Airport World - Patrick Lucas and Dimitri Coll
ACI World’s vice president and chief economist, Patrick Lucas, and vice president for airport customer experience, Dimitri Coll, remind us of the economic challenges facing small airports and how enhancing customer service can boost revenues.
Airports are asset-intensive businesses that require large investments just to accommodate a single aircraft landing. They must achieve a critical mass before they can start recovering these large investments in infrastructure and their operating costs to reach profitability.
However, the majority of airports across the globe are small. In pre-pandemic times, as much as 90% of the world’s airports had fewer than five million passengers (in 2019) on a per airport basis. And airports that serve smaller markets tend to have higher overall unit costs on a per-passenger basis.
The economics of airport infrastructure is such that average total costs decline with an increase in market size up to a point – this refers to economies of scale. As such, a significant proportion of smaller airports operate at a loss. This challenge was only exacerbated through the pandemic.
Based on data from the ACI Airport Economics Survey, 97% of airports that have fewer than one million passengers operated at a loss in 2019. The propensity to reach profitability increases with airport size thereafter.
The reason smaller airports remain in operation hinges on the fact that they contribute to the local, social, and economic development of their surrounding communities. Because of the positive externalities that they generate, government intervention in the form of subsidies
or grants helps to cover the shortfall or deficits.
