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Block 6 Summary Airport Business (AB)
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Summary of all the lectures given during the Airport Business part of the subject Airport Business and Capacity Planning.
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Airport BusinessBlock 6
Week 1: Airport Business Models Lecture by Gert Meijer
One of the definitions of a business model:
‘A business model describes the value an organization offers to various customers and
portrays the capabilities and partners required for creating, marketing, and delivering this
value and relationship capital with the goal of generating profitable and sustainable revenue
streams.’
Objectives this lecture:
- Understanding airports as a business
- What are main business drivers
- What is the link between the various businesses at the airport;
- What are costs related to the business model
- What are the boundary conditions?
Understanding airports as a business
For understanding a business for an airport, multiple elements have to be known, think of:
- Defining the business model of an airport.
- One business or multiple businesses?
- One market or multiple markets?
- One cost structure or multiple cost structures?
From last year we can conclude that an airport is a connection between land based and air
and/or air/air traffic. An airport is a place where infrastructure is based. It is a node in a
worldwide network. The main business areas of an airport are the aeronautical and non-
aeronautical areas and the Airport City development.
Another question of importance is ‘who controls the airport fees and charges?’. Is an airport
allowed to make a profit on airport fees and charges? And what is the role of airlines and
government?
Another element to understand an airport as a business is the cost structure of an airport. This
include maintenance of infrastructure and facilities, depreciation, staff, etc.
Airport Operating Revenue Sources
Aeronautical Non-aeronautical
- Landing fees* - Concessions
- Passenger fees* - Rents
- Aircraft parking fees - Car park**
- Handling fees** - Recharges
- Other aeronautical fees (for gas, water, electricity etc.)
(air traffic control, lighting, - Direct sales
airbridges etc.) (shops, catering and other services
provided by the airport operator)
*These fees are defined by the government - Other non-aeronautical revenue
(IL&T of CAA) and not by the airport itself. (consultancy, visitor and business
It includes the necessary airport services, property development etc.)
investments, inflation and an incentive for
becoming more efficient.
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, Airport Business
Block 6
** if provided by the airport operator
However, there are different views of an airport:
- Runway: landing/take-off aircraft;
- Shopping center with runway;
- Intermodal node;
- Airport city: multi-functional/entertainment park;
- Airport for the region;
- Node in worldwide network.
Another way of understanding the airport as a business is looking at the 4 building blocks of
an airport business:
Block 1: Traffic based revenues
- Aeronautical revenues
- Related non-aeronautical revenues
Block 2: Location based revenues
- Airport city development:
o Real estate.
o Other like tourism, landside commercial activities.
Block 3: Supporting activities or services to stakeholders
- Business areas in the region (SADC-concept)
- Handling and security services
- Dedicated companies i.e. Cargonaut.
Block 4: Investments in other airports or companies.
- For SPL:
o Regional airport in the Netherlands
o JFK IAB, Brisbane Airport, ADP
o Shopping areas at the airports
o …
Block 1 shows traffic based revenues which can be found at any airport with commercial
traffic, this only applies to Block 1. Blocks 2, 3 and 4 will differ per airport and depend on
airport organization, local opportunities and size of airport.
What are main business drivers
‘Business drivers are the key inputs and activities that drive the operational and financial
results of a business. In order to make internal choices about business strategy or build a
financial model to value a company, it is critical to gain a solid understanding of the main
drivers of a business.’
For an airport, important business drivers are the volume (ATM but also number of
passengers) and price. This is because:
Revenue=Volume∗Price
For example, more passengers lead to more ATM, which result in higher aeronautical income
streams and more possibility to develop business models driven by non-aeronautical income.
If you want to investigate business drivers, good questions to ask are:
Define per block what drives business: what parameters drive revenues, costs and risks per
block? What drives traffic-based revenues, costs and risks? How can an airport profit from its
location, what are costs and risks? What are the revenues, costs and risks related to services
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and investments in other businesses? Are business blocks dependent or independent (meaning
that developments of revenues, costs and risks are related to each other or not)?
Major developments in airport business today
Retail declining
- Constant decline of airport shopping revenues due to internet and lack of
differentiation between airport prices/offering and downtown shopping.
- Only food and beverage seem to be increasing
Airport fees and charges under pressure by airline business models
- LCC and FSC try to lower airport fees and charges
- Airport charges today are high percentage of total ticket price for passenger
Capacity shortage demands additional investments
- High investments in infrastructure but no additional traffic.
- Sustainability requires new facilities and operating procedures that are costlier (i.e.
green/solar power, recycling of de-icing fluids, reduction of emissions etc.)
Limited growth due to societal concerns
- Environmental hinder (noise and emissions)
- Reduction of opening hours for operations
- …
Airport Development
An airport has different stages
of airport development. This can
be shown in a pyramid form
below:
The activities
on an airport
are highly
interdependent and will eventually lead
to an airport growth cycle. Which
indicates that an airport will get bigger
and bigger and bigger.
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