a poor trading situation.5). technical services. which followed a share buy-back in 2000 that resulted in 10 per cent of shares being placed in an employee foundation. A comprehensive management information system (MIS) was launched.8 billion. like most others throughout the world.

15 .7 per annum (Figure 2.2 per cent in 2001.1 Ownership of Vienna airport up until 1992 Source: Annual report.5 per cent in 2001.9 per cent. Since 1991 when new accounting procedures were adopted the profit before interest and tax increased from AS409 million in 1991 to AS1157 million in 1999 – an annual average growth of 13. Private shareholders 48% Amsterdam airport 1% City of Vienna 17% Province of lower Austria 17% Federal republic of Austria 17% Figure 2.6) with a decline of 2.3 Ownership of Vienna airport after secondary offering in 1995 Source: Annual report. During the same period revenues have grown by 8.2 Ownership of Vienna airport after IPO in 1992 Source: Annual report. In 2000 profit was up by 4 per cent but it declined by 8.The changing nature of airports Federal republic of Austria 25% City of Vienna 50% Province of lower Austria 25% Figure 2. since 11 September in that year. Private shareholders 27% City of Vienna 37% Federal republic of Austria 18% Province of lower Austria 18% Figure 2.

5 Total passengers at Vienna airport. 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 20 20 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 16 .4 Ownership of Vienna airport after changes in 2001 Source: Annual report. 14 Total passengers (million) 12 10 8 6 4 2 0 19 700 Revenues (Index: 1979=100) 600 500 400 300 200 100 0 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Figure 2. Figure 2. 1979–2001 Source: Annual reports.6 Total revenues – Vienna Airport Group. 1979–2001 Source: Annual reports.Managing Airports Private shareholders 50% Employee foundation 10% City of Vienna 20% Province of lower Austria 20% Figure 2.

it has been partly responsible. For example. as were the small US airports of Stewart and Niagara Falls. and Cuba. 35 per cent from individual investors. Birmingham. having been financed 35 per cent from local government. Similarly. Stockholm Skavsta. This was the total flotation of shares of BAA plc. This successful privatization opened up the debate at many other airports as to whether they too should be privatized. which at that time owned three London airports (Heathrow. Kerala in southern India. for a new international terminal and car park at Istanbul airport which was opened in 2000. Newcastle. Further privatizations took place in 1998 in Australia as well as in South Africa. Melbourne. and Belfast International which was subject to a management buyout in 1994. for instance. Wellington. As previously mentioned. the Dominican Republic. Bournemouth and Cardiff airports were privatized in the United Kingdom and private involvement in the new Athens airport at Spata was agreed. However. the airport has been keen to become involved in international projects. privatization occurred at airports as varied as Frankfurt. The first partially privately financed Indian airport was opened in Cochin. Brisbane. Inevitably. were privatized. Costa Rica. As the pace to privatize has gathered momentum. it joined a joint team to build a new Cuidad Real airport in Spain and in 2002 a consortium led by Vienna airport won a 40 per cent stake in a 65-year concession to operate Malta airport. such as Mexico. In that year. Auckland. The year 1996 appeared to be a turning point for the airport industry and the following few years saw airport privatization becoming a much more popular option in many areas of the world. East Midlands which was totally privatized in 1993. In the United Kingdom. Rome. In 2001. 27 per cent of shares in Vienna airport were floated in 1992 followed by a secondary offering of a further 21 per cent in 1996. In 2001. a number of airports in central and southern America countries. Naples. Argentina and other destinations such as Luton. 1999). Edinburgh. Glasgow. There were also share flotations for Malaysia Airports Beijing Capital International Airport. Gatwick. Elsewhere in Europe and in other continents there was little evidence of definite moves towards privatization. with the notable exceptions of Vienna and Copenhagen airport. this included Liverpool airport which was partially privatized in 1990. with other investors. Chile. and Stansted) and four Scottish airports (Aberdeen. and Prestwick). In 1999 and 2000. and Perth were partially or totally privatized in 1997. Bristol. this has meant that in some cases purchase prices have been inflated and that some 17 . and 30 per cent from companies supplying goods and services at the airport (Barker. and Sharm El Sheikh in Egypt. and Hanover. Seeb and Salahah in Oman. Sandford Orlando. in the next few years only a handful of airports actually were privatized. It is a member of the consortium which is to develop and operate the new Berlin Brandenburg airport. The privatization timetable The first major airport privatization took place in the United Kingdom in 1987. more and more investors and companies have become interested in becoming potential purchasers.The changing nature of airports Like many major airports in Europe. at Copenhagen airport there were share flotations of 25 per cent in 1994 and a further 24 per cent in 1995. and Zürich Airport. Airports as diverse as Düsseldorf.

the Czech Republic. EBIT) when deciding whether to invest. In Berlin. for example. leasing. For later privatizations multiples of up to 15 have been achieved in countries such as Mexico. Italy. Many of the airports. up to 20 in some cases.Managing Airports buyers are thought to have overpaid for their airport acquisitions. the relatively low investment needs and the economic and political stability of the country (Bennett. for a number of reasons. the airport industry has strong growth potential. Calcutta. it has taken three attempts to privatize the airports since 1991. the Frankfurt airport company Fraport was involved with a privatization project at Manila Airport in the Philippines but problems with this investment meant that in 2003 the company withdrew from this venture. Korea. and Russia (Moscow). In the United States. 1999. India was expected to have leased its four major airports in Delhi. 2000b). However. Germany. For earlier privatizations such as BAA plc. Other privatizations were being planned or considered although investors generally appeared much more cautious (Forbes. 1999. BAA had a management contract at Harrisburg airport which was terminated early. O’Connor. EBITDA. For example. The long-term viability of the airports in question in this privatized form may also be in doubt and it could be that certain airports may be reoffered to investors. face limited competition. Privatization was also being considered for a number of South American countries such as Venezuela. and Argentina. Spain. In 2001. or concession arrangements was expected to grow significantly in the future (ICAO. and in Asian countries such as Thailand. or earnings before interest and tax. Vienna. By mid-2002. Brazil. Bombay. the events of 11 September coupled with an economic downturn and airline failures in some areas meant that airport privatization temporarily became a less attractive option and various privatizations at airports such as Milan. for the Australian airport sales. 2000). with the successful privatizations of Sydney and Malta airport. An International Civil Aviation Organization (ICAO) survey of 82 countries covering 303 airports found that privatization through sales. and Copenhagen the EV/EBITDA multiples were in the region of five to ten. 2002). Aviation Strategy. This was due to a combination of factors such as an excessive number of bidders and the attractiveness of the airports on offer with regard to their traffic and commercial potential. and amortization. Indonesia. Brussels. both from other 18 . First. and Sydney were postponed or cancelled. Deutsche Bank. Types of privatization Airports are generally seen as attractive organizations to investors. This is of particular concern to airlines that fear charges will have to be raised to compensate for the high purchase cost. Panama and Peru. Not all privatizations have been successful. South Africa. Ireland (the Aer Rianta company). depreciation. 2002. These included European countries such as the United Kingdom (Belfast City. Norwich) Portugal. Analysts typically will consider the price of the airport (enterprise value. and Madras for a 30-year period by 2003. and Japan. particularly the major ones. tax. Malaysia. Cyprus (Larnaca and Paphos). The EV/EBITDA multiples were particularly high. EV) in relation to profit (earnings before interest. all evidence points to the continuation of this privatization trend well into the twenty-first century. though there were signs that airport privatization was back on the agenda for a number of airports.

ABN Amro Ventures bought another 8 per cent.The changing nature of airports airports and other modes of transport. while transferring the economic risks and effective control to the new shareholders. The BCIA flotation is interesting as it is the first airport where a share flotation has come after an initial trade sale to a strategic partner. For example. They broadly fall into five categories: 1 2 3 4 5 share flotation. Malaysia Airports (an organization owning 37 airports in the country). Risks clearly exist as well. With this ‘cornerstone’ approach AdP bought 10 per cent of the airport. project finance privatization. namely Aeroport de Paris (AdP). The selection of the most appropriate type of privatization involves a complex decision-making process which will ultimately depend on the government’s objectives in seeking privatization. concession. and Beijing Capital International Airport (BCIA) (Table 2. is the type of privatization required to lessen the burden on public sector finances. Copenhagen Airports A/S. Generally. the types of privatization models which have been adopted have become increasingly diverse. such as political interference in the form of airport regulation and control over airport development and the changing nature of the airline industry with developments such as deregulation and greater collaboration through alliances. 2000). There are very high barriers to entry within the industry due to the large capital investment needed and the difficulties in finding appropriate. the government owner will give up total or partial ownership. and institutional and retail investors a further 17 per cent – leaving the Chinese government with a 65 per cent share (Beechener. By the end of the 1990s. limited competition because of high barriers to entry and minimal threats of substitutes. Share flotation The first option is a share flotation with the airport company’s share capital being issued and subsequently traded on the stock market. with positive factors such as strong growth prospects. further investment requirements and the financial robustness of the airports under consideration all have to be taken into account. As airport privatization has become more popular. Fraport. Zürich. increase share ownership or encourage greater efficiency. Total or partial privatization of this type will totally eliminate or certainly reduce the need for state involvement in the financing of airport investment. and potential commercial opportunities influencing their views. The proceeds from such a privatization could be used for funding future investment at the 19 . Auckland Airport. factors such as the extent of control which the government wishes to maintain. the quality and expertise of the current airport operators. management contract. trade sale. generate funds from the airport sale.1). the only 100 per cent share flotation which had taken place was with BAA plc in 1987. the stock markets have viewed purchases of shares in airport companies in a favourable light. Other partially floated airport companies include Vienna airport (Flughafen Wien AG). convenient locations where airport development is allowed. competition or management expertise within the airport sector? In reaching a decision. With a share flotation.

the UK government had a golden share in BAA which gives it the right of veto over undesirable takeovers deemed to be against national interests and caps the amount of shares that any one shareholder can hold at 15 per cent. Fully developed capital markets also need to be in existence. or can go directly to the government. The airport company will have to get used to daily scrutiny of its financial performance by its shareholders and other investors and. However. the airport company will be required to have a track record of minimum profits to make the airport attractive enough to investors. Even when total privatization takes place. the European Court of Justice declared this type of shareholding to be illegal in 2003 because it prevents capital movements within the EU. as with BAA plc. issuing shares to employees may give them an incentive and make them feel move involved in the affairs of the airport company. airport.6% IPO 18% IPO 35% IPO and trade sale 22% IPO and 28% secondary offering 39% IPO 29% IPO Note: a In 2001 at Vienna airport a further sale of shares following a re-purchase of some shares which were transferred to an employee foundation resulted in 40% of the airport remaining under government ownership. South America and Africa.Managing Airports Table 2. To prevent domination by any individual shareholder. a degree of government influence can theoretically be maintained by issuing a golden share to the government so that in extreme cases national interests can be protected. Airports not performing well clearly would find it hard to be successfully privatized in this way. may find it hard not to become preoccupied with the share price. This meant that the management 20 . some or all of the airport will be sold to a trade partner or consortium of investors. However.5% IPO 51.1 Airport UK: BAA Austria: Vienna Denmark: Copenhagen Italy: Rome New Zealand: Auckland Malaysia: Malaysia Airports China: BCIA Switzerland: Zürich Italy: Florence Germany: Fraport Airport privatization through share flotations Date 1987 1992 1995 2001 1994 1996 2000 1997 1998 1999 2000 2000 2000 2001 Type of sale 100% IPO 27% IPO 21% Secondary offering Further secondary offeringa 25% IPO 24% Secondary offering 17% Secondary offering 45. limits can be placed on the maximum shareholding. Trade sale With this option. as a consequence. which may not be the situation in certain areas of. For instance. In order to be floated on the stock market. All the trade sales which took place in the 1990s involved strategic partners rather than just passive investors. Source: Compiled by author from various sources. as with the IPO of 27 per cent at Vienna airport. for example.

The first significant trade sale was in 1990 when 76 per cent of Liverpool airport. Hamburg. Aeroports de Paris has a 25 per cent share of Liège airport in Belgium. an airport management company or consortium will purchase a concession or lease to operate the ‘privatized’ airport for a defined period of time.2). Aer Rianta Irish Airports. BAA plc is the strategic partner in the Naples airport sale and Aeroporti di Roma belongs to the consortium which bought part of the ACSA. and Düsseldorf airports. which owns Amsterdam airports. there was an airport interest within the successful consortia. With most of the Australian airport sales. Newcastle. Concession With this type of arrangement. namely La Paz. the strategic partner is an established airport operator or the purchasing consortium will contain a member with airport management experience. Subsequently a number of other UK airports. For example. and Humberside airports. Bournemouth. was sold to British Aerospace (Table 2. and Cochabamba. the majority of which have been sold on long-term leases (50 years with a further possible option of 49 years) to different consortia. and Southend have been totally sold off to a trade partner. commonly between 20 and 30 years. was awarded the 30-year concession during which time it guaranteed to upgrade the three airports and pay an annual fee of 21 per cent of gross revenues. One of the earliest concession arrangements were agreed in 1997 for the three main airports of Bolivia. has been successfully involved in the partial privatization of Birmingham. Santa Cruz. Outside Europe.The changing nature of airports and technological expertise of the partners as well as financial capabilities were taken into account when agreeing on a sale. SEA. Durban. Privatization has been discussed for both these airport groups but has not yet occurred. which has among its partners. such as East Midlands. Aeroportuertos Argentinos 2000. which it wants to develop as an alternative venue for freight activities. Many of the participating airports in these airport privatizations are not actually privatized airports themselves which leads to further complications in the definition of a ‘private’ airport. Airports which have been leased on long-term arrangements to strategic partners or consortia can also be included in this category – as effectively all control will be transferred from the publicly owned airport to the trade partner. Airports Group International. In the case of Birmingham. which is a public corporation. which was awarded to the consortium. For example. Two-thirds of Wellington airport in New Zealand has been sold through a trade sale. the Milan 21 . Cardiff. 20 per cent of the Airports Company South Africa (ACSA) has been sold to a strategic partner. and Naples airports have also been partially privatized through a trade sale. has a number of interests in other airports around the world. and Cape Town. Düsseldorf. Similarly the government owned Schiphol group. Another example is the 30-year concession for the 33 Argentinian airports. Financial terms and the types of lease will vary but typically this option will involve an initial payment and a guaranteed level of investment and/or payment of an annual fee. Elsewhere in Europe. The ACSA owns and manages nine South African airports including the three major international airports of Johannesburg. previously owned by local government. The most notable example here is the Australian airports. an airport management company. Hanover. a strategic partner has been brought in through a partial sale. In many of these cases.

airport company. Perth Sanford Orlando Skavsta Stockholm South Africa: ACSA Germany: Hanover New Zealand: Wellington Australia:a 15 remaining major Australian airports (except Sydney) UK: Humberside US: Stewart Internationalb Belgium: Liege US: Niagara Fallsb Italy: Rome Italy: Turin Germany: Hamburg UK: Newcastle Australia:a Sydney 1990 1992 1993 1994 1995 1995 1996 1997 1997 1997 1997 1997 1997 1997 1997 1998 1998 1998 1998 1998 1999 1999 1999 2000 2000 2000 2000 2001 2002 British Aerospace British Aerospace National Express Regional Airports Ltd TBI National Express TBI Aer Rianta/Natwest Ventures (40%) Other investors (11%) Firstbus Peel Holdings Wiggins Hochtief and Aer Rianta consortium BAA Various TBI TBI ADRI South Africa consortium (Aeroporti di Roma had 69% share) Fraport Infratil Various Manchester airport National Express AdP Cintro Leonardo consortium Benetton Group consortium Hochtief and Aer Rianta consortium Copenhagen airport Macquarie/Hochtief consortium Notes: a Most of the Australian airports have been sold on a 50-year lease with an option for a further 49 years. 1998). with over US$800 million being spent in the first five years. The consortium has agreed to pay an annual US$171 million a year for the first 5 years of the agreement. After that time. Melbourne. 22 . the airport services company.Managing Airports Table 2.2 Airport Airport privatization through trade sales Date Share of airport sold (%) 76 100 100 100 100 100 100 51 51 76 100 50 65 100 100 90 20 30 66 100 83 100 25 100 51 41 36 49 100 Main buyer UK: Liverpool UK: Prestwick UK: East Midlands UK: Southend UK: Cardiff UK: Bournemouth UK: Belfast International UK: Birmingham UK: Bristol UK: Liverpool UK: Kent International Germany: Dusseldorf Italy: Naples Australia:a Brisbane. and Ogden. The consortium has also agreed to invest US$2. primarily at the two Buenos Aires airports (Gray. b Ninety-nine-year lease.1 billion at the airports in the 30 years. the concession fee will be related to traffic growth.

1999). ownership will revert back to the government owners. as the name suggests. Generally such an arrangement will require no upfront payment but the operating company will bear all the costs of building or re-developing the facility. Costa Rica. for a certain length of time. and it is planned that there will be a subsequent flotation of remaining government shares as well – this has already happened with the Southeast Group ASUR. the airport company will take full economic risk for investment and operations. traffic growth is predicted to be high but in many cases the infrastructure is inadequate and the governments are unwilling or unable to invest in the airports (Ricover. a company will usually build or redevelop and then operate an airport or specific facility. operate it for a certain length of time. There are a number of project finance privatization methods with the most popular being build–operate–transfer (BOT) when. for example. 1998). Cintra. with this type of arrangement. the Southeast Group. the government owner will have a greater degree of control than with an outright sale. an identical share of the North Central Group was sold to an AdP consortium. and AGI (which was subsequently bought by TBI in 1999) was given the 30-year concession to run the airport in 1998. Since the privatized airport will only be handed over for a fixed period of time. This has proved more politically acceptable in some countries. At the end of this period. This arrangement involves paying an initial annual concession fee of US$19 million which will increase as passenger traffic grows (Communique Airport Business. Concession contracts have been awarded or are planned for each group for an initial 15-year period with an underlying 50-year agreement. In 2000. Other countries which have concession agreements for their airports include the Dominican Republic. Other options may actually involve the ownership of the facility such as build–own–operate–transfer (BOOT) 23 . Chile. 15 per cent of this group (which includes the airports of Cancun and Merida) was sold to a consortium which included Copenhagen airport and the construction company. Barclays have subsequently sold off their interest in this airport. as a key partner. rather than a flotation or trade sale.The changing nature of airports Generally. such as a terminal. the Spanish airport group. the concessionaire will take full economic risk and will be responsible for all operations and future investment. Peru. At Luton airport in the United Kingdom. Bechtel Enterprises. Here. There will be a strategic partner with each group.3). In 1999. and then transfer ownership back to the government. 15 per cent of the Pacific Group of twelve airports was sold to a consortium with AENA. Project finance privatization With this option. namely the North-Central Group. Other similar models include build–transfer (BT). The situation is rather different in Mexico where the country’s 58 airports have been divided into four groups. and the Mexico City Group. the company will have to cover the operating costs but will also retain all revenues until the facility is handed back. a consortium originally consisting of Barclays Investment. Thus. since the local government owners had promised not to relinquish total control of this publicly owned asset to private hands. build–rent–transfer (BRT). and Tanzania (Table 2. the Pacific Group. in South America where a number of concession arrangements were negotiated in the late 1990s. A concessionaire-type arrangement was chosen. In 1998. the company will build the facility. or design– construct– manage–finance (DCMF). Uruquay. When it is built.

The ASUR company which operates the South East Mexican airports was subsequently floated on the stock market in 2000. Source: Compiled by author from various sources.3 Airport Airport privatization through concession agreements Date Length of concession (years) 15 15 15 25 30 15c 15c 33 25 20 15 25 20 20 15c 20 25 65 30 Concessionaire Columbia: Barranquilla Columbia: Caratagena Bolivia: La Paz. b .Table 2. Santa Cruz. Cochabamba UK: Luton Mexico: South East Groupb Mexico: Pacific Group Argentinean Airport System Tanzania: Kilimanjaro International Airport Dominican Republic: 4 airports including Santo Domingo Chile: Terminal at Santiago International Airport Uruguay: Montevideo Costa Rica: San Jose Columbia: Cali Mexico: North Central Group Peru: Lima Oman: Seeb and Salahah Malta Jamaica: Montega Bay 1996 1997 1998 1997 1998 1998 1999 1998 1998 1999 1999 1999 1999 2000 2000 2000 2001 2002 2003 Schiphol consortium AENA consortium AENA consortium AGIa AGIc Bechtel/Barclays consortium Copenhagen airport consortium AENA consortium Aeropuertos Argentina 2000 consortium (including SEA Milan and Ogden) Mott Macdonald consortium with minority government share Vancouver Airport Services (YVRAS) and Odgen consortium YVRAS consortium YVRAS consortium TBI AENA consortium AdP consortium Fraport /Bechtel consortium BAA consortium Vienna airport consortium YVRAS consortium Notes: a AGI was bought by TBI in 1999. c Fifteen-year contract but underlying 50-year concession.

Hochtief. Airports Group International/TBI now have a management contract for this terminal The Eurohub at Birmingham airport was build under a BOT-type arrangement by a company comprising Birmingham airport (25 per cent). however.The changing nature of airports or rehabilitate–own–transfer (ROT) projects. British Airways (21. Elsewhere. The consortium which was involved with this twenty Table 2. One of the first major projects of this type was Terminal 3 at Toronto’s Lester B. the international terminals at airports such as Budapest and New York JFK are all being developed through BOT projects (Table 2. Pearson International Airport which was developed as a BOT project by Huang and Danczkay and Lockheed Air Terminals (Ashford and Moore.4 per cent). 45% Hochtief consortium Aeroport de Montreal Consortium Fraport consortium Schiphol consortium YVRAS consortium Greece: Athens 1996 30 12 25 20 25 Hungary: Budapest International Terminal 1997 Philippines: Manila International Terminal 1999 US: New York JFK International 1997 Arrivals Terminal Egypt: Sharm El Sheikh 2001 Source: Compiled by author from various sources. Another example of a BOT project was the international passenger Terminal 3 at Ninoy Aquino International Airport in Manila. This terminal is now a fully owned and managed facility of Birmingham International Airport plc.4 Airport Airport privatization through project finance Date Length of agreement (years) Terminated Terminated Contractor Canada: Toronto Terminal 3 UK: Birmingham Eurohub 1987 1989 Lockheed consortium Various including Birmingham airport. 1999). and John Laing Holdings (11. The remaining share 45 per cent share belongs to an international consortium. Athens International Airport SA (AIA). The new Athens airport at Spata Eleftherios Venizelos was built under a 30-year BOT arrangement.3 per cent).4 per cent).9 per cent) (Lambert. British Airways. 25 . 1999). and Frankfurt airport. All these methods. are often referred to by the generic term BOT (Ashford. National Car Parks 55% Greek state. local authorities (14. This was the first project finance model of its kind in the Asia/Pacific region. The Greek government holds 55 per cent of the shares in the new company. This type of arrangement is often used when relatively large investments are needed for totally new airports or perhaps for new passenger terminals or other major facilities. 1995).4). Forte (6 per cent). which is being led by the German construction company. National Car Parks (21.

the Irish operator has retail contracts at various airports including Greece. Competition issues The amount of influence that a government can exert over a private airport clearly depends upon the type of privatization model chosen. may be seen as too great a risk. Investment will normally remain the responsibility of the government owner and so the overall economic risk will be shared between the owner and the management company. Pakistan. Management contract The least radical privatization option is a management contract when ownership remains with the government and the contractors take responsibility for the dayto-day operation of the airport. this company merged with the public company operating the rest of the airport to become the Brussels International Airport Company. (PIATCO) was led by Fraport which actually withdrew from the project in 2003. the Philippine International Air Terminals Co. whereas for the contractor such an arrangement may be attractive in countries where greater financial exposure. Vienna. the Brussels Airport Terminal Company. Bordeaux airport has contracts in Togo and Mauritania. Syria. In 1998. The contractor will pay an annual management fee. For the government owner this may be politically more acceptable. such as retail. Aer Rianta. 1999). the Cook Islands and the Turks and Caicos Islands. and Canada. from 1987. at BAA plc London airports. Such arrangements can cover all airport operations or just one aspect. BAA plc. Russia. and Marseilles airport has an involvement with the airports in Gabon and Côte d’Ivoire (Carre. Cyprus. while very little state influence may remain after an airport company has been floated on the stock market or sold to a strategic partner. Within Europe. for example. the terminal of Brussels airport was under a management contract to a private company. Bahrain. while AGI (now TBI) has management contracts at some US airports such as Burbeck and Albany. usually related to the performance of the airport. AENA. 26 . More common is for European airports to have management contracts in other areas of the world. for instance. however. Hamburg. has management contracts for Cayo Coco airport in Cuba and three major airports in Columbia. and some of the Australian and South American airports. has a general management contract at Indianapolis airport in the United States and in Mauritius and has retail contracts with Pittsburgh and Boston. Qatar. Vancouver Airport Services (YVRAS) has contracts with the main Bermuda airport. In these latter cases it is often feared that the privatized airport will become a private monopoly and will not always operate with the best interests of the airport users in mind. Kuwait.Managing Airports five year project. AdP has management contracts in Cameroon and Madagascar. This has occurred. A government may hold on to a considerable amount of control if a management or private finance contract is chosen. The Spanish airport company. Chapter 5 explains in detail the type of regulation introduced and the rationale behind it. for example. For example. through a trade sale. Therefore economic regulation has been introduced at a number of airports when the privatization process has taken place. Beirut. Elsewhere.

was sold off as a single entity in 1987. and Stansted airports in the South East and Aberdeen. and Cork – and is likely to be privatized in the early 2000s. which owns three airports – Dublin. Glasgow. Critics of BAA plc privatization argue that the group sale has given BAA plc much less incentive to provide any extra capacity than would have been the case with individual airport sales. In India. However. the sale proceeds from the group privatization was much higher than would have been achieved otherwise. there have been various reviews into BAA investigating whether it should be split up but these have generally concluded that the additional benefits of competition would be more that offset by the disbenefits of loss of economies of scale and fragmentation of financial strength together with the dispersion of expertise. In Australia. fearful that they will be paying charges at one airport which will finance the development of another airport. Belfast International airport wanted to buy the neighbouring Belfast City airport but was prohibited from doing so by the government as it was seen as anti-competitive. This debate is also relevant for Aer Rianta. a few years after BAA plc privatization. and Prestwick airports in Scotland. owning London Heathrow. typically in some remote area which they do not use (IATA. BAA plc. the Irish airport company. Airlines tend to be suspicious of airport groups. and if generally this group as a whole has a good financial track record. Over the years. In addition. while in Mexico the airports have been divided into four different groups. although the extent of competition which exists between airports in a group is always debatable. This was the case with the Australian airports and also in a number of South American countries prior to privatization. selling off airports in this manner may inhibit competition. a higher sale price may be achieved – primarily because of the lack of perceived competition from other airport operators. If the airport group is sold as a single entity. the government had to amend its plans to privatize Narita.The changing nature of airports There is also another competition issue which has to be taken into account if a group of airports rather than a single individual airport is being considered for privatization: should the airports be sold off together as a group or should they be split up into different companies? This is particularly an issue when the airport group or system may contain a few large international airports which are profitable and a number of smaller regional or local airports which are loss makers. After a long debate in the United Kingdom. Interestingly. Unsurprisingly. any unprofitable parts of the airport system (usually the smaller airports) will not have to remain under public ownership and raising capital on the commercial money markets for future investments may be easier for a larger company. the government decided on individual privatizations for the major international airports but with packages of some of the smaller ones. all 33 Argentinian airports are covered under the same concession agreements. In Japan in 2002. reaching an agreement to lease out the four major airports on long-term agreements has been a long and difficult process since these airports provide the bulk of the profits of the whole Indian airport network. and a new airport in Central Japan near Nagoya as an airport group. 2000b). airports often argue that they are making best use of resources and expertise by operating as an airport group. Edinburgh. Shannon. Gatwick. In South America. This was an interesting example as BAA plc airports in London were in many ways in direct competition with each other. 27 . Kansai. In response. Restrictions were imposed to stop the same operator from having overall control at a number of airports.

The first part of the Act was concerned with the then government-owned BAA which operated seven UK airports. The Act also introduced economic regulation at these airports which is discussed in Chapter 5 (UK Government. and Oman. owned by a consortium of local authorities which at that time had a throughput of 9 million passengers. The most significant impact of the Airports Act has been the change in ownership patterns which have emerged (Table 2. to Southend airport. and the four Scottish airports of Aberdeen. BAA plc was floated in 1987 with £1. This gave BAA plc the freedom to borrow from commercial markets and diversify into areas of operations such as hotels. Glasgow. London Stansted. airports had been run directly by their local government owners. London Gatwick. Italy. Sixteen airports were covered by this part of the Act. which it did in its first few years of operation (Doganis. 1986). the new situation at the regional airports had also given them considerable more opportunity to commercialize their activities.This was the Conservative government’s ultimate aim. and Prestwick. property management and hospital shops.Managing Airports Opposition particularly from the airlines. ranging from Manchester airport. 1992). who feared that Narita would be used to subsidize the debts of the other two airports. Meanwhile. Edinburgh. owned by Southend Borough Council and handling just over 100 000 passengers. Mauritius. The Act made provision for the British Airports Authority to become a private company through a subsequent 100 per cent share flotation in 1997. This reflected the overall aim of the conservative Thatcher government of the time to privatize nationalized industries such as utilities and communications. the Airports Act. and to increase share ownership among the UK population.5). the United States. the regional airports were finding it increasingly difficult to obtain permission to borrow funds for 28 . but also because subsequent privatizations have been quite varied in nature. Airport privatization came about because of a major piece of legislation. namely London Heathrow. The second part of the Act required all airports with a turnover of more that £1 million in two of the previous 3 years to become companies. meant that the government decided to privatize each airport separately instead. not only because the first major airport privatization took place in this country. As a result the share of non-aeronautical revenue has increased at the majority of these airports and more resources have been devoted to commercial activities such as marketing (Humphreys.2 billion going to the government. The shareholders of these airport companies were initially to be the local government owners but the shares could then be sold off to private investors if desired by the public sector owners. The United Kingdom: paving the way for airport privatization The United Kingdom is worthy of special attention when privatization is being considered. By the early 1990s. Prior to this these. BAA plc has subsequently dramatically expanded the retail part of its business and has become a global player in airport management by having interests in airports in as diverse areas as Australia. 1999). which was introduced in 1986.

2003 Present ownership Private interest (%) 100 100 51 100 100 100 100 100 0 100 0 83d 0 76 100 100 100e 100 0 49 0 100 100 0 Privatization date Table 2. which was very much ideologically attracted to the transfer of public service to the private sector whenever possible. 29 . which an increasing number of airports had no choice but to adopt. not necessarily the first private sector owner. Ownership remains with the local authorities. in 1993.5 Airport Aberdeen Belfast International Birmingham International Bournemouth International Bristol International Cardiff International East Midlands Edinburgh Exeter and Devon Glasgow Highlands and Islands Airportsb Humberside Internationalc Leeds Bradford International Liverpool London Gatwick London Heathrow London Luton London Stansted Manchester Newcastle International Norwich Prestwick Southampton International Teesside Internationalc BAA TBI Local authorities/Aer Rianta/Macquarie Airport Group/Employees Manchester airport Cintra/Macquarie Airport Group TBI Manchester airport BAA Local authorities BAA Highlands and Islands Airport Ltd Local authorities/Manchester airport Local authorities Local authorities/Peel Holdings BAA BAA TBI/Alterra BAA Local authorities Copenhagen airport Local authorities Infratil consortium BAA Local authorities 1987 1994 1997 1995 1997 1995 1993 1987 N/A 1987 N/A 1999 N/A 1990 1987 1987 1998 1987 N/A 2001 N/A 1987 1961 N/A Notes: N/A not applicable. investment and. undoubtedly played a major role. Political pressures from a Conservative central government. the government announced that there would be no further spending allocation for airports. d Eighty-three per cent share is held by Manchester airport which is under local authority ownership. the table shows the most recent owner. Source: Compiled by author from various sources.The changing nature of airports Ownership patterns at maina UK airports. e The private investors have a 30-year concession contract. b Nine airports including Inverness and Sumburgh with over 100 000 passengers. The only alternative for airports that wished to invest was privatization. a All airports with more than 100 000 annual passengers. c Privatization was planned for 2003.

1998). Newcastle. while others have not. however. Cardiff. Some of the privatized airports have performed better than those remaining in public sector ownership. Some airports such as Newcastle and Liverpool have opted for a partially privatized approach which gives them access to finance but also enables some local public control to be maintained.Thus. It was involved with the successful consortium in the sale of Adelaide/Parafield and Coolangetta airports in Australia but because of its status could only act on a consultancy basis with no equity share involved. and Norwich) to be able to borrow money on the open market (DETR. and Bournemouth. Manchester is one such airport and financed the whole of its second runway project from retained profits. a state-owned company. Birmingham airport is an interesting example which initially overcame funding difficulties by establishing a joint venture company to build the additional Eurohub terminal with a BOT project without a change in overall ownership. such as East Midlands. Leeds-Bradford. Highlands and Islands Airports Ltd. means that it has not been free to expand internationally on equal terms with competing private airports. has indeed improved efficiency. Humberside. and Sheffield City airports have always been in private hands. Belfast City. in addition to providing a new investment opportunity. it is difficult at this relatively early stage to draw any conclusions as to whether privatization. and Stansted airports. This enabled Manchester to purchase 83 per cent of the nearby Humberside airport soon afterwards. Liverpool. 1999). however. Liverpool. such as Exeter. 30 . Its public sector status. Traffic has grown substantially at all these airports over these years.This solved the short-term problem of funding but subsequent traffic growth meant that there was once again pressure for additional investment and this time the airport opted for a partial privatization. Most of the smaller regional airports in the United Kingdom remain under public sector ownership. operates nine airports in Scotland with the help of a government subsidy. Bristol. Looking back to 1986 before the Airports Act. it may be seen that a number of airports. and Prestwick. By 2000. London Stansted. Norwich.Managing Airports Various airports have chosen full privatization through a trade sale to a strategic partner. The relatively newly developed London City.6). Southend airport has also been totally privatized but in this case the sale was undertaken to ensure the survival of the airport rather than to give access to finance for expansion as with many of the other airports (Humphreys. recorded a loss before depreciation and interest (results after depreciation charges were not available) (Table 2. this situation changed with legislation introduced to allow for the larger profitable regional airports which were still in local governments hands (Manchester. There are also a small number of other airports in the United Kingdom which have had a different history. The smallest average traffic growth of just over 3 per cent was recorded at Belfast International and Aberdeen airport whereas growth in excess of 10 per cent annum was experienced for Birmingham. all airports were in a profitable situation with the exception of Liverpool and the Highland and Islands Airports. From April 1999. Some local authority airport owners have remained strongly opposed to privatization moves – arguing that the airport should remain in public sector hands to maintain its role as a regional public asset. Belfast International was privatized by means of a management buyout in 1994 and was subsequently sold to TBI in 1996.

and tax ( 1 000 UK£) 1986–7 2000–01 Profit before interest and tax ( 1 000 UK£) 2000–01 Aberdeen Belfast International Birmingham International Bournemouth International Bristol International Cardiff International East Midlands Edinburgh Exeter and Devon Glasgow Highlands and Islands Humberside International Leeds Bradford International Liverpool London Gatwick London Heathrow London Luton London Stansted Manchester Newcastle International Norwich Prestwick Southampton International Teesside International 1 452 1 882 1 725 137 436 436 941 1 756 105 3 200 N/A 118 508 263 16 751 32 092 1 635 577 7 596 1 165 191 330 267 297 2 431 3 175 7 712 279 2 210 1 547 2 237 5 645 330 7 022 782 461 1 608 2 071 32 242 64 670 6 364 12 399 19 112 3 376 371 1 232 869 757 1 500 3 935 6 781 164 1 131 689 3 637 2 800 59 5 500 N/A 34 2 134 2 053 53 200 119 000 4 003 1 800 18 715b 3 526 56 500 N/A 135 12 443 14 864 43 513 1 529 13 224 10 723 15 967 23 760 1 366 33 740 102 1 526 7 013 2 666 160 000 464 600 6 640 46 153 98 606 15 405 1 857 N/A 4 627 1 435 10 913 13 864 30 474 840 10 490 9 699 12 372 17 868 542 25 441 1 179 997 4 600 4 369 119 500 349 200 1 173 28 049 49 869 8 425 659 N/A 3 357 438 Table 2. b Australia: a phased privatization process Between 1988 and 1997. Centre for Regulated Industries (CRI). The FAC corporate office undertook various central services and imposed a common charging policy on its airports. 1985–6 data. the FAC operated 22 airports and handled over 60 million passengers annually. interest. 1987–2001 Total passengers (thousands) 1986–7 2000–01 Profit before depreciation. At the beginning of 1997. BAA. Considerable attention was given to whether the airports should be sold off as a system (as had happened with BAA plc which was the only other airport group at that time that had been privatized) or to whether they should be sold off 31 . and annual accounts. most of Australia’s airports were operated by the stateowned Federal Airports Corporation (FAC).6 Airport Notes: a All airports with more than 100 000 annual passengers.The changing nature of airports Traffic and profitability growth at maina UK airports. Source: Chartered Institute of Public Finance and Accountancy (CIPFA). Discussions relating to the privatization of the FAC began in the early 1990s with a firm decision to privatize being made in 1996.

were sold in 1997. Banktown includes Camden and Hoxton Park Total passengers (million) 20 15 10 5 0 Sydney Melbourne Brisbane Adelaide Coolangatta Canberra Darwin Hobart Alice Springs Townsville Launceston Mount Isa Moorabbin Bankstown Parafield Essedon Archerfield Jandakot Perth Figure 2. and Perth. namely Melbourne. they are required 25 Alice springs includes Tennant Creek. these three airports were the most profitable airports in the FAC system and they handled the most traffic (Figures 2. 1996–7 Source: Annual report. Eventually. In phase 1 of the privatization process.8). 120 100 EBIT (A$million) 80 60 40 20 0 Sydney Melbourne Alice springs includes Tennant Creek. It was the government’s intention to bring competition and diversity into the airport system and so there were strict cross-ownership limits associated with the airport sales. it was decided that the airports would be leased off individually on long-term 50-year leases. 1996–7 Source: Annual accounts.Managing Airports individually. Potential buyers had to have a majority Australian interest and airport management experience. with a further option for 49 years.8 Profitability at Australian airports. As in the United Kingdom. After Sydney. Banktown includes Camden and Hoxton Park Brisbane Perth Adelaide Coolangatta Canberra Darwin Hobart Alice Springs Townsville Launceston Mount Isa Moorabbin Bankstown Parafield Essedon Archerfield Jandakot –20 Figure 2. 1999). the privatized airports were initially price regulated. Issues relating to the national interest. 32 . efficiency and competition were fiercely debated. In addition. Brisbane. particularly as government forecasts had shown that separate sales would generate more income (Knibb. Political factors played a key role.7 Traffic at Australian airports. three airports.7 and 2.

AMP. Hastings Fund. Parafield Airport Ltd (Unisuper.They also had to provide development guarantees by preparing five-yearly master plans and pledging a certain sum for investment. the EV/EBITDA multiples Table 2. Deutsche Asset Management and Hastings Fund) Metropolitan Airport Consortium (property investors and former FAC employees) Australian Airports Ltd (former FAC CEO and financial investors) Southern Cross Airports Consortium (Macquarie Airport Group. National Express. Amsterdam. In the end BAA plc. and others) Northern Territories Airports Ltd (AGI/Infratil) Archerfield Airport Corporation Ltd (Miengrove Pty) Capital Airports Group (local company) Gold Coast Airport Ltd (Unisuper. and AGI.7 Privatization details of Australian airports Airport Ownership Privatization date: sale price (million A$) July 1997: 1 397 Brisbane Melbourne Perth Adelaide/Parafield Alice Springs/Darwin/ Tennant Creek Archerfield Canberra Colangatta Hobart Jandakot Launceston Moorabbin Townsville/Mount Isa Sydney Brisbane Airport Corporation Ltd (Schiphol Group. Hobart Ports. and others) July 1997: 1 307 July 1997: 639 May 1998: 365 May 1998: 110 May 1998: 3 May 1998: 66 May 1998: 104 May 1998: 36 June 1998: 7 May 1998: 17 May 1998: 8 May 1998: 16 June 2002: 5 588 Source: Compiled by author from the individual airport regulation reports and other sources. Deutsche Asset Management and Hastings Fund) Westralia Airports Corporation Ltd (AGI. Serco. Port of Brisbane and others) Australia Pacific Airports Pty Ltd (BAA.7). Macquarie Airport Group. Aer Rianta. Commonwealth Investments. As previously mentioned. Macquarie Airport Group.The changing nature of airports to undertake quality of service monitoring and to provide evidence of this to the regulator. Hochtief. Manchester. Amsterdam and AGI were each partners in winning consortia (Table 2. Hambros) Jandakot Airport Holdings (property investors and former FAC employees) Australia Pacific Airports Pty Ltd (BAA. Vienna. A number of airport companies were interested in operating the Australian airports including BAA plc. John Laing. Serco and others) Hobart International Airport Corporation (AGI. 33 . Infratil) Adelaide Airport Ltd. AMP.

the general aviation airport in Victoria which had been withdrawn from the privatization process. was established to run the four Sydney airports and Elldeson. First. which was not only due to the fact there were a large number of binders. It was decided that a further group of airports would be privatized in 1998. Some airport companies which were involved with the phase 1 airports. Nearly all US airports remain under local public ownership – with the pace towards privatization being much slower than in many other parts of the world. 1997). a separate state-owned entity. it is often assumed that the airport industry must be primarily driven by private sector considerations as well. Whereas the phase-1 airports had been relatively independent profitable entities. gained further airports under this phase-2 privatization. These ‘phase-2’ airports included Adelaide which was the largest airport with just under 4 million passengers and general aviation airports such as Archerfield. but also because high growth was being forecast and the infrastructure needs were relatively small. Sydney Airports Corporation. the collapse of the Australian carrier Ansett and the events of 11 September. Airlines are also not allowed to have greater than a 5 per cent share in any airport. again there was considerable interest in the sales and relatively high purchase prices were paid. Crossownership restrictions prevented certain neighbouring airports coming under single ownership. and Mount Isa. The airports. 1997).Managing Airports were particularly high for the Australian airports. such as BAA plc and AGI. This is not the case. There are two key factors which make US airports unique when possible privatization is being considered. US airports: the slow pace towards privatization Since the United States has always possessed a private airline industry. and Hoxton Park) were excluded from these two phases of privatization because of unresolved issues related to noise control at Sydney Kingsford airport and continuing controversy over if. However. which detail the charging and conditions for the use of both airfield and terminal facilities. Camden. operate very closely with the airlines and the airlines have a considerable amount of influence as regards future developments at the airports. In spite of the fact that these airports were smaller and not in such a healthy position. 34 . Townsville. known as airport use agreements. Considerable preparation was therefore involved in getting the airports reading to be stand-alone entities (FAC. 2001 meant that the privatization of Sydney airport was postponed until 2002 when it was bought by a consortium led by the two companies Macquarie Airports Group and Hochtief AirPort. Former FAC employees also gained interest in a number of airports such as Jandakot. In 2000 plans to develop a second Sydney airport were shelved for at least a decade clearing the way for privatization in 2001. over half of these smaller airports were making losses and were much more reliant on the services of the FAC corporate office. Moorabbin. In 1998. US airports enter into legally binding contracts with their airline customers. when and where a second Sydney airport would be built (Ballantyne. in reality. Sydney Kingsford airport and the general aviation airports in the Sydney basin (Bankstown. Parafield and Jandakot.

10 External capital funding at small US hub airports.9 and 2. 2000 PFCs 16% State 4% Other 4% Bonds 39% AIP 37% Figure 2. Funding is also available from passenger facility charges (PFCs) which are generated by the passengers at individual airport. as elsewhere where airport funding has become an issue. In 1995. already have access to the commercial bond markets.10). and all the major ones. 1995). if privatization were to take place. 1999). the privatization of John Wayne Airport in California’s Orange County was discussed as part of the solution to the county’s bankruptcy (Poole. Most airports. it is not an easy process. privatization has been considered as an option. and from grants from the Airport Improvement Program (AIP) which comes from the federal government’s Aviation Trust Fund. financed primarily by a national passenger tax. The major criticism of the federal grants is that they are subject to congressional spending procedures and that the amount of funds available is not enough. the airports are funded through a mixture of private and public funds. However. the likelihood of litigation by the airlines – who argued that federal law prohibited the use of airport revenues State 2% Other 13% Bonds 40% PFCs 33% AIP 12% Figure 2. with airports being seen as a popular investment particularly because of their tax-exempt status due to their public ownership. Second. There is a growing concern that in the future there will not be enough funds to meet investment needs – estimated to be in the region of US$3 billion (GAO. though.9 External capital funding at large US hub airports. The PFC and AIP were raised in value in 2000 but shortfalls in investment funds are still thought to exist. 2000 35 . At major airports tax-exempt commercial bonds and PFCs make up the bulk of the investment funds whereas at smaller airports the AIP funds are proportionally more important (Figures 2. therefore. Inevitably.The changing nature of airports Airline approval would be needed. In the United States.

the restrictions on prohibiting revenues to be used for non-aeronautical reasons have been waived. and payroll costs. In another development in 1997. construction and operation of the international arrivals building at New York 36 . Airports Group International had some management contracts before the 1990s. McCormick. PFC. However. 1998). Also many local politicians. BAA plc expected to save the airport $100 million during the 10-year contract by increasing non-aviation revenue and reducing expenditure from energy supply. This makes provision for five airports to be exempt from some of the legal requirements that impede their sale to private entities (GAO. Under the scheme. For example. the use agreements with the airlines could mean that the airports could only be privatized as the agreements expire or that privatization would have to be limited within the bounds of the agreement. equipment. 2000. General aviation airports may be leased or sold but larger airports can only be leased. albeit rather limited. 2000a). There has been only limited interest in this scheme particularly because of slow and rather complex approval procedures and the majority airline consensus rule. 1996b). Niagra Falls. greater private participation has been achieved with the adoption of management contracts and project finance schemes at some airports. more radical privatization still seems fairly remote. which was an airport of considerable size with a throughput of 6. The airport transferred management in April 2000 (Federal Aviation Administration. The company guaranteed average annual savings of more than US$3 million (US$32 million over a 10-year agreement) and would not be paid any fees until after it produced average annual savings of nearly US$6 million (US$58 million over a 10-year agreement). Various other issues would have to be resolved if such privatization were to take place. namely the inability of airport owners to reap the financial benefits from the airports. This issue. 2000b). Other airports which have been involved with the scheme and are at various stages of approval are Brown Field (a GA facility in San Diego). Such privatizations need approval of the majority of airlines using the airport. is seen as one of the key obstacles to airport privatization in the United States. which was given a 99-year lease to the British company. There has been some. The first airport to be approved under the scheme was Stewart International Airport in New York. do not wish give up control of their airports. National Express. BAA plc also has retail management contracts at Pittsburgh and Boston. The airport board would continue to set policy enforce agreements and control rates and charges (Ott. BAA plc was not to receive any fixed management fee but would share in the savings it generated. In spite of these developments. but mostly at small airports with the exception of the international terminal at Atlanta airport. Aguadilla in Puerto Rico and New Orleans Lakefront (McCormick. Under the scheme.7 million passengers.Managing Airports (including sale proceeds) for non-airport purposes (so-called ‘revenue diversion’) – led to the conclusion that airport privatization was not feasible. the financing. In 1998 an amended new 10-year contract was signed. or tax-exempt debt financing? Would they have to pay back the federal grants? At many of the airports. there must be a general aviation (GA) airport and only one large hub airport. would private airports survive if they could not use trust fund. who hold very powerful positions. moves towards airport privatization with the introduction of the airport privatization pilot programme in October 1996. in 1995 BAA plc won the 10-year management contract for Indianapolis airport. However. For example.

with the exception of some Canadian airports such as Vancouver with interests in a number of South American airports and Sharm El Sheikh airport in Egypt. Some of these airports. AdP. Zürich. Frankfurt airport has been involved with ground-handling contracts and baggage systems in as diverse areas as Spain. Milan. and the United States. Australia. and the airports of Amsterdam Schiphol and Frankfurt have always been very active in providing consultancy services and running management contracts for certain activities at some airports. AENA (Spain). Mauritius. and Kenya. The Wiggins group also withdrew its interest at Smyrna airport near Nashville. for example. Tennessee because of administrative constraints. Copenhagen. Outside Europe. such as Rome. Milan. the United States. Cyprus. Aeroport de Paris has built a reputation in the management of engineering and construction projects in countries such as China. As further opportunities for privatization occur. Manchester. US 37 . 2002a). and to a lesser extent Montreal which is involved with the Europort-Vatry cargo airport in France and Budapest Ferihegy airport. the Schiphol Group has involvement in other airports in the Netherlands. now has airport interests in countries such as Italy. With most global industries. Aer Rianta. Generally. Vienna. This expansion has occurred not only with well-established airport companies such as BAA plc and Amsterdam Schiphol. The opportunities for international expansion have increased substantially with airport privatization. Indonesia. For example. international airport companies are less involved. 2002). Australia. 1998. Fraport. Fraport has set a business target for 2005 which aims for 50 per cent sales to be generated by external business (Frankfurt Airport. the Philippines. and Manchester. Vietnam. Other European airports or airport groups with international interests include Rome. BAA plc. and Oman. Bennett. For example. Traditional airport companies There are a number of airport operators who are well established in providing services for other airports. Fraport. but also with a number of non-airport companies whose previous experience in running airports was rather limited or non-existent (Schneiderbauer et al. The notable example here is the airport of Harrisburg where BAA lost a management contract after only managing the airport for three years of the ten year agreement primarily because the airport’s administration changed (Gethin. BAA plc. 2000b). Bates. however the fiscal and political constraints which exist at US airports have meant that private sector involvement has in some cases been difficult to maintain successfully. 1999. also have involvement in other airports in their own country.. The globalization of the airport industry Privatization has enabled a number of airport companies to expand beyond previously well-defined national barriers. Most of these European airports have ambitious plans to expand their external operations. the United States. this will accelerate the pace of globalization of the industry. Similarly. and the Lebanon. Aer Rianta has mostly specialized in retail contracts. AdP. and Aer Rianta (Ireland).The changing nature of airports JFK airport was handed over to a private consortium (which includes Amsterdam Schiphol airport) for 20 years.

it handled 40 million passengers and 1. (Note: accounting practices changed in 1999) 38 . 1989–2001 Source: Annual reports. Since 1958 the company has operated as an independent. self-sufficient business. the city of Amsterdam (22 per cent). The shares are held by the state of the Netherlands (76 per cent). there is little competition from US companies with the exception of Houston airport which in 2002 was involved in the bidding consortium for Ecuador’s existing and new airport in Quito and San Francisco which has provided management services at various Honduran airports. The Schiphol Group: attempting to expand from Amsterdam airport to a global airport company The Schiphol Group is a publicly owned company. In 2001. and the city of Rotterdam (2 per cent). However. unusually.2 million tonnes of freight. 1989–2001 Source: Annual accounts. Figure 2. In the last 12 years. its passenger traffic has grown by an 45 Total passengers (million) 40 35 30 25 20 15 10 5 0 1989 800 Profit before interest & tax (Index: 1989 =100) 700 600 500 400 300 200 100 0 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Figure 2.12 Profitability – Schiphol Group. because of the unique situation of US airports.11 Total passengers at Amsterdam airport.Managing Airports companies tend to play a major role.

the profit increased by 6 per cent and then subsequently increased by 12 per cent in 2001 in spite of the events of 11 September. In addition. which is being developed into an airport offering short-haul scheduled flights for the business community. the Philippines. Up until 1991. the Gambia. Schiphol acquired a 51 per cent shareholding in the regional airport of Eindhoven where it plans to attract scheduled European airlines to the airport. Bulgaria. Lithuania. and Stewart in the United States. St Maarten. Mexico. and the Philippines. In 2000. In 1999. in 1998. The overall company name became Schiphol Group. and Schiphol Real Estate and the two support units – Schiphol Support Services and Information and Communications Technology (Figure 2. these units became independent. It also had management contracts with other airports such as Cartagena in Columbia and St Maarten. and in the CIS in countries such as Russia. Curaçao. It aims to do this by reinforcing Amsterdam Airport Schiphol’s international 39 . Lelystad was bought with the aim of making it into as a business airport for general aviation. Schiphol’s international involvement was confined to providing training and education at other airports. The first domestic airport to come under Schiphol’s control was Rotterdam airport in 1990. Then. which was agreed in 1993.12). France. the consortium chosen to run Brisbane airport. Schiphol has also been involved in a number of unsuccessful bids. Greece. China. Schiphol International. In 1998.This BOT project was due to be completed by 2001 and then the JFKIAT consortium. whose other partners are a property developer LCOR (40 per cent) and the American financial institution Lehman Brothers (20 per cent) will operate the facility until 2015. The airport company has been adapting its organizational structure to reflect this increasing involvement in other airports. Schiphol has had a 13 per cent shareholding in the Brisbane Airport Corporation. rather than Amsterdam Airport Schiphol which is now just one organization within the structure. In this year. It is the Schiphol Group’s stated mission to be a leading international airport operator. limited liability companies. Thailand. while its profit figures before tax and interest increased by 19 per cent between 1989 and 1999 (Figures 2.11 and 2. for example in South Africa. In 1993. Portugal. and Georgia. By the mid-1990s it had considerable consultancy experience particularly in the developing areas of South East Asia in countries such as Indonesia. Lithuania. Russia. Separate business units. Schiphol’s first international involvement came in 1997 when it took a 40 per cent share in the JFKIAT company which was selected to provide a new international arrivals terminal at New York JFK airport. Malaysia. China. Malaysia. it made the decision to expand by offering more general airport consultancy and managing commercial airport operations. Egypt. there are the three independent subsidiaries – Schiphol Project Management. Since 1990. the name of the airport company was also changed to reflect the increasing diversity of activities. Further expansion meant that by the end of 1999 it had active consultancy and management projects being undertaken in a wide range of countries including the United States. South Africa. namely Schiphol Project Consult and Schiphol International were set up for the consultancy and international undertakings. the Schiphol Group has also been pursuing a policy of acquiring equity shares and other interests in both domestic and international airports.13). One of its first management contracts was in Curacao.The changing nature of airports average annual increase of 8 per cent. to optimize feeder flights with Amsterdam and to develop charter traffic. Since 1997.

13 Organizational structure within the Schiphol Group. 2002 .40 Schiphol Group Board of Management Corporate Staff Participations Schiphol Real Estate Schiphol Project Management Amsterdam Airport Schiphol Information and Communication Technology Schiphol Support Services Schiphol International Business Unit Passengers Business Unit Retail Business Unit Airlines JFKIAT Brisbane Airport Figure 2.

in the areas of retail performance. However. The other key issue for the group is its public ownership. communication and business activities. hotels and recreation.The changing nature of airports competitive position particularly by developing its concept of an ‘AirportCity’ which provides services 24 hours a day in the form of shops and catering. although a government decision at the end of 1999 confirmed that the airport would be allowed to expand at a controlled pace (Schiphol Group. One of the reasons for why the Schiphol group wants to have a strategy of expanding overseas and entering into alliances is its relatively small home market. In the same year. and property development. This consortium. Pilsen (Czech Republic). cost efficiency. Perth. and North America. The utility and property company. Hochtief which has interests 41 . and manages further small airports in Odense (Denmark). It wants to market this concept internationally. 1 per cent in Vienna airport. Other UK companies include Peel Holdings which has a majority share in Liverpool airport and has plans to develop Finningley airport in the North of the United Kingdom. with the aim of sharing expertise. 1999b). it became the first airport company to take a shareholding in another company. 2002). retail. and Ajman (UAE). and international activities. subsequent changes in government meant that no privatization occurred by 2002 – although it is still being talked about as an option for the future (Piling. has involvement with Prestwick. but was subsequently unsuccessful. Cuneo (Italy). In 2000. They include property developers such as TBI (which took over AGI in 1999) which has interests in airports in the United Kingdom. The airports consider that synergies in airport operations and combined financial strength will help in the acquisition of further international airports (Schiphol Group. for example. It is particularly keen to develop alliances with other airports to optimize management skills and knowledge (Schiphol Group. Parchim and Lahr (Germany). Infratil. There are also traditional construction companies such as Vinci which has a close partnership with AdP on international projects. Sweden. It has worked with Brussels International Airport Company to develop a new flight information system and with other information technology projects. the government stated that in principle it was in favour of privatization and the company began to prepare for privatization. More recently in 2002 Schiphol also had plans to buy 30 per cent of the Malaysian Airports company but in the end this did not happen. 1999a). handling and cargo. Moreover. In 1995. property development. 2000). called Establishing a Network for European Airports (ENEA) expressed interest in gaining a share in the Aeroporti di Roma company. Borgond (Hungary). there is uncertainty about long-term growth at Amsterdam airport. it formed the Pantares alliance with Frankfurt airport (Fraport) and started looking at co-operation in areas such as information technology. Also in this year a consortium of financial and industrial organizations was formed with both the Schiphol Group and Fraport having a 1 per cent shareholding. and Wellington airports. and information. and Wiggins which owns the Manston airport in the United Kingdom. New airport operators The other organizations which have taken advantage of the privatization trend to become airport management companies are quite varied.

Finally. and Rome airports. Birmingham. when TBI acquired 90 per cent of Stockholm Skavsta airport in Sweden. Further expansion into the airport business occurred in June 1998. Sydney. It first became involved with airports when it bought Cardiff International. Elsewhere. in August 1996 from the management owners. There has been considerable discussion as to whether airlines could buy and operate airports. The only recent developments have been the terminal facilities developed exclusively for BA at Manchester airport and Lufthansa’s joint venture partnership with Munich airport in developing the second terminal. An unusual example is the Birmingham Eurohub which was partially financed by British Airways (BA). It was listed on the stock exchange in 1994.TBI initially paid US$27. the third busiest international airport in Florida. and Niagara Falls airport. EasyJet.5 million to be paid when certain goals 42 . such practice is rare. airlines already partially or totally lease terminals and in Australia the domestic terminals are leased to the domestic carriers. Its first airport acquisition outside of the United Kingdom was in 1997 when it purchased Orlando Sanford International. Bristol. an airport handling around 1 million passengers.Managing Airports in Athens.5 million for the airport with a further US$6. which was handling around 2 million passengers. based at Dublin airport has also proposed building its own low-cost terminal. Low cost carriers have also expressed an interest in running their own facilities in order to keep the service simple and keep down costs. however. there have been transport companies. handling just under 1 million passengers. Ryanair. This means that the airlines get exclusive rights to parts of the terminal and/or they may receive substantial discounts on usage. If an individual airline or alliance grouping wanted to buy a substantial share of an airport to obtain more control and develop a stronger brand presence. Another construction company Bechtel has teamed up with Singapore Changi airport to form Alterra Partners which has an interest in Luton airport. and Stewart International until 2001 when it sold its UK airports to concentrate on other transport activities. Berlin. Bournemouth. and Düsseldorf airports and Cintra which has involvement in the Mexican airports. which has developed services out of London Luton airport. Skavsta airport is a small airport about 100 km south of Stockholm. Then there are international financial investors such as Macquarie Bank which is involved with Bristol. Lima airport in Peru and San Jose airport in Costa Rica. At all three airports it embarked on major capital investment programmes. unsuccessfully tried to buy the airport when it was up for sale. in April 1995 from the local government owners. Hamburg. Thomas Bailey Investment. It subsequently went on to buy Belfast International Airport. In the United States. most notably National Express which had interests in East Midlands. This shows that perhaps the synergies from airport operations which these transport operators had hoped for were not as significant as was first thought. there would be a number of regulatory and competition issues which would need to be considered. UK transport operators Firstgroup and Stagecoach also each owned one UK airport in the late 1990s but have now sold these. TBI: from property management to global airport operations TBI began life as a Wales-based property company.

New York.The changing nature of airports are achieved. Perth. In June 1999. 1999). and Hobart) and equity interests in a concession contract for La Paz. At around the same time as the AGI acquisition. US$2. it had management contracts for Terminal 3 at Toronto Pearson International airport. It had equity shares in a number of Australian airports (Darwin. TBI has subsequently developed new terminal facilities allowing the airport to handle 1 million passengers annually and has lobbied for the airport to achieve ‘Stockholm Second Airport’ status. In 1996–7 when it began to enter into the airport business its profit from airports was £10 million compared with £15 million from the property business.8). non-controlling equity shares at another six and contracts to manage or to provide services at another 24 locations (TBI.5 million paid upfront and the rest in annual payments. Airports Group International had involvement with 29 airports worldwide when it was acquired by TBI. 43 . AGI was a large private airport operating company backed by the US financier George Soros. In November 1999. Tennant Creek. per annum (Figure 2. 1998). These goals relate to passenger and freight throughout. it took the decision to concentrate on its airport business and so disposed of all its £190 million property interests except the Cardiff Hilton Hotel.The annual payments are matched by Federal Aviation Authority and Florida Department of Transportation funding (Orlando Sanford Airport Authority. 2000). Its turnover and profit before interest and tax has increased by 40 and 30 per cent. TBI has subsequently gone on to expand its business further. 1999). TBI has grown very rapidly from a property company with interest in a couple of small airports to a major global airport company in less than 5 years (Table 2. In North America. approval was given to TBI for a 30-year management contract to operate Orlando Sanford airport’s domestic terminal. there were 213 000 passengers. respectively.5 million when passengers numbers exceed 600 000. and 25 000 tonnes of freight (ACI Europe. Alice Springs. and GE Capital. Santa Cruz.25 million when both goals are achieved (Graham. Two major changes occurred in 1999 to the company’s focus and operations in line with the company’s declared strategic objective of becoming an established airports group with a substantial international presence. a 20-year management contract was agreed for Juan Santamaria International Airport in Costa Rica which served around 2 million passengers.TBI owns 82 per cent of the equity in management company. Finally. it acquired Airports Group International (AGI) for £86 million (TBI. and has guaranteed to implement the master plan which will increase the capacity of the airport to around 4 million passengers at a cost of around US$20 million (TBI. AGI had a 25 per cent equity share in the concession consortium which was managing Luton airport. flying mostly on lowcost carriers and charter. Lockheed Martin. 2000). This meant that its stock market classification was changed from property to transport. and Cochabamba airports in Bolivian airports. Acquiring AGI changed TBI into a company which had controlling equity shares at seven airports. By 1997–8.14).This involved TBI paying US$10 million towards the US$25 million cost of the terminal expansion to handle up to 3 million passengers – US$7. for the international concourse at Atlanta Hartsfield and for the small airports of Burbank airport in California and Albany airport. Then in September 1999. At a number of other US airports it had contracts for handling and other airport services. Bechtel. In 1998. Consorcio AGI. namely US$2.5 million when freight exceeds 71 120 tonnes and US$1. 1999).

however.8 Date 1995 1996 1997 1998 1999 TBI’s expansion into the airport business. 200 000 180 000 160 000 Revenue Profit before interest and tax ×1000 UK£ 140 000 120 000 100 000 80 000 60 000 40 000 20 000 0 1994/5 1995/6 1996/7 1997/8 1998/9 1999/0 2000/1 2001/2 Figure 2. The disposal of the property business in 1999 meant that subsequently nearly all profits in that year were airport related.The gap widened in 1998–9 with £24 million from airport profit and only £14 million from property. 1994–2002 Source: Annual reports. TBI’s financial position remained relatively strong in 2001–02 in spite of the events of 11 September. 2001.Managing Airports Table 2. 44 . the additional expense of defending a hostile bid for the company and the loss of the major services of BA and British Midland at Belfast International airport (TBI. 1995–2002 Development Acquisition of Cardiff International Airport Acquisition of Belfast International Airport Acquisition of Orlando Sanford International Airport (long leasehold interest) Acquisition of 90% share of Stockholm Skavsta Airport Disposal of entire property business (except Cardiff Hilton Hotel) Purchase of Airport Groups International (AGI) acquiring airport interests in Australia. £21 million profits came from airports while £17 million came from property. 2002). Bolivia.14 Financial results of TBI. Perth and Northern Territories) Acquisition of controlling share (71%) of Luton airport 2001 Source: Compiled by author from various sources. US Canada and Luton Acquisition of management contract for domestic terminal at Orlando Sanford Airport Acquisition of 82% share of Consorcio AGI which has management contract for Juan Santamaria International Airport in Costa Rica Disposal of airport interests in Australia (Hobart.

for example. skills in running the airport as a business as well as operational expertise are equally as important. To be successful. and technological development opportunities to 45 . the tender authorities may stipulate the type of expertise required in the consortia. it is clearly not just a question of transferring the core skills and competencies which have already been gained through airport management in the home country to the new airport. In order to take advantage of these new opportunities it will also have to have expertise in change management and global business skills. 1998. which may involve identifying new opportunities and marketing and developing new business. which have always held a rather privileged. This means that it will need to have skills in investment evaluation and business planning. Once the airport company has bought or acquired effective control of the ‘privatized’ airport it then has to demonstrate additional skills to those just associated with the core competencies of airport operations and commercial management. and master planning. Nichols et al. quasi-monopolistic position by serving the capital city of the country. which may operate within a different competitive environment and regulatory regime.The changing nature of airports Skills needed to become a global airport player For a traditional airport company to become a global player. They include overall management of the airfield and terminal areas. surface access planning and co-ordination. In any bidding process there is always considerable debate as to the best mix of partners. it will need to be competent in bid and project management. and competence in quality management techniques. The core competencies in traditional airport operations are familiar to any airport manager. are being controlled by various consortia partners rather than individual companies. cost control and optimizing organization and productivity. In some cases. 2002). there are a number of new areas of expertise which must be acquired if the airport operator is to become a successful international organization (Schneiderbauer et al. security and safety operations. Gangl. It must be able to achieve success and add value at the new airport. in Australia previous aviation management experience was required and in Mexico a major local partner was essential.. consortia formulation and management. Many of the airports that have been privatized. in Australia and South America. (1999) suggest that an airport operator plus an engineering company to control the master project management and a financing partner to structure project financing may be the optimal solution. In addition. passenger and other customers. these core skills will have to be adapted for an airport perhaps in another part of the world. in this modern age of airport management. marketing advantages. Why go global? Globalization is a dominant trend within the world’s economy bringing cost savings. In addition. This may be hard to achieve for some of the large state-owned European airport operators. facility and utility management. and bid preparation and negotiation. These include skills in the management and development of retail and other commercial facilities. If the airport company is to compete within the global airport industry. For example. marketing expertise in meeting the needs of airlines.

and Vienna) which are seeking to become international companies. particularly when the airports are operating in different regulatory environments. however. Perhaps for some airports there may be an element of fear of being left behind in the race to globalize. Copenhagen. but are just as keen to acquire other airports. In addition. there are many perceived advantages of such a development such as marketing strength. Benefits can include higher returns and increased shareholder value. as is the situation with the London. Frankfurt. For example. There is no guarantee that successful management practices at one airport will work in a similar manner at another airport. it seems quite logical that the commercially minded airports might next seek to acquire other interests to expand and add value to their company.and taxfree sales in 1999 has also made commercial opportunities outside the EU more attractive. This factor may be partly responsible for increasing the competition at the bidding stage at a number of airports in the late 1990s. It is not.g. just the privatized or partially privatized airports (such as those of BAA plc. terminal or runway) is physically or environmentally constrained.Managing Airports many industries – including travel-related businesses such as hotels. There certainly do not seem to be such obvious synergies in controlling a global group of airports as there are with airlines. There are also companies such as AdP. Milan. international expansion can provide the much needed finance for development in the home market and may safeguard the success of the core business. Globalization can be seen as a natural progression for airport companies that have gone through the processes of commercialization and then privatization. Once privatization has proved to be successful. The motivation for such expansion is less clear – though it is true that such airports. thereby placing less relevance on any one national economy and lessening exposure to downturns in individual economies. cost reductions could be 46 . There are. and Amsterdam airports. Also risks may be reduced by going global. Financial growth in the home market may be hindered by a regulatory system which may limit the amount of revenue generated from aeronautical sources. of course. Some airport companies. For airport companies. and tour operators. For airlines. are increasingly under greater pressure to perform well and many are expected eventually to be privatized. One of the major general benefits that international or global companies have is that they may be able to reduce costs through bulk buying and joint purchasing in some areas. the Schiphol Group. travel agents. The airline industry is a high-profile example of an industry which has been developing alliance and globalization strategies for a number of years. some quite persuasive general arguments for encouraging any business to aim for a global or worldwide presence. as is the case with BAA plc. for example. and AENA. The abolition of EU duty. have claimed that a globalization objective is that much more difficult if the airport company is under public ownership and have used this argument to encourage privatization of the group. Specifically for airports there may be distinct advantages in expanding internationally if their own core infrastructure (e. and reduction in costs. which are not responsible to private shareholders. too. network spread and product integration. brand loyalty. and in some cases inflating the prices being paid. the motivation for globalization is somewhat less well defined. This could be the situation of the airport industry although the savings would probably not be very substantial.

which are particularly relevant to the airport industry given the industry’s high political profile. a lack of common strategy or objectives. they were at similar levels of globalization and they shared the same strategic approach. there are also many risks. Airport alliances and co-operation The main driving force behind the globalization of airport networks has been airport privatization which has enabled a growing number of airports to be purchased outright or at least managed on a long-term basis by an external airport operator. In addition. Standard commercial contracts could be agreed with core partners at the airports. The Schiphol–Fraport ‘Pantares’ alliance. In some cases this may be just a question of developing informal links. conflicts can also arise through incompatible vision. However. As with any expansion. theoretically. They identified seven 47 . as with all collaborations. There may be some fundamental flaw in the business plan which has been put together. particularly in the light of increased competition in the airline industry and more advanced globalization strategies. particularly if the bidding process is highly competitive. which was agreed in late 1999 was the first major alliance agreement witnessed by the airport industry. Schiphol and Fraport believed that there was scope for cooperation because the two airports were both European hubs but serving different airlines alliances. Too high a price may be paid. and through negotiation of more favourable insurance policies. This seems inevitable.The changing nature of airports achieved with joint purchasing of equipment such as ramp buses and fire engines. and financial resources. to a cover a broader scope of activities. can be helped by airport co-operation. Co-operating in international projects can share both the risk and investment needed. improve quality. As with other industries. they had complementary competencies. Even if a government has relinquished all effective control of an airport to a private operator. and add value to their organizations – all of which. alliances can enable the transfer of knowledge. In the future. particularly involving partners from different countries. which is primarily driven by a need to expand networks and increase market accessibility. a change in the air transport regulatory system or the introduction of more stringent environmental legislation could have a fundamental impact on the way in which the airport operates. which already exist for information exchange or marketing support. Unlike airline co-operation. There are also political risks. the advantages of being ‘big’ may help the airport company keep up to date with technology developments and the latest airport management tools and techniques around the world. Joint training programmes could be arranged and there may be cost advantages through combined marketing. expertise. skills and technology which can produce synergies and economies of scale. airport co-operation is likely to be encouraged by a desire to benefit from shared knowledge. or inherent cultural and business differences. This has meant that airports themselves face increased competition and are under greater pressure to reduce costs. Costs could also be saved by having a single head office and through centralizing many functions such as accounting and information technology. airport globalization also looks likely to occur as a result of greater co-operation between airport operators or through the establishment of airport alliances.

would probably not be aware of any common branding and would find it very difficult to define any distinguishing features of a certain airport brand. however.Managing Airports areas where co-operation seemed possible (Endler. 6 International projects: privatization projects. project management. research. Branding could make passengers feel more familiar with the airport services and facilities they use. 2002). e-business and intermodal strategies. Pantares Systems to serve the information technology and communications needs of the two organizations and to offer related services outside the alliance. project management and technical services. As part of the alliance partnership. marketing. Since Pantares was established Fraport has taken a share in Brisbane airport. Examples of this have existed for many years with national airport groups. the airports have agreed not to compete against each other on international contracts. Much of the focus in this area. 5 Information technology: system and equipment standardization. bidding for international projects. From the airport operator’s point of view. standardization of equipment and technology. 2000): 1 Aviation ground services: ground and cargo handling logistic systems. Impact of airport globalization on users Passengers One of the major advantages of globalization for airlines and other companies is the advantage of being able to sell one common product or one global brand to the customer. 3 Facility management: purchasing. and the alliance is operating a new logistics centre. Other examples of co-operation include Schiphol assisting Fraport to improve its spend per passenger in the commercial areas. however very questionable. but it will not be until the global airport companies have established a much stronger presence that a ‘global brand’ will be recognizable by most passengers. marketing. Verboom. The companies have also formed a joint venture company. 7 Other: marketing. For example. bidding for international projects. 4 Real estate: site development at home and other airports. The merits of branding within the airport industry. financial risk sharing. there may be some advantage in aiming to provide a common brand image in that a well defined level of quality of service can be defined and guaranteed for all airports. colour schemes and interior design for the entire airport. has been on developing automated passenger control and passenger guidance (Fraport. BAA plc has traditionally used a common and constant brand image for its seven UK airports. are. 2 Retail and passengers: retail business at home and international airports. Tradeport. 2001. branding involves the use of similar signposting. Most passengers. environmental issues. For international or global airport companies. training and recruitment. 48 . at Hong Kong airport. encouraged by the heightened security requirements because of 11 September. product and technology development. particularly leisure passengers who travel infrequently. 2000.

which is situated 65 miles southeast of London. In 1998 it bought Manston airport. The transfer of skills in the management and development of retail and other commercial facilities may increase non-aeronautical revenue and may reduce the airport’s reliance on aeronautical sources. such as landing and passenger fees. It has 49 . check-in desks and other office space. An additional fear is that sophisticated systems not really necessary for certain smaller airports may be adopted merely because they are available (IATA. Moreover. 2000b). For example Lufthansa – one of the airlines most affected by the Pantares agreements – has expressed concern that airport globalization will just lead to global airport groups exploiting their monopoly position which will bring no benefits to airlines (Gethin. in some cases. For instance. there could be benefits to an individual airline or airline alliance in operating out of more than one airport which is owned by a global airport company. regulation has been introduced to control charges – but this may not always be satisfactory to users if. This is the idea behind the Wiggin’s Group expansion into airports. 1998). However. standard contracts could be agreed for the whole airport network. 2001). It is in favour of such developments if the resultant lower costs bring lower charges. For example. for example. the International Air Transport Association (IATA). particularly the airlines. airport charge increases at Belfast International airport (owned by TBI) and Luton airport (operated as a concession by TBI and other partners) were bitterly opposed – notably by British Midland at Belfast and easyJet at Luton. In the United Kingdom. for example. founded in 1919 which became listed on the stock exchange in 1964. The airline industry body. Chapter 5 describes how. have remained fixed by regulation (Gill. with the Argentinian airports the airlines have claimed that there have been unreasonable increases in charges in the non-regulated areas such baggage handling. joint purchasing and shared development costs of new systems. quantity discounts on charging could be negotiated and there could be common agreements on the use of gates and other facilities.The changing nature of airports Airlines As with most industry privatizations there has been concern from users. IATA has also expressed concerns that globalization could lead to management attention and funds being diverted away from core airports. while the direct airside charges. has acknowledged that airport globalization may bring beneficial economies of scale due to. The airline industry does also not appear to be in total support of moves towards airport globalization. On the other hand. that prices will rise once privatization has occurred and profit maximization becomes the key business driving force and motivation. for example. the availability of new sources of funding may enable the quality of airport facilities to be improved which would generally be welcomed by the airlines – as long as it does not push up airport charges. not all relevant prices are regulated. Wiggins: developing the PlaneStation global branding concept The Wiggins Group is a property company. from the UK Ministry of Defence.

which exist if an airport is taken over by a different operator.9 PlaneStation airports operated by Wiggins in 2003 Airport London Manston Odense Pilsen Lahr Black Forest Schwerin-Parchim Cuneo-Levaldigi Ajman Borgond Location UK Denmark Czech Republic Southern Germany Northern Germany Northern Italy United Arab Emirates Hungary subsequently acquired long-term contracts at a number of other regional airports in Europe and also one in the United Arab Emirates (Table 2.Managing Airports Table 2. These partnerships with the public sector often allow access to grants and infrastructure loans. 2001. the public or private operators of the airport have retained ownership whilst Wiggins has taken over full operational and development control. Wiggins believes that their smaller sized airports and more straightforward security operations will be a distinct advantage. At most Wiggins airports there is no or very little traffic when Wiggins gets involved. It also tried to gain control of Smyrna airport near Nashville. just-in-time assembly locations and for supporting all the freighter operations. Wiggins is hoping to operate more airports in the future (Gethin. The ideal airports are former military bases or those with disused or underutilized facilities with ample availability of surrounding land which can developed using the real estate experience of Wiggins. Tennessee in the United States but eventually withdrew its interest from this airport in 2003. With most of the Wiggins contracts.Wiggins therefore has a very different strategy to most of the other emerging global airport companies who tend to buy up airports which already are successful or appear to have great potential. Specifically with increased security measures at major airports since 11 September. hotels and leisure facilities or business and light industrial activities will bring jobs. increased land values and generally considerable regional economic development to the surrounding areas of the airport in the network. Wiggins believes that the power of the PlaneStation brand will significantly benefit the airports within this network and will bring the resources needed to improve their performance which have previously been unavailable under individual. Wiggins expects that projects such as local community centres with shops. Other potential benefits include the general lack of congestion and availability of slots compared to alternative airports plus the ownership of adjacent land which is ideal for business park development. were too great. 2002b). primarily because it found the political and regulatory obstacles. The overall objective is to develop a global network of over 20 regional airports under its so-called PlaneStation concept. Wiggins intends to use its network airports particularly to serve low cost and dedicated all freighter airlines who demand quick handling and rapid turnaround facilities which the PlaneStation airports can provide. Wiggins claims that common standards and processes at all the network airports along with one single administrative system provides the potential for improving the quality and 50 .9). public ownership.

