Business model for airports under threat, globally
Changes in passenger behaviour will require skilful management by airports
Photo by Duane Daws/Creamer Media
Worldwide, airports are facing a significant challenge to their current business models, S&P Global infrastructure ratings senior director Mar Beltran has warned. The challenge comes from important changes in the behaviour of passengers using their facilities.
Airports have benefitted from a boom in air travel over the past 30 years. This has been driven by airlines cutting costs and reducing prices. Airports have expanded to meet the demand, cut their rates to airlines to attract more carriers, and made up the difference with commercial activities in their terminals.
Low cost carriers, also known as budget airlines, have played a key role in these developments. Today, in Europe, for example, low cost carriers account for 40% of the short-haul air traffic market. And they are now moving into long-range sectors, particularly routes across the North Atlantic.
While these developments have brought much more business to airports, the past two years have seen passengers changing their behaviour at the terminals. They are spending less.
Around the world, sales of duty free and travel retail outlets declined in 2015 and then stabilised at the lower levels in 2016. “This figure is worrisome if we take into account that in the face of this stagnation, the volume of passengers continued on the rise,” he pointed out.
Another important source of income for airports is the car parks they provide. But improved public transport links to airports, and the rise of services like Uber, have reduced the number of passengers driving themselves to airports and parking their cars at the terminals.
On top of this, the medium to long term increase in the number of electric and self-driving cars will add to the challenges. Airports will have to make investments in their parking facilities to meet the requirements of these vehicles (such as battery recharge points).
“We are therefore facing a situation that seems to threaten the [airports’] current business model,” observed Beltran. S&P Global expects the returns of airports around the world to remain stable over the next two years. “However, skilful management of this whole series of changes will be necessary to take advantage of the new business opportunities that now open up.”
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