Top Advocacy Areas for Airport Economics
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1. Economic Regulation and Airport Charges
Airports have transitioned from public infrastructure entities to autonomous businesses. Governments must support the airport business by ensuring greater flexibility in developing diverse revenue portfolios. Through light-handed, consistent, and transparent models of economic oversight, fertile grounds for investment in airport infrastructure are created, enabling the diversification of revenues.
Airports generate revenues primarily from two sources: aeronautical activities and non-aeronautical (commercial) activities. Aeronautical charges, levied on passengers and aircraft operators for the use of airport facilities, are vital for infrastructure development and ongoing operations. Airport charge policies need to evolve in favor of passengers who are central to the aviation ecosystem and traffic development. Commercial revenues come from non-aeronautical activities, such as rents charged to concessionaires offering services like car parks, retail, banking, advertising, and car rental facilities on airport sites.
Airports levy various charges to fund the provision, operation, and development of airport facilities and services. These charges enable operators to manage and plan for infrastructure that meets both current and future air transport demand. Pre-funding airport projects through user charges is a significant financing source for long-term, large-scale investments. These investments, aimed at expanding airport capacity, ensure better access to air travel and foster competition, benefiting consumers by enhancing service quality.
Aircraft operators typically pay for using airside infrastructure (including runways, taxiways, aprons, parking stands, and airbridges), while passengers pay for using passenger processing facilities (terminals, ground access to terminals, and security services). Airports should have the freedom to develop and customize charge structures and levels according to their specific circumstances, creating targeted pricing strategies that align with competitive and market situations. By implementing market-responsive pricing mechanisms and incentive schemes, airports can fund capital investment needs more effectively, manage existing capacity efficiently, and increase connectivity.
Noise and emissions from airport activities may impact surrounding communities. Although many stakeholders in the air transport ecosystem are responsible for these effects, airports have a prime responsibility in managing externalities. Modulating airport charges to stimulate efficient and environmentally conscious operations can support decarbonization efforts, implemented or considered in several jurisdictions.
2. Ownership and Management Models and Private Investment
Airport ownership and management models vary, with some airports operating as individual entities and others within an urban agglomeration or municipality part of an airport system under a single management structure. Additionally, airport networks have emerged as a viable business model, sustaining smaller, potentially loss-making airports at the national or sub-national level. Operators of airport networks should have the flexibility to determine the most suitable charging system to recover costs, generate returns, and ensure sustainable operations for smaller airports within the network.
Furthermore, an airport group refers to a company that operates or has a controlling interest in a portfolio of airports or airport networks. This model is not mutually exclusive from other management structures and has increasingly played a significant role in the industry over the last few decades, making a substantial contribution to the global economy.
Considering the global need to finance new airport infrastructure and the energy transition, airports should be permitted to operate under a wide range of ownership models. States have the responsibility to incentivize continuous investment in the airport sector. ACI maintains a neutral position on airport ownership; however, if government spending cannot be relied upon, there is increasing recognition and evidence of the value created by private investment in airports worldwide. Private investment can be incentivized through stable, predictable, and consistent legal frameworks. Moreover, the ability to recover costs and generate a return commensurate with the risk throughout the term or contractual period, as well as the application of dual till arrangements, remain vital tenets to incentivize such investments.
3. Transparency, Consultation, and Risk-Sharing
Effective consultation with airline users is essential for developing airport user charges. All involved parties have a responsibility to actively and constructively engage in the consultation process, as reciprocity is essential for success. Both airport operators and airport users should be committed to sharing relevant information with each other.
Airport operators should maintain their autonomy to set charges, considering feedback provided by airlines during the consultation process to the maximum extent possible. Although reaching a consensus with users on airport charges is desirable whenever feasible, consultation does not equate to negotiation. Unless stipulated otherwise, there is typically no legal obligation to reach an agreement with airlines, and airport operators are usually entitled to introduce charges even without agreement.
It is the role of the airport operator to decide on the traffic opportunity and risk it can face based on consultations with users. In some cases, traffic risk-sharing mechanisms can be incorporated into multi-year pricing periods for regulated airports, calibrated to ensure incentives for airports to pursue growth while safeguarding them from being undercompensated for their investments and ensuring protection for users from certain risks. Airport operators and aircraft operators may negotiate bilateral commercial agreements and contracts. This fosters a longer-term vision among air transport partners to incentivize traffic growth, defines triggers for various charging schemes, and establishes risk-sharing mechanisms that mitigate significant changes in traffic patterns, among other areas. Such agreements, subject to competition law in many jurisdictions, typically adhere to transparency and non-discrimination principles. They have proven successful in numerous jurisdictions and continue to grow in importance as they aim to manage risks in a mutually beneficial manner. Considering lessons learned from the COVID-19 pandemic, states should allow bilateral commercial agreements if proposed by the airport, as well as similar alternative forms of economic oversight.