References and further reading ACI Europe (1999). which will simplify their travel experience whilst providing high levels of security and also from the familiarity and consistency which the global airport brand will bring (Lewin. 2nd edn. (1999). Experiences with airport privatization. June. Aviation Strategy. (1999). (1999). Aviation Strategy (1999a). Summer. Aviation Strategy. Sydney syndrome. Beijing rides market downturn. Ashford. for example. ACI Europe. Bennett. C. In Airport 2000: Trends for the New Millennium (N. ed. April–May. October. (2002). Airline Business. J. Airport privatization: cleared to take off. Aviation Strategy (2000). Airport World. December. too. October. Winter. November/December. Croes. Collet. (1997). T. J. (2000). 2002). Ballantyne. Institute of Air Transport Airport Management Symposium. Communique Airport Business (1998). 10–21. and Moore.There will also be scope for the building of close relationships with airlines and other operators with. Elsevier. R. Department of the Environment. Strategic Airport Planning. How to sell an airport. Beechener. 58–61. M. N. Airport privatization – no stopping the juggernaut. but they will also have the ability to share best practice ideas across the network and to introduce new technology over the entire network which will reduce costs at each airport. Aviation Strategy. January. Routledge. 51 . Ashford. Possible forms of state intervention. November. 8–9. A New Deal for Transport. simplified negotiation. P. Barker. will benefit from this new technology. particularly biometric systems. March. Aerlines. Changes in airport management. N. Global airport developers: risky business. E. (1999).-D. Airport privatization: competition for management project intensifies. Privatization. Senegal. Transport and the Regions (DETR) (1998). Airport Finance. 8–9. and Gosling. (1999). 10–13. 46–58. November. Caves. Beesley. worldwide and in Africa. G. Loughborough Airport Consultancy. 2nd edn. Wiggins believes that not only will the individual airports benefit from increased traffic as the result of being part of an airport network. Regulation and Deregulation. 28. Ashford. Taking on the world. J. Athens International Airport: Preopening Special Report. HMSO. Jane’s Airport Review. Senegal. 36. A. H. Our best deal ever – AGI and London Luton. (1997). Airline Business. F. 28–30. (1997). Carre. May. Institute of Air Transport Airport Management Symposium. Communique Airport Business (2000). Passengers.). Airport Traffic Report. risk sharing. Jane’s Airport Review. (1999). Aviation Strategy (1999b). Sovereign. Private interest in India. and common tariffs. 14–17. (1999). Bates.The changing nature of airports effectiveness of the facilities offered to the airline operators and logistic organizations who plan to operate from a number of airports in the network.

Managing Airports

Deutsche Bank (1999). European Airports: Privatization Ahead. Deutsche Bank. Doganis, R. (1992). The Airport Business. Routledge. Endler, J. (2000). Global alliances and privatization. Tenth ACI Europe Annual Assembly, Rome, June. Federal Airports Corporation (FAC) (1997). Annual Report 1997. FAC. Federal Aviation Administration (2000). Fact Sheet: Stewart International Airport Privatization, 21 March. Feldman, J. (2001). Airports: sell, sell, Air Transport World, February, 65–8. Forbes, P (2002). Airport privatization – How should airport operators and investors react to changing market conditions? European Transport Conference, Cambridge, September. Frankfurt Airport (2000a). Flying into the 21st century: the Frankfurt airport authority is major partner in Terminal 3 project Manila International airport. Press release, 28 June. Frankfurt Airport (2000b). Annual Report 1999. Frankfurt Airport. Fraport (2002). Annual Report 2001, Fraport. Freathy, P. and O’Connell, F. (1998). European Airport Retailing. Macmillan. Gangl, S. (1994). Financing a partially-privatized airport. Airports as Business Enterprises Conference, April. Gangl, S. (1995). Going to market – Vienna Airport’s share flotation. In Sources of Finance for Airport Development in Europe (J. Amkreutz, ed.), ACI Europe. Gangl, S. (1998). Experiences of privatization. University of Westminster/Cranfield University Airport Economics and Finance Symposium, London, March. Gangl, S. (2002). The globalization of airport companies. University of Westminster/Cranfield University Airport Economics and Finance Symposium, March. General Accounting Office (GAO) (1996a). Funding Sources for Airport Development. GAO. General Accounting Office (GAO) (1996b). Airport Privatization: Issues Related to the Sale or Lease of US Commercial Airports. GAO. General Accounting Office (GAO) (1998). Funding of Airport Development. GAO. General Accounting Office (GAO) (1999). Annual funding as Much as $3 Billion Less than Planned Development. GAO. Gethin, S. (2001). Twist in the tale for Pantares, Jane’s Airport Review, September, 15. Gethin, S. (2002a). BAA faces a profit squeeze, Jane’s Airport Review, July–August, 10–11. Gethin, S. (2002b). Looking for the next PlaneStation, Jane’s Airport Review, July–August, 12. Gill, T. (1998). Stampede to market. Airline Business, April, 50–3. Graham, E. (1998). TBI buys Stockholm-Skavsta in Sweden’s first privatization. ACI Europe Communique, October, 8. Gray, S. (1998). SEA consortium prepares $2.1 billion Argentinian plan. ACI. Europe Communique, August–September, 7. Hanlon, J. P. (1999). Global Airlines, 2nd edn. Butterworth-Heinemann. Humphreys, I. (1999). Privatization and commercialization changes in UK airport ownership patterns. Journal of Transport Geography, 7, 121–34. International Air Transport Association (IATA) (2000a). World Air Transport Statistics, 6/44, IATA.
52

The changing nature of airports

International Air Transport Association (IATA) (2000b). Airport networks and airport cross ownership. ANSConf Working Paper No. 18, ICAO. International Civil Aviation Organization (ICAO) (2000a). Privatization in the provision of airports and air navigation services. ANSConf Working Paper No. 6, ICAO. International Civil Aviation Organization (ICAO) (2000b). Organisational aspects of the provision of airports and air navigation services. ANSConf Working Paper No. 18, ICAO. Jackson, P. M. and Price, C. P. (eds) (1994). Privatization and Regulation. Longman. Jane’s Airport Review (2000). Stockholm’s third airport. Jane’s Airport Review, March, 14. Knibb, D. (1999). Australia’s road to privatization. Airline Business, August, 40–1. Lambert, R. (1995). Birmingham’s public–private finance partnership. In Sources of Finance for Airport Development in Europe (J. Amkreutz, ed.), ACI Europe. Lewin, R. (2002). Developing a global network of airports. University of Westminster/Cranfield University Airport Economics and Finance Symposium, March. McCormick, C. (2000a). Private partners. Airports International, March, 36–41. McCormick, C. (2000b). US privatisation program to expand? Airports International, September, 9. Nichols, W. K., Koll, E., and Stevins, A. (1999). Airport internationalisation: the time is now, Airports International, June, 16–20. O’Connor, A. (2002). Cross equity deals win support, Jane’s Airport Review, May, 8–10. Orlando Sanford Airport Authority (1999). Sanford Airport Authority approves deal – TBI US to Operate Orlando Sanford airport’s domestic terminal. Press release, 30 August. Ott, J. (1998). Indianapolis serves as a privatization testbed. Aviation Week and Space Technology, 14 December, 52. Piling, M. (2002). Amsterdam: forward thinking, Airport World, August–September, 42–7. Poole, R. W. (1995). How to Privatize Orange County’s Airports. Policy study 194, Reason Foundation. Ricover, A. (1999). Airport privatization of Latin American airports. In Airport 2000: Trends for the New Millennium (N. Ashford, ed.), Sovereign. Schiphol Group (1999a). Schiphol Group and FAG seek close co-operation. Press release, 21 December. Schiphol Group (1999b). Dutch government gives go-ahead for further growth. Press release, 17 December. Schiphol Group (2000). Annual Report 1999. Schiphol Group. Schneiderbauer D., Feldman D., and Horrex, M. (1998). Global Airport Management: Strategic Challenges in an Emerging Industry. Mercer Management Consulting. TBI (1999). Interim Report 1999, TBI. TBI (2000). Annual Report 2000, TBI. TBI (2002). Annual Report 2002, TBI. UK Government (1986). Airports Act 1986. HMSO. Verboom, P. (2000). Schiphol Group: creating airportcities. Tenth ACI Europe Annual Assembly, Rome, June.
53

3
Airport economics and performance benchmarking
Industry profit levels
This chapter considers the economics of the airport industry. The modern-day commercial and business pressures being placed on most airports mean that a thorough understanding of the economics of airports is now, more than ever before, a fundamental prerequisite for all airport managers. The chapter begins by looking at profit levels within the industry and describing the revenue and cost structures. It then goes on to discuss some of the key factors which influence the economics of airports. This leads to a discussion of how economic performance can be measured and whether it is possible to produce a single efficiency measure for each airport. Table 3.1 shows the profit levels at thirty of the largest airports or airport groups in the world in 2001–02. All the airports produced an operating profit (i.e. profit before interest and tax) and most airports also recorded a net profit (i.e. after interest and tax payments are taken into account). The few exceptions were mostly North American airports and Zürich airport which were clearly significantly affected by the events of 11 September 2001 and the difficulties faced by the airlines during this time – particularly the failure of Swissair. Overall, the net profit margin, that is net profit as a percentage of revenues, for the 50 leading airport groups in 2001

Airport economics and performance benchmarking

was 11 per cent. In comparison, the 50 major airlines recorded a negative profit margin of 4 per cent (Pilling and O’Toole, 2002). A broader assessment of overall profitability can be obtained from the ACI which produces the most comprehensive global economic surveys. The 2001 survey covered 620 airports which collectively handled over 2.1 billion passengers, or about two thirds of all ACI members traffic in 2001 (ACI, 2002). The survey identified trends in airport economics by geographical region but some distortions may have arisen because of the composition of the sample used. This seemed to be particularly the case with the Africa/Middle East airport where the influence of the performance of a few large airports may have resulted in a disproportionate effect on the results of this region or with the Latin America/Caribbean airports where the Brazilian airports dominated the sample. Overall, the ACI survey found that in 2001 a net profit of US$ 630 million was made at all the airports which represented
Table 3.1 Profitability for 30 major airport operators, 2001–02 Total revenues (million US$) 2716.1 1535.8 1427.1 1416.9 1215.2 1111.8 955.1 676.6 632.7 543.2 510.9 493.0 485.9 485.4 481.0 475.9 467.1 460.4 450.7 414.9 392.1 372.0 334.0 319.0 314.6 287.1 286.9 274.1 274.1 267.4 Operating profit (million US$) 803.2 276.6 363.1 201.2 180.1 297.2 170.9 84.6 189.3 150.1 60.1 13.9 55.8 172.8 60.9 82.5 80.3 63.5 227.3 33.1 65.1 146.0 94.6 4.6 27.4 166.6 76.4 117.0 28.9 38.4 Net profit after tax (million US$) 461.9 90.6 336.4 90.4 6.3 N/A 145.9 30.3 163.8 N/A 33.0 1.3 3.4 183.9 114.8 11.3 23.6 16.8 25.8 65.6 10.4 30.0 8.9 21.5 N/A 80.5 59.4 75.0 79.4 7.4

Airport operator

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

BAA Fraport Port Authority of New York and New Jersey AENA Spanish Airports Aeroports de Paris New Tokyo International Airport Authority Kansai International Airport Company Hong Kong Airport Authority Schiphol Group City of Chicago Department of Aviation Flughafen Munchen Luftfartsverket Sweden SEA Aeroporti di Milano Civil Aviation Authority of Singapore Los Angeles World Airports Miami-Dade County Aviation Department Aeroporti di Roma Norwegian Air Traffic and Airport Management City and County of Denver San Francisco Airports Commission Aer Rianta Irish Airports Manchester Airport Group Greater Toronto Airports Authority Unique Zürich Airport Washington Airports Authority Airports Division, Hawaii Flughafen Wien Massachusetts Port Authority Dallas/Fort Worth International Flughafen Dusseldorf

Source: Airline Business and annual reports.

55

Managing Airports

about 1.5 per cent of total revenues – down from about 2 per cent in 2000 – with the North American airports as a group making a loss of nearly 1 billion dollars after a modest profit of US$ 160 million in 2000. The overall net margin was much lower than for the 50 major airports because this survey covered many smaller airports which tend to be less profitable. Profits before tax, interest, depreciation and amortization (in international accounting terms known as EBITDA) were around US$ 12.6 billion which represented about a 30.0 per cent margin of total revenues in 2001, down from 32.4 per cent in 2000. The Asia/Pacific airports had the highest EBITDA margin of just over 43 per cent. Predictably, given the 11 September, 2001 events, the North American airports had the lowest margin of 18 per cent – although the profit levels of many US airports tend to be relatively low in most years because of the unique way in which they are financed.

Revenue and cost structures
Airport revenue is usually classified into two main categories: aeronautical (or aviation) and non-aeronautical (or commercial) revenues (Table 3.2). Aeronautical revenues are those sources of income that arise directly from the operation of aircraft and the processing of passengers and freight. Non-aeronautical revenues are those generated by activities that are not directly related to the operation of aircraft, notably income from commercial activities within the terminal and rents for terminal space and airport land. The International Civil Aviation Organization (ICAO) has a long list of activities which can be classified as non-aeronautical including cattle farming, concrete-post manufacturing, baseball training camps, mannequins and models show, and pipeline inspection shows (ICAO, 1991)! Then there are a few categories of income that can be classified as either type of revenue. For example, handling revenues are usually treated as aeronautical revenues unless handling is undertaken by handling agents or airlines when the associated revenue (rent or fee based on turnover) is included under rents or concession revenue items. Income received by the airport from aircraft fuel companies or from airlines as a fuel throughput fee could be regarded as directly related to aircraft operations and hence an aeronautical revenue. Alternatively, this income could be considered as

Table 3.2 Airport operating revenue sources Aeronautical Landing fees Passenger fees Aircraft parking fees Handling fees (if handling is provided by the airport operator) Other aeronautical fees (air traffic control, lighting, airbridges etc.) Non-aeronautical Concessions Rents Direct sales (shops, catering and other services provided by the airport operator) Car park (if provided by the airport operator) Recharges (for gas, water, electricity etc.) Other non-aeronautical revenue (consultancy, visitor and business services, property development etc.)

56

it was apparent that aeronautical revenues represented just under half of all revenues (Figure 3. are usually included under a different ‘non-operating’ revenue category. Revenues. mostly due to the lower income per capita. Overall. A breakdown of revenues for a sample of European airports is shown in Table 3. The Asia/Pacific and European airports generated around half their revenues from non-aeronautical sources and are generally considered to the regions where airport non-aeronautical or commercial policies are the most developed. From the 2001 ACI survey. 2001 Source: ACI. and because the non-aeronautical policies tended to be less developed than in many other parts of the world. landing and passenger fees are by far the most important aeronautical revenue sources. 2002.3 for 1983–2001. The table shows that aeronautical revenues account for around half the total revenues within Europe which is very similar to the results of the ACI survey.1). such as interest received and income earned from subsidiary companies. At some airports. The African/Middle East and Latin American/Caribbean regions appeared to have the lowest share of non-aeronautical revenues. the increase in the proportion of non-aeronautical revenue over the 15 years from 1983 to 1998 had been considerable – for example. the generally smaller sized airports which had less non-aeronautical opportunities.and tax-free goods in this year with the average 80 70 60 50 40 30 20 10 0 /L an be ib a ar ric C me A As Eu N ta To id M a/ ric Af ast E or ia p ro th /P l e er Am ac Aeronautical share of total revenue (%) ifi dl e c ic Figure 3. The situation changed in 1999 because of the impact of the abolition of EU duty. in at a 57 . This not only reflected pressures from airlines and regulatory bodies to keep airport charge increases to a minimum but also the increased focus being placed on commercial activities. Most of the non-aeronautical revenue comes from concessions and rents. at Copenhagen airport the share increased from 41 to 54 per cent and at Geneva airport it rose from 40 to 51 per cent.1 Percentage share of aeronautical revenue at ACI airports by world region.Airport economics and performance benchmarking commercial income and hence a non-aeronautical revenue. The dominant trend up until 1998 was a decline in the importance of aeronautical revenues with a subsequent increase in reliance on non-aeronautical sources. The North American airports had the lowest share of aeronautical revenues which reflects the low level of US airport charges because of the unique way in which these airports are financed. One of the most notable increases in commercial revenues has been with BAA plc airports – Chapter 6 outlines how this was achieved.

2001 Airport Revenue shares (%) Aero Amsterdam Basel-Mulhouse Birmingham Brussels Copenhagen Dusseldorf Frankfurt Geneva Glasgow Milan London Gatwick London Heathrow Manchester Marseilles Paris Rome Oslo Vienna Zürich Source: Annual reports.1 45.0 39.4 100.6 44.5 44.5 21. capital. Cost shares (%) Labour Depreciation Other Total 23 22 33 24 38 41 49 38 35 55 27 22 24 26 33 39 21 57 24 21 38 21 21 29 21 15 22 18 11 21 25 22 29 22 22 40 17 34 56 40 46 55 33 38 36 40 47 34 52 53 54 45 45 39 39 36 42 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 Non-aero 53 55 36 38 44 33 30 52 38 28 59 60 44 56 56 38 49 25 48 Total 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 47 45 64 62 56 67 70 48 62 72 41 40 56 44 44 62 51 75 52 non-aeronautical share declining slightly to around 44 per cent.6 39.6 100. 1988 1993 1998 1999 2000 2001 58.2 100.0 Table 3. In part this is due to more 58 .0 55. there is no industry standard for the reporting of airport operating costs.9 44.2 21. labour costs account for an average 33 per cent of total costs with depreciation representing a further 24 per cent.9 43.4 Revenue and cost structures at a selection of European airports.9 41. Unlike with revenues.0 52.6 18. however.9 24. 1983–2001 1983 Revenue shares (%) Aeronautical Non-aeronautical Total Cost Shares (%) Labour Depreciation Other Total Source: Annual reports.0 56.0 48. it is usually possible to identify the three separate cost items associated with labour.6 23. This value remained fairly constant in 2000 and 2001.1 100.0 32.1 100.0 34.2 100.9 100.0 55.6 35.6 43.5 100.0 54.6 100.3).4 100.8 20.0 43.0 36.2 42.0 34. Over the years the labour costs have decreased in importance (Table 3.0 45.8 42.0 55.Managing Airports Table 3.0 100.3 Average revenue and cost structures at European airports.4 40.2 36.1 100.9 100.0 100.1 23. From published accounts. Within Europe. and other operating costs.

which the airport operator only has limited control over. Some of these are more easily influenced by airport management than others. First. Studies of British airports in the 1970s showed that unit costs. Milan. or unit costs. 2000). were US$9. More complex analyses also suggest that airports experience economies of scale – with the effects being most significant for smaller airports (Gillen and Lall.00 for airports between 2. Studies of Australian and Spanish airports have produced similar findings (Assaily. 1973). Gatwick and Heathrow. and Oslo which are not involved with so many activities.5 million and 25 million (ICAO. again reflecting their heavy involvement in the labour-intensive handling activity. 1997. In 1999 an ICAO airport economics study found that costs per WLU or unit costs for airports of less than 300 000 WLUs averaged US$15. the volume and nature of the traffic. Doganis et al. The revenue figures reflect differences in strategies towards aeronautical and commercial activities and also differences in the functions carried out by the airport operator itself.. Amsterdam.4 for airports with WLUs between 300 000 and 2. can have a major impact on the airport’s economic performance.. This suggests that there might be an optimal size of airport in economic terms – but as yet the evidence is far from conclusive. declines. labour costs account for around half the total costs. and Vienna in 2001 were heavily involved in handling. Then at a traffic level of around 3 million passengers or WLUs. There has also been some limited research which shows that as airports get very large their unit costs start to rise again because the airport system becomes more and more complex. 1989. 59 . Factors influencing costs and revenues There are many factors that affect an airport’s level and structure of costs and revenues. There may also be higher depreciation charges due to additional investment at the airports to cope with the traffic growth and a more accurate representation of depreciation at some airports because of their transfer from public sector accounting procedures to more commercial practices. These average values hide the variation between individual airports which in some cases in quite considerable. 2000). London Heathrow.5 million WLUs and were US$8. the unit costs tended to flatten out and ceased to exhibit a strong relationship with airport size (Doganis and Thompson.4 shows these values for a number of European airports. For example. As airports increase their traffic throughput the costs per unit of traffic. airports such as Basel-Mulhouse. which is more costly to operate. The labour costs also vary quite considerably at airports.5 million passengers or WLUs. were much more dependent on commercial activities. 1995).Airport economics and performance benchmarking outsourcing being undertaken by airport operators and in some cases a more productive labour force.. Pels et al. Frankfurt. 2000). with their aeronautical charges regulated. measured in costs per passenger handled or per work load unit (a WLU is equivalent to one passenger or 100 kg of freight) fell dramatically as total traffic increased to around 1 or 1. for example with a number of different terminals. (Pels et al. By contrast. Many small airports experience poor utilization which will also push up unit costs. have much lower staff costs. It is likely that for small airports there will be certain fixed costs associated with the provision of infrastructure and services which will be incurred at the airport irrespective of the traffic levels. Table 3. At Vienna and Frankfurt. Düsseldorf.

and tax-free shopping. duty-free shops. BAA plc has estimated that for a hypothetical terminal of 8 million passenger capacity. as with the business airport London City which put leather seats in the departure lounge. Airports operators are relatively free to choose their own physical and service standards which are considered desirable to provide an acceptable level of service to passengers although in practice many of the standards at airports are fairly similar. different airports have little in common. Charter passengers also have different spending patterns to scheduled terminal passenger as do transfer passengers at hub airports (a more detailed description of different spending patterns is given in Chapter 7). in order to keep down the cost of airport charges. International passengers also have more luggage. in Heathrow’s Terminal 1 it has been estimated that international passengers on average have 1. a number of low-cost carriers such as Ryanair and EasyJet have expressed preferences for operating out of low-cost terminals with only basis facilities. SEA. cleaning. terminals may also be leased as is the situation in the United States and Australia. There is no ‘typical’ airport when it comes to looking at the services and facilities an airport provides. this will clearly have resource implications. if an airport does decide to aim. airports serving holiday destinations may have a problem with peakiness and uneven capacity utilization which may push up costs. In the extreme case. Nevertheless. namely 1. while others will contract these out. handling.20 (Toms.3 bags compared with 0. these passengers spend longer in the terminal. which gives a cost multiple between international and EU traffic of 1.36. air traffic control. All this will impact on both cost and revenue levels. For example.Managing Airports Larger airports are normally in a better position to provide a greater range of commercial facilities for passengers and other consumers and tend therefore to have a greater reliance on non-aeronautical revenues. with no provision of airbridges. say. Some airport operators will provide activities such as security. At the other extreme. For example. More space for passengers than is strictly necessary may be deliberately provided at some airports which are keen to develop their retail and catering activities in order to increase their non-aeronautical revenue. 2000). the Milan airport operator traditionally has been heavily involved in handling and generated over 50 per cent of gross revenues from this source. the cost associated with an international passenger is likely to be 1. Moreover. The ICAO survey found that on average airports with more than 25 million passengers generated 58 per cent of their revenue from non-aeronautical sources compared with the sample average of 36 per cent. Beyond the basic operational functions. Costs associated with international passengers tend to rise as this type of traffic requires more space in the terminal for customs and immigration.5 for domestic passengers. This is very different from airports such as London Heathrow or Amsterdam Schiphol which generate a relatively 60 . These passengers tend to spend more money at the airport on commercial facilities such as retail and catering which will push up unit revenues – particularly if they have access to duty. for a more exclusive product.62 times greater than the cost of domestic passengers. Likewise. Charter passengers will not usually need certain facilities such as airline lounges which will influence the airport’s cost and revenue levels. car parking. hub airports with a true ‘wave’ pattern of flights will have well-defined crests and troughs of traffic which will be more costly to handle than a more evenly spread distribution of flights. and heavy maintenance. The cost multiple for EU passengers is less.

Measuring economic performance Growing interest in performance assessment Until the 1980s. will only be incurred at certain airports. With government-owned airports it is possible. For example. In a more general sense. The ownership patterns can also influence other factors such as funding arrangements and the cost of capital. BAA plc depreciates runways for up to 100 years while Amsterdam airport uses 30–40 and AdP uses just 10–20 years. for example. imposed to reduce noise or other adverse impacts of air transport. For instance. Location is also likely to influence the actual layout and design of the airport and the positioning of both airfield and terminal facilities. the capital costs will reduce and utilization will hopefully improve. There are many other factors dependent on an airport’s location and geographic situation which. In some cases. such as snow removal and deicing facilities. This will have an impact on any comparative analysis of net profit levels. will be beyond the airport operator’s specific control. may also mean that the airport cannot make the most efficient use of all resources. capital costs are likely to be high and poor utilization may push up the operating costs. Environmental limits. weather-related expenses. as is typically the case with the provision of policing. the situation may be even more complicated as the government may choose to pay for the provision of certain services. Later in the cycle. Within the airport industry accounting procedures vary quite considerably particularly since some airports adopt government or public authority accounting methods rather than commercial practices. an airport’s performance is likely to depend very much on where it is positioned in the investment life cycle. airports will be subject to different taxation regimes. the systematic monitoring and comparing of airport economic performance was not a widely practised activity within the airport industry. to find that the airport’s land will not be considered to be an airport’s asset and hence will not appear in any balance sheet. but because of wind conditions or some other particular climatic or geographic characteristic. For example. an airport may require two or more runways not to meet traffic needs. The ICAO 1999 economic survey found that one-third of airports did not show realistic costs associated with depreciation and interest. Views related to how assets should be depreciated differ. In addition. with many public sector airports. since investment at airports tends to be large and ‘lumpy’ rather than continuous and gradual. locational factors may also effect the cost and quality of labour and the availability of capital for investment.Airport economics and performance benchmarking small amount of revenues from this activity in the form of rents and concession fees paid by the airlines and handling agents. for instance those in the United States. security or fire and rescue. Moreover. Economic comparisons in any industry have to acknowledge the accounting policies adopted by individual operators. An airport may be forced to close at night even if there is sufficient demand to make night flying feasible. to a large extent. When major developments have taken place. being exempt from most business taxes. This can largely be attributed to insufficient commercial and business pressures for 61 .

now operating in a much more cost-conscious and competitive environment. Analysing an airport’s economic performance has therefore become an important task for many of those involved. ICAO listed 10 indicators which it identified as being some of the key measures for assessing economic performance (ICAO. These noneconomic areas are considered in detail in the next chapter but the inter-relationships between these different aspects of performance must be recognized. Airlines. only one aspect of airport performance which needs to be assessed. Irish Commission for Aviation Regulation. only further discouraged most airports from seriously attempting to analyse their comparative performance. Comparative performance analysis can also give valuable insight into issues such as whether privatized airports are more efficiently run than public sector airports. with the airport industry. CAA. 2001. see National Economic Research Associates. Economic regulators of privatized or autonomously managed airports also have good reason to monitor airport performance to ensure that users are being fairly charged and that the airports are run efficiently and increasingly a number of regulators have commissioned airport benchmarking studies (e. are likely to view the findings from a different perspective. thus. traditionally much more used to using financial ratios and other benchmarking techniques than airport operators. For example. see also Chapter 5). 2002. In addition consumer satisfaction levels also need to be assessed. Clearly any decision on service levels or operational procedures will greatly influence an airport’s cost and manning levels and vice versa. directly or indirectly. There is. the ACI-Europe Economics Committee started work on producing comparative airport performance indicators for its member airlines. 1991). 2001. equipment availability. what is the best organizational framework for an airport and whether airports operated as part of national networks or systems perform better than individual airports. terminal processing times. Many other organizations external to the airport sector are also showing a keen interest in using performance measures to compare achievements between airports. The difficulties involved with producing meaningful comparisons. baggage delivery. such as varying involvement in airport activities and different accounting policies. hence. As airports become more commercially oriented. of course. Senior managers can use performance measures to help them define goals and targets. and so on.g. typically through passenger surveys. In the late 1990s. With airport commercialization and privatization has come a marked interest in performance comparisons and benchmarking. Such organizations will have a different ultimate objective for comparing performance and. are anxious to identify possible business opportunities and to ensure that their chosen airport investments continue to perform well. in 1991.Managing Airports airports and the general lack of experience of benchmarking techniques within the public sector as a whole. they have been keen to identify the strong performers in the industry and adopt what are seen as best practices. The growing acceptance of airport performance monitoring is further illustrated by various international industry bodies showing an interest in such activities. have an interest in identifying which airports are being inefficiently managed – particularly to add substance to any lobby against increases in user charges. a growing recognition of the value of continuous performance appraisal within the airport industry. Investors and bankers. Economic performance appraisal is. There are a wide range of operational activities which need to monitored by looking at measures relating to airside delays. 62 .

namely aircraft movements. The financial measurement of output is relatively straightforward and can be measured by considering the total revenues generated. Determining a reliable measure of the capital input is much more difficult. Since most airports handle both passengers and freight. As with other businesses. cross-subsidies between different traffic. perhaps. reflect the relative importance or value of the different outputs and. This relationship can be expressed in both financial and physical terms. this suggests the use of an output measure which combines the two. Costs or employee numbers associated with the different outputs could theoretically be used to determine the scaling factor but there is the major problem of joint costs or joint tasks undertaken by the staff. In physical terms. is a rather arbitrary method of linking the two outputs since the same weight of passengers and freight does not involve using the same resources. Any part-time and temporary staff should be converted to full-time equivalents.e. one WLU one passenger or 100 kg of freight). gates. passengers or freight. the output of an airport can be assessed in three ways: in terms of quantities of aircraft. The simplest physical measure of the labour input is the total number of employees. sometimes. include an aircraft movement element. There is the additional problem that there are even different costs and revenues associated with different passenger types. capital input is measured by the production capability or capacity of the system. reflect the accounting policies of the specific airport and may not always be closely related to its economic production capability. for example. its role as a retail facility. such as the WLU. These will.Airport economics and performance benchmarking Performance concepts Performance measures analyse the relationship between inputs and outputs at an airport. Capacity can be measured on an hourly. At an airport this cannot be assessed by one measure. namely employee wages and salaries. 1998). passengers. daily. therefore. 2000) has suggested 63 . although probably the most widely accepted aggregate measure. Physically. or annual basis. that the focus should be on passenger numbers since freight handling at airports is very much an airline activity and has little impact on an airport’s economic performance. Depreciation or asset values can be used to measure the financial capital input. the labour input can also be measured in financial terms. Some argue. These measures do not cover all aspects of an airport. however. the most notable examples being international and domestic passengers and terminal and transfer passengers. The capacity of the runways. The WLU originated from the airline industry and uses a weight criteria for combining these two types of traffic (i. Ideally. To capture the effect of the cost of labour as well as productivity per head. the WLU formula should. There has been some research undertaken in this area to investigate whether a more appropriate output measure can be found which takes into account all three key outputs of an airport. An alternative scaling parameter is the relative prices of the outputs but this assumes a close relationship between price and cost which is not usually the case because of market imperfections. regulation and government interference and. The WLU. but they do capture the key outputs. labour and capital are the major inputs of the airport system. and so on all have to be considered. and freight (Vallint. however. terminal. The Transport Research Laboratory (TRL. The use of aircraft movements is not ideal as such measures will not differentiate between different sizes and different types of aircraft.

Managing Airports

that the use of the airport throughput unit (ATU) which combines output measures of WLUs per ATM and WLUs and is defined as:

ATUs

(WLUs)2 ATMs

(WLUs)

(WLUs) ATMs

ATUs have subsequently been adopted in TRL’s more recent performance assessments and have also been used by IATA (TRL, 2002). To summarize, performance measures or indicators are all about relating one or more of the outputs to one or more inputs. By using a number of these indicators, an airport can assess different aspects of its performance and identify where its strengths and weaknesses lie. These indicators can be grouped into certain categories such as cost-efficiency, labour and capital productivity, revenue generation and commercial performance, and profitability. In addition to these input : output ratios, a few other key measures such as the share of revenue from aeronautical sources or the percentage of costs which are allocated to staff can give further insights into comparative performance. There are around fifteen to twenty indicators which are commonly used (Ashford and Moore, 1999; Doganis, 1992; Humphreys and Francis, 2000). Table 3.5 presents the most popular indicators. Some of these have been used for the analysis of specific markets such as France (Assaily, 1989), Australia (Doganis et al., 1994) or the UK (CRI, 2002) or more generally to compare airport performance within Europe (Doganis and Graham, 1987; Doganis et al., 1995; Graham and Lobbenberg, 1995) or around the world (TRL, 2002). In 2000, a survey of 200 of the world’s largest airports was undertaken by Loughborough University and the UK
Table 3.5 Performance indicators commonly used to assess economic performance 1 Cost efficiency Costs excluding depreciation per WLU Costs including depreciation per WLU Depreciation costs per WLU Labour costs per WLU Depreciation share of operating costs Labour share of operating costs 2 Labour productivity WLU per employee Revenues per employee 3 Capital productivity WLU/ total assets Revenues/total assets Total assets per employee 4 Revenue generation Revenues per WLU Aeronautical revenues per WLU Non-aeronautical revenues per WLU Aeronautical share of total revenues 5 Commercial performance Concession plus rental revenues per passenger Concession revenues per passenger 6 Profitability Revenues: costs ratio Operating profit excluding depreciation per WLU Operating profit including depreciation per WLU Operating profit including/excluding depreciation/total assets Net retained profit after interest and taxation per WLU

Notes: 1 Only operating revenues and cost have been included (i.e. interest, extraordinary items, taxation, and dividends are excluded) with the exception of last indicator (net retained profit after interest and taxation per WLU) 2 Some analysts use passenger numbers rather than WLUs and may include aircraft movements as an airport output measure as well.

64

Airport economics and performance benchmarking

Open University to investigate how airports themselves were measuring their performance (Francis et al., 2001). Some of the most popular measures used were found to be cost per passenger and total, aeronautical and non-aeronautical revenue per passenger whilst revenue per WLU, for example, was a less used indicator. While airport managers will be very keen to understand how efficiently the airport is using its infrastructure and how cost-effectively it is doing so, the financial sector will be more focused on ratios related to the business potential of the airport such as profit levels, liquidity ratios and capital expenditure levels. In the international financial markets, profit excluding depreciation is known as EBITDA and profit including depreciation is known as EBIT. Another indicator which can be used is the EBITDA or EBIT margin which is earnings expressed as a percentage of revenue. Operating profit:total assets is commonly referred to as return on capital employed (ROCE) or return on assets. Putting the traditional indicators in these financial terms enables comparisons to be easily made with other business sectors. Other standard financial ratios such as the interest cover (EBIT:interest) the dividend cover (post-tax profit/dividends), or gearing (debt as a share of shareholders funds) can be used to assess the financial well-being and capital structure of the airport company. Capital expenditure (Capex) per WLU, employee, or revenues can also give an indication as to the amount of investment which is taking place. For the few publicly quoted airport companies such as BAA plc and Vienna, additional indicators associated with the value of the company can be used. A number of these ratios relate the enterprise value (EV), which shows the market value of the company’s core businesses, to sales, earnings or throughput (e.g. EV:total revenues; EV : EBITDA; EV : EBIT; EV : WLU). Reference has already been made to these ‘value’ ratios in Chapter 2 when privatization trends were considered. The price earnings ratio (PER), which shows the relationship between the price of the share and earnings attributable to that share, can also be used (Vogel, 1997; ABN AMRO, 1998; WDR, 1998). The information needed for these basic performance indicators is normally available from sources in the public domain, such as published reports and accounts. More detailed and disaggregate performance measures can usually only be produced internally within an airport unless airports agree to voluntarily provide additional information. For this reason London, Paris, and Amsterdam airports in Europe have an agreement to swap data on a regular basis. The availability of more disaggregate data enables more specialized comparative analyses to be undertaken for different areas of operation. For example, indicators commonly used by the retail industry such as sales per square metre of space and sales by location and type of outlet can be applied to airport commercial areas (ICAA, 1985; CAS, 1998).

Inter-airport performance
Producing meaningful inter-airport performance indicators is fraught with difficulties because of serious problems of comparability – particularly due to the varying range of activities undertaken by airport operators themselves. Comparing indicators from the raw data can give misleading impressions as airports involved with more activities would inevitably have higher cost and revenues levels. This problem can be overcome by standardizing or normalizing the airport data so that each airport’s performance is presented as if it undertook a uniform set of
65

Managing Airports

activities by taking into account the typical profit margins associated with each separate airport activity. For example, if an airport operator undertakes ground handling activities itself, the assumed costs, revenues and staff numbers associated with this can be deducted in order to make the data more comparable with airports with no involvement with this activity. A hypothetical concession income from handling agents can then be added to the airport’s revenues. Similar adjustments can be made for car parking and other commercial activities. Whilst there will obviously be an element of subjectivity in the assumptions which are made, a sensitivity analyses of adjusted standardized data for a sample of 29 global airports in 1999–2000 showed that, for example, total costs were not very sensitive to the assumed profitability of the various activities which required adjustments, with the exception of ground handling (National Economic Research Associates, 2001). Ideally, the accounts of each airport could also be adjusted to conform to a common treatment of depreciation, asset values and so on as well, but normally this is too difficult a task. It is never possible to achieve total comparability between airports but at least making adjustments when large discrepancies exist enables more meaningful assessments to be made. The measures must be viewed as ‘indicators’ of performance to be used as a management tool to aid performance improvement, rather than as precise and accurate absolute values of economic performance. Another issue to be faced in comparing airport performance is the difference in cost of living between countries. Official exchange rates may not be a close reflection of relative prices at different airports in different countries. This problem can be addressed by using purchasing power parity exchange rates, rather than market exchange rates. Purchasing power parity exchange rates are calculated by dividing the cost of a given basket of goods in one currency by the cost of the same basket of goods in another country. So, effectively, they convert currencies on the basis of equalizing buying power rather than on the basis of prevailing market conditions. They also overcome problems of currency fluctuations during the period under investigation.

European comparisons
To illustrate how individual airport performance may be measured on an inter-airport basis, a selection of the three indicators have been calculated for a sample of European airports. The 16 airports represent a cross-section, from the largest European airport, London Heathrow, to smaller airports such as Marseille and Birmingham . The airports come from seven different countries, five of which are within the EU. The sample includes privately owned airports such as Glasgow, partially privatized airports such as Copenhagen, publicly owned but independent corporations such as Amsterdam and airports run as concessions such as Nice. The sample also includes the unique bi-national airport of Basel-Mulhouse, the smallest airport, which has two check-in concourses and arrivals halls, one of each in France and Switzerland. The data has been normalized and converted into purchasing power parities. It may be seen from Figure 3.2, which shows the costs per WLU, that even when the data is normalized that the values for each airport are very different, with some of the lower cost airports having almost half the costs of higher-cost airports. The revenue figures are as varied and the ranking of the airports is fairly similar – which is hardly surprising given that all the airports are profitable (Figure 3.3). There is also a wide spread of values of WLU per employee with
66

Airport economics and performance benchmarking

20 18 16 Cost per WLU (Euros) 14 12 10 8 6 4 2 0
o sl O a ev en G k ic w at G w ro th ea h ric Zu t ur kf an Fr am gh in H e n ic ge N ha en op m C da er st Am e ill se ar M na en f Vi or ld se us D ow sg la G M
25 20 Revenue (Euros) 15 10 5 0
O G Bi rm in gh am H ea th ro w M an ch Fr an es te r Ba Vi G G N M Am D Zu C ic us op sl en at la ar en ric se e o st sg w se se en ev na kf h er l ic ow

Figure 3.2 Costs per WLU for European airports, 2001
Source: Annual accounts.

Figure 3.3 Revenue per WLU for European airports, 2001
Source: Annual accounts.

some of the large airports such as Heathrow and Amsterdam achieving high labour productivity while at other large airports such as Frankfurt and Manchester the staff do not seem to be so productive (Figure 3.4).

The global picture
A similar methodology is used in the annual global study of performance which is undertaken by the TRL. The study looks at 35 different indicators. One of these indicators, total revenue per employee, is shown in Figure 3.5 for the global sample of airports. This indicator combines the effects of both staff productivity and the revenue generation ability of the airport. Most of the airports with high values have larger than average revenue-earning capabilities, with the exception of Vancouver and
67

l se r te Ba es ch an

Bi

rm

ille

ur t

ld

a

ha

k

da m

or f

ge n

Managing Airports

30 000 25 000

WLU per employee

20 000 15 000 10 000 5 000 0
o sl O m en G Am st ea H th e ic N Zu ric h M ar se at G op C en s la G us D Ba se rm Bi M an en Vi Fr an k ic w se ev ch na g in go kf er da l ro w ille o ld ur a n ha ge

es

Figure 3.4 WLU per employee for European airports, 2001
Source: Annual accounts.

Calgary where there are flexible working practices which brings down staff numbers. The Japanese airports of Osaka Kansai and Toyko Narita (not shown in the Figure 3.5) have even higher index values of 657 and 399, which is primarily the result of very high aeronautical revenues and also higher than average non-aeronautical revenues. Indeed, over the years these two airports have come under considerable criticism from the airline industry regarding the higher level of their airport charges.

w

ha

t

te

rf

m

r

A single efficiency measure?
The performance measures in Table 3.5 are partial measures in that they give an indication of performance which relates specifically to the inputs and outputs that have been chosen. They can highlight strengths and weaknesses in certain areas but they cannot give an overall picture or identify the ‘best in class’. This shortcoming can be overcome by investigating the relationship between the combined inputs and combined outputs to produce a single efficiency measure. In contrast to other transport operations and public sector organizations there has been little exploration of the use of such methodologies until the 1990s, with the airport sector preferring to concentrate mostly on partial measures (Lemaitre, 1998). There are various different ways in which overall efficiency can be assessed (CAA, 2000). A parametric or statistical approach can be adopted by using stochastic frontier analysis. This method involves the estimation of a ‘frontier’ and the airport is only efficient if it operates on the frontier. The model is based on the estimation of a production or cost function which recognizes several variables influencing performance. Examples of this approach include an assessment of the performance of BAA plc airports and a sample of European airports (Tolofari, 1989; Pels et al., 2000). Alternatively, a non-parametric index numbers approach, called Tornqvist total factor productivity (TFP), can be used. This requires the aggregation of all outputs into a weighted outputs index and all inputs into a weighted input index. The prices of the inputs and outputs are the weights which are applied to the quantities of outputs and inputs. Such a technique has been used to assess the performance of Australian airports (PSA, 1993; Hooper and Hensher, 1998).
68

2000–01 North America Europe Asia/Pacific st up ro pe G da ts Bu A or S Airp AC sh i nn Fi up A ro AN g G n rli Be rio a nt O A N t AE ur kf a an ta m Fr ian i Ro p r R ti d ou Ae por n Gr ro age rts Ae nh rpo e Ai op C ish r ed ste Sw he c m ris a an a M gh P in de rm rts Bi po up ro les ro Ae ng G A ts s or Lo a p ev Air en n G iia sco a i aw nc H Fra n Sa a n en Vi h c up e ui r M Gro Ha A O’ BA go ca hi olm ick C kh atw oc G St on es nd ne ull Lo our n D b to el M hing p as W h rou ric l G Zu ho p hi e Sc an b is d Br n la ck l Au na io rth at N Pe i m ton ia M hing as W o sl O ey dn Sy o nt ro re row To apo ath e ng H Si on nd u Lo olul on H ry ga r al ve C ou ng Ko 69 . 50 250 200 150 Revenue per employee (index value.5 Revenue per employee for world airports. average=100) 100 0 Va nc Figure 3.H on g Source: TRL.

4 0.2 1 0 70 Source: ATRS. Vancouver = 1) .6 0.Se Figure 3.8 0. 1999 1.6 Total factor productivity for world airports. Total factor productivity (index value.2 0.4 North America Europe Asia/Pacific t ur kf an Fr h ic rts un M irpo A ai Th o nd n o rla O ngt hi as W t i ro i et D nat n ci m in C rda e st Am al tre on th M o or nt W ro rt To Fo o s/ sc la al nci D a Fr n Sa o g ca hi C on st g ou H Kon g on u H ul ol r te ob H es ch is l an M apo ne in re M o ap n ng ge Si ha en op C i m ia M y r ga al C ka sa er O uv o nc s Va gle An s Lo h ric Zu y e dn Sy on st Bo tle at Se l ou 1.

Airport Benchmarking Report. 71 . 1999. C. A linear programming technique. aeronautical revenues per ATM. also produces a weighted output index relative to a weighted input index similar to the non-parametric TFP measure. Air Transport Research Society (2002). (1989). For each measure airports are measured according to how they perform relative to other airports – with a score of 1 for best performer and 0 for worst performer. This looked at partial and total measures of various aspects of performance for up to 70 airports in Asia Pacific. Airport Finance. The weighted sum of these scores gives an overall summary efficiency measure. Assaily. Centre for Airport Studies (CAS) (1998). ACI Airport Economics Survey 2001. which was adjusted to eliminate the effects of airport size and the proportion of international traffic characteristics is shown in Figure 3. Frankfurt and Munich performed particularly poorly which must partly be the result of these airports’ direct involvement in ground handling activities.6. Europe and North America. 2002). and operating costs per passenger (Jessop. However. ACI. European Airports Review. 2nd edn. Gillen and Lall (1997) and Vasigh and Hamzaee (2000) used DEA to assess US airports and Martin and Roman (2000) used it with Spanish airports. N. Airport Productivity. ATUs per unit of asset value. 1997). called data envelopment analysis (DEA). ATRS. The most efficient airport appeared to be Seoul’s Gimpo which outsourced a number of activities and was congested with a high utilisation rate. A multi-attribute approach has also been used to assess airport performance. DEA is therefore a more attractive technique than the Tornqvist TFP because it has less demanding data requirements. ATUs per employee. 2002). TRL. This method has been used with a sample of around thirty five global airports with six performance measures. By contrast. Airport Retail Survey 1998 Edition. Loughborough Airport Consultancy. concession revenues per passenger. Ashford. The key advantage of DEA is that the weights for the inputs and outputs are not predetermined but instead are the result of the programming procedure. CAS. Institute of Air Transport. Parker (1999) also used DEA to study BAA plc and concluded that there has been no noticeable change in efficiency since privatization. and Moore. (1999). the data was not adjusted to take account of involvement in different activities unlike the other data sets which have already been shown. The overall TFP measure. Airport Council International (ACI) (2002). C. ABN AMRO. References and further reading ABN AMRO (1998). This combines a number of partial performance measures as a weighted sum of inputs. DEA techniques have been used to undertake a comparison of the performance of 25 European and 12 Australian airports with the results showing that generally the Australian airports on average achieved higher efficiency scores than was the case for European airports (Graham and Holvad. A production function was adopted to develop the so-called endogenous-weight TFP method which was used in this research.Airport economics and performance benchmarking One of the most comprehensive studies of total factor productivity in the airport sector was undertaken by the Air Transport Research Society (ATRS) with its Global Airport Benchmarking Report (ATRS. namely: EBITDA.

Measuring Total Factor Productivity of Airports – An Index Number Approach. Francis. CAA. Monash University. and Lobbenberg. 72 . 3. and Francis.Managing Airports Centre for Regulated Industries (CRI) (2002). G. Civil Aviation Authority (CAA) (2002) Manchester Airport’s price cap. J. Doganis. 2003–2008: CAA recommendations to the Competition Commission. Cranfield University. R. Open University Business School Working Paper 01/4. Vienna. G. A. (1997). A. ICAO. Lemaitre. Commission recettes extra-aeronautiques. ICAO. Open University. (1994). A. Financial situation of airports and air navigation services. July. (2001). (1987). ANSConf Working Paper No. Vancouver. A. R. Barcelona. and Graham. (2000). Developing measures of airport productivity and performance: an application of data envelopment analysis. Gillen. A. First Air Transport Research Group Conference. University of Westminster (formerly Polytechnic of Central London). Irish Commission for Aviation Regulation (2001). Cranfield University. A.. G. Graham. Journal of Air Transport Management. R. Jessop. Humphreys. D. Report on the reasons for the determination. November. A. Martin. Graham. C. Doganis. (1995). ICAA. University of Westminster (formerly Polytechnic of Central London). CAA. 1703. 9562. The development of performance indicators at airports. A multiattribute assessment of airport performance. Efficiency variations for European and Australian airports. (1999). and Hensher. Air Transport Research Group Conference. EURO XV/INFORMS Joint International Conference. Traditional Airport Performance Indicators. (1998). Consultation paper. Transportation Research Board. D.. Civil Aviation Authority (CAA) (2000). A. J. 12–14. Graham. T. International Civil Aviation Organization (ICAO) (2000). Routledge. July. Doganis. Airports Statistics 2000/2001. Doganis. S. Transport Studies Group Research Report 1. July. and Lobbenberg. A. Airport Management: The Role of Performance Indicators. R. CRI. and Humphreys I. (1992). Institute of Transport Studies Working Paper ITS-WP-98-2. (1998). A. F.. International Civil Aviation Organization (ICAO) (1991). I. An International Survey of Performance Measurement in Airports.. Doc. 149–57. Airports International.. and Lall. no. and Thompson. The Economic Performance of European Airports. Graham. The Airport Business. The use of benchmarking in airport reviews. Fry. (1995). Transport Studies Group Research Report 13. Twenty-fifth Euro Working Group on Financial Modelling of the Institut für Finanzierung und Finanzmarkte. Hooper. The Economics of British Airports. (1973). R. An application of DEA to measure the efficiency of Spanish Airports prior to privatization. May. (2000). and Roman. (1997).. Department of Air Transport Research Report 3. International Civil Airports Association (ICAA) (1985). and Lobbenberg. Vancouver. A Comparative Study of Value for Money at Australian and European Airports. A. Airport Economics Manual. Benchmarking European airports. Irish Commission for Aviation Regulation. 7. P. Doganis. and Holvad.

Parker. Airline Business. The Netherlands. Review of Airport Performance 1998. R. University of Westminster. Privatization of European commercial airports: motivations. 73 . 33(2). Transport Research Laboratory (TRL) (2002). Journal of Transport Economics and Policy. PSA. Toms. 38–39. Loughborough University. Airport Performance Indicators 2000. (2000). Airports Review 1998. Airport Cost and Productivity Analysis: Summary of Research Results. D. B. Vogel. (1998). Pels. (1989). The Netherlands. Fourth Air Transport Research Group Conference.. M. Tolofari. Airports: gloves off. Emery-Riddle University. Inquiry into the Aeronautical and Non-aeronautical Charges of the Federal Airports Corporation. Pilling. Prices Surveillance Authority (PSA) (1993). and O’Toole. CAA Workshop on Benchmarking of Airports: Methodologies. valuations and implications. The Application of Benchmarking to Airports Phase 1: Date Collection and Assessment. (1997). and Rietveld. 133–46. Airport Performance Indicators 2002. Airport efficiency: an empirical analysis of the US commercial airports. K. The suitability of the work load unit as a measure of airport output. WDR. Nijkamp. Critique of cost benchmarking. E. (2000). Symonds Travers Morgan (STM) (1998). Transport Research Laboratory (TRL) (2000).. Warburg Dillon Read (WDR) (1998). July. Vallint.Airport economics and performance benchmarking National Economic Research Associates (2001). S. Fourth Air Transport Research Group Conference. TRL. (2000). M. Inefficiencies and scale economies of European airport operations. The performance of BAA before and after privatization: a DEA study. and Hamzaee. NERA. Unpublished MSc transport thesis. P. Problems and Relevance to Economic Regulation. December. Unpublished MBA thesis. R. September. TRL. Department of Transport Technology. London. STM. P. H. July. (2002). (1999). Vasigh. J.

Airports which had become regulated in their post-privatization stage. Different dimensions of service were defined and customer satisfaction. was assessed. began to be replaced by customer-focused notions. New approaches such as total quality management and continuous improvement programmes began to be applied by an increasing number of service industries (Lockwood and Wright. 1999). Quality management began to be viewed as an overall process which involved everybody from top management down to junior staff rather than just to do with concentrating on the employee customer interaction. also found that their service . considered to be the gap between perceived and expected service. The airport industry was not immune to this ‘quality revolution’ which was taking place – although it was rather late in adopting some of the principles. privatization. such as the London and Australian airports. This required close consideration of what the customers wanted and how their needs could be met. together with increased competition between airports. Structural changes such as commercialization. and globalization. encouraged airports to place more emphasis on quality.4 Service quality and its measurement Increasing emphasis on quality The 1980s saw many service industries placing increased emphasis on managing quality. which had evolved from manufacturing industries and had been based on the conformance to standards defined by operations management. Traditional ideas of quality.

a clothes valet. There was the ‘hot desk’ business area where office facilities including internet access were available. passenger flows in the early morning or evening at an airport dominated by short-haul business traffic will be considerably greater than at other times of the day. most of the time airports still tend to offer one overall product which has to appeal to a very heterogeneous collection of passengers. In this lounge. express security clearance. toys. pressure was coming from the travelling public who were becoming more experienced and demanding consumers of the airport product. It is not just the airlines which are providing such services now. there were separate areas for refreshments. and hot and cold drinks. In 1999. 1992). Airports tend to serve passengers with very different expectations – and so it is very difficult to please everybody! Traditionally. very little segmentation has taken place at airports. London Heathrow opened its first pay-as-you-go lounge which gave passengers. These different bodies may have different ultimate objectives and conflicting views on what determines satisfactory or good service (Lemer. which had an entrance fee of £15. and provide other services such as valet parking. In 2000. The expanding use of airline lounges has also helped to separate business and leisure travellers. passengers could have access to a special lounge. cartoons. a number of other airport operators have opened pay-as-you-go lounges. therefore. have to be very clearly identified and the airport operator must define a common goal for all as regards service quality. customs and immigration officials. Moreover. and other activities. currency exchange at reduced rates. Then there was the ‘comfort zone’ where shops and catering facilities were available. Areas of responsibility. Subsequently. Another example was Manchester airport which opened a new premier lounge in its Terminal 2 in 2000. The level of segmentation has now increased with more and more businesses travellers having access to fasttrack systems which guide them swiftly through various processes such as immigration and customs. With many airports.Service quality and its measurement quality became the subject of increased scrutiny. consisted of three seating areas. shower facilities. concessionaires and so on. shoe shine. London Stansted launched an interesting airport upgrade product on its website which meant that for a fee of £20. a reserved premium short-stay car parking space. a terminal will look and feel very different on a quiet Tuesday in winter compared to a busy summer Saturday in the school holidays. Airports have the additional problem that the overall service is produced as a result of the combined activities of various different organization such as airlines. the airport operator only has partial control of all the processes which make up the final product. Some passengers may want to get through the airport as quickly as possible 75 . handling agents. with the most notable differentiation being separate check-in for economy and business-class passengers and remote stands rather than air-bridges for passengers travelling on charter or low-cost airlines. With most service industries there is a particular problem with measuring the quality of service because of the characteristic uneven spread of demand. electronic games. for instance. In spite of these developments. and a range of other additional offers. for a £25 entrance. Likewise. This is bound to play a major role in influencing the passenger’s perception of the quality of service provided. This lounge. In effect. The third area was the ‘oasis of calm’ with comfortable seating and a calm water feature! Another interesting concept launched by KLM ground services at London Heathrow in 2001 was the ‘Holideck’ which was the first full-scale lounge to cater for families with children.

availability of lifts. 2000). there is a manager of Entertainment and Services who is in charge of these activities. With growing congestion at airports and increased emphasis on security because of 11 September 2001.9 m2 standing passengers 20% space allowance for circulation excluding major through corridors Check-in desks Scheduled services Sufficient check-in desks will be provided to allow handling agents to offer a multi-class service. and baggage reclaim time. say. The CNN airport network is shown 24 hours a day on 80 screens around the terminal and there are also educational touch screens throughout the airport for the children (Airport World. 2002). an area of particular concern as regards the quality of service has become the queuing and waiting processes. Actors have been employed to entertain passengers waiting in security checks and there is live music every Friday afternoon. and operational research surveys of factors such as queue length.6 m2 per passenger without baggage or accompanying visitor 0. space provision.1 Service standards used by Manchester airport Space Queuing space Holding lounge 0. these surveys need to be undertaken regularly and at varying time periods when different volumes and types of passengers are being processed through the airport. The standards are set and revised in the light of customer levels of satisfaction by surveying passengers to find out. To be accurate. ‘Mystery shoppers’ who sample the airport product by anonymously pretending to be passengers can also be used. The advantages of these measures is that they are precise and easy to understand (Maiden. Objective indicators measure the service delivered and can cover areas such as flight delays. Measuring the quality of service Quality of service can be assessed with both objective and subjective measures. waiting time.2 m2 per passenger seated and 0. when they become Table 4. for example.1. They can also link into the passenger service standards which many airports adopt. At Amsterdam airport. Some airports have started to look at how they can keep their passengers entertained as they wait. An example of the service standards used by Manchester airport is given in Table 4. Also a sufficient number to achieve queuing times of less than 3 minutes for 95% or.6 m2 per passenger with baggage or awaiting reclaim 1. escalators and trolleys. peak periods less than 5 minutes for 80% of passengers Charter services Sufficient check-in desks will be provided to allow a minimum of 1 check-in desk per 130 passengers at peak periods Seating Concourse Departure lounge Seating will be provided for 25% of people present including general catering areas Seating will be provided for 75% of people present including general catering areas 76 .Managing Airports with a minimum of distractions while others enjoy the opportunity of being able to shop and take refreshments.

80% will queue for less than 5 minutes The acceptable queuing times have been detailed by HM immigration services. Last bag within 15 minutes of arrival time on 90% of occasions Baggage trolleys Target availability for total system to be 98% Trolleys to be available for all passengers who require one Vehicles and plants Target availability for all lifts. Maximum queuing times under normal operating circumstances are as follows: UK passports – 15 minutes EC passports – 20 minutes Other passports – 30 minutes Passengers should queue for less than 3 minutes after collection of their hand baggage from security check A maximum of 5% of passengers in any one year to be handled on remote stand Minimum connection times: International to international – 45 minutes International to domestic – 45 minutes Domestic to international – 45 minutes Domestic to domestic – 30 minutes (maximum) No customer is to wait on average more than 5 minutes for a courtesy coach A maximum queuing of 3 minutes for customers at any pay station An automated failure of less than 5%. escalators. less than 5% of car park users should arrive at the barriers with invalid out tickets To provide a level of service at least comparable with off airport parking companies Gate lounges Security Outbound control Immigration Arrivals Departures Bussing Connection/ transfer times Car parking Courtesy coach Pay stations Barriers Level of service Equipment Baggage processing Outbound: baggage acceptance process can always proceed by take away belts immediately accepting baggage into the system Inbound: international flights – 90% of first bags to be delivered within 20 minutes of declared arrival time. 77 . and air-bridges to be 98% including planned maintenance Target availability for all operations vehicles to be 92% including planned maintenance Source: Competition Commission (2002b).Service quality and its measurement Table 4. passenger conveyors.1 (Continued ) Seating will be provided for 70% of people present. Gate areas where departures are predominately short-haul international or domestic scheduled flights may be reduced to a figure of 65% Given present security regulations 95% of passengers will queue for less than 3 minutes or at peak periods. Last bags within 35 minutes of arrival time on 90% of occasions Domestic flights – first bag within 12 minutes of arrival time on 90% of occasions. i.e.

There are two key types of subjective measures. While such a system may be able to identify a weakness which can be rectified swiftly. If the comments are favourable they may provide a positive public relations opportunity. One hundred and twenty airports responded with the sample ranging from large airports such as Cairo. Consumer surveys are more suitable. Amsterdam. Rome. These objective measures can only cover a limited range of issues and service dimensions. of course. it is not systematic enough to be used for quality improvement programmes or target-setting. Both criteria were adopted by 32 per cent of all the airports. Comment cards are cheap and immediate. These measures will enable the quality of service to be assessed through the eyes of users rather than airport management. cleanliness. moving walkways. Focus groups may also be used to investigate important or topical issues in greater detail. Copenhagen. while they can measure the reliability of equipment. Fortythree per cent of respondents said that they used objective criteria. a passenger’s perception of the time that they have spent waiting in a queue may be very different from the actual waiting time. Paris. The results are also not so immediate as comment cards and may require careful interpretation (Maiden. Clearly consideration has to be given to the sample size. the survey findings can be used to investigate relationships between usage and satisfaction of services with demographics. Also. are also needed. and taxi services. while 62 per cent used subjective criteria. if passenger profile information is collected. Similarly. In 1998. Some of the most popular objective measures were related to the availability of trolleys. For instance. value for money. Sydney. and most appropriate place to survey. Chicago. All geographical regions were fairly well represented except for South America. The comments will not come from a representative sample of travellers at airports and will usually only record extreme views since customers will not be motivated to comment unless they feel very strongly about their experience at the airport. conveyors. The main drawback of surveys is. 2000). escalators. the airport is faced with the dilemma that not all types of passenger groups will have the same expectations and so a compromise standard in most cases has to be reached. congestion. 2000). assured and satisfied with their use of the equipment. ACI investigated quality of service measurement at airports through a survey of its members (ACI. looking at passenger satisfaction ratings. Typically. their high cost. The airport operator. and their opinion of them in terms of comfort. As with all the service measures. and Tokyo to some very small regional airports. attitudes and experiences of travellers. comment/complaints cards and customer surveys. but tired arriving passengers may be less co-operative – being anxious to find their luggage and return home. Departing passenger may be keen to participate while waiting in their departure lounge having completed all the major essential processes. and so on. however. they cannot tell whether consumers feel safe. Subjective measures. Baggage delivery was also measured by a large number of 78 . Dallas.Managing Airports dissatisfied with the waiting time that they experience. Direct observations or camera shots can also be used to assess real-life situations when queue lengths start to have a negative impact on passenger behaviour. security and immigration was a fairly common practice. Johannesburg. Houston. Frankfurt. lifts. The assessment of waiting time and queue length at check-in. such surveys will ask passengers about their usage of facilities and services. interview time. Hong Kong. has very little control over this type of feedback.

Analysis of complaints and comments was viewed as important as well. Whilst Heathrow and Gatwick generally improved their Table 4. commercial services (banks. as was cleanliness. post offices. With any performance analysis. mostly as a public relations exercise.Service quality and its measurement airports.3 reproduces the survey results from BAA plc’s annual report of 2001–02 for the London airports. Some airports publish summaries of their results. The quality of survey monitor (QSM) is based on a sample of over 60 000 passengers for the UK airports and uses a rating scale which gives a value of 5 for an excellent score and 1 when the aspect of service is considered extremely poor.) Baggage delivery Ground access Delivery time Taxi availability/waiting time Source: ACI (2000).2). Table 4. the results should be made available to all interested parties so that corrective action can be taken and targets can be set. 79 . information desk/telephone service Check-in Security check Immigration Catering Quality of public announcements Terminal atmosphere/temperature Availability/quality of trolleys Cleanliness (especially toilets) Seating areas Telecommunication facilities Security/airport safety Overall satisfaction Waiting time/queue Waiting time/queue Waiting time/queue Overall satisfaction Overall satisfaction Quality of goods Value for money Choice Overall satisfaction Range of goods Value for money Staff courtesy Overall satisfaction Waiting/delivery time Overall satisfaction: ground access/public transport Shops.2 Criteria most frequently used to measure quality of service at ACI airports Airport process General Objective criteria Response to/analysis of complaints/mail comments Availability of lifts/escalators/ moving walkways etc Availability of trolleys Cleanliness Subjective criteria Overall customer satisfaction in terms of attractiveness/ convenience/quality Flight information displays. The subjective measures which were identified considered overall satisfaction with all the general processes at the airport together with more detailed measurements looking at specific service dimensions (Table 4. etc.

1998). While most of the focus in the past with quality monitoring has been within internal performance.0 3.9 4.1 – – Poor. Also certain airports such as small airports and single terminal airports tend to inherently perform better in quality of service surveys.1 0.1 – 0. This is not just because smaller airports seem more personal but also because they are usually served by smaller national or regional populations which may view their airport as a local asset and have a much greater pride in it.0 3.1 Extremely poor.6 4. BAA plc also uses its QSM at the international airports where it has an involvement. Table 4. business travellers. IATA has undertaken quality of service passenger surveys for a sample of airports around the world. 2 Stansted Variance 0.0 3.1 0.3 Summary of QSM scores 2001–02 at BAA London airports Heathrow 2001–02 Cleanliness Mechanical assistance Procedures Comfort Congestion BAA staff 3.8 4. the operational perspective (the objective quality measures) and the marketing perspective (the subjective quality measures) (Lemaitre. frequent travellers. Some of the questions are related to what is called ‘Airport Service’ which are the services provided by the airport operator.1 – – 0.1 0. Since 1993. Variance 0.9 3.1 0.5 3. first-time users.9 Variance 0. The environmental perspective and the measurement of environmental good practice are also becoming increasingly important. It is worth reiterating that service quality is just one area of performance at an airport which should be assessed alongside economic or financial efficiency. 4 Gatwick 2001–02 3.8 3.6 4. such as Naples and Melbourne.9 4.9 3.0 3. Systems of performance measures at airports can be defined from different management perspectives such as the financial perspective.1 – – Excellent.1 0. Some passenger types are likely to complain more than others. 2002).1 Good. 3 Average.8 3. 1 2001–02 4. This global airport monitor survey began with just over 30 airports and a sample size of 40 000 passengers but now covers 52 airports and over 80 000 passengers. and female passengers (Maiden. the rapid growth at Stansted due to the low-cost airlines put pressure on the facilities and caused a decline in four out of the six key service dimensions. airports are now appreciating that it is equally important to make international comparisons and to benchmark themselves against other airports – just as with economic performance analysis. 80 . For example in the United Kingdom. An airport’s performance in any one of these four areas will inevitably be linked to its performance in other areas – so none of the performance monitoring systems should be considered in isolation. Such an exercise is particularly problematic because of the lack of consistency or common format of each airport’s consumer survey.2 – Note: Rating scale: 5 Source: BAA (2002).8 3. and male passengers tend to be far more critical than foreign leisure travellers.Managing Airports position in 2001–02.

handling agents or the airport operator itself. that it depends on which airlines participate in the Table 4. with airports which perform well using the findings to publicize and sell their airport to their customers. flight information schemes. Copenhagen. for example.4). These cover areas such as the efficiency and experience of check-in or the efficiency and punctuality of boarding. Sydney had the highest overall rankings for airports with 15–25 million passengers and Helsinki was ranked top amongst the smaller airports (Table 4. Then there are ‘Airline Service’ questions which are services associated with airline activities which can be provided by airlines. Madrid.Service quality and its measurement airport concessionaires and tenants and includes such measures as ease of finding one’s way through the airport and quality of the shopping and washroom facilities. Dubai achieved the overall highest ranking in the survey followed by Singapore Changi and Copenhagen.4 Overall passenger satisfaction levels: best performing airports from IATA’s 2001 global airport monitor by size of airport Airports 25 million annual passengers 1 2 3 4 5 Singapore Hong Kong Minneapolis Amsterdam Atlanta/Seattle Airports 15–25 million annual passengers 1 2 3 4 5 Sydney Copenhagen Manchester Vancouver Zürich Airports 15 million annual passengers 1 2 3 4 5 Helsinki Vienna Birmingham Oslo Geneva Source: Radia and Morris (2002). Birmingham. The more detailed IATA survey information can indicate to the airport how it is performing as regards different market segments and each service element or dimension. and courtesy of airport staff was very important. The least important services were eating and parking facilities. and Copenhagen scored highest in the courtesy/helpfulness of airport staff category (Competition Commission. The regularity with which the IATA survey is undertaken has meant that it has been generally accepted within the industry. For European airports. The BAA QSM has also found that way-finding is the most important individual service element that links with the overall satisfaction scores (Maiden. 2002). In 2001. In 2002. as is demographic data in order to give a greater insight into the satisfaction levels of the different market segments. The 2001 IATA survey identified the three highest rated service items for the top three airports of each different size category and found that way-finding. Düsseldorf. Stockholm. Zürich. However some airports do feel that the sample size is too small. Helsinki was ranked first by business travellers whilst Copenhagen had the highest ratings from leisure passengers. in 2001. and Amsterdam airports were considered ‘best in class’ as regards ground transport to and from the airport whilst Helsinki. Its role in airport marketing has become important. and Vancouver were noted for their significant improvements in rankings. class and frequency of travel and transfer details is also collected. Travel profile information such as purpose. 2002a). Other airports such as San Francisco. Manchester. Dubai was not included in the study and Singapore Changi was first amongst the airports which handled over 25 million passengers. 81 .

freight forwarders. including passengers. the Airports Council International (ACI) has been looking at the option of developing its own worldwide survey (ACI. North America. 2002). for instance. The information obtained from the airlines was used in a data envelopment analysis to rank airports relative to their quality level. This problem can be overcome by having service level agreements (SLAs). 82 . They have two types of surveys. airlines. or just a ‘best endeavours’ commitment based on performance targets. these are arrangements between the service provider and its customers. the image of the building. visitors. IATA. In general terms. focus groups. concessionaires. feedback from their tenants is assessed through formal surveys. 1998). Individual airport operators obviously need to consider all their customers. based on penalty payments for poor performance. the quality and value for money of the accommodation and the overall performance of BAA plc as a landlord. One rare example was a study undertaken by Adler and Berechman (2000) which looked at airline factors such as delays. the efficiency of the relevant BAA plc processes. There has been increased use of SLAs in the service industries in recent years. As a result. for airline customers the exact quality of service for facilities which are covered by airport charges is rarely specified. The agreement requires the service to be quantified and the acceptance of minimum levels – taking into account the interests of both parties (Van Looy et al. and the Far East. Such SLAs can be incorporated into more broader use agreements or strategic partnership agreements (SPAs) between airports and airlines (see Chapter 5) (Cruickshank. and there is a growing interest in the air transport industry to use such agreements in order to formalize service provision between airport operators and airlines and other key users. cost of local labour force.Managing Airports survey and that it lacks sufficient detail. Performance targets are set. Areas covered include quality and cleanliness of common areas. handling agents. 1996). SLAs can involve a one-way commitment when the airport aims to achieve defined service quality levels or a two-way reciprocal commitment when both parties in the agreement aim to achieve service quality levels. At BAA plc airports. Research into the airlines’ point of view is less common. runway capacity. BAA plc aims to resolve 95 per cent of all faults within four working hours and to issue 95 per cent of draft standard tenancy documents within 5 days of terms being agreed (Le Marquand. 2000). 2000.. informal meetings. These agreements can be contractural and incentivized. and so on. Most comparative studies of airport quality look at quality from a passenger’s point of view (Lemaitre. For example. the effectiveness of the building security and BAA plc’s speed of response. Service level agreements A key airport customer is clearly the airlines – in fact many airlines will argue that they are the only true customers at the airport! However. A tenant survey involves interviewing the property managers of each organization to assess the managers’ views on whether they think their needs are met. and hospitality events. In addition there is also an occupier survey which deals with the actual user of the property. the effectiveness of the heating. and the reliability of air traffic control for a sample of 26 airports in Western Europe. 1998).

The basic GSSs are shown in Table 4. Targets vary for different equipment. and Stansted. The areas covered were stand availability. or reductions in. and the availability of ‘people movers’ (Table 4. They were not legally binding and no penalty payments had to be made for poor performance.Service quality and its measurement One airport operator to introduce SLAs is BAA plc. This has been partly due to pressure from the regulatory body which felt that the absence of quality standards in the regulatory regime could mean that the price cap imposed on the airports might produce inadequate. b 83 . jetty availability. Incentivized SLAs have also been introduced at Heathrow for the departures baggage systems in Terminal 1 and 4. Source: CAA (2000a). Although all these SLAs were initially negotiated between BAA and BA. and Manchester airport and its other external providers (Competition Commission. 1999 Heathrow Stand availability (%) Jetty availability (%) Security queues length less than 10 minutes (%) People movers:a Availability (%) Mean time to repairb Transits (hours) Other (hours) 99 98 95 98–99 1 2 Gatwick 98 98 95 97–99 1 2 Stansted 98 98 95 97–99 1 5 Notes: a Includes passenger conveyors. 2002b). 2002a). security queuing. In the late 1990s. for the transfer baggage systems and for the baggage tunnel between these terminals. BAA plc began developing SLAs with BA and by 1999 four SLAs were in place at London Heathrow. Manchester airport and its ground handling agents. excalators. Gatwick. ACI particularly has stressed the need for Table 4. By early 2000. Manchester airport developed some new-style incentivized SLAs or so-called Generic Service Standards (GSS) with the airlines. The agreements were one-way best endeavours types based on agreed minimum service levels and targets. To support these primary agreements it was aimed to have secondary agreements covering Manchester airport and its other subsidiary companies. 1996). Various other airports have also looked at SLAs and ACI and IATA have been working together to develop a common thinking on SLAs.5 BAA London airport ‘best endeavours’ service level targets. For a number of reasons these did not prove to be a success. levels of quality (Monopolies and Mergers Commission. The aim of the GSSs was to provide a framework for monitoring service delivery and to establish appropriate levels of rebates to the airlines should satisfactory standards of service delivery not be achieved. there were effectively multilateral agreements with all the airlines. transits. In addition BAA tried to introduce a SLA related to connecting passengers but this proved difficult because of the joint responsibility of both airlines and airport in this area (Competition Commission.6. However in response to the regulatory review which was undertaken in 2002. Manchester airport also began experimenting with best endeavours SLAs in the late 1990s – again partly due to regulatory pressures. BAA has abandoned this target at Heathrow and Gatwick.5).

