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ACI airport economics survey 2010

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17-Dec-2010 ACI Director General Angela Gittens announced the annual airport economics survey results today. ACI compiles the financial performance report based on the input from its membership.

Gittens announced the findings, "As background on the financial results in 2009, it is important to consider the traffic trends during the reporting period. The first quarter of 2009 represented the peak of the crisis for air travel with a 9 percent decline in passengers and 20 percent decline in air freight. Results were improving steadily over the following quarters and the year wound up with 3.5 percent growth in the fourth quarter. Overall, the airport industry concluded the year 2009 with a 2 percent decline in global passenger numbers and a more severe 8 percent drop in air freight."

This 15th edition of the ACI Airport Economics Survey presents airport data and analysis for the financial year 2009 / 2010, based on ACI member input through a survey conducted in 2010 (2nd and 3rd quarter). The survey drew a strong response from 646 airports that together handled 3.23 billion passengers or about 67.5 percent of worldwide traffic in 2009, thus providing unique and comprehensive insights into the economics and finances of airports around the world.

Revenues

Worldwide total airport income in 2009, based on ACI extrapolation from the survey results, reached USD 95 billion, including an estimated USD 4.3 billion revenue for the Middle East. Compared to the income reported in 2008, industry revenue declined by roughly 2 percent in 2009. Aeronautical revenues worldwide declined by 2.5 percent while non-aeronautical revenue sources generated around 1.5 percent less revenue when compared to 2008.

The global airport industry generated USD 51 billion in aeronautical revenues in 2009 (including ground handling). Aeronautical revenue from passenger and airline user charges accounted for 53.5 percent of industry-wide income, a slightly lower proportion than 2008. Non-aeronautical revenues worldwide made up 46.5 percent of industry revenue in 2009, including non-operating income of USD 5.7 billion (6% of total income).

While non-aeronautical revenues overall declined by 1.5 percent worldwide relative to 2008 figures, revenues from the core commercial areas rose by 3 percent in 2009, driven by retail (+2%), real estate (+10%), car rental concessions (+9%) and Food & Beverage (+7%). Car parking (-3.5%) and advertising (-11%) revenues dropped. Performance in the retail and real estate sector underscore the resilience of the airport business model and helped to protect the bottom line of many airports in a difficult year.

Gittens commented, 'Non-aeronautical revenues are a vital component in the economics of airports. During the downturn the diversification of airport revenues cushioned the impact of lower passenger and freight volumes. Non-aeronautical revenues critically determine the financial viability of an airport as they tend to generate higher profit margins than aeronautical activities, which are typically cost recovery only, or operate at a deficit'.

Operating expenses

Airports worldwide in 2009 incurred operating expenses in the amount of USD 57 billion or 60 percent of revenues. The largest expense item reported was personnel cost, accounting for 39.5 percent of operating expenses, followed by contracted services (outsourcing cost to third parties) as the second biggest cost item at 23 percent of total operating cost.

Capital Expenditure

Capital expenditure at airports worldwide was almost 20 percent lower than predicted for 2009, with USD 34.6 billion spent on airport upgrades or expansions of existing airport infrastructure. These figures do not include new (greenfield) airports, nor do they include capital investment in the Middle East and China, where significant amounts of capital are invested, (to a large a degree in new airports). The lower numbers are a result of the global financial crisis which led to comprehensive reassessment of projects and tighter lending practices by banks delaying or reducing capital projects.

For 2010, airports expect capital expenditure to rise by 11 percent to USD 38.5 billion.

Capital Costs:In 2009, capital costs industry-wide (including depreciation) amounted to USD 29.5 billion or 31 percent of total revenue. 40 percent of that cost is for interest while the remainder constitutes depreciation. Of the 646 airports reporting, 165 airports (25%) made a net loss in 2009. By contrast, looking at operating results only (EBITDA), 35 airports (5%) did not operate profitably.

For long term debt (financial liabilities with a maturity of more than one year), based on two years of data, ACI revised its calculation of global airport industry debt upwards from USD 240 billion to USD 280 billion. This means that industry debt is three times higher than annual industry revenues.

Outlook

The outlook on 2010 financial performance of the airport industry is positive. Global passenger numbers are expected to rise by 6 percent in 2010 while freight volumes will increase by over 15 percent. 2010 turned out a much better year than expected as GDPs expanded robustly and unemployment did not exacerbate the situation.

Consumer and business confidence is positive and the propensity to travel remains high. Demand for premium travel has returned as companies make profits once again.

Profitable airlines, optimistic consumers and growing economies will be the ingredients of the foreseeable future and support a positive outlook. Yet airports are challenged to look ahead five, ten, twenty years and guess what the right airport needs to look like. That means vision, risk and investment. Airbus in early December 2010 predicted that the global commercial aircraft fleet will double within 20 years. ACI forecasts global passenger numbers to exceed 10 billion passengers during the same period. Airports are the cornerstone of that growth and will be pushed hard to deliver the infrastructure to enable expansion in an efficient and qualitative way.