4. Non-Aeronautical Revenue Development
Airports aim to diversify revenue streams beyond existing channels, with non-aeronautical revenues continuing to play a prominent role in airport income. Different sources take leading positions across jurisdictions, usually depending on passenger traffic profiles. To generate non-aeronautical revenues in areas such as retail or food and beverage services, the passenger experience and dwell time play an important role. This should be considered when planning capacity development. Airports should seek opportunities to solidify non-aeronautical revenues by leveraging digital transformation and technological advancements for seamless transactions, improved efficiencies, and enhanced customer experience.
Diversifying airport revenue streams and broadening the scope of non-aeronautical activities help provide airport operators with an additional cushion amid an economic downturn. This includes fostering the development of on-arrival duty and tax-free sales. ACI urges airports to develop non-aeronautical revenues to the maximum extent possible, generating value for passengers and other stakeholders and ensuring the financial stability and growth of airport operations. ACI's advocacy mission includes promoting the importance of non-aeronautical revenue development as a key component of airport economics. ACI works with regulatory bodies, governments, and industry stakeholders to create an environment that supports the growth of non-aeronautical revenues. This involves pushing for policies that provide airports with the autonomy to explore new commercial opportunities and to enhance passenger services. By championing these initiatives, ACI aims to ensure that airports can maximize their revenue potential, ultimately benefiting passengers, airlines, and the broader aviation ecosystem.
5. Liberalization, Connectivity, and Traffic Growth
The liberalization of air transport, involving the relaxation of rules and regulations governing air carrier ownership, control, and market access, is a prerequisite for airport traffic growth. Airports naturally strive to attract and increase traffic, as it helps offset the costs of providing aeronautical facilities and services to airlines while boosting commercial revenues. Consequently, airports advocate for the liberalization of air transport, as it promotes sectoral growth on a solid economic foundation and fosters both local and global socio-economic development.
Liberalization tends to increase competition, resulting in reduced travel costs and a wider range of choices for consumers. Moreover, it leads to greater and better connectivity, enhancing access to various destinations. This improved connectivity supports economic integration, tourism, and business activities, benefiting not only the airports and airlines but also the broader economy. Enhanced connectivity through liberalization facilitates seamless travel experiences, strengthens international relationships, and provides passengers with more options and flexibility in their travel plans. Thus, liberalization is a critical driver for achieving a robust, competitive, and interconnected air transport system.
6. Taxation
The proliferation of various taxes and duties on airports, passengers, and air transport, as well as disproportionate or unwarranted airport concession fees and rents to governments, represent an impediment to air transport. Only justifiable, equitable, and non-discriminatory taxes on airports, passengers, and air transport are acceptable, as others can engender negative economic impacts, hindering the sustainable development of airports and air transport. It is also important to clarify that the airport industry is not opposed to taxation per se, but rather to taxes imposed solely on aviation and used for non-aviation purposes. Any revenue generated from taxes applied to passengers and air transport specifically should be earmarked and used for the aviation sector.
The airport industry is particularly concerned by the intentional confounding of passenger taxes and user charges. Although the latter are designed specifically to recover the cost of providing airport facilities and services to users, the former do not follow the same principle but rather increase the cost of travel in an arbitrary manner and may pose risks to the development of air transport and the associated economic benefits.
7. Consumer Protection
The aviation industry bears the responsibility of meeting the needs of consumers by upholding the terms of the contract of carriage between airlines and air passengers. ACI recognizes the importance of fulfilling this commitment and supports established consumer protection frameworks at both global and jurisdictional levels. For instance, the Airport Service Quality (ASQ) program serves as a robust oversight mechanism for monitoring the service quality provided to passengers. This program allows for a thorough examination of service quality levels at airports and has proven to be a valuable monitoring tool for both airport operators and aviation oversight authorities worldwide.
ACI encourages airports to maintain and develop the highest level of service quality for passengers and other customers. This commitment to excellence involves continuous investment in infrastructure, technology, and staff training to ensure a seamless and enjoyable travel experience. Airports are urged to adopt best practices and innovative solutions to meet the evolving needs of passengers, from efficient check-in and security processes to high-quality amenities and customer service. By prioritizing passenger satisfaction