Table 4. will be available for arriving aircraft on 100% of occasions Coaches to be available for planned transport to/from remote stands for 1005 of critical operational periods as follows: 1 Domestic departures – coaches at gate at 30 minutes to estimated time of departure (ETD) 2 International departures – coaches at gate at 60 minutes to ETD or 60 minutes for wide-bodied aircraft 3 All arriving passengers to be coached within 25 minutes of the aircraft arriving on stand and the steps being positioned FEGP that is provided on stands will be available for 100% of critical operational period Compensation/rebate 100% rebate of check-in desk charge 100% rebate of baggage sortation charge Rebate of 10% of passenger security charge will be given for each passenger who queues more than 4 minutes All airlines that are allocated airbridgeserved stands where the airbridge is not available will be compensated by £25 per movement If an aircraft waits more than 15 minutes for a suitable stand there will be a 7. including marshalling and lighting. To be agreed Airlines will be required to use FEGP where it is supplied.6 GSSs agreed at Manchester airport in 2002 Service level target Check-in desks Inbound baggage Outbound security queuing Airbridge availability In-feed baggage belt to be available for 100% of critical operational periods Baggage reclaim carousels to be available for 100% of critical operational periods Queue for security will be no longer than 4 minutes at any time Airbridges on pier-served stands to be available for 100% of critical operational periods An aircraft stand. If FEGP is required but not available the following penalties will apply: Rebate of the FEGP charges that the aircraft would have incurred had the FEGP been available To be agreed .5% rebate of the runway charge If coaches late for a pre-planned arriving or departing flight the following rebate will apply: 1 Coach up to 5 minutes late – no rebate 2 Coach delayed for 5–10 minutes – rebate of 50% of coaching cost 3 Coach delayed more than 10 minutes – rebate of 100% of coaching cost Stand availability Airside coaching operations Fixed electrical ground power (FEGP) Outbound baggage system Source: Competition Commission (2002b).

Luton. when the airlines complained of paying for airport facilities which they do not want. In the longer term. Such an arrangement. as with passengers. One of the problems with airline customers. Dublin. Maximum runway throughput can only be achieved with queuing of aircraft (on the ground for departing flights or through speed control and ‘stacks’ in the air for arriving flights) so that there is always an aircraft ready to use the runway. flights may also be held awaiting crew or transfer passengers. however. Many of the new low-cost carriers have shown that they are prepared to accept a trade-off between service standards and cost by choosing to fly from airports with a less-developed product. In the United States. that airport operators often prefer not to focus on. Level of delays A crucial measure of airport performance for airlines and passengers. this may be an airline operational decision to await the availability of a preferred gate or avoid bussing passengers from a remote stand. arriving aircraft may be held on the taxiways or apron before they are able to unload. A good example of this is the rebate given at some airports for remote stands which involve transferring the passengers by bus to the aircraft. Shortcomings in terminal capacity can also delay aircraft. Considerable friction has arisen between both EasyJet and its airport base. Airports which are operating close to their runway capacity are therefore likely to impose additional delays on flights and exacerbate delays originating from other causes. 2002). it is common practice for the last flight of the day from a hub to be held much longer than earlier ones as it does not present reactionary problems for subsequent flights and enables as many passengers as possible to get home that night. is that they all have different demands of service quality. The airlines can take account of expected queuing times related to shortages of airport runway capacity in planning their schedule. is the level of delays. bad weather or technical problems with the aircraft). This may be because there are many factors that lead to flights being delayed which are outside the airport operator’s remit (e. 2000c. This enables them to maintain 85 . If there are insufficient stands available. At the day-to-day level. has been favoured by the UK CAA (CAA. An airport with spare runway capacity has more scope to accommodate delayed aircraft without disrupting other flights and may be able to avoid queuing aircraft in most cases. Congestion within the terminals may lead to passengers who have checked in failing to reach the aircraft in time thus delaying departure. which adds an unpredictable element to the time at which any given flight will wish to use the runway.g. It is therefore inevitable that aircraft will deviate from the published schedule. Some airlines may be prepared to pay more for premium service whereas others may be willing to accept lower service levels in return for lower airport charges. where airports can be penalized for underperformance but should also be rewarded for overperformance (ACI. airports have the opportunity to expand or upgrade facilities to address these problems. for example. en route air traffic control.Service quality and its measurement balance with incentivized models. These problems could be overcome by identifying a standard quality product and then also by having additional individual agreements with different airlines which want lower or higher service levels. 2002a). and Ryanair and its airport base. creating a knock-on of delays from one flight to another.

have to be treated with caution. but at the expense of longer scheduled flight times and the resultant increase in costs from poorer utilization of aircraft and crew. Frankfurt was better with less than one-fifth of flights delayed more than 15 minutes. If one compares the Copenhagen–Amsterdam route of the same distance but with less congested airports this is still scheduled for 1 hour 25 minutes.8 shows delay figures for 2002 which were at a lower level than in the last 4 years primarily since traffic was reduced because of events of 11 September 2001. Comparisons between airports and airlines. If one considers the Frankfurt–London Gatwick route it can be seen that a morning flight from Frankfurt to Gatwick. The Scandinavian airports had the best punctuality as well as Brussels where traffic levels were very much depressed due to the demise of Sabena.7). Source: OAG Flight Guide/ABC World Airways Guide. Table 4. As a slightly faster aircraft type is now being operated. The worst affected airports were Madrid and Rome with a third of the flights significantly delayed.7 Increasing scheduled journey times at congested airports From To Milesa Year Depart Arrive Aircraft type Sector time (hours : minutes) 1 : 25 1 : 50 1 : 20 1 : 25 Frankfurt (FRA) Frankfurt (FRA) Frankfurt (HHN) Copenhagen (CPH) London (LGW) London (LGW) London (STN) Amsterdam (AMS) 396 396 396 393 1982 0735 2000 0725 2000 0940 2000 0900 0800 0815 1000 1025 BAe1-11 B737 B737 B737 Note: a IATA ticketed point mileage. this must be due primarily to airport-related delays on a sector where the actual flying time is only about 1 hour.Managing Airports a similar level of punctuality performance at congested airports. Airlines thus include a contingency allowance for delays in their schedule. therefore. scheduled for 1 hour 25 minutes in 1982 had increased to 1 hour 50 minutes by the year 2000 (Table 4. This means that published comparisons of schedule performance tend to understate the total time wasted compared with the theoretical minimum journey time and airlines can improve their punctuality performance by extending their scheduled journey times. 86 . Ryanair’s low-cost alternative on the Frankfurt–London route is a Hahn–Stansted service. This means that Ryanair can accomplish four round trips per day with one aircraft but the same aircraft could manage only three round trips if operating on the Frankfurt–Gatwick route. The London and Paris airports came next. using secondary airports at each end and scheduled for 1 hour 20 minutes. Table 4. There is thus a penalty of about a quarter in aircraft and crew costs from operating to the more congested major airports.

5 18. It was suggested that the standards of service should include measures of quality of service to airlines (QA.5 17. when the two UK regulators.).2 15. and Manchester as regards the lack of formal quality of services requirements linked to pricing was against the public interest.8 15.2 14. to passengers (QP).1 19.8 21.7 25. The components of the Q factor as proposed by the CAA. are shown in Table 4.6 21.2 24.1 25.6 13.2 28.0 27.2 18.0 16.9.Service quality and its measurement Table 4.3 23.4 16. there was no formal regulation related to quality of service – although it was clearly recognized that a price cap could produce a strong incentive to cut service levels.9 12.8 Delays at major European airports on intra-European scheduled services. 2002 Airport % departures delayed more than 15 minutes 30. BAA. and the major carrier at Heathrow and Gatwick.3 26. The CAA recommended that up to 3 per cent of the regulated charges should be subject to meeting these particular standards of service.6 Madrid Rome London LGW Paris CDG London LHR Paris Orly Milan MXP Amsterdam Munich Zürich Frankfurt Vienna Copenhagen Brussels Stockholm Helsinki Oslo Source: Association of European Airlines (2003). 87 . namely the Civil Aviation Authority (CAA) and the Competition Commission. both recommended that this situation should change as it was considered that the current situation at London Heathrow.8 26.5 18.9 15.0 14.0 23. It was not until 2002.4 25.8 11. BA. London Gatwick.8 29. and delays (QD). Service quality and regulation at UK airports When the British airport regulatory system was established following the privatization of BAA in 1987.5 % arrivals delayed more than 15 minutes 26. for example in the reviews undertaken in 1996–7. it was recommended that the airports should look at SLAs as a means to improving their quality of service.6 11. However during each five yearly regulatory review of BAA London airports and Manchester airport.7 15.8 12. The CAA initially recommended a ‘Q’ factor for Heathrow and Gatwick under which the price cap would vary according to performance against a number of measures of service quality.9 26. service quality has come under close scrutiny and.

In addition. with the rebates being purely negative with no reward to the airport for performance above the standard set. BA felt that the 3 per cent figure for the Q factor should be increased to as much as ten per cent but objected to the inclusion of the passenger measures primarily because they would come from the BAA’s own QSM which BA felt would bias the results. Subsequently.8 4. It also argued that FEGP should be excluded because this was not covered by regulated airport charges. and pier service should be excluded because BAA did not undertake stand allocation. the CAA accepted the alternative Competition Commission recommendation of a system of rebates to users rather than price cap adjustments.7 3. $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ % fully equipped availability % fully equipped availability % passengers pier served Serviceability vs agreed target % serviceability Cars available Waiting time 10 minutes Baggage carousel serviceability % serviceability % serviceability Measure excluded Monthly QSM score Monthly QSM score Monthly QSM score Monthly QSM score 98% 97% 90% 98% 98% N/A 95% 98% To be decided To be decided $ $ $ $ $ $ $ $ $ $ 3. BAA claimed that baggage measures would be unnecessary as incentivized agreements were being developed in this area. The maximum impact of these rebates was recommended to be 2 per cent of the regulated airport charge revenue initially increasing 88 .9 Proposed service quality elements to be included in the regulation of BAA London airports Initial views of key organizations: CAA BAA BA CAA draft recommended performance measure Target value: Heathrow QA Stand availability Jetty availability Pier service Fixed electrical ground power People movers Transit system Security queues Arrivals reclaim Runways Taxiways Departure baggage QP Departure lounge seat availability Cleanliness Way-finding Flight information QD Delay ($ to be used. BAA argued that the Q factor was unnecessary and queried the inclusion of the delay factor because it was difficult to measure and largely outside the control of BAA.0 To be decided not to be used) Source: Competition Commission (2002a) and Civil Aviation Authority (2003).6 3. On the other hand.Managing Airports Table 4.

the airport operator. baggage trolleys. taxiways) than the terminal facilities. By way of illustration. and Darwin) and decided that these airports would continue to have their quality monitored – although some changes to the detailed measurements have been suggested (ACCC. Melbourne.11. Canberra.The quality-monitoring programme in Australia was introduced to assist in the review of prices at the airports. to improve transparency of airport performance and to discourage operators from abusing their market power by providing unsatisfactory standards.The CAA and Competition Commission also decided on a system of rebates at Manchester airport which could be based on the new-style GSSs which the airport has developed (see Table 4. The regulation reports of the airports showed the quality of service information which was provided through passenger perception surveys and they also published ‘static indicators’ as was required by the Airport Act 1996. Brisbane. or strongly influenced by.This was in order to prevent the airport operators underinvesting and lowering the quality of services provided.The services to airlines measures would largely be based on the existing SLAs with the passengers services being based on BAA’s QSM.1 and Tables 4. This covered aeronautical charges and financial accounting reporting. The monitoring concentrated on facilities or services provided by. Adelaide.6). To compensate for the lack of formal regulation. As discussed in Chapter 4.Service quality and its measurement to 3 per cent after 2 years. 1998a).10 and 4. 2002). the summary results of this quality assessment for Brisbane airport in 2001–02 are presented in Figure 4. The airlines were generally more satisfied with the airfield facilities (runways. Part of this agreement relates to a service charter and 89 . In addition. to monitor the quality of services against criteria defined by the ACCC. It stipulated that records had to be kept in relation to quality of service and that the ACCC should publish the results of the quality of service monitoring exercise (ACCC. the ACCC also undertook surveys among airlines. and least pleased with inbound government inspection and airport access. It was apparent that passengers were most satisfied with the gate lounges. Perth. in 2002 the Federal Government replaced price regulation with price monitoring at the major airports (Sydney. It also made specific quality reporting requirements unlike the UK situation immediately after privatization. Brisbane airport has developed a new pricing regime with its airline customers which is a legally binding 5-year agreement. 1998b). the air traffic control agency. Australian Customs Surveys and Airservices Australia. Post-privatization experience in Australia When the Australian airports were privatized in 1997 and 1998 (see Chapter 2). and security clearances. a regulatory framework comprising a package of measures was introduced.The CAA also decided that regular independent audits of the QSM should be undertaken to ensure that the methodology was in accord with best market practices and that representative samples were used. but also were being faced with declining aeronautical charges because of post-privatization economic regulation (ACCC.This could well have been an issue since the airports were not only having to produce commercial returns to satisfy private investors. The Airports Act 1996 provided for the regulator. the Australian Competition and Consumer Commission (ACCC). aprons.

1 Passenger survey results at Brisbane airport. Malaysian Airlines. Royal Brunei. Cathay Pacific Airways. and Singapore Airlines. Eva Airways.Managing Airports Check-in Government inspection waiting time inbound Government inspection – customs and outbound Security clearance Gate lounges Baggage Baggage trolleys Flight information displays Washrooms Car parking – waiting time Car parking – standard and availability Airport access Airport access – space provided for taxis 66 68 70 72 74 76 78 80 Satisfaction level (%) 82 84 86 88 Figure 4. Japan Airlines. Source: ACCC (2003). Qantas Airways. 90 . 2001–02 Source: Australian Competition and Consumer Commission.10 Facility Runways Survey results of seven major airlinesa at Brisbane airport. 2001–02 Aspect Very poor Poor Satisfactory 1 1 1 2 2 2 2 2 4 2 2 1 1 4 3 3 3 1 Good 5 5 5 7 5 5 6 5 6 3 3 3 3 3 3 4 3 3 6 Excellent 2 2 2 1 1 1 1 1 1 1 1 1 1 2 2 1 Availability Standard Aprons Availability Standard Taxiways Availability Standard Gates Availability Standard Aerobridges Availability Standard Ground service Availability Standard Flight equipment Availability Standard Check-in facilities Availability Standard Baggage Availability processing Standard Addressing airline concerns 1 Note: a Air New Zealand. Table 4.

Service quality and its measurement
Table 4.11 Indicator Number of international aircraft parking bays Number of aerobridges Percentage of passengers (embarking) using an aerobridge Percentage of passengers (disembarking) using an aerobridge Number of check-in desks Number of baggage inspection desks Number of inbound immigration desks Number of outbound immigration desks Number of security clearance systems Number of seats in gate lounges Capacity of outbound baggage handling equipment (bags per hour) Capacity of inbound baggage reclaim system (bags per hour) Throughput of the car park per year
Source: ACCC (2003).

Static quality indicators at Brisbane airport, 2001–02 Value 13 10 99.2% 99.1% 54 24 26 20 4 1 522 6 000 9 000 1 916 264

Brisbane airport’s continued commitment to the measuring of quality services along the lines of the ACCC monitoring.

Quality management at airports
At an increasing number of airports, measuring quality of service is just part of the overall quality management system which has become all about the continuous process of identifying customers needs, assessing their level of satisfaction and taking corrective action when necessary. All employees and all processes are considered to contribute to the long-term success of this system. Effective total quality management is now considered to be key element in many services businesses and is viewed as giving companies a competitive edge and a way to increase customer confidence. Potential benefits include increased employee motivation, enhanced communication and teamwork within the organization and increased productivity and efficiency. Theoretically, the ‘cost of quality’ does not have to be expensive as good quality management through quality appraisal and prevention schemes aim to minimize the costly situation when the service is unacceptable and has to be rectified (Lockwood and Wright, 1999). A wide range of different quality approached have been adopted by various airports. For example, in 1998 Nice airport launched a quality policy based on the European Foundation for Quality Management (EFQM) scheme of reference for their total quality management approach which was based on four priorities (Nice Cote D’Azur airport, 2002): 1 Objective quality indicators: 28 objective indicators were monitored each month and a quality representatives committee analysed all the services offered to passengers.
91

Managing Airports

2 Customer satisfaction measures: Customer satisfaction measures were taken at least once yearly from passengers, airlines, on-site services providers and administration bodies, companies of the region, and local residents. 3 Quality certification: It was the objective to formally certify the quality system of various areas of the airport’s operation. In 2001, this occurred with the commercial flight handling, the passenger services and the access and parking areas. 4 Benchmarking and local airport quality committee: The local airport quality committee was set up to jointly promote quality and comprised of airlines, the chamber of commerce, government services such as the CAA, police and customs, shops, and rental companies. Working parties were established to report twice yearly to the committee with research and benchmarking results related to specific areas and to recommend improvements. A similar example to this airport quality committee is the Passenger Services Council which was established at Dublin airport in 2002. This is concerned with service standards for passengers, people accompanying or meeting passengers and other visitors. It has an independent chairman and members representing passengers, persons with special needs, business travellers, the travel trade, and the airport operator (Aer Rianta, 2002). In some cases, airports have chosen to certify their quality system and gain external recognition by using the International Standards Organization’s (ISO’s) ISO 9000 family of standards. ISO 9001 is the most comprehensive standard and it covers the following elements: management responsibility; quality system; contract review; design control; document and data control; purchasing; customer supplied product; product identification and traceability; process control; inspection and testing; inspection, measuring and test equipment; inspection and test status; control of non-conforming product; corrective and preventive action; handling, storage, packaging and delivery; quality record; internal quality audits; training; and servicing and statistical techniques. ISO 9002 does not include the design requirements. ISO 9003 has the least requirements as it concentrates very much on the final inspection and test. The ISO standard does not tell the airports how they should set up their system but simply gives guidance on the elements which should be included. Certification involves inspection by an independent registration body (ACI, 2000). There are diverse examples of services at airports which have been certified. The Milan Airport company SEA had its ramp operations and baggage handling certified with ISO 9001 in 1997, followed by the security and emergency areas in 1998 and cargo areas in 2001. In 2001, Marseille gained ISO 9001 certification for its public reception and information centre, its operations co-ordination centre and its technical co-ordination centre whilst Geneva was similarly accredited in 2001 for its operations, passenger and security divisions, Frankfurt airport has ISO 9001 for its handling services, whilst Singapore airport has it for its training processes. Vienna airport was the first airport to receive ISO 9001 creditation for the total organization. More recently in 2002, Sharjah is an example of an airport which has been accredited in many areas of operation namely ground handling; management information systems; travel agency; freight handling; administration and commercial; aircraft maintenance, engineering and development; purchasing control stores; and ground services, equipment and vehicle maintenance. Examples of
92

Service quality and its measurement

ISO 9002 accretitation include centralized technical management at Brussels airport, the aircraft noise monitoring system at Aeroport de Paris (AdP) and the emergency services at Singapore airport. The ACI survey of quality of service asked airports about whether they had any ISO certification for their services. Out of 120 airports, only seventeen had ISO certified services – 10 of which were in Europe. ISO 9002 was the most popular. A further 24 airports were planning to be certified in the future. Four airports had equivalent quality systems such as the Malcolm Baldridge Award in North America but the majority, 75, of airports had no services certified. Another survey of the top 200 busiest passenger airports found a fairly similar result – namely that 23 per cent of the airports had quality certification (Francis et al., 2002). There is a considerable debate as to the merits of becoming ISO certified. As well as giving external recognition and guarantees, certification is often thought to help improve the quality management system of an organization by clearly identifying roles, responsibilities, and processes within the business and encouraging a quality culture. However, the certification process is a costly one, requiring much paperwork and extra workload. For example, when Munich airport was preparing for certification of its terminal and passenger services department in 1998, it prepared a very detailed 104-page quality manual which identified all the responsibilities and processes associated with the 214 employees within the department to do with activities such as information services, telephone exchange, VIP special handling services and other services such left luggage, dry cleaning, sale of underground train tickets, and so on (Penner, 1999). One of the fundamental principles of the ISO certification concept is that every process should be written down and regularly updated. This procedure is often criticized as being more suitable to the manufacturing industries, where it originated, rather than the services industries where many process are more difficult to formally identify and more flexibility is preferred.

Total quality management at Vienna airport
Vienna airport is a partially privatized airport which handled nearly 12 million passengers in 2001 (see case study in Chapter 2). It is worthy of consideration in relation to quality issues since it has been a leading airport in the implementation of total quality management (TQM) systems. In 1995, it was the first airport in the world to gain ISO 9001 certification for its entire airport operations. This required the culture of the airport company to be changed. The TQM philosophy, such as the focus on customer and employee satisfaction and the continuous improvement of all airport processes, was communicated to all staff through a series of training courses, workshops, meetings, and informal discussions. In 1997, the airport re-organized its processes to be more focused on customer needs and efficiency. This entailed introducing a new organizational structure. One of the central service divisions or corporate units, which supported the business and service units of the organization, was made responsible for TQM. The TQM corporate unit was to be involved with supporting the management board, heads of departments, middle management and all staff in achieving their quality-related goals.The overall quality policy and evaluation of the quality management systems, 93

Managing Airports as with all total-quality focused companies, was given highest priority and was made direct responsibility of the management board. In addition, TQM co-ordinators were appointed to each business, service and corporate units to facilitate communication with the TQM unit and to look after the quality management system in their area of expertise. A number of different elements are incorporated into Vienna airport’s TQM model and corporate philosophy. An effective targeting system is considered crucial for all employees. The airport aims to keep all employees informed about the targets, such as how and why they were formulated and current progress, through various communication channels including the airport’s intranet. In fact, staff knowledge of all TQM developments is considered to be very important and the airport uses a variety of different methods for communicating information – ranging from the intranet and TQM newsletter to TQM workshops and annual forums. Within TQM philosophy, a high degree of staff motivation and satisfaction is considered to be essential. With this in mind, a nursery is available for employees’ children and free transport is provided to Vienna and surrounding towns. At Vienna airport, a staff satisfaction survey in 1998 found that 29 per cent of staff felt that they had enough information to be able to do their job well and 35 per cent were satisfied with the work routines in their department.Twenty-eight per cent felt that ideas regarding an improvement of the working situation were suitably appreciated by their managers. The survey was used as a starting point for more extensive surveys and for target setting (Kotrba, 1999). A target of 50 per cent of employees being highly satisfied or satisfied with communications, work processes, and appreciation of their ideas was set for 1999. Some targets have been exceeded, for example, the ‘work processes satisfaction’ score was 55 per cent in 2000. In 2001, another target was reached, namely that 50 per cent of employees believed that work flows with other units in the organization were good or very good.This annual employee survey is considered to be a crucial tool for informing management about levels of staff motivation (Vienna Airport, 2002). Another important feature of Vienna airport’s approach is the processes which it uses to find out about its customers and their needs and requirements. It started regularly interviewing its passengers in 1995 with two main surveys. First, there is the ‘Passenger Map’ which collects passenger profile information related to characteristics such as age, sex, residence, mode of transport to the airport, transfer details, ticket used, time spent at the airport, services used, and purchasing patterns of departing passengers. The airport also undertakes a quality monitor in which passengers have to rate their opinion of airport facilities and services. In addition, every other year the airport undertakes a ‘conflict detector’ which helps investigate, from a passenger viewpoint, the relative importance of facilities and services and to identify any conflicts which exist. Information from these surveys is also supplemented by ad hoc surveys of meeters, greeters and employees at the airport and regular feedback from other businesses at the airport. The results of this market research are used to analyse passenger and other customer requirements, define target groups, identify problems areas, support product development, and to set quality targets (Pongratz, 1999). Another way in which the airport has tried to improve its emphasis on customer orientation has been in encouraging its customers to get involved in the planning of future developments at the airport – so-called ‘customer imagineering’ or the airport’s ‘one step ahead’ approach. A prime example of this policy has been with 94

Service quality and its measurement the development and expansion of the terminal, the VIE Skylink terminal. The airport has worked very closely with Austrian Airlines to define requirements for the expansion of the terminal and to ensure that the new facilities will enable Austrian Airlines to use the airport as a hub by offering quick and efficient transfers. This co-operation was based on joint overall responsibility between the airport and airline with a mixed steering committee, mixed working groups and equal status project managers. Phase 1 involved two working groups ‘Traffic Development’ and ‘Visions’ preparing the groundwork for the future project work by considering forecast traffic levels and the activities and functions of the terminal and how these would affect the design. During phase 2, six other working groups, ‘Airside Operations’, ‘Terminal and Aircraft Handling’, ‘New Information Technologies’, ‘Non Aviation’, ‘Working with Authorities’, and ‘Ecology and Infrastructure’, then worked out the detailed requirements on the basis of the results from phase 1, which eventually led to the selection of the design of the terminal extension. The planning and construction stages are also being co-ordinated jointly by Vienna airport and Austrian Airlines. As regards external standards, Vienna airport was ranked second in the category for airports up to 15 million passengers, eighth overall with all the 48 airports included, and first in the availability of connecting flights category in the IATA 2001 quality of service survey. Its on-time performance for intra-European services in 2001 was also above average (see Table 4.7). In addition, the airport undertakes it own quarterly passenger survey, the Terminal Performance Index and business-to-business surveys with its other customers and tenants. For example, from this it was observed that in 2001, 68 per cent of rental tenants were very satisfied or satisfied with personal attention. (Vienna Airport, 2002).

References and further reading
Aer Rianta (2002). Passenger services council to be established, Press release. Airports Council International (ACI) (2000). Quality of Service at Airports. ACI. Airports Council International (ACI) (2002). Activities and Achievements, September 2001–September 2002, ACI. Airport World (2002). Are we having fun yet? February–March, 45–6. Alder, N. and Berechman, J. (2000). Measuring airport quality from the airlines’ viewpoint. Fourth Air Transport Research Group Conference, The Netherlands, July. Association of European Airlines (AEA) (2003). Fewer airline delays in Europe in 2002, Press release, 13 February, 2003. Australian Competition and Consumer Commission (ACCC) (1998a). Economic Regulation of Airports – An Overview. ACCC. Australian Competition and Consumer Commission (ACCC) (1998b). Quality of Service Monitoring for Airport – Statement of the ACCC’s Approach to Analysis, Interpretation and Publication of Quality Information. ACCC. Australian Competition and Consumer Commission (ACCC) (2002). Draft Guide: Quality of Service Monitoring for Airports. ACCC. Australian Competition and Consumer Commission (ACCC) (2003). Brisbane Airport Regulatory Report 2001/2002. ACCC.
95

Consultation paper. Consultation paper. Service level agreements. 26A (1). Heathrow. (1999). P. Transportation Research. A report on the economic regulation of the London airports companies. CAA. Maiden. Le Marquand. July. Delivering quality in a globalized market. CAA. Position paper. (1999). (1998). C. The Stationery Office. Civil Aviation Authority (CAA) (2003). MMC. L. Civil Aviation Authority (CAA) (2000c). Measuring service quality at airports. CAA. MMC. CAA. Measuring performance of airport passenger terminals. A Report on the Economic Regulation of Manchester Airport plc. Nice Cote D’Azur Airport Handbook. How BAA uses its market research. The CAA Approach to Economic Regulation and Work Programme for the Airport Reviews. University of Westminster/Cranfield University Airport Economics and Finance Symposium. Competition Commission (2002b). A. and Fry.. Lockwood. CAA. CAA.Managing Airports BAA (2002). Airport–airline agreements: what is the way forward? University of Westminster/Cranfield University Airport Economics and Finance Symposium. July. The Stationery Office. University of Westminster Marketing and Market Research for Air Transport. Ninth ACI Europe Annual Congress. CAA proposals for consultation. Service quality proposals: specification of standards and rebates. Gatwick and Stansted price caps 2003–2008. March. ANSConf Working Paper No. London. A. and Wright. Pleasing the airport property customer. Cruickshank. ICAO. 96 . 5–6. Humphreys. Civil Aviation Authority (CAA) (2002b). ACI Europe Communique. (2000). June. CAA. Civil Aviation Authority (CAA) (2000b). The development of performance indicators for airports: a management perspective. (1992). Penner. Heathrow. 37–45. Eighth World Conference on Transport Research. Nice Cote D’Azur Airport (2002). S. Monopolies and Mergers Commission (1997). A. G. Kotrba. The benchmarking of airport performance. (1999). Pisa. F. CAA recommendations to the Competition Commission. Francis. CAA proposals for consultation. Competition Commission (2002a). (1996). BAA London Airports: A Regulatory Report. Journal of Air Transport Management. December. Manchester airport. Civil Aviation Authority (CAA) (2002c). BAA. Terminal and passenger services certified according to ISO 9001. Principles of Service Marketing and Management. International Air Transport Association (IATA) (2000). ACI Europe Good Communication and Better Airport Marketing Conference. 85. Consultation paper. Civil Aviation Authority (CAA) (2000a). Prentice-Hall. (2002). Monopolies and Mergers Commission (1996). March. Civil Aviation Authority (CAA) (2002a). Maiden. A Report on the Economic Regulation of the London Airport Companies. Annual Report 2001/2002. C.. 8. London. I. S (2002). Quality of Service Issues. Consultation paper. J. April. Bologna. Lemaitre. Antwerp. Gatwick and Stansted airports. T. 239–47. Lemer. A report on the economic regulation of Manchester airport plc. (2000).

Services Management: An Integrated Approach. A measure of success. July. P. B. Radia. R. Airport World. Van Dierdonck. (2002).. P. and Gemmel. Annual Report 2001. Van Looy.. ACI Europe Communique. S. 97 . and Morris. 9–10. (eds) (1998). Vienna Airport. B. Market research and total quality management at Vienna International Airport. Vienna Airport (2002). (1999). Financial Times Management. 31–3.Service quality and its measurement Pongratz.

the events of 11 September. This reflects the increasingly commercial and competitive airport environment and the contemporary challenges faced .5 The airport–airline relationship The relationship between the airport operator and airlines is clearly fundamental to the success of any airport business. more than ever before. Moreover. an ongoing problem is that demand is outstripping capacity at a growing number of airports and so the traditional mechanism for allocating slots has had to be revisited. The sweeping changes which have occurred within the airline industry mean that airlines. Many airports still generate their aeronautical revenue in this way. This is having an impact on the aeronautical policies of airports and their regulation. 2001 have meant that airport charges have come under even greater scrutiny from the troubled airlines. At other airports charging practices have become more complex and more market based. are trying to control their costs in order to improve their financial position in an ever increasing competitive and deregulated environment. All these issues are considered in this chapter. The structure of aeronautical charges Aeronautical charging traditionally has been relatively simple. with most revenue coming from a weight-based landing charge and a passenger fee dependent on passenger numbers. In addition.

This charging mechanism uses ‘ability to pay’ principles.The airport–airline relationship by airports such as the growing pressure on facilities. Some costs such as runway wear and tear do increase with weight and also larger aircraft require vortex separations. many of the German airports. Frankfurt airport has a minimum landing charge set at 35 tonnes. there is not a strong relationship between aircraft weight and airfield cost. for example. As a result of this. Brussels. This simple method is used at many airports throughout the world including the US and Australian airports. particularly at congested airports. Düsseldorf at 32 tonnes. the airport attempted to introduce a movement-related element into its landing charge. Some airports have a unit landing charge which declines as the weight of the aircraft increases such as Manchester airport. and rising security costs. Kuala Lumpur and the Italian. most airports tend to stick to a very simple fixed unit rate. Mexico City. Overall.g. and Brussels airports have higher charges in the early morning. At other airports. and Copenhagen. the unit rate increases for larger aircraft. which can reduce the number of aircraft movements during a certain period. For example. in Greece (excluding Athens). For example. Very few airports have adopted a movement-related charge which clearly will tend to be very unpopular with airlines flying small aircraft types. and Indian airports. namely Menorca and Ibiza. Vienna airport has a large fixed movement element in its landing charge as well as a variable fee. increase their landing fees slightly in the summer months. One such airport which was experiencing acute runway congestion in the late 1980s was Boston Massport. since airlines using larger aircraft are in a better position to pay higher charges. US$X per tonne) regardless of the size of the aircraft. At a few airports. Sometimes charges for air traffic control (ATC) 99 . environmental concerns. but was forced to abandon such a policy when its airline and general aviation customers questioned the legality of this in the law courts. The simplest method is to charge a fixed amount unit rate (e. BAA plc’s fixed landing charge for all aircraft only applies to peak early morning and evening flights in the summer. A flat rate landing charge for all aircraft types may be more appropriate. however. A fixed unit rate will favour smaller aircraft types since tonnage tends to increase faster than aircraft capacity or payload. Other airports have not gone this far. This is because the cost of occupying the congested runway is movement related and independent of aircraft size. Some other airports also have differential landing charges by season or time of day to reflect peaking of demand. In the United States. but have made an attempt to charge the smallest aircraft more to encourage general aviation traffic particularly to move away from congested major airports. It will also benefit airlines which have high load factors or seating capacities. for example. Toronto. Spanish. Notable exceptions are Heathrow and Gatwick airports which have a fixed runway charge at peak times. the variable rate successively increases and decreases as the weight of the aircraft rises. Some of the Spanish airports. Landing charges Most airports have a weight related landing charge based on maximum takeoff weight (MTOW) or maximum authorized weight (MAW). Each aircraft movement will consume the same resource. Dublin airport has differential charging by both season and time of day.

is strongly opposed to such practices (IATA. Seychelles. chapter 2 aircraft which were banned in 2002 from most countries. There are currently three classifications: chapter 1 aircraft which were banned from airports in 1990. A growing number of airports have noise-related surcharges or discounts associated with their landing charges as a result of increasing concerns about the environment.Managing Airports or terminal navigational facilities will be incorporated into the landing charge. In addition to noise disturbance effects there are increasing concerns about the impact that aircraft emissions are having on the environment (see Chapter 9 for a fuller discussion). Sometimes there is a separate noise tax as well as is the case at the French. Spain. imposes the same costs on the ATC infrastructure. Chapter 4 classifications will come into force in 2006 – see Chapter 9. Elsewhere. there is no logical cost rationale for this since each aircraft movement. it tends to exist to support local and regional services. At a number of airports such as Brussels. 2001. all EU countries had abandoned such practices (TRL. Clearly. with the notable exception of Zürich and Geneva airports in Switzerland and the Stockholm airports of Arlanda and Bromma which introduced emissions charges in the late 100 . for example. Instead. Most airports in Germany have chapter 3 ‘bonus’ or ‘non-bonus’ aircraft. like the landing charge. the airline organization. Italy. 2002a). ‘base’. Manila. Typically this charge will be. By 2002. Oslo. Switzerland and Belgium. The International Air Transport Association. This will naturally favour the established home carrier at the airport and European airports particularly have been subject to considerable criticism from the European Commission concerning such policy. the landing charges are higher at night. A few airports. the airport operator may levy a separate charge. As yet this has not been reflected in airport charges. and ‘high’ categories. At other airports. Some of these are based on airport or country specific aircraft acoustic group classifications as is the case with airports in France. There may be a cost rationale for such charging when the noise related revenue is used for noise protection and insulation projects but this is not often the situation. the airline will pay the air traffic control agencies direct and the airport operator will not involved in the financing of ATC services at all. and Korean airports. have traditionally offered a volume discount on the landing fee. This is not a cost-related charge since the cost to land an aircraft is independent of its origin. Alternatively. (These classifications are based on the level of noise which aircraft make and the areas on the ground which are affected by the aircraft noise. Sometimes such services will have a social role in linking together regional communities and so in effect the discount will be an unofficial subsidy. Airports may adopt different sub classifications within the chapter 3 group. At some airports. and chapter 3 aircraft which are the quietest aircraft. and Portugal which had such policies. and Oslo. ACI-Europe. Sweden. 2000a). Brussels and Macau airports and those in Spain and Portugal. whereas at London there are ‘minus’. more standard ICAO ‘chapter’ classifications are used.) This is the practice at the German and London airports and those serving the cities of Stockholm. related to the weight of the aircraft. domestic or short-haul services have traditionally paid a reduced landing fee. The European Commission has been against landing charge differentials for domestic and intra-EU traffic claiming that they are contrary to the principles of the Single Market and recently exerted pressure on Finland. Italian. regardless of the size of the airport. which are comparatively expensive to operate. and those in Germany. As a result by 2002 all EU airports had discontinued such discounts.

A number of airports charge a smaller fee for transfer passengers (e. such policies are often maintained to subsidize the national carrier which has a large domestic operation. This results in different systems being in place to finance the security measures. that domestic passengers have less potential for generating commercial revenues and hence do not justify the lower passenger charge. In Europe. business. and Luton airports in the United Kingdom which charge more in the summer. the responsibility for airport security has passed from 101 . Helsinki. and Copenhagen). security. As with the landing charge in some cases. neighbouring countries are charged less. and international. and international charges. and Taipei) to encourage this type of traffic. At most airports. EU. Since 11 September.g. Passengers at London City airport pay more in the morning and evening peak times. 2001.The airport–airline relationship 1990s. In India. there may be political or social reasons for keeping down the cost of domestic travel as well. Pakistan airports have different fees for passengers who are travelling first. Amsterdam. These charges are most commonly levied per departing passenger. The French airports have three types of charges. The provision of security services may be performed by the airport’s own employees. Manchester. They may be paid for by the government via general taxation or via a special government departure tax. At Zürich airport there is even a noise charge related to passengers! Security charges The responsibility for the provision and financing of airport security varies considerably from country to country. the airlines. Historically. It can be argued. Stockholm. or waive the fee completely in certain circumstances (e. Passenger charges Passenger charges are the other main source of aeronautical revenue. Tokyo. or by private company under contract to the airport. Some other airports also have differential charges to reflect peaking. and very often will not need check-in. Dublin. Frankfurt. there have been signs that the European Commission would like to harmonise the ways in which noise and emissions charges are levied although as yet there has been no direct action in this area. In many cases responsibility may be shared between these different bodies. namely domestic. the whole issue of airport security has become a top priority and many airports throughout the world have been enhancing security levels. A lower transfer charge can be justifiable on cost grounds as such passengers will have no surface access requirements. and immigration facilities either. there tends to be a lower charge for domestic passengers to reflect the lower costs associated with these types of passengers. or economy class. In other countries security costs may be financed directly by the airport operator who will have a special security charge or include it in the passenger charge. or a government agency. however. Similarly Johannesburg airport in South Africa has domestic. will not have associated meeters and greeters. Vienna. such as East Midlands. regional. In the United States.g. transfer passengers still require facilities such as baggage handling and may require special facilities in order that a rapid transfer is achieved. On the other hand.

Manchester. sometimes. and some US airports such as Boston. Elsewhere. Most airports have a free parking charge. At other airports. with a US$2. Frankfurt and Hong Kong. There may be a lower fee for all-cargo aircraft. Düsseldorf. Then there are ground handling fees which the airport operator may levy if it chooses to provide some of these services itself rather than leaving it to handling agents or airlines. A few airports. For those airports which have a 24-hour charge. Other charges There are also a number of other charges which tend to be fairly small compared with the landing and passenger fees. such as Amsterdam. and other airport specific activities. 2001. there are the fuel charges which are levied by the fuel companies which are normally independent of the airport operator. have no free parking charge to encourage the airlines to minimize turnaround time. hangar use. In Europe. there is the parking charge which is usually based on the weight of the aircraft or. which have already been discussed. have increased their security charge. such as BAA plc’s London airports.Managing Airports private security contractors to federal employees after 11 September. perhaps. at the French and Italian airports there is a lighting charge. Oman. For example. Vienna. Malaysia. BAA plc’s airports charge per quarter hour and during peak times each minute counts as three. The European Commission is keen to harmonise the provision and financing of security services to produce equity within Europe and ensure that airports can compete fairly with US airports (see Chapter 10 for full details). 2002b). Sometimes. the governments have covered some of the additional costs (ACI-Europe. First. and Miami. such as certain Middle Eastern airports like Abu Dhabi 102 . Malta. Houston. First. other airport fees. Ground handling and fuel charges Airlines incur three types of charges when they use an airport. a rebate for using remote stands. a number of airports. There may be additional charges related to services such as fire-fighting. as is the case at Amsterdam airport. storage facility. There is normally an hourly or daily charge with. There may be other charges for certain facilities or services which airports choose to price separately rather than including in the landing or passenger charge. on aircraft wingspan as in the case of Singapore. sometimes. as an alternative to the passenger charge. such as Brussels and Amsterdam. there may be an air-bridge fee typically charged per movement or based on the length of time that the bridge is occupied. and the Canadian airports. or a higher charge as at Belfast International or the airports in Cyprus. Finally. they pay landing and passengers and. typically ranging from 1 to 4 hours to allow the airline to turnaround at the airport without incurring any charges. There a few notable exceptions. there is clearly no incentive for airlines to make the most effective use of the apron space. there are cargo charges based on the weight of loaded or unloaded cargo as is the case at the Spanish and Swiss airports.50 charge per passenger to cover some of the increased costs of this and other enhanced security measures.

Hence. The taxes may also cover the provision of some security services. This income does not directly go to the airport operator but does impact on the overall cost of the ‘turnaround’ from an airline’s point of view (Pagliari. In some cases there may be just one or two charges that cover everything. until 2002 there was a tax to help national transport links. Elsewhere. aircraft cleaning. a departure tax Table 5. all services at the airport can be offered to the airline in one overall package. These are usually negotiable and the agreed prices will depend on various factors such as the size of the airline. it is very difficult to distinguish between these government taxes or airport passengers charges as both are usually shown as ‘airport taxes’ on the ticket. apron buses. a ‘Tourism Tax’. 1998).1). whereas elsewhere there may be a multitude of individual fees. For the passenger. the scale of its operation at the airport in question. pushback. and so on.The airport–airline relationship where the fuelling is provided by a government agency. Jamaica. ground power. Sometimes these taxes may have a travel-related objective as is the case with a number of taxes in the US or Australia where some of the tax directly funds the national tourist board. and a ‘National Aid Tax’. It is rare to find published data relating to handling and fuel charges.1 Main aeronautical charges at airports Charge Common basis for charging Weight of aircraft Included in landing charge or based on weight of aircraft Included in landing charge or based on aircraft movement Departing passenger Included in passenger charge or based on passenger numbers Weight of aircraft per hour or 24 hours after free period Different charges for different activities Volume of fuel Departing passenger Income to airport operator? Yes Sometimes Yes Yes Yes Yes Sometimes No No Landing Terminal navigation Air-bridge Passenger Security Parking Ground handling Fuel Government taxes 103 . passenger handling. such taxation is just used as means of supplementing general government taxation income from other sources. Further complexities occur since there are a variety of ways of charging for activities such as ramp handling. Government taxes There is one final charge which airlines or their passengers sometimes experience at an airport – government taxes (see Table 5. The Republic of Yemen has a ‘Development Tax’. and whether other airports used by the airline are served by the same handling and fuel companies. In Norway. and Pakistan impose a tax on departing passengers. Mexico City has a tourist tax on international arriving passengers and a number of other countries such as Malta. In the United Kingdom.

Singapore has relatively low charges in spite of having a good reputation for service as was illustrated in the IATA Global Monitor (see Chapter 4). 2001. As a compromise. reductions in staff numbers. in 2001. The costs are divided between aircraft-related costs which include landing charges as well as ATC and air-bridge charges. There is a wide spread of charges (excluding taxes) ranging from less than 300 Euros at Dubai airport to over 5000 Euros at New York Newark. and demanding that airports adopt such cost-cutting and efficiency saving measures themselves. passenger-related costs which include passenger charges and any security charges. and Athens. at Madrid airport (Air Transport Group. was introduced in 1994. To overcome this problem. Only published charges were used. Reduced passenger demand and the poor financial position of airlines as a result of the events of 11 September. These are all internal costs over which the airlines have a considerable degree of control. Dubai has not increased its charges for many years and reduced them after 11 September. 1998). Since then there has been some discussion as to whether this tax should be substantially increased to reflect the environmental costs of the flight. Low airport charges may also be compensated for by relatively high handling charges as is thought to be the case.1). airlines have also been looking at their external costs such as airport charges. and government taxes. and pegging the level of wages. A sample of 24 airports from around the world has been chosen.Managing Airports which goes directly to the treasury. Kansai. airport charges have become subject increasingly to scrutiny from the airlines – particularly from the new breed of low-cost airlines in Europe. so the figures do not take account of any discounts that may be available. for example. If such a tax has to be levied. a differential tax system with different amounts for economy and business-class passengers was introduced. The level of aeronautical charges It is very difficult to compare the level of charges at different airports because of the varied nature of the charging structures. if these exist. rather than raising their charges (Doganis. the low-cost carriers feel it would be fairer to base it on a percentage of the ticket price (Gill. For example. However. 2001). comparisons have to be made by examining the representative airport charges for a Boeing 737 on an international route (Figure 5. A more competitive airline environment and falling yields has forced airlines to focus on major cost-saving initiatives such as outsourcing. Moscow. The situation changes somewhat when government taxes are included and Los Angeles takes second position. 1998). The data was not sufficient to allow ground-handling and fuel costs to be added. The impact of aeronautical charges on airline operations In recent years. 2001 combined with economic recession in the 104 . This has been greeted with considerable opposition. especially from the new breed of low-cost carriers who complain that it is too large in proportion to the fares that are being offered. in 2000 fares as low as £30 were on offer by low-cost carriers such as Ryanair and EasyJet to European destinations with one-third of this (£10) being the airport tax.

105 Charges and taxes (Euros) N ew 10 000 12 000 2 000 4 000 6 000 8 000 0 Source: Cranfield University.1 Aeronautical charges and taxes for an international B737–800 turnaround in 2002 at world airports rk os EW co R w SV O Ka ns a Lo At i s he An ns ge le s Am LA X st er da Bu m en os Ma Ai cau re s EZ E Li Lo sb o nd on n LH R Ab id M ex jan ic o Pa Ci ris ty C Se DG ou lI C N H el si nk Si i ng ap or e Ka ra H on chi g Ko R om ng e FC O M ad r Pa id Jo pe ha et nn e es bu rg C ai ro D ub ai . M Yo Aircraft related Passenger related Government taxes Figure 5.

Charges for the low cost carriers are around 8–9 per cent but this share would be higher if it was not for the fee discounts which are obtained at various airports. would outweigh the impact on costs due to the airport charges. Cyprus airports temporarily waived landing fees for all flights and the Moroccan airports waived them for all charter carriers. Only landing and passenger charges are shown and so these figures do not represent the total turnaround costs for the airlines. charges went up. and Athens airports reduced their landing charges by 4. Some airports lowered their charges in order to encourage the airlines to maintain or even grow their airport operations. such as British Regional and Brymon. respectively. which has a range of domestic and European services. however. Figure 5. Airport charges are the most significant for the charter and low-cost carriers as these airlines have minimized or completely avoided some of the other costs which traditional scheduled airlines face. in a general sense. resulted in increased pressure from airlines and the airline organization. British Airways. These charges account for around 13–14 per cent of all costs for carriers with short-haul and mostly domestic services. Most low-cost airlines operate short sectors which means that they pay airport charges more frequently.Managing Airports United States and various other countries in 2001. For most airlines the impact on demand. it is difficult to see how airport charges can have a major impact on airline behaviour. Munich and Stockholm. particularly to cover the increased security costs. in 2002. It is hardly surprising that it is this type of airline which has been most active in attempting to bring down their airport costs by negotiating incentive deals at airports or operating out of secondary or regional airports which have lower charges. Dubai airport halved its landing charges. for example. In spite of this growing concern over the level of charges. Other short-term measures included Copenhagen reducing its landing fees by 10 per cent for intercontinental flights. This share is double for British Midland. A study of UK traffic suggested that a 50 per cent increase in all airport charges would only result in a 7. However.5. IATA. Pilling and O’Toole. on airport operators regarding the level of charges. Singapore. postponed charge increases which had been planned and Hong Kong airport maintained the 15 per cent reduction in landing and parking charges which it had introduced in 2000 to strength its position as a major hub airport in the Asian region. For example. show the situation for UK airlines. and 15–23 per cent. Accurate international figures illustrating this are difficult to obtain because many airlines do not now report the passenger fee as an airport charge and very often the airport charges may be combined with some other cost item. airport costs generally represent a relatively small part of an airline’s total operating costs. (Pilling. For the charter airlines of Britannia and Airtours.2 does. They are least important when long-haul operations are being considered.5 per cent reduction in total demand – although 106 . Amsterdam. the airport charges represent around 20 per cent of total costs. 10. In fact in some cases increases in security charges at airports had the effect of cancelling out all or at least some of the reductions in the normal charges as was the case at Amsterdam airport for example when reduced landing charges were introduced at the same time that security charges were increased. At other airports. since the charges are levied relatively infrequently. 2002). with a mix of long and short haul flights. has the lowest share of costs at around 4 per cent.and on other costs which might be incurred if operations were changed to avoid certain airports or airport charges. 2002. Other airports.

In practice such pricing policies are complex and very difficult to implement. The airport operator faced widespread opposition from the airlines. 2000). Moreover. While BAA plc has retained the landing and parking peak charge. particularly the US carriers. In the 1970s. and a peak passenger and parking charge based on marginal cost principles at Heathrow and Gatwick airports. BAA plc is the only airport operator to have used a peak pricing charging system based on a detailed assessment of marginal costs. In theory marginal cost pricing leads to the most efficient allocation of resources as only the users. clearly the effects will differ according to both airport and traffic characteristics (DETR. Peak charges have been introduced by some airports to make the airlines. peak profiles at other airports.2 Landing and passenger charges as a share of total costs for UK airlines. Most peak pricing has very little impact on airline operations other than making it more expensive for airlines to operate in the peak. who value a facility at least as much as the cost of providing it.The airport–airline relationship Share of total costs (%) 25 20 15 10 5 0 o G t Je sy Ea sh d iti an Br idl M sh s iti ay Br irw A ym Br s ur rto Ai ia nn ita Br l sh a iti ion Br eg on R Figure 5. will pay the price for using it. In effect. Airline scheduling is a complex task which has to take into account factors such as passenger demand patterns. which are generating the peak demand. it has abandoned the more complex peak passenger charges. 2000 Source: CAA airline statistics. pay for the peak capacity infrastructure costs. to such 107 . this could well mean that the peak is merely shifted to another time. mean that demand is fairly inelastic to changes in airport fees. and so on. these schedule constraints coupled with the fact that charges make a relatively small contribution to airline total costs. They have also been used with the intent of shifting some of the peak operations into the off-peak. the impact on passenger behaviour also tends to be marginal since generally the different airport charges tend to be averaged out. BAA plc introduced a peak surcharge on runway movements on certain summer days. crew availability. This is unlikely to occur unless the differential between peak and off-peak pricing is very much higher than current practice. airport curfews and environmental restrictions. If the airline were to shift operations to outside the peak period. but also because the charging system was so complex that it was very difficult for the airlines to react. It proved to be ineffectual in shifting any demand largely because of the scheduling problems already described.

the airports are now effectively full in most hours and so the concept of the peak hour has become far less relevant. there may be nothing to pay with the discount tapering in the second year to 70 per cent of the first year’s discount and to 40 per cent in the third year. One of the most popular methods is to waive or reduce the landing fee in the first few years of operation so that the airline only pays for the passengers it carries. This means that the airport will share more of the risk when the airline is developing the route. The airport operator gave discounts on new routes and growth on existing routes. incentive schemes are not always popular with all airlines – particularly the full fees paying ones who may be unhappy about effectively subsidizing the new carriers.2). discounts on both landing and passenger charges are available for new international services. for a 120-tonne aircraft. 1996). which probably represented around 1 per cent of an airline’s costs in most circumstances. Aer Rianta. BAA and the US airlines finally resolved their differences through international arbitration which required BAA to phase out the peak passenger charges. 2000c). An airport charging policy probably has its greatest impact on airline operations when new routes are being considered – especially when being operated by lowcost airlines or on short regional sectors. the typical fee surcharge for a chapter 2 aircraft in the 1990s was about 20–25 per cent of the normal landing fee.6 per cent in the same year although. clearly. As a result chapter 2 aircraft at the airport reduced from 15 per cent in 1999 to 0. BAA plc claims that the new policy takes into account both economic pressures and the preferences of its airlines (Toms. At Norwegian airports. More sophisticated approaches include that of Belfast City airport which introduced a dual charging process in 1993. in many cases. At many airports. Amsterdam airport increased its surcharges for chapter 2 aircraft between 50 and 100 per cent every 6 months. IATA remains opposed to peak pricing as it feels that it could lead to discriminatory practices and could be ineffective in addressing capacity problems (IATA. Between 1994 and 1999. which reduced over 108 . This is due to the existence of airport incentive schemes or discounts. In general. some of this fleet replacement might well have happened without such a charging policy – particularly with the banning of chapter 2 aircraft within Europe from 2002 (see Chapter 9) (Schiphol Group. the airline will pay very little. If demand at the start of a service is initially low. been a critical factor when low-cost carriers are selecting suitable airports for their operations. This was too insignificant alone to alter a carrier’s choice of equipment (Dennis. It is equally as difficult to influence an airline’s choice of aircraft as it is to shift their schedules by using pricing mechanisms. the Irish operator had one of the most complex published discount schemes in existence (Table 5. Such discounts have. These are most likely to be offered at smaller airports which want to encourage growth and provide inducements to airlines which might otherwise not choose to use the airport. Between 1995 and 2000. Of course. 2000). To have any meaningful impact the surcharge probably should have been at least double the equivalent chapter 3 charge. In 2000.Managing Airports charges which were considered discriminatory. the chapter 2 landing surcharge was 6075 Dutch guilders per landing compared with a basic runway charge (landing and take-off) of 2290 Dutch guilders. This has been particularly the case when there have been a number of neighbouring or equally suitable airports from which to choose. In reality. 1994). In the first year of operation. Airlines themselves could choose to come under a conventional charging structure or be charged an inflated passenger fee but with no landing charge.

0 29.8 28.7 30.6 23.7 11.3 34.The airport–airline relationship time.3 30.7 45. 1994–9 on airport fees Discount rate (%) 1994 New growth – landing and passenger fees 93–94 growth 95–94 growth 96–95 growth 97–96 growth 98–97 growth 99–98 growth New route – passenger.6 13.4).0 2. Aer Rianta terminated their discount scheme at the end of 1999.4 9.0 32. and parking fees Note: a Passenger fees only.3 8.7 4. airlines could be paying as little as 10 per cent of the standard landing and passenger charge.3).and tax-free sales. Various airlines. especially Ryanair.8 7. Table 5. 1998–2001 % of initial calculated charges 1998 Dublin Aer Lingus Ryanair British Midland Lufthansa Shannon Aer Lingus Ryanair Cork Aer Lingus Ryanair Source: Doganis (2002).2 44.4 20. benefited significantly from this scheme – particularly because of the short-haul nature of their services and the price sensitivity of their leisure passengers (Table 5.6 3. 1999 2000 2001 (to Oct) 32.0 6.2 New growth and new route discounts available at Aer Rianta airports.7 40. largely in preparation for the demise of EU duty.9 16. Source: Aer Rianta.5 14. This was greeted with considerable opposition from Ryanair. 2001 new discounts schemes were introduced to stimulate new routes particularly at Cork and Shannon airports where the discounts were more generous and available for a longer time period (Table 5.3 Discounts given to each airline at Aer Rianta airports. In the initial years.3 109 . After 11 September. landing.8 21.5 7.6 14.5 50. 1995 1996 1997 1998 1999 80a 70 80 60 70 90 50 60 90 90 90 40 50 70 90 90 90 80 80 90 30 40 70 70 90 90 90 Table 5.

Pre-financing has traditionally not been an acceptable principle for a number of reasons. cheaper source for funding investment in addition to loans and equity which can also be used as security for raising extra finance (ACI. A fundamental principle of the long established cost recovery policy in ICAO guidelines on airport charges is that charges should not be levied for any facilities until they become operational. in spite of airline opposition. The airlines tend to be strongly opposed to such cross-subsidizing and argue that if the smaller airports really need financial help for social or economic reasons. The ICAO has acknowledged that. 2000a. some airports have introduced fees for prefinancing purposes.b). In Greece. in the United Kingdom. Airports argue that self-financing in certain circumstances can provide a useful. Moreover. Another important issue is the pre-financing of future airport infrastructure through airport charges. the airlines tend to be fearful that they will pay twice for the infrastructure. the regulator takes into account the fact that some pre-financing will take place when setting the appropriate level of charges. to pay for the financing of the new Athens airport. 2000e). A similar situation exists at some Canadian airports. The most notable example is the United States where PFCs go towards future development projects. First. and parking fees Discount rate (%) 2001–02 Year 1 Dublin Cork/Shannon 100 for 3 years 100 for 4 years 100 100 Year 2 65 80 2003 Year 3 50 60 Year 4 0 40 Year 5 0 20 A particular area of concern for airlines as regards charging policies is crosssubsidization within an airport group under common ownership. 2000d). This typically occurs when a large international airport provides financial support for a smaller airport. usually serving primarily domestic services. The recommendations do. landing. 110 . Also.Managing Airports Table 5. allow for airports to make a reasonable return on assets to contribute towards capital improvements. higher passenger fees were levied. there may be no certainty that the airport charges will be efficiently spent to provide new facilities. Elsewhere. both before it is built and once it is operational (IATA. that they should be supported by government funds instead (IATA. there is no guarantee that the airlines paying the charges will actually be the airlines which will benefit from the new infrastructure. Operators of airport groups argue that the individual airports need to operate as a system to make the most efficient use of resources and to produce cost savings. however. Airports claim that pre-financing also avoids large increases in airport charges when the infrastructure comes on stream as was experienced at Narita and Kansai airports in Japan or was initially proposed at the new Chek Lap Kok airport in Hong Kong – but was not fully implemented because of fierce opposition from the airlines. for example.4 New route discounts available at Aer Rianta airports 2001–03 on passenger. with the growing commercialization within the industry and diminishing dependence on government sources for financing. In spite of these airline concerns.

Then there is economic regulation with the main focus being on charge or tariff control. The airport regulatory environment Airports are subject to a number of different regulations at both international and national level. Other economic aspects of operation such as handling activities and slot allocation are also regulated in some areas of the world. On a worldwide basis. For example. They are. 2000a). states that airport charges must be related to costs and should allow only reasonable profits. provides a basis for airport charging. In addition. 2001).The airport–airline relationship pre-funding could perhaps be considered for the future. 2000a). The final proposal had three basic principles related to non-discrimination. These also recommend that the charging system should be transparent and non-discriminatory and that consultation should take place between airport operators and their customers if changes are proposed (ICAO. 2001). restrict aircraft movements due to noise considerations or limit airport infrastructure development. The first proposal appeared in 1985. the economic regulatory interest in airports seems to be increasing at a time when. These environmental issues are discussed in detail in Chapter 9. 1992). being broadly related to average cost pricing combined with some market or ability-to-pay pricing. the airlines business is being progressively deregulated. in principle. the European Commission has proposed introducing an airport charges regulatory framework for the whole EU.b). which established an international regulatory air transport system. effective accounting practices and prior consultation with users to ensure that such financing was considered fair and appropriate (ICAO. The ICAO produces more detailed guidelines which have an overriding principle that charges should be cost related. This resulted in a lengthy dispute over Heathrow charges in the 1980s and 1990s between the US and UK governments with an eventual agreement in 1994 which provided for compensation of nearly $30 million in settlement (Competition Commission. The airports were. were revised as a consequence of ANSConf 2000 and give greater flexibility as regards the use of non-aeronautical revenues (ICAO. This would only occur if there was adequate economic regulation. Such principles. and then there were several different attempts to seek approval for such legislation. Airports are also increasingly becoming subject to environmental regulations which may. The ICAO Conference on the Economics and Airports and Air Navigation Services (ANSConf 2000) therefore recommended that countries could consider prefunding through airport charges but only in specific safeguarded circumstances and this has been incorporated into new charging guidelines (ICAO. Airport charges can also be subject to the international obligations of bilateral agreements. ironically. the 1944 Chicago Convention. particularly from different countries. Many of these are technical regulations related to the operational. Bermuda 2. always opposed to the Commission’s 111 . Article 15 gives international authority for the levying of charges by ICAO member states and specifies that there shall be no discrimination between users. 2002a. cost relatedness and transparency (European Commission. however. safety and security aspects of managing an airport. for example. only guidelines and are open to different interpretations but nevertheless have generally led to fairly similar overall pricing regimes being adopted by most airports. the UK/US bilateral air service. Overall.

Regulation of privatized airports The basic principles There are often serious concerns that airports with considerable market power will abuse this situation. particularly if the airports are privatized. their common purpose is to allow the regulated airports a reasonable rate of return on capital while providing the correct incentives for an efficient operation and an appropriate investment policy. the treatment of commercial revenues. In addition to international regulation. 2000b). However. In 1999.Managing Airports plans. At the other extreme. They claimed that there was no need for such regulation since airports are adequately regulated by their own national governments and EC competition law. the European Commission eventually decided to withdraw the proposal in December 2001 (ACI-Europe. and the maintenance of standards of service. The degree of control varies considerably at different airports. However after the proposal was blocked by the Council of Ministers for various political reasons. In choosing the most suitable regulatory system. 112 . and a further 16 per cent of airport operators determined their charges independently. For the remaining countries. consideration has to be given as to the best incentives to encourage appropriate investment. This has resulted in new regulatory frameworks being established at a number of airports. the ICAO reviewed the situation at 76 member countries throughout the world. While the regulatory systems at different airports vary. 2002a). Fifty-seven per cent of countries stated that charges were determined by the airport operator with government approval. By contrast the airlines were more in favour of the proposals (Clayton. Most airports still under public sector ownership usually need to seek government approval before changing their charging level or structure. there are four key ways in which organization with monopolistic characteristics can be regulated: 1 rate of return (ROR) regulation. it may be the government’s responsibility to set charges – perhaps after receiving recommendations from the airports. Elsewhere. the European Commission does still wish to harmonize policies related to environmental and security charges and eliminate other differences between charges which are seen as discriminatory and contrary to the articles of the Treaty of Rome such as the domestic: intra-EU service differentials and volume discounts which have already been discussed. In Italy. the government was directly responsible for setting the level of fees to be charged (ICAO. as is the case at Brussels airport. In some cases this may be just a formality. A considerable amount of effort was exerted by all interested parties in discussing the proposals – especially related to how to define cost relatedness. the level of charges may be automatically linked to the consumer price index. 2 price cap regulation. what costs should be used as a basis for charge setting and the whole issue of self-financing. This has involved using regulatory authorities which are already in existence or creating new bodies specifically for this purpose. there can also be some kind of control at a national level. airport fees are considered as taxes and there are actual laws associated with them. In general. A suitable review process also has to be established. 1997).

Costs which are beyond the control of the company can be excluded from the regulation: Price cap CPI X Y where Y is the external costs. Typically. the formula will be adjusted for inflation and an efficiency factor: Price cap CPI X or RPI X where CPI is the consumer price index. individual users are permitted to set up alternative contracts with the airport operator outside the price cap condition if both parties are agreeable. Thus. Since there is no cap on the profit levels. The ROR mechanism. 4 reserve regulation. However. and X the efficiency gain target. RPI the retail price index. Such a method tends to be simpler to administer as companies can change their level or structure of prices as long as they still conform to the price cap without any justification from the regulator – which would be the situation with the ROR system. to regulate natural monopolies. The aim is to prevent regulated companies from setting prices that bear no relation to costs. were privatized (Helm and Jenkinson. In spite of this shortcoming. unlike the ROR method. is the traditional mechanism which has been used extensively. While such a system can ensure that the prices are related to costs. A certain rate of return is established and price increases can only be justified when an increase in costs is incurred. 113 . Such a system can also encourage over investment. argue that price cap regulation is not actually an effective alternative to cost-based regulation since the regulator will take into account the rate of return of the company. or so-called cost-based or profit control regulation. any efficiency gains which the regulated company can make in excess of the required X will directly benefit the company. planned investment and the competitive situation. when setting the price cap. It works by establishing a formula which provides a maximum price which can be set. alternative regulatory systems have been sought. This type of regulation was considered to be more favourable as it can provide the regulated company with incentives to reduce costs while simultaneously controlling price increases. The operator will be guaranteed a certain rate of return irrespective of efficiency. it provides no incentives to reduce costs. Opponents to such a system. To overcome these shortcomings. price cap regulation began to be used – for example. A ‘default’ price cap system works by having a price cap which is available to all users. forms of price setting and any specific infrastructure developments. 1998). the regulated company may still have an incentive to overstate the capital expenditure needed. Cost inefficiencies can be built into the cost structure which can be passed on to the consumers through increased prices.The airport–airline relationship 3 default price cap. for example. in the United Kingdom where a number of the state utilities such as gas and electricity. as well as other factors such as operational efficiency. Independent arrangements could therefore be established relating to levels of service quality. In the 1980s. price cap regulation has been the most popular approach adopted for privatized airports. in the United States and Australia. which will only be discouraged by careful scrutiny of the regulator. the regulator has to scrutinize carefully the financial operations and development plans of the regulated companies. To ensure that this does not occur. however.

with so-called ‘shadow’ reserve regulation. This may encourage growth and have the effect of increasing congestion and delays at the airport. 2001). when commercial activities are used to reduce aeronautical charges. In this case it is the threat of regulation. The single till principles were traditionally accepted by the ICAO in its charging recommendations (ICAO. the X factor is established by just considering the aeronautical revenues and costs rather than the total airport operation. The rationale for the single till is that without the aeronautical activities. the single till principles will tend to pull down airport charges. As traffic increases. Sometimes. This is a difficult task because of having to allocate many fixed and joint costs between the 114 . and focuses on the monopoly aeronautical airport services. namely the single till approach when all airport activities are included.Managing Airports Any users wishing for a different level of service could. However. there would be no market for the commercial operations and hence it is appropriate to offset the level of airport charges with profits earned from non-aeronautical facilities. 2000g). By contrast. for the airport regulator the setting of the price cap will be a complex process which will involve a thorough investigation of both the aeronautical and non-aeronautical areas of operation. 2000c). 2001). are widespread. This is the justification which the airlines use in favouring such a system which is clearly likely to bring the lowest level of actual charges for them (IATA. This process could also allow for direct contracting for terminal facilities or up-front payment for specific facilities. There are two alternative approaches. 2001). negotiate this with the airport operator. In this case. the airport industry argues that using commercial revenues to offset aeronautical fees prevents these revenues from being used to help finance capital investment. which is used to provide an effective safeguard against anti-competitive behaviour (Toms. Bringing down the airport charges for such scarce resources makes no economic sense. The busiest. 2001a). A further type of regulation is the ‘light-handed’ approach or reserve regulation. 1992). With the single till concept growth in non-aeronautical revenue can be used to offset increases in aeronautical charges. Here the regulator will only become involved in the price-setting process if the airport’s market power is actually abused or if the company and its customers cannot reach agreement. When airports are regulated using price caps. These contracts could have different duration for different users. European Commission. or to aid the development of better commercial facilities. Yet it is these airports which need to manage their limited capacity the most. There is less incentive to develop commercial operations to their full potential (ACI. 2000a. and the dual till approach when just the aeronautical aspect of the operation are taken into account. decisions have to be made as to which airport facilities and services are to be considered under the pricing regime. some major concerns about this approach have been voiced (Starkie. in theory. there may be a predetermined regulatory model which will become effective at this stage. 2001. Therefore. Such an approach has yet to be used but would clearly lessen the direct regulatory involvement (CAA. Within the airport industry such single till practices. most congested airports are likely to be in the best position to significantly offset commercial revenues against airport charges. In addition within Europe the airports argue that a single till approach is contrary to the European Commission’s White Paper on European Transport Policy which advocates the user pays principle (ACI-Europe. the dual till concept treats the aeronautical and non-aeronautical areas as separate financial entities. In addition. rather than actual regulation.

2000 c). As a result of the fierce debate of the merits of the single versus dual systems in recent years. the regulator must also decide how the ‘price’ element of the formula is to be set. the weighted average price of a specified ‘basket’ of tariffs or charges will be allowed to be raised by CPI X. Alternatively.The airport–airline relationship aeronautical and non-aeronautical areas. In general the tariff basket approach is considered to give airports greater incentives to move to a more efficient pricing structure (Monopolies and Mergers Commission. such as inflating the asset base. in theory. There has been some debate. 2001). This could lead to the setting of some charges below the marginal costs of the corresponding services. 2000). With the revenue yield methodology. It is common practice to set the price cap in relation to the average costs. With the tariff basket definition. Companies might. ICAO amended its guidelines on charging in 2001 and states that it may not always be appropriate to use commercial income to offset airport charges (ICAO. This would mean that the regulatory control would be independent of any company action inappropriately influencing the key variables used in the regulatory formula. The method does. however. the subjective nature by which some of the associated problems are overcome and the lack of general consensus as to the optimal method of benchmarking (see Chapter 3). The revenue yield formula means that the predicted revenue per unit (usually passengers. Kunz and Ng. and their relative strengths have been fiercely debated by regulators and the industry. estimating investment costs or assessing the scope for efficiency and service quality improvements. benchmarking could be used much more as a cross-check to internal methods of setting the price. CAA. This has already been used by the utility regulators for both England and the Netherlands (Burns. however. additional costs related to improvements in the quality of service and a reasonable rate of return. The main choice is whether to use a revenue yield or tariff basket methodology. Industry best practice could. be encouraged to put the largest increases on the faster growing traffic since the weights used in the tariff basket are from a previous period. an artificial incentive may be created to increase passengers to inflate the denominator in the definition. however. 2000. unlike with the single till approach when any development in the commercial areas may well be accompanied by a reduction in aeronautical charges. replace an assessment of accounting costs as the basis for setting the price cap. 1997. 1996). 2001b). in the case of airports) in the forthcoming year will be allowed to increase by the CPI X or RPI X percentage. The tariff basket approach tends to be simpler since it operates directly on charges and is independent of any forecasts. At the London airports it was calculated that the transfer from a single till to a dual till approach could mean that airport charges would have to be increased by 35 per cent (Monopolies and Mergers Commission. There is also the fundamental issue that such an approach assumes 115 . Clearly there is a major logical argument in not including commercial activities within the regulatory framework since they cannot be considered as monopoly facilities. 2000 d. In addition to establishing whether a single or dual till approach is to be adopted. Both methods have their drawbacks. as to whether industry benchmarking could have a much more active role in this process (CAA. The adoption of such ‘regulatory benchmarking’ is fraught with difficulties because of the extensive problems of comparability associated with such an exercise. which will include consideration of any proposed investment programme. provide airports with incentives to develop the commercial side of their business which effectively are uncontrolled.

The other smaller regional airports do not have direct price control as they are not considered to have sufficient market power to warrant this. This could be overcome. The price cap is reviewed every 5 years after an extensive assessment of the airport’s operations. the operator could be able to soften the blow of the price control. the approach has tended to drift 116 . Another area of major concern within any regulatory framework is often the quality of service (as discussed in Chapter 4). Over the years. high costs are in fact the result of inefficiency. When the regulation does not formally establish service standards or require an appropriate quality monitoring system.Managing Airports Table 5. 2002a). whereas in reality they may be due to a number of other factors.5 summarizes the airlines views about the airport regulation. financial performance and future plans has been undertaken. all regulatory requirements. Regulation examples In the United Kingdom. The airlines are. Only a very detailed assessment of the benchmarking data may be able to identify these factors (Shuttleworth 1999. The default price cap mechanism can. in theory. Table 5. as outlined in Chapter 4. More generally. In reducing the service standards at the airport. At BAA airports service quality comes under close scrutiny during the review process. should only be agreed after close consultation with the airlines and there should always be an independent review process. 2000). although there are no explicit regulations until 2003. The review of service quality at London airports has played a major role in encouraging airports to consider entering into service-level agreements with their customers. In practice. both BAA plc London and Manchester airports have been subject to single till price cap regulation since 1987–8. In Australia. argue the airlines. understandably. in theory.5 IATA’s criteria for airport economic regulation 1 2 3 4 5 6 7 The starting base charges to be set at an acceptable level Airlines to share the benefits of traffic growth and improved productivity Commercial revenues to be taken into account All charges to be regulated The regulation to be transparent and simple to understand and administer An effective and meaningful consultation process must be established There must be an independent regulatory review process Source: IATA (2000). by ensuring that there are measures of congestion and delays to assess the adequacy of the airport facilities and by assessing passenger and airline feedback to determine the operational efficiency of the airport. defining service dimensions and attempting to adopt a standardized quality level is extremely difficult – particularly given the different expectations of different types of airlines and passengers. the initial regulatory framework which was set up when the airports were privatized included some formal service quality monitoring and reporting. in favour of some formal regulatory process to guarantee that service levels are maintained (Competition Commission. overcome some of these problems. there may be little incentive for the airport operator to optimize quality.

being RPI 1 (Table 5. Source: Centre for the Study of Regulated Industries (1999). At Manchester. Instead. Initially 75 per cent of costs were permitted to be passed through with this percentage rising to 95 per cent after the first 5-yearly review. During the second 5-year review period in the early 1990s the price cap was far more restrictive. 2002). At Manchester airport. The revenue yield method has been adopted at these airports. These airports could allow most increases in security costs to be passed straight through to the airline.The airport–airline relationship much more closely to a ROR method with very detailed consideration of the asset base and cost of capital – which tends to be one of the shortcomings of the price cap approach. 117 . A major impact of this single till regulation at the London airports has been that the commercial aspects of the business have been considerably expanded which has simultaneously led to a substantial reduction in real charges to airline users. Table 5. It is the Competition Commission which undertakes the detailed review of the airports’ operations every five years which then offers advice to the CAA concerning the most appropriate level of price control.6). the abolition was considered when setting the value of X. namely the Civil Aviation Authority (CAA). a compensatory 15 per cent increase in charges over two years following abolition of sales was allowed. particularly for the London airports. The regulation process is somewhat complex because there are two regulators involved. Initially the price cap was the same at all airports. airport changes still remained comparatively high which is one of the key reasons for the more restrictive price cap for the 1998–2002 period. There is the sector regulator with detailed knowledge of the aviation industry. the two bodies have not always been in agreement. and the Competition Commission (previously known as the Monopolies and Mergers Commission) which is a very experienced more general trading regulator. For 1997–2002. in the 1991 review of BAA they had very different views on assumptions concerning the cost of capital which led to substantially different values of ‘X’ in the pricing formula being suggested until a compromise was eventually reached (Toms.6 The ‘X’ value used for the UK airport price caps Airport X value (%) 1987–91 1 1 1988–92 1 1992–3 8 8 1993–4 3 1994 4 4 1995 3 1995–6 1 1 1996–7 3 1997–2002a 3 1 1998–2002 5 Heathrow and Gatwick Stansted Manchester Note: a The normal 5-year charging period was extended to 6 years because of the timing of decisions related to the possible development of Terminal 5 at Heathrow. For example. the London airport formula did not take account of the loss of EU duty. Whilst the skills of these two regulators should be complementary. The CAA then makes the final decision on the price cap after consultation with the industry and other interested parties.and tax-free sales in 1999.

