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Airports in Europe are under growing pressure to become commercial as the drive to full privatisation, as per the UK model, continues to pervade. However, airports’ P&Ls at the point of privatisation differ so vastly across countries and even within countries. France for example has public air traffic control so, unlike the UK, ATC costs are not part of the fixed cost base. Some airports have already received significant historical public funds for expansion and therefore development costs are sunk, and it is easier to achieve profitability. Others require non-public funding for expansion and, worse still, there are often regulatory pressures to invest in, for example, the ever-growing security requirements. Airports thus generally have a very high fixed cost base that has to be covered. Traditionally business aviation has been the unwelcome cousin of the airlines. Their associated aeronautical fees represent lower margins and their passengers pass straight through, without visiting the duty free shops and generating retail, non-aeronautical revenue. However as we shall see, this might turn out to be short-sighted. Let’s take the UK again. It is the one country in Europe with nearly 100% airport privatisation (with the exception of one or at the most two), and experiences some of the highest fixed cost bases anywhere making it perhaps the most challenging country we can consider. Other countries had better take note as they will soon be affected in a similar way. The European Commission made a detailed analysis of UK airport profitability during the 2002 post 9/11 dip and what really stands out is one regional and business aviation UK airport, Bournemouth, has always been profitable, regardless of the number of aircraft movements, despite the notable failure of a regional airline operating out of it. The reason for this is not high landing fees and aeronautical revenues but consistent and predictable non-aeronautical revenues in the form of tenants occupying real estate such as maintenance companies and flying clubs. Furthermore, this airport has freight traffic which allows for the sale and lease of land to freight forwarders and associated companies. Other UK airports by contrast, are less profitable due to their reliance on revenues from aeronautical charges as they are almost exclusively dominated by passenger traffic. This is clear evidence that smaller business airports can become profitable on revenues other than aeronautical and retail (as is the case with larger airports) and do not necessarily require a high throughput of passengers and large aircraft in order to make a profit. But what does all this mean in practice? Firstly, work needs to be done with local government. Our analysis of Germany shows how, in some regions, the local government wishes to stimulate the economy but the building of large airports is not always within local government budgets. It is precisely these regions that are ideal for small business aviation airports to serve these communities. Existing government aerodromes can be converted to civilian use with far less investment and then privatised, in line both with shrinking public defence budgets and current economic factors catalysing a state’s desire to privatise. Also, airports must work with local governments to demonstrate the economic value business aviation brings and one need only refer to the famous 2008 PWC study for the evidence of this. The French have been particularly effective at this in Europe and may be used as a case study, even though their airports are largely still state-owned. Next, airports also need to focus their attention on the end-user. ThyssenKrupp is just one example of a company whose move from Düsseldorf to a location close to a bizav airport was influenced by business aviation availability for their own travel requirements. This again points to the possibility of achieving profitability for business airports through real estate, whilst benefiting business and the local economy. The Airports Council International Europe illustrates how there are already airports with available land that are developing business parks to capitalise on the attractiveness of air service connectivity. These are not only for companies that use the airport directly but may also be non-aviation related companies that make extensive use of air transport. Cork, Hamburg, Nice and the “Aviapolis” development at Helsinki airport are prime examples but again, local government engagement and approval is paramount. The final step is to ensure seamless integration of airport and operator planning. By accessing current operators’ historic data, airports should be better able to plan their capacity and ensure that no business is turned away unnecessarily. Without integrated software this task is manually intense, as integrated technology solutions are not yet in existence – however it is only a matter of time before these become available. It is worth repeating our mantra that the close collaboration and detailed mutual understanding of all components in the value chain is critical in ensuring the success that the part, contributes to the success of the whole – airport innovation is as important as innovation in the operators themselves, and operators have to work with airports if they are to be successful.
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