Aci (2). Europe’s airports report strong growth
But rising costs and emerging risks
Brussels becomes the Global meeting point for the airport industry this week, as the joint ACI EUROPE & WORLD Annual Congress & General Assemblies takes place today & tomorrow, hosted by Brussels Airport. This morning, ACI EUROPE addressed the immediate and longer-term outlooks for its 500-strong airport membership spanning 45 countries.
Air traffic developments and airport experience
Europe’s airports welcomed more than 2.23 billion passengers in 2017 – an absolute record. Over the past 5 years alone, an additional 513 million passengers have passed through their doors. Demand this year remains strong, with passenger volumes having expanded by +6.9% since January.
Market (IM)maturity… but fading momentum
Passenger traffic at Europe’s airports is set to more than double by 2040 (+108%), driven by new fundamentals. These include changing consumer behaviours on the back of the emergence of ultra-mobile Millennials and affluent & healthy retired baby boomers - as well as rising inbound demand from emerging markets (the new Global middle class) and new aircraft technology enabling direct connectivity developments.
Financial performance and increasing costs
The financial performance of Europe’s airports has kept improving, with the industry’s return on invested capital (ROIC) standing at +8.5% - up from +5.1% back in 2011. However, EU airports keep underperforming (+7.1%) their peers in other regions, even more so when compared to airports in emerging markets (+10%).
The key improving factors have been efficiencies and cost reduction – not revenue growth. These have pushed operating costs per passenger down by an impressive -17.8% since 2011, a reflection of increasing competitive and shareholder pressure.
Challenges to airports' business model
Looking at revenues, airports are also facing a new reality. The fact that Low Cost Carriers are driving traffic growth comes with significant pressure on aeronautical revenues (airport charges). The convergence of airlines business models (hybridization) and consolidation will only reinforce these competitive pressures – including for larger airports.
But airports’ commercial revenues (from retail, food & beverage, real estate, parking, car rental and advertising) are also under threat. The combination of less affluent but more frequent travelers, endless online retail & advertising competition, restrictive airline cabin-bag policies and shared urban mobility are all combining to dilute these revenues. Since 2011, airports commercial revenues per passenger have fallen by -4.8%.
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