2002). Cork. 2002). A considerable debate occurred related to the merits of the single versus the dual till (CAA.9 per cent suggested by the Competition Commission which the CAA felt could damage Manchester’s service provision and overall development as well as the emerging competition from other airports (CAA. 2003a). At Vienna airport. 6. 2001. 6. For 2001–02 and the following 4 years X values of 7.5 per cent to take account of £7.Managing Airports The latest review of BAA and Manchester took place in 2002 for the years 2003–8 and again there were some significant differences in views between the two regulators. However this price cap was lower than the 8. 2003). When there is a loss in traffic or no growth. price cap regulation. Other airports which have adopted a similar price cap regulatory mechanism include those of Argentina and South Africa. the CAA recommended a dual till approach to reduce the scope of regulation to just the core monopoly activities. Hamburg airport also uses a sliding scale related to traffic growth with a dual till price cap regulatory system (Niemeier. The 118 . A number of the other privatized airports have a more relaxed regulatory regime. In Copenhagen. respectively.b). with different limits related to off-peak periods and cargo. In Ireland also. Initially. a price cap of RPI 5 per cent was set which reflected the higher charges at this airport and the extra capacity because of the additional second runway. Above growth of 11 per cent.4 per cent. The initial regulatory framework for the privatized Australian airports was fairly similar to that adopted by the UK airports. There is a sliding scale which protects revenues when there is slow growth. 2002a. These airports are owned by the public sector Aer Rianta company which has considerable market power and handles over 97 per cent of all passenger traffic in Ireland (Hogan. However. prior to the Competition Commission’s review. 0.b). 2002a. in that there was a CPI X formula which also had a security element – but in this case 100 per cent of the charges were allowed to be passed through to the airlines and a dual till was adopted. while requiring productivity gains to be made when traffic growth is high. At Manchester. 1998). and 1. and Shannon (Commission for Aviation Regulation. was introduced in 2001 (and subsequently revised in 2002) for the airports of Dublin. If the growth is between 7 and 11 per cent. the price cap was set at RPI 6. 2000b). The regulation is applied directly to the charges. eventually the CAA decided that the single till should be retained – as this was the approach favoured by the Competition Commission and the users (Competition Commission.4 billion investment needs (particularly Terminal 5) whilst at Gatwick and Stansted it was set at equal to RPI (CAA. a slightly different approach has been adopted taking into account both inflation rates and traffic growth patterns. the charges can be increased in line with the CPI. 2003b). In the first 2 years after private participation in the South African airports. were set. When the annual traffic growth is up to 7 per cent the sliding scale is used with the permitted charge increases being less than the CPI. the charges must decrease (WDR. for instance. For Heathrow. It was also decided that at all the airports there should be rebates for users if certain service quality standards were not achieved. aeronautical charges were allowed to increase at the same rate as inflation before an X value to increase efficiency was introduced. there is a set of guidelines which stipulates that the company is allowed to alter its charges in line with costs subject to the company ensuring that it continues to improve the efficiency of its operation.7. no increase is allowed. to provide better use of existing scarce capacity and to enhance incentives to deliver capacity additions particularly at the congested London airports (CAA.

e.0 3.0 5. reserve regulation) was the fact that the price 119 . As a consequence in October 2001. X value was set with reference to a number of factors including traffic growth and. 2001 and the collapse of Ansett. but the Australian regulatory framework had more formal conditions relating to relating to airport access and quality of service monitoring which did not apply to the UK airports. It was recommended that price regulation should be replaced by a much more lighted handed price monitoring or surveillance approach although the price control could be re-introduced if the airports abused their pricing freedom.The airport–airline relationship Table 5. Perth. The Australian airports used the basket tariff rather than the revenue yield approach. was larger for Brisbane than for Melbourne because Brisbane had higher forecasts (Table 5.7). and Brisbane the price caps were adjusted upwards which allowed the airports to substantially increase their charges.5 1.0 2.5 1. the price cap was set for an initial 5 years. the Australian Productivity Commission was required to undertake a review after it had been in force for 5 years. Amongst some of the arguments used to support this change in regulatory approach (i. The final report of the Commission was published in 2002 (Productivity Commission.7 The ‘X’ value used for the Australian airport price cap for 5 years after privatization in 1997–8 Airport Adelaide Alice Springs Brisbane Canberra Coolangatta Darwin Hobart Launceston Melbourne Perth Townsville X value (%) 4.0 4.0 4. The problems of inadequate investment under such regulation were also recognized and so provision was made for an upward adjustment to the price cap if approved investment was undertaken. for example. 2002). Under the regulatory system.5 3. the Australian government suspended the price regulation at all but the four largest airports. particularly the requirement of detailed and cumbersome regulatory intervention if investment was planned and overall profit volatility. Australia’s second largest domestic airline.5 4. This price regulation of Australian airports was identified as causing a number of problems. These problems became acute with the events of 11 September.0 Source: Australian Competition and Consumer Commission (1998).0 3. 2002 a). The only major airport which was not controlled in this way was Sydney airport. which was not privatized when this regulation was introduced and was subject to a rate of return type of regulation which just involved the surveillance or monitoring of prices rather than more restrictive price control (Forsyth. As in the United Kingdom. Price surveillance was maintained at Sydney airport and at Melbourne.

It is argued that most of the current regulatory systems are time-consuming. attention has been focused on more short term solutions to provide some relief for the shortage of capacity both by consideration of capacity or supply-side 120 . the cost of regulation when BAA underwent its regulatory review in 1996 was estimated to be $US9. For example. 2002a). bureaucratic. a somewhat different development has occurred in New Zealand where the two main airports of New Zealand. physical. where the abuse of market power was not considered to be such an issue (National Economics Consulting Group. Mackenzie-Williams. while timely capacity addition might provide a solution to this problem. particularly runway capacity. 2001. namely Auckland and Wellington. and costly. However. 2001 and other events eased this pressure slightly at a number of airports but only for a short time. This was not recommended for Christchurch and Wellington. Theoretically. for example. Elsewhere. Moreover. It is also claimed that the risks of abuses of market power are minimal and can be adequately addressed either through litigation or national competition law. had produced poor financial results for the airports and was unnecessary as commercial pressures would ensure that the airports would not abuse their market power. There has in fact been considerable debate within the airport sector over the last few years as to which is the most optimal method of economic regulation to use. For the 2002 review BAA had 12 people working on this full time for 3 years and they produced over 700 different papers. 2002). There is a view that given the fact that airports are operating in an increasingly competitive environment that they should no longer be considered as monopoly providers and consequently in the future more governments will move towards a more reserved or light-handed approach.4 million (Mackenzie-Williams. The legislation also called for the regulator to conduct periodic reviews to assess whether price controls were necessary. the Scottish airports in the United Kingdom are examples of reserve regulation practice and the Bolivian airports are a rare case of airports which are subject to shadow pricing. (Forsyth. The temporary relaxation of the pricing controls was subsequently made permanent and the airports have moved to a reserve regulation system. this light-handed approach led to much conflict between the airport operators and users regarding the level of charges particularly at Auckland airport and in 2001 it was recommended that price control should be introduced at Auckland airport. of using a single till approach at congested airports which may well give wrong pricing signals or with the difficult cost allocation decisions which have to be made should the dual till approach be adopted (Starkie. it is asserted that economic regulation can bring its own economic distortions with the problems. The significant downturn in traffic in 2001 and 2002 due to the events of 11 September. 2002a). however. in many cases environmental. The privatization legislation allowed for these airports and Christchurch airport to review their charges every three years but they are not subject to any formal price regulation. Slot allocation The steady rise in air traffic in most recent years has put increasing pressure on airport capacity. Interestingly. 2002 b). Instead. throughout the world. or financial constraints have meant that in practice this has not been a feasible or desirable option. were partially privatized in 1998.Managing Airports cap system had been costly to administer.

which number over 260. Between 1990 and 1999. and thus provide for incremental increases in traffic. The most recent IATA scheduling guidelines use level 1. This is as long as the airline operates 80 per cent of the flights – the so-called slot retention requirement or ‘use it or lose it’ rule. however. Airport slots are usually defined as an arrival or departure time at an airport – typically within a 15. the number of fully co-ordinated airports increased by 121 . Currently. and terminal capacity that is needed and the share of environment capacity which is used (PricewaterhouseCoopers. As already discussed. In a climate of growing environmental opposition to new developments. which manages the slot allocation process. Demand management techniques consider the most appropriate mechanisms for allocating airport slots. have to use its slots for the same services each year and can switch them. The airline does not. This is obviously not helped by the widespread acceptance of the single till concept which can pull down the level of charges to below that of the cost of supply (Starkie.The airport–airline relationship approaches and by the assessment of demand management options. however. Thus the slot would not only be defined by a time period for arriving or departing. gate. For example. and 3 classifications for fully co-ordinated. between domestic and international routes. but also by the stand. Alternative slot allocation procedures have to be considered at airports because the pricing mechanism fails to balance demand with the available supply. 2. These airports. These voluntary conferences of both IATA and non-IATA airlines are held twice a year for the summer and winter season with the aim of reaching consensus on how schedules can be co-ordinated at designated capacity-constrained airports. in all parts of the world except the United States the mechanism for allocating slots is industry self-regulation by using IATA Schedule Co-ordination Conferences. This means that any airline which has operated a slot in the previous similar season has the right to operate it again. Each of the fully co-ordinated or level 1 airports has an airport co-ordinator. schedules facilitated and non-coordinated airports. are designated at two levels: 1 Schedule facilitated: demand is approaching capacity but slot allocation can be resolved through voluntary co-operation. Supply-side options aim to make more efficient use of existing capacity by improving ATC services and ground-side facilities. There is a view. that the definition of a slot should be more broadly defined to take account of all the resources necessary to operate at the airport. They are different from ATC slots which are takeoff and landing times assigned to the airline by ATC authorities. traditionally the national airline of the country. the current level of charges at airports and peak/off-peak differentials when in existence have a relatively limited impact on airline demand. The most important of these procedures is ‘grandfather rights’. such solutions may be politically more acceptable. 2 Fully co-ordinated: demand exceeds capacity and formal procedures are used to allocate slots. 1998). for example. Peak charges would have to be considerably higher to ration demand or to be the equivalent to the market-clearing price needed to match supply and demand or ‘clear the market’. priority would be given to an airline which plans a daily service rather than one which is less than daily or a service which operates throughout the season rather than only in the peak. Preference is also given to airlines which plan to use a slot more intensively to make the most effective use of the capacity. 2000).or 30-minute period.

Managing Airports 18 per cent. Tegel. For example. The IATA system developed primarily as a process to co-ordinate schedules and to avoid unnecessary congestion. Ciampino Amsterdam Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Portugal Spain Dublina Sweden UK Stockholm – Arlanda London – Heathrow. whereas the EU regulation has other key objectives such as making the most efficient use of capacity and encouraging competition. Over 60 of the fully co-ordinated were in Europe. This airport is the only major airport to be coordinated although there are a number of other medium-sized airports which fall into this category. In 2000. namely non-coordinated. In 1999 there were 120 fully co-ordinated airports with more than ten others being fully co-ordinated in the summer months only. b 122 . Stansted Manchester Faro Lisbon Barcelona Las Palmas Madrid Malaga Palma de Mallorca Stockholm – Bromma London – Luton Notes: a Brussels and Dublin changed to fully co-ordinated in 2000. 2000. Linateb Rome – Fiumcino. coordinated (comparable Table 5. the EU rules are a legal requirement. However. Source: PricewaterhouseCoopers. slot allocation comes under the regulation number 95/93 which was introduced in 1993. Many US airports are also capacity constrained but do not come under the IATA Scheduling Committee mechanism (ICAO. While the IATA co-ordination system is voluntary. Malpensa. Schonefeld Dusseldorf Frankfurt – Main Munich Athens Thessalonika Milan – Bergamo. Orly Berlin – Templehof.8 Slot co-ordination status of major airports in the EU Country Fully co-ordinated airports Non-coordinated airports Vienna Brussels – Zaventuma Copenhagen – Kastrup Helsinki Paris – Charles de Gaulle. 2000 c). with a further 30 in Asia Pacific and 10 in Africa. Gatwick. there are three levels of capacity constraints or co-ordination. Around 80 airports were schedule facilitated. while for schedule facilitation or level 2 airports there was a higher growth of 63 per cent. many of the IATA features have been incorporated into the European law. Milan Linate was co-ordinated having switched from fully co-ordinated when the new Milan Malpensa airport was opened. Within the EU.

In other countries such as Portugal and Greece where slot allocation is the responsibility of the main home carrier. such as Denmark. France.8 shows the co-ordination status of major airports in the EU.9 Key features of the 1993 EU slot allocation regulation Slots are allocated on basis of historical precedence or ‘grandfather rights’ Airlines must use slots of 80% of time – ‘use it or lose it’ rule There is a slot pool for new or returned slots 50% of slots in the pool are allocated to new entrants Certain slots can be ring fenced if they are vital for social or economic reasons Airports are non-co-ordinated. In 2000. The European legislation (Table 5. it is generally recognized that a ‘grey market’ in slots already exists. there were 13 co-ordinated and 57 fully co-ordinated airports in the EU (PricewaterhouseCoopers.The airport–airline relationship to the IATA schedule facilitation airports and fully coordinated airports) and each of the airports uses an airport co-ordinator. Italy. The grandfather rights system is used with an 80 per cent slot retention requirement although this ‘use or lose it rule’ was temporarily suspended after 11 September. In order for an airport to become co-ordinated. 2001 since airlines dropped routes because of the sudden downfall in traffic but did not want to lose their historical slots. the Netherlands. Table 5. aims to encourage new entrants. Airlines are allowed to exchange slots with other airlines but not to trade slots. thus enabling the process to be more transparent and impartial. Sweden. the European Commission has been exerting pressure for a change to a more independent situation.9). In reality. co-ordinated or fully co-ordinated Co-ordination status is defined after capacity review and consultation An independent co-ordinator supervises the allocation of slots Source: European Commission (1993). such as the London airports. An important difference with the European regulation is that the co-ordinator must be independent of all airlines at the airport. In a number of countries. and the United Kingdom. New entrants are defined as airlines with less than 4 per cent of daily slots at an airport or less than 3 per cent of slots in an airport system. They are also airlines which have requested slots for a non-stop intra-EU service where two incumbent airlines already operate. Table 5. which are clearly disadvantaged by the grandfather rights system. 1999). an independent company has been established. Under certain conditions. 2000). by giving them preference of up to 50 per cent of any new or unused slots. 123 . slots may be reserved for domestic regional services or routes with public service requirements – so-called ‘ring-fencing’. as with the IATA mechanism. the legislation theoretically requires that a thorough capacity analysis and consultation process must take place. In practice this has rarely occurred primarily because many of the airports were already fully co-ordinated under the IATA system or perhaps because of some legal constraint such as a limit on aircraft movements at Düsseldorf airport. Within this context an interesting decision was made in 1999 by the UK High Court when it ruled that the financial payment from BA to Air UK to ‘compensate’ for the exchange of some highly demanded slots with some less attractive slots did not invalidate the exchange (Financial Times.

should be regarded as long-term concession rights at airports. Other suggestions are that slots. Priority could be given to airlines which cause the least noise nuisance. encourages claims of ownership by the airlines. These rules restricted assess to charter. which normally have less flexibility in scheduling than short-haul flights because of night closures and other constraints. rather than being considered as a right in perpetuity. partly because few new slots become available and partly because the definition of new entrant is very limited. Another suggestion is to give priority to larger aircraft which make the most efficient use of slots. As a result any such system will again share the shortcomings of the traditional system. airports maintain that they have created and own the infrastructure which enables slots to exist. There are also a number of issues related to the current structural changes taking place in the airline industry. In reality airlines do view slots as a financial asset which are taken into account whenever airline purchases or mergers take place. Various regulatory suggestions have been put forward such as giving preference to long-haul international flights. Scheduled airlines could be favoured over charter airlines and passenger aircraft could have preference over cargo airlines. just granted usage rights. especially within Europe. While such mechanisms can be useful in pursuing some economic.Managing Airports Alternative slot allocation mechanisms The current scheduling committee system is widely accepted and has succeeded in providing a stable environment for allocating slots. There are a number of examples of purchases. which have to be handed back after a certain period of time. or environmental objective. namely in not ensuring that the scarce runway slots are used by those who value them the most. historically giving airlines the rights to use slots for long periods of time. Critics claim that this procedure gives no guarantee that the scarce airport capacity is used by the airlines who value it most highly. social. On the one hand. the grandfather rights system. and so the airlines are. 1999). when BA bought Cityflyer Express based at London Gatwick. Therefore. For example. frequency caps could be placed on certain services once a daily maximum limit has been reached. to manage the scarcity of slots or encourage competition. There is no legal sense in this. they are still likely to be used in combination with grandfather rights. it provides no guide to future investment requirements and is administratively burdensome. the issue of who actually owns the slot is clearly very crucial. On the other hand. Most new entrants are still prevented from competing at airports. there is considerable concern – as pressure on runway capacity continues – that it may not be the most effective mechanism. Within this context. This could potentially have an environmental benefit by switching short-haul traffic from air to surface transport. can a franchise partner gain slots by claiming to be a new entrant with the result of effectively increasing the number of overall slots for the larger incumbent carriers for which it is operating? Should some slots held by airlines in alliances be given up and reallocated to new entrants for competitive reasons? There have been lengthy debates discussing whether a better system could be introduced (Reynolds-Feighan and Button. market-based options have also been considered. general aviation and cargo flights – although the charter rule was subsequently relaxed in 1991 (Doganis. for example. However. Alternatively. in effect. 1992). The traffic distribution rules imposed at London Heathrow airport in the 1980s were an example of such administrative regulation in practice. and the most important financial asset 124 .

In 2001. Slots obtained at one end of the route might not match up with those at the other end and in general there would be a great deal of uncertainty. It is difficult to quantify the value of a slot but the ‘slot exchange with compensation’ between BA and KLM UK provides some guide. Then there could just be a system of slot trading when airlines are able to buy and sell slots – so-called secondary trading. selling the slots rights in perpetuity and then any further changes would have to be implemented through slots actually being traded. Such a mechanism. 1993). the marketclearing price would have to be set at a considerably higher rate that is the current practice with airport charges. 2001). particularly since there has been very little evidence that this regulatory process has encouraged competition or lessened the influence of the major flag carriers at the airports. as previously discussed. At the same time. Following the introduction of the European slot allocation regulation in 1993. This might potentially overcome the anti-competitive problem caused by slot trading but in practice could cause havoc with airlines’ schedules and be very disruptive.. An alternative suggestion is to use the auction mechanism or so-called primary trading as a means of allocating slots. but this would clearly lead to considerable upheaval and disruption for both airlines and passengers. slots allocated under long-term lease agreements could be an attractive compromise. It was revealed that BA had paid around US$25 million for eight daily slots – thus representing around US$3 million per slot (O’Toole. Boyfield et al. the European Commission has been considering whether a better system of regulation could be introduced. 2003). however. 1992. only based on the views of the UK industry. airports and slot co-ordinators about secondary trading and concluded that such a system offered a real potential to improve the efficient allocation of scarce airport capacity and that it had widespread support in the industry (CAA. This study was. The merits of such a system is that airlines that value the slots the most can buy the slots. Individual slots or a combination of slots could be auctioned at one particular time (Jones et al. At the other extreme there could be just one auction. These auctions could be held every 6 months like the scheduling committees. Officially airlines have so far been prevented from such processes. After a long period of review and consultation. Any such process would also have to be seen as non-discriminatory to comply with international obligations. would be bound to favour the large incumbent carriers as they would be the airlines most able to afford to buy the slots.The airport–airline relationship of the airline being purchased was considered to be its slots. There is also the issue as to whether it is appropriate for existing slot holders to make windfall profits from slots for which they never actually bought (Doganis. A detailed study of primary trading and the feasibility of different options was undertaken in 2001 for the UK government (DotEcon. however. 1998). the UK Civil Aviation Authority consulted airlines. Somewhere in between these two options. except with the case of four US airports (see ‘Slot allocation’ in ‘The US experience’ section). This is hardly surprising given that the European regime has largely maintained the grandfather rights system. More recent sales have suggested that the value of a slot at Heathrow is in the region of £50 per passenger (Andrew. 2001c). However. Alternatively lotteries for slots could be held. 2003). The simplest of all market-based options is the use of the airport charging mechanism to match demand and supply. delays and congestion at many European airports has increased. the European Commission put forward some proposals in 2001 which were passed by the European Parliament in 2002 and by 125 .

One of the problems with the consideration of slot allocation processes is that often there are too many conflicting objectives. Ground handling issues Ground handling activities at airports are very important to airlines. rather than adopting just a single mechanism. Ground handling services cover passenger handling. which have been heavily involved in such activities.Managing Airports early 2003 were subsequently waiting for approval from the Council of Ministers. it may be feasible to focus on competition but that may cause sudden disruption in schedules. Rome. The proposals confirmed that slot trading was not allowed but in the more radical long-term plans suggested that this method could be an option. They recommended that there should be financially independent co-ordinators at each airport and that there should be better enforcement of the slot rules. 126 . as has been proposed for the EU. In other cases. but it will always tend to favour the large incumbent airlines. (Den Braven. any new system is likely to use a combination of the different approaches. these services are provided by the airport operators. often the national airline or airport operator may have had a monopoly or near monopoly in ground handling. freight and mail handling. first. as well as other aspirations. which covers activities such as aircraft loading and unloading. The proposals were divided into two parts. in the near future at least. Historically. Some airport operators such as Milan. Likewise. Slot trading may ensure that slots are allocated to those who value the slots the most. Another new feature was consideration of environmental constraints with the possibility of higher priority being given to larger aircraft size or lower priority to services where surface alternatives existed. This was by far the most contentious issue. and Frankfurt airports. Therefore. The technical proposals covered a number of different areas. it may be possible to protect certain routes through ring-fencing but this may not produce the most effective use of the scarce runway slots. An attempt was made to clarify the legal status of slots by defining them as ‘entitlements’ or ‘rights of usage’ rather than property to be owned. it seems most probable that. and airside or ramp handling. They impact both on an airline’s cost and the quality of service which they provide for their passengers. Such activities are often divided between terminal or traffic handling. baggage handling. although at most airports they are provided by airlines or handling agents. But are these two aims. Countries in Europe where the national airline has had a handling monopoly include Spain with Iberia and Greece with Olympic. 2003). earn very significant revenues from such activities – sometimes over half the total income of the airport. The proposals also recommended the retention of grandfather rights and the ‘use it or lose it’ rule but suggested that the new entrant threshold should be raised to 7 per cent. fuel and oil handling. Frequently quoted aims are often to make the best use of existing resources while at the same time encouraging or enhancing competition. really compatible? For example. which is passenger check-in. ramp handling. A report looking at slot trading for the European Commission was due to be completed in 2003. and aircraft services and maintenance. cleaning and servicing. the airport operator will just earn rental fees and perhaps a small concession fee from the airlines or agents which are providing the handling services. Vienna. some immediate technical amendments to the existing regulation and second some more long-term aims. Sometimes. baggage and freight handling.

which provides for phased liberalization of ground handling services.The airport–airline relationship A study of European airports showed 44 per cent of aircraft movements were handled by airport operators. 1994). such as at Frankfurt and Vienna airports. 1999). 1997). The details of the directive.10. reducing service standards (Bass. Moreover. particularly for ramp handling would merely duplicate resources. only 16 per cent were handled by the airport operator. It was also unclear as to the level of implementation of the Directive within Europe and certainly the speed at which the Directive was incorporated into national legislation varied quite considerably. This has resulted in the EU’s adoption of the ground handling directive 96/67. such as Düsseldorf have been more successful. it is far easier to have a number of airlines providing traffic handling rather than ramp handling – given capacity constraints of the equipment and space in the ramp handling areas. Critics of the situation. Many supporters of ground handling liberalization are concerned that such conditions are only prolonging the existence of monopolies at airports. Frankfurt airport was one such company but only gained exemption from competition in ramp handling in certain areas. 7 per cent were handled by independent ground handlers. By 2002. in terms of passenger numbers. A study in 1997 of airline turnaround costs at a number of European airports commissioned for the AEA found that the nine most expensive airports all had ramp handling monopolies whereas the next 14. By contrast. The directive does allow for service providers to be limited in the ramp area. in some cases. delayed until 2000. in descending order of price. For operational reasons. The longterm purpose of this directive is to end all ground handling monopolies and duopolies within the EU by opening up the market to third party handlers. particularly the airlines. recognizing the right of airlines to self-handle and guaranteeing at least some choice for airlines in the provision of ground handling services (European Commission. Providers of monopoly services claim that providing competition. Within Europe many have argued that air transport cannot be fully liberalized unless the ground handling activities are offered on a full competitive basis. A number of monopoly handlers in countries such as Germany have applied for such exemptions. are shown in Table 5. 8 per cent were handled by the national carrier for other airlines. In 1993. claim that ground handling monopolies are pushing up prices and. it was too early to assess the overall impact of the directive – particularly since the introduction of the new ramp handler was in many cases. in some exceptional circumstances airports may be granted temporary exemptions on the basis of space or capacity constraints in order to ease the transition from a monopolistic to competitive situation. and the remaining 14 per cent were selfhandled by other airlines. there were complaints at Lisbon airport that although there were two operators at the airport. 1998). again 7 per cent by independent ground handlers and the rest by airlines (Deutsche Bank. particularly at airports which are already at full or near capacity. neither was independent as one was TAP airlines and the other was Pathway which was 127 . the European Commission acknowledged that it had received a number of complaints related to ground handling activities at various airports including Milan and Frankfurt and at the Spanish and Greek airports (Soames. 27 per cent were self-handled by the national carrier. lower efficiency and may also cause considerable apron congestion. For example. There had still been a significant number of complaints and disputes regarding handling services at airports. operated in a competitive situation (AEA. Other airports. 1996).

Frankfurt AGS. owned by Fraport generated $US524 million in 2001 by providing handling at 25 airports in nine countries. related issue. generated over $US892 million revenues and together provided handling services at over 200 airports in 40 countries. 2002 b). To compensate for a lesser involvement at their home airports. these access fees had been successfully challenged in court but they remained at other airports in Europe (TRL. These are not cost related and can be quite large – for example 7 per cent of the handlers’ turnover in Germany. a number of airports such as Frankfurt and Rome have been actively expanding their handling activities at other airports. Airport operators still have the right to perform ground handling but these activities must be separated from their main role as airport operator. Undoubtedly. The impact of airline alliances of the ground handling industry is a very important. there will be a loss of market share to the independent handlers.Managing Airports Table 5. In the future ground handlers at airports may achieve economies of scale by negotiating common contracts with all alliance members rather than by consulting with the individual airlines. 128 . ramp. encouraged by ground handling liberalization and following the trends of internationalization and globalization in both the airline and airport industry. airlines have the right to self-handle for baggage. Other disagreements concerning the handlers’ tender process and selection criteria had also occurred (Barker. 2001. 2003). (Pilling. third party handling is allowed At least one handler must be independent from the airport operator or dominant airlines with more than 25% of the traffic From 1 January 1998 From 1 January 1999 From 1 January 2001 Source: European Commission (1996). majority owned by the airport. Mackenzie-Williams.10 Key features of the 1996 EU ground handling directive Airlines have the right to self-handling for airport terminal services For airports with more than I million passengers or 25 000 tonnes of freight. fuel. Some large international handling agents are emerging through a number of corporate mergers and takeovers. third party handling is allowed For airports with more than 2 million passengers or 50 000 tonnes of freight. Worldwide Flight Services – owned by Vinci which also is a global airport management company – ranked fourth in terms of revenue ($US344 million) with handling services at 100 airports in 20 countries. There had also been unease about the access fees which airport charge for access to the ground handling market. and freight services For airports with more than 3 million passengers or 75 000 tonnes of freight. 2003). Then there is Swissport with revenues of $US668 million and interests at 160 airports in 29 countries. At the Paris airports. for the airports which have previously provided monopoly services. GlobeGround and Servisair merged together in 2001.

A key reason for the existence of these agreements has been because private bondholders have demanded the security of such formal relationship between the airports and airlines before investing in the airport. The use agreements traditionally have been long-term contracts of between 20 and 50 years. they have become shorter to reflect the more volatile. the method by which these are to be calculated and the conditions for the use of both airfield and terminal facilities. or even lease or build total terminals – as in the case of JFK airport in New York. while the compensatory approach is more similar to the dual till approach. The risk of running the airport is left to the airport operator. combining elements of both the residual and compensatory methodologies. is more akin to the single till practice. deregulated environment. A study in 1998 showed that for the large US airports the residual and compensatory approaches were each used by 41 per cent of the airports with the remaining 18 per cent of airports using some kind of hybrid model. compensatory (19 per cent). As a result there has been an increasing use of ‘use it or lose it’ clauses in which the control of assets are returned to the airport if the airline does not use the facilities as intended (Federal Aviation Administration/Department of Transportation. and so they take considerable risk. The anticompetitive nature of such agreements can be a problem if other non-signatory airlines are prevented from gaining access to terminal space and gates. The airports and airlines enter into legally binding contracts known as airport use and lease agreements which detail the fees and rental rates which an airline has to pay. These clauses. therefore. In the United States. The airlines which carry most of the airport’s traffic may also play a significant role in airport investment decisions if they agree to the majority-in-interest (MII) clauses in the use agreement. which are far more common among residual agreements. Airports have applied these two different approaches in various ways to suit their particular needs and some have adopted a hybrid approach. With the residual approach the airlines pay the net costs of running the airport after taking account of commercial and other non-airline sources of revenue. By contrast with the compensatory approach the airlines pay agreed charges and rates based on recovery of costs allocated to the facilities and services that they occupy or use. it is common for airlines to lease terminal space or gates. typically mean that these signatory airlines have to approve all significant planned developments or changes at the airport. In more recent years. 1999). For medium-sized airports the relative shares were residual (38 per cent). Capacity improvements which may bring more opportunities for competition may also not 129 . There are two basic approaches to establishing the airport charges: residual and compensatory. The residual approach. The length of use agreement will normally coincide with any lease agreements which the airlines have with the airport operator. and hybrid (43 per cent) (Federal Aviation Administration/ Department of Transportation.The airport–airline relationship The US experience Airport use agreements The relationship between airports and airlines in the United States is unique and so is worthy of special consideration. The airlines provide a guarantee that the level of charges and rents will be such that the airport will always break even. 1999).

Signatory airlines may pay less. Firstly. US airports do not have passenger charges – although some of the costs associated with terminal and gate space which are normally incorporated into the passenger fee may be covered by airline lease payments. there are also a number of government taxes which push up the total amount paid by the airlines and their passengers. If PFCs are used by large and medium-sized airports then the airports have to forego up to half their AIP funding. There is the air transportation tax. However. there is the Federal Government requirement for ‘fair and reasonable’ and not ‘unjustly discriminatory’ aeronautical fees based strictly on costs (Federal Aviation Administration/Department of Transportation. This latter requirement is one of the major obstacles in the way for any significant developments towards airport privatization in the United States. Secondly airports are prohibited to use airport revenues for non-airport purposes (Federal Aviation Administration/Department of Transportation.5 billion for 310 airports with 164 airports having PFCs at the maximum $4. 1996). Some airports have discarded MII clauses altogether. or US$3 fee which had to be spent on identified airport-related projects or could be used to back bonds for the projects. and customs and immigration services. The generation of revenues at US airports is subject to a number of statutory requirements determined by Congress and policy statements issued by the FAA / Department of Transportation. Unlike most other airports in the world. The initial PFC legislation. As a result some airport operators have tried to reduce the powers of the signatory airlines by requiring MII disapproval rather than approval or have limited the airlines’ influence to only major projects. The level of landing fees tends to be relatively low partly because the airport operator provides a minimal number of services itself. the federal government approved the levying of PFCs. Passenger facility charges were first used in June 1992. By the beginning of 2003. the total approved collections for all airports was $39. This means that airports have greater control over this type of funding. Seventeen per cent of this total funding was for airside projects. However.50.Managing Airports be approved by the signatory airlines. being based on a fixed rate per 1000 lbs.50 level. In 2000 it was agreed that the maximum PFC could be raised to US$4. Airport fees and passenger facility charges The landing fees at US airports are normally very simple. in 1990. Passenger facility charges are also largely independent of airline influence. The charges do not vary according to noise levels or peak periods. Although the PFCs are legally and constitutionally different from passengers charges levied elsewhere in the world. US$2. US’ airports are not legally allowed to levy passenger charges primarily because of fears that such revenues will be diverted from the airport to be used for non-aviation purposes. 1999). Airlines have no veto rights when it comes to PFCfunded projects nor can they have exclusive rights. which goes towards the federal aviation trust fund to provide the finance for the airport grants which are available under the AIP. unlike revenue bonds which may require guarantees from the airlines. 30 per 130 . These funds go directly to the airports rather into central federal funds as with the air transportation tax. PFCs were first used in June 1992. allowed for airports to levy a US$1. unlike the practice at some European airports. they have a similar impact on airlines. There are also separate taxes relating to agriculture and health inspection.

Detroit (US$641 million). This can result in considerable congestion at certain times of the day when many flights are scheduled around the same time. This trading of slots was limited to domestic operations (international routes being more complex because of international regulation) with air carriers slot being unable to be traded for commuter slots and vice versa. The traffic was divided into three categories. 1998). however. Slots used for essential air services were excluded. 6 per cent for noise projects. Initially the rule worked relatively well. This has to be viewed. Boston (US$599 million) and Chicago O’Hare (US$484 million). The exception to this practice is at four airports which are subject to the ‘high density airport rule’. Some PFCs have been approved for a long time (longer than 30 years) whereas others will be used for as little as three years. and airlines design their schedules independently taking into account any expected delays. and 28 per cent for paying interest. These were to be reallocated using a lottery – with 25 per cent initially being offered to new entrants. resulted in a new allocation system being introduced (Langner. new long-haul entrant carriers and airlines operating regional jets were given slot restriction exemption. O’Hare airport in Chicago and Washington National airport (now Washington Reagan). airlines were then be permitted to buy and sell their slots. As a result of these concerns. there is no formal slot allocation mechanism. Las Vegas (US$1585 million). such as the IATA scheduling committees. such as a major air traffic control strike. 1992.The airport–airline relationship cent for landside projects. This is the only formal secondary trading market for slots in any part of the world. International slots were allowed to be co-ordinated through the IATA scheduling committees (Starkie. Airlines were also allowed to ‘lease’ slots on a short-term basis. Large amounts of PFCs have been approved at Denver (US$2331 million). This was the ‘buy–sell’ rule which effectively meant that after an initial allocation process based on grandfather rights. This led to major overscheduling and congestion in La Guardia in 2000 and so the Port Authority of 131 . namely air carriers. within the context of the US airline industry which itself has become more concentrated (Starkie. 1995). 10 per cent for access projects. This rule was introduced in 1969 by the Federal Aviation Administration (FAA) as a temporary measure to reduce problems of delay and congestion at JFK and La Guardia airports in New York. barring any environmental constraints. This means that instead there is open access to the airports. Over 10 years’ experience of this slot trading has led to increasing criticism of the system. since these would be in conflict with antitrust laws. 1994). No slot allocation mechanism was defined but the relevant airlines were given antitrust immunity to discuss co-ordination of schedules. At La Guardia all restrictions are to be eliminated by 2007. The established airlines have actually increased their dominance at the airports. with a different limit on the number of flights during restricted hours for each category. Slot allocation At most airports in the United States. There was a ‘use or lose it’ rule requirement of 65 per cent and a slot pool was established for newly available slots. but the increase in traffic due to airline deregulation in 1978 and other factors. air taxi (now commuters) and other (primarily general aviation). In the interim. There have been few outright sales of air carrier slots and very few new entrants. A further 8 per cent funded the new Denver airport. the Aviation Investment and Reform Act (AIR21) of 2000 made substantial changes to the slot rules at these four airports.

However. Moreover. For example. it was evident that generally the airport industry was much more in favour of market-based options than the airline industry which wanted to keep the current system (ACI-North America. 2002). Boston. This is not a formalized relationship as it does not identify the rights and obligations of both parties. This took place in December 2000. 2002. However. the method by which these are calculated and the conditions of use of the facilities. (Federal Aviation Administration/Department of Transportation. as more airports are being privatized. 2001b). this type of agreement exists between the privately run railway infrastructure and train operators. the Department of Transportation issued a ‘Notice of Market Based Actions to Reduce Airport Congestion and Delay’. In 2001. Air Transport Association of America. The normal contract between an airline and an airport traditionally is the published airport conditions of use. This discussed market-based approaches to charging at airports such as peak pricing. Airport charges have come under increased scrutiny from both airlines and governments. The US agreements concentrate on the fees and rentals to be paid. In the United Kingdom. traditionally the only country which has the rights and obligations clearly defined and incorporated into a legally binding contract is the United States. In the meantime the industry has been consulted about more longer-term solutions (Federal Aviation Administration / Department of Transportation. In short. for example. being driven by trends towards greater competition. privatization. there is no agreement as regards the standard of services to expect and no process is identified should disputes between the airlines and airports arise. A number of airlines have therefore been considering a more appropriate. which describes the services provided in exchange for the aeronautical fees. Whilst the outcome of the consultation had yet to be decided by early 2003. the FAA claimed that the airport authority did not have a legal right to impose this moratorium and instead it was agreed that the number of new flights would be capped and a slot lottery would be undertaken. and San Francisco) and slot auctions. 132 . The industry has also been consulted more generally about the basic principle that airport charges must be determined purely by cost or whether a more marketbased approach could have a role to play in coping with the congestion problems which exist at many airports. Formalized service standards are not usually incorporated into these agreements. economic regulation is becoming more commonplace. the airline–airport relationship is starting to become much more to do with the linking of two privately owned international companies. rather than two state owned organizations operated within the limits of national laws and regulations. This temporary solution was due to end in October 2002 but has been extended until October 2004. contractual relationship with the airports which they serve.Managing Airports New York and New Jersey imposed a moratorium on peak hour flights. For the airport industry. and globalization within the industry. more clearly defined. Los Angeles. These included market-based initiatives such as congestion based pricing or slot auctions or administrative processes such as favouring operations with larger aircraft. minimum landing fees (which in fact have already existed at airports such as New York. A new airport–airline relationship This chapter has shown how the airline–airport relationship is changing. Airlines and other interested parties were asked to comment on this notice by July 2002. 2001a).

British Airways (BA) has suggested that a use agreement should contain the following elements: duration and termination. Second. services to be provided in return to charges. Danish airlines and IATA representing foreign airlines reached a second consecutive three year period agreement when it was determined that charges would increase by 2. such as Ryanair and EasyJet. the airline industry has been looking at use agreement from a wider prospective. Finally. which includes quality of service aspects. the movement from price regulation to price monitoring. as the name suggests. Then there are two types of service level agreements. typically 5–10 years. and 2005 (Copenhagen Airport. the low cost airlines. in relation to the London airports BA proposed that there should be a clear definition of the services covered by the airport charges including a description of the generic levels of service quality. is more strategic and covers areas such as future financial investment and rights. 1999. capital expenditure. there is the basic agreement which covers what the airlines receive for the main airport charges or the basic plus agreement which also identifies what additional facilities and services are available at the airport and their cost. the airport operator. when discounted fees are agreed for the entire contract period (see Chapter 7). 1997). 2004. Another example of a longer duration agreement is at Copenhagen airport.The airport–airline relationship outside the United States. more recently. 2002). security and policing. In Australia. This agreement provides for more long-term planning security for both airports and airlines and contains a commitment from the airport to improve the level of services. protect both airlines and airports from uncertainty and risk by providing financial guarantees. there is the strategic partnership agreement (SPA) which. One of the developments which has been observed is the introduction of more long-term airline–airport agreements at a few airports which could be said to be moving slightly closer to the type of model that is adopted in the United States. Agreements of this nature have yet to be adopted at any airport although more specific service level agreements have been adopted by a few airports (See Chapter 4 for more detail). and provide more financial security. for the increasing number of private airports which are dependent on commercial borrowing. and obligations for both airlines and airports (ACI-Europe. and disputes and arbitration (Monopolies and Mergers Commission.75 per cent in each of the years 2003. For example. rentals. terminal navigation services. lessening the need for government economic regulation (Clayton. In 2002. First. The airlines claim that such agreements could clarify the airline–airport relationship by identifying clear rights and obligations. Cruickshank. either a one-way commitment by the airport operator to achieve defined service quality standards or a two-way commitment by both the airport and airlines to reach the required quality levels. for example at Brisbane 133 . De La Camara. 2000). automatic entitlement to a rebate or compensation when the quality levels are not achieved and the establishment of a dispute resolution procedure relating to service standards (Competition Commission. insurance and liabilities. 2002a). fees and charges. They could also help to minimize the conflict between the two parties – thus. service standards. 1997. additional services. have sought more long term deals at airports. 1998). IATA set up a working group to develop a generic use agreement or SPA which could be used worldwide and adapted according to local circumstances. Again. ACI-Europe has identified six types of use agreements which can exist between airports and airlines. perhaps. In 1997. as in the case of the United States. there is the facility agreement which is an additional arrangement between one or more airlines relating to just part of an airport.

Fraport and local government which has four meetings a year to discuss issues arising from the agreement and to swop information. this means that Fraport is taking more of the overall financial risk as it revenues are more directly related to traffic levels. the airlines have waived their right to take legal action against the level of charges whilst Fraport has made commitments not to cut costs by reducing service standards and to undertake investment projects which are planned. the first of its kind. 2002. Under the agreement.The deal has also secured the financing of a 76 million Euro noise protection programme for the local residents. ABN AMRO. the airlines will bear one third of the risk associated with the passenger traffic if it falls below the levels which were planned. the German Airline Association and the board of airline representatives in Germany (BARIG) which represents airlines flying to Germany. Hence. Big Issues: Airport Charges. This means that the airport charges are now more related to the revenue streams of the airlines which are based on passenger throughput.Managing Airports airport. The first element of this new approach which was gradually introduced in the late 1990s was a shift towards a greater reliance on the passenger fee and less reliance on the landing fee. Fraport has been developing a new charging policy at Frankfurt airport which it feels is more suitable to sustain a long-term sustainable partnership with its airline users. Then in April 2002 Fraport reached an agreement with Lufthansa. The 2001 ratio of airports charges to the number of departing passengers is used a reference ratio for this model. This is a 5-year agreement. 2002. (Fraport. there is a Special Review Board which has representatives from the airlines. Klenk. It has been agreed that if the passenger forecast figures are reached then the reference ratio will be increased by about 2 per cent annually. Conversely. has encouraged the airport and airlines to reach a five year agreement which covers charges and service and thus replaces the need for detailed regulation. This was thought to be particularly necessary because of the growing volatility of the airline industry and more specifically the partial privatisation of Fraport in 2002. If the passenger traffic grows faster than expected then the airlines will receive one-third of this additional revenue due to the unplanned passenger numbers and two-thirds will go to Fraport. The Hamburg airport regulatory system was also established by an agreement between the airport operator and the airlines which was subsequently validated by public law. This agreement replaces the requirement for government approval of the level of charges for the 5-year period. References and further reading ABN AMRO (2000). 2002). 134 . ACI-Europe working paper. applied retrospectively from 1 January.The agreement is a risk sharing model which links airport charges to traffic growth. A new approach to the airline relationship at Frankfurt airport In the last few years. At Frankfurt. Pan-European Airports Review. ACI-Europe (1998).

Infrastructure constraints and the EC. Time for a freehand in Europe. Airports Council International (ACI) (2000b). CAA. Airport Use Agreements.The airport–airline relationship ACI-Europe (1999). AEA. and Humphreys. Jane’s Airport Review. Airport pricing and slots. Civil Aviation Authority (CAA) (2001a). ACCC. Cranfield University. Comments re: Notice of Market–based Actions to Relieve Airport Congestion and Delay. SE Asia and the USA. K. Pre-financing of airport capital expenditures. Airports Council International (ACI) (2000a). The CAA approach to economic regulation and work programme for the airport reviews. Report to the Minister for Public Enterprise and the Minister for Finance. The Single European Aviation Market: The First Five Years.. Boyfield. Institute of Economic Affairs. ACI-Europe ACI-North America (2002). University of Westminster/Cranfield University Airport Economics and Finance Symposium. London. Position paper. A Market for Airport Slots. Civil Aviation Authority (CAA) (2000d). User Costs at Airports in Europe. Problems and Relevance to Economic Regulation. B. 22–23. CAA.. Air Transport Group (1998). Economic Regulation of Airports – An Overview. March. Airport Charges in Europe. Civil Aviation Authority (CAA) (2000a). T. Airport Statistics 1998/9. Consultation paper. Issues for the airport reviews. Bass. The single till. ICAO. Consultation paper. CAA. 1(3). Consultation paper. D. ICAO. ANSConf Working Paper No. CAA. (2003). (2003). Australian Competition and Consumer Commission (ACCC) (1998). The use of benchmarking in airport reviews. Andrew. The use of benchmarking in regulatory proceedings. Barker. Recommendations for new ICAO guidelines on pre-financing of airport capital expenditures. Airports Council International (ACI) (2000c). D (2003). CAA. CAA Workshop on Benchmarking of Airports: Methodologies. ANSConf Working Paper 48. CAA. Financing Civil Aviation Security Costs in Europe. ACI-Europe (2002a). CAP 685. Association of European Airlines (AEA) (1998). Civil Aviation Authority (CAA) (1998). Direct consulting between airports and users. AIB. Civil Aviation Authority (CAA) (2000c). Air Transport Association of America (2002). Bass. Journal of Air Transport Management. CRI. Centre for Study of Regulated Industries (1999). 145–50. ANSConf Working Paper 52. September. ACI-Europe working paper. Comments re: Notice of Marketbased Actions to Relieve Airport Congestion and Delay. March. 55. SH&E and Warburg Dillon Read (1999). Civil Aviation Authority (CAA) (2000b). Review of Strategic Options for the Future of Aer Rianta. 135 . J. Starkie. The single till and the dual till approach to the price regulation of airports. Benchmarking of Airport Charges. Research report 6. Consultation paper. ICAO. (2000). Burns. P. ACI-Europe ACI-Europe (2002b). T. (1994).

Consultancy Advice on Aviation Issues. Doganis. Adjustment of traffic charges at Copenhagen Airport. Air Traffic Forecasts for the United Kingdom 2000. (1996). Civil Aviation Authority (CAA) (2002b). ACI Airport Financial Management Seminar.Managing Airports Civil Aviation Authority (CAA) (2001b). Commission for Aviation Regulation (2001). University of Westminster/Cranfield University Airport Economics and Finance Symposium. Coleman. Gatwick and Stansted Airport’s price cap 2003–2008: CAA recommendations to the Competition Commission. Doganis. DETR. Competition Commission (2002a). (2003). 8–9. DotEcon (2001). De La Camara. N. (2002). CAA. Commission for Aviation Regulation. European ground handling: new competitive dynamics. CP2/2002. (1997). Competition Commission (2002b). CAA. Aviation Strategy. Consultation paper. J. R. Deutsche Bank. Journal of Air Transport Management. Civil Aviation Authority (CAA) (2002a). The Airline Business in the Twenty-first Century. March. (2000). E. March. March. Civil Aviation Authority (CAA) (2001c). 136 . University of Westminster/Cranfield University Airport Economics and Finance Symposium. Heathrow. Civil Aviation Authority (CAA) (2003a). Auctioning airport slots. Decision of the Commission further to a referral by the Aviation Panel of the Commission’s decision in relation to its determination of the 26th of August 2001 on maximum levels of airport charges. Transport and the Regions (DETR) (2000). Fortaleza. Airport charges – the key developments. R. March. CAA. Den Braven. (2001). (1998). 95–8. Department of the Environment. Airport–airline agreements: what is the way forward?’ University of Westminster/Cranfield University Airport Economics and Finance Symposium. A Report on the Economic Regulation of Manchester Airport plc. Commission for Aviation Regulation (2002). The implementation of Secondary Slot Trading. Economic Regulation of Manchester airport: CAA decision. A new approach to airport user charges. The Stationery Office. The Stationery Office. (1992). Pricing structures and economic regulation. CAA Clayton. CP7/2001. A Report on the Economic Regulation of the London Airports Companies. DotEcon. October. Manchester Airport’s price cap 2003–2008: CAA recommendations to the Competition Commission. 24 April. R. Press release. The Airport Business. Commission for Aviation Regulation. A. CAA. Determination of Maximum Levels of Airport Charges. Routledge. Current issues in slot allocation. Irish Department of Public Enterprise. European Airports: Privatization Ahead. Cruickshank. CAA Civil Aviation Authority (CAA) (2003b). (2000). Economic Regulation of BAA London Airports: CAA decision. 3 (2). Dennis. Deutsche Bank (1999). Routledge. Airport charges and airport finance – the airline’s perspective. N. Doganis. Copenhagen Airport (2002). K.

Washington DC. Press release. FAA/DOT. Gill. Draft proposal for amending council regulation No 95/93 of 18 January 1993 on common rules for the allocation of slots at Community airports. Benchmark Airport Charges 1999. Airline Business. COM (2001) 370. Official Journal of the European Communities. A. S. Docket No 27782. D. The Economic Regulation of Airports – German Aviation Research Seminar. George. General Accounting Office (1999). Airport Business Practices and Their Impact on Airline Competition. 137 . Alternative Policy Options for Managing Capacity at La Guardia Airport. Forsyth. Gethin. November. (2002b) Privatisation and regulation of Australian and New Zealand airports. European Commission (2001) White paper on European transport policy for 2010. Washington DC. The European regulatory framework. 19–28. GAO. Passenger Facility Charges: Program Implementation and the Potential Effects of Proposed Changes. Forsyth. Policy and Procedures Regarding Use of Airport Revenue Docket No 28472. What should regulators do? The academic perspective on optimal economic regulation. Washington DC. A. European Commission (2000b). Hague Consultancy. Council Directive 96/67/EC on access to the groundhandling market at Community airports. EC. Council Regulation 95/93 on Common Rules for the Allocation of Slots at Community Airports. Competition in Regulated Industries. T. (1998). 18 January. Policy Regarding Airport Rates and Charges. O. March. Hogan. Docket No 2001-9854. July. Guiomard. Journal of Air Transport Management. and Jenkinson. (eds) (1998).eld University Airport Economics and Finance Symposium. Federal Aviation Administration/Department of Transportation. Federal Aviation Administration/Department of Transportation (2001a). University of Westminster/ Cranfi. Hague Consultancy (2001). FAA/DOT. C. App. Helm. March. November. Federal Aviation Administration/Department of Transportation (2001a). (2003) Economic regulation of Irish Airports. May. FAA/DOT. Jane’s Airport Review. European Commission (1996). Fraport (2002) Fraport and airlines sign first five-year agreement on airport charges at FRA. p. Washington DC. (2002). Industry fears EC slot shake-up plans. L 272/36. 8. P. Replacing regulation: Airport price monitoring in Australia. Notice of Market-based Actions to Relieve Airport Congestion and Delay. (2002a). Financial Times (1999). Financial Times. 20. High Court rules. 30 April. ANSConf Working Paper 76. 6–7. P. Air slots can be traded. Sixth Air Transport Research Society Conference. (1998). European Commission (2000a). Federal Aviation Administration/Department of Transportation (1999).The airport–airline relationship European Commission (1993). Weakened by taxation. (2000). FAA/DOT. ICAO. Federal Aviation Administration /Department of Transportation (1996). Oxford University Press. Airline Business. 23. 26 March. T. 35–7. (1999). EC. Airport charges proposal general fierce debate. FAA/DOT. Docket No 2001-9849.

(2002a). Kunz. Mackenzie-Williams. Langner. Airport networks and airport cross-ownership.. M. Contractual aspects of transacting in slots in the United States. CAA Workshop on Benchmarking of Airports: Methodologies. (2002b). The economics of airport slots. 31. ICAO. Ground handling – the story so far. Mackenzie-Williams. M. Comments on New Zealand experience and incentives for monopoly pricing. A report on the economic regulation of Manchester airport. International Airport Review. 151–61. 80. I. Viehoff. ICAO. 11. London. 1 May. 31. New approaches in airport/airline relations – charges framework of Frankfurt Airport. ICAO. 2 (3/4). 138 .. Pre-funding of projects through charges. and Marks. Capacity management and slot allocation. The Economic Regulation of Airports – German Aviation Research Seminar. Ansconf Working Paper No. 9. 4 (3). Aviation Week and Space Technology. ICAO. Mackenzie-Williams. 9082/4. Benchmarking and economic regulation: introduction and overview. C. P. International Civil Aviation Organization (ICAO) (1992). Forward pricing. ANSConf Working Paper No. A shift towards regulation – the case of New Zealand. P. Mecham. SFO flights delays by targeting United. (1995). Monopolies and Mergers Commission (1997). NECG. S. 27. ANSConf Working Paper No. Issue 4. P. 45–50. I. International Air Transport Association (IATA) (2000c). MMC. 9082/6. November. 32–3. The single till. ICAO. International Air Transport Association (IATA) (2000f). P. Ansconf Working Paper No 82. ANSConf Working Paper No. (1993). A report on the economic regulation of the London airport companies. International Civil Aviation Organization (ICAO) (2000b). Statement by the Council to contracting states on charges for airports and air navigation services. ICAO. Fiscal Studies. ICAO. National Economics Consulting Group (2001). International Air Transport Association (IATA) (2000b). ICAO. (2000). Jones. 30. ICAO. Liberalisation of the ground handling market – experience so far. International Civil Aviation Organization (ICAO) (2000a). Marginal pricing. and Ng. ANSConf Working Paper No. Peak/off-peak charging. The Economic Regulation of Airports – German Aviation Research Seminar. ICAO. September. International Air Transport Association (IATA) (2000g). Problems and Relevance to Economic Regulation. (2000). ICAO. Klenk. International Airport Review.Managing Airports International Air Transport Association (IATA) (2000a). International Air Transport Association (IATA) (2000d). ANSConf Working Paper No. Charges discounts. K. ANSConf Working Paper No. ICAO’s Policies on charges for airports and air navigation services. November. International Civil Aviation Organization (ICAO) (2000c). International Air Transport Association (IATA) (2000e). 68–71. International Civil Aviation Organization (ICAO) (2001). MMC. ANSConf Working Paper No. Monopolies and Mergers Commission (1996). 81. 37–57. Economic regulation. Airport economic regulation. (2002). (2000). ICAO. 33. 14 (4). ANSConf Working Paper No. Journal of Air Transport Management.

An assessment of the capacity and congestion levels at European airports. Starkie. September/October. Pilling. (2002). Warburg Dillon Read (WDR) (1998). Pilling. Hayes and Bartlet Ltd. Slot Trading at United States Airports. Study of Certain Aspects of Council Regulation 95/93 on Common Rules for the Allocation of Slots at Community Airports. WDR. Starkie. User charges: Gloves off. (1999). Annual Report 1999. (1997). March. 5. M. (1998). Journal of Air Transport Management. Journal of Air Transport Management. 119–35. Price caps. T. September. (1998). Airline Business. PricewaterhouseCoopers. G. Airport World. Flight International. Thoughts on airport regulation. Report no. Empire building. Taxing for take-off. 111–16. 58–62. Journal of Air Transport Management. 8. 41. 8–14 July. (2002). Regulatory benchmarking: a way forward or a deadend? Energy Regulation Brief. D. D. M. (2002). Soames. Airline Business. M. M. Problems and Relevance to Economic Regulation. University of Westminster/ Cranfield University Airport Economics and Finance Symposium. 10–12. December. Starkie. M. (2002). (1999). 35 (1). 1 (2) 77–82. Ground handling liberalization. Regulation of airports: the case of Hamburg airport – a view from the perspective of regional policy. 8. (1994). Review of airport charges 2001. benchmarking and efficient costs. (2002). Toms. Toms. Journal of Air Transport Management. D. CAA Workshop on Benchmarking of Airports: Methodologies. A. Pilling.The airport–airline relationship Niemeier. Starkie. Airport regulation and competition. Shuttleworth. O’Toole. Putnam. M. The Economic Regulation of Airports – German Aviation Research Seminar. Avmark Aviation Economist. Unlock your potential. PricewaterhouseCoopers (2000). Journal of Transport Economics and Policy. September. TRL. K. January. KLM accounts hint at the true worth of BA slots at Heathrow. 19. The US market in airport slots. K. Allocating airport slots: a role for the market? Journal of Air Transport Management. Airports Review 1998. (1994). London. and O’Toole. Airport regulation – fifteen years on. (2003). D (2002). Toms. 3 (2). Journal of Transport Economics and Policy. Ausinfo. 83–94. Schiphol Group. Starkie. Schiphol Group (2000). (2001). 4. Reynolds-Feighan. Productivity Commission. 63–72. 52–4. 38–42. Airline Business. R. Price regulation of airport services. 113–34. H. (2001). D. Shuttleworth. (2001). National Economic Research Associates. K. M. 139 . G. Journal of Air Transport Management. Reforming UK airport regulation. Ground handling: seeking stability. and Button. 8. August–September. January. Charging for airports: the new BAA approach. Pilling. 325–9. (1992). Transport Research Laboratory (TRL) (2001). (2000). November. 37–48. Pagliari. (1998).

6 The provision of commercial facilities The importance of commercial facilities A key development in the evolution of the airport industry has been the increase in the dependence on non-aeronautical or commercial revenues. This chapter will discuss the generation of nonaeronautical revenues by looking at the market for commercial services and assessing how the facilities can be planned and managed. There are. namely the abolition of intra-EU duty. There have been a number of factors which have contributed to the growth in dependence on nonaeronautical revenues. The focus of this chapter will be on individual consumers who buy commercial goods/services at airports. moves towards commercialization and privatization within the industry have given airports greater freedom to develop their commercial policies and diversify into new areas. will also be discussed. First. These activities are covered in Chapter 5 which considers the airport–airline relationship.and tax-free revenue. and so on. in-flight kitchens. of course. check-in-decks. A more business-oriented approach to running . lounges. The most significant development of the late 1990s. other consumers such as the airlines and handling agents who also generate concession and rental revenues by paying for the use of office space. It will consider factors which influence commercial performance.

airlines are demanding that airports adopt such cost-cutting and efficiency saving measures themselves. Manchester gave discounts on duty-free purchases to 141 . Thus. however. Increasing airport competition. As a result of this. increasing numbers of people are travelling through airports and making more frequent trips. value and choice at the top of their priorities (Freathy and O’Connell. of course. At the same time. be more influenced by the commercial facilities if they cannot perceive any significant difference between the convenience and quality of the choice of connecting flights at different airports. airport charges have become subject to more and more scrutiny from the airlines – particularly from the new breed of low cost airlines in Europe. the airlines have been exerting increasing pressure on the airport industry to control the level of aeronautical fees which are being levied. 1998). A more competitive environment and falling yields have forced many airlines to focus on major cost-saving initiatives such as out-sourcing. This reflects general trends in the high street where consumers have become more discerning with quality. passengers are becoming more sophisticated and experienced airport shoppers. have run highprofile marketing campaigns emphasizing the quality and good value of the commercial facilities on offer to transfer passengers. The impact of these pressures on the level of aeronautical charges. has encouraged the airports to look to alternative ways of increasing their revenues and growing their businesses by giving greater attention to commercial facilities. For example. Consideration of the retail and other commercial facilities is bound to be secondary. Certain airports. It is also true to say that this increased emphasis on commercial facilities has not been welcomed by all the travelling public with significant groups of passengers. airport shoppers are becoming more demanding not only in the quality of service which is provided. particularly those from the business community. often desiring a quick route through the airport as uncluttered as possible from the distraction of numerous shops and catering outlets. The main reason for why a passenger will choose a certain airport will. either from the airlines themselves or regulatory bodies. has also played a role in the development of non-aeronautical revenues. In effect. it is difficult to determine entirely whether the raised expectations at airports have been caused by a genuine need or desire of the consumers for expanded facilities or whether an airport’s drive to maximize its commercial income by becoming a shopping centre has merely changed the expectations of passengers. and are generally much better informed. reductions in staff numbers. such as Amsterdam Schiphol and Singapore Changi. the airports have had to broaden their horizons in managing their businesses. Moreover. Admittedly.The provision of commercial facilities airports has also raised the priority given to commercial facilities. the ability of some airports to increase aeronautical charges is now restricted by government regulation as has been the case with BAA plc and Australian airports post-privatization (see Chapter 5). and the pegging of the level of wages. 2000). Such facilities were traditionally considered to be rather secondary to providing essential air transport infrastructure for airlines. Transfer passengers may. Hence. Other airports have gone one stage further. rather than raising their charges to the airlines (Doganis. especially between airport hubs. be the nature of air services which that airport offers and the convenience of the airport’s location. but also in the range and value for money of the commercial facilities on offer. In addition. Increasingly. Managers are now eager to adopt more creative and imaginative strategies and to exploit all possible aeronautical and nonaeronautical revenue generating opportunities.

of varying degrees of sophistication. They often tend to be more affluent than the average and they may have time on their hands to have a quick meal or snack. the passengers. this involves an analysis of the air services offered and the origin and destination of travellers. In the Middle East a number of the airports such as Abu Dhabi. They may spend spontaneously to acquire the last minute essential or discount purchase for a holiday. however. airports. Consequently. BAA plc. It was considered more important to certain subsegments such as eighteen to twenty-four year olds (64 per cent) and less important for others such as UK business travellers (34 per cent). 70 per cent of passengers considered catering to be important or very important. particularly by using incentives like raffles with high-value prizes. together with their retailing and catering partners. regularly undertakes market research regarding commercial facilities. make up a large captive market. which will investigate the demographic. Results have shown that on average 53 per cent of passengers considered airport shopping to be important or very important. this is supplemented by market research.Managing Airports transfer passengers as part of their ‘Manchester Connects’ strategy to increase the use of the airport as an interline hub. To achieve this aim. In many cases. To fully harness the commercial development potential of the airport traffic. At the most basic level. who does not shop at airports and why. is the envy of most high street retailers. The UK leisure market gave it a higher rating (77 per cent) while the European business market gave it a much lower rating. The main shoppers. They may even spend just to dispose of the last of their foreign currency. coupled with a fear of missing the flight. or souvenirs and gifts while returning.and tax-free shops as a way of capturing competing traffic. the range of facilities on offer and even the product selection should match very closely the preferences and needs of the specific passengers types at the airports. Such research will often aim to determine who shops at airports and what they buy. Dubai. BAA plc has also investigated the nonbuying share of the passenger 142 . Overall. and Bahrain try to use their duty. have increasingly been devoting more resources to getting to know their customers. such as luxury cars. This type of research needs to be updated regularly as customer demands and perceptions are continuously changing. which is automatically collected at airports.and tax-free retailers can get information about travellers from their boarding passes which are shown when purchases are made. Even this detail of information about the market. like other large European airport operators. may impose a sense of anxiety on the passengers. The market for commercial facilities Who buys at airports? The airport environment is a unique location for shopping and other commercial facilities. fundamentally different from high street retailing since passengers are going to the airport to catch a flight rather than to shop. duty. In addition. and attitudes towards the range of facilities on offer and the value for money of the products. geographic and behavioural features of the passengers. Airport retailing is. the passengers will be far less familiar with the airport shopping environment than with their neighbourhood shops and this.

secretarial support. with 12 per cent of the sample claiming that they would shop if the prices were reduced by a tenth. a significant share of whom were UK business travellers. and showers. but this will only be possible if there is sufficient time between flights. 1995). and so on. For example. They may want to make some retail purchases. As a result of this business travellers make purchases relatively infrequently – although their average spend on a purchase tends to be high. car hire. there is the mass market leisure flyers who travel just once a year and are in the mood for treating themselves. Price was the key reason given. optical. Prior knowledge of the prices on offer would have encouraged 22 per cent more passengers to make purchases. if the transfer passengers stay for longer than 4 hours. a sauna. Various airports have developed some quite imaginative airside facilities and services which can be shared between these and local passengers. Business travellers also tend to make high use of certain facilities such as banks. Moreover. First. Long-haul leisure passengers tend to spend more than shorthaul leisure travellers. solarium. there will also be passengers who spend a considerable length of time in the airside area. Twenty-two per cent of the passengers. claimed that they had no interest in the shops and would not be persuaded to buy (Maiden. Then there are transfer passengers. opened its Wellness Plaza in 1999 where passengers can experience different massage techniques and make use of the fitness bar. and airport hotels. particularly if the dutyand tax-free prices are competitive. Sixteen per cent said they would shop if they had more time (an extra hour) at the airport. At most major hubs. Regular business travellers typically have a shorter dwell time and are less likely to browse in shops. They are unlikely to make use of facilities such as banks and post offices. The new breed of leisure passengers on low-cost carriers often tend to have a different spend profile and they are particularly good users of the catering services because of the lack of in-flight refreshments and car parking because they are often quite time-sensitive travelling on short-break trips. Amsterdam airport has an art gallery and casino. 143 . It is hard for an airport to maximize the commercial opportunities from transfer passengers if it also wishes to maximize its efficiency as a hub by providing swift connections. A further 47 per cent. and obviously will not need car hire or car parking facilities. Bangkok airport offers head and foot massage. Leisure passengers have traditionally been favourites for impulse buys and the use of catering facilities. for instance. These examples illustrate the different spending profiles and preferences of different types of passengers. Within the business market there is an increasing number of women travellers who have different needs and preferences from the more traditional male traveller. A number of airports also have fitness and health centres. Internet access. the widespread adoption of airline lounges for business and first-class customers has further discouraged these passenger from having spare time to visit the main terminal shops. many of whom were UK leisure passengers. Vienna airport. Most airports have business facilities such as meeting rooms.The provision of commercial facilities population at its airport and the factors which might entice them to buy. Frankfurt airport provides dental. a karaoke lounge and a putting green and. they can go on a bus tour of Singapore. They are impulse buyers and they tend to buy duty-free if they can. and foot reflexology services and a clinic which has become a specialist centre for laser operations to repair damaged shoulder and knee joints! BAA plc has identified four key traveller groups associated with UK nationals – each of which have different shopping characteristics. Singapore Changi airport has a swimming pool. would have shopped if the prices were reduced by a quarter.

and tax-free shops in Europe. Factors such as nationality. As regards age differences. Finally. although being very fond of shopping generally. Nationals from countries in Scandinavia. They will be brand conscious and prepared to pay for quality products. who still have access to duty. and socio-economic group will also influence spending and shopping behavioural patterns. 2002). more independent Japanese travellers. The Japanese have the same high spend per passenger but this is due their tradition of buying gifts to take home to friends and relatives – although this is not so common for the younger. Some of these services may used by arriving passengers – another potential market sub-segment which is generally considered to have significant spending potential but has only more recently been recognized by most airports. They will make duty-free purchases if they can. The airports have thus exploited their commercial potential of being business or commercial centres which generate. Indeed for certain large 144 . Many airports. employ and attract a large number of visits – rather than just providing facilities for passengers who choose to use the airport. have traditionally not expected to do their shopping at airports and so their average spend is much lower (Maiden.Managing Airports Then there are the young upmarket leisure flyers who travel several times a year and are high spenders. Americans. however. younger travellers tend to make much heavier use of facilities such as electronic entertainment zones and Internet cafés which are becoming commonplace at many airports. Older upmarket leisure flyers again travel several times a year and have a high disposable income. banking services. They will treat themselves at airports although they will be price-conscious buyers. hairdressers. which have relatively high taxes on alcohol. convenience shopping (wide choice of known brand names). toiletries). there are the timestarved frequent business flyers who will be attracted by ‘one-off’ promotions and electronic products. Most of the airport commercial facilities historically were provided for passengers. are particularly good spenders at these shops. particularly as they may not be able to combine a visit to their local shops and their working life at the airport. timepressed shopping (last minute/emergency purchases). distinctions can be made between entertainment shopping (gift/ novelty purchasing). For instance. Airports may also be attractive to the local residential community as an alternative shopping centre – especially if the airport is relatively uncongested and easily accessible with good road and rail links. and perfumes will be popular. have now recognized the commercial opportunities which exist with other consumer groups which use the airport and have introduced facilities wholly or partially for their needs. may find the airport facilities useful. occupation. staff employed by the airport operators and by the airlines. concessionaires. Popular services include supermarkets. chemists. 1997). 2000). and governments agencies may wish to use airport commercial facilities. or from airport industrial estates. local residents will be encouraged to the airport by free parking or a certain period of free parking if a purchase is made. books. age. The growing popularity of the use of initiatives to encourage public transport use. foreign currency exchange. purposive shopping (confectionery. handling agents. may be in conflict with such commercial strategies. Another way of looking at passenger shopping is by segmenting the customers by behaviour. essential shopping (restaurants/cafeterias. insurance) and lifestyle shopping (high-quality international brand purchases) (Institute for Retail Studies. Surveys at Heathrow show that Norwegians. however. are favourites for buying such products at airport shops. For example. and dry-cleaners. They will use the airport as a convenience place to shop (Maiden. Workers from nearby office complexes. Sometimes.

additional facilities such as florists and gifts and souvenir shops. and other customers. There are numerous other examples. distribution centres. and exhibitions can also be provided on a commercial basis. and catering and retail facilities. a shooting range. conference facilities. Environmentalists. Meeters and greeters and other visitors to the airport will also need catering services. catering. and six office buildings on 39 000 square metres (Kim. Munich airport opened its new commercial centre in 1999 consisting of offices. Within the boundary of this airport there is a Formula One motor-racing track. is involved in buying electricity in bulk and then reselling it. The new offshore Inchon International airport in Korea has a business centre with two hotels with over 1 000 rooms. Munich airport visitors park is one of Bavaria’s most popular day-trip destinations. Air travel still holds a strange fascination for certain people and for these enthusiasts specialist shops and merchandise can be sold. a ‘behind the scenes at the airport’ display. and equestrian park! For the business community. has created the Australia TradeCoast economic development area which uses 2 700 000 square metres of airport-owned land. and business parks. For example. 1998a). For example. freight warehousing. Car-parking revenue can be generated from them. consider such developments to be flouting government policy. a shopping mall of 12 000 square metres. Many of the shops are well-known quality international branded outlets which are relatively difficult to find elsewhere in the Netherlands. Brisbane airport in partnership with other organizations. encouraging additional visits to the airport will be the last policy that they want to adopt. guided bus tours. Many airports have also expanded beyond the boundaries of the traditional airport business by using neighbouring land for hotels. Viewing platforms. an adventure park. Airports may be particularly popular as alternative shopping centres if there are legal restrictions on shopping hours imposed on the high street. Most major airports offer these. 2000). The good transport links which airports generally possess can make them ideal for international business events. and. These facilities can be shared by business passengers. The small UK regional airport of Southend relies on its property business for its survival and. light industries. Opposition may also be voiced from nearby local shopping centres as has been the case at London Gatwick airport with shopping facilities at the neighbouring town of Crawley. golf course. While airports can measure their potential passenger market quite accurately. Visitors may also be attracted to airports if leisure facilities are provided. Amsterdam airport opened its landside shopping ‘Plaza’ of 40 shops in 1995. unusually. and shops – aiming to appeal to a number of the different consumer groups at the airport. tours. Frankfurt airport was one of the first airports to develop its landside shops into a shopping mall concept. conferences and meeting facilities can be provided (Table 6. rock climbing. For instance. which is against out-of-town retailing. A notable example is the new Kuala Lumpur airport. benefiting from downtown shopping hour limits which were only relaxed in the mid-1990s. cinema. perhaps. it is much more difficult to obtain meaningful figures for the other consumers at an 145 .The provision of commercial facilities airports with severe surface access problems.1). office complexes. This has a shopping area of 5400 square metres and is easily accessible by private and public transport. such as the Friends of the Earth in the United Kingdom. Elsewhere. They can have a dual purpose in acting as a public relations function or service to the community. medical clinic. consisting of an interactive multimedia centre. an observation hill. Only around 30 per cent of the Plaza’s customers are passengers (Gray. local businesses.

etc. tours. chemists.8 times greater than in landside shops. and sales per passenger were 32 times greater.5 million visitors and meeters and greeters and 3 million staff/employees at Ben Gurion airport in Tel Aviv (Kostelitz. there were 60 000 employees at the airport (Middecke. 64 per cent of the landside purchasers were passengers. with the remaining 7 per cent being local residents and others. A 1995 survey of 47 European airports showed that on average meeters and greeters made up 34 per cent of the customer volume (Schwarz. low-cost/full cost. 2000). the size of this market is quite varied. and in addition. A study of fifteen airports of varying size in Europe in 1998 showed that on average landside shops occupied 37 per cent of an airport’s retail space but only 22 per cent of total sales. land for business development/light industry Market segment Passengers (departing/arriving. it was estimated that 46 million passengers were joined by 7 million meeters and greeters.5 million passengers. (Meznarsic. business/leisure. 13 per cent meeters and greeters.25 million meeters and greeters and 15 000 airport staff along with 13 million passengers (Amore. it is the sales in the airside area of the airport which still brings in the most revenue for the airport operator – although the abolition of intra-EU duty. or booking agencies may not bring in huge amounts of revenues to the airport but may be perceived as adding value to the airport product from the point of view of the passenger and other consumers.1 The different markets for commercial facilities at airports Facilities provided Wide range of retail. travel agents. gift. At Frankfurt airport. 1999). there were 8. Airside sales per square metre were 6.Managing Airports Table 6. For example. and souvenir shops Specialist aviation shops. catering. however. At these airports. At individual airports.) Workers at the airport and in the surrounding areas Local residents Visitors – meeters and greeters Visitors – air transport enthusiasts Local businesses airport. and leisure services Catering. exhibitions.and tax-free sales may have a major impact on this in the future. catering and other essential and leisure services dependent on passenger type Convenience shops. banks. in 1999 it was assumed that in addition to the 8. terminal/transfer. 1996). different nationalities. In the same year. 16 per cent employees. and other essential services Shops. This is due to a number of general factors such as the large international traffic volumes within Europe and the relatively high 146 . 2000). visitor terraces. 8 million other visitors. catering Office/meeting facilities. ages. Geographical characteristics Many of the most successful airports in terms of non-aeronautical income generation are situated within Europe. At most airports. Malpensa Milan airport was predicted to handle 3. which must partly reflect traffic and cultural characteristics but also the methodology used to estimate the figures. 1999). Some landside facilities such as post offices.

1).1 Non-aeronautical revenue per passenger at ACI airports by world region. According to ACI non-aeronautical revenue per passenger for North American airports is much less than in Europe – averaging only US$5. shop or retail sales accounted for 42 per cent of all concession revenue at Brussels airport in 2001 (Figure 6. 2002) shows that European airports as a whole generated US$8 per passenger from non-aeronautical sources in 2001 compared with a global mean of US$7 (Figure 6. These airports are dominated by domestic passengers who spend less. 2001 Source: ACI.2). 2001 Source: Annual report. For example. Concession income is the most important non-aeronautical revenue source. Shopping generates the most concession income and is likely to continue to do so in spite of the abolition of EU duty.and tax-free sales. emphasis is placed on swift efficient connections rather than providing passengers with the time to browse and shop. European airports have also led the way in terms of commercialization and privatization trends with the development of non-aeronautical revenues being one of the most notable outcomes of these more advanced evolutionary stages of the airport industry. 147 . The dependency on the car and the lack of adequate public 10 9 8 Non-aeronautical revenue per passenger (US$) 7 6 5 4 3 2 1 0 Asia/Pacific Europe Africa/Middle North East America Caribbean/ Latin America Total Figure 6.2 Concession revenue: Brussels airport. Other 26% Retail 42% Car parking 21% Catering 11% Figure 6. Also at hub airports. 2002. The 2001 ACI airport economics survey (ACI.The provision of commercial facilities income per capita.

The turning point came about in the early 1990s at around the time when BAA plc acquired a 15-year contract to manage the commercial facilities at Pittsburgh airports. Compared with Europe. transport access to many airports means that the two single most important non-aeronautical sources is car parking (US$1.3 Concession revenue: Washington airports. Singapore Changi airport has built up a worldwide reputation for good shopping – a reputation which new airports such as Kuala Lumpur’s Sepang and Hong Kong’s Chek Lap Kok also wish to acquire. There are also arrival duty. in spite of their widespread use elsewhere in the country.Managing Airports Other 23% Retail 6% Car parking 43% Car hire 23% Catering 5% Figure 6. only began to fully recognize the commercial potential of airports in the 1990s – well behind the European airports. which have relatively more of the total commercial area being allocated to catering concessionaires. The situation in Asia is very different where duty.and tax-free sales are not very significant at most North American airports with the exception of certain airports such as San Francisco.87 per passenger) and car hire (US$0. 1999a).and tax-free revenue is generated from a much wider range of products. 2000). such as pre-ordering products. Again the important role that the car plays can be seen when looking at the concession sources at the Washington airports (Figure 6. which is world famous for its shopping malls.66 compared with US$6.47 in Europe (ACI. For the Washington airports. tobacco and fragrance. Similar practices have been introduced by BAA plc at Indianapolis and Boston airports.3). Another forerunner in airport commercial development in the United States was Portland airport which was of the first airports to introduce a mall concept to the airport with its ‘Made in Oregon’ mall (Citrinot.and tax-free shops at many of the major Asian airports. where traditionally most of the sales have been associated with core products such as liquor. 2001 Source: Annual report. Car parking and car hire together accounted for two-thirds of the concession revenues compared with much less at Brussels airport. 148 .and tax-free income is much more important. Branded shops and catering outlets were rarely found at US airports until this time. the ratio of catering to retail revenue was also much higher. It is surprising that the United States. in Asia the duty.99 per passenger). Los Angeles. This also reduces the overall concession income per square metre for US airports. Shopping is much less important. and Honolulu which handle a large proportion of Asian traffic. This is typical of most US airports. The company replaced the typical newsagent outlet and general store with well-known brands and developed other concepts which it had used with its European airports. with a revenue per passenger value of only US$0. Duty.

1999).The provision of commercial facilities The passenger profile at these airports is changing with the upper-class highspending Asian nationals being joined by an increasing volume of Asian travellers who are of a younger average age and are from the rapidly growing middle classes. Nevertheless. Bahrain. The specialist retail chains which had grown so quickly in the high streets started to appear at airports. particularly in South America. prices can be kept low since the shops are operated as a division of the Department of Civil Aviation and can be subsidized. In addition. All three airports have a history of launching major marketing initiatives to strength passenger awareness of the shopping services and to encourage passengers to use their airports. In Abu Dhabi and Dubai. book. and Sock Shop. The Asian sample also included the major airports from Australia who have been developing their commercial facilities because of privatization and also due to the downward pressure on airport charges due to regulation. are encouraging growth in traffic and broadening the customer base for commercial facilities. there generally tends to be less reliance on non-aeronautical income. the traditional duty-free shop with its internationally branded products and the bland catering services with no recognizable identity. For instance. More variety was also introduced into the catering 149 . In Bahrain. more cost-conscious group of travellers (O’Conner. often closely tied to its government owners. many European airports began to recognize the attraction of speciality retail outlets and the advantages of using familiar brand names such as the Body Shop. Tie Rack. and gift shop. This is partly because many of the airports in these regions have relatively small numbers of passengers and also because the spending power of the local population is more limited. who was aware of the quality and price level of the goods within the branded outlet. Approaches to the provision of commercial facilities . has neither the expertise nor the commercial pressures to fully exploit the non-aeronautical opportunities at these airports. The Middle East is an interesting area where there is a considerable amount of competition between airports and where shopping is used as a major marketing tool to attract passengers. and Dubai have developed extensive duty-free facilities. inbound passengers are now a much more diverse. The branding provided reassurance for the traveller. Moreover. The developing economic conditions in some countries. in a number of these countries the airports have been privatized and have brought in experienced European and North American airport managers who are introducing many tried and tested commercial strategies which have been used elsewhere. Most airports have come a long way since they just provided the generic newspaper. such as in Africa and South America. the management expertise of Aer Rianta International has been brought in to run the shops. In other areas of the world. with more emphasis being placed on ‘value-for-money’ goods. the ACI survey still found that the average non-aeronautical spend per passenger in this region was the highest globally – albeit that the sample was dominated by large airports such as Singapore and Seoul which handle international passengers who have higher spending patterns. The airport management. airports such as Abu Dhabi. In the 1980s. Spending patterns are consequently changing.

which took up considerable valuable floor space. sometimes competing individual outlets. Madrid airport has its ‘Palaces and Museum’s’ outlet which has merchandise inspired by Spain’s culture and heritage. In this area AdP put in world-famous brands such as Hermes. most airports are trying to blend together famous brand outlets with local outlets which can give the airport some kind of identity and can distinguish it from other airports. or Parma ham from Italy. However. Hence.Managing Airports outlets by again bringing in famous brand names as McDonald’s and Burger King. Hong Kong’s Chep Lap Kok airport tries to reflect its unique ‘East meets West’ culture with a wide range of international retail shops combined with both Asian and western restaurants and fast-food outlets. favour a more streamlined airport service. Airlines have been responding to these needs by developing automatic ticketing and self check-in which theoretically should speed up the travel process 150 . Cartier. 2000). The catering area began to be split into a number of different. Amsterdam Schiphol and Singapore Changi airports are good illustrations of such a policy. confectionery and so on. A flavour of the local environment can also be provided by theming the commercial facilities. Certain passenger types. Vancouver airport is themed to represent the physical characteristics and cultural heritage of British Columbia. at Las Vegas airport a number of the outlets are themed after hotels in the city and at Orlando airport there are shops representing the major theme parks in the area. while the new terminal at Santiago airport in Chile tries to depict Chile’s diverse geography from desert to Antarctic conditions (Byrd. Brand fatigue can become a problem – particularly for the frequent traveller who can find that airport shopping can become rather dull and boring. Manchester airport has its ‘Donkey Stone’ pub which is stocked with the local beer Boddingtons and it has a Manchester United football club shop. fragrances. and fragrance shops and replace them with a new retail concept based on the large Parisian avenues called Passenger City. rather than according to who sells them. For example. All the staff wear the same uniform. particular business travellers who are seeking a quick transit through the terminal. at Amsterdam airport all the shops in the airside area are branded under the ‘See Buy Fly’ identity and the outlets are grouped by product type such as electronics. the widespread adoption of branding at airports has meant that there is now greater similarity between the shopping facilities at many airports and less diversity. The airport operator decided that it would get rid of its traditional duty. The development of airport terminals into shopping centres has not been universally popular. Some airports have chosen to enforce and promote an airport brand rather than the individual brands of the high street retailers. The character and the culture of the city or the country which the airport serves can be represented by selling local merchandise or gourmet products such as cheese from Switzerland. For instance.and tax-free. In most cases. chocolates from Belgium. Aeroport de Paris is just one example of an airport company which launched a new retail strategy in 1994. the large sit-down restaurant. became a relic of the past. and Christofle but also shops representing the tradition of Paris and France such as Musées de France and others selling gourmet French products. The skill is in finding the correct balance between international recognized global brand retailers and local shops and catering outlets which give the airport an individual identity. All sold products are placed in bright yellow branded shopping bags which have become a very recognizable feature in Europe and beyond.

the schemes not only provide the airport operators with a mechanism to encourage repeat buying but also enable them to find out about their customers and communicate with them when new products and services are being introduced. 2002). Some airlines have also complained that airports have been giving too much attention to developing commercial facilities while ignoring basic operational requirements. 2000). More recently. At Amsterdam airport. for example. BA complained about the insistence of BAA for compensation due to dilution of its car parking income if BA provided fly-through check-in facilities and also that first class passengers had to be routed through BAA’s retail facilities on their way to their airline lounge were further examples of the priority which BAA gave to commercial facilities. particularly since the demise of intra. Airport operators such as BAA plc and Aer Rianta have encouraged loyalty purchases at airports by introducing loyalty cards such as BAA plc worldpoints and the Dublin airport executive club. a major charter airline.The provision of commercial facilities and reduce the time a passenger has to spend in an airport before departure (Conway. was aggrieved that their request for greater space in the gate lounge areas had been refused although extra space had been provided for duty-free outlets (Monopolies and Mergers Commission. 151 . As with high street shopping. in the mid-1990s at Heathrow airport BA complained about the lack of airline information desks at the entrance to the Terminal 1 departure area because the space was being occupied with commercial facilities. Similarly Airtours continued to complain that pressure to maximise retail income at Gatwick had led to inadequate provision of passenger facilities such as seating and toilets and that additional shops had distracted passengers from making their way to the gates (Competition Commission. Some concessionaires are appointing service assistants to greet customers in an attempt to make the shopping experience a more personal one (Anderson. airports have also been applying other tried and tested retail practices. while at Gatwick airport Airtours. The airlines. which have further increased resentment to airport shopping from certain passengers. A correct balance between commercial and operational space is needed so that the non-aeronautical revenue is optimized without compromising the operational effectiveness – but this is no easy matter. the perceived value of such initiatives tends to fall as they are adopted by more and more operators. while welcoming the fact that non-aeronautical income can reduce an airport’s reliance on aeronautical charges. Clear signage to gates. the See Buy Fly retailers are partners in KLM’s Flying Dutchman frequent-flyer programme.and tax-free shopping. have made ‘shopping announcements’ instead. a few airports. in 2001. There have been claims that passengers have delayed flights because they have been lost in the duty-free shops – so some airports have now placed flight information systems in the commercial outlets as well.EU duty. 1999). As well as adopting high street preferences for speciality shopping and branded products. While flight departure ‘tannoy’ announcements have long since been abandoned at most airports because they have proved ineffective and annoying. 1996). For instance. This has been partly as a result of airports employing professional retail managers from the high street rather than always making internal appointments. have periodically expressed concerns that the shopping function of the airport has interfered with the normal flows of passengers through the airports. However. is difficult to achieve if the airport is cluttered with retail and catering signage and branding.

in effect. It must be remembered. Vienna airport had a large ‘T’ in the terminal advertising the telecommunication industry but research showed that passengers did not like this and wanted airport logos instead (Bates. tobacco. 2002). trolleys. such as Amsterdam airport’s practice of supplying travel agents and KLM offices with their ‘See Buy Fly’ catalogues. A full refund or exchange will be given for any goods whether they are faulty. and Internet kiosks as well as the traditional billboards and light boxes. Short-term large-scale promotions are also becoming more popular such as the 4000-litre. plasma screens and the sponsorship of airport furniture such as clocks. At an increasing number of airport. that many purchases at airports are made on impulse and form part of the ‘leisure travel experience’. baggage carousels. They may be better able to plan their shopping in the limited time period which they have available. In some ways. Information provided on the web can complement or replace more traditional promotional methods. and cosmetics will be no higher than at other major airports in the Asia Pacific region. E-commerce may also offer other non-aeronautical revenue opportunities for airports in the form of web advertising and the selling of travel-related products. Prices for other goods will be no higher than established downtown shops. inappropriate. products can be pre-ordered for collection at the airport. scrolling billboards. a refund of double the price difference will be given. airports have also introduced value and money-back guarantees which have been commonplace on the high street for many years. Special insurance had to be taken out and the floor had to strengthened! However. Many airport websites now give details of the commercial facilities which are available and so passengers can be more prepared when they visit the airport. These are seen as particularly important because of the perceived expensive ‘rip-off’ reputation of many airports. Advertising has become much more very varied and interactive with for example. it is important with airport advertising not to inhibit ease of movement through the airport or to irritate the passengers. perfumes. In the case of BAA plc and some other airports. For example. Singapore Changi airport has two such guarantees: 1 The price of liquor. and can achieve far greater widespread coverage. Advertising is also an area where airports can generate a significant amount of revenue.Managing Airports Moreover. If higher prices are found at the airport. For example. or unwanted purchases. now participate in ‘airport shopping’ without leaving the comfort of living room! Such a development will no longer mean that airport shopping has to be limited to what the passenger can carry. 2 No discussion about retail activities would be complete without references to the impact of the Internet and e-shopping. merchandise can be delivered to home addresses and so consumers can. For example. research undertaken in 2002 based around a fictitious brand Bleu showed the total awareness of the brand was 31 per cent after just 1 month (BAA. however. the Internet must clearly be seen as a threat because there is a whole new range of discounted goods which are now available and easy to access. The Internet can also bring many opportunities for airports if strategies are developed in conjunction with the terminal facilities. 2002a). 152 . 7-tonne aquarium filled with 2000 tropical fish which was installed in Heathrow’s Terminal 4 to promote gin in 2000. aboriginal arts and crafts can be bought on the airport website. At Vancouver airport. with airports increasingly being seen as an important advertising medium.

BAA plc used this type of contract with its duty-free retailers in the 1990s before it operated these facilities itself.and tax-free sales in 1999. The airport operator will usually only provide the shell for the outlet and it will be up to the concessionaire to provide the capital investment for fitting out the facility. such as 153 . These have been used for car parking facilities at airports for many years. there is no guarantee that the concessionaire will aim to maximize its sales as it may be more concerned with profit margins. Alternatively. although this can vary quite considerably and there may be options for renewal. the airport operator may choose to enter into a management contract with the retail or catering company. BAA plc only adopted this approach in 1990s to enable it to have total control over the whole retailing process from suppliers to warehouses to customer purchases and to provide it with opportunities for international expansion. There are a few companies. such as duty. 1998). The fee may also increase at a faster rate than the level of turnover in the belief that concessionaires will be in a better position to pay higher fees once all basic fixed costs have been covered (Freathy and O’Connell. For Aer Rianta this is primarily because it has built up much expertise in this area being directly involved with such operations since the first shops were opened in the 1940s. Other examples include a number of regional UK airports. Car parking tends to be the only commercial activity which is provided by a substantial number of airport operators themselves since it generally requires less specialist skills and also greater capital investment by the airport operator. Some airports. The contractual details When airport operators contract out their commercial facilities they usually enter into a concession contract with the companies providing the services.The provision of commercial facilities The commercial contract and tender process There are various ways in which commercial facilities can be provided at airports. since this revenue stream will be linked to the concessionaire’s sales rather than profit volumes. particularly smaller ones. A typical length for the concession will be around 5 years. The airport operator will be assured of a certain amount of revenues. This typically involves the concessionaire paying a percentage of sales to the airport operator often in addition to agreeing a minimum annual guaranteed amount. It is currently not a popular approach for other commercial activities but the idea has generated some interest – particularly since the abolition of intra-EU duty. such as Aer Rianta and BAA plc who have chosen to provide some facilities themselves. Such an arrangement will be relatively low risk for the airport operator which will tend to have little responsibility over the commercial facilities. However. This lower-risk option is usually chosen because the airport operator does not have specialist skills required or a detailed understanding of the market environment. The turnover fee may vary from as little as 5 per cent for some landside commercial activities to up to 50 per cent for facilities with higher profit margins – notably duty. Most airports have chosen to contract out these services to specialist retail and catering companies. may opt to offer their airports as a total retail package to a master concessionaire who will then in turn seek specialist operators to run the individual outlets.and tax-free sales.and tax-free products.

While selection criteria will vary from airport to airport. Examples of this practice at home airports are relatively rare – Amsterdam airport used to have such an arrangement with its catering facilities. vision.). This type of arrangement can be on a profit. They have to work together following common objectives to optimize revenue and profit levels and sharing the risk. the concession fee paid) and the more qualitative terms (i. Such a practice is not so widespread in some other more developing areas but is usually the most effective way of ensuring the best contractual arrangements. in recent years. etc. The problem of overbidding was one of the key reasons behind ACI Europe’s attempt to develop a tender code (ACI-Europe. This has led to a tendency to overbid in offers. Aer Rianta. such a situation will not be sustainable in the longer term. The objectives of this code was to facilitate tender processes by recommending standardized tender procedures and to establish generally recognized selection criteria based on a combination of qualitative and quantitative factors. entered into a number of joint venture agreements in order to provide commercial facilities in the CIS and the Middle East. Some airports will just choose the bid which will generate the highest revenue – indeed.or sales-sharing basis or a mixture of the two. It should enable the airport operator and the concessionaire to develop a much more longer-term relationship with each other than is typical with a traditional concession contract. A points system was developed which considered three different areas. quality. namely appraisal of the tenderer’s qualities (size and range of activities. This may not be an easy path to go down. and Asia an increasing number of concession contracts are automatically put out to tender when they come up for renewal.e. appraisal of the business plan (market analysis and product strategy. While in the short run this will benefit the airport operator with high levels of concession revenue.Managing Airports Birmingham airport. 1999). financial reliability). particularly in Europe. North America. There are many other factors which will also play a role. generally the evaluation of offers will consider both the financial terms (i. There are perhaps more opportunities for this type of arrangement when an airport operator is wishing to expand its involvement to other airports. however. which now have profit share style management agreements for several concessionaires (Savage.e. turnover forecast. innovation. specific experience. and such an approach may be costly in management time both while the contract is being negotiated and once the agreement is in place (Gray. for example. in some countries such as Singapore and Israel they are required to do so by law. 2000). 2000). organization/personnel/investments) and assessment of the concession fee offered. A third option is to have a joint venture arrangement when the airport operator enters into a partnership with the specialist retailer or some other organization to provide the commercial facilities. Within Europe. The airport operator may be able to influence some of these factors – but by no means all of 154 . The concessionaire will loss money and have to renegotiate conditions with the airport operator or be forced to abandon its airport operations completely. shop design. Factors driving success Choosing the right concessionaire and negotiating the most appropriate contractual agreement is crucial if an airport is going to fully exploit its commercial opportunities.

security or immigration will have the reverse effect. the UK carriers Airtours and Britannia. This has meant that commercial facilities very often are not ideally situated or have been added on later as an afterthought. and foreign currency fluctuations. is all about providing facilities close to passenger flows and not in areas which are ‘dead ends’ or are too far from passengers’ view. and catering outlets. level of taxation. and Bahrain and some Asian airports serving destinations such as Singapore. E-shopping. Kuala Lumpur. a large proportion of the airports which are in use today were designed without taking sufficient account of the commercial opportunities which airport terminals can offer. necessary to diversify and support specialist retail and catering outlets (Gethin. space and design of facilities. more specialist shops can be added until finally the airport can be considered as a shopping centre (Jones. One 155 . All too often. newsagent. thought to be around 5 million passengers. allow prebooking of goods in order to catch some business before the passengers can see what the airport competitor has on offer. There is also competition from the in-flight sales of airlines. Just as in the high street. 2000). Successful concession planning. competition can come from downtown tax-free outlets for international travellers.The provision of commercial facilities them. and reduce or even eliminate the dwell time that passengers have for browsing in the shops and having something to eat or drink. First. competition exists with discounted electrical and other high street businesses and from the growth of factory outlets. concession planners get involved at a much too late stage of the terminal design and development process (Gray. Notable examples of airports which are in a particularly competitive situation are those in the Gulf such as Dubai. Walsh. A change in the flow line of passengers can have a dramatic impact on concessionaire’s sales. In Europe and North America. which are allowed in a number of countries. In addition. Clearly. Airports go through different evolutionary stages as regards their commercial income depending on their size. However. Understanding the mix of passengers and planning the facilities to match as closely as possible their needs and preferences is paramount to maximizing the revenue generating opportunities and return on investment. These airlines. as previously discussed. outlet size and mix is very important as is the location. particularly the charter airlines. As the airport grows. Also small airports with limited passenger traffic are at a distinct disadvantage since they will not have the critical mass. inflation rates. which can come from a variety of different sources. Small airports can only really offer the basic facilities such as a duty-free shop. for instance. 1997). 1998b. For instance. Purchasing patterns will also be affected by delays at an airport. at least when passenger purchases are being considered. lengthy operational delays within the terminal. such as long queues for passport control. Spending by all passengers will be influenced by the general economic climate. A delay of an hour or so for a departure slot may give passengers extra time to visit the shops or catering outlets. Factors to consider include growth in gross domestic product (GDP) and consumer expenditure. 2002). and Hong Kong. Then there is the competition for airport commercial facilities. particularly in Asia. there are other airports. Such a delay may be popular with the commercial department but not with anyone else! On the other hand. is quite likely to develop into a major competitor as well. an airport handling predominantly domestic business travellers is likely to be in a less favourable position for generating commercial income than an airport with many long-haul leisure passengers. the nature of the airport traffic needs to be taken into account. Abu Dhabi.

1992). must be found. Thus. Passengers also need to feel relaxed when they shop and so they tend to have a preference in buying from outlets which are situated within the vicinity of the departure gates – once all essential processes such as check-in and security screening have been completed. but also for staff. The amount of time a passenger has at an airport will obviously influence their shopping behaviour. BAA plc has estimated that in the domestic lounge in Terminal 3 at London Heathrow the average dwell time for economy passengers is 49 minutes compared with 27 minutes for business class and 13 minutes for first-class passengers (Toms. 2000). This is partly due to a drive for 156 . 2001). with their concessionaire partners. but not too large that consumers may be deterred by an appearance of inactivity and empty space. Problems have also occurred for airports in European countries which have signed up to the Schengen agreement and have abolished immigration controls with other Schengen countries. resulting in reduced custom for each outlets. BAA plc has also calculated that the incremental airport spend for each additional 10 minutes available time is £0. it can have a major impact on a passengers image and perception of the airport. 2000). 1998). Catering outlets can compete with passengers’ dwell time in shops and so they need to be positioned near to the retail facilities but must not interrupt the flow. Particular problems can arise from terminals which are of a linear design. Shops and catering outlets have to be large enough so as not to give a congested and overcrowded image. This was the situation with the fourth terminal at London Heathrow Airport when it first opened. Airports serving low-cost carriers often find that the rapid growth in passenger numbers which occurred makes it very difficult in the short-term to provide adequate and appropriately situation commercial facilities. such as Munich airport. Measuring non-aeronautical performance Airports. because very often facilities have to be duplicated which can be costly until there is sufficient throughput of passengers to support all the facilities. Different types of passengers spend different average dwell times in the lounge. The outlets should. They also will not want to walk long distances to be able to shop.Managing Airports option. be on the same floor levels as the departure gates. meeters and greeters and local residents. ideally. located in secondary sites or because subsequent extensions of the terminal have significantly shifted the main direction of passenger flows. as having to go through the inconvenience of changing levels may deter some passengers from visiting the commercial facilities (Doganis. have become increasingly active in monitoring their non-aeronautical performance. many airports cannot maximize their commercial spend because their facilities may have been inappropriately designed as at Narita airport in Japan.80 for domestic passengers and £1. this has caused unnecessary duplication of facilities. Select Service Partner found that typically catering income accounts for 2–3 per cent of airport income but 20–25 per cent of perceived image (Allett. is to place popular outlets like dutyand tax-free shops in the ‘weak corners’ outside the main flow lines and the less popular outlets in the ‘strong corners’ (Haugaard. adopted by Brussels airport to ensure that passengers pass by all outlets. Landside shopping is different as convenient locations not only for passengers. Whilst catering tends to account for a fairly small share of total airport commercial revenues.60 for international passengers (Maiden. At some airports.

15 0. The latter measure has the advantage in that it can be used to compare airport performance with other retail facilities at other sites such as shopping malls.45 5 885 4 224 3 361 1 003 17 914 6 786 3 278 1 596 902 21 538 3 435 2 861 2 066 1 249 25 000 Source: Competition Commission (2002). in 2001.58 1. and North America were investigated. 157 . These included geographic location. are being bought in to manage airport facilities.27 0.26 0.02 0.31 0. Making inter-airport comparisons is difficult because of the commercially sensitive nature of the information required and lack of reliable industrywide data. the Geneva airport survey found that 46 per cent of respondents felt that airport prices were too high (Geneva Airport.12 2. and analysed various factors which helped explain the comparative results which were obtained.37 0. 2002). with experience of assessing retail performance at other locations.68 0. Asia Pacific.39 0. Table 6. One of the most comprehensive benchmarking studies is the Airport Retail study which has been undertaken since 1998 (Favotto. Africa.24 0. 2002) In the 2000–01 research thirty one major airports in Europe. Consumer satisfaction levels and perceptions of value for money are assessed by many airports through customer surveys (as described in Chapter 4). Duty-free generated by far the largest amount of income per passenger and square metre at Heathrow and Gatwick due to long-haul passengers – but this was not the case at Stansted with its different passenger mix.24 0.2 Concession income at BAA London airports.20 0.12 2. passenger penetration levels and sales per square metre to analyse the economic performance of their commercial facilities.32 0. 2000–01 Heathrow Concesssion income per pax (£) Duty-free Other airside Landside Catering Bureaux de change Other Total Concession income per square metre Duty-free Other airside Landside Catering Bureaux de change Gatwick Stansted 0. For example. In addition.37 0. airports use indicators such as sales per passenger.58 0.92 0. ownership model.73 0. The study looked at performance indicators such as retail revenue per passenger and retail revenue per square metre both airside and landside. By way of illustration.2 shows concession income per passenger and per square metre for BAA London airports.The provision of commercial facilities better performance monitoring of all aspects of the industry and also because retail experts. The relative small amount of income per square metre which was generated from catering facilities is typical for most airports.09 1. the volume and Table 6.

size. and perfumes and a few other items. 1993 as the single market was ‘born’. was one of the first airports to offer taxfree electronics and photographic material.and tax-free outlets but also air and ferry travellers. In addition. tobacco.and tax-free sales Background For much of the travelling public. airport retailing is all about duty. ranging from the traditional alcohol. watches and jewelry. 1998). the number. The rationale was that it was illogical and incompatible to have such a system when the EU should be behaving as a single market with open borders. Consumer perception of value for money at airport duty. such as Austria and Germany. Portugal. Spain. tobacco and perfume products to camcorders. sports clothing. The first duty. is presented in Figure 6. This shows the dominance of Europe among the best performing airports (Heathrow. few passengers are actually totally aware of the differences between tax-free shopping (when the sales/value added tax – VAT – on goods such as perfumes and cosmetics. and Dallas Fort Worth). In response.and tax-free shopping and nothing much else.and tax-free shopping with many airports substantially increasing the area dedicated to such shops and offering a much more diverse and varied product selection.and tax-free sales would be abolished on 1 January. retail revenue per square metre. Duty taxes are again highest in the Scandinavian countries and lowest in Greece. It was argued that EU consumers were subsidizing not only duty. and to be unfair trading in relation to downtown shopping. It was originally intended that all EU duty.4 with the average value indexed at 100. Then came a retail boom in duty. Moreover. The 1990s were a period of uncertainty for most EU airports. such as rail. This was primarily in response to the rapid increase in passenger traffic at that time and particularly the growth in package holidays and other forms of leisure travel. Sweden. another shop was opened in Prestwick airport in Scotland. these shopping privileges were considered to distort competition between modes of transport with no access to these sales. and Italy. Copenhagen. One of the indicators used. In 1951. and associated manufacturing industries collectively argued that duty-free privileges did not distort or 158 . ferry companies. location.Managing Airports nature of traffic. New York. most VAT-free sales are not allowed. Vienna. for example. and Paris Charles de Gaulle) and North America among the worst performing airports (Montreal. other airports had opened similar shops and had started to expand the range of merchandise on offer. mix. Amsterdam Schiphol airport.and tax-free airport outlet was opened in 1947 at Shannon airport in Ireland. density of outlets. In some countries. The shops sold a small range of alcohol. and other fashion accessories. charter airlines. and the area devoted to retail. and Norway to around 15 per cent in Spain. Gatwick. The ending of EU duty. and electrical equipment is not charged) and duty-free shopping (when the higher ‘duty’ tax on alcohol and tobacco is excluded).and tax-free shops will thus very much depend on their country of origin. This is in spite of the expansion in the range and type of other retail activities on offer. and Luxembourg. These shops were designed to be attractive to transatlantic passengers on refuelling stops (Freathy and O’Connell. the airports. Value added tax rates within Europe vary from above 20 per cent in Denmark. By the 1960s. clothes.

159 Index value (100 = Average) 100 150 200 250 300 350 H 50 0 ea G at w ic k p ou gr ’H th ro w C hi ca go O op C A Source: Favotto (2002). BA Figure 6.4 Airport retail revenue per square metre in 2000–01 Europe North America a en re ha ge Ka n ns Sy ai dn C ey ha rle N ar s de ita G Va aul nc le ou v Br er is ba Si n ng e a Am po st re er M dam el bo ur Br ne us s Fr els an kf In u di an rt ap M St ol is oc an kh ch es ol te m Ar r la nd a Sa n O Fr rly M on anc t i H rea sco ar ts l Do fie r ld val At la nt a Pe rth N Y M g ad rid rou D p al la Bar s Fo aja s rt W or th Vi en na Jo C ai h r M ann ns on es tre bu al r M g ira be l Asia-Pacific and Africa Average .

intra-EU duty. ferries and in other public places. The immediate impact of loss of EU duty. Also companies such as BAA plc and Aer Rianta had bought duty-free concerns outside Europe in an aim to grow their businesses in areas which would be unaffected by EU developments. This research concluded that EU airports would lose at least 40–46 per cent of their total duty. this meant that on 30 June 1999. This was largely the result of airports being 160 . 1999. The Danish government. looking at the impacts on the airport. with not enough effort being channelled into preparing for change if abolition were to occur. plastic bags. which would have a knock-on effect throughout entire national economies. This was because the negotiation position with suppliers would be weakened. however. a disbelief that abolition would really occur in 1999 meant that when 1 July arrived many airports were not nearly as ready as they could have been.and tax-free sales it quickly became apparent that the airport industry had focused too much of its attention on fighting the campaign to save the sales.Managing Airports hamper the development of the single market and that abolition would result in millions of jobs being lost. Airport strategies In the first few months after the abolition of duty. It was claimed that the cost of travel would have to rise substantially to compensate for the loss of income. and customer choice would be reduced with suppliers less eager to provide marketing support and trial new products (Institute for Retail Studies. It was argued that this large-sales loss would fundamentally alter the cost structure and profit potential of airport retailing. 1997). and the Federation of Transport Workers Unions. but the prospect of no EU duty. ETRF. The IDFC launched a major awareness campaign at airport terminals. and other bodies such as charter carriers and regional carriers associations.and tax-free sales in many cases was much greater than was expected. Messages such as ‘Act now to keep your Duty Free’. Generally. however. Anti-abolition lobbyists (airports. During this reprieve period the arguments for and against abolition were hotly debated. Admittedly. as well as changing consumer expectations and retail trends. charter. The European Travel Research Foundation (ETRF) commissioned various studies to support the lobbyists’ arguments. By 1999. almost all governments had been persuaded in favour of another 30-month extension to the abolition date in order for the industry to be adequately prepared. and in leaflets. was not convinced by the arguments. and low-cost scheduled airline industry. a number of airports had broadened their retail mix and diversified into new activities in the 1990s. the gross margin achieved on duty/tax sales would fall and lessen investment opportunities. the proponents to the abolition managed to achieve a six-anda-half-year extension of these sales until 30 June.and tax-free sales and at least 58–64 per cent of duty. 1997. manufacturers. Through active lobbying of government ministers. and so on) co-ordinated their work through the International Duty Free Confederation (IDFC) which was based in Brussels.and tax-free sales were abolished. (Air Transport Group.and tax-free sales was only one contributing factor. ferry companies. which had led to this development.and tax-free profits. ‘1999: Travelling would never be the same again’ or ‘Duty-Free: It doesn’t have to go’ were displayed on placards. Since unanimity among EU members was needed to approve the extension period. 1997).

Source: Compiled by author from annual accounts. To address the confusion among passengers. The key message that most were trying to get across was that there were still bargains to be found within the EU and that outside of this area the situation remained unchanged (Newhouse. the loss of revenue within the first year of operation after this development was in many cases considerable (Table 6.and tax-free shopping would no longer be available after 30 June 1999. Tax paid revenue up by 12%. rather than from January to December. a number of airports launched major marketing campaigns. At BAA airports for instance.3). explaining what passengers travelling to EU destinations and beyond could and could not buy at airport shops. While for many airports. Total sales (including duty/tax free) revenue up by 11% Shopping revenue (duty/tax free and paid) down by 5% in 1999 compared with 1998 Dusseldorf Paris Vienna Note: For UK airports the impact is likely to be greater since the financial year runs from April to March. the situation improved after the initial reaction to abolition. At many airports passengers for both EU and non-EU destinations share the same retail terminal area and so the airports have had to devise Table 6.The provision of commercial facilities victims of their own very successful awareness campaigns. Landing fees raised by 58 pence per passenger (around 12% increase) Duty/tax free revenue down by 46% in 1999–2000 compared with 1998–9 Duty/tax free revenue down by 22% in 1999 compared with 1998 Duty/tax free shopping centre revenue (includes duty/tax free) down by 23% in 1999 compared with 1998.and tax-free sales on airport revenues Airport Amsterdam Aer Rianta BAA Birmingham Brussels Copenhagen Impact on revenues Duty/tax free revenue down 12% in 1999 compared with 1998. in partnerships with their retail concessionaires.3 Short-term impact of the loss of intra-EU duty. Other concession income up 7% Shops sales down 44% and related profits 70% July–December compared to January–June Duty/tax free revenue down by 26% in 1999–2000 compared with 1998–9. have absorbed the value added or sales tax themselves – effectively offering the merchandise still at ‘tax-free’ prices. 2000). retail income was down by 20 per cent in July 1999 compared with the equivalent amount in 1998. Other concession revenue up by 14% Landing charges up 15% in 1999 and 13% in 2000 Duty/tax free revenue down by 20% in 1999 compared with 1998 Duty/tax free revenue constant but spend per passenger down by 6% in 1999 compared with 1998. Many of the EU airports. 161 . The travelling public was sold the message that duty. and hence stayed away from all airport shops – even those passengers who could still use them. Some airports are also selling a selection of liquor products at duty-free prices but at most airports cheaper tobacco is no longer available to EU passengers.

Managing Airports

some method for identifying the merchandise which is on sale to these two types of passengers. At some airports, for example, at BAA airports, goods which have been displayed in areas which are colour coded blue are made available to EU passengers while products in green areas are available to non-EU passengers. Understandably, many passengers were confused by such a system and this has prompted the airports to provide more explanatory literature to clarify the situation. Elsewhere, a number of European concessionaires, airports, and ferry companies have joined together to form the Travel Value Association. All these organizations have adopted the common and recognizable ‘Travel Value – Buy more for less’ trade mark on their shops, merchandising and advertising in order to indicate to the travelling public that there are still good savings to be made when travelling. This organization also embarked on a large advertising campaign between Easter and autumn 2000. Some major airports such as Frankfurt, Vienna, and Dublin are members of this association. At the same time the airports were anxious to put across the message that duty- and tax-free sales still exist, as normal, for non-EU passengers. At Manchester airport, for example, large notices were placed at check-in informing non-EU passengers of this fact. Airport web sites gave details about what passengers can buy. Non-EU European airports where duty- and tax-free sales can still be made have also been trying to capitalize on this situation. Such strategies have undoubtedly enticed some passengers back to the shops and softened the blow of the loss of EU duty free. However, EU airports have still been very much aware of the need to increase the volume of retail income if they are going to make up for the lower profit margins on EU sales. Some airports, such as Copenhagen and BAA have introduced arrivals shops in the baggage reclaim area or after customs where discount purchases can be made while others have arranged for goods to be ordered on the outbound part of a journey and to be collected on return. Airports with significant amounts of domestic traffic have been making these passengers aware that for the first time they, too, can have access to discount shopping at airports. Before abolition in June 1999, it was widely predicted by the ERDF and other bodies that aeronautical charges would have to be substantially increased to compensate for the reduction in non-aeronautical revenue. Only a few airports have adopted this strategy of increasing their dependency on aeronautical fees. Copenhagen raised its charges in January 1999 and 2000 by 15 and 13 per cent, respectively – although this airport had not raised their charges for a number of years prior to this. Aer Rianta wound up its discount scheme for new traffic and carriers. BAA plc’s regulator allowed an increase in charges of 70 pence per passenger – equivalent to an increase of around 15 per cent. In the end BAA plc raised charges by 58 pence per passenger. By contrast the regulator did not allow Manchester to raise its charges even if it so desired. Other airports such as Amsterdam, Frankfurt, and Paris decided not to increase their charges to compensate for the loss of non-aeronautical revenue. It is difficult to assess the more longer-term impact because of the difficulty of disintangling the effects of the loss of duty free from all the other developments at the airport – particularly 11 September 2001. However, Figure 6.5 shows that the share of non-aeronautical revenue has generally decreased at European airports since 1998 and clearly one of the contributory factors must be the ending of duty free sales. It is interesting to note that Geneva airport, which is not in the EU, maintained a constant share of non-aeronautical revenue over the years in question
162

The provision of commercial facilities

70 60 Non-aeronautical share (%) 50 40 30 20 10 0
Am st er da m s Ba el -M ul ho us e rm Bi in gh am C op en ha ge n Fr an kf ur t G en ev a G la sg ow Lo nd on G at w ic k Lo nd on H ea th ro w M an ch es te

1998 1999 2000 2001

Figure 6.5 Non-aeronautical revenue share (%) at European airports, 1998–2001
Source: Airport accounts.

unlike all the other airports. Table 6.4 also shows that non-aeronautical revenue income per passenger at UK airports went down by 10–30 per cent in many cases. Again it is impossible to identify how much of this reduction was attributable to duty- and tax-free losses – albeit that this was before 11 September 2001. For many airports as well as a fall in overall non-aeronautical revenues, the abolition of EU sales has meant a fundamental change in the mix in revenues from different market segments. For example, at Copenhagen airport, the passenger split is roughly 70 per intra-EU and 30 per cent non-EU. Before 1999, the retail split mirrored these passenger shares but now 30 per cent of sales come from intra-EU passengers and 70 per cent from non-EU passengers (Bork, 2002).

e Vi nn a r

The impact of 11 September 2001
Shortly after the abolition of EU duty free, airport commercial managers had to face a new challenge, namely the impact of 11 September 2001. There are a number of factors to consider which have had different influences on the airports. First, there were obviously less passengers to generate commercial revenues. However, the overall impact of this decline depended very much on the type of passengers using the airport. For example, post 11 September 2001, the actual concession revenue per passenger from retail facilities at BAA airports went up from 4.12 to 4.19 because of the decline in US passengers who typically spend relatively little at airports (BAA, 2002b). Revenues have also declined because of the additional time being spent during check-in and other processes because of more stringent security requirements. However, in some cases passengers arrived earlier at the airports because of security requirements and actually had more time to shop. There have been examples of catering spend going up because traditional airlines have cut
163

Managing Airports
Table 6.4 Changes in non-aeronautical revenue at UK airports, 1998–2001 Airport Terminal pax (thousands) Non-aero income ( 1000) (£) Non-aero income per pax (£) Change 2001/ 1998 (%)

1999/98 2001/00 1999/8 Belfast International Birmingham International Bristol International Cardiff International East Midlands Edinburgh Glasgow Humberside International Leeds Bradford International Liverpool London Gatwick London Heathrow London Luton London Stansted Manchester Newcastle International Southampton International Teesside International 2 669 6 716 1 824 1 250 2 145 4 614 6 566 434 1 409 936 29 555 61 037 4 385 7 535 17 405 2 988 754 674 3 175 7 712 2 210 1 547 2 237 5 645 7 022 461 1 608 2 071 32 242 64 670 6 364 12 399 19 112 3 376 869 757 8 493 31 599 13 928 5 441 11 279 13 512 26 417 2 622 5 288

2001/00 1999/8 2001/00 11 022 31 132 19 482 4 864 9 698 16 569 24 215 3 668 4 824 3.18 4.71 7.64 4.35 5.26 2.93 4.02 6.04 3.75 3.47 4.04 8.82 3.14 4.34 2.94 3.45 7.96 3.00 2.30 5.99 8.22 4.84 5.17 5.89 3.21 7.76 2.69 9.1 14.2 15.4 27.8 17.6 0.2 14.3 31.7 20.1 13.9 28.5 1.8 21.3 27.3 12.2 10.7 15.3 32.8

2 501 4 767 2.67 247 600 193 000 8.38 493 100 531 600 8.08 26 946 30 771 6.15 53 558 64 109 7.11 116 806 112 569 6.71 10 736 10 834 3.59 5 071 6 740 6.73 2 700 2 038 4.01

Source: Centre for Regulated Industries (CRI).

back on their in-flight refreshments and low cost carriers, who provide minimal or no catering, have expanded their market share since 11 September 2001. Some airports have been quite innovative in providing catering kiosks and carts for passengers who are waiting in long security queues. However, these security queues at some airports have blocked important retail areas which previously had been in prime locations. It is therefore very difficult to disintangle all these different factors to assess the overall impact on commercial revenues. In the United States, it is estimated that overall non-aeronautical revenues declined by 4.5 per cent in 2002 compared to 2001 for the whole airport industry (ACI-North America, 2002). For individual airports, the impacts were very varied. For example, at Amsterdam airport, prior to 11 September 2001 concession revenues were up 3 per cent but then in the remaining months of the 2001 they were 4.8 per cent lower (Schiphol Group, 2002). At Brussels airports similarly commercial sales were up by 5 per cent before September 2001. They then fell considerably and in the worse month – November – were down by 20 per cent. This was due to a decline in passenger numbers, particularly with the demise of Sabena and more stringent security measures which reduced the dwell time. Also the airport refused entry to the terminal to any visitor that was not a passenger because of the social unrest following the announcement of Sabena’s collapse and so clearly this eliminated the spend from this important market segment (Brussels International Airport Company, 2002).
164

The provision of commercial facilities

Some airports, notably in the United States, have had to redesign many of their commercial facilities in order to conform with new security measures, which has been costly and has led to a decline in non-aeronautical revenues. For example, previously meeters and greeters had been permitted to accompany passengers right up until the gates but this practice has now been stopped. Most of the commercial facilities were near to the gates and so this has caused a reduction in the commercial revenue generated by non-passengers. Also car parks near to the terminal which generated large amounts of income have had to be closed or reallocated for security reasons since the FAA has brought in a 300-foot rule which prevents any vehicle being parked within that distance of the terminals. A notable example is Los Angeles airport which had a terminal design surrounding the central parking facilities. This rule has also affected the courtesy buses which were another good source of commercial revenue for the airports. Some airports have reacted by introducing ‘express parking’ by increasing the number of shuttle buses to transfer the passengers from the car parks to the terminal as at Dallas Fort Worth airport, by bringing in valet parking as has happened at Jacksonville airport or by installing automatic vehicle identification technology (Pilling, 2002). The events of 11 September 2001 have also created a much more volatile trading environment for concessionaires. Some airports, such as San Francisco and Los Angeles have suspended their minimum guarantees and/or cut turnover rates in order to help the concessionaires. A number of retailers have also been calling for concession payments to be linked to passenger flows as well as turnover so that the fees can be adjusted if traffic suddenly falls (Rozario, 2002).

Aer Rianta: becoming an international retailer
Aer Rianta is an interesting example as it was one of the first airport companies to expand beyond national boundaries and get involved with the management and operations of commercial facilities at other international airports. Aer Rianta is the Irish state-owned airport company which has been responsible for managing the country’s three major airports, namely Dublin, Shannon, and Cork since 1937. It has a long history with the provision of commercial facilities, as the world’s first duty-free shop was opened at Shannon airport in 1947. It continues to operate its own duty-free and travel-value shops at the three airports and also provides fuelling and catering services at Shannon airport. It also runs a college of hotel management in Shannon and in 1990 acquired a chain of hotels, Great Southern Hotels. In 1988, Aer Rianta International (ARI) was set up as a wholly owned subsidiary of Aer Rianta. With a population of less than 4 million, Aer Rianta recognized the limits of its own market and aimed to use ARI to promote commercial activities in locations outside of Ireland. The first undertaking was a joint venture company Aerofist with Aeroflot Russia, the Moscow airport authority and ARI each having a one-third interest in the company. Aer Rianta had originally developed links with the Soviet Union in the early 1970s with an agreement whereby Aeroflot would trade airport charges for fuel at Shannon airport. In 1988, Aerofist opened the first duty-free shop at Moscow airport. It also began offering in-flight duty-free sales on international flights operated by Aeroflot out of Moscow. In the next few years, joint venture companies with ARI involvement were also set up to manage duty-free 165

Managing Airports shops at St Petersburg and Kiev airports as well as downtown shops in Moscow and two shops, which are now closed, on the Russian–Finnish border. In 1991, ARI expanded its involvement into the Middle East area with the setting up of a joint venture company with local investors in Bahrain to be responsible for designing the duty-free shops, overseeing their fitting out and their day-to-day management. ARI further expanded operations in this region by getting involved in the management of the duty-free shops at Karachi airport in 1992 and at Kuwait airport in 1994. In 1997, other new duty-free shop contracts were awarded in Beirut, Qatar (in-flight catering for Qatar airways), Damascus, and Egypt. In Europe, ARI’s first retail operation outside of Ireland in Europe was at the terminals of the Channel tunnel. The organization provided duty free facilities from the tunnel opening in 1994 until the abolition of duty-free sales in 1999. In addition ARI opened two shop in Cyprus in the late 1990s – one at Larnaca airport in 1997 and one in Paphos in 1998. In 1999, it took over operations of a number of duty-free shops at Greek airports, sea ports and at border crossing in a joint venture with the Gebr Heinemann and Jacques Parsons. Elsewhere, in China in 1996 ARI signed a consultancy contract with China National Duty Free Corporation concerning the operation of duty-free shops in Beijing Airport. This was ARI’s first venture in the Far East. Aer Rianta International also project managed the construction of the duty-free shops at Hong Kong’s Chek Lap Kok airport. Then, in 1998, ARI expanded into North America for the first time by acquiring the duty-free division of Canada’s United Cigar Stores and the concession for duty-free shops at Montreal, Winnipeg, Edmonton, and Ottawa airports. In 2002 ARI took over the duty-free concession at Halifax airport as well (Table 6.5).

Table 6.5 Region Europe

Aer Rianta’s involvement in international retailing activities, 2002 Location Larnaca Airport Paphos Airport Greece (Hellenic duty-free shops at 15 airports, five sea ports and eight border crossings) Sheremetyevo I and II Airports, Moscow Pulkova II International Airport, St Petersburg Borispol Airport, Kiev Bahrain International Airport Karachi International Airport Kuwait International Airport Beirut International Airport Damascus International Airport Qatar Airways (in-flight) Montreal Airports Winnipeg Airport Edmonton Airport Ottawa Airport Halifax Airport

CIS Middle East

North America

Source: Aer Rianta annual reports.

166

which requires the level of charges to be reduced. The low dependence on airport charges is unlikely to change following the introduction of airport regulation in 2002. Airport charges had not increased at these airports since 1987 and this. First. 50 per cent of the ownership of Düsseldorf airports was sold to ARI and its consortium partner Hochtief. the German construction company. In 1997. the subsidiaries and associated undertakings of Aer Rianta accounted for close to half all profits compared with just 3 per cent in 1992 (Figure 6. Thus.The provision of commercial facilities 50 000 Net profit after tax (IR£ million) Associated undertakings ARI and hotels Irish airports 40 000 30 000 20 000 10 000 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 Figure 6. ARI made a profit of 13 million euro. In addition to providing duty-free retailing. airport charges only represented 17 per cent of Irish airport revenues (Aer Rianta.6 Profitability – Aer Rianta. In the same year a consortium of ARI and NatWest Ventures bought 40 per cent of Birmingham airport. the profits from the international business are seen as particularly welcome and invaluable for future success. In 2000.6). there was a series of developments which resulted in the company undertaking a thorough review of its non-aeronautical activities. coupled with a widespread discount scheme to encourage more traffic. 2000). BAA: the development of a new retail approach In the first few years after the privatization of BAA plc in 1987. In 2001. and Great Southern Hotels recorded a figure of 3 million euro. The year 1999 was a particularly problematic year for the Irish airports because of the abolition of duty free. the turnover of all these international activities (excluding joint venture activities) was 43 million euro compared with 352 million euro for the Aer Rianta Irish airports and 42 million euro for the hotel activities. ARI and Hochtief acquired 36 per cent of Hamburg airport. had meant that just prior to the end of EU duty-free sales. In terms of profits. 1992–2000 Source: Annual reports. The airport group has become more and more dependent on these external activities over the years and by 2000. ARI has also become involved with the ownership and management of international airports. the airport group gained a reputation in the 167 .

shopping assistants were even employed on the Gatwick Express train between Gatwick airport and London! The early 1990s also saw BAA plc progressively introducing more and more international brand names to its airports and offering increased competition with many of the services on offer particularly in areas such as catering. and car parking. 1996). BAA plc also introduced a free telephone enquiry number for shopping facilities. drinking. branded AirportPlus. By 2000. and 30 per cent for fragrances. the renowned food critic. Information about the key characteristics of the passengers. whereby points could be earned for car parking. In 2002. at Gatwick airport the bonus points scheme was launched. and could be traded for money off certain goods and services such as car parking and shopping at the airports or points on some airlines’ frequent-flyer programmes. BAA launched a credit card BAA WorldCard. The passengers are asked about which outlets they have visited and the amount they have spent – both landside and airside. banking. This led to the launching of a new retail strategy in 1990. BAA plc has also undertaken passenger-tracking surveys to understand where departing passengers spend their time in the terminal and how available time influences retail 168 . The key message with this was that all taxpaid goods sold at the airport were guaranteed to be the same price as equivalent goods in the high street. such as nationality. An improved system of market research and customer satisfaction was introduced by the replacing the passenger opinion survey (POS) at the airport with the QSM.7). Moreover. Around 30 000 passengers at Heathrow and 14 000 passengers at Gatwick are annually interviewed and. eating.Managing Airports press of being a ‘rip-off’ airport in terms of the value for money of the goods on offer and the associated quality of service. and reason for travel is also gathered. frequency. In addition. BAA plc began undertaking a continuous departing passenger survey called a retail profiler. The total floor space allocated to retail activities was increased substantially from a mere 41 000 square metres in 1990 to over 100 000 square metres 12 years later (Figure 6. a regulatory review looming which would determine the level of aeronautical charges for the next five years. Savings of up to 50 per cent were assured for duty-free goods such as liquor and tobacco. The bonus point initiative was subsequently adopted at all the airports in 1996 and re-launched in 1999 as world points. At Heathrow and Gatwick airports. choice.This promised a full refund on goods bought at BAA airports to passengers from any region of the world. a travel insurance scheme called BAA WorldSure and a new range of airport upgrade packages. In the same year. since 1999. Second. BAA plc launched its value guarantee in 1991. speed of service and value for money. this scheme had over 300 000 members. The QSM considered more effectively issues such as quality. a quarter of whom were not UK residents. There were various elements to this strategy. with a freepost address in the United Kingdom and refunded postage elsewhere. Egon Ronay. The next stage of the value guarantee was introduced in 1994 after BAA plc had undertaken further extensive market research into its commercial operations. pre-ordering possibilities and help desks. shopping and currency exchange. and his team of inspectors began to monitor the quality of all the catering outlets at Heathrow and Gatwick airports. and personal shopping consultants at its airports. costs were increasing at the airports and passenger growth was slowing down (Phythian. A year later. the survey has also included 6 600 passengers at Stansted. To overcome the problem of being regarded as a ‘rip-off’ airport.

so they negotiated new management contracts with their concessionaires. BAA plc funded the costs and kept all the sales revenue except for paying a management contract fee to the concessionaire. Gradually BAA plc started to replace the management contracts at its own UK airports. In 1993. Another feature of the retail strategy in more recent years has been development of the internet as a marketing and distribution medium. A new website was introduced in 1998 which gave information about the commercial facilities on offer and enabled the pre-ordering of retail goods. BAA plc claimed that this would give it complete control over the duty-free business a its airports and would enable the company to introduce more effective warehousing and distribution systems. Subsequently in 1997. and obtain procurement discounts. the concessionaire would receive a share of the profits. Links to the expendia website were established so that travel arrangements could be made.7 Retail space at BAA UK airports. 1990–2002 Source: Annual reports. In addition. BAA plc acquired the US retail chain Duty Free International which had around 200 outlets. The establishment of World Duty Free was also seen as a way to give BAA plc opportunities to expand its commercial activities to non-BAA locations. They do this by planting a sticker on passengers at check-in and tracking their passage to the gate by recording the time at various points on the way (Maiden. This process was completed in 1999. currency. 2000). With this system.and tax-free shopping.Then in 1996 BAA plc launched World Duty Free. either through commercial management contracts or as part of an overall privatization package to operate the whole airport. This was relaunched in 2000 with dedicated ‘Airzone’ sites for each airport.and tax-free shops. if targets were exceeded. these facilities were provided by concessionaires using a traditional concession fee basis. BAA plc wanted to take more responsibility and control.The provision of commercial facilities 120 Retail space (m2 × 1000) 100 80 60 40 20 0 /1 /2 /3 /4 /5 /6 /7 /8 /9 /0 /1 00 20 20 90 91 92 93 94 95 96 97 98 99 19 19 19 19 19 19 19 19 19 19 01 /2 Figure 6. and car parking to take place. mainly in 169 . which it established to run airport duty. a wholly owned subsidiary of BAA. spend. Other interesting features of BAA’s retail strategy includes the advertising or media management area where BAA launched media@BAA in 2000 which brought together all of BAA’s advertising under one identity. Up until 1993. BAA plc now has more control over its duty.

Naples) or airport management contract (Indianapolis).To overcome the confusion among passengers. it did not stop BAA plc share price falling by around 30 per cent by October 1999.8). Another area of retail diversification has been discount designer outlet centres.6 summarizes the key retail developments which have taken place in the last 12 years. It was also involved in diplomatic and in-flight business. BAA plc entered into a joint venture scheme with the US retail developer McArthur/Glen to develop a chain of outlets in the UK and continental Europe. In August it was down by 16 per cent and by September by just 13 per cent. It also launched a major advertising campaign telling consumers that they could still shop at airports – with slogans such as ‘Miss you’ or ‘I deserve 170 . it reconfigured passenger flows in its major terminals so that passengers were channelled through the shops where they could still make purchases. BAA plc began to manage commercial facilities at non-BAA airports The first main contract was for Greater Pittsburgh International airport. The acquisition was undertaken to provide greater geographical strength away from Europe. Launceston. the abolition of intra-EU duty. the first month after abolition.and tax-free sales had a major impact on the financial performance of BAA plc. In a parallel development in the 1990s. Table 6. the share of revenue from these commercial sources has increased dramatically in the last 12 years (Figure 6.The AirMall was opened in 1992. BAA plc has also looked after the commercial facilities at airports where it has an equity share (Melbourne. BAA plc even issued a profits warning in October to alert markets that the abolition would have a more severe the impact that was previously expected – a loss of £122 million of retail sales which was over 40 million more than predicted (Skapinker. Although this downward trend showed signs that the situation was improving. As a result of all these non-aeronautical activities.40 per passenger. BAA plc introduced a number of strategies to address this problem.The new facilities were grouped together in what was called ‘The AirMall’ which had over 100 outlets and 60 companies – many of which have famous branded names – and covered an area of around 10 000 square metres. From 1998 onwards BAA plc has adopted a strategy of disposing of its interests in these outlets once they have been developed in order to benefit from then value which has been created from these joint ventures.The first BAA McArthur/Glen centre was opened in Cheshire Oaks in the northwest of England in 1995 followed by a second centre in Troyes in northeast France. In July 1999. With this arrangement the airport operator was guaranteed an index-linked US$0.Managing Airports the United States at airports and border crossings. the revenue was to be split. Consequently. and if further income were generated. in 1999 it took over responsibility for the commercial facilities at the terminals for the Channel tunnel at Folkstone and Calais/Coquelles on a profitsharing based 15-year contract with Eurotunnel. In addition. 1999). where the abolition of sales appeared imminent and to increase the company’s purchasing power. net retail income at all the UK BAA airports was down by 20 per cent. A number of other centres have opened subsequently or are planned. BAA plc received a certain share of income above this amount. This was a 15-year agreement signed in 1991 – which has subsequently been extended until 2017. This subsidiary was renamed World Duty Free Americas with BAA’s original duty-free company being renamed World Duty Free Europe. However. BAA plc has been involved in the management of commercial facilities at Boston airport.

and a range of spirits and cigars. champagne.The provision of commercial facilities Table 6.8 Revenue sources for BAA. Egon Ronay became catering inspector First retail airport contract awarded at Pittsburgh Worldwide guarantee launched First BAA McArthur/Glen outlet opened BAA bonuspoints launched at all BAA airports. Eurotunnel contract awarded World Duty Free Inflight business sold. For EU passengers. 1999–2002 Source: Annual Reports. BAA WorldCard and WorldSure introduced World Duty Free Americas sold BAA McArthur/Glen joint venture dissolved Source: BAA Annual reports. On the aeronautical side passenger fees were raised by 58 pence per passenger – equivalent to an increase of around 12 per cent. 171 20 01 /2 . QSM introduced Value guarantee launched. Arrivals duty-paid shops and collection-on-arrival facilities were provided. it’ – and ‘it still costs less at the airport’.6 Date 1990 1991 1991 1994 1995 1996 1997 1998 1999 2000 2001 2002 Key developments in BAA’s retail strategy in the 1990–2000s Development Launch of new retail strategy. bonuspoints re-launched as worldpoints. Eurotunnel contract terminated. World Duty Free established Acquisition of Duty Free International (renamed World Duty Free Americas) New website launched enabling pre-ordering Abolition of EU duty/tax free. 2 500 2 000 1 500 1 000 500 0 /1 Non-aeronautical Aeronautical Revenue (£ million) /2 /3 /4 /5 /6 /7 /8 /9 /0 /1 00 20 90 91 92 93 94 95 96 97 98 99 19 19 19 19 19 19 19 19 19 19 Figure 6. 40 per cent savings on fragrances were offered with up to 20 per cent savings on wine. BAA plc added extra retail space and is planning for still more.

Overall profits before tax were down by 2. the BAA–McArthur/Glen joint venture was dissolved and BAA aims to exit permanently from this activity in the future.6 per cent which was the first decrease since 1991–2 when the economy was in recession and the Gulf War took place (Figure 6. overall. rising by 8 per cent before 11 September 2001 but decreasing by 1 per cent after this event (BAA.9). By the end of the 1999–2000 financial year in March 2000. by 2001–2000 UK retail sales had recovered and increased by 6 per cent compared with the year before (BAA. The in-flight business of World Duty Free was sold in 2000 and World Duty Free Americas was sold in 2001. Retail revenue from other shops was up by 12 per cent so. 2001).9 Profitability – BAA. In 2002.and tax-free shops had fallen by 18 per cent compared with the previous year. However. and this meant that in September 1999 BAA plc wrote down goodwill by £147 million in respect of this business in its accounts. retail revenue from duty. They continued to increase by a total of 3 per cent in 2002–2001. 2002b). Dubai airport: non-aeronautica strategies for a competing airport Many of the Gulf airports are in fierce competition for transit and transfer traffic – albeit to a lesser extent nowadays because of more non-stop long-haul 172 . 1999–2001 Source: Annual Reports. leaving BAA to focus on the 58 World Duty Free outlets at UK airports.Managing Airports Profit before interest and tax (£mn) 700 600 500 400 300 200 100 0 1990/1 1991/2 1992/3 1993/4 1994/5 1995/6 1996/7 1997/8 1998/9 1999/0 2000/1 2001/2 Figure 6. In the same year World Duty Free Americas underperformed against BAA plc’s expectations. BAA also terminated the Eurotunnel contract which lost the company £20 million in 2000. the loss in total retail revenue was 7 per cent. The result of this meant that in 2001–02 nonaeronautical revenue increased at UK airports but decreased overall for the BAA group (Figure 6. BAA plc’s strategy for recovery has been to refocus on what it sees as its core airport business by disposing of World Duty Free Americas and BAA McArthur/Glen.8).

the turnover associated with these sales has increased by over 1000 per cent. Emirates. a new duty-free area was opened at the airport in the new 180 000 square metres. In November 1989. it handled 16 million passengers compared with just 4. The duty-free shop operator Dubai Duty Free (DDF) is also run by this department. were limited to 1000 per draw.5 million in 1989. Since 1984.They are very interesting airports as regards non-aeronautical strategies as they have probably done more than any other airports in the world to attract passengers by promoting the duty-free facilities on offer. as before. It is the fifth largest duty free outlet at an airport in terms of turnover. by early 2003. To commemorate the opening of these new facilities. The airport serves Dubai. arrival duty-free shopping was added. totalling around US$306 million in 2002 (Dubai International Airport. The airport is forecast to handle 30 million passengers in 2010 – although it only has a national population of 790 000. US$200 million five-level Sheikh Rashid terminal concourse (Walters. After 1991 two cars were offered simultaneously and. This promotion offered US$1 million to winners of the ‘Millennium Millionaire Draw’. the DDF launched its ‘Dubai Duty Free Finest Surprise’ to mark the expansion of its shopping complex. the airport launched another promotion called the ‘Dubai Duty Free Finest Cyber Surprise’.The provision of commercial facilities flights. Other competing airports in the Middle East. 2003). and public facilities such as retailing and catering. All routes to the 27 departure gates go through the retail area. Dubai airport is the largest airport in the region. 20 passengers had been made millionaires! 173 .The promotion was extended throughout the 1990s with a continuous high-profile display of luxury cars in the airport concourse. 1 078 luxury cars had been won by travellers from over 65 different countries. The tickets.2 million square metres and includes areas used for apron space.This promotion offered a Rolls-Royce Bentley Mulsanne car to the winner of a raffle. were limited in number (5000 this time) to increase the chances of winning ticket.The duty-free complex covers an area of 9 000 square metres and is four times larger than the previous shop. which has become the major trading base of the Gulf region as well as being used as a transit stop for intercontinental services. By the beginning of 2003. and cigarettes and food represent a further 45 per cent of sales (Bampton. In 2002. This state ownership enables the prices to be kept low and very competitive compared with other airports. Another important area of diversification for the airport is the Dubai Airport Free Zone which was launched in 1997. 2000). This covers an area of over 1. The airport is owned and operated by the Dubai Department of Civil Aviation. light industry. in 1987. Tickets for this draw could only be bought at the airport for nearly $300 a ticket and. In 2000. The DDF works very closely with the airport management and this enables it to get involved with the master planning process at a very early stage. as well as airports in other areas such as Malta have also undertaken similar promotions. Gold and jewellery account for around 16 per cent of these sales and liquor. which is based at the airport. such as Abu Dhabi and Bahrain. DDF also runs a tennis stadium and an Irish village with restaurants and pubs away from the airport. 1999). The first DDF shop was introduced in December 1983 and then. which were sold exclusively at the airport at over $100 a ticket. It works closely with the national airline.

It also has a science discovery area which has devices such as holograms. In 2001 the airport handled 28 million passengers compared to 31 million at Bangkok. By 1999. The airport is now building on an already relatively sophisticated commercial strategy which it has had for many years. In Terminal 2 it has an orchid garden which covers an area of over 600 square metres and has over 40 different varieties of orchids. There is a news lounge. One of its unusual features is its gardens. capable of handling 20 million passengers and raising total capacity to 64 million passengers. The airport aims to ensure that it provides the latest technological and communication services – particularly for its business travellers. and jacuzzi. the airport reduced its landing fees and rentals by 15 per cent with the government setting up a US$119 million Air Hub Development Fund in order to pay for these reductions and to provide for additional marketing support with the aim of further consolidating the airports’ hub position. it has five themed gardens! It has a cactus garden located in Terminal 1. The growing importance of non-aeronautical revenues within the airport industry is a very visible trend which can be observed by any passenger who is able to compare their visit to an airport now with an equivalent visit of 10 or 15 years ago. which is owned by the Civil Aviation Authority of Singapore. This meant that it had to reduce its landing fees by 10 per cent and give rebates of up to 15 per cent for rentals at commercial concessions to remain competitive. and other interactive exhibits. In addition to all these commercial facilities for passengers. colour-blindness tests. a ‘sports arena’ lounge and a ‘movie theatre’ lounge which shows films 24 hours a day and is decorated with film posters and memorabilia. has developed some interesting strategies in order to maintain its position as a hub in the very competitive Asia and Pacific market. It offers a very wide range of commercial facilities and has pre-shopping facilities and price guarantees like BAA plc and some other airports. In addition.4 per cent in 1998 – the first decrease ever for the airport – as a result of the Asian crisis. It now has an extensive Internet area which includes numerous personal computer connection points and infrared Internet access kiosks. The airport is facing fiercer competition with the opening of the new Hong Kong and Kualu Lumpur airports in the late 1990s and the new Bangkok airport which is planned for completion in the mid-2000s. traffic had more or less recovered. mini putting green. However. the airport has also set up a cargo park with the aim of establishing itself as a leading air cargo centre in South East Asia. is due to open in 2006. To appeal to transfer passengers it organizes bus tours of Singapore. it has three television thematic lounges.Managing Airports Singapore airport: aiming to maintain its position as a leading Asian/Pacific hub Singapore Changi airport. A third terminal. swimming pool. and 15 million at Kuala Lumpur. 33 million at Hong Kong. This compares with 13 million passengers at Changi airport in 1989. The terminal also had a fern garden and outdoor garden terrace. It also has a bamboo garden in Terminal 1. In all. gym. Moreover. which has more than 20 varieties of cacti which are native to North and South America. sauna. Then after 11 September 2001. this increased emphasis on commercial facilities has not been popular with all 174 . In 1996 it was one of the first airports to offer Internet services to passengers. There is also an airport hotel situated in the transit area which has many facilities including a karaoke room. its passenger traffic dropped by 5.

European duty free is dead: what’s changed? Airports International. London. (1999). Doganis. ACI-Europe. Jane’s Airport Review. Copenhagen Airport. 50–2. ACI-NA. L. 7. Jane’s Airport Review. airport operators will be even more imaginative in developing new ideas. Anderson. Retail management structures: transatlantic differences. J. A. Centre for Airport Studies (1998). new opportunities. Bork. (2002). (2000). ACI Airport Economics Survey 1999. (2000). Cranfield. November–December. Bampton. Annual Report 1999. BAA (2002b). December– January. J. BAA (2002a). Cranfield University. April. Press release European Travel Research Foundation (ETRF) (1997). T. Annual Report 2002/2001. Air Transport Group (1997). 1–19. April. Airport Council International (ACI) (2002). vol. London. (1999a).The diverse collection of case studies at the end of the chapter shows that the options available to airports are vast and no doubt. D. Janes’s Airport Review. Annual Report 1999. This chapter has aimed to describe the market for commercial services and to assess commercial strategies and polices. Copenhagen Airport (2000). Duty free challenge. 9. Eye-catching figures. 175 . Allett. Annual Report 2001. Citrinot. Airport Development Economics. Food and beverage. March. BAA. R. Competition Commission (2002) A Report on the Economic Regulation of the London Airport Companies. 44–8. ETRF. Doganis. Airports International. Dubai International Airport (2003). Aer Rianta. (2000). Airport Council International (ACI) (2000). ACI. University of Westminster/Cranfield University Airport Economics and Finance Symposium. Conway. 3. Marketing and Commercial Strategy Handbook. Economic issues in airport management. (1992). The ACI Europe tender code. News Release. 7. Brussels International Airport Company (2002). (2001). Will check-in get smart? Airline Business. Cranfield University Airport Commercial Revenues Course. J. The Duty and Tax Free Industry in the European Union: The Facts. ACI-Europe. Pseudo brand demonstrates power of advertising at airports. (1999b). BIAC. ACI-North America (2002). 8–9. Amore. Asia takes a long term view. 23 April. (2000). in the future. M. February. Ninth ACI-Europe Airport Trading Conference. State of the Industry Report. References and further reading ACI-Europe (1999).The provision of commercial facilities users – even though it may be essential for the airport operators’ financial well-being. Citrinot. New commercial strategies for airports. August. L. CAS. vol. Routledge. Airport Retail Study. ACI. Marketing and Commercial Strategy Handbook. The Airport Business. May. 9. The Stationery Office. Travel and Tourism Analyst. P. Aer Rianta (2000). Remarkable Growth for Dubai International Airport. 6–7. (2002). Byrd. New approaches to concession planning post-abolition. ACI Airport Economics Survey 2001. (1999). R. New airport. Bates. December.

(2000). 11–15. 7.). Macmillan. February. Phythian. Cranfield. University of Westminster Marketing and Market Research Seminar. Maiden. 6. London. (1999). Geneva Airport. Institute for Retail Studies (1997). M. 42. O’Conner. I. M. March. Harrison. (1997). Landside shopping. (1995). (1998). Understanding the retail market. D. December. Concession contracts and tendering processes. vol. Pilling. (2002). Gethin. May. Communique Airport Business. Monopolies and Mergers Commission (1996). February. (2000). How BAA is surviving without cheap booze and fags. Middecke. Landside vs airside – a study of airport shopping centres. February. October. Jones. 69–72 Freathy. 6. 176 . London. Gray. European Airport Retailing. Meznarsic. February. B. F. ACI-Europe. S. R. 55–7. (1998). Life without intra-EU duty free – adapting to the loss of the business and exploiting new opportunities. (1996). February. Gray. Optimising income from commercial operations at Asian airports. University of Westminster Marketing and Market Research Seminar. (2000). Kim. Ninth ACI-Europe Airport Trading Conference. Ninth ACI-Europe Airport Trading Conference. Marketing and Commercial Strategy Handbook. (2002). Designing the perfect airport to optimise retail revenue: a retailers point of view. Maiden. London. (2000). Kostelitz. London. Dynamics in Asia: Inchon International Airport and airport community development. Airside shopping is becoming big business. vol. C.Managing Airports Favotto. and O’Connell. (1999). Cranfield. Fourth ACI-Europe Airport Trading Conference. Airports seek parking revival. ed. F. Getting to know the market at airports. October–November. International Airport Review. (2000). Sovereign. December. MMC. J. Ashford. J. University of Westminster/Cranfield University Airport Economics and Finance Symposium. Gray. (1998a). A. Airport World. Cranfield University Airport Commercial Revenues Course. Newhouse. June–July. University of Stirling. (2000). A retailer’s perspective. Concessions: plan early or else! Marketing and Commercial Strategy Handbook. Ninth ACI-Europe Airport Trading Conference. Old experiences – new challenges. A Report on the Economic Regulation of the London Airports Companies. Airport retailing: problems are opportunities. P. Benchmarking airport retail performance. 23 August. S. Airport Retail Economics. S. Marketing and Commercial Strategy Handbook. Cranfield University Airport Management Course. May. Geneva Airport (2002). London. London. (2000). (1998b). (2002). Annual Report 2002. F. London. Independent. In Airport 2000: Trends for the New Millennium (N. Jane’s Airport Review. Haugaard. Innovative commercial strategies. Maiden. London. ACI-Europe. Getting to know the market at airports. (2002). R. vol. F. H. ACI-Europe. Ninth ACI-Europe Airport Trading Conference. S.

177 . September. (1999). End of European duty-free party gives BAA a hangover. Problems and Relevance to Economic Regulation. December–January. November. Dubai aims for the top 20. Commercial and Marketing Best Practices Handbook. London.The provision of commercial facilities Rozario. Toms. B. 10. S. K (2002). Skapinker. Jane’s Airport Review. Financial Times. R. Jane’s Airport Review. March. University of Westminster/ Cranfield University Airport Economics and Finance Symposium. ACI-Europe. Schwarz. (2000). Retailers call for help. Critique of cost benchmarking. R. 3. (1996). Jane’s Airport Review. A further examination of European commercial activities. (2000). (1999). 5 November. A winning formula. Walters. Walsh. M. 13. M. London. vol. Developing commercial strategies. CAA Workshop on Benchmarking of Airports: Methodologies. 21. Savage. (2000). December– January.

typically consisting of the production of a timetable and publicity leaflets. In most cases. Prior to this.7 The role of airport marketing The birth of airport marketing Airport marketing as a concept at most airports did not really exist until the 1980s. This passive approach has long since gone at most airports. the role of the airport as a public service meant that very often airport management would merely respond to airline requests for new slots by providing published charging and use-of-facility information rather than initiating talks to attract new services. and reactive responses to press enquiries about the airport. generally. the resources allocated to marketing activities were very small. Airports have become much more proactive in their approach and have developed a wide range of increasingly sophisticated techniques for meeting . It was up to the airport to provide an efficient and safe airport with good facilities for aircraft and travellers. Airport promotion tended to be very basic. with the view being that this should be undertaken by the airlines and travel agents selling the products. Promoting the air services at the airport was also not considered to be a responsibility of the airport. the airports considered it was solely the role of the airline to identify opportunities for new or expanded services. It was rare to find airport marketing managers and.

The travelling public has also become more demanding and more sophisticated in their travel-making decisions and their expectations of the airport product. The increase in demand for air transport due to deregulation and other more general factors. such as economic growth. low-cost carriers such as easyJet and Ryanair. This has provided airports with greater incentive to develop innovative and aggressive market strategies so that they can reap some of the benefits from this growth.1 Airport Number employed in airport marketing at selected regional airports Total number of marketing staff 1991 1997 27 24 6 9 6 6 4 5 4 Number of passengers per marketing staff 1991 631 000 325 000 382 000 164 000 392 000 257 000 250 000 215 000 163 000 1997 562 000 227 000 428 000 202 000 248 000 185 000 41 000 54 000 70 000 Manchester Birmingham Newcastle East Midlands Bristol Cardiff Bournemouth Norwich Humberside Source: Humphreys (1999). Deregulation of air transport markets has made the airport business much more competitive. tour operators and so on. the majority of airports were devoting considerable resources to marketing activities. which certain airports may wish to attract through a range of marketing techniques. are much freer to operate out of any airport they choose without being constrained by bilateral restrictions. In addition.The role of airport marketing the demands of their complex mix of customers such as passengers. and globalization trends within the airline industry have increased the commercial pressures being faced by airlines. marketing is considered to be a core activity and one which is a vital ingredient for success. They are thus much more susceptible to aggressive marketing by airports. freight forwarders. Within any commercially run business. Airlines in Europe. which. New types of airlines. The airport sector is no longer an exception and marketing is increasingly being seen as an integral part of the airport business. airlines. has encouraged airports to recognize the need for a professional marketing-orientated approach when dealing with their airline customers. in turn. for example. a number of airports are close to capacity and unable to offer attractive slots for new services. This means that there may be attractive prospects for other airports to promote themselves as alternative uncongested airports. deregulation. have emerged. Moreover. It is difficult to accurately quantify this increased emphasis on the role of marketing but some indication of this trend can be gleaned from Table 7. Airports have had to develop more sophisticated marketing strategies and tactics to meet the needs of the traveller. privatization. for example. By the late 1990s. 16 10 4 7 7 2 1 1 1 179 . has meant that there have been enhanced opportunities for more airports to share in this expansion of the market.

The development of non-aeronautical activities can also be treated as a marketing role. Notable examples are the European cities of London and Paris. airline choice was considered to be limited to particular airports because of bilateral agreements. 180 . For short-haul routes.1). La Guardia. For long-haul flights passengers may be more willing to travel further distances to an airport that they regard as offering a more desirable or superior long-haul service. passengers tend to choose the most convenient. and the American cities of New York and Washington. particularly in Europe. which owns Charles de Gaulle. there are now a growing number of opportunities for airports to compete for both passengers and airlines. one airport tends to become the dominant player with the other airports playing a more secondary role. while in Washington the Metropolitan Washington Airports Authority airports of Dulles and National compete to a certain degree with Baltimore airport. Certain airline developments such as the formation of global alliances and other types of co-operation between airlines such as franchising have been particularly important. there are various other activities (which have been discussed in other chapters) that also can be considered as airport marketing. In some major urban areas or cities there are a number of situations when more than one airport serves the population. 1995). Moreover. which is owned by the State of Maryland. and environmental neighbourhood communication initiatives. and so in all but the smallest airports they are usually now considered to be separate functions. Orly. While this may still be true in certain markets. and Newark airports. as have the development of the lowcost sector. These activities include quality assessment and improvement. and Stansted compete with the independently run London City and London Luton airports. Clearly if airports are physically close. Most airports have now recognized that for both activities to be effective. Such common ownership may clearly reduce the amount of potential competition. with UK regional airports the number of passengers per marketing staff decreased significantly between 1991 and 1997 (Table 7. There are a number of key ways in which airports can compete (ACI-Europe. and Le Bourget airports. in creating new views on airport competition. very different skills and management are required. BAA plc airports of Heathrow. and the Port Authority of New York and New Jersey. The modern-day airline industry. has played a major role in this changing airport situation. nearest airport that has suitable services. In many cases when there are overlapping catchment areas. Up until quite recently marketing and commercial activities.Managing Airports an analysis of staff employed in the marketing area. were often covered by the same department at the airport (Meznarsic. from a regulated and public sector controlled activity into a liberalized and commercially orientated business. 1999). Elsewhere in London. For example. Gatwick. The nature of airport competition It used to be commonly believed that most major airports were monopolies with their precise role being determined by the passenger demand in the catchment area. which owns JFK. their catchment areas may overlap for certain types of traffic. Sometimes the airports may be under the same ownership as with the AdP. which has been transformed. especially at regional airports. If marketing is defined in its broadest sense of satisfying customer needs. for instance.

Other airports may choose to specialize in charter operations (e. short walking distances from the terminal to the aircraft. has not proved to be particularly successful but it remains an important issue (CAA. particularly those travelling on business. Rome Ciampino airport) or freight operations (e. Frankfurt airports. This is particularly the case with Ryanair at Dublin airport where a new competing terminal may be built (Hogan. Elsewhere separate ownership patterns exist. The secondary airports tend to fulfil more specialized roles (Dennis. which is what the low-cost carriers want. Liège airport). for example. 1995). as is the case with Düsseldorf airport. Heathrow airport is considered by many passengers.2). Sometimes these airports may be owned by the same operator who has control of the competing airports. In many cases they are situated substantially further from the town or city they are serving compared with the competing airports. These types of passengers favour the convenience and generally less congested environment that a city centre airport such as London City or Belfast City may offer. BAA plc owns Stansted airport. 2001). owns Bergamo airport. Some limited evidence of such a practice. 2003). Table 7.g. owns Hahn airport. for example. and the nearby secondary airport of Moenchengladbach. They may act as an overspill airport when the major airport has inadequate capacity. They are also usually in a position to be more flexible on pricing and to enter into long-term pricing agreements.The role of airport marketing In the London area. particularly business-related traffic.2 Alternative low-cost airports within Europe Low-cost airport Beauvais Bergamo Charleroi Carcassonne Cergy-Pontoise Hahn Liverpool London – Luton London – Stansted Prestwick Rome – Ciampino Sandefjord – Torp Skavsta Competing major airport Paris – CDG/Orly Milan – Linate/Malpensa Brussels National Toulouse Paris – CDG/Orly Frankfurt Manchester London – Heathrow and Gatwick London – Heathrow and Gatwick Glasgow International Rome – Fiumicino Oslo – Gardermoen Stockholm – Arlanda Under same ownership? No Yes No No No Yes No No Yes No Yes No No 181 . to be the ‘London airport’ in spite of a range of services being offered at the other London airports. Some low-cost airlines have suggested that there ought to be competing terminals at airports run by different operators. centrally located secondary airports may be able to attract a certain amount of domestic or short-haul traffic. These airports offer faster turnarounds. Then there are the airports that have begun to market themselves as low-cost alternatives to the major airports – having been encouraged by the rapid development of European low-cost carriers (Table 7. which suffers from runway constraints. which are all vital elements of the low cost model. and fewer delays. for example. Alternatively. and SEA. the Milan airport operator. at JFK airport in New York and Toronto airport in Canada.g.

in reality there is now less opportunity for this to happen as a result of the growing concentration within the airline industry through developments such as global alliances and codesharing. This is particularly the case within Europe where most long-haul freight is trucked to its final destination.Managing Airports Problems can arise when a new airport is built and is perceived as providing a inferior service to the old one – perhaps being in a less conveniently situated location. London. Most airports would probably agree that both airlines and passengers are key customers. Hub airports are. In most cases. and Denver (ACIEurope. which has happened in locations such as Munich. it is useful to divide this demand into two. very much dependent on the operating strategies of airlines. The same can be true with cargo traffic. The marketing techniques used for these two types are very different. Certain airports can compete as hubs for cargo operations especially for express parcel services. the only feasible way of ensuring that traffic will transfer to the new airport is by actually closing the old one. notably at Asian destinations such Kuala Lumpur. Americans visiting Europe may not have a strong preference as to whether they start their European tour from Paris. to the newly expanded Milan Malpensa airport. Caves and Gosling. From a marketing perspective. particularly if they are open all night and have a good weather record. demand comes from a variety of markets each with their own specific requirements. New infrastructure. Hong Kong. A notable example is Montreal Mirabel’s airport. The other important way in which airports compete is as a hub. and Macao. passengers will have a specific destination in mind when they travel. therefore. Milan is a more recent case where there has been considerable reluctance for carriers to transfer from the Milan Linate airport. For the airport product. 1999). or Frankfurt. Unless effective regulation is introduced. which was built in the 1970s to provide extra capacity in addition to Dorval airport but never managed to attract the volume of traffic that was forecast. The exception may be with some intercontinental traffic when passengers might be more indifferent. Key prerequisites for a hub are a central geographic position and adequate runway/terminal capacity to enable a ‘wave’ system of arriving and departing flights to take place.and large-sized airports have aspirations of becoming a hub. Obviously these types of demand do not impact directly on the amount of aeronautical revenue and traffic throughput at an 182 . Oslo. In addition. 1999. whereas airlines tend to think of passengers as their customers and themselves as customers of the airports. namely the trade such as airlines who buy the airport facilities direct and the general public or travellers who merely consume or utilize the airport product. For example. however. there are the other market segments such as local residents and businesses whose needs must also be met. which is closer to the city centre. Airports serving these cities can. compete for this traffic. While many medium. has provided the impetus for more intense competition for hub traffic. Hong Kong. Marketing concepts The market for airport services The focal point of any marketing system is always the consumer of the services.

Factors such as the distance. and a charter service. For example. Most complaints come from ‘Airport controllers’ who are typically frequent business passengers flying economy with their families on holiday and feel aggrieved that they do not have the privileges that they normally experience when flying business class. They can also help airports in acting as a catalyst for economic development. For business passengers. facilities such as fast-track processes and airline 183 . Airline alliances could well be given special consideration. Then there are the ‘Euphorics’ who are the once-a-year holidaymakers who arrive early at the airport and spend money as part of the holiday experience. passenger airlines. cost. 1996). with passenger travel this would include a full-cost traditional service. there are ‘Agoraphobics’ who have the lowest level of need. it can sometimes be useful to consider it by travel behaviour in order to match more closely the needs of each market segment.The role of airport marketing Table 7. and do not want to be distracted from the departure monitor. Each of these needs to be further subdivided into much smaller discreet segments in order that they can be targeted appropriately and so that the airport’s marketing efforts can be the most effective. tenants. cargo airlines. The amount of time that these types of passenger spend at the airport varies from considerable in the case of the Agoraphobics down to the minimum possible for the Self-controllers (Young.3 shows some of the major market segments at an airport.3 The airport’s customers Trade Airlines Tour operators Travel agents Freight forwarders General aviation Passengers Scheduled (traditional and low-cost) Charter Business Leisure Transfer Others Tenants and concessionaires Visitors Employees Local residents Local businesses airport but their presence at the airport can have a significant impact on the level of non-aeronautical revenue. For each type of customer. The quality of the airport product can have a marginal impact. the market may be segmented into integrators. Concessionaires. but only after these other factors have been taken into account. Next in the order of needs are the ‘Confident indulgers’ who are frequent leisure fliers who are familiar with the airport product and want to be pampered.4). finally. and other organizations such as handling agents can also be considered customers of the airport. for example. and other freight companies. there are the ‘Self-controllers’ who are frequent business fliers who just want to be processed through the airport as quickly and as efficiently as possible. For example. A common way to segment demand is by airline product type. For passengers. Then. clearly the nature of air services on offer – in effect the airline product – will be the key factor as no one will choose to fly from an airport unless it offers the required travel opportunities. In the cargo area. a low-cost service. choosing an airport is the result of an amalgam of many decision processes (Table 7. and ease of surface access to a certain airport can also be very important. Table 7. Rather than considering the demand by product type or purpose of travel. have a fear of flying and of missing the plane.

1998). Gatwick.g. The location of airport and flights on offer are 184 . For example. but not always. key factors are business and tourist appeal of the catchment area for incoming passengers. obtained from passenger surveys. This is especially the case among the business community. It may be because of ignorance about the other airports. catering and other commercial facilities Image of airport and ease of use Airlines Catchment area and potential demand Slot availability Competition Network compatibility Airport fees and availability of discounts Other airport costs (e. retailers will only wish to operate at an airport if they have proof that the passenger profile is attractive enough and that the airport has a sufficient traffic throughput. for example. The marketing assistance that the airport is prepared to give. lifts. Other customers will take into account different factors. for why five airports in the United Kingdom. and the characteristics and purchasing power of those residing in the catchment area (Favotto. Table 7. The later factor can be measured by some kind of connectivity ratio and IATA has developed such a ratio that is based on a model combining flight frequency and travel time. and general assistance may be important. in many European countries there will be a preference for the established capital city airport even if there are alternative airports that offer a comparable service. especially among travel agents. namely Heathrow.5 gives reasons. For example. Other important elements include the availability of attractive slot times. this may be because of better flight availability and frequency at the main airport. In some instances. Manchester. and the network performance of the airport . Depending on the type of route being considered. or because of some other factor such as the traveller’s choice of a certain airline in order to add to their frequent flyer points. Birmingham and New Castle were chosen in 1998/99. handling) Marketing support Range and quality of facilities Ease of transfer connections Maintenance facilities Environmental restrictions lounges may affect choice. not only in terms of pricing incentives but also with the funding of activities such as market research and promotional campaigns can also be crucial. it is clearly the nature of the catchment area rather than design details of the airport facilities that are of paramount importance.Managing Airports Table 7. For the airline and other trade customers such as tour operators. Then there are other factors that are more difficult to explain and quantify. the presence of competitors. while for customers with special needs.4 Factors affecting the choice of airports Passengers Destinations of flights Flight fare Flight availability and timings Frequency of service Image and reliability of airline Airline alliance policy and frequentflyer programme Surface access cost to airport Ease of access to airport Car parking cost Range and quality of shops. the quality of the provision of wheelchair. fuel. disabled passengers.

flight frequency and air fare were found to be unimportant and surface access time to be very influential.0 100 20.3 0.2 2.2 1. The core product is the essential benefit that the consumer is seeking. In highly regulated markets. to meet the needs of different market segments.3 2. Ashford (1989) identified three key factors affecting passenger choice.7 1.9 10.3 6.6 4. most important is the nature of flights on offer – at Heathrow for both local and connecting flights.7 6. the key factors determining choice.7 3. while the actual product delivers the benefit. and augmented elements. however.0 100 47. design.0 1. Sometimes 185 . Similarly locational factors are very important for the regional airports of Birmingham and New Castle.The role of airport marketing Table 7.1 9..5 2.5 100 49. and air fare. actual or physical.5 Passengers reasons for choice of UK airport in 1998/99 Reason for Choice London Heathrow London Gatwick Manchester Birmingham Newcastle Near Home Flights/Package available Connecting Flights Near Business Near Leisure Economic/Cheaper Prefer Airport Timing of Flights Better Surface Access Other Total 12.7 4.1 0.7 0. flight frequency. than at the other airports. namely access travel time.6 100 62. brand name. 2000.3 2.7 5.5 2. 1996).6 6.4 7.8 17. For the London airports. Marketing theory often divides the product into the core. Much of the competition will typically take place at the augmented level (Kotler et al.0 51.0 0.2 2.8 2.0 6.5 6.6 25.9 3.1 6. Product features. The timing of flights appears to be a more influential factor at Heathrow.7 2. and will distinguish the product from others.6 0. chose the airport because it was close to their home.5 10. quality level.6 2.7 4. The augmented product is then additional consumer services and benefits that will be built around the core and actual products.8 0. and packaging will all make up the physical product. such as Nigeria in Africa.4 3.1 4. 1999.2 10.0 19. because of its higher share of business passengers. Half the passengers at the regional airport of Manchester.3 4.2 0. both tangible and intangible. with an additional 13 per cent picking it because it was near to their business or leisure destination.2 100 Source: Civil Aviation Authority.4 2. The airport product The airport product consists of a supply of services. Through modelling survey data.8 38.

and so on – and the expertise to provide all these facilities efficiently and safely. and information. the core is the ability to land and take off an aircraft. In addition. the airport product includes the airline product as well as the product of the concessionaire. 2002). communication. and rescue) and intangible service elements provided by the airport operator’s own staff and those of the customs. catering. while for the passenger it will be the ability to board or disembark an aircraft. 1999). fire. taxi-account services and a range of different meeting facilities. To produce the refined product involves adding the services provided by concessionaires and other tenants and the air travel elements. provides services 24 hours a day in the form of shops and catering. Each market segment will perceive these product levels very differently. offer marketing support or pricing incentives to the airlines or may formalize some agreement about the exact service levels to be expected. fuel. buildings. travel and hotels reservation desk. the airport product can be considered to be a large commercial centre. apron. It wants to market this concept internationally through airport alliances and partnerships. hotels and recreation. The actual product will also include adequate transport services to and from airport. the Schiphol Group has defined Amsterdam airport as an ‘AirportCity’ to get over the message that the airport. For the passenger. both tangible and intangible. For the airline. For the passenger the range and diversity of shops. According to the airport. handling agent. which meets the needs of travellers. the terminal building. since time is money in the business world. the actual product will need to consist of the runway. visitors. For freight forwarders it will be the ability to load and unload the freight on the aircraft. the actual product will include check-in desks. and other commercial facilities as well as other features such as ease of transfer between different aircraft could all be considered to be part of the augmented product. the freight warehouses. Corporate jet aircraft have also been encouraged and there are dedicated facilities for these (Lavelle. lighting. immigration. At the augmented level the airport may. provided by the airlines (Reantragoon. Other airports may look at the product in a different way. there are service features specifically designed for the business traveller in mind ranging from leather seats in the departure lounge. and the provision of outlets selling essential travel goods. for example. baggage handling. 2001). the main product feature is time. 1994). Within this context. as well as other facilities such as information desks and toilets. navigation aids. and so on. and is already applying this model to other airports where it has some management involvement (Schiphol Group. 186 . Another way of looking at the airport product is by considering its ‘raw’ and ‘refined’ features.Managing Airports the physical product is referred to as the ‘generic’ product with the ‘wide’ product representing the augmented elements (Jarach. and business activities. and other features such as immigration control that will enable the passenger to fulfil his/her need of boarding or disembarking the aircraft. the equipment. It is difficult to apply this marketing concept to the airport sector because of the composite nature of the airport product. The raw product consists of both physical tangible elements (such as the runway. there is London City airport in the United Kingdom that targets the business market. In order to provide the core product for the airline. and security agencies. like any other city. For example. This is achieved by having a 10 minute check-in and a 5 minute arrival time from plane to terminal. Valet parking is also provided to speed up the departure process. From a passenger viewpoint. At the broadest level. shoe shining in the terminal concourse. and residents.

with the London area there is now not only London Heathrow. London Gatwick. No amount of money spent on improving facilities will attract airlines to the airport unless they consider that there is a market for their services. Within the airport sector it is certainly true that there are widespread attempts to create a corporate identity with the use of catchy publicity slogans. and eye-catching logos and designs on promotional information and within the terminal itself. which was rebranded as ‘Unique Zürich Airport’ in 2000 to reflect a new management structure. Many airports use a number of sub-brands for different areas. use of similar signposting. particular as airlines and their alliance groupings are also becoming increasingly keen to have their own identity represented in the area of the terminal where their passengers are handled. however. very debatable although it may make the customer feel more at ease because of the familiar surroundings. 2001). which all give the product an identity. especially retail areas (Peterson and Malmgren. Ultimately most decisions concerning the choice of airport will be based primarily on the air services available at the airport (i. 2000). and London Ashford.The role of airport marketing Related to the concept of the airport product is the idea of an airport brand. These tangible and intangible features of the identity differentiate the product from its competitors. Other interesting examples include Zürich airport. The name EuroAirport for Basel-Mulhouse airport has been devised to reflect its central European location and bi-national ownership characteristics.e. and Skavsta as Stockholm South. London Biggin Hill. colour schemes. signing. logos. and there may be more conveniently located airports. and expanded facilities (Hill. partial privatization. Too many brands may confuse passengers. Sandefjord-Torp as Oslo South. Lyon airport in France changed its name from Lyon Satolas to Lyon-Saint-Exupery in an aim to strengthen the airport’s worldwide reputation (European Regions Airline Association. For example. the airline product) and the proximity of the airport to the potential customer. when marketing to airlines. design. they may choose to drop the international name as Manchester airport did in 1986. In marketing theory a brand is represented by a name. London Southend. even if it may not be particularly close. Charleroi is known as Brussels South. 1996). BAA plc has traditionally used a common and constant brand image for its seven UK airports. Whether such ‘branding’ actually gives an airport any competitive edge is. 187 . it is information about the nature of catchment area and potential demand rather than small details about the airport infrastructure that will most probably sell the airport. Other airports will include the name of the nearest large city or town. Many regional airports like to be called ‘international’ airports to demonstrate that they serve international as well as domestic destinations – even if in some cases there may be only one international route! On the other hand. and interior design may also be used for all its airports. For airport operators who own more that one airport. For instance. Marketers often give considerable attention to the name of the airport. Similarly. For example. and London Stansted but also London Luton. Manchester airport has used ‘Manchester Connects’ for its transfer product and ‘En Route to the World’ for its retail product (Teale. as airports become more developed and more well known for their range of services. It is very important for the airport to remember this and to focus its marketing on the air services on offer and the airport’s convenience rather than giving every fact about the facilities on offer. In the same year. merchandising. however. London Manston. and advertising. 2000).

Trade At the most basic level. for example. Smaller airports competing with major capital city airports will probably find that they are always faced with an uphill struggle but nevertheless a considerable amount of proactive and aggressive marketing may achieve results. Atlanta airport has invited airlines to become ‘Members of the busiest airport in the world’ while Rome airport has used the message ‘With more than 150 destinations we help half of the world to reach the other half. while Stansted claimed that it was a ‘London airport where you can call the shots’. For instance. Price sometimes features in such advertising. may 188 . while Macau airport advertised half price landing fees at night with the message ‘Our night fall brings sweet dreams … 50% off at night’. The marketing of airports aiming to be hub or feeder points is totally different from marketing an airport that relies on point-to-point services such as charter or low-cost services. Kansas airport told airlines not to ‘Get drawn into a congested hub’. the new Incheon Airport is promoted as the ‘The Winged City’ and is described as the ‘21st century airport of your dreams’. Developing regular contact with key airlines and tour operators through visits by airport sales staff. Sometimes simple messages may be used to sell the airport. for instance. sales. while Nice airport has described itself as the ‘Greatway to Europe’. Clearly every airport is unique and needs to be marketed in its own specific way. Airports with considerable spare capacity will adopt different strategies to congested airports. has sold itself as being ‘The high yield airport with surprising low costs’. Once an airport gets to a certain size. Towel Down 11:45’. At small airports.Managing Airports Airport marketing techniques Successful airport marketing involves focusing on understanding and responding to the needs of the various customer segments. tour operators. The aim here is to increase awareness among the trade. roadshows. Large hub airports may focus on their size to demonstrate that the airport is popular and has connecting traffic possibilities. all marketing tasks may be undertaken by a couple of staff. Other airports try to emphasize different product characteristics such as uncongested facilities and quick processing times. the marketing focus is likely to change. And vice versa’. has promoted itself as being ‘Europe’s best address’. or with regular mail shots and other promotional activities. Other airports adopt much more vague and less specific messages. by placing advertisements in trade journals. The small Palm Beach airport’s slogan was ‘Touch Down 11:00. Geneva airport. and other similar events. Vienna airport. With other airports the key message may be more specific. whereas at larger airports there may be separate departments for coping with different customers such as the passengers and airlines. which already have a reasonably developed route network. and public relations. and different teams looking at different marketing activities such as market research. Larger airports. freight forwarders. For instance. travel trade seminars and workshops. airports promote themselves to airlines. may be more concerned with putting forward a good positive image for the airport and building on a corporate identity. and so on by producing general publicity information. Small airports may concentrate on growing specific services that appear to offer opportunities for the airport. and by being represented at exhibitions.

and route cost and yield considerations. the Irish operator. The airport may also agree to share the costs of further advertising to ensure that the initial level of demand is sustained. This was a task previously left solely to the airlines. This would be supplemented by information about the catchment area. with airlines being concerned that the cost of such infrastructure may be passed on to them. The airports that first adopted this more reactive approach to marketing to airlines. The emphasis must be very much on the potential demand at the airport with the quality of facilities taking second place. to deal with potential airlines customers in a much more direct and personal way. the potential for market stimulation.The role of airport marketing also be effective. So the airports started to take a leading role in initiating interest from airlines. airline presentations from the marketing departments of airports to route planners in airlines had become commonplace. Emphasis on architectural excellence and best-quality facilities could even have a negative impact. for example. The airline presentation is still an important element of an airport’s marketing but it has to be highly focused. have claimed many success stories. they would provide airlines with information about potential routes and the size of the market and perhaps other factors such as the likely requirements for frequency and aircraft size. For example. These can be particularly important and can be crucial particularly for low-cost carriers. The airlines themselves have become awash with route studies from numerous airports and so have become much more skilled in using this information to back-up and verify their own research. states that marketing support will be considered on an individual airline basis and will depend on the aircraft size on the proposed route. The airport marketers analysed passenger and catchment area data that gave them adequate information to suggest new route opportunities to potential operators. Many of the airports had the advantage that they already kept at least some of these data for their own passenger marketing and forecasting. From their databases. They also benefited from certain cost economies by being able to consider all different markets and routes simultaneously. Information would also be given about the airport’s facilities and also accessibility by transport links. the cost of undertaking such research could well have been too prohibitive. By the 1990s. and other trade users. For a small airline interested in operating just one or two new routes. Once an airline has shown some interest in a potential route. Such discounts will usually diminish as traffic grows and the service becomes sustainable. tour operators. the proposed service frequency.Times have now moved on in the air transport industry and both the airports and airlines have developed more sophisticated marketing techniques. the airport will typically agree to provide additional support in a number of ways. Typically. Airports tend. Joint advertising and promotional campaigns may be run to promote the new service both through the media and travel agents by pooling resources. Aer Rianta. in terms of the characteristics of residents and its tourist and business appeal for incoming passengers. This assistance can vary quite considerably. reduced fees may be offered for a certain period of time. the presentation would give a detailed analysis of the new route or routes. 189 . and the network development potential. although this may develop into an area of considerable friction between the airport operator and airline. however. such as Manchester and Vienna. This hard-selling approach was developed in the 1980s owing to the realization that airports were actually in a good position to identify new route opportunities for airlines.

7 4.5 2. one-to-one meetings airlines explain their expansion strategies to airports. in a number of bilateral agreements. 2002).2 3. Such services 190 .6 shows the costs associated with the marketing support. Since 1998.8 4. An interesting development as regards airline marketing has been the ‘Routes’ conference. as well as marketing initiatives in the form of discounted fees and other incentives that the airport may be in the position to offer. Manchester airport has estimated that for every £1 spend on support of tour operators. who in turn try to sell the virtues of their facilities and services. frequency increases.5 6.6 19.4 1. which Manchester airport has given. which successfully helped persuade the regulatory authorities to agree to non-stop services being operated to Shanghai. and car parking income. Around half of the costs was estimated to be associated with new services. but with six receiving 72 per cent of this and 20 receiving 94 per cent.5 6 6. In prearranged. retail. alongside the London airports. The airport may also promise to help to lobby government to remove bilateral regulatory obstacles. 1998–2003 Year Marketing costs (£ millions) 6. For example. Manchester airport was particularly active in this activity in the 1970s and 1980s when it frequently attempted to get gateway status. Table 7. catering. 75 airlines have benefited from some help. and opportunities for connecting traffic may be discussed. In 2002–03. £3 additional revenue goes to the airport (Competition Commission. This has averaged around £5–6 million compared to total costs of about £200 million.6 1. namely reductions/rebates in airport charges and contributions to joint marketing campaigns. This has been held annually since 1995 and is an opportunity for airport marketers and airline route planners to get together to discuss future market opportunities.3 1998/99 1999/00 2000/01 2001/02 2002/03 (estimate) Of which: Rebates Marketing campaigns Of which: Promotion of new services Prevention of reductions in existing services Promotion of business with tour operators Source: Competition Commission (2002).1 18. it was forecast that rebates would account for about two-thirds of this marketing support.Managing Airports Table 7.6 Airline and tour operators marketing support costs at Manchester airport.5 18.4 17. A more recent example is San Francisco airport. New routes. a quarter to prevent reductions in existing services and the final quarter to help tour operators who brought additional traffic.7 Passenger numbers (millions) 17. These costs obviously have to be off-set against the additional revenue that will be brought to the airport in terms of airport charges.

Ryanair began to operate two flights a day to Dublin and the airport passenger numbers increased dramatically to 200 000. Airports may be able to make themselves appear particularly attractive if they guarantee that the overall package of costs that an airline is faced with will be reasonable. the airport operators are able to offer discounted public transport for the airline passengers. Since all the facilities. which worked together with airlines to coordinate the arrival and departure time of air services in order to create ‘Manchester Connects’ – the interline hub.The role of airport marketing began in 2000. There can be a problem with such a strategy if the low-cost operations prove to be so successful that they necessitate adding extra capacity at the airport which the low cost carriers do not wish to pay for in their fees. particularly if an airline is to benefit from connecting traffic from other airlines. If the airport is under regional public ownership. including aircraft fuelling. The most significant change came in 2001 when Ryanair decided to make Charleroi its first continental base and began operating 10 routes with 19 daily frequencies. Lamezia. its passenger levels fluctuated at around 50 000. Ryanair’s passenger numbers increased from 86 000 in 1997 to 178 000 in 2000 but the airport still remained very much a small regional airport. for example. Another way in which an airport can put together an attractive deal for an airline and be costeffective in its marketing is by pairing up and co-operating with the airport at the other end of a route that has been identified as having potential. Between 1990 and 1996. It was at this time that the name 191 . airports will be able to offer discounted airport charges but will have no control over handling or fuel charges. the new services may be supported because of the potential broader economic benefit that they could have on the whole region. However. In many cases. An example of this occurred with new terminal capacity at Luton with the low-cost carrier easyJet. The most common airlines to benefit from a total package of measures are the low-cost carriers. are owned by the government. Airports are willing to enter into such agreements due to the additional commercial revenues that the extra passengers will bring and the impact that such services will have on encouraging other carriers to the airport. Then. A good example of this practice is again Manchester airport. The airport believes that this changed its status from that of a regional airport serving passengers on charter airlines originating from the Walloon region to a larger secondary airport with a much greater traffic base in the whole of Belgium and also cross-border regions in France and Germany. At other airports. Airports may also choose to give advice on scheduling decisions. Moenchengladbach airport near Düsseldorf. Low-cost operations at Charleroi Brussels South Airport Charleroi airport is a regional airport owned by the Walloon regional government which is 46 km south of Brussels. and Rimini airports. Elsewhere there have been examples of low-cost carriers transferring to other airports once the introductory fees have unwound as has been the case with Ryanair’s operations at Kristenstad. a few airports such as Abu Dhabi in the Middle East offer a one-stop approach when there is a single contract for all ground services at the airport. the airport is in a position to do this and to have complete control over what it offers to the airlines. in 1997.

Table 7. The expenses covered by BSCA include marketing support. Office and hangar space is also provided for a minimal cost. In addition. it has transformed the coach shuttle from the Airport to Brussels City from a loss-making into a profitable activity and has generated a substantial amount of revenue from car parking since it introduced parking charges in 1999. For this support from BSCA Ryanair has agreed to base a certain number of aircraft and operate a defined number of flights for 15 years – if not it will have to repay the incentives (Aviation Strategy. However. BSCA also contributes towards other expenses incurred by Ryanair.Managing Airports was changed from Charleroi Airport to Brussels South Charleroi Airport (BSCA) (Jossart. which together with the low charges results in a net benefit to Ryanair. and Ryanair’s costs for local crew hiring and training. For example.00 Handling fees/ pax: 1.3 euros in 2010.00 Marketing contribution/pax: 2. Table 7. 2003). 2001). The airport offered Ryanair a very favourable deal because it felt that the presence of Ryanair could substantially grow its non-aeronautical revenues and attract other airlines to the airport. incentive payments for each route started.00 Hotels costs/year: 250 000 Payment/new route: 160 000 Recruitment/training (one-off): 768 000 Estimated office costs/year: 250 000 Estimated hangar costs/year: 250 000 Other assumptions (euros) Annual pax: 1 million New routes: 12 Ryanair to BSCA Landing fees Handling fees Total BSCA to Ryanair Marketing fees Hotel costs New route payment Recruitment payment Office costs Hangar costs Total Net benefit 1 000 000 1 000 000 2 000 000 2 000 000 250 000 1 920 000 768 000 250 000 250 000 5 438 000 3 438 000 Source: Aviation Strategy (2001). the European Commission was considering whether the Charleroi deal and perhaps other agreements that Ryanair had negotiated were in breach of European competition law on the grounds that it was an exclusive arrangement and could have distorted competition between BSCA and Brussels National airport (Pilling. 192 . It has also expanded the duty free and catering outlets to cope with the additional passengers and increase the overall non-aeronautical revenues. 2003).7 shows the reported details of the arrangement made between BSCA and Ryanair.13 euros in 2006 and 1. Ryanair pays very low landing and handling charges starting at 1 Euro per passenger which goes up to 1. in 2003.7 Elements of agreement between Ryanair and BSCA Annual Payments Amount (euros) Cost assumptions (euros) Landing fees/ pax: 1.

however. The type of information usually available includes airport location details. with perhaps opportunities for pre-booking car parking space or buying public transport tickets online. shopping centres. particularly the regional and smaller ones. also in the United Kingdom. In many cases. and other information. the agents will have automatically advised passengers to travel via a larger airport further away. and stationery items are frequently distributed. for the moment travel agents still remain highly influential when passengers go through the process of selecting and assessing possible travel options. and local transport details. Instead. Very often airports will also organize competitions. tourist information offices. can be circulated. promotions. have found that it is particularly important to spend some time and effort in developing close and personalized links with travel agents serving the direct catchment area. Branded giveaways to reinforce the airports image and identity. Nearly all the websites. Sponsorship of key events is also quite common in the airport business. Some of the general sales promotions directed at the airlines may be targeted at the travel agency sector as well. Passengers and the local community Generally. This usually involves regularly sending out a sales representative who can talk to the agents about new developments at the airport and explore the agents’ knowledge and views of the services on offer. To increase awareness of the airport and improve relations with the community. air shows. a much more soft-sell approach is adopted for passengers. information services are provided for passengers and visitors. Numerous airports. and other social events to encourage greater interest in the airport and to forge closer links with the agency sector. new facilities. 1998). Cardiff airport in the United Kingdom overcame this problem by buying a chain of 22 local travel agents in an attempt to promote flights from its airport (Humphreys. such as badges. this is not enough. up-to-date timetables. This one-to-one contact can be supplemented with frequent. Norwich airport. key rings. and educational visits are also often organized. with various degrees of sophistication. personalized mail shots giving details of routes launches. even the most basic 193 . facilities and surface access. Travel brochures. and may help to give exposure to the airport and the services that it offers. T-shirts. has adopted a similar strategy. exhibitions. airport tours. Tourist and other information about the airport’s catchment area might be included. produced jointly with tour operators or airlines. open days. libraries. There are many stories of regional airports discovering that all their neighbouring travel agents are completely unaware of any local air flights. Regular mail shots to agents may enhance that awareness. Airport information is now available on airport websites that have been set up by most airports. car parking. and other promotional literature is commonly distributed to travel agents. At the airport itself. and so on.The role of airport marketing Travel agents In spite of the increased use of the Internet and other direct-booking methods. Airport timetables with details of airport services. as are maps and other information about the facilities and services. This not only has this advantage of sharing the cost but also has the benefit of having the operators’ brand associated with the airport.

include terminal maps and a list of facilities. which uses SMS or e-mail to update passengers and others on arrivals and departures times. and transfer passengers. travel plans. health advice. and an increasing number of airports are taking full advantage of this. In September 2001. and advertising can increase non-aeronautical revenues. for example. particularly business travellers. airport taxis. gate. in 2000. Customer profile and preference information can automatically be collected from users of the website. The advertising may be targeted at certain market segments.and tax-free sales. Abu Dhabi’s airport marketing campaign ‘Start at the Heart’ was based around a heart logo designed to inform business travellers that they could check in at the ‘heart’ of the city and take a luxury car to the airport. online shopping. the target audience. Airlines should be able to retrieve traffic statistics and catchment area information. It defines the Internet as the virtual AirportCity and has customized information for specific groups such as business. BAA plc invested in lastminute. magazines. newspapers. and the message that the organization wants to put across. More specific messages may relate to a certain service or facility at the airport – a notable example being the advertising that various airports have undertaken to recover some of their lost retail trade since the loss of EU duty. while details about customs requirements. last-minute travel details. 194 . and destination profiles. It also has airport upgrade packages available on the net. Amsterdam airport uses the Internet to further develop its concept of its airport being an AirportCity. needs to be presented in the written form. 1999). for example. It also have the Schiphol Travel Update service. The Internet can offer potentially numerous marketing and revenue opportunities. which allows passengers to book online airline tickets. radio. Most commonly. The local community can find out about achievements. leisure. or baggage carrousel. whereas more detailed information. such as shops and catering. A basic message or idea can be successfully communicated with radio or television media (although in practice this is rare). Schiphol Travelport. rentals car. the Internet clearly has a much greater role to play than merely providing information for the traveller. This is bound to become common practice. Shareholders can track the performance of their shares and have instant access to the airports’ financial reports. As with the marketing to airlines. weather updates. airports try to increase the consumer’s awareness of flights and closeness of the airport by listing the destinations on offer or by focusing on the convenience of the public transport links. and handling and warehousing facilities should be available to cargo customers (Hoevel. Moreover. clearly depends on the relative costs. in environmental protection. However. the check-in counter. timetable or flights material. Airports are experimenting with various initiatives. Schiphol launched its virtual travel agency. as with all marketing. For instance. BAA plc in co-operation with the travel company expedia UK provides online reservations for many airlines and hotels.com. Many of the major airports have real-time flight information and flight-delay details.Managing Airports ones. and other travel products. and posters. For example. Airports advertise to the public through the Internet and all the other usual media channels such as television. It also provides information to customers who are interested in Schiphol real-estate properties and online purchases from the See Buy Fly shopping centre can be made. Pre-ordering purchases. on offer. The choice of media. airports adopt various approaches to woo passenger to their airports.

age. but also by generating jobs and other economic benefits. flying frequency. 195 . Generally. foreign media is crucial. This has the advantage in producing survey data that are directly comparable for different airports. the environmental impacts such as noise and pollution are of major concern. the quality of commercial facilities is unlikely to have an impact over a passenger’s choice of airport unless perhaps the passenger is transferring flights or the incentives are very considerable – as with the high-value raffles at the airports serving Dubai.The role of airport marketing The ultimate aim of promotional and advertising activities is usually to sell a product. and the more subjective area of passenger satisfaction. The quality of service paper has already considered passenger satisfaction and so the emphasis of the discussion here is very much on the first area. or in addition. For all these reasons. have a major impact on the local community not only by providing local flights for the residents. national. Market research A fundamental element of marketing is market research – in order that organizations can have a thorough understanding of the characteristics and needs of their market. of course. and so on. regional. The passenger will not go to the airport unless the required airline service is there and marketing communication techniques can usually only encourage use at the margins. share. namely market characteristics in terms of market size. Most major airports will carry out periodic surveys of their passengers to find out details such as origin and destination. socio-economic group. and hosting events for journalists and travel writers can increase interest in the airport and stimulate press coverage. Information about passengers can be collected from a number of different sources. Passenger surveys at the airport are the most common but surveys or group interviews at home or at work are also possible. Airports. It is worthwhile for airports to put reasonable effort into trying to capitalize on the general interest that people have with airports and to create a degree of goodwill between airports and the community. but the airport has a rather unique relationship with its passengers as it is not directly selling a product to them. and Abu Dhabi. and trends. On the other hand. airports tend to receive extensive coverage. to those carried out by the airport operators. Bahrain. Views about current services and particularly any underserved destinations can be gleaned from organizations such as travel agents. Most research will cover two areas. surveys may be undertaken by the national civil aviation authorities or government transport departments instead of. particularly should anything so wrong. in some cases. and. the CAA regularly surveys passengers at all main airports. In some countries. Developing good links with local. the aviation industry being the newest of all transport modes still holds a fascination and wonder for some and a fear for others. These surveys may be tied in with the quality surveys so that correlations between passenger profiles and levels of satisfaction can be made. For example. Similarly. both favourable and otherwise in the press. sex. in the United Kingdom. segmentation. Arranging school visits and other trips will also be an essential public relations activity. local businesses. and freight forwarders.

It also changes depending on the destination being assessed. Table 7. Most of the market analysis that is undertaken is based on revealed preference techniques. The cost of obtaining such information is. 1998). Thirty-two per cent of all passengers had business/first tickets as opposed to only 21 per cent at Heathrow and 12 per cent at Gatwick. The catchment area is a dynamic rather than static measure that has to be constantly reviewed and revised. Manchester airport was one of the first airports to use such techniques in the mid-1980s (Swanson. can significantly alter the catchment size. that is. their application within the airport industry is more limited. For instance. will assist airport operators in the identification of new routes or enhanced frequency opportunities. This is the area where most of the local traffic comes from and so will be where airports concentrate their marketing effort. business. For less popular or longer-distance destinations there is likely to be less competition and so the catchment area will be extended over a greater area. The notion of catchment areas for large capital city airports is not generally so applicable since in many cases these airports may offer the only link to the destination under question in the whole country (Humphreys and Gardner.8 shows the main originating areas of the passengers and shows the reasons why the airport thinks the demand for business travel – both currently and in the future – will be so strong. market research related to the size of nearby businesses and any new developments can prove very useful in helping to assess the levels of future demand. Improvements in the road infrastructure or public transport. and the competing services at other airports. The size of the catchment area and the proportion of it which is likely to fly will depend on factors such as the quality of the road network. Such information can give airports invaluable insight into how passengers rate the factors that influence passenger choice. While stated preference techniques are widely used for other transport modes. and tourist activity within the area. normally beyond the reach of many airport marketing department budgets. The techniques have been used to look at airport choice and also transport modal choice for surface access.Managing Airports Market research information. 196 . particularly in the regions. For airports that attract many business travellers. Most airports. 64 per cent of all passengers through the airport travelled for business purposes. refer to the surrounding population and economy that they serve as their catchment area. Many regional airports have overlapping catchment areas. the demographic characteristics of the residents. Isochromes of longer times may represent weaker or secondary catchment areas. by assessing the passenger’s current behaviour to determine future travel patterns. Usually for short-haul travel to popular destinations there may be considerable competition from other airports and so the catchment area will probably be comparatively small. supplemented with traffic data. with over 60 per cent of the passengers working for banking and finance organizations. The alternative is to use stated preference techniques when passengers are asked to state their preference between a number of different scenarios. The most basic approach to defining a catchment area is by using a certain drive time period criteria – typically 1 hour. however. 1995). the economic. For example. or new or additional services at neighbouring airports. passengers might be asked how they would trade-off higher journey cost to an airport compared with journey time. at London City in 2000. Data that are particularly useful are the true origin and destination from global distribution systems such as Sabre and Amadeus.

In 2002.8 million m2 under construction 0.8 Main catchment areas of London City airport.The role of airport marketing Table 7. and has a rail station that has direct services to London and other southeast destinations.9 million m2 awaiting planning approval Canary Wharf London’s new business and financial district 10 minutes from City and LCY 738 000 m2 of offices and shops 500 000 m2 being built 180 000 currently in design stage 400 000 available for future use 3 million workers lie within 1 hours’ commute of Canary Whalf and LCY Working population 55 000–100 000 by 2006 Docklands Westminster Canary Wharf just one part of Docklands 565 000 people employed – largest UK 2 Millennium quarter (500 000 m office employment district space) 32% in business and financial services Royal’s business park (150 000 m2 office 47 000 businesses space) 13% increase in GDP forecast for next 2 Excel 65 000 m exhibition hall 5 years Silvertown Quays 92 000 m2 commercial development and 14 000 m2 aquarium Source: Lavelle (2002). A significant proportion of the passengers are relatively frequent travellers. Since then BAA plc has invested £27 million on a total redevelopment of the airport that has included a new terminal.9). Various subsequent changes in ownership took place until the airport was finally purchased by BAA plc in 1990. and a runway refurbishment. It is the airport’s intention to become a business airport for local demand and to attract traffic that traditionally has used the congested London airports of Heathrow and Gatwick. Business travellers accounted for 49 per cent of the traffic in 2000 compared with only 18 per cent in 1985. This is also reflected in the fact that two-thirds of the travellers are males. 14% (Westminster) originating passengers in 2000 City of London 331 000 people work in City 80% in financial services 481 foreign banks 7. Southampton airport Southampton airport’s modern history began in 1961 when the airport was bought by an aviation enthusiast from the public sector owner. with 72 per cent of them travelling alone (Table 7. Southampton Corporation. which was completed in 1997. mostly in professional or semiprofessional occupations. 197 . 2002 Docklands/Canary Wharf 27% originating passengers in 2000 City of London/Westminster 18% (City of London). which was opened at the end of 1994. the airport had scheduled services to a number of domestic destinations. is accessible by two motorways.3 million m2 office space exists 0.The airport is situated on the south coast of Britain around 80 miles south of London.

In spite of its small size. In addition. The marketing department meets with a group of frequent business travellers. the ‘Scoops’ group.1). Frankfurt. Source: Civil Aviation Authority (2001). Barcelona. Milan. it regularly arranges for current and prospective airlines to meet and hear the views of local corporate travel agents named the ‘Dirty Dozen’ (Airline Business. the annual throughput of passengers at the airport was around 493 000 (Figure 7. Geneva. 1999). Dublin. It also has some limited summer service charters but. by sponsoring the region’s youth games.The airport also aims to forge links with the local community. when BAA plc bought the airport. and Toulouse. At the most basic level it has a request book at the information desk where travellers can fill in suggestions for new destinations. the so-called ‘High Flyers’. and the international airports of Amsterdam. including the nearby Channel Islands. package holiday travellers represented just 6 per cent of total traffic in 2001 – a much lower share than at most other UK regional airports. Its overall rating in BAA plc’s quality of service monitor in 2001–02 was the best out of all BAA plc UK airports. Paris. it has an airline lounge for business travellers and was the first regional airport in the United Kingdom to introduce electronic ticketing for BA passengers. Brussels. Malaga. 2000 Journey purpose % Socio economic group A/B C1 C2 D/E % Sex1 % UK residents business Foreign residents business UK residents leisure Foreign residents leisure Total Flight type Scheduled International Charter International Domestic Total 42 7 47 4 100 21 5 74 100 39 43 11 7 100 Male Female 64 36 100 Group size Alone 2 3–4 Other 72 22 5 1 100 Note: 1Sex breakdown is for 1994/5.Managing Airports Table 7. In the early 1990s. traffic growth 198 . Around three-quarters of the airport’s traffic is domestic. at least four times a year to discuss future developments at the airport. overall. The airport has a range of marketing activities to encourage traffic growth. Bristol. and Bournemouth. Nice. Cork. It also has periodic meetings with the travel and aviation press. In 1990. for example. Much of the leisure traffic in its catchment areas uses services from the nearby airports of Gatwick.9 Passenger profile at Southampton airport. The airport considers that its relative small size gives it a significant advantage in terms of the level of personal attention that is provided and the relative short check-in times.

but during these years the airport managed to achieve an annual growth rate of 6. However. but growth was also considerably less than the average annual rate of 4.The role of airport marketing 1000 900 Total Passengers (mns) 800 700 600 500 400 300 200 100 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Figure 7.1 Total passengers at Southampton airport. This increase of just 1 per cent per annum can be partly explained by general factors such as poor economic conditions and the Gulf War. but the dominance of North Sea oil-related business 199 . which was experienced at all UK airports. The airport has one scheduled international flight to Amsterdam and four domestic services. Norwich airport Norwich airport is a regional airport situated in East Anglia in the east of Britain. In the late 1990s. with the new facilities in operation and with an increased emphasis on airport marketing. by 2002.2 per cent compared with the national average of 5. was slow while the new facilities were being developed. Twothirds of the traffic is for leisure purposes with a large proportion of the passengers taking charter services (Table 7. the airport handled 516 000 passengers.7 per cent. in the following 4 years. undoubtedly general factors such as a healthy economic climate and European deregulation had a role to play with this development. It has been operated by the local authorities of Norwich City and Norfolk County as a commercial civil airport since 1969.10). 1990–2002 Source: CAA airport statistics. A higher proportion of leisure passengers would normally mean a more even split between males and females. the airport experienced far greater growth and. although in 2003 there were plans for it to be partially privatized. around 130 miles north of London.5 per cent. In 1995. This means that compared with Southampton airport there are more travellers from the C2 and DE socio-economic groups. was handling 788 000 passengers despite a decline in traffic in 2002 due to the event of 11 September 2001.

however. The airport added summer services to Malaga and Faro in 1996 and a winter service to Malaga in 1997. not only for package holidays. and Malta and had allocations on flights to Corfu and Cyprus. and catering. By 2000. Cyprus. This move came about because the airport had been unable to persuade the large tour operators to operate programmes from Norwich airport. The airport has adopted a very unusual approach to encourage passengers to use its airport. namely Alicante. 1999 % Socio-economic group AB C1 C2 D/E Sex Male Female % Journey purpose UK residents business Foreign residents business UK residents leisure Foreign residents leisure Total Flight type Scheduled International Charter International Domestic Total 31 6 59 4 100 31 47 22 100 35 34 20 11 100 2 61 39 100 Source: Civil Aviation Authority (2000). Some of the seats were sold to tour operators and some direct to passengers. In 1988. but has subsequently made a considerable profit from such operations in spite of increased competition from low-cost scheduled operators such as Ryanair and easyJet at neighbouring Stansted and Luton airports. traffic at Norwich. Like 200 . The other development has been the decision by the airport to operate its own charter flights. the airport was down to offering allocations on only four destinations. The service was a success. it was offering services to Malaga. it opened its own travel agency in the terminal building to persuade passengers to buy flights and package tours departing from Norwich. Alicante.10 Passenger profile at Norwich airport. which consists almost entirely of male travellers. This also acted as a call centre for London City airport which brought in additional nonaeronautical revenue. By 2002. The success of the agency encouraged the airport to open another five outlets in the surrounding area of the airport in 1998 to further promote the sales of flights from Norwich airport. This was because the airport had proved successful in persuading the tour operators that there was a demand for direct services and the tour operators had therefore taken over the majority of the destinations themselves (Eady. bringing in a profit in the region of around £150 000 directly from aeronautical charges and associated increases in non-aeronautical revenue from sources such as car parking. This destination was chosen because it was apparent from passenger surveys that there was considerable demand. Faro. 2002). retail. In 1995. and Malaga.Managing Airports Table 7. The airport initially took the risk of chartering its own aircraft to prove that there was a market at the airport. a weekly service at a total annual cost of £400 000 was operated from the airport to Alicante. but also because there was a large number of British-owned villas in this area. means that male passengers still outnumber females. Minorca. Faro.

Passengers at Birmingham. Heathrow and Manchester Airports. CAA. R. Ryanair. Between 1995 and 2002. Heathrow. (1999). Manchester. its annual growth of 3. Passengers at Gatwick. the proportion of traffic on international charter services increased from 18 to 49 per cent of the total. Luton. traffic grew annually at 7. London City. Liverpool. References and further reading ACI-Europe (1999). East Midlands. The airport marketing awards.3 per cent between 1990 and 1995 was lower than the national average of 4. Civil Aviation Authority (CAA) (2001).2). ACI Europe Policy Paper on Airport Competition. Airport Forum. CAP 703. CR00. Competition Commission (2002). Civil Aviation Authority (CAA) (2000). Stansted. Cardiff. Norwich and Teesside Airports in 1999.7 per cent. G. Passengers at Gatwick. 3. At the peak time for airport-operated flights in 2000. 1990–2002 Source: CAA airport statistics. The Stationery Office. Leeds–Bradford. when the charter flights were in operation and with the expanded travel agency business. R99. Caves. just too good a negotiator. Airline Business (1999). Airline Business.The role of airport marketing 500 Total passengers (millions) 400 300 200 100 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Figure 7. October. Exeter and Southampton Airports in 2000. A report on the economic regulation of Manchester airport plc. 201 . Strategic Airport Planning.5 per cent nationally (Figure 7. Southampton. CAA. 3.4 per cent compared with 5. 74. Aviation Strategy (2001). Humberside.2 Total passengers at Norwich airport. and Gosling. Predicting the passengers’ choice of airport. Ashford. (1989). around 10 per cent of the passenger throughput was associated with these services. CAA. ACIEurope. Newcastle. Civil Aviation Authority (CAA) (1999). Bristol. Between 1991 and 2002. Bournemouth. July–August. 42–4. Elsevier. N.

London. 17–18. Knowing your customer. Not all airports are created equal. (1998). Department of Maritime Studies and International Transport Occasional Paper No 25. December. Hill. J. University of Westminster Marketing and Market Research Seminar. Peterson. Teale. April. Young. European Regions Airline Association (2000). London. University of Westminster Regional Airport Seminar.. Armstrong. (2003). Creating Airport Cities. (2003). Airports on the Net. J. May. multi-service marketing driven firm. March. (2001). L. ACI-Europe. and Wong. 121–34. Airports World. EC investigates Ryanair/Charleroi deal. The Netherlands. M. Eady. (1995). Jossart. University of Wales. D. (2001). (1996). Name change and airport expansion part of master plan for Lyon. (1998). The competitive role of secondary airports in major conurbations. E. University of Westminster Demand Analysis and Capacity Management Seminar. and Gardner. 12. Developing a travel product for regional airports. D. (1996). Hogan. J. Southampton Airport (1998). Fourth Air Transport Research Group Conference. (1999). Commercialization and privatization: the experience of Cardiff Airport. September. (1995). 18. B. Prentice-Hall. Southampton Airport. Creating the airport image. Meznarsic. Humphreys. Department of Maritime Studies and International Transport Occasional Paper No 49. 71–3. 53–5. ACI-Europe. Lavelle. March. July. The use of stated preference techniques. London. D. B. vol. University of Westminster/Cranfield University Airport Economics and Finance Symposium. Principles of Marketing: The European Edition.Managing Airports Dennis. (1998). 202 . Warwick. Airline marketing. PTRC Annual Conference. Saunders. Schiphol Group (1999). Swanson. The airport’s relationship with low cost carriers. O. (2002). (1994). I. V. University of Westminster/Cranfield University Airport Economics and Finance Symposium. (1995). 7. ERA Regional Report. T. Southampton Airport Profile. Economic regulation of Irish airports. January. Unique Zürich airport. Airports International. (2002). Airport branding. D. Hoevel. Reantragoon. December. Airport marketing: an analysis of the use of primary catchment areas. December. July. A. I. N. ACI Europe Good Communication and Better Airport Marketing. (2003). The evolution of airport management practices: towards a multipoint. Air Transport World. University of Wales. Jarach. University of Westminster Marketing and Market Research Seminar. ACI Europe Good Communication and Better Airport Marketing. December. Pilling. Criteria for successful airport marketing. October. Favotto. I. Privatization and commercialization: changes in UK airport ownership patterns. Humphreys. 7.. Schiphol Group. ACI Europe Marketing and Commercial Strategy Handbook. P. I. G. Airline Business. L. (2000). August. Structure of airport retail and marketing functions. Journal of Transport Geography. April. (1996).. London. and Malmgren. M. Humphreys. Commercial and Marketing Best Practices Handbook Volume 1 – Commercial Practices. Kotler. (1999).

They are doing this for a number of reasons. An increasing number of airports are now undertaking economic impact studies. Impact studies may be used for planning purposes to assess whether there is enough land for new commercial projects in the vicinity of the airport or whether there is a sufficient supply of labour and associated housing to support such developments.8 The economic impact of airports The wider picture The focus of this book now shifts in the next two chapters from the internal environment within which the airport operates to considering the wider consequences of the airport business. A key issue for any airport operator is how to optimize the economic potential of an airport while providing acceptable environmental protection. They want to inform debates about strategic economic investment and to make the economic case for investment in new airport facilities or off-site infrastructure such as roads or rail links. This may be a particular problem when the economic benefits of airport development may be perceived as being the most relevant within a regional or national context. whereas the negative environmental impacts may be hardest felt by the local community. This chapter looks at the economic impacts of airports while the next chapter discusses the environmental effects. Alternative expansion options may be evaluated with consideration of the relative economic benefits which they will bring. Impact information may also be used for .

This indicator can be related to an area’s total income or GDP to assess the relative contribution that the airport has on wealth generation. In addition. employment. car hire. indirect. Thus. the concessionaires providing commercial facilities. there are the wider catalytic or spin-off benefits. The direct or primary impact is the employment and income generated by the direct operation of the airport. freight forwarders and hotels may actually be located off-site. in the surrounding area of the airport. First. Moreover such studies can have an important public relations role in educating policy-makers. food and retail good suppliers. airport users. for more direct services. food. customs and immigration. 204 . This is the value that the airport dependent activities add to the economy in terms of wages. the economic impact of an airport is not just limited to these direct. and induced impacts. transport. or ‘value added’ measure. These types of activities include the utilities and fuel suppliers. which can occur as the result of the presence of the airport. This is the most obvious economic impact and is the most easily measured. within an economic context airports have role to play both by being a significant economic activity in their own right and by supporting business and tourism activity. capital investment and tax revenues which airport operations can bring by nature of the fact that they are significant generators of economic activity. Second. and housing. This requires an examination of the indirect impact. This is the most readily understandable measure and can easily be used to determine an airport’s relative importance within an economy. ‘earnings’. such as car parking. Indicators related to capital investment and tax revenues can also be considered. to gain regulatory approval. salaries. for example. the airlines. in-flight catering. The indirect and induced effects are together often known as the secondary effects (Figure 8. 2003). and security. This so-called induced impact can be defined as the employment and income generated by the spending of incomes by the direct and indirect employees on local goods and services such as retail. Then there is the economic activity or output measure which is the sum of the gross revenues of all the businesses which depend on the airport. However. there is the ‘income’. This can contribute to the economic development of the area surrounding the airport. the impact that these direct and indirect activities have on personal spending also needs to be taken into account. the handling agents and other agencies which provide services such air traffic control. This impact is associated with the activities of the airport operator itself. Economic impacts are measured in a variety of ways. A key indicator is the number of jobs generated. interest. which is defined as the employment and income generated in the chain of suppliers of goods and services to the direct activities that are located both at and in the vicinity of the airport.Managing Airports lobbying purposes. There are basically two types of economic impacts at airports. and profits. construction and cleaning companies. there is income. Airports as generators of economic activity Economic effects can be classified as direct. airport-related effects – although this is the impact which is most frequently quantified and studied. and the general public of the economic value of airports (Mason.1). The role of the suppliers to the airport industry also needs to be considered. In addition. such as inward investment or the development of tourism. Some of these activities.

The multiplier analysis thus quantifies the economic value and jobs of the financial transactions which take place within any economy. computer systems. regional and national government revenues. some airports in the public sector may be exempt from these but may. There will be new investment associated with these direct. Airports. indirect. Some of this money will then be re-spent again. Some of the money spent on airport-related activities will be re-spent on purchases from suppliers of goods and services – the indirect effect – with a proportion of this leaking out of the economy as imports. a certain proportion of the money will accrue to local residents in the form of wages. Eventually.The economic impact of airports Direct impacts Induced impacts Indirect impacts Direct and secondary impacts Catalytic impacts Total impacts Figure 8. offices. the successive rounds of spending will become so small that they will be considered negligible. on the other hand. Much of the remainder will be spent on labour or will go to the government in the form of taxes. On the one hand. In return.1 The economic impact of airports These indirect and induced impacts are clearly much more difficult to measure. The suppliers will then make purchases locally. and profits. This concept takes account of the successive rounds of spending that arise from the stimulus of the direct impacts and assumes that one individual’s or organization’s spending becomes another individual’s or organization’s income in the next round. and sales transactions will be subject to sales or value added taxes. pass over a considerable share of their profits to their government owners. and so on. Employees will pay income tax. of course. Their combined impact can be measured by the economic multiplier. producing the induced effects. will probably also be subject to other taxes such as property or land taxes and business or corporation taxes. many government owners have traditionally allocated considerable public sector funds to aid airport development. maintenance facilities. The rest will be saved and not re-circulated within the economy. salaries. These may be required to cover some specific 205 . distribute wages and salaries. Then there are the taxes collected through airport charges. and induced activities in the form of airport facilities. and pay government taxes. particularly in the private sector. Airport activities can also have a significant impact on local. During each round of spending. import goods and services. involving an understanding of how the airport interacts with other sectors within the economy.

1995). the off-site data collection may be more difficult. there is an annual spring census of all airport-related employers. Details concerning purchases of goods and services. the amount of freight and the actual capacity utilization of the airport. Direct impacts Direct impacts are clearly the easiest of all the impacts to measure. perhaps. for example. expenditures. For example. on average the largest employers at the airport. by direct visual inspection. ACI-Europe has become actively involved with promoting best practice within the industry and has published two airport impact study kits (ACI-Europe. to provide funds for investment such as the US transportation tax. A study of employment in 1996 at European airports showed that the airline and handling agents were. This is particularly the case in Europe. whether it acts as a base for airline activity and whether it provides other opportunities such as office or other commercial development. how much they earn and where they live. York Consulting/ACI-Europe. 2000). Many airports systematically measure the direct economic impacts – particularly the employment effects. However. in more recent years other airports have been becoming increasingly interested in assessing their overall economic value. location of suppliers. Conversely. Employers at the airport can be asked to provide details of their employees. available to airports which want to measure their economic impacts. a definition of ‘off-site’ needs to be established – a rule-of-thumb figure is an area within a 20-minute drive time (York Consulting/ACI-Europe. travel to work mode and whether they are engaged in functions more related to passengers. Historically. in the duty. whether it is a major hub. First. which produces total numbers of staff by type of employer.and tax-free sales area of operation it can be argued that the airports and their passengers receive a direct tax subsidy. and capital expenditure also need to be gathered. it has been in the United States where these techniques have been developed and where most of the economic impact studies have been undertaken. Measuring the direct.Managing Airports airport service such as immigration and public health inspection as in the United States. and induced impacts There are a number of different techniques. of varying levels of sophistication. While such a process for on-site airport activities should not pose too many difficulties. or just to boost public sector funds as in the United Kingdom with the air passenger duty. aircraft movements. indirect. or cargo (Maiden. Then every few years BAA plc also undertakes a survey to find out details of employees characteristics such as home address. revenues. followed by the airport operators and concessionaires 206 . at London Heathrow airport. 1993. 2000). The role of the airport also has to be considered. Then the relevant companies within this area need to be identified by taking into account the knowledge of the airport operator and other industry bodies and. The direct employment at an airport will vary according to a combination of factors such as the volume and structure of passenger traffic.

Cardiff. airport direct employment is related to the traffic throughput of an airport to produce an employment density figure. regional airports. and 2 900 jobs (Department for Transport. It has been suggested that airports can be classified according to their economic impact characteristics. jobs per mppa figures average around 1 100. airports such as Brussels.The economic impact of airports Freight companies 8% Control agencies 7% Other 12% Airline/handling agents 52% Concessionaries 10% Airport operator 11% Figure 8. the employment levels tend to be lower. tourist receiver airports. have the ability to attract extensive off-airport business. and Hamburg have density values of over 1 500. They are also run by the operator. Airports such as Barcelona. By contrast. This gave an overall employment density figure of 1 616. Also at airports serving low-cost airlines. which concentrates most of its resources at Madrid. Within Europe. A figure of 1 000 jobs for every million passengers equal to a density figure of 1 000 tends to be the rule-of-thumb figure generally accepted by the industry. There are six main groups of airports. tourist generator airports. and Newcastle. and no base airlines. Malaga. The international gateways. This is usually equivalent to the number of employees per million passengers per annum (jobs per mppa) or per WLU if freight is an important activity at the airport. This ratio was much higher for the North American and Pacific airports since many more activities are outsourced (ACI. respectively whilst using the density assumption would give estimates of 6 600. such as Heathrow. and transit and interline airports. particularly in the form of international 207 . (Figure 8. and Gran Canaria in Spain have much lower values – below 500 – because of limited development at the airports.2 Employment at European airports in 1996 Source: ACI-Europe. primarily because of higher than average involvement in freight operations at Brussels and major maintenance facilities being located at the other two airports (ACI-Europe. 2002). and 2 560. Amsterdam.2). AENA. For every person employed by an airport operator. Manchester. although it obviously masks wide variations in employment at different airports. 1998). For meaningful airport comparisons to be made. namely international gateway airports. 16 400. national hub airports. The actual direct employment figures for these airports were 5 390. Paris CDG. A study in the United Kingdom in 1998 has shown the ‘rule-of-thumb’ density figure of 1 000 for the regional airports of Birmingham. 2002). and Frankfurt. in 2001 it has been estimated that there were 333 000 airport operator employees and a total of over 3 446 000 employed at the airport. dependence on incoming tourism traffic. there were another nine working for other companies at the airport. Eighty per cent of the employees were male – although women made up 60 per cent of the part-time workforce. 17 200. Globally.

in money terms. This methodology involves constructing a transaction table which shows. and Stockholm. Analysis of past trends at Amsterdam airport has enabled ‘elasticity’ values to be produced for various types of employment. such as Madrid. check-in. This will involve some assessment of the productivity gains which are likely to occur. Since the 1980s. can act as airline bases and encourage capital city tourism. The national hubs.g.g. 2000).97.77 and 0. such as London Luton can be bases for charter airlines or low-cost carriers while tourist airports such as Dubai can be important for duty-free trade and cargo operations (Andrew and Bailey. These should be derived from historical trends and experience elsewhere. RIMS II. and should also take account of the changing demands on airport employment due to more stringent security and quality requirements and technological developments. For example. fuel. 1996). which indicates that a 1 per cent change in passenger numbers brings a 0. This technique will thus allow the impact of additional spending in any one specific economic activity to be identified sector by sector as well as for the area as a whole. airport operators will have to project their employment figures into the future. Any economies of scale that also apply to labour productivity should be taken into account. coefficients or multiplier values can be obtained for each economic activity.61 for cargo have been estimated for the future (Maiden. Tourist generator airports. This model looks at the linkages which exist within any economy by considering the relationships between the different economic sectors (e. and services) within a certain area. aircraft size may rise with traffic growth which will increase staff productivity in certain areas. handling and freight forwarders) and aircraft-related (e. the Bureau of Economic Analysis in the Department of Commerce has been developing their regional input–output modelling system. Corresponding values for freight-related (e. This has been used widely to estimate regional impacts in both the public 208 .46 (York Consulting/ACI-Europe. 1995). Indirect and induced impacts There are two main approaches to estimating the multiplier effect and measuring the indirect and induced impacts. From this table. construction. With passengerrelated employment (e. The first method involves using multiplier values that have been calculated by using information which has been gathered from surveys of on-site and off-site employers and by making assumptions about the tax rate and the share of purchases which are imported. One country which has extensive experience of using the input–output method to measure impacts is the United States.Managing Airports company headquarters and distribution and retail centres. Oslo. Very often in using economic impact studies to support proposals for future development. maintenance. manufacturing. A more sophisticated approach involves using an input–output model.g. Each sector is shown as a column representing purchases from other sectors and as a row representing sales to the other sectors. and to encourage long-haul tourism.83 for passenger-related employment and 0. At Heathrow (assuming that a fifth terminal is built) values of 0. and air traffic control) activities are 0. agriculture. and commercial facilities) the elasticity value is 0. the input–output relationships for the sectors in the economy. cabin crew.g.97 per cent change in related employment.

Department for Transport. to 1. The choice of method will usually depend on the amount of data which is available and the resources which can be utilized. which gives a secondary:direct jobs ratio in the range of 0. jobs (ACI-Europe. The impacts of smaller airports clearly need to be considered within a narrower context. that it makes sense to assess their impact within a national context. or local situation is being assessed. This ratio ranges from 2. 2003). Even. recent research has tended to consider the indirect jobs to be broadly equivalent to a third of the direct jobs. Globally. Halcrow. with between 750 and 2 000 of these jobs being direct airport-related employment (ATAG. on average. If a more local situation is being assessed. propensity to travel characteristics. the data requirements will be greatest for the input–output models.7 (Oxford Economic Forecasting. or secondary.1 (ACI-North America. In the United States average direct figures are 1 270 staff per mppa and secondary are 2 063 – which gives a ratio value of secondary to direct jobs of 1. The choice of study area will depend primarily on the role and size of the airport and the reason for measuring the impact. in the United States where the FAA recommends procedures for identifying and quantifying the economic impacts of airports there are substantial 209 .6–0. 2002b). With this estimation a distinction was made between international hub airports which were assumed to generate 1 500 direct jobs per mppa and 2 100 secondary jobs compared with lower values of 1 000 and 1 100. in addition to 1 100 direct jobs. of which 1 200 are direct and 1 500 are secondary. Specific issues. the other approach may be more appropriate. The input and output structure of nearly 500 US industries is contained within the model (US Department of Commerce. The indirect impacts tend to increase with the size of the study area as this increases the likelihood of goods and services required by airport-related companies being supplied within the area. respectively. Clearly.The economic impact of airports and private sector. 1998). They will also be related to the size of the economy under consideration.62.2 for the small airports (ACI-North America. may be more appropriately considered at a regional or local level. and likewise for the induced jobs. however. regional. Another estimate is 2 700 total jobs per mppa. Individual values will depend on many factors such as the nature of the traffic at the airport. Large capital city and main international airports tend to have such an important impact on the overall economy. direct and secondary) per mppa ranges between 2 500 and 8 000. Clearly. Specifically within the United Kingdom. and only 0. 1998).32 for the larger airports. there are the same number of indirect and induced. depending on whether the national. particularly related to the employment market. it has been suggested that on average the number of total jobs (i.32 for the medium-sized airports.e. In Canada. 1997). at smaller regional airports (Mason. and forms the basis of many of the airport economic impact studies. of adapting the national or regional input–output model. with a considerable degree of caution. 2002. Within Europe it is estimated that. 2000). Estimates for airports may vary quite widely because of the use of different terminology and methodology or the adoption of models of varying levels of sophistication. employment sector mixes and the role of the airport. or there may be the option. these aggregate figures will hide significant variations which exist between different airports. 2002). 1999. and this technique tends only to be used at a national or regional level. in 2001 the comparable figures are broadly 1 640 (direct) and 1 850 (secondary) with a secondary:direct ratio of 1. rather than being imported from outside.

Then there is the problem of how to treat any activities which are based at the airport but not actually related to airport operations.Managing Airports differences in the detailed methodologies used. whereas at Birmingham. restaurants. and Vancouver airports have been estimated to generate over 2 000 secondary jobs per mppa. treat these as indirect jobs. and exhibitions. and Newcastle airports this value is less than 500. Some airports. When there is a major capital investment programme. Cardiff. This makes it very difficult to compare multiplier values. Other studies separately identify the visitor impacts. Direct jobs per mppa range from as little as 646 at Washington National airport to 1 656 at Winnipeg airport. conferences. For example. Gatwick. This means that the secondary : direct jobs ratio is very varied – ranging from as little as 0. airports tend to identify the impacts separately to add additional support to the case for new capacity. One of the major areas of discrepancy is in the treatment of jobs associated with leisure and business tourists who arrive via the airport. which can have a dramatic effect on the overall magnitude of indirect impacts.3).1). sometimes all off-site impacts are considered as indirect impacts. the secondary : direct income ratio has been estimated to be below 0. Studies adopt different definitions of multipliers and interpret direct and indirect impacts in a number of ways. About 15 per cent of direct employment was off-site (Figure 8. Phoenix. Sometimes the temporary staff employed in the construction industry will be included in the impact figures and sometimes they will not. When income generation is considered.5 at Phoenix.3 at the airports of Cardiff and Gatwick to 2. 210 . irrespective of whether the activities are directly airport related. or adopt a more qualitative approach to assessing this effect. Very often the split of activities on and off-site will depend on whether the actual site is constrained or not.3 Employment at Gatwick airport in 1997 Source: BAA Gatwick (2000).5 Cardiff airports between 1 but less than 2 for Düsseldorf airport and around 2 for the Paris airports. At Gatwick airport. Another area of inconsistency between airports occurs with the treatment of construction activities. Munich. These jobs are thus in tourism industry activities such as hotels. attractions. Induced 19% Indirect 4% Direct off-airport 10% Direct on-airport 67% Figure 8. the secondary : direct ratio was also estimated to be around 0. For example. just as wide-ranging impact values are obtained. particularly in the United States. These differences largely will be responsible for the spread of employment density figures which have been estimated for a number of European and North American airports (Table 8. such as a new runway or terminal.3 with the bulk of the secondary employment coming from induced effects.

Aviation’s contribution to GDP was estimated to be 4. The industry is thought to contribute £10.9 951 1 213 1 546 812 992 646 1 656 1 202 2 998 2 005 733 796 402 951 2 153 4 211 3 551 1 545 1 788 1 048 2 607 1.0 30.8 2.9 1997 1996 1997 1997 1998 1998 2000 3. Figures for 1998 estimate that the aviation industry generated US$911 billion in economic activity. an input–output model of Oxford Economic Forecasting has been expanded to include the aviation rather than just the transport sector in order to assess the overall economic impact of aviation.0 6. US$259 billion in annual earnings and 10.9 0. studies are undertaken to assess the overall economic impact of aviation. 2000b).7 2.8 0.1 31. 1999).1 1 581 816 1 570 774 1 023 1 147 953 1 075 858 854 1 560 1 068 1 142 806 408 483 966 1 023 354 781 2 131 446 1 195 1 910 828 1 082 2 387 1 224 2 053 1 740 2 046 1 501 1 734 3 206 1 304 2 049 3 470 1 896 2 224 0.1 15.3 0.2 15.8 0.5 0. National estimates for just the airport sector are more difficult to obtain.4 1. in the absence of any equivalent of RIMS II.2 0. 1999.6 Note: a mppa million passengers per annum.9 11.3 1.5 6.3 million jobs (Wilbur Smith Associates.4 27.3 0. and Department for Transport (2002).3 2.2 15. At a national level in various countries.2 1. In the United Kingdom.3 17. Source: Individual airport economic studies as reported by the airports themselves and ACI-Europe (1998). For example. ACI-North America (1998.8 1.4 14.2 billion to UK GDP which is 1. ACI-North America has calculated values 211 . in the United States.0 0. 2000).6 0. including airport operations.4 9.5 billion goes to the government in the form of taxes (Oxford Economic Forecasting.8 2.5 1.0 0.6 15.4 per cent of total GDP and at least £2.6 1.1 Employment impacts at European and North American airports Airport Year Passengers (millions) Direct Secondary jobs jobs per per mppaa mppaa Direct and secondary jobs per mppaa Direct jobs : secondary jobs Europe Amsterdam Birmingham Cardiff Düsseldorf Geneva London Gatwick Manchester Munich Newcastle Oslo Paris CDG Paris Orly Vienna North America Ottawa Phoenix Vancouver Victoria Washington Dulles Washington National Winnipeg 1997 1998 1997 1997 1998 1997 1998 1996 1998 1996 1996 1996 1996 31.7 per cent.5 1. the Department of Transportation’s databases and the RIMS II model are used to assess the overall impact.5 0.The economic impact of airports Table 8.7 27.

1 billion in economic activity. or spin-off impact. A good illustration of this was the recent planning enquiry for Manchester airport’s second runway. where unemployment is high and there is a narrow declining economic base. has increased the importance of locating in the vicinity of an international airport. They can encourage inward investment and the relocations of businesses by attracting industries which rely on quick and convenient access to air services for both people and goods. communications. In Canada. These arguments are frequently used to gain approval for airport expansion or development. has meant that air travel has become a critical element for a quick and efficient distribution system and rapid delivery times. 2002a.5 billion in taxes. (ACI-North America. as has been the situation in some developing countries in Africa and Latin America where air travel has enabled the export of fresh and perishable fruit and flowers to Western economies.Managing Airports for both Canada and the United States by using the individual airport studies in both countries in 2001. Airports can give a company easy assess to other parts of the company as well as to suppliers and customers. Some of the fastest growing knowledge-based industrial sectors such as computing.9 million direct jobs and 6. and tax revenues generated by the wider role which an airport can play by being an economic magnet for the region it serves. Hence. it is estimated that there are 304 000 jobs in total with the airports generating Canadian $34. and can offer speed and security for goods being transported. and pharmaceuticals are the most international. and are heavily reliant on air travel for the transportation of their high-value/lowweight products. an airport can also play a role in attracting and sustaining wider economic activity in the surrounding area – both in terms of business and tourism development. This impact can be defined as the employment. creating wealth and regenerating the area. Moreover. such as car manufacturing. In economically disadvantaged areas. Overall. The increasing reliance on just-in-time inventory systems for these expanding industries and more traditional sectors. both in terms of multinational companies and also in terms of increased reliance on imported components and products. Airports and economic development As well as being a generator of economic activities in its own right. Airports can also help retain current businesses or encourage them to expand. magnetic.7 million jobs in total. These businesses will not rely directly on the airport for their operation. US airports are estimated to generate 1. income. airport development is often seen as a way of generating new employment. In some cases the airport can be the lifeline to local economies. by providing access to a wide range of both passenger and freight services. The trend towards globalization. This is the catalytic. They are estimated to produce US$507 billion in economic activity and US$33. electronics. In short. airports have become increasingly more important for businesses operating in global marketplace. investment. an airport can enhance the competitiveness of the economy and can contribute to the export success of the businesses located in the vicinity of the airport. Manchester airport claimed there would be some much 212 . but they will have a preference for a location near an airport because of the accessibility benefits which can be gained. airports can play an important role in influencing company location decisions.b).

1999). and conference business. evidence suggests that the links between air transport and economic growth are largely historical (Graham. There are many examples of countries. The situation is also made more complex by the fact that many economic regions are served by a number of airports. Asia and Pacific. whereas neighbouring Liverpool airport. attractions. and transport infrastructure. it is very difficult to formally establish the causality between the expansion of an airport and wider economic development (Caves and Gosling. not the quality of the infrastructure (Graham and Guyer. The wider economic benefits will depend very much on the scale of the airport and. and the supporting communications. The exact location of any business activity will be only partially related to the existence of any nearby airport services. Tourism markets which are particularly dependent on air travel include package holiday travel. where the tourism potential of a destination has only been realized after direct services and suitable airport infrastructure have been provided. as with business development. Causality between airport growth and tourism development. for example. city break tourism. Certain regions will find it difficult to attract inward investment if their airports have not reached the critical mass needed to provide an adequate range of services. in choosing whether to operate from the airport or not. and exhibitions. and areas which are relatively inaccessible by air will be at a distinct economic drawback. is it new air services at a resort which encourage new hotel development. It is certainly true that investment in airport infrastructure is not usually sufficient in itself to generate sustained increases in economic growth. Their primary concerns will be whether sufficient passenger demand exists and the airport’s strategic and geographic location. is very difficult to prove. The increase in visitor numbers may then have a spin-off effect on the income and employment generation in tourism industry activities such hotels. particularly in developing areas such as the Caribbean. However. or do more bedspaces encourage more frequent flights? Some impact 213 . rather than the development of air services influencing the economy. tax incentives. It is extremely difficult to isolate and quantify the economic effects which are due to the presence of the airport from the wide range of other factors which will affect a company’s location decision. which opposed the plans. trade policy. its ability to attract air services. In the United States. claimed that there would substantial economic benefits for the Liverpool area if the runway was not built and Liverpool airport expanded instead. In many cases it is impossible to establish whether it is the nature of the surrounding economy of an airport.The economic impact of airports needed economic development as the result of the second runway. Thus airports are often considered as a vital component of a regional development policy and can be viewed as giving a real advantage to competing regions. Airports can play a role in encouraging both business and leisure visitors to the surrounding area. Airports undoubtedly play an integral part in economic development. in terms of wealth and population size and distribution. it will be the airlines that will determine the success of an airport and broader economic impacts. 2000). The ability of airports to generate jobs and attract new business should never be used as the main justification for new airport construction. long-haul travel. In the end. which has encouraged airlines to operate from the airport. the nature of the local labour market. restaurants. quality and cost of any potential development sites. with either complementary or competing roles. with other factors being the availability. For example. very critically. 1995). conferences.

This will be in order to gain a closer understanding of the nature of the interaction between the airport and the wider elements in the local economy. A difficulty with this interview approach is to ensure that respondents give genuine comments. wage rate and trade union profile of the local labour market were very important locational decision factors. indirect. 2003). Some studies have made some estimates by usually assuming that a certain proportion of jobs within the business and tourism industries in the vicinity of the airport exists because of the airport. and Oslo to above 2 000 at Barcelona. particularly in the United States. it is not usually feasible or suitable to identify with any certainty the exact number of jobs. and induced impact measurements (York Consulting/ACI-Europe. housing. since the respondents will bear no direct costs associated with the new services but may benefit from the gains.Managing Airports studies. namely London. For instance. it is more preferable to consider them alongside the catalytic impacts causing business development. and the health system. For example. Brussels. 2000). Birmingham. competitiveness and business performance by surveying and holding discussions with relevant businesses. property costs. that by including crude estimates for these catalytic impacts that these have the effect of reducing the credibility of the more accurate direct. Other airports choose to categorize the visitors’ impact as indirect. An estimate of spending is often calculated by multiplying the visitor numbers by average daily spend and length of stay. 2000). unskilled labour. three major non-stop international routes to London. many of these tourism businesses will be reliant on air services for their tourism demand. Admittedly. Düsseldorf. Amsterdam. Other factors mentioned included financial incentives. that this tourism industry would not exist if a certain airport was not present. proximity of markets. in 1996 at Phoenix Sky Harbor International. It was calculated that in the first year of operation the routes generated 214 . Düsseldorf. but it unlikely. and Brussels. 1998). raw materials. telecommunications. Similarly trends in business and leisure tourism can be investigated and the importance of the role of the airport discussed among industry experts. 2000). and Toronto were opened. Paris. In another survey in Europe in 2002. Since it is very difficult to prove any direct causality between airports and broader business and tourism development. however. environmental regulations. Frankfurt. Alternatively. were also rated as the top five cities in which to locate a business (Mason. or the amount of income which is generated from these catalytic or spin-off impacts. except in an isolated island situation. Within Europe such estimates have ranged from below 1 000 jobs per mppa for airports such as Amsterdam. They will often have a very positive but perhaps not totally realistic view of the value of new air services. have a separate visitor impact category. Instead. a survey of US corporate executives found over 50 per cent of the sample felt that the road infrastructure. and Newcastle in the United Kingdom. There is a danger. and the skills. the school system. An average figure is 1 800 jobs per mppa (ACI-Europe. the impact of opening up new routes can be considered in order to see how air services directly impact on business or tourism development (Button and Taylor. for example. It thus seems rather inappropriate to include these tourism impacts as indirect impacts. Eighteen per cent identified the presence of major airport as being important (Mason. A more qualitative approach is often adopted which will involve investigating factors such as the significance of the airport to location decision. the top five cities for transport links with other cities.

and US$52. it is the net benefits which should be considered (Caves and Gosling. and Vienna airports to give an example of the range and type of measures which are available in different areas of the world. The overall impact on the local community of tourism development related to aviation activity also needs to be assessed.8 million at Washington National. Table 8. 215 . such as city centres. The Washington airports also estimate the impacts of the US$31 million capital expenditure programme at National airport and the US$57 million capital programme at Dulles airport. 1994). and Birmingham–New York. With some of the airports visitors activities are identified separately and so the impact of including them in the economic assessment can be seen. For comparative purposes. the availability of nearby direct air services may increase the use of imported goods and services at the expense of local products. It was also estimated that the routes created US$351 million air exports income. The total jobs and output at Brisbane is very high. At Geneva airport the catalytic impacts associated with business development. also need to be taken into account. non-airport related. The total employment is estimated to represent 5. 3 323 jobs. The crossover effects on other industries. Brisbane. Other interesting examples include an assessment of the impact of the four long-haul routes. with indirect/induced income of US$97 million and 915 jobs. although many of the wider economic benefits are likely to be less linked to passenger volume. 1999).2 presents a selection of economic impact measures for the Washington. Each of the studies have been undertaken separately so there is no consistency in the method used – which may explain some of the differences. Manchester–Hong Kong. Similarly.The economic impact of airports US$39 million direct income and 366 jobs. The impacts should also ideally be compared with possible alternative. By way of illustration. Increased industrial and economic activity around an airport may merely be draining resources from other areas. have been identified. Alternative developments could have a better overall impact on the economy. all need to be considered. such as extensive urbanization and industrialization. the impact on other modes of transport. overheating of the economy and consequences of local labour shortages. In assessing the impact that airports have on the wider economy. and it is likely that this is reflecting the impact of aviation on the neighbouring Australia TradeCoast economic development area. The negative or adverse potential impacts of airport development. Geneva. in addition to the tourism activities.7 new annual tax revenues (ACI-North America. These airports are all medium-sized airports with passenger throughput varying from 6.2 per cent of employment in Queensland. The positive effects may not be very substantial if the tourism industry has to be supported by a substantial level of imports and foreign investment (Wheatcroft. For example. economic activities with an assessment being made of the comparative economic benefits and opportunity costs. with the income accounting for 6. for example. namely Manchester–Atlanta. airports cannot only encourage visitors to the local region but can also enable local residents to holiday abroad rather than staying in the local region.8 per cent of the gross state product. 1994). Washington National airport has the least jobs per mppa primarily because of the domestic nature of the passengers and less involvement in other activities such as freight. which was undertaken by the UK CAA (CAA. 1998). Manchester–Dubai.4 million at Geneva airport to 15. the measure have been divided by passenger throughput.

there is little doubt that airports have a substantial economic effect on the region in which they are located. Vienna International Airport (1998). Geneva Airport (2000). In conclusion.8 million passengers Direct 10 394 1 058 N/A Totalc 20 234 2 361 N/A Visitors N/A N/A 2 361 N/A 67 N/A N/A N/A N/A 255 462 N/A 992 1 788 3 076 50 82 646 1 048 4 418 26 41 1 547 7 887 1 029 2 058 1 684 d 35 64 64 2 4 24 42 85 1 2 N/A 151 N/A N/A N/A N/A 116 259 N/A 264 N/A 128 N/A N/A 153 N/A 184 N/A N/A N/A 819 226 N/A 684 231 N/A N/A 262 28 N/A 18 0 N/A 19 N/A 27 0 N/A N/A 6 N/A N/A N/A N/A 28 51 N/A 1 142 2 224 N/A Notes: a mppa million passengers per annum. bppa passengers per annum. 216 . they are very difficult to actually quantify with any degree of confidence. Brisbane.2 Economic impacts at Washington. Metropolitan Washington Airports Authority (1999).Managing Airports Table 8.4 million passengers Direct 6 587 N/A 1 458 Totalc 13 174 N/A N/A Catalytic 10 779 N/A 4 404 d Visitors N/A 1 488 Vienna (1996) 9. it is likely that in the future more consistent and accurate approaches to measuring economic impacts will be developed. Geneva. While concepts such as the multiplier or the catalytic effects are reasonably straightforward to understand.6 million passengers Direct 15 481 548 4 125 440 Totalc 27 888 992 N/A N/A Visitors 47 981 998 1 989 277 Construction: Direct 778 31 N/A 7 Totalc 1 281 56 N/A N/A Washington National (1998) 15.0 million passengers Direct 16 400 N/A N/A Totalc 83 600 1 596 8 685 Geneva (1998) 6. More and more airports are showing interest in measuring their economic impact but still there are considerable inconsistencies in the terminologies and methodologies used. Sources: Brisbane Airport Corporation (1998). As research into this area continues.8 million passengers Direct 10 211 384 2 414 295 Totalc 16 562 664 N/A N/A Visitors 69 805 1 347 2 909 425 Construction: Direct 417 19 N/A 4 Totalc 650 32 N/A N/A Brisbane (1996–7) 10. and Vienna airports Jobs Income Output (million (million US $) US $) Taxes (million US $) Jobs per mppaa Income per ppab (US$) Output per ppab (US$) Taxes per ppab (US$) Washington Dulles (1998) 15. This chapter has discussed these various economic impacts. c Direct and secondary impacts. dIncluded in ‘total’.

PTRC European Transport Forum. N. BAA Gatwick. Master Plan – Executive Summary. September. MWAA. ACI-Europe. B. Geography and Air Transport. Brunel University. The Economic Impact of US Airports. DfT. March. R. The contribution of airports to regional economic development. Geneva Airport (2000). Proof of Evidence: Forecasting – Heathrow Terminal 5 Enquiry. Strategic Airport Planning. Journal of Air Transport Management. ACI-North America (2002b). The Contribution of the Aviation Industry to the UK Economy. CAA. The Economic Impact Study Kit. Halcrow (2002). SERAS Stage two: Methodology report. BAA Gatwick (2000). The Economic Benefits of Air Transport. DTLR. Geneva Airport. The economic impacts of airports. ACINorth America. Civil Aviation Authority (CAA) (1994). and Taylor. (2000). BAA/31. Metropolitan Washington Airports Authority (1999). and Guyer. (1995). (2000). ACI-North America (1998). ACI-North America. University of Westminster/Cranfield University Airport Economics and Finance Symposium. R. (2000). The Economic Impact of New Air Services. N. DOC. 6. Oxford Economic Forecasting (1999). (2003). A User Handbook for the Regional Input–Output Modelling System (RIMS II). ACI-North America (1999). and Bailey. The Economic Impact of US Airports. 249–62. International air transportation and economic development. Mason. Button. The Economic Impact of Geneva International Airport – Summary. Graham. S. 8. The Economic Impact of Canadian Airports. H. US Department of Commerce (1997). (1995). CAP 638. Graham. Maiden.The economic impact of airports References and further reading ACI-Europe (1993). K. 3rd edn. ACINorth America. ACI Airport Economics Survey 2001. ACI-North America. G. R. Regional Air Services Co-ordination Study. Gatwick Airport Sustainable Development Strategy. Department for Transport (DfT) (2002). (1996). Airports Council International (ACI) (2002). Creating Employment and Prosperity in Europe. The economic impact of airports. BAC. S. Pergamon. March. 217 . C. Regional Economic Impact. Air Transport Action Group (ATAG) (2000). The Economic Impact of Canadian Airports. The role of regional airports and air services in the United Kingdom. Mason. Brisbane Airport Corporation (1998). and Gosling. ACI-Europe. (1999). Andrew. Caves. ACI-North America (2002a). B. 209–22. Journal of Transport Geography. ATAG. ACI-Europe (1998). University of Westminster/Cranfield University Airport Economics and Finance Symposium. ACI. BAA. Wiley. OEF.

Vienna International Airport. York Consulting/ACI-Europe (2000). S. The Economic Impact of Civil Aviation on the US Economy – 2000. Aviation and Tourism Policies: Balancing the Benefits. Europe’s Airports: Creating Employment and Prosperity – An Economic Impact Study Kit.Managing Airports Vienna International Airport (1998). (1994). Wilbur Smith Associates (2000). ACI-Europe. Introducing our Airport and its Economic Potential. Wilbur Smith Associates. Wheatcroft. 218 . Routledge.

In many countries increased prosperity has led to greater expectation for the quality of life and more sensitivity to the environmental impacts of airports. The environmental impacts have to be considered at two levels. In short. At the same time. continual growth in demand is putting greater commercial pressures on airports to develop activities.9 The environmental impact of airports Growing concerns for the environment In the 1990s. The problems are particularly acute for airports which are popular because of their proximity to local population centres but which means that a significant proportion of the community is affected by airport operators. depending on views about aviation and other social and political attitudes. All indications are that this will become even more difficult in the future as concern for the environment grows. environmental issues must be seen as one of the greatest challenges to. The level of environmental concern varies from country to country or indeed from one airport to another. the future activities of the air transport industry. the airport industry. faced the effects of increasing environmental pressure. Within a . like all other industries. and possible constraints upon. For this reason it has become increasingly difficult to substantially expand airport operations or to build new airports. namely global and local.

These will have a complexity of different. when mitigation measures are considered. public tolerance of aircraft noise has been diminishing. 2000a. whereas elsewhere many airport operators are increasingly voluntarily introducing measures to mitigate the impacts. night flights. These are long-term issues which society as a whole has to address. or loss of wildlife habitat can cause anxiety among certain sectors of society and generate considerable emotive concern. is very much at the local level. in many cases. Some impacts cannot adequately be measured. heritage. These include the airport operator. most standard procedures have to be adapted to suit each airport’s individual circumstances because of variation in aircraft use. Pressures from the environmentalist lobby for a reduction in air transport because of overall environmental needs. and often conflicting. At a local level. It is the more local problems which airport operators mostly have to address on a day-to-day basis. Then. closeness to residential areas and overall environmental sensitivity of the community. at the expense of economic growth. Water pollution and use. The meeting of governments in Kyoto in 1997 was one of the first attempts to introduce constraints upon environmental impacts at a global level although aviation currently is excluded from this. Waste and energy management. 2000a). This is in spite of the fact that over the years the noise levels 220 . and local residents. for example. Consideration of the environmental impacts at airports is made that much more difficult because of the many different bodies involved in. Issues such as resident safety. Emissions. In some areas of operation airport operators may be legally required to minimize the adverse effects. CEDelft. interests. can be accurately assessed by monitoring noise levels at airports. Public concern at a local level. is a much more difficult challenge to face – even quantifying the environmental costs is very problematic (DETR. or affected by.Managing Airports global context. amenity and conservation groups. The focus of this chapter. and landscape. governments and statutory organizations. The main impacts The main environmental impacts can be divided into five categories: 1 2 3 4 5 Noise. concerning airport noise. the role that aviation plays in contributing to world problems such as global warming and ozone depletion is increasingly coming under scrutiny. which may be difficult for all interested parties to fully understand. airport operations. to aircraft noise and air quality have to be considered. the airlines. Other impacts may require complex technical data to be assessed. Wildlife. for example. therefore. Noise Aircraft noise has traditionally been considered the most important environmental problem at airports and. land-use rules. impacts due. although some investigation of the global developments has also been made to put the local issues into a broader context.

ICAO adopted similar international standards in 1971. particularly in Europe. the first generation of noisy aircraft (i. They are. These standards were included in the Environmental Protection Annex 16 of the Chicago Convention. such as the Boeing 707. DC-9 and older types of Boeing 737 and 747. 221 . In 1977. 1999. 1999). Chapter 2 aircraft include the Boeing 727. Baker and George. and all the airbus family of aircraft. This banned the addition of new hushkitted aircraft to European registers from 2000 and excluded all this type of aircraft entirely after 2002.e.The environmental impact of airports associated with aircraft movements has been declining. 2000. 224 chapter 2 aircraft. 2000). For some time ICAO through the Committee on Aviation and Environmental Protection (CAEP) explored the scope for a new chapter 4 noise standard but reaching agreement between all ICAO member states proved very difficult. Since that time the second generation Chapter 2 aircraft have become the noisiest types. This largely explained the difference of opinion over this issue (Gill and George. 767. By far the greatest proportion of chapter 2 aircraft is in Latin America and Africa where they accounted for over half the total. For example. The initial standards for jet aircraft. the noisiest of the chapter 3 aircraft and so there have been pressures. A standard was finally established in 2001 (Feldman. in the EU it was estimated that there were two chapter 1 aircraft. These are chapter 2 jets which have been modified to comply with the chapter 3 rules. In the United States. compared with corresponding global figures of 9 and 86 per cent. 2 448 chapter 3. became known as ‘chapter’ 2 or ‘stage’ 2 in the United States. chapter/stage 1). 2000). with all single-aisle aircraft in January 2000. 777. George. and 13 supersonic in the world’s fleet (European Commission. have been prohibited. globally 15 per cent was certified chapter 1 or 2. were adopted by the ICAO. 2001). claiming that it discriminated against the US aviation industry. Newer aircraft certificated under chapter 3 include the Boeing 757. Current aircraft types are typically 20 dB quieter than aircraft of 30 years ago – reducing noise annoyance by around 75 per cent (ATAG. known as chapter or stage 3. based on the maximum noise level given a certain flight procedure. Noise certification was first introduced in 1969 by the United States in the Federal Aviation Regulations Part 36 (FAR Part 36). The absence of an agreed standard from ICAO meant that the EU in the interim introduced its own regulation. The Americans were strongly opposed to this unilateral action by the EU. to be applied to all new aircraft designs. This was because the United States was the sole supplier of hushkit technology and US airlines had a higher proportion of hushkitted equipment than any others. however. more stringent standards. for phasing them out. This has been the cause of a very major dispute between European and American authorities. 19 per cent was hushkitted or re-engined. 31 per cent of aircraft were hushkitted and 60 per cent are chapter 3 compliant. An issue which has complicated this noise certification process is the treatment of hushkitted or re-engined jets. In 1998. and the remaining 66 per cent were chapter 3 compliant. This reduction has been primarily due to the development of less noisy aircraft and the pressure of more stringent requirements for noise certification of new aircraft types. The first measure was originally to become effective from 1999 but was delayed in the hope that an agreement with the Americans could be reached. They were phased out completely in the United States at the end of 1999 and internationally ICAO required these aircraft to be phased out by 2002. Since 1990.

and the long lifetime of an aircraft. For example. and make scheduling long-haul services more difficult. however. Such constraints may significantly impact on the development of freight or charter traffic which often rely on night movements. for example. This can be used to measure local noise levels and calculate noise contours. or a limit on the noisier aircraft. governments and other interested parties. land-use planning and management measures.Managing Airports The new chapter 4 standards will apply to all new aircraft designs beginning 2006 which have to cumulatively be 10 decibels quieter than chapter 3. or to enforce noise limits. There may be difficulties with this. This concept of a ‘balanced approach’ to noise management comprised four principal elements: 1 2 3 4 reduction of aircraft noise at source. Individual airports can. In most cases. 2002). introduce unilateral noise abatement operating measures which can more immediately reduce the annoyance caused by aircraft noise. Flight-track monitoring equipment when combined with airport surveillance radar is used to improve airline departure and arrival procedures and to monitor the adherence to the PNRs. airport operators may impose financial penalties on airlines that deviate from their required flight track. local noise-related operating restrictions. In some cases. and a growing number of airports actually publish the results. Airports may also choose to place restrictions on flight procedures by requiring.and track-monitoring procedures can be provided for the airlines. restrictions on noisier aircraft only apply at night 222 . reduced power and flap settings for take-off or approach. This is usually done by directing aircraft away from the most densely populated areas. because airlines quite legitimately may be required to depart from their preferred route for ATC reasons. many airports have introduced preferred noise routes (PNRs) to minimize the noise impact on the surrounding population. This may involve a blanket ban on all aircraft. However these standards are already achieved by existing designs and so the EU and most airports were disappointed that their demands for a much tighter cumulative 14 decibel reduction were not met. local community. The directive allows operating restrictions to be placed on marginally compliant aircraft that have a cumulative margin of no more than 5 decibels in relation to the chapter 3 certification limits but it is not yet clear how many airports will choose to impose such a restriction (Pilling. Many airports also use noisemonitoring equipment. In addition no agreement was reached regarding the phasing-out of the marginally-compliant chapter 3 aircraft such as the hushkitted aircraft although ICAO did agree to airports considering operating restrictions as part of a balanced programme of noise mitigation. for example. A common restriction is a night curfew or limitations on night flights. however. Airports can also impose other operational measures to reduce the noise impact. Money from penalties may be used for soundproofing or other community projects. The acceptance of this approach meant that in 2002 the European regulation regarding hushkits was repealed following the adoption of a new directive which incorporated ICAO’s balanced programme. noise abatement operational procedures. The information gathered from the noise. international certification has an impact on reducing aircraft noise levels but these take a considerable length of time to achieve – given the heavy investment needed by both aircraft manufacturers and airlines. Undoubtedly.

This allowed a maximum of 120 000 movements in the 6-month period. However. especially during maintenance. the budget was repealed in 1999. no consistency in the way that these noise charges are structured although within Europe it is likely that a directive aimed at harmonizing the noise charging schemes to promote greater use of quieter aircraft will be introduced. There is also the noise from airline engines running. however. In December 1997. the airport had invested in the nearby small airport of Moenchengladbach. In the 1980s and 1990s. On both runways.The environmental impact of airports but in some case they have been imposed during the day as well. but due to pressure from the airport and DHL which has its European base there. The government of Belgium proposed a total night-time ban at Brussels airport in 2003. is an interesting example of an airport which has had its operations restricted by noise concerns. a number of airports have introduced mufflers or noise attenuating walls and special noise attenuating hangars. The UK Government appealed against this ruling in 2002 arguing that it was up to national governments to strike a balance between individuals’ rights and the country’s economic interests but by the beginning of 2003. The airport consequently applied to fully utilize the single runway capacity of 120 650 movements and was granted approval in 2000 (Düsseldorf Airport. There is. 2000a. The airport also has daily movement limits and a night ban between 2300 and 0600 hours. or engine testing. Frankfurt airport was one of the first airports to introduce such charges in 1974. which is situated relatively close to the city of Düsseldorf. There is the noise from ground vehicles and auxiliary power units. these became increasingly popular – particularly in Europe (see Chapter 5). no decision had been reached.7 tonnes MTOW in the busiest 6 months of the year. Restrictions have been placed on when and how engine tests can be undertaken. unlikely to influence an airline’s choice of aircraft unless the fee differential is very large. A second runway was completed in 1992 but because of environmental pressures. has a very restrictive upper limit on movements. a so-called ‘noise budget’ was approved which made an allowance for a gradual increase in the number of flight movements because of the use of quieter aircraft. To reduce the noise emission levels. Noise has been reduced at a number of US airports which have mostly 223 . Salzburg was one of the first European airports to ban all chapter 2 aircraft as early as 1991. taking-off. this blanket ban has been replaced by night noise quotas. Restrictions have also been placed on the use of reverse thrust by airlines. In order to provide capacity for smaller aircraft operating regional services. However. These limitations over the years have placed restraints on the growth of both passenger and freight traffic at the airport.b). the airport was restricted to 91 000 aircraft movements of over 5. Düsseldorf airport. These charging policies are. Airports may also choose to use the runways in a such a way as to minimize the number of people being affected by take-off or landing-related noise. however. Many airports also impose noise surcharges for noisier aircraft and an incentive to use quieter aircraft. due to political and environmental pressures. Eight members of an organisation called Heathrow Action for the Control of Aviation Noise (HACAN Clear Skies) complained to the European Court of Human Rights that the sleep disturbance caused by night flights was a breach of their human rights and the Court agreed in 2001 that a good night’s sleep was a human right. taxiing. There has been an interesting development relating to London Heathrow airport which could lead to further restrictions on night flights. the noise problem is not just limited to the aircraft landing.

carbon monoxide. for example. Housing and also buildings such as schools and hospitals may be insulated. primarily carbon dioxide (CO2) and water vapour are greenhouse gases which contribute to global warming and climate change.75 million grant money was allocated to 624 sound insulation projects from tax income (Aeroports de Paris. 1999). a simple noisemonitoring system was introduced. Since 1972. Zürich airport was one of the first airports to address noise issues seriously. Noise abatement procedures have existed at most major airports for some time. Then there is zone C where housing with special noise insulation is allowed – but the cost must be borne by the house owner or developer (Meyer. as is the case of some European airports such as Zürich and Copenhagen. However. The radiative forcing or global warming effect of all aircraft 224 . a flight-track monitoring system was added. By consuming fuel. is considered to be fairly small. FF37. there is a ‘new’ environmental threat which has been growing in recent years – that of aircraft emissions. Surrounding this area is zone B where industrial buildings are permitted. particles (mainly soot) of sulphur oxides. and various hydrocarbons. In 1984.Managing Airports fixed rather than auxiliary power units. or noise buffer. there have been night-time restrictions and in 1980 noiserelated surcharges to the landing charges were introduced. around an airport where the construction of new houses and other noise-sensitive buildings is not allowed. However. which is the most important of all the greenhouse gases. 1996). Some of these gases. water vapour. By contrast. and for this reason many airport operators will fund or assist in the funding of noise insulation for properties in the vicinity of the airport – either voluntarily or because it is a legal requirement. Zone A is in the centre of all airport activities where only airport-related buildings are allowed and residential property is prohibited. This is in order to prevent the gains which have be achieved by using quieter aircraft being offset by people living closer to the airport. The appropriate control of land use near the airport is vital when the mitigation of the noise impacts is being considered. This involves defining a certain area. 2000). although technology is increasing the sophistication of such practices. most airports have managed to contain many of the problems arising from aircraft noise. federal law in Germany requires airports to provide and pay for sound insulation within a noise zone around the airports. Sometimes the funds may come from airport noise charges or noise taxes as it the case with the Paris airports where. noise zoning is often applied to airports. at around 2 per cent. For some time the airport has had three noise zones. To overcome this problem. the aircraft are producing emissions of carbon dioxide. The present fleet of subsonic aircraft globally consumed around 130 million tonnes of fuel in 1992. it employed its first noise abatement employee and in 1966. Globally aviation’s contribution to the world total of human-made CO2. in 1999. This is expected to reach 300 million tonnes in 2015 and 450 million tonnes in 2050 (Intergovernmental Panel on Climate Change. there will always be some residents who will be subject to noise annoyance. In 1964. Emissions Through the combination of the development of quieter aircraft and noise abatement operating procedures. nitrogen oxides.

1999). 1999). 1999). By 2050. This was not considered to be acceptable. if such a tax was introduced in 1998. the European Commission expressed significant interest in the introduction of an EU-wide fuel tax. taxing all flights of all carriers operating within the EU. 1999). CO2 emissions from all forms of transport account for around 26 per cent of all CO2 emissions with air accounting for 12 per cent of the total transport impacts (AEA. could bring about a further reduction in fuel burn of around 8–18 per cent in the next 20 years – but still these developments by the themselves are not likely to reduce emissions to an acceptable level (Intergovernmental Panel on Climate Change. The subsequent effect on the operating result of the airlines with the first option was predicted to be a reduction of 12 per cent for EU carriers and a 4 per cent increase for other carriers. It considered two options. Thus.The environmental impact of airports emissions is estimated to be around 3. while greater fuel efficient aircraft will may produce less emissions such as CO2. again. Although the absolute amount of emissions is relatively small. As well as the greenhouse gases.5 per cent. The alternative of taxing all flights was estimated to bring down the results of EU carriers by 15 per cent and other carriers by 4 per cent. just taxing EU carriers on intra-EU flights and. the scale of these developments will only be sufficient to partially offset the growth effect. Currently aviation kerosene fuel is exempt from tax on international flights under the 1944 Chicago Convention and also the many bilateral air service agreements between countries prohibit such a tax. The second option would bring a greater saving of 2. In Europe. As yet. such as more efficient air traffic management. However. These include a kerosene tax. In addition. the first option would reduce fuel consumption by 0. It was estimated that. Aircraft in the 1990s were 70 per cent more fuel efficient than 40 years ago. first. The taxing of EU carriers would therefore give them a distinct competitive disadvantage and produce fairly marginal emission savings. In the late 1990s. 2000). The environmental effectiveness of taxing all routes would be far greater but this option would be very difficult to implement since this would involve complicated reworking of bilateral agreements or amending global Chicago Convention policies – most probably through agreement with 225 . when the aircraft are flying at altitudes of between 9 and 13 km. In the UK air emissions represent 18 per cent of all transport emissions and 5 per cent of all emissions (DfT. the exact effect is unclear. Improved operational procedures. the aviation industry is looking at other ways to mitigate aviation emissions. depending on different growth scenarios and other assumptions (Intergovernmental Panel on Climate Change. It is projected that there will be a 20 per cent improvement in fuel efficiency by 2015 and a 40–50 per cent improvement by 2050 (Intergovernmental Panel on Climate Change. Of more certainty is that future global air traffic will increase at growth rates which will outperform the impact of any technology improvements which will reduce engine emissions. 2003). second. Market-based options are another alternative. Within the EU. the AEA fleet is predicted to be 22 per cent more fuel efficient by 2012 (AEA. the effect of these emissions at high altitudes is not fully understood. this global share may have risen to around 4–15 per cent. nitrogen oxides (NOx) are also thought to have a significant impact on the ozone layer but. they directly occur in the upper troposphere and lower stratosphere. At present there does not appear to be a viable alternative to jet fuel.5 per cent between 1992 and 2005.5 per cent. the higher combustion temperatures needed for greater efficient may actually produce more NOx emissions. All this also has to be viewed within the global context where major CO2 reduction efforts are taking place in other industrial sectors.

It has also been estimated that demand would decrease by 10 per cent if environmental costs are passed onto passengers (DfT. if limited to flights within EU airspace would not give rise to legal objections from third countries. The European Commission has also been looking at a more boarder application of emission charges as an alternative to a fuel tax having commissioned a major study of this option in 2002 (CE Delft. 1994). An alternative to a tax is an emission charge which could be levied as part of the airport or ATC charge. However. There is actually some limited experience of such a charge in Sweden and Switzerland. In the UK the environmental costs have been estimated to range from £3 to £35 per passenger for a single trip (Royal Commission on Environmental Pollution. Geneva and Zürich also introduced an emissions charge in 1997.1 Emission charges at Swedish airports in 2002 Class of aircraft Average value of emissions during LTO a cycle Increase in landing charge (%) 30 25 20 15 10 5 0 0 1 2 3 4 5 6 19 g/kN HC or 80 g/kN NOx 19 g/kN HC and 80 g/kN NOx 19 g/kN HC and 70 g/kN NOx 19 g/kN HC and 60 g/kN NOx 19 g/kN HC and 50 g/kN NOx 19 g/kN HC and 40 g/kN NOx 19 g/kN HC and 30 g/kN NOx Note: a LTO landing and take-off. Source: International Air Transport Association (2002). 2003). A survey of airlines of the European Regions Airline Association found that 91 per cent had not yet altered their fleet mix as a result of the charges in Switzerland and Sweden. This research concluded that emissions charges.25 per kilogram of CO2 initially in 1989 (Alamdara and Brewer. as with the noise surcharges. The impact of such unilateral policies on fleet choice seems to have been rather limited – which. the Swedish government abandoned this tax in 1997 and replaced it with an emission charge (Table 9. It was concluded that this it was not a feasible option in the short term (European Commission.Managing Airports ICAO. 2000). unlike fuel taxes. Therefore. 1999). according to EU directives. 2002b). The Swiss and Swedish authorities are working together towards a harmonized system with the aim of making it easier for users and for other countries to adopt.1). Such charges would be levied through the air traffic control system and the research explored two main alternatives. 2002). The Swedish government levied an emission tax on Swedish domestic flights at a rate of 12 Swedish Crowns per kilogram of nitrogen oxides and hydrocarbons and 0. is the result of the relative price inelastic demand at airports. and 67 per cent would not consider doing so despite the fact that 73 per cent were now paying high charges as a result of the schemes (McNamara. nor would they create any distortions of competition. The first was a charge proportional to the volume of greenhouse gas emissions discharged in EU Table 9. this type of tax was not allowed in Europe and was also seen as discriminatory towards Swedish carriers once full European liberalization has occurred. 226 .

While the ICAO emission standards can have an influence over aircraft emissions at airports. Very often independent companies will undertake the monitoring. It was estimated that this would cause a five per cent reduction in emissions coming almost entirely from technical and operational measures introduced by the airlines and. since they are based on the aircraft landing and take-off (LTO) cycle and do not cover emissions during the cruise phase. These include voluntary programmes. About half of this reduction would be due to technical and operational changes introduced by the airlines and about half would be due to a reduction in air travel demand because of the rise in ticket prices.The environmental impact of airports airspace. en route emission charges) and emissions trading options whereby airlines would buy licences to pollute that can be traded with other industries. the problem at airports is not just limited to aircraft operations since the local air quality may also be affected by the ground service vehicles. With this option if an aircraft performed better than a performance standard it would receive money but if it performed worse it would pay money. which tend to be fuel powered. fuel tax. carbon monoxide. carbon monoxide. as such a scheme would be revenue-neutral.g.The second alternative which the research explored was a revenue-neutral charge or performance standard incentive (PSI). The monitoring systems vary considerably in their level of sophistication and accuracy. As with the noise issue. taxes and levies (e. Some airports use these systems to help them model predicted air quality in the future. they are not legally binding and it is up to member states to include these standards into their law.6 euros per kg of NOx were used. Emissions from international flights are excluded from the Kyoto Protocol – if it is ever ratified – and instead ICAO through CAEP has been given the responsibility for developing proposals on international aviation emissions. namely smoke. Encouraging more fuel-efficient operating procedures such as continuous descent approach may help a little. there would be no additional funds to distribute. ICAO has also been looking at various market-based options. In addition to considering the most appropriate standards and the best operating practices to reduce emissions. An increasing number of airports monitor local air quality at airports. At a regional level the emissions from aviation are thought to contribute to acid rain. depending on the exact valuations which were used. The operator can also seek to reduce the impact of running engines while the aircraft are on the ground. the actual airport operators have very little control over this matter. If charges of 30 euros per tonne of CO2 and 3. Since 1981. While the global impacts of aircraft emissions have attracted a great deal of attention in recent years. These standards are aimed at local air pollution problems. Overall the years these standards have been strengthened. The additional revenue generated could be allocated to individual EU member states or to a supranational fund for financing emission abatement measures. ICAO has laid down standards for four categories of engine emissions. It was estimated that this could produce annual revenues of 1–9 billion euros. It was estimated that ticket prices would rise by roughly 3–5 euros for short-haul one way flights and 10–16 euros for long-haul flights. and nitrogen oxides. it was estimated that emissions could be reduced by 9 per cent in 2010. clearly they are not the only impacts which need to be considered. However. hydrocarbons. electric vehicles which are more economically and environmentally 227 . At a local level the air quality of the area in the immediate vicinity of the airport can be affected – primarily due to emissions of hydrocarbons. and nitrogen oxides. At some airports.

An increasing number of airports now monitor water quality as well as air quality and have adopted various measures to minimize this water pollution. the transfer of waste from airside to landsite at airports is problematic because of security. The waste at airports is generated by airlines. airport operators. Surface water discharge or run-off which goes into local watercourses from runways. However. Off-airport disposal methods which typically involve incineration and landfill also need to be considered. Then there is the normal wastewater from buildings and facilities such as domestic sewerage. Improvements can usually be brought about by an assessment of on-airport treatment methods and the scope for reducing. The chemicals used in maintaining and washing aircraft and vehicles. In many cases there may be general legislation related to waste management. and other airport-related companies. especially the airlines. Then there are emissions from maintenance and cleaning processes. can also contribute to this pollution. do not have enough space for waste management facilities and there are cost economies of scale to be gained by having communal recycling and other waste management procedures. have been considered and used in a few instances. with the disposable nature of most of the packaging. In addition. it is very difficult to identify the specific airline involved and so the airport operators often provide a repair service and introduce measures to minimize the likelihood of this happening. airports need to incinerate or send to a controlled landfill site all ‘international’ food waste from aircraft. to improve cleaning processes and to minimize the spillage and leakages. In-flight catering waste. but more often with the airline. However. Responsibility for this sometimes rests with the airport operator or property owner. as it is with most other industrial activities. customs. not directly related to emissions but to the trail of turbulent air left behind by an aircraft. is considered to be a particular problem. car parks and other land development may be contaminated by anti-icing and de-icing fluids such as glycol which are used during the winter months. These include revised operational practices to reduce the use of the harmful chemicals.Managing Airports favourable. airports are also faced with specific operating restrictions because of the nature of the aviation business. Balancing reservoir treatment may be undertaken before the surface water joins local watercourses. aprons. While most of the waste comes from the airlines. Waste and energy management Waste pollution is also an issue. For example. is wake vortices which can damage the tiles and windows of property under flight paths. Leakages from underground tanks and pipes. and grass fertilizers used in landscaping activities can contaminate the soil. reusing or recycling waste. and insurance restrictions. Most of the individual companies. auxiliary power units and from the cars and other surface transport modes. as well as fire training activities and fuel spillages. it is usually the airport operators who have overall responsibility for waste management for the entire airport activities. 228 . Another impact. Water pollution and use Water pollution at airports can occur for a number of different reasons.

Energy conservation techniques can reduce this by between 5 and 20 per cent (ACI-Europe. 1995). In the case of Manchester and Copenhagen airports. this has meant that such buildings have been moved. for example. air conditioning. a 1-km exclusion zone for dolphins was set up to ensure that their sensitive hearing was not harmed during blasting work. With energy conservation. rather than being opposed to it. a considerable amount of time and effort was expended in attempting to integrate the airport as much as possible into the local landscape. The need to protect the wildlife. At Oslo Gardermoen airport. a bridge had to be built to prevent the 1 000 moose who annually migrate across the region from wandering onto the airport approach roads (Anker.The environmental impact of airports Energy management. The role of other transport modes There are two ways in which the use of other transport modes can affect the direct and indirect environmental impacts of airports. At Indianapolis airport. At Manchester airport. development was halted when a rare western swamp tortoise colony was discovered. heritage. An unusual example is San Francisco airport. there are good financial reasons for why airports should address these issues since environmental improvements may bring about considerable cost savings. the death of four manatees beneath the runway forced the airport operator to take action to protect this endangered species. which can disturb the ecosystem and can be visually intrusive. While the new Chek Lap Kok airport in Hong Kong was being built. Heritage may also be affected by airport development. associated with the provision of heating. and landscape The major impacts of noise and emission clearly can have a significant affect on the population living in the vicinity of the airport. as with waste and water management. However. and the landscape of the local environment also needs to be addressed. 3000 new bat homes for the Indiana bat had to be installed due to a new maintenance building which displaced the bats. Landscapes can be radically changed by airport development. is also very important. It has been estimated that energy costs account for about 5 per cent of the operating costs of an airport. it is not just the effects on the daily life of people that the airport operator has to consider. and lighting. At Perth airport. For example. to other locations. and a rare breed of new had to be protected when the second runway was being built. There are many examples of how specific airport operators have tackled the disturbance of certain wildlife habitats – particularly during the construction of a new airport or during airport expansion. Wildlife. badger sets had to be relocated. there may be some 229 . heritage. When Stansted airport in London was developed. At Miami airport. historic buildings may be situated within the area which has been allocated for airport expansion. Here. 1998). environmental lobbyists were actually in favour of airport development. ventilation. because it involved the restoration of 55 acres of wetlands in the San Francisco Bay area (Gethin. 1997). Some airports undertake energy audits. First.

Such rail links also require huge capital investment. This relates to short routes from air to rail once the high-speed network in Germany has been completed. However. switching from air to rail is only feasible when dense routes are being considered. An interesting development occurred in Germany when. Many airports are trying to develop more effective public transport alternatives to the car for accessing the airport. 2002). For transfer to rail of flights to nearby European destinations comparable reductions of 145 000–402 000 and 23 000–64 000 were identified (Friends of the Earth. Ground transport makes a major contribution to the overall noise levels and air pollution at an airport. 230 . signed a memorandum of understanding. Elsewhere. the rail share was estimated to have increased from 40 to 55 per cent in the first 4 years of operation and the first TGV route in France between Paris and Lyons was claimed to have gained an 90 per cent market share (CAA. the diversion rate of air to rail on the Eurotunnel London–Paris route has been far greater than that for the London–Brussels routes. Moreover. Deutsche Bahn. an agreement between the French and Americans has been reached which allows the airlines to offer passenger services which include a rail connection or other surface mode of transport (DETR. 1999). The individual airport operator has far greater control in influencing the mode of surface travel used by passengers and employees to reach the airport – which is the other aspect of surface transport that needs to be considered. with the impacts rising as the transport system becomes congested. for instance. 2000b). For example. it was recommended that high-speed rail should be encouraged for domestic and some intra-European journeys to reduce the environmental impacts of air transport (Royal Commission on Environmental Pollution. In Europe. 1998a). in 1998. 2000). In the 1980s and 1990s there was a continuing growth in the number of high-speed rail services notably in France and Germany. it is estimated that around 10 per cent of passengers could be transferred from aircraft to high-speed trains (International Panel on Climate Change. Lufthansa and the railway company. In a recent study in the United Kingdom. Various studies have shown that a quick city centre to city centre rail service have been quite successful in attracting a certain share of the population away from competing air services. The appeal of the rail alternative will also depend very much on the comparable level of fares and the quality of service on offer. 2000).Managing Airports opportunity for passengers on short and medium distance flights to be diverted on to high-speed rail services. It is Lufthansa’s aim to gain more slots for longerhaul services. They have also introduced many initiatives to encourage passengers and airport employees to use public transport. It has been calculated that for flights between 500 and 1000 km than a high speed alternative could typically consume one third less fuel per passenger kilometre than an aircraft (Friends of the Earth. as at Frankfurt. 1999). Research undertaken for Friends of the Earth (UK) quantified the environmental benefits from transferring domestic flights to rail as being in the range of 118 000–362 000 tonnes in reductions in CO2 emissions and 18 000–58 000 tonnes for NOx emissions by 2015. There is some evidence to suggest that this has been partly due to the availability of much cheaper air fares on the London–Brussels route (Dennis. it was estimated that the rail share of traffic on the Frankfurt–Munich route increased from 30 to 37 per cent in the first year of operation with a drop in airline share from 27 to 23 per cent. For example. On the Stockholm–Gothenburg route. they are clearly not usually an attractive option for transfer traffic unless the high-speed network is linked to airports.

Janic. This has meant that a number of airports. Changi Singapore. particularly those with large traffic volumes or a long journey away from the city centre. A number of airports have also developed high-speed links connecting airport terminals to international routes such as Charles de Gaulle in Paris. Other dedicated airport rail link examples include Gardermoen in Oslo. and Amsterdam. Few of the North American links integrate effectively 60 50 Number of rail links Existing Planned 40 30 20 10 0 Europe North America Asia Africa Australia South America Figure 9. Arlanda. and Shanghai. with many examples being found in North America and other airports such as Düsseldorf. and London Heathrow (IARO/ATAG/ACI. Airports particularly interested in developing rail freight include Liege. 1998. Heathrow in London. Some airports also have integrated regional and high-speed rail links – Paris Charles de Gaulle being a good example. Indeed. Munich. have instead developed high-speed dedicated links. underground or light rail services) were extended to reach the airport.g. Barcelona. Zürich. With airport growth in the 1970s and 1980s. Stuttgart. Leipzig/Hall Amsterdam.1 Existing and planned rail links to airports Source: ATAG. They are still the most common form of rail link today. Figure 9. Chek Lap Kok in Hong Kong. with only a small proportion using bus or coach transport. some existing suburban rail services (e. 231 . and are not dedicated links to the airport. Such links bring environmental benefits and alleviate road congestion as well as bringing extra convenience for passengers. most passengers arrived at airports by private car or taxi. historically. Lyon. 1998. the only freight transported has been aviation fuel. and Sepang in Kuala Lumpur.The environmental impact of airports Historically.1 shows the total number of rail links to airports – both currently in existence and planned. This is a relatively new idea since. There are many more rail links in Europe than in North America as they are considered to be a much more acceptable and attractive surface access option in Europe. 2003). with a rather basic quality of service. an AIRail terminal for long distance services and a rail connection to Cargo City South. They may be popular with employees but are less attractive to passengers. Frankfurt airport has three railway interfaces. Many of these services are relatively slow. Paris Charles de Gaulle. Milan. Stockholm airport’s third runway was only approved subject to a rail link being built. There is a regional train station below Terminal 1. Frankfurt. Other airports as well are looking at rail links for the carriage of freight.

232 Am . At London Heathrow in 2001. signage and the availability of information. and offering more remote check-in.2 Public transport usage by passengers to and from the airport. For example. Figure 9.3). and Geneva at 116 rail stations. has a very high share of 59 per cent of passengers accessing the airport by public transport (Grossenbacher. For UK business passengers this figure was 23 per cent and for UK leisure passengers it was 31 per cent. The average was around 21 per cent – 9 per cent for rail and 12 per cent for buses (Navarre. the comparable figures were 38 and 50 per cent (BAA Heathrow.Managing Airports with other rail services as is the case with a growing number of links in Europe. Many airports now set targets for public transport use.2 shows the public transport share for some other European airports. 34 per cent of passenger trips were on public transport (Figure 9. Some airports are designing better interchange processes between public transport and the airport. A study of 18 European airports found that passenger public transport use varied from 1 per cent at Lelystad to 41 per cent at Munich airport. complete check-in can be made for flights of Swissair and partner airlines. 2001 Source: Compiled by author from various sources. A growing number of airport operators have recognized that encouraging passengers onto public transport is very much more than just consideration of journey time. At 23 rail stations. Basel. which was not included in the original study. Heathrow has set a target for passenger public transport trips of 40 per cent by 2007 and Gatwick has an identical target for 2008. It also includes looking at the accessibility of the surface modes. ease of transfer to the airport and arrangements for baggage. The most developed service of this type is the Fly Rail Baggage system in Switzerland which provides two-way check-in for Zürich. 2002a). 1999). Remote baggage services are also frequently available in Europe but not in North America. 1996). For foreign passengers. Manchester airport has a target of 25 per cent for all public 70 60 % passengers on public transport 50 40 30 20 10 0 H Lo ea n th do ro n w Lo G n at do w n i Pa ck ris O rly M an ch es te r o h sl ic da st er Zu r O an St st ed m Figure 9. These factors plus the greater car dependency in North America explains why rail modal share and the actual number of rail links is far less common there than in Europe. Others have tried making improvements in marketing. More recent studies show that Zürich airport.

The most popular reasons for car use at the major UK airports have been identified as cost and convenience. 1998b). 1997). over 75 per cent of staff arrive by car (Figure 9.4). often at unsociable times when public transport services are inadequate.3 Mode of surface transport used by passengers at London Heathrow airport in 2001 Source: BAA (2002a). Surveys at other airports also show this greater dependence on car 233 .4 Mode of surface transport used by employees at London Heathrow airport in 1999 Source: BAA (2002a). 1999). while the equivalent figure for employees was 92 per cent (Manchester Airport. and because a friend or relative was available to offer a lift (CAA. Underground Bus/coach 12% 6% Taxi 1% Rail/other 6% Car 75% Figure 9. Inherently there are a number of characteristics of airport employment which encourage the use of private car. At Heathrow. transport journeys by 2005. As a result of these factors. Many of the jobs tend to be on a shift basis. car use tends to be even higher for employees than for passengers. Employees’ residences tend to be dispersed around the vicinity of the airport which makes it much more difficult to provide an effective public transport system. For Zürich the key reasons for using rail transport were comfortable access (46 per cent). Moreover. Airport operators have also been trying to encourage more airport employees to use public transport. Amsterdam has a target of 40 per cent of by 2003 – this airport nearly achieved this target in 2001 with 38 per cent. For example. rail being the quickest way of getting to the airport (17 per cent) and parking costs at the airport being too high (20 per cent) (Grossenbacher. airport employees have traditionally been provided with free parking spaces at airports – thus increasing the attractiveness of car transport. 80 per cent of passengers used private cars or taxis. at Manchester airport in 1996.The environmental impact of airports Bus/coach 13% Underground 13% Rail/other 8% Car 39% Taxi 27% Figure 9. rail ticket included in package (17 per cent).

Table 9. current or new New New Current Current Current New New Travelling to and from Heathrow Rail 40% of air passengers by public transport by 2007 Long-term target of 50% BAA to work with Railtrack to introduce an interim stopping service between Heathrow and Central London by end of 2000 BAA to work with Railtrack for approval of Heathrow express service to London St Pancras with first phase operational by end of 2002 BAA and Railtrack to work with promoters group to prepare a Transport and Works Act application for Airtrack scheme To begin a Heathrow Express Shuttle to Hayes in 2001 To work with London Underground to ensure the tunnel and station infrastructure for the Piccadilly Line extension to Terminal 5 is completed on time BAA to work with the Strategic Rail Authority and Railtrack to progress the proposals to link Terminal 5 to Staines (Airtrack) To prepare a strategy for the provision of on-airport bus priority by the end of 1999 The ATF (through the bus working groups) to work to develop performance indicators by end of 2000 To work with bus and coach operators to deliver customer service training to bus drivers by end of 2001 To introduce eight mercedes-benz Citaro buses to the Slough-Heathrow corridor by end of 2002 To introduce a bus priority cut through from the A4 to Nettleton Road by end of 2002 To produce a cycle implementation plan by end of 1999 To double the number of employees cycling to work by end of 2002 To identify and deliver two new or improved cycle parks for airport staff by 2003 Bus and coach $ $ $ New New $ Current New Cycling and walking . 2002 Targets and commitments Achieved ($).2 Targets and commitments – Heathrow airport surface access strategy.

encouraging ten of the. . to produce their own travel plans by end of 2000 To double the number of car shares by end of 2001 The ATF to continue to operate for the foreseeable future To increase the number of car shares with 65% actively sharing cars at least once a week by March 2003 To publish a Green Travel Plan for Terminal 5 construction workers To introduce an Employee Commuter Centre by 2003 To develop a computerized surface access database by end of 1999 To publish each year a report on progress against the targets in the surface access strategy $ $ and current Current Current $ $ $ Current New New New $ $ Note : $ achieved Source: BAA Heathrow (2002a). business partners and user groups on design of public transport interchange at Terminal 5 and Hatton Cross and improvements to existing Central Terminal Area interchange. To limit the number of parking spaces under BAA control to 46 000 BAA to research the potential to relate employee car parking provision to individual need and public transport accessibility Journey planner to be available to all Heathrow and off-airport employees by end of 1999 BAA to work with on-airport employers.Road Accessibility and interchange Parking Managing demand Monitoring To introduce road traffic monitoring at all airport entrances and exits by 1999 BAA to continue to consult with transport operators.

It reached this target in 1998 with a share of 42 per cent (Schiphol Group. An overheated economy associated with a successful airport development may bring problems of labour shortages. When car use is still necessary. enhancing opportunities for travel and increasing consumer choices for foodstuffs and other products. Staff initiatives to encourage public transport use include discounted bus and rail travel. Amsterdam airport had a target of 40 per cent of employees using ‘environment-friendly’ transport (i. 1999): 1 To agree to short. the local community. and rising prices. Clearly.Managing Airports transport for employees (Niblett. dedicated airport workers buses. air pollution. and park and ride schemes.e. The most recent targets and commitments are shown in Table 9. From 1998 in the United Kingdom all airports with scheduled services were required to form airport transport forums (ATFs) and prepare airport surface access strategies (ASASs) as part of a national policy framework for integrated transport (DETR.). 1996). London Heathrow airport was the first UK airport to establish an ATF. For example.and long-term targets for decreasing the private car usage to and from airports. the development of cycling networks. It was followed by London Gatwick airport in 1997. Another very obvious social role played by certain airports is that of providing lifeline links to remote areas which might otherwise remain isolated. carpooling etc.2. The ATF consists of the airport operator and representatives from local businesses. While the exact relationship 236 . In 1999. Aviation can clearly have a multitude of impacts on society as well. and other social needs. The major areas of concern are aircraft noise. In preparing the ASASs the forum has to ensure that the proposals are consistent with the broader integrated transport plans for the area. 2 To devise a strategy for achieving these targets. 1998). In acting as a catalyst for economic development. Employment and living patterns will change with implications for housing. These are all very general impacts. consideration has been given to the economic and environmental impacts of airports. airport environmental impacts can have a detrimental impact on the quality of life of residents in the vicinity of the airport. in 1995 – before this became official government policy. it is often claimed that air travel brings wider benefits to society in the form of strengthening ethnic and cultural links between countries. fuel odour. 2000). Some airports have also set targets for public transport use for staff. Heathrow was the first UK airport to launch its 5-year ASAS setting out nineteen targets and commitments. In the broadest context. and Manchester in 2000. car sharing has been encouraged at some airports. 3 To oversee implementation of the strategy. and other interested parties. public transport plus cycling. The social consequences So far. ecological damage and the safety of aircraft. The ATFs have three specific objectives (DETR. London Stansted in 1999. which are extremely difficult to quantify or contribute to any one airport. transport operators. local government. insufficient housing. health. education. Restrictions on car use within the airport area have also been introduced. airports will also have a major social impact on the surrounding area.

These may be a legal requirement. an area which has received particular attention is the problem of sleep disturbance due to night flying. environmental policies increasingly are becoming a core component of their overall business strategy. supporting and sponsoring local events. It is for this reason that many airports restrict aircraft movements at nights or ban noisier aircraft types. and airport users. Moreover. a key to any successful environmental strategy is a partnership approach between all the different interests on the airport site. and encourage the use of renewables and public transport. users and other bodies have made it essential for airports to address environmental issues very seriously. Many airports address some of the social issues raised by airport operations within the framework of a broader environmental or sustainability strategy. and developing educational links. For airport employees. Environmental pressures from governments. airports often have to comply with environmental legislation. offering a complaints-handling service. this may involve consideration of issues such as equal opportunities. though. Smaller airports and airports in the developing world have more basic approaches – but few have managed to escape the whole issue of environmental management entirely. local commerce and industry. Through adopting such an approach the airport operator also sends messages to the outside world that it is tackling the environmental issues in a responsible manner. Environmental management For many airport operators. and workplace safety and security.The environmental impact of airports between human health and wellbeing and these factors is still not entirely clear. such as air or water quality. As a result. reduce waste and energy use. These provide the framework for airport operators to develop an effective and co-ordinated response to all the environmental issues. clearly defined objectives and targets are set for reducing the impacts and the most appropriate mitigation methods are identified. amenity groups. Increased technology and new mitigation methods are constantly enabling improvements in the efficiencies of such policies. Since airport operators themselves produce relative little of the direct environmental impacts. In Australia. Airports have recognized. Some airports set up residents’ forums. most major airports in the Western world now have well-established environmental strategies and relatively sophisticated policies which typically seek to reduce noise and emissions. Most airports get involved in community relations such as the provision of information about environmental and other developments. The rising number of aircraft movements has also increased concerns about aircraft safety and has resulted in some airports establishing risk contours around airports associated with third party death and injury. control pollution. In some areas. ethics policies. waste and water. 237 . Within any system. forging strong links with the community and ensuring continual public dialogue with all interested parties is often considered an important role. that sound environmental practice can also bring financial benefits through the effective management of resources such as energy. the Airports Act of 1997 actually requires airport operators to prepare airport environmental strategies for government approval. skills training. Many airports have seen their environmental control processes develop into comprehensive environment management systems. Many airports also have consultative committees with representatives from local government.

Airport companies such as Schiphol and Fraport have reached these standards. in 2002.Managing Airports Some airports choose to formalize their environmental management system by conforming to the International Environmental Management system standards ISO 14001. set objectives and targets to improve environment performance and demonstrate that appropriate measures have been introduced so that environmental practice can be monitored and targets can be reached. fuel) per passenger Proportion of passengers using public transport Proportion of staff using public transport Ethnic origin of staff Gender split of staff Number of complaints Response time for complaints Emissions Water Waste Energy Transport Social policy Community relations 238 . The results should be available to everybody who has an interest in the airport. The indicators need to be fairly simple.. 2003). One of the key elements of any environmental management system is the identification of suitable environmental indicators which can be used to monitor performance and set targets. there is an additional system called the Eco Management and Audit Scheme (EMAS) which is based on 1993 European regulation. The EMAS takes the ISO 14001 standard that much further by requiring companies to report to the public about their environmental performance. Dublin airport became one of the first European airports to receive ISO 14001 certification in 1999 and other European airports such as Zürich.3 Key environmental performance indicators at airports Impact Noise Performance indicator Population within specified noise contour Number of noise limit infringements Number of engine testing rules infringements Proportion of aircraft on track CO2 and NOx emissions per passenger (and other emissions) Fixed electrical power usage Number of spillages per 1000 atms Water consumption per passenger Waste per passenger Proportion of waste recycled Proportion of waste going to landfill sites Energy consumption (gas. To meet the requirements of ISO 14001. Athens. electricity. formulate an environmental policy. The indicators should provide a representative picture of the issue under consideration and it must be possible to obtain relatively easily and accurately the data required for such indicators. The exact number and range of objectives and targets will vary considerably. and Paris have subsequently been certified (Hooper et al. Within the EU. as well as the implementation of the management system. ensure that their practices comply with all relevance legislation. easy to interpret and able to show time trends. For example. This is equivalent to ISO 9000 standard for quality management (see Chapter 4). including the local community. Rome. Toronto Lester B. airports need to review their environmental impacts. is subject to external scrutiny. This report. Pearson was the first airport in North America to achieve this standard in 1998. Heathrow had 12 key environmental targets and since 2000 these Table 9.

A 239 . 2001–02 Expenditure ( 1000£) Environmental communications/PR Staff Revenue/consultancy/research projects On-going management and maintenance Regulatory charges Capital projects/infrastructure Monitoring Total Savings Source: BAA Heathrow (2002b). EIA for the new Oslo airport at Gardermoen Since 1939. a survey of 200 of the world’s largest airports was undertaken by Loughborough University and the UK Open University to investigate how airports themselves were measuring their performance (Francis et al. When an airport is planning a major extension of its facilities. Many of these tend to be further disaggregated when detailed targets are being set In 2000. The results of this assessment are summarized in an environmental impact statement (EIS).6 2594. to identify the expenditure and savings related to their environmental. situated close to Oslo city centre was beginning to reach capacity but could not be expanded because of physical constraints and environmental pressures. as part of the environmental management system.Managing Airports Table 9. This will examine the potential impacts of the proposed development during the construction and operational stages.. and social management policies. it is usually required by law to undertake an environmental impact assessment (EIA) as part of the planning approval process. and social expenditure and savings at Heathrow airport. It should possible. However.0 targets have played a part of the senior management salary incentive scheme – just as with the financial and surface quality targets.2 1178. economic.4 Environmental. Table 9.0 270. The savings were in energy and water consumption. The greatest expenditure was related to water quality. the population within a specified noise contour by 67 per cent.9 6.4 6526.6 159.6 11519. economic. and waste management. Geneva airport launched an environmental action plan which had 27 key measures to be addressed. by the 1980s this airport. Table 9. 2001). passengers using public transport (53 per cent) and waste recycled (50 per cent). In 1999. Oslo has been served by Fornebu airport. In 2000. 1006.4 shows these for Heathrow airport. Nice airport adopted an environmental charter which identified a total of 15 objectives and these were broken down into 46 detailed actions.3 shows some common key environmental performance indicators used by airports. transport.7 46. Some of the most popular environmental measures used were found to be number of complaints which was used by 84 per cent of the airports.

(e) minerals. Environmental issues and a new runway at Manchester airport Manchester airport which is owned by the Manchester Airport Group plc (MAG) handled 19 million passengers and 112 000 tonnes of freight tonnes in 2001. (d) landscape. which operates airports in Norway was responsible for assessing the environmental impact of the airport itself. The EIA for Gardermoen considered the following impacts (Luftfartsverket. the Public Roads Administration and Norwegian State Railways analysed the impact of the access system. By the early 1990s this runway was becoming full at peak hours and so the draft development strategy published in 1991 identified the need for a second runway. In addition evaluation of possible mitigation measures and proposals for monitoring programmes were made. (c) climate. For each impact an investigation of the current situation was made. (b) social impacts. (c) impacts on municipal economy. 4 Social factors (a) impact on the employment market. (c) outdoor recreational areas. the existing military airport site of Gardemoen was chosen. 1996).Managing Airports number of new airport sites were assessed and. either to the east or to west of the existing runway. For this reason. (b) air pollution. (f) flora and fauna. Its runway had a declared hourly capacity of 47 movements. The Department of Environment and Department of Agriculture were involved in the investigation of the regional and social impacts. along with an impact assessment of the two alternative options. (b) post-Reformation heritage. (b) water resources. 3 Impact on cultural heritage (a) pre-Reformation heritage. 1991): 1 Pollution factors (a) noise.While the CAA. 16 groups of environmental experts were appointed to look at the whole range of possible impacts associated with the second runway scheme and 240 . 2 Impact on natural resources and natural conditions (a) land and forest resources. (d) impacts on land utilization. in 1991. The decision to build the new airport was made in 1992 and it was opened in 1998 (Gaustad. At this stage there were two options with a runway.

and the ultimate capacity of the airport.5 Key events in the development of Manchester airport’s second runway Date August 1991 September–November 1991 December 1991–March 1993 Event Draft development strategy to 2005 published. Public consultation also took place at this time. the environmental team and the engineering design team worked together in developing the runway scheme.The environmental impact of airports to provide input into the environmental impact assessment. at an early stage. identifying the need for the second runway Public consultation period and eight public meetings held Results from public consultation were considered and environment impacts of development options were assessed. environmental works. This formed the basis of Manchester airport’s ‘green charter’ (Table 9. This enabled the environmental effects of engineering solutions to be assessed.6). highway improvements and public transport. Further consultation and assessment of the impacts took place until a final development option was selected in 1993. Specialist engineering consultants were also appointed at this time. and other interested parties. Continual dialogue also had to be maintained with airport users. to show its commitment to the environmental issues. The airport operator.This package contained over 100 different measures of targets and guarantees covering noise control and night flying. 241 . the airport entered into a legal agreement with the local planning authorities concerning its proposed package of environmental mitigation measures. The proposals were subsequently developed into a planning application which was subject to a planning inquiry which lasted from June 1994 to March 1995. local authorities. community relations and social policy. government agencies. The feedback from the initial assessment of the environmental impacts and key areas of public concern were used to influence the design details of the runway scheme. Before the decision had been made. and mitigation measures to be considered. This ranged from private meetings with individuals to large-scale public gatherings. Further consultation and public exhibitions took place Final development option was selected Final development strategy was published and the EIA completed Planning application submitted to local authorities Public exhibitions held over 22 days at 9 locations Public inquiry opened Public inquiry closed Planning permission granted Commencement of development Runway opened March 1993 June 1993 July 1993 July–August 1993 June 1994 March 1995 January 1997 Summer 1997 Spring 2000 Source: Twigg (2000). Planning permission was granted in January 1997 (Table 9. The points of agreement were related to various stages during construction and operation Table 9. Primarily as a result of environmental considerations. the idea of a full-length parallel taxiway was abandoned and the runway site was modified to reduce the length of river tunnel that would have been required.5).

statutory bodies and local wildlife groups will form a nature conservation steering group The MA will financially support the Bollin Valley project and upgrade the River Bollin channel to encourage the migration of fish Where possible.6 Manchester airport’s ‘green charter’ Environmental topic Noise control Main measures Night flying Environmental works Highway improvements Public transport Community relations The noise impact will be controlled up to at least 2011 and will be no worse than in 1992 A noise and aircraft track monitoring system will be maintained Monthly monitoring reports will be produced and an annual external audit undertaken 100% of scheduled night movements to be by the quieter chapter 3 aircraft 92% of total scheduled operations to be by chapter 3 aircraft by 1998. permission will be sought to relocate two of the four affected listed buildings The aviation viewing park will be relocated MA will fund a number of road improvements Restrictions will be placed on operation times and routes taken on construction traffic and construction material is to be brought by rail 25% of all trips to the airport will be made by public transport MA will promote the extension of Metrolink and development of heavy rail services A ground transport group will promote and develop enhanced public transport services and a ground transport strategy will be introduced 10% of the annual marketing budget will be used to promote public transport services The sound insulation grant scheme will be maintained Local environmental projects will be supported by a community trust fund with an annual budget of at least £100 000 242 .Managing Airports Table 9. 96% by 2000 A preferential charging system for quieter aircraft will be developed MA will continue to seek powers to penalize aircraft that deviate from the set departure routes A ground noise policy will limit night ground engine tests to 20 per year. local authorities. and encourage use of fixed electrical power The night noise level will be controlled up to at least 2011 and will be no worse than in 1992 Night movements will not exceed 7% of total movements Chapter 2 aircraft will not operate at night Financial noise penalties will apply at night The use of reverse thrust will be restricted at night The second runway will not normally be used at night More than twice as many ponds will be created or restored than those lost Landscape and ecological mitigation works proposal will be submitted to the local authority for agreement A 15-year landscape and management plan will be developed Ecologists and landscape architects will oversee and implement the environmental works MA. require the use of the engine test bay.

The environmental policy of CPH establishes the fact that as an environmentally responsible company. and by striving to achieve a representative ethnic mix of employees There will be no consideration of a third runway until at least 2011 MA will oppose inappropriate development in the area other than that related to the airport’s technical efficiency Source: Twigg (2000). how the data is collected and the indicator value for 2001. the airport operates and develops in a way that improves its environmental results (CPH. like many other airports. Preventive action and the use of cleaner technology. Twigg. but the airport viewed it as an investment and considered such an approach fundamental to gaining permission to build the additional runway (Thomas. Between 1997 and 2001. In other areas. An open dialogue on the environmental state of the airport. and engine testing and airline performance in these areas is monitored. Environmental practice at Copenhagen Copenhagen Airport A/S (CPH) is a good example of an airport operator which has developed a comprehensive environmental policy. the overall noise impact declined by 2. Improvement is provided through: I I I I Environmental considerations in all decisions. As regards noise. older aircraft. 1996. 2002). Increased environmental awareness by employees and partners.7 summarizes the main environmental indicators used.1 million passenger numbers and 379 000 tonnes of freight. these two airports handled 18.7 dB although the number of air transport movement increased by 2 per cent during the same period. There are rules related to noise levels. amounting to over £20 million. of the airport up until 2011 when the agreement will be reviewed. In 2001. in 1999 new facilities 243 . CPH. This approach to the environmental effects was costly.6 (Continued ) Main measures Environmental topic Social policy Ultimate capacity MA’s recruitment policy will offer a fair and equal opportunity to applicants by advertising jobs in the airport job centre and local media. For example.The environmental impact of airports Table 9. There is a third runway which involves aircraft passing over more built-up residential areas. by operating a crèche. and so it is only used when special weather and wind conditions make it necessary for safety reasons. has made improvements to its impact monitoring process and has been developing new techniques which could reduce the detrimental environmental effects. This company manages the two Copenhagen airports. around 98 per cent of all movements at Kastrup take place on the two main runways. This was due to greater use of newer. 2000). namely Kastrup and Roskilde. Table 9. quieter aircraft and less use of the noisier.

lead 1. fire services and other in-house and third-party sources Volume of glycol used calculated by companies handling de-icing Contents of collected glycol are registered for each truck load moved away Consumption based on volumes purchased less quantities sold to other companies at the airport Discharged surface water quality: Substances (kg) Number of spills Volume of spills (litres) Consumption of glycol (cubic metres) Collection of glycol (cubic metres) Electricity consumption (Tera Joule TJ) Heating consumption (Tera Joule TJ) Fuel consumption (litres) Water consumption (000 cubic metres) Consumption of herbicides (litres) Waste per 1 000 passengers (kg) Industrial accidents per one million working hours 271 10 201 763 444 173 118 775 143 40 144 16 Weed control Consumption of herbicides based on volumes purchased Waste Weighing slips or monthly statements from recipients of the waste Working Reported number of industrial environment accidents Source: Copenhagen Airport A/S (2002).7 Main environmental indicators used by Copenhagen airport A/S Impact Means of data collection Main indicators 2001 indicator value 150 Traffic and noise Night time noise Engine testing Waste water Traffic statistics system: ATMs by aircraft type. cadmium 0. use of runway and time Noise monitoring system Engine test monitoring Discharged volume by means of metres Water quality assessed by monthly water samples made by third-party laboratory TDENL: total-day–evening– night-level method (decibel dB) Infringement of 85 dB (A) noise limit (number) Infringement of engine testing rules (number) Waste water discharged per 1 000 passengers (cubic metre) Discharged waste water quality: Substances (kg) 13 8 13.g.9.8.4 e. lead 1.g. chrome 0.1.Managing Airports Table 9. cadmium 0.9 e. 244 . take-off weight.9 Surface water Oil and fuel spills De-icing Resources and energy Discharged volume on the basis of the pump effect of CPH’s pumps or volume of participation reported by Danish Meteorological Institute Water quality assessed by monthly water samples made by third-party laboratory Reports filed by CPH’s safety service. chrome 1.1.

and adequate investment in infrastructure. ATAG/UNEP. it was taking up valuable space for future terminal expansion – hence the need for relocation. which weighed more than 2600 tonnes and covered more than 4000 square metres in area. CPH annually produces an environmental report which is externally audited. Sustainability and environmental capacity Fundamental to the discussions of the environmental and other impacts. Following various developments such as the publication of the Brandtland report in 1987 and the Earth Summit in Rio de Janeiro in 1992 there has been an increasing awareness and commitment to the principles of sustainable development in many industries – the aviation sector being no exception. 2001. can be considered as helping to encourage a more sustainable industry. Complementary social policies include active involvement by the airport operator in the local community and an effective community relations programme. waste and energy management programmes. This process took place over one weekend and involved shifting the airport terminal. However. safety. The concept of sustainable development 245 . Many of the measures described in this chapter. Most definitions also identify the need for a balance between social. see IPPR. For airports. the environmental aspect of sustainable development is all about effective environmental protection and prudent use of natural resources. which can be used to ensure that any expansion conforms to the objectives defined in the environmental policy. noise and emission mitigation initiatives and water. The responsible management of employee health. 2001). Copenhagen Airport A/S has also prepared a manual on environmentally sound design and planning. The largest single environmental investment that CPH has made took place in 1999 when the old terminal building. The airport has also introduced a waste-handling plan to enhance waste sorting and increase recycling and CPH and the airlines have investigated ways in which the environmental impact from aircraft washing could be reduced. environmental. and security issues at the airport and equal opportunities employment policies is also seen as promoting sustainability. is the concept of sustainability and sustainable development. sustainability is to do with the maintenance of high and stable levels of economic growth and employment. for example. Most definitions of sustainability tend to be rather vague and imprecise.8 km from the east to the west of the airport. No overall consensus has yet been reached as to exactly how sustainability can be defined in the context of the aviation industry although there have a number of recent studies which have investigated this area (e. From 1999. was relocated. Thus the benefits of any development must be carefully weighed against the resources to be consumed. all new purchasing contracts between CPH and suppliers stipulate that the supplier’s business is to be operated in an environmentally responsible manner. From an economic viewpoint. which was designed in 1939.The environmental impact of airports to monitor air quality and surface water quality were introduced and in 2000 the airport established permanent air quality monitoring. In 1997 this building had been listed as a protected building by the Historic Buildings Council. sharing the theme of meeting today’s needs without sacrificing tomorrow. Social equity and improvements in the quality of life are often cited as key aims of sustainable development. a distance of 3. and economic impacts of any activity.g.

which is owned by the Schiphol Group. social benefits. In effect. airports will reach their environmental capacity before making full use of existing infrastructure. airport operators and airlines are free to expand or modify their services (Graham. If growth has to be regulated. However. Within these predetermined threshold capacity values. many of these are separate and uncoordinated and. many in the industry consider that such environmental controls are more appropriate than placing an overall limit. so. It is the environmental capacity of airports which is likely to constrain growth. and water quality. Another area of consideration is where to draw the boundary between global and local impacts when determining environmental capacity. Airports may also not be able to make changes to the physical infrastructure if this involves exceeding the environmental capacity limits. However. Central to the notion of sustainability is the idea of environmental capacity. gates. increasingly it is the environmental capacity. For example. The environmental capacity can de defined as ‘the extent to which the environment and the local community is able to tolerate. 2000). on passenger throughput.Managing Airports recognizes that economic growth. In a purely physical sense. surface transport and so on. air. airports will only be able to grow if they minimize the impact of these expanding activities on the environment and the community. assimilate or process outputs derived from airport activities’ (London Luton Airport. like emissions. 2000). In many cases. 1999). The capacity limits can be set using environmental criteria related to noise. They should not be treated as being in conflict. for example. and environmental quality are not mutually exclusive events. Throughout the early 1990s 246 . which will determine the ultimate overall capacity of an airport. This can be done by looking at all the individual impacts at airports and ways to reduce them. it is clearly very much more difficult to put the idea into practice. rather than assessing the physical capacity of the infrastructure. Environmental capacity consideration at Amsterdam airport Amsterdam airport. and 1. While environmental capacity as a concept is relatively easy to understand. which is set by consideration of the impacts of an airport’s operation upon the local environment and the lives of residents of local communities. They can also be adjusted to take account of new mitigation measures. an airport’s capacity can be defined in a variety of ways. or apron areas. to the long-term use of the environment. handled 40 million passengers. the approach to environmental capacity must go further (Gillingwater. rather than any physical or financial considerations (Coleman. it has been suggested that in order to take on fully the ideas of sustainability. These environmental threshold values ideally should be based on scientific research and sociological research on the tolerance of local communities to environmental impacts. should there be some trade-off between costs and benefits associated with all the different environmental impacts and also consideration of their effects throughout time? For instance. or capacity of terminals. such as the number of runway slots. 1999). aircraft noise is a short-term quality of life issue rather than being related.2 million tonnes of freight in 2001.

after 2010. The results of the analysis are shown in Table 9. healthy growth in 1997 and 1998 meant that in both these years the noise contour limitation was exceeded.The airline Table 9. but instead at diverting traffic to a less noise-sensitive approach. The options for the short-term optimization of the capacity have been considered by the Dutch civil aviation department to assess which measures are the most efficient and lead to a minimum of economic costs and a maximum of environmental benefits. The airport also became slot co-ordinated in 1998. in terms of the house affected. These options were assessed by analysing the impact on traffic. not at increasing capacity.8 The impacts of different options for optimizing noise capacity at Amsterdam airport Impact of option (% change 1996–2010) Unconstrained growth 44 million passenger limit 7 euro passenger levy 1–4 euro noise surcharge Slot trading with 600 000 movements limit 18 10 6 40 21 Movements Passengers Fares Noise Jobs 128 141 0 43 43 31 32 20 35 18 15 11 7 39 24 8 3 2 32 18 247 . Various measures were then tested such as a regulatory limit on passenger numbers. The model used assumed that passenger numbers would grow unconstrained to 65 million passengers in 2010. The impact on jobs was also considered. At the end of 1999. a 7-euro surcharge on all passengers and a noise surcharge related to different levels of noise. 2 Passenger numbers could not exceed 44 million in any year.8. a redesign of Schiphol might be possible or beyond 2020 the development of a new offshore airport might be considered – although this project has now been dropped from the official planning procedure. and then no larger than 10 000. so in 1995 a decision was made by the government about the future development of the airport. A number of environmental limits were also established: 1 The acceptable noise contour was to be no larger than 15 000 houses until completion of the fifth runway in 2003.The environmental limits were still to be applied but further growth could be possible until 2010 by optimizing the environmental capacity. The government granted Schiphol an exemption from the noise limits. However.The environmental impact of airports traffic was forecast to grow steadily. but instead imposed a limit of 380 000 movements in 1998 and then annual growth limits of 20 000 movements. and airline cost or passenger fare. A simple levy to reduce passenger numbers to 44 million proved to be very costly for the airlines. the government stated its views for the long-term development of the airport. 3 Cargo tonnes could not exceed 3. It gave approval for a fifth runway (opened in 2003) which was aimed. noise.3 million in any year. Slot trading to achieve a maximum of 600 000 annual movements was also considered. In the longer term. although the houses affected still remained under 15 000.

the aviation industry clearly faces a major challenge in the future. operational. 149–59. Aeroports de Paris. (1997). New York’s answer to Heathrow. Environmental Handbook. On the Path of Environmental Limits. encourage economic development through mobility and yet respond to the increasing environmental pressures being placed on the industry. this chapter has identified the major environmental impacts associated with airport operations and has described various environmental management approaches designed to reduce these effects. In conclusion. which aims to balance the social. BAA Heathrow (1999). AEA. BAA Heathrow. ACI-Europe. J. environmental. A Surface Access Strategy for Heathrow: The Next Five Years. BAA Heathrow (2002a). Airport Business Communique. 6. A Surface Access Strategy for Heathrow – The Next Five Years. 1 (3). Yearbook 2000. Annual Report 1999. BAA Heathrow. Alamdara. (1994). December–January. Some combination of these measures may have to be introduced at Amsterdam and other airports in the future to enable airports to grow within the boundaries of environmental limits (Veldhuis. this challenge is how to maintain economic and social benefits from air transport. and other mitigation measures to minimize the environmental impacts. London. R. Ashworth. Association of European Airlines (AEA) (1999). 12 August. The chapter has also discussed how environmental concerns can be viewed within the context of sustainable development. Association of European Airlines (AEA) (2000). if allowed to take place. University of Westminster Airport Policy and Planning Seminar. Aviation and the environment. Geneva. Policy paper 6. Yearbook 1999. and economic impacts of any activity.Managing Airports cost fell when the option of a 600 000 movement limit and slot trading was considered. Therefore. The noise surcharge provided a more optimal balance between economic costs and environmental benefits. Transport Policy. and Brewer. 2000). Aeroports de la Cote d’Azur (2000). 26. Airports Policy Consortium (1997). There is still a great deal of uncertainty as to how this can be achieved. p. the growth rates being predicted for air transport. Airport Business Communique (2000). BAA Heathrow. D. (2000). AEA. Environmental issues are beginning to affect most aspects of airport operations – even the EU proposal on slot allocations suggests that environmental as well as physical capacity should be considered. APC. Aeroports de Paris (2000). Europe’s airports could face a 30% reduction in operations. BAA Heathrow towards Sustainability. 248 . but still the economic costs were comparatively high compared with the environmental benefits. Taxation policy for aircraft emissions. Air Transport Action Group/United Nations Environment Programme (2002). BAA Heathrow (2002b). May. Air Transport Action Group (2000). In spite of technological. will mean that the environmental impacts will increase. Industry as a partner for sustainable development. The Times. In essence. Airports and the environment. Annual Report 1999. ATAG/UNEP. ATAG. F. Anker. References and further reading ACI-Europe (1995). Aeroports de la Cote d’Azur.

Department of the Environment. ECAC/EU dialogue with the European air transport industry: aviation capacity – challenges for the future. June. Gethin. April. CE Delft. Heathrow and Manchester Airports in 1997. (1998). European Commission (1999). D. COM (1999) 640 final. An environmental lead. Environmental Report 1999. Coleman. Feldman. DETR. Passengers at Gatwick. The Future of Aviation. London. Frankfurt Airport (2000). Airline Business. University of Westminster Aviation and Tourism Seminar. DfT (2003). Air Transport and the Environment: Towards Meeting the Challenges of Sustainable Development. Frankfurt Airport. London. Copenhagen Airport A/S (CPH) (2000). Environmental Report 2001. Brussels International Airport Company. CE Delft (2000a). 26. EC. Francis. A. Transport and the Regions (DETR) (2000b). J. DETR. January. Environmental impact assessment: the Norwegian experience. Communique Airport Business (1998). Transport and the Regions (DETR) (1998). Aviation and the environment: Using economic instruments. 32–3. Raper. (1999).The environmental impact of airports Baker. T. CAP 685. Air Transport World. Dennis. CE Delft (2002b) Economic incentives to mitigate green house gas emissions from air transport in Europe. FoE. 22 September. Open University Business School Research Paper 01/4. CE Delft. 54–7. Holden eds). (2000). G. Transport and the Regions (DETR) (1999). Airline Business. Environmentally sustainable capacity. (2000). A New Deal for Transport. A. Gillingwater. Düsseldorf International granted permission to increase number of aircraft movements. Department of the Environment. 36–7. The next chapter. Press release. A user-friendly decision. Europe breaks ranks on noise. Pedoe. and J. Department of the Environment. Civil Aviation Authority (CAA) (1998a). CAA. Jane’s Airport Review. Düsseldorf Airport (2000b). Airline Business. EU challengers ICAO in hushkit case. Guidance on Airport Transport Forums and Airport Surface Access. CAA. (2000). George. 10. Winter. DFT. and George. Düsseldorf Airport. N. March. and George. Good neighbour project ensures local environmental voice. Fry. Brussels International Airport Company (2000). CPH. March. Gaustad. Gill. Civil Aviation Authority (CAA) (1998b). White Paper. From Planes to Trains. 21. In Environmental Management at Airports (N. May. Thomas Telford. Environmental capacity – the challenge for the aviation industry. R.. Emission impossible. Annual Report 1999. D. I. (1999). CPH. Consultation document. 249 . Copenhagen Airport A/S (CPH) (2002). April. Valuing the external costs of aviation. Sustainable Cities and Aviation Network UK Workshop Conference. Communique Airport Business. (1999). (2001). Low cost carriers and scheduled airline operations. and Humphreys. Salzburg. C. Baker. Düsseldorf Airport (2000a). Friends of the Earth (UK) (2000). DETR (2000a). (1996). C. An international survey of performance measurement in airports. CAP 690. October. S. Annual Report 1999. A. The Single European Aviation Market: The First Five Years. (2000). DETR. A. External costs of aviation. Annual Report 1999. October. Airline Business. (2001). The Stationery Office.. 51–3. J.

M. M. November. Navarre. LLA. (1996). (1999). Pedoe. (2002).Managing Airports Graham. June. D. Thomas eds). Earthscan. Environmental sustainability. IPPR. Determining environmental capacity at Amsterdam airport Schiphol. 22–4. Noise related to airport operations – community impacts. D. Environmental Report 1999. University of Westminster/Cranfield University Airport Economics and Finance Symposium. Upham. 250 . G. London. In Environmental Management at Airports (N. Ground Transport Policy. (2003). Twigg. Jane’s Airport Review (1999). Luftfartsverket (1991). International Air Transport Association (IATA) (2000). Los Angeles airports on environment fast track. 9. Earthscan. Jane’s Airport Review. IARO/ATAG/ACI. Hooper. Luftfartsverket. and J. Brunel University. March. J. Heath. D. April–May. Newcastle Airport (1999). Airport World. and J. Niblett. (1999). airport capacity and European air transport liberalisation: irreconcilable goals? Journal of Transport Geography. J. (1996). Thomas Telford. Zürich flughafen as a model number 1 in Europe regarding integration of the rail and air modes. B. Manchester Airport. Salzburg. Thomas Telford. Royal Commission on Environmental Pollution (2002). Pedoe. A. Manchester Airport (1997). The true cost of environmental issues. Development Brief. Noise abatement at Zürich airport. Aviation and the Global Atmosphere: Summary for Policymakers. Meyer. (1996). IPCC. D. The environmental effects of civil aviation in flight. Towards sustainable aviation (P. IATA. Comparison of airport accessibility by land transport. RCEP. ECAC/EU dialogue with the European air transport industry: aviation capacity – challenges for the future. (2003).. R. November. 23. Holden eds). Air Rail Links: Guide to Best Practice. (2000). and Maughan. October. 7. Long distance rail services to airports. 165–80. Balancing act. Grossenbacher. Maughan. April. Thomas. Maughan. J. Schiphol Group (2000). New Oslo Airport Gardermoen Master Plan. The potential for modal substitutions. Airport and En-route Charges Manual. PTRC Annual Conference. Institute for Public Policy Research (IPPR) (2001) Sustainable Aviation 2030. Second Airport Regions Conference. IARO/ATAG/ACI (1998). (2000). Raper and C. Schiphol Group. Pilling. J. Annual Report 1998/9. Raper. McNamara. D. Veldhuis. In Environmental Management at Airports (N. P. Raper and C. September. (1996). Vantaa. London. B. C. Janic. University of Westminster Demand Analysis and Capacity Seminar. Raper. Environmental management and the aviation industry. ERA Regional Report. (2000). Holden eds). Intergovernmental Panel on Climate Change (1999). Continuous descent approach trials reveal significant improvements in emissions and fuel consumption. Upham. J. London Luton Airport (2000). Thomas eds). In Towards sustainable aviation (P. S. Newcastle Airport.

Overall effect on the air transport industry . This chapter begins by considering just how the airports have been affected by these terrorist attacks and then goes on to assess more broadly the prospects for the industry in the future. depressing demand for travel and leading to passengers trading . Enhanced competitive pressures from airline deregulation and airport privatization coupled with increased demands for a more sustainable and quality conscious industry have brought many new challenges for the airports. was spreading to Europe. which was already in existence in the United States and Japan. airports have had to face the unparalleled consequences of the events of 11 September 2001 and a much more volatile environment. In many ways it is very difficult to isolate the effects of 11 September 2001 and other changes that were also taking place in parallel. Economic recession.10 The impact of 11 September 2001 and future prospects A dominant theme running through this book is that airports are going through a period of unprecedented change. In addition.

which made them more able to offer price cuts to stimulate demand. for the months of September. October 2001 was the worst month as September had some normal days at the beginning and advance bookings. 23. However. There was only modest improvements for all airlines right through until the end of 2001. It had already been widely predicted that the airline industry was heading towards a cyclical downturn and it is certainly quite probable that some of the changes that were accelerated by the crisis following the events of 11 September 2001 would have happened anyway. and November. especially long-haul. they stimulated demand and grew their traffic by launching new routes that previously had not been served. Between January and August. to encourage passengers to switch from more traditional airlines. In the last quarter of 2001.Managing Airports down to cheaper fares. They were also able to take the opportunity. the American carriers experienced decreases in passenger-kilometres on the previous year of 32. helped explain this situation. 26. protected traffic in the latter part. These low-cost carriers appeared to be seemingly immune to the problems facing the rest of the airline industry after 11 September 2001. which includes all the major European ‘flag carriers’. and 20 per cent. In addition. Ryanair maintained a 20 per cent profit margin while the traffic of easyJet and go rose by a third (Dennis and Graham. traffic was down by about 10 per cent in both markets. but excludes most of the European low-cost airlines. such as the fact that the low-cost airlines were more profitable than the majors prior to 11 September 2001. caused by the pressure on business travel budgets brought on primarily by recessionary factors. respectively. and then 14 per cent. Various reasons. freight traffic started to increase again for many airlines during these 8 months and growth rates of 3 and 13 per cent were achieved. respectively. In the United States. Freight demand was also down due to poor economic conditions and ending of the ‘dot. These airlines had no routes to North America or the Middle East where the decline in traffic was the most dramatic. Elsewhere. freight tonne-kilometres declined by 24. Overcapacity existed in many markets. The most obvious impact of the events of 11 September 2001 was the decline in traffic initially caused by the closure of US airspace and then loss of passenger confidence in flying. as a string of air disasters in Europe and the United States coupled with a suspected bomb on a Paris–Miami flight just before Christmas continued to make the general public very nervous of flying. coupled with their lower costs. 252 . Labour costs were rising in the airline industry as were fuel prices. the Asia/Pacific airlines recovered more quickly although they still only experienced zero growth during this period. 2002a).com’ and technology boom years of the 1990s. such as Ryanair and easyJet. Similarly. It needs to be noted that the European airline traffic statistics are for the Association of European Airlines. Monthly traffic numbers in 2002 remained at a lower level for both American and European carriers until September when growth returned because of the very depressed 2001 figures. October. for American and Asia/Pacific airlines although a decline of 4 per cent was still recorded for the European airlines (Airline Business. 2002). Passenger-kilometres for both European and Asia/Pacific airlines were down around 22 per cent in October 2001. made before 11 September 2001. and this coupled with a rapid growth of low-cost airlines in some regions was causing airline yields to fall. By contrast.

Airport traffic levels These changes in airline operations since 11 September 2001 clearly had a major impact on airport operations as well. Alitalia. In North America. the airline industry made a net loss of almost US$12 billion. namely 13 000 employees. American also had major financial problems. in Europe.1 shows monthly growth rates of airports. For the US major airlines this was in the region of 15–25 per cent of their total capacity and for most of the major European airlines the reduction was around 10–20 per cent. For example. although some of their services were taken over by the new airlines SN Brussels Airlines and Swiss. however. especially out of secondary hubs or where there were isolated free-standing routes. British Airways made a quarter of their workforce. 2002). Figure 10. British Airways used Boeing 737s on its Frankfurt and Munich routes out of Gatwick and Avro RJ100s on its Dusseldorf and Hanover services. some airlines laid off a significant proportion of their staff. in 2001. compared to the previous year. insurance. the cutbacks were less dramatic. and air traffic control. averaging less than 10 per cent (Doganis. 9 000 employees. that is. which greatly surpassed any of the losses during the early 1990s Gulf War and recession period. Airlines also dropped frequencies or abandoned services entirely. By August 2002. meant that there have been a number of airline failures and bankruptcies since 11 September 2001. particularly associated with security. Within Europe. there was the demise of the two major carriers Sabena and Swissair. 2002). the financial problems were the most acute in the United States and resulted in US Airways and then later United Airlines declaring bankruptcy and filing for Chapter 11 protection under Federal Law. Since the terrorist attacks. went at Air Canada and a fifth of the staff at both American and United. Unsurprisingly.The impact of 11 September 2001 and future prospects The major airlines adopted a number of strategies to cope with the declining demand. For the Asia/Pacific airlines. Again. Overall. and Virgin Atlantic all made around 15 per cent of their workforce redundant. for example. 253 . rather than at major hubs. Austrian. Smaller European airlines such as Gill Airways and National Jet Italia also went out of business. SAS. were laid off post-11 September 2001 (Doganis. Other airline failures included the Australian carrier Ansett and Canada 3000. A result of all these strategies meant that most airlines made significant capacity cutbacks post11 September 2001. it is important to emphasize that many of the airlines were in a poor financial position even prior to 11 September 2001 and this event only made the situation considerably worse. in August 2001. 20 000 at each company. For example. Reduction in traffic levels was experienced and airports had much greater instability in their customer base as airlines cut capacity or in some cases disappeared altogether because of financial collapse. Some decided to reduce aircraft size rather than cutting frequencies in order to maintain flights for schedule-sensitive business passengers and to protect their slots at airports. redundant and Aer Lingus reduced their work force by an equivalent amount by losing 2 500 employees. Many airlines took quite drastic measures to reduce their costs. the RJ100s had been replaced by the smaller ATR72 aircraft with the RJ100s providing less capacity on the Frankfurt route (Dennis and Graham. The reduction in airline demand and revenues coupled with rising costs. representing a third of the total. 2002).

and then grew by 5 per cent.Managing Airports Monthly growth compared to previous year (%) 5 0 a fic a Ea st Eu ro pe Af ri c ia /P ac i To ta l er ic er ic Am N or th a Am La tin As –10 –15 Nov ’01 Mar ’02 Aug ’02 –20 Figure 10. London Gatwick was the principal loser whilst at London Stansted. It can be seen that the airports’ performance is closely correlated with that of their base airline(s). For example. Fort Lauderdale. March 2002. such as Oakland. 254 M id dl e –5 . 2. A similar less substantial reduction of traffic was experienced at one of American Airlines’ main hubs. In particular. Some US airports suffered much more than others. Washington National was closed for nearly a month following the terrorist attacks and experienced a traffic decline of 55 per cent in November. Other airports. the main base of the low-cost airlines. By August 2002. the passenger loss at Chicago was not as large. growth was once more being experienced in the Middle East and the African region. it was North America that felt the brunt of the crisis with traffic down by almost a fifth in November 2001. that is. The changes in airport traffic levels for the year following 11 September 2001 for a number of European airports is shown in Table 10. Zürich airport also lost a substantial amount of traffic because of the collapse of Swissair. Traffic was down for all regions in November 2001 and in March 2002 with the exception of Asia/Pacific where growth of nearly 5 per cent returned.1 Airport passenger growth by world region since 11 September 2001 Source: ACI. and Baltimore faired better because of increases in low-cost passenger numbers. whilst elsewhere in Europe and the Americas traffic levels were still depressed compared with the year before. passenger numbers were dramatically lower at the east coast airport of Boston and fell by 32 per cent. Likewise. Clearly. by global region for November 2001. As a consequence.1. Milan Malpensa suffered because of Alitalia’s failure to establish it as its main hub. and August 2002. In the United Kingdom. which showed that generally cargo flows were less affected by the crisis and recovered more quickly. Traffic at San Francisco airport also declined significantly by 29 per cent in November as United regrouped at its Chicago hub. just 17 per cent in November. In the case of Brussels. For the same 3 months global cargo traffic declined by 9. Dallas Fort-Worth. significant increases in passenger numbers were experienced at Chinese airports and Tokyo Haneda because of new runway capacity. the demise of Sabena in November led to traffic falling by almost 40 per cent.

5 7.4 13.1 0.7 Brussels 9.0 London Stansted 11.4 Madrid 2.5 4.9 13.9 12.2 Vienna 3. As discussed in Chapter 5.1 Copenhagen 0.0 Paris Orly 12.8 6.9 21.1 5.8 15.1 21.2 London Heathrow 13.2 Barcelona 3.9 19.1 4.2 9. The decline in passenger numbers meant that there were less commercial customers at the airports and also in some cases they had less dwell time because of more stringent security requirements.0 2.9 8.8 13.6 36.6 1.5 N/A Jan. where underlying growth rates had also been high in recent years.4 9.–Aug. Airport financial performance These reduced traffic levels clearly had a major impact on airport revenues.7 26.8 8.8 6.2 14. 01 Amsterdam 5. Oct.2 6.4 11.1 19.6 1.6 Milan Malpensa 14.3 6. passengers had more time to shop because they arrived earlier – again for security reasons.1 3.8 8.8 Dusseldorf 5. also experienced traffic growth between January and August 2002.2 16. However.9 7.7 Lisbon 3.6 13. 01 12.0 10. Some airports. Other airports such as Barcelona and Dublin.8 18.0 4.3 7. Elsewhere.8 4.5 3.2 5. notably in the United States.1 2.4 6.8 8.1 Manchester 2. 01 4.5 10.6 5.1 4.1 N/A Nov.3 0. 01 9.6 Zürich N/A Source: ACI Europe. Income from passenger charges contracted with the fall in passengers numbers and income from landing charges also decreased at many airports as airlines reduced their capacity by downsizing their aircraft types or lowering their frequency.2 Helsinki 2.4 12.6 N/A Dec.0 Paris Charles de Gaulle 9.3 4.3 14.3 4.3 Frankfurt 7. have had to redesign many of their commercial facilities in order to 255 .2 13.8 London Gatwick 6. there are have been a number of impacts to consider as discussed in Chapter 6. some airports lowered their charges in order to encourage the airlines to maintain or even grow their airport operations and other airports postponed planned increases.8 12.7 34.1 33.4 34.The impact of 11 September 2001 and future prospects Table 10.8 29.0 0.1 Change in passenger numbers at major European airports since 11 September 2001 Airport % Change relative to same period in previous year Sept.0 23.7 9.4 6.7 20. particularly to cover the increased costs of implementing extra security measures.8 N/A 15. 02 0.9 12.5 7.5 3.9 10.2 Dublin 2. some airports increased their charges. As regards commercial or non-aeronautical revenue. in other cases.4 passenger number continued to grow throughout the time period.

which has led to a decline in non-aeronautical revenues. Table 10. For 2001. As regards costs. it was found that almost one-half of the 60 largest airports had introduced such policies (Behnke. Amsterdam airport also put some major investment projects on hold. construction of the new South terminal was postponed although the expansion plans for the North terminal went ahead. it was estimated that airport revenues would recover and grow by 5.8 per cent. car parking down 6. Airports also have to plan and build for the long-term and this is very difficult in any period of uncertainty. For example. However. some airports decided to go ahead with their future investment as planned. the cost-cutting measures that the airport industry have used are not nearly as dramatic as those implemented in the airline industry.7 per cent 256 . Overall revenues increased by around 5 per cent in 2001 with more or less equal increases coming from aeronautical and non-aeronautical sources. at Detroit airport it was decided that the construction of 25 new gates would still go ahead. In a special survey conducted by ACI. Holding back on any planned investment because of the downturn in traffic may constrain growth in the future. Approval for the development of London Heathrow Terminal 5 was given shortly after 11 September 2001. new restrictions on the movements of meeters and greeters have limited their access to certain retail and catering outlets and many car parks have had to close.2 shows the operating revenues and costs for the US airport industry for 2000 and 2001 with estimates for 2002. due partly to an increase in fees. and rental cars down 5. However. For 2003.Managing Airports conform with new security measures. it was estimated that total revenues in 2002 would be fairly similar to 2001 with an increase in aeronautical revenues. The consequences for planned future investment in the United States was also mixed. Other expansion plans at Phoenix. Work on the fourth runway at Orlando airport continued post-11 September 2001 but the new South terminal could not be built as planned because of new security requirements. and San Francisco airports were put on hold whilst at Los Angeles the funds for expansion were directed towards security and safety improvements instead. Charlotte. as fixed assets cannot be moved or closed when traffic goes down. Airports have introduced cost-cutting measures as well. It was estimated that food and beverage revenue would only be down by 0.7 per cent. Rome continued to implement its major 10 year development programme and Frankfurt airport kept all major expansion work on schedule. Immediately after 11 September 2001. It is much more difficult for airports to downsize or get rid of excess capacity when demand is reduced. For example. generally these have gone up since 11 September 2001 particularly because of increased insurance and security costs. if and when normal conditions return. being balanced by a decrease in commercial revenues as a result of a decline in numbers and changes in the non-aeronautical facilities because of new security requirements. the crisis situation after 11 September 2001 was rather overshadowed by the more normal situation for the rest of the year. however. partly because passengers were spending longer at the airport and also because the airlines had cut back on their food service as a costsaving measure that encouraged more food buying in the terminal. For the other commercial revenues it was estimated that retail revenue would be down by 9 per cent. These include restrictions on staff travel and either freezing recruitment or employee redundancy. Boston Massport. At Arlanda airport in Stockholm.4 per cent. 2002). For example.

0 4.2 Change in financial performance of the US airport industrya since 11 September 2001 Operating revenues (US$ millions) 2000 2001 2002 (estimate) % change 01/00 % change 02/01 (estimate) 7. and Zürich. London Gatwick. In the United States. Whilst there may have been specific reasons for some airports for these increases. b Excludes depreciation. Moody’s. and Vienna is evident. Globally. These results are considerably more healthy than those of the 150 leading airline groups who experienced an EBIT margin of 4 per cent in 2000 and of 2 per cent in 2001.8 37.8 38. Brussels Copenhagen. As regards operating costs (excluding depreciation) in 2001 these increased by around 9 per cent with security and insurance costs going up by 11 and 10 per cent.8 8.3 9.3 Notes: a Based on a sample of 100 airports that are used to estimate industry totals. 2002b). Different financial years exist. The exceptionally large increase in costs at Zürich airport was due to bad debt write-offs connected with Swissair Group.5 5. Frankfurt. (ACI-North America.The impact of 11 September 2001 and future prospects Table 10. both these items were expected to rise very substantially by 38 per cent. revenues were up in spite of declines in traffic after 11 September 2001.3 0. At other airports. downgraded the credit rating of the Port Authority of New York and New Jersey 257 . in 2002.5 8. The short-term impact of the reduction in traffic volumes and the uncertain situation caused by the events of 11 September 2001 was a loss of confidence in airports as attractive investments.1 556 89 5 501 6 147 619 98 5 971 6 689 853 136 5 920 6 909 11. both of which recorded above-average increases in revenues in 2001. 2002). Revenues were substantially higher at London Stansted. primarily because of the growth of low-cost carriers at this airport. Amsterdam.3 shows the financial results for some of the major airports for 2001 and a decline in revenue for certain airports such as Geneva. All airports showed increases in costs. the Investor Service. Table 10. The exceptions were the Schiphol Group and Stansted airport. However. the EBIT margin for the 50 leading airport groups in 2001 was 23 per cent compared with 28 per cent in 2000. increased security and insurance payments have been major factors influencing all the airports. for example. The two items are discussed in further detail later on in this chapter.8 5. This situation has meant that airlines have exerted increased pressure on the airports regarding their airport charges (Airline Business.3 0. Paris. Putting the revenue and cost trends together meant that the profitability (measured by the EBIT or operating margin) of most airports declined in 2001.9 Aeronautical Non-aeronautical Total Operating costsb ($US millions) Security Insurance Other Total 4 869 5 677 10 546 5 101 5 987 11 088 5 456 5 732 11 188 4. respectively. Source: ACI North America.9 3.

Miami. EBIT margin.4 0.8 27.0 12.1 16.8 9.8 9. Source: Airport Annual Accounts.6 13. EBIT margin earnings before interest and tax as percentage of revenues. 01 12 Oct. and Detroit on its watchlist for possible downgrade.4 Notes: a Different financial years exist.9 1.9 6.7 2.0 14. Standard and Poor’s also placed US airports on creditwatch.7 6.1 EBIT margin. In addition.Managing Airports Table 10.3 28.7 2.9 39. Elsewhere.9 18.2 0.5 36.0 15.8 8.6 37.6 21.0 42.4 Share prices of airport companies since 11 September 2001 13 Aug.1 27.9 01/00 change in costs (%) 4.1 28. b Table 10.8 25.3 7.5 40. Source: Jane’s Airport Review. 01 72 97 83 115 86 77 94 94 76 48 12 Nov.0 16. Washington.2 8.6 5.0 6. and Boston Massport and had a number of other US airports such as Charlotte.2 16.1 28.5 28.7 3. 2000 (%)b 2001 (%)b 20.1 0.6 32.8 9.2 0.3 Change in financial performance at major European airports since 11 September 2001a 01/00 change in revenues (%) ADP (Paris) Aer Rianta (Ireland) Copenhagen Brussels Dusseldorf Fraport Geneva London Gatwick London Heathrow London Stansted SEA (Milan) Schiphol Vienna Zürich 2.4 6.6 15. Los Angeles.1 1.2 13.9 12.0 42. namely the Aviation Trust Fund and the Passenger Facility Charge – both directly related to traffic throughput – were reduced.4 5. the share price of the listed privatized airports fell quite substantially but within most 258 . Chicago O’Hare.0 11. the decline in passenger numbers meant that two key sources of finance for investment.6 25.7 2.6 20. 01 70 99 87 102 77 71 88 85 73 50 16 Apr.8 1.9 1. 02 95 128 100 99 100 85 115 102 97 56 21 May 02 98 127 96 99 109 78 110 105 96 58 ASUR (Mexico) Auckland BAA Beijing Copenhagen Fraport Malaysia TBI Vienna Zürich 100 100 100 100 100 100 100 100 100 100 Note: Values are indexed with 13 August values set at 100.

based at the airport. security at airports had been undertaken by private security company staff who were often underpaid and poorly qualified but the Act provided for these to be replaced by a federal workforce of initially 28 000 properly trained staff who had a mandatory requirement to be a US citizen (Bacon. At a global level. with the successful privatizations of Sydney and Malta airports.5). in 2002. by mid-2002 though there were signs that airport privatization was back on the agenda for a number of airports. Neubauer. At Zürich airport. 2002. The collapse of Swissair and Sabena clearly had a major impact on both Zürich and Brussels airports. However. became a national concern and high-profile issue that received a considerable amount of media attention. The situation was made worse at both airports since there were major expansion schemes in progress that were planned around the assumption that the home carriers would have a major input into the operations at the airport. with many additional security measures being introduced. because of other specific problems such as its investment with Manila airport and Zürich suffered because of the collapse of Swissair. The depressed position of the airport sector immediately after the events of 11 September 2001 meant that various privatizations at airports such as Milan and Sydney were postponed. for example. Brussels airport had also planned to be privatized but these proposals have been put on hold. The most sweeping changes occurred in the United States where traditionally security measures were relatively lax compared with the rest of the world. Security issues The events of 11 September 2001 led to aviation security coming under close scrutiny for both airports and airlines. 259 . Fraport did not do so well.4 that the share value at Zürich airport (a partially private airport) was very significantly reduced by Swissair’s failure. 2000a). This set a number of important deadlines regarding security that had to be met by the end of 2002 and transferred direct responsibility for security to the Federal Government with the setting up of the Transportation Security Administration (TSA) (Table 10. For this 3 year programme it was agreed that regular and mandatory audits would be conducted of member states to identify and correct deficiencies in the implementation of ICAO security-related standards. Suddenly. It may be seen from Table 10. particular in the United States. which was signed by President Bush on 19 November 2001. In addition. ICAO adopted an Aviation Security Plan of Action. 2002). for example. Congress quickly developed the Aviation and Transportation Security Act (ATSA). new mandatory security standards were agreed ranging from locking flight deck doors. 2002). related to maintenance and cargo. sharing information about potential security risks.The impact of 11 September 2001 and future prospects cases returned to pre-September values within 8 months (Table 10. The local canton of Zürich agreed to provide a credit line of SFr100 million partly for the airport to acquire some of these former Swissair subsidiaries (Baker. security. the problems were compounded by the fact that Swissair had subsidiary businesses. and ensuring that the security measures were implemented in a non-discriminatory manner (Jane’s Airport Review. At Zürich airport the work continued on the new terminal post11 September 2001 although the opening was delayed.4). Previously.

because of the enhanced security measures that were required.50 per sector introduced at all airports Federal Government assumes direct responsibility for civil aviation security Deadline for review of the effectiveness of biometrics and other security access systems Deadline for all federal passenger screening personnel to be in place Deadline for the requirement of screening of all checked baggage by explosive detective systems (EDS) at 429 major airports The new security policies received considerable criticism from the airline and airport industries in terms of the practicalities of introducing enhanced security measures. As of February 2002. 2001–02 19 November 2001 18 January 2002 1 February 2002 18 February 2002 18 May 2002 18 November 2002 31 December 2002 Aviation and Transportation Security Act passed and the establishment of the Transportation Security Administration (TSA) Deadline for the requirement of screening all checked baggage or the matching of passengers with bags New security charge of $2. an increase of 11 per cent. taking advice from experts such as the Walt Disney Corporation. a massive 38 per cent rise in 2002.Managing Airports Table 10. This was viewed as being totally unrealistic. The ATSA authorized US$1. 2002b). In addition. Express systems for frequent fliers were considered and the TSA also introduced more effective queue management techniques. In response to this various concessions were granted to try and reduce the security hassles such as letting passenger carry take-away coffee through the security checks and axing the rule that required passengers to be asked if they had packed their own baggage.5 billion for 2002 and 2003 to allow airports to meet FAA mandated security expenses. It may be seen from Table 10. There were numerous complaints that the new security procedures and rules were inconveniencing passengers and that this significant ‘hassle’ factor was putting passengers off flying or encouraging them to travel by different modes of transport. allowing a mixture of scanning and manual checks. They were estimated to increase to $US853. Such fundamental changes to the country’s airport security system were costly to implement. it also permitted airports to use AIP funds for other expenses related to changes in security requirements such as the replacement of airport 260 . One of the major areas of discontent was the deadline for all checked baggage to be screened by explosive detective systems (EDS) by the end of 2002. The act also gave airports the flexibility to use PFC or AIP funding to pay for any additional security-related activity required by law or the Department of Transportation between 11 September 2001 and 1 October 2002. only 150 EDS were in operation at a total of 47 airports. However. it was estimated that 90 per cent rather than total 100 per cent screening by EDS had been achieved.5 Important dates for new security measures in the United States. the feasibility of meeting the tight deadlines and in relation to how the measures would be financed. despite pressure from the airports this deadline was not extended although a few concessions were granted. whilst the deadline meant that over 2000 EDS would be needed at 429 airports (Jane’s Airport Review. By 31 December 2002.2 that security costs incurred by the airports rose from $US556 million in 2000 to $US619 million in 2001.

Often there may be a combination of these different these types of funding (Table 10. or a subcontractor may play a role (Airports Council International. the government in Amsterdam and Lisbon. In 2002. Elsewhere. However. However. 2002). within Europe the situation as regards who has responsibility for security measures at airports and who funds them varies considerably between each country and even between individual airports in some countries.6). Munich airport provided a figure of US$5. A US$2.3 million. Outside of the United States. security is paid for by the airport operator through normal airport charges or special security fees as is the case with UK airports. Milan. An ACI study undertaken shortly after 11 September 2001 attempted to quantify the security costs directly attributable to the terrorist attacks and found. As regards the provision of the security services. a US$10 million runway extension project that was to be financed from AIP funds was deferred as was a US$10 million new runway at Cincinnati airport and new apron and taxiway infrastructure costing $7. In addition to the funding provided by the ATSA. 2003). in the aftermath of the events of 11 September 2001 there was still serious concern in the United States as to how the extra security costs would be covered. that Paris CDG airport estimated this to be US$20 million. the airline. Sometimes. much attention was also paid to improving security methods at airports and numerous changes have been made. for other security activities. responsibility for designing security measures lies with the airport operator in Athens and Helsinki. the airport operator may receive a refund from this tax revenue to cover the costs of the provision of certain security services. the police. for example. aircraft protection. a wide range of different organizations such as the airport operator. in spite of all this additional funding for security. Lisbon.4 million. and cargo checks. particularly as the initial plans for the TSA had proved totally inadequate with the budget demands and the staff requirements more than doubling (Power. and Vienna. At some airports the security costs are borne by the government that is paid for in many cases by a security tax – as at Amsterdam and Frankfurt – or otherwise out of general taxation. and Toyko Narita US$2. for example. 2002).The impact of 11 September 2001 and future prospects baggage systems and the reconfiguration of terminal baggage areas to accommodate the explosive detective systems. Whilst the industry acknowledged that this short-term help was much needed. For example.5 million at Indianapolis airport (General Accounting Office. Traditionally.3 billion available for AIP grants in 2002. virtually all terminal protection is provided by the government through the police and also in most cases checks on passengers and luggage are the responsibility of the airport operators. in 2002.6 million (Behnke. there were fears that the use of AIP funds for security projects would mean that there would be less money available for other items and that this would effect long-term expansion and development. For example. the FAA authorized US$561 million in AIP funds to airports for security projects related to the events of 11 September 2001. in 2001 Congress authorized an extra US$175 million to aid airports for unexpected post-11 September 2001 security costs. This accounted for 17 per cent of US$3. 261 . such as staff access checks/badge control. and is shared between these two and the airlines in Munich. 2002). at Paris. Nairobi US$3.50 per sector security fee was also been introduced to cover some of the costs of the TSA (Field. 2002). compared to previous years when security expenditure averaged less than 2 per cent.

airlines. Source: ACI-Europe and individual airports. the European Parliament took this view with its proposal for an EU-wide framework for security regulations based on European Civil Aviation Conference (ECAC) Document 30 guidelines.Managing Airports Table 10. and the member 262 . However. They cited the United States as an example as where this was happening with the various security funds which had been approved by Congress. To fully resolve this issue. this was rejected by the EU member states so the Parliament suggested that member states should at least shoulder some of the financial burden. However. which could produce increases in security costs in some countries but not others. Post-11 September 2001. They also argued that an inconsistent approach to funding. could distort competition. there was general agreement that security measures should be harmonized throughout the European region. it was very difficult to reach any consensus as to how any extra security measures should be financed given the varied traditional approach to security funding. infrastructure. Originally. it was decided that the European Commission would carry out a study on how the financing burden should be shared between airports. Again this was not agreed to by the Council of Transport Minister but eventually in December 2002 a compromise was reached between the Parliament and Council of Ministers which left individual countries with the final say on funding but included a ‘recognition’ by the member states that they had a responsibility to assist with additional costs. and staff training – claiming that since terrorist acts are targeted at states it is the responsibility of states to finance countermeasures to protect the travelling public.6 Airport Funding of security at European airports. The airports and airlines called for the governments to pay for the extra security measures required – such as additional security equipment. 2002 Government security taxa? $ Security tax refunded to airport operator? Airport charges? Amsterdam Athens Brussels Copenhagen Dublin Frankfurt Helsinki Lisbon London Heathrow Madrid Manchester Milan Oslo Paris Stockholm Vienna Zürich $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ Note: a The security tax may not cover the cost of all the services provided by the Government and general taxation may be used as well.

this technology concentrates on the individual themselves rather than the more traditional approach of focusing much more on the passenger’s baggage. airlines. Other airports such as Boston experimented with face recognition. 2002). However. various airports began experimenting with new types of security measures such as biometric identification (Cruz. finger prints. For example. and technological suppliers. BAA launched a campaign over Easter 2002 to increase public awareness. Therefore. 100 per cent staff searches in restricted areas. which included off-airport advertising. The measures included unannounced airport inspections by independent European Union inspectors. 2002). Such techniques can be as simple as a specialized identity card or as sophisticated as the recognition of retina patterns. At Amsterdam airports iris recognition was also introduced at the end of 2001 under a scheme called ‘Privium’. increased signage asking passengers to put sharp objects into their hold luggage. whilst San Francisco and Chicago investigated fingerprint techniques. for example. in a survey undertaken shortly after 11 September 2001. improved staff background checks. BAA found that 91 per cent of travellers knew that airport procedures for security had changed and 81 per cent claimed to know that there were new hand luggage security restrictions. As a result of this. The enhanced security procedures that were agreed by the 15 EU states plus a further 23 states that are members of the ECAC covered various aspects of airport security. the ATSA required biometric testing to be undertaken at a minimum of 20 airports and allocated US$50 million a year for biometric activities. Virgin. the immigration authorities. In the United States. BAA was still confiscating 15 000 sharp items daily that were no longer permitted in hand luggage at its seven UK airports. Prior to 11 September 2001. 2002). Membership cost 99 euros for the 1-year trial and entitled the passengers to priority parking and check-in. and a new ‘travel trips and security advice’ card that was distributed to airlines and travel agents (BAA. An additional problem associated with the new security measures at airports was that the travelling public had to be made aware of the changes. The industry had been developing the technology needed for such biometric processes for some time before 11 September 2001. through a gate or door. In parallel with these developments to enhance security procedures. with the aim of speeding up processing times as well as improving security. Eight airports in Canada in 2003 were also testing iris scanning. but the terrorist attacks obviously made the case for using such measures that very much more convincing. and more stringent baggage screening methods such as limiting personnel to 20 minutes ‘screen-time’. An industry coalition called the National Safe Skies Alliance was set up and tested some of these measures at Orlando International airport. The original aim of this initiative was to see how passenger journey times could be reduced but the post-11 September 2001 need for enhanced security measures added another dimension to this. These use unique physical characteristics to ensure that a passenger or member of staff is known and is allowed to proceed. or speech. even by March 2002. particularly within the United States and Europe. IATA had set up a ‘Simplifying Passenger Travel’ interest group that included airports. The airport also launched a second initiative aimed at the 263 . immigration authorities. A 5-month trial of iris recognition under this scheme was undertaken in 2002 at London Heathrow with the participation of British Airways. which involved frequent travellers to European destinations on nine participating airlines. and 2 000 invited frequent flyers (Farmer.The impact of 11 September 2001 and future prospects states as part of its wider analysis of intra-airport competition in Europe.

Meanwhile for the short-term in November 2002 the US government enacted the Homeland Security Act. Throughout 2002 these short-term emergency government guarantees. the European Commission had allowed the member state governments to provide temporary cover on a rolling 30-day basis. Tel Aviv airport used hand scanning. and Dubai and Singapore airports investigated fingerprint identification.Managing Airports 80 000 employees at the airport and tested the technology that controlled access to secure areas (Lanza. namely Eurotime. Prior to this insurance had been a fairly routine and low-profile cost item but suddenly failure to reach agreement could technically have led to a complete grounding of the whole of the industry. 2002). was proposing an insurance plan called Equitime (named after the point in flight at which the risk of going forward is equal to the risk of returning). It would also have a cancellation period of at least 90 days rather that just 7 days. In the United States. which caused such problems for the airlines and airports after 11 September 2001. which had to be renewed several times. 264 . which would involve the major carriers setting up a company that would sell insurance coverage and collect premiums. However. However. ICAO has been investigating the setting up a ‘not-for-profit’ mutual insurance fund called GlobalTime. regional solutions were also being considered which could potentially be quicker to introduce. The insurance problem After the events of 11 September 2001 the insurance companies withdrew. namely $US50–150 million compared to the previous $US1 billion per airport or airline at much higher premiums. there was not total widespread support for such a scheme. all third-party cover for risks of war and terrorism and instead offered unacceptable reduced cover. At the same time. After intense pressure from the airlines and airports. the airline industry. the air transport industry has been looking at new ways whereby it would actually have responsibility for the third-party insurance. Initially this fund would require government to take most of the risk until the fund was of a sufficient size that the industry could take over full responsibility. and the European Commission. particularly from certain European governments. in co-operation with the Department of Transportation. in principle. was also proposed. a number of other airports experimented with biometric technology. notably in Britain and the Netherlands. in 2002 and was planned to come into effect once it was approved by a sufficient number of ICAO contracting states that represented 51 per cent of the organization’s annual budget. Elsewhere. However. by the beginning of 2003 there were still considerable doubts as to whether such approval could be achieved and if the scheme would ever be implemented. Globally. A similar fund to Equitime. backed by government support. Sydney airport tested facial recognition. This would initially be a 5-year war risk insurance plan. the situation was temporarily resolved with most governments agreeing to provide cover until a more realistic long-term solution could be found. which allowed for the FAA to provide war risk cover. As a result of this. enabled operations to continue as normal. It was agreed. Within Europe. at only 7 days notice. For example. as yet there has been no co-ordination with all the different schemes that have been introduced and no common consensus as to which technique is the most effective.

2002). airports will need to continue to adapt to new demands. all indications are that more privatizations are planned for the early years of the twenty first century in spite of the short-term uncertainty and the depressed aviation market. The evolving e-economy will also continue to have a major impact on the nature of freight operations at airports just as e-procurement policies are bound to play an increasing role. Casablanca). will have major infrastructure and capacity implications for the airports. currently the degree of concentration and private sector involvement within the airport industry is fairly small – much less than in the airline industry. Whilst unsurprisingly this was also the view held by the insurance industry itself. While a number of significant airport privatizations have taken place. Saudi Arabia. the airlines and airports did not agree particularly as they felt at a disadvantage compared with the United States where the government was seen as being much more supportive (Frank-Keyes.The impact of 11 September 2001 and future prospects who considered the industry to be best served by the commercial insurance market. However. likely to be more much cautious than they were in the late 1990s. the Iraq War and the outbreak of SARS.g. Pinkman. The introduction of new aircraft types. With the increased emphasis on security post-11 September 2001 further technology advances can be expected in both the processing of individuals and their baggage. 2002. however. Future prospects 11 September 2001 has undoubtedly left the airport industry operating in a much more uncertain and volatile environment. New developments such as EU enlargement and even perhaps the collapse of the traditional bilateral system based around sovereign states and national carriers could potentially have far reaching impacts on an airport’s customer base. such as alliances and low-cost carriers. in Bali. Investors are. then Europe and to a lesser extent Asia. Changes have taken place in both the airline and airport industry but it is difficult to attribute all of these to the terrorist attacks and the resulting fall in demand for air travel. One of the most important changes that has occurred within the airport industry is privatization. Technological improvements to airfield and airspace infrastructure and aircraft may improve efficiency and reduce some of the undesirable environmental impacts of airports. such the A380. some of the gloomier predictions following 11 September 2001 such as the demise of Europe’s entire independent airline sector or the desertion of less popular airports have failed to come to fruition. with governments playing no further role. However. There are also now a significant number of non-airport organizations who may 265 . although the whole air transport industry still remains particularly vulnerable to external problems such as further terrorists attacks (e. There will be new markets available for airport management companies who have more limited possibilities for expansion at home. It is important to acknowledge that none of the challenges that faced the industry prior to 11 September 2001 have gone away. As the airline industry evolves and as further deregulation occurs. first in the United States. The more competitive environment brought about by the deregulation of the airline industry. Airports are functioning in an increasingly commercial marketplace and are having to modify their product to meet the needs of new airline customers. has had a major impact on airport operations.

They operate in a much more cost conscious environment than most other airlines and hence make different demands on airport management. and global alliances. are airports really any different from any other business once the technical and operations know-how has been acquired? It is too early in the evolutionary stage of airport globalization to answer this question with any degree of certainty or to identify the factors which will determine the most successful type of airport management in this new global environment. each teamed up with a large airline alliance. or which will bring the greatest value added.There has been considerable debate as to whether the traditional airport companies with a long track record of operating airports. of course. Indeed. There probably will eventually be only space for a limited number of players. may. Moreover. war and SARS coupled with the global economic downturn has resulted in such pressures becoming that very much greater. irreversibly change the traditional airline–airport roles and interactions that have existed for many years. Such developments will. These airlines have different requirements at airports and can attract different types of passengers. which 266 . the relationship with their airline customers has also changed in recent years due to another post-deregulation development. Some industry commentators have argued that ultimately the air transport industry will be dominated by a few powerful airport global players. but increasing globalization within the airport industry might help to balance out this. like the airline industry. The airport industry. the creation of airline alliances has meant that airlines are no longer automatically linked to the national airport of the country. particularly those serving the same airline alliance. Falls in demand due to fear of terrorism. The charter industry. are better equipped to run airports than more recently established airport management companies such as TBI. Airline alliances could potentially become very powerful partners in the airport–airline relationship. privatization. change this. The post-deregulation environment meant that airlines were trying hard to control costs to improve their operating margins and were consequently exerting pressure on the airports to control their costs and keep down their level of airport charges. It appears that those most likely to achieve success will be the companies who already have had both the ability and the foresight to establish themselves as international companies. It is very difficult to predict the exact impact that globalization will have on both industries – particularly whether it will lead to greater co-operation or conflict between the two. for example. This situation is set to continue particularly in Europe as the low-cost carriers expand into the mainland region. albeit often in protected quasi-monopolistic markets. The impact of such fundamental changes within the airport industry cannot be assessed without considering the parallel airline developments towards deregulation.Managing Airports hope to use these opportunities to become global airport players. with the 2001 purchase of Go by easyJet and the 2003 purchase of Buzz by Ryanair. after being fairly concentrated in just Britain and Ireland. given the apparent lack of synergy between the current airline and airport groupings. if permitted on fair competition grounds. It is difficult to see how such a system would work. This sector also appears to be consolidating within Europe. this raises the fundamental question. For some other airports. seems set to become more consolidated and more airport alliances and co-operation seems likely in the future. Greater co-operation between airports. however. namely the emergence of the low-cost scheduled airline sector.

7 per cent.7 4. All indications are that the air transport demand is set to continue to grow – putting pressure on airports to expand their capacity.9 4. healthy long-term growth rates in the region of 4 per cent were predicted (Table 10. Boeing and Airbus were also predicting long-term average annual growth rates in the region of 4.5–4. Airbus. Clearly the uncertainty brought about by the events of 11 September 2001 meant that forecasting in the short term was very difficult. 267 .The impact of 11 September 2001 and future prospects again has different expectations at airports.7 4.2 5.9 7. is becoming more concentrated as well and is dominated by a few very large vertically integrated European countries. but the passenger forecasts produced by IATA in 2002 showed that after a couple of years of high growth to compensate for depressed traffic levels in 2001–02.5 4. In 2002.7 Base year 2001 2002 2003 2004 2000 2005 2010 Source: IATA.6 4.5 Sources: Boeing.9 3.9 5. which means that overall the forecasts of the manufacturers Table 10. IATA forecasts of international scheduled passengers Forecast period 2002 2003 2004 2005 2001–2005 2006–2010 2011–2015 Annual growth rate (%) 0. IATA. This tends to push up passenger forecasts by up to 1 per cent per annum as the average distance flown is predicted to increase. which are more relevant to airlines than airports. but increasingly this sector is unable or unwilling to provide such support. The units of these forecasts are passengerkilometres.7). Many funds traditionally came from public sources.8 Organization Long-term forecasts of global traffic growth Time period (base year 2000) Traffic measure Average annual growth rate (%) Passengers Boeing Airbus IATA Freight Boeing Airbus 2001–21 2001–20 2001–15 2001–20 2001–20 Passengers-kilometer Passengers-kilometer International scheduled passengers Freight tonne-kilometers Freight tonne-kilometers 4. A key reason behind airport privatization is the need to find new funding for investment.9 5.4 Table 10.

5 per cent. Intra-European traffic is expected to grow at 4. the relative immature market and higher than average predicted economic growth will ensure high growth rates.Managing Airports were very similar to those produced by IATA.5 per cent compared with the higher growth rates for the more rapidly developing markets of Europe–Asia/Pacific and North America–Asia/Pacific – 5. Deregulation and particularly the introduction of low fares may stimulate new growth. 2002. Airbus. More sophisticated telecommunication links may facilitate more effective teleconferencing and could reduce the demand for business travel. For example. as has been experienced in Europe with the new breed of low-cost airlines. 2002. likewise. however. The Boeing forecasts prepared before 11 September 2001 and using the same base year predicted an average growth rate of 4. For certain markets. which reflects business activity and personal wealth. the responsiveness of demand to changes to income may be weakening as demand maturity sets in. 2002). 2002–21 Source: Boeing. Freight traffic is generally expected to increase at a faster rate than passenger traffic with Asia/Pacific markets having the highest average growth rates (Table 10. respectively. and the cost of travel.4 and 5.7 per cent compared to the post-11 September 2001 growth rate of 4. Similarly the differences between the Airbus forecasts made before and after 11 September 2001 represented just one year’s traffic growth.2). Boeing.2).2 Average annual pax-km forecasts of main regional flows. primarily driven by economic growth and Average annual pax-km growth (%) 6 5 4 3 2 1 0 Intra-North Europe–North Intra-Europe Europe– America America Asia/Pacific North America– Asia/Pacific Total Figure 10.8). therefore is that global passenger numbers will grow at around 4 per cent per annum. 268 . particularly in developing areas of the world. 2002. although clearly it was not foreseen that there would be continued volatily well in 2003 due to terrorism and other threats (Table 10.5 per cent. Boeing predicts that the relatively mature North Atlantic market will grow by only 3. These forecasts also did not take into account any physical or environmental constraints that might may occur (IATA. Therefore in the long-term the impact of these terrorist attacks was forecast to be fairly small. Air freight demand is. perhaps somewhat optimistic view. will continue to play a major role in shaping the growth of passenger demand. may actually encourage more global trade and act as a complement to air travel rather than as a substitute.7 per cent per annum (Figure 10. Elsewhere. The general. Economic growth. particularly within the United States and Europe. Such links.

partly due to the high growth of the express sector and partly because the current bellyhold capacity of passenger aircraft is insufficient. These freight aircraft are increasingly likely to use uncongested hubs with no environmental restrictions – particularly at night – but such hubs may be more difficult to find in the future! In most cases it is passenger growth that drives airport development. The shortage of airport capacity in Asia is currently not too serious an issue due to the recent opening of new airports in. Airports lack this flexibility. and pharmaceuticals are the most international and are heavily reliant on air travel for the transportation of their high-value/low-weight products. admittedly. Macau. Higher growth is generally expected because of globalization trends that have led to increased reliance on global components and products that need to be transported around the world. Increasing reliance on just in-time inventory systems favours air freight. such as Africa and Middle East. This has put further pressures on the already congested runways at many airports. Airlines are much more capable than airports of adapting to market growth by redistributing capacity across the networks. and Milan are the only examples. lack of sufficient airport capacity is not usually a major problem. has meant that the average aircraft size has not increased substantially since the early 1980s. The new Athens airport opened in 2001 and the expanded airport in Berlin-Schonefeld may be ready for operation in the late 2000s. It can take years for airports to gain approval and then to build new infrastructure. advanced wake vortex technologies and arrivals and departure management systems. could optimize traffic flow in and out 269 . competitive pressures and the rapid growth of low-cost carriers. A number of privatizations in South America should enable greater investment in this region. The consequences are growing congestion and delays although. A new airport to serve Mexico City is planned although there have been problems in selecting the most suitable site. In the remaining areas of the world. In spite of this. E-commerce has also brought substantial reductions in the distribution costs of air freight and increased demand for the integrators and the express mail sector. communications. Munich. this is seen as a major hurdle to achieving the full benefits of a deregulated market. Shanghai. The proportion of freight carried on all-freight flights is likely to increase. or even by adding extra aircraft to the fleet. New airports are also planned for China. Denver. and Kuala Lumpur. some of these difficulties could potentially be reduced through greater ATC co-ordination and harmonization. Even if there is a gradual slow-down in the rate of growth in certain passengers markets. The overstretched airport infrastructure in Europe and North America has been afforded some temporary breathing space by the fall in demand due to the events such as 11 September 2001 but capacity problems still remain. In Europe. Very few new airports or fully expanded airports have been built in the United States or Europe in 1990s.The impact of 11 September 2001 and future prospects travel cost – as well as international trade. for example. Technical improvements at the airport. the sheer volume of traffic at many airports means that even relatively small growth rates still produce large increases in the absolute number of air passengers. Hong Kong. The London Heathrow Terminal 5 inquiry in the late 1990s in the United Kingdom lasted more than 4 years and was one of the longest planning enquiries in UK history. Oslo. Bangkok. electronics. Plans for a new airport in Lisbon or an offshore airport in Amsterdam have been put on hold. increasingly by sharing capacity with alliance members. The rapidly expanding knowledge-based industrial sectors such as computing. and Bangalore. typically using relatively small aircraft types. Seoul. for example.

Beyond the crisis: The impact on airlines and airports. References and further reading ACI-Europe (2002). Airline Business. Press release. Travel and Tourism Analyst. Behnke. Financing civil aviation security costs in Europe.Managing Airports of the airport. D. January–December. Global market forecast. as experienced at Amsterdam. BAA (2002). which are increasingly being driven by private sector concerns. 7. The scheduled airlines seek greater capacity and have evolving needs as they continue to restructure themselves into global alliances. J. 25–8. Issue 1. The environmentalists want greater protection of the environment and society. (2002). The Aviation and Transportation Security Act: The law and its Implementation. Market outlook. Current market outlook. Secondary and regional airports could also take some of the growth away from major airports as could high-speed rail. Airport security – A review of passenger processes. Governments want to guarantee. December. In the short term a more effective slot allocation process might alleviate some of the capacity bottlenecks. 46–8. 270 . airport operators have a challenging time ahead. Airline Business. H. (2002). and that the solution is to constrain growth. P. Boeing. February. the problem of capacity shortages at major airports is not going to disappear. there are the financial demands from the airport owners or shareholders. Airbus (2002). that airports are not abusing their considerable market power. Farmer. (2002). They are confronted with conflicting demands from their different stakeholders. will make it more and more difficult to provide additional airport capacity. 20 March. Airline Business (2002a). March. Bacon. 1–25. Airline Business. In conclusion. International Airport Review. Field. ACI Europe. Airbus. This book has considered all these important interrelated issues and has aimed to provide some insight into how airport operators might address the challenges of the future. Growing pressures for greater sustainability and environmental capacity constraints. March. Then. BAA Easter getaway and security awareness campaign. (2002). Airport World. Low-cost airlines and freight operators have other requirements. 7(1). Cruz. Airline Business (2002b). Baker. State of the industry report. It is a difficult problem balancing out the needs for quality of life and sustainability against desires for greater mobility. AAAE/ACI-NA Legislative Affairs Issue Brief. The more extreme environmentalists will argue that there is no way that the potential demand for air transport in the future should be met. Passenger expectations in terms of service quality is rising. A. (2002). ACI-North America (2002). 38–42. In the long term. C. June. US security: Uncertain world. (2002). Out of the ashes. Economic Impact. University of Westminster/Cranfield University Airport Economics and Finance Symposium. 1. R. (2002). Simplifying passenger travel: Heathrow’s expedited arrivals trial. however. perhaps through regulation. Regional authorities want to ensure that airports generate maximum economic benefits. Boeing (2002). Charges comment. of course. ACI-NA. Airline Business. Doganis.

The impact of 11 September 2001 and future prospects Frank-Keyes. GAO. February. IATA (2002). Neubauer. US security catches up. European Transport Conference. The effectiveness of America’s emergency airport security legislation. (2002). April. International Airport Review. Issue 34. E-communique. 72–4. Insuring against the unthinkable again: Eurotime or Globaltime. Wall Street Journal. May. Using airport grant funds for security has affected some development projects. October. D. 3. ICAO set new security standards. 45–8. Power. 271 . Communique Airport Business. (2003). Airline fees only scrape surface of the TSA’s needs. 12–13. Jane’s Airport Review (2002a). No. October. Airline Business. 6 February. R. Jane’s Airport Review (2002b). (2002). 18. IRMS News. (2002). R. J. Issue 3. A. Lanza. Iris recognition passenger service fully operational at Amsterdam Airport Schiphol. General Accounting Office (2002). Graham. May. C. (2002). Pinkham. Insurance: at odds. Cambridge. S. The crisis in air transport and the future structure of European airlines and airports. and Dennis. September. (2002).

7. 55. 258 aeronautical charging policy. 3. 47. 266 Airport branding. 24. 61. 215 Auckland airport. 24. 163–5 A Aer Rianta. 208. 24. 260 Airport product. 69. 102. 21. 11. 9. 102–3 landing charges. 262. 172. 60. 26. 99. 33. 74. 26. 17. 33. 81. 118. 54. 154. 236 Airport use agreements. 31–4 regulation. 43. 120. 44 see also TBI Amsterdam airport/Schiphol. 81. 19. 151. 68. 48. 108–10 international retailer. 101. 189. 183. 185–7 Airport surface access strategy (ASAC). 106. 194. 100–1. 4. 104. 258 Australian airports. 56. 160. 189–92 emission charges. 264. 21. 34. 3. 18. 102–3 fuel taxes. 258. 23. 38–41 Argentinean airports. 150. 100. 34. 186. 256.Index 11 September. 39. 43. 34. 223 passenger charges. 165–7 see also Dublin airport Aeronautical charges: discount charges. 22. 164. 99–101 noise charges. 47–8. 17. 92. 119. 25. 37. 154. 162. 180–2 Airport Improvement Program (AIP). 86. 98. 43. 108. 37. 159. 89–91 . 236. 221–2 Airline alliances. 17. 130. 251–3 airport financial performance. 118 Athens airport. 14. 267–9 Aircraft chapter classifications. 2001. 27. 108–10. 187 Airport competition. 41. 101–2 peak charges. 76. 50. 260. 6. 18. 20. 65. 18. 199. 161. 64 Airport transport forum (ATF). 4. 266 Airport alliances. 120. 35. 261. 263. 141. 101. 129–30 Airports Group International (AGI). 141 privatization process. 55. 21. 22. 48. 100–1. 33. 266. 255–9 airport traffic. 269 Impact on: aeronautical charges. 48. 257. 108. 107–8 Air transport forecasts. 268. 253–5 commercial income. 152. 265. 36. 123. 145. 143. 27. 236 Airport throughout unit (ATU). 153. 246–8 global company. 269 Atlanta airport. 26–8. 15. 225–6 ground handling charges. 263 environmental capacity. 226–7 fuel charges. 267. 25. 188. 69. 109. 46. 158. 174. 69. 162. 99. 118–20 service quality. 151. 110. 106 airline industry.

32. 155. 18. 238 Economic development and airports. 6. 122. 58. 9. 119 Aviation and Transportation Security Act (ATSA). 161. 108. 26. 86. 37. 142. 198. 33. 67. 106. 18. 22. 99. 69. 81. 99. 86. 174. 264 C Canadian airports. 158 loss of EU sales. 42. 22. 68. 65 Environmental capacity. 223. 208. 30. 215. 159. 257. 224–8. 19. 156. 159. 149. 122. 269 Biometric testing. 233. 254. 20. 181 Berlin airports. 42 Commercial revenues: branding. 41. 107. 153–4 geographical trends. 10. 42. 29. 37. 179. 20. 258 Duty and tax free sales: history. 245–8 Environmental impact assessment (EIA). 17. 5. 165. 66. 212–15 Emissions. 107. 32. 146–9 reasons for growth. 10. 29. 17. 118. 264 non-aeronautical strategies. 143. 255. 18. 8. 58. 18. 262 environmental practice. 215. 69. 39 D Data envelopment analysis (DEA). 253. 29. 254. 17. 263 Catchment area. 164. 215 Eurohub. 30. 164. 36. 83 see also London airports Balanced approach to noise. 263 Brussels airports. 46. 31. 17. 212. 235. 162. 133. 91. 42. 234. 90. 206–8 Dubai airport. 9. 26. tax. 258. 170. 158–63 E East Midlands airport. 23. 259. 141. 120. 46. 180. 263 Chinese. 37. 102. 157. 71 Delays. 9. 160. 89. 253. 17. 145. 259. 33. 18. 258. 148. 23. 81. 101. 263 Chicago airport. 20. 210. 163. 57. 255. 25. 147. 156. 209. 39. 257. 100. 18. 112. 40. 87. 89. 21. 56. 22. 257. 119. 162. 111. 232. 67. 4. 239. 42 Brisbane airport. 42. 71 Eco Management and Audit Scheme (EMAS). 158. 243–5 B BAA. 169 regulation. 198 British Airways. 179 Earning before interest and tax (EBIT). 207. 258. 197. 198. 109. 239. 262 see also Aer Rianta Dusseldorf airport. 55. 163. 27. 240. 230. 93. 168. 42. 151. 27. 87. 166. 33. 23. 110. 78. 28. 255. 159. 37. 122. 161. 4. 33. 5. 78. 99. 85–8 Direct economic impacts. 195. 67. 59. 17. 258 Earnings before interest. 261. 184 273 . 198. 171. 48. 172–3 Dublin airport. 85. 133. 253. 30. 164.Index Australian Competition and Consumer Commission. 161. 181. 68. 92. 241 Environmental impact statement (EIS). 149–50 concession contracts. 122. 238 Enterprise Value (EV). 48. 269 Cintra. 66. 27. 143. 22. 79–80. 44. 8. 161. 108. 133. 263–4 Birmingham airport. 214. 163. 164. 39. 159. 159. 167. 194. 68. 160. 142. 140–2 type of customer. 258. 162. 104. 58. 49. 70. 192. 90. 99. 30. 238. 117–19 retail approach. 105. 21. 26. depreciation and amortization (EBITDA). 69. 30. 25. 206. 65. 214. 174. 260. 161. 22. 31. 5. 216 Bristol airport. 19. 253. 22. 70. 181. 191. 57. 58. 166. 152. 106. 164. 101. 69. 131. 18. 69. 60. 29. 154. 220. 68. 163. 55. 42. 22. 88. 222 Bangkok airport. 21. 181. 269 Basel-Mulhouse airport. 191. 187. 187. 81. 58. 82. 29. 22. 55. 118. 3. 6. 31. 106. 89. 18. 61. 254. 5. 211. 262 Build-operate-transfer. 148. 66. 8. 24. 210. 255. 65. 81. 239 Equitime. 25. 116. 17. 102. 225. 179. 221. 102. 151. 17. 153. 44. 172. 24. 31. 25. 224. 167. 181. 187 Belfast airports. 29. 207. 262 quality of service monitor (QSM). 29. 65. 34. 87. 101. 142–6 Copenhagen airport. 229. 168–73 service level agreements. 31. 122.

4. 264 H Harrisburg airport. 22. 75. 264 J Japanese airports. 31. 208. 59. 86. 215. 44. 6. 18. 257. 141. 27. 5. 164. 238. 191. 31. 59. 78. 5. 181. 37. 118. 240–3 regulation. 127. 117. 87. 181. 165. 18. 188. 196. 181. 59. 105. 187. 110. 163. 70. 255. 181. 236. 129. 55. 75. 254. 133. 90. 101. 55. 200 catchment area. 196. 57. 17. 185. 181. 89. 182. 104. 262 agreement with airlines. 165. 150. 6. 163. 258. 197 London City airport. 211. 10. 5. 262. 155. 66. 17. 226. 17. 128. 48. 132. 180. 47. 145. 10. 197. 174. 214. 256. 191. 105. 152. 130. 69. 236. 27. 26. 8. 259. 21. 231. 101. 164. 69. 80. 164. 187. 69. 232. 26. 37. 122. 60. 18. 22. 269 London Luton airport. 115. 28. 32. 81. 105. 261 Indirect/induced economic impacts. 233. 83. 258 Global airport companies: globalization rationale. 118. 42. 37 I IATA schedule co-ordination conference. 146. 99. 70. 110. 127–8 EU regulation of slot allocation. 55. 49. 236. 157. 41. 24. 67. 208. 45 Globaltime. 17. 46. 71. 258 G Geneva airport. 193–5 Marketing to travel agents. 49 impact on passengers. 195. 25. 261. 269 M Madrid airport. 11. 216. 209. 17. 30. 186. 101 Indianapolis airport. 239. 58. 158. 232. 5. 148. 92. 18. 105. 69. 9. 31. 92–3. 207. 145. 255. 159. 68. 238 ISO 9000/9001/9002/9003. 5. 210. 148. 174. 162. 129. 160 Eurotime. 29. 28. 231. 102. 31. 223. 167 Hong Kong airport. 179. 159. 4. 229.Index EU ground handling directive. 181. 45–7 impact on airlines. 229. 122. 31. 33. 185. 68. 26. 256. 258. 111–12 Internet and e-business. 27. 143. 157. 69. 170. 234. 257. 122. 168. 156. 99. 251 Johannesburg airport. 256. 223. 25. 27. 263. 84. 264 Frankfurt airport/Fraport. 78. 150. 107. 8. 158. 99. 163. 215. 87. 117. 151. 257. 262 Majority in interest clause (MII). 193. 181. 6. 33. 159. 188–92 Marketing to passengers. 207. 215. 29. 102. 196. 81. 207. 6. 101. 208. 111. 4. 67. 184. 255. 88. 200. 159 F Federal Airports Corporation (FAC). 197. 162. 142. 196–7 London Gatwick airport. 101. 34 Federal Aviation Administration (FAA). 19. 67. 194 ISO 14001. 106. 180. 22. 126 European Travel Research Foundation. 58. 26. 159. 80. 157. 81. 104. 144. 43. 211. 87. 164. 100. 70. 55. 122. 152. 81. 24. 48. 131–2 Hochtief. 253. 86. 130 Manchester. 41. 30. 102. 34. 28. 118. 30. 20. 257. 208–12 Insurance. 21. 68. 68. 87. 80. 168. 198. 196 Marketing to airlines. 31. 58. 163. 67. 99. 17. 162. 230. 85. 180. 233. 124. 5. 253. 187. 156. 36. 116. 150. 86. 123. 185. 238. 258 London Heathrow airport. 231. 101. 29. 184. 124. 190. 163. 232. 148. 13. 255. 33. 67. 159. 207. 264–5 International regulation of charges. 68. 182. 60. 6. 99. 42. 48. 255. 83. 79. 117–19 Market research. 23. 116. 87. 68. 8. 190. 28. 232. 26. 22. 58. 122. 41. 14. 122. 262 enviromental issues. 144. 193 Mauritius airport. 180. 206. 48 skills needed. 131. 151. 79. 260. 107. 213 London airports. 29. 6. 198. 261. 132. 212. 246 Los Angeles airport. 3. 69. 88. 126. 8. 4. 58. 211. 117. 123. 238 274 . 187. 235. 239. 121–3 Indian airports. 78. 76. 4. 87. 29. 92. 125. 134 L Liverpool airport. 100. 198. 4. 157. 83. 159. 164. 17. 79. 181. 5. 189. 184. 143. 37 High Density US airport rule. 102.

181. 114–15 service quality. 65. 42 New York airports. 30. 43. 69. 158. 231. 208. 106. 82–4 Singapore airport. 106. 187. 23. 26 Pittsburgh. 23. 101. 37. 43. 210. 259. 58. 229. 21. 126. 87. 115–16 reserve. 131. 35. 17. 17. 105. 181. 69. 42. 199–201 S Security. 115 single and dual tills. 90. 10. 55. 261. 257 New York JFK airport. 61–2 Melbourne airport. 181. 100. 118 Southampton. 90. 187. 109. 122. 260. 8. 29. 208. 180. 60. 261 Transportation Security Administration (TSA). 131. 24. 211. 113 regulatory benchmarking. 253. 69. 112. 58. 80. 260 Philippine International Air Terminals Co (PIATCO). 266 global company. 43. 42. 49. 119. 266 N Naples airport. 5. 20–1 R Regulation of airports: price caps. 86. 104. 122. 105. 60. 257. 93. 182. 99. 231. 44. 24. 68. 200 marketing strategies. 122. 24. 55. 207. 105. 55. 4. 86. 211. 220–4 Norwich airport. 5. 105. 39. 55. 25. 145. 26. 231. 148. 46. 152. 26 project finance. 69. 92. 36 Noise impacts. 179. 37. 42. 25. 155. 4. 17. 22. 258. 257. 61. 119. 87–91 Rome/Aeroporti di Roma (AdR). 262 Sydney airport. 3. 78. 230. 130. 129. 34. 68. 88. 214. 150. 254. 170 National Express. 171 Preferred noise route (PNR). 67. 222 T TBI. 258. 29. 133. 89. 22. 10. 19. 269 EIA 239–40 P Pantares. 23. 129. 269 Milan airports. 238. Ryanair. 17. 132. 269 Munich airport. 59. 103. 150. 4. 170 Mexican airports. 4. 32. 103. 81. 42–4 see also AGI Total factor productivity (TFP). 4. 37. 36. 17. 230. 18. 229 Passenger facility charge (PFC). 261. 180 Niagra Falls airport. 37. 18. marketing strategies. 141. 159. 159. 37. 210. 24. 79. 191. 182. 26. 78. 154. 31. 182. 29. 48. 81. 47. 207 Stockholm airport. 87. 258. 43. 231. 46. 179. 252. 104. 255. 69. 105. 200. 180. 23–6 share flotations. 119. 59. 22. 42. 269 Privatization models: concession. 181. 70. 261 275 . 27. 86. 41. 106. 4. 262 Perth airport. 22. 70. 31.Index Measuring economic performance: inter-airport comparisons. 259. 39. 127. 143. 33. 180. 230. 114 revenue yield and tariff baskets. 164. 264 Service level agreements (SLAs). 211. 6. 19–20 trade sales. 65–8 reasons for increased interest. 131. 92. 87. 128. 102. 24. 71. 22. 42. 231. 8. 159. 70. 69. 46. 259. 198. 8. 44. 33. 45. 122. 161. 25. 18. Airport Company South Africa. 17. 224. 36. 198. 68. 20. 193. 49 Paris/Aeroports de Paris (AdP). 182. 214. 262. 87. 146. 215. 262. 174 South African airports. 44. 6. 231. 256. 32. 181 New York La Guardia airport. 9. 42. 39. 158. 77. 41. 170. 252. 261. 81. 264 non-aeronautical strategies. 41. a85. 83. 42. 232. 21. 58. 87. 26. 9. 59. 80. 22. 26. 21–3 management contract. 181. 55. 181. 30. 104. 113–14 rate of return. 262. 5. 197–9 Spanish airports/Aeropuertos Espanoles y Navegacion Aerea (AENA). 21. 264 O Oslo airport. 89. 23. 100. 258. 58. 69. 21. 93. 232. 71 Toyko airport. 232. 148. 36. 101. 69. 156. 101. 93. 192. 99. 149. 22. 159. 36. 87. 5. 5. 21. 255. 162. 41. 22.

10. 261. 210. 188. 216. 81. 41. 171. 118 total quality management. 211 Vienna. 159. 159. 24. 37. 38. 55. 3. 68. 215. 46. 189. 232 276 . 65. 70. 210. 131–2 evolution of an airport business. 37. 49–51 World Duty Free. 71. 59. 130–1 privatization. 127. 93–5 W Washington airports. 163. 152. 56. 17. 18. 67. 37. 5. 257. 26. 211. 254. 25. 131. 99. 258. 148. 22. 143. 169. 69. 24. 161. 8. 122. 17. 122. 150. 215. 223. 102. 41 global concept. 70. 162. 20. 216. 211. 126. 258 Wiggins. 9. 129. 101. 158.Index U US airports. 26. 13–16 regulation. 81. 102. 125. 148. 19. 69. 152. 254. 255. 70. 43. 69. 58. 68. 67. 212. 26. 180. 172 V Vancouver airport (YVRAS). 262 Z Zurich airport. 33. 69. 92. 170. 67. 258 charges. 87. 34–7 slot allocation.

Sign up to vote on this title
UsefulNot useful