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Managing Airports Butterworth-Heinemann an Imprint of Elsevier Linacre House, Jordan Hill, Oxford OX2 8DP 200 Wheeler Road, Burlington MA 01803 Managing Airports Butterworth-Heinemann An imprint of Elsevier Linacre House, Jordan Hill, Oxford OX2 8DP 200 Wheeler Road, Burlington MA 01803 First published 2001 Reprinted 2002 Second edition 2003 Copyright © 2001, 2003, Dr Anne Graham. All rights reserved The right of Dr Anne Graham to be identified as the author of this work has been asserted in accordance with the Copyright, Designs and Patents Act 1988. No part of this publication may be reproduced in any material form (including photocopying or storing in any medium by electronic means and whether or not transiently or incidentally to some other use of this publication) without the written permission of the copyright holder except in accordance with the provisions of the Copyright, Designs and Patents Act 1988 or under the terms of a licence issued by the Copyright Licensing Agency Ltd, 90 Tottenham Court Road, London, England W1T 4LP. Applications for the copyright holder’s written permission to reproduce any part of this publication should be addressed to the publisher Permissions may be sought directly from Elsevier’s Science and Technology Rights Department in Oxford, UK: phone: (+44) (0) 1865 843830; fax: (+44) (0) 1865 853333; e-mail: [email protected]. You may also complete your request on-line via the Elsevier homepage (http://www.elsevier.com), by selecting ‘Customer Support’ and then ‘Obtaining Permissions’ British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloguing in Publication Data A catalogue record for this book is available from the Library of Congress ISBN 0 7506 5917 3 For information on all Butterworth-Heinemann publications visit our website at www.bh.com Typeset by Newgen Imaging Systems (P) Ltd, Chennai, India Printed and bound in Great Britain Managing Airports An international perspective Second edition Anne Graham AMSTERDAM BOSTON HEIDELBERG LONDON NEW YORK OXFORD PARIS SAN DIEGO SAN FRANCISCO SINGAPORE SYDNEY TOKYO Contents List of figures vii List of tables ix Preface xii Acknowledgements xiii Abbreviations xv 1 Introduction 1 2 The changing nature of airports 8 Traditional airport ownership and management 8 Moves towards commercialization 10 Why privatization? 12 The privatization timetable 17 Types of privatization 18 The globalization of the airport industry 37 Impact of airport globalization on users 48 3 Airport economics and performance benchmarking 54 Industry profit levels 54 Revenue and cost structures 56 Factors influencing costs and revenues 59 Measuring economic performance 61 4 Service quality and its measurement 74 Increasing emphasis on quality 74 Measuring the quality of service 76 Service level agreements 82 Level of delays 85 Quality management at airports 91 Contents 5 The airport–airline relationship 98 The structure of aeronautical charges 98 The level of aeronautical charges 104 The impact of aeronautical charges on airline operations 104 The airport regulatory environment 111 Regulation of privatized airports 112 Slot allocation 120 Ground handling issues 126 The US experience 129 A new airport–airline relationship 132 6 The provision of commercial facilities 140 The importance of commercial facilities 140 The market for commercial facilities 142 Approaches to the provision of commercial facilities 149 The commercial contract and tender process 153 The ending of EU duty- and tax-free sales 158 The impact of 11 September 2001 163 7 The role of airport marketing 178 The birth of airport marketing 178 The nature of airport competition 180 Marketing concepts 182 Airport marketing techniques 188 Norwich airport 199 8 The economic impact of airports 203 The wider picture 203 Airports as generators of economic activity 204 Measuring the direct, indirect, and induced impacts 206 Airports and economic development 212 9 The environmental impact of airports 219 Growing concerns for the environment 219 The main impacts 220 The role of other transport modes 229 The social consequences 236 Environmental management 237 Sustainability and environmental capacity 245 10 The impact of 11 September 2001 and future prospects 251 Overall effect on the air transport industry 251 Airport traffic levels 253 Airport financial performance 255 Security issues 259 The insurance problem 264 Future prospects 265 Index 272 vi Figures 1.1 Airport passengers by world region, 2001 2 1.2 Airport cargo tonnes by world region, 2001 3 1.3 Airport aircraft movement by world region, 2001 3 1.4 The world’s 20 largest airports by total passengers, 2001 4 1.5 The world’s 20 largest airports by cargo tonnes, 2001 4 1.6 The world’s 20 largest airports by air transport movements, 2001 4 1.7 The world’s 20 largest airports by international terminal passengers, 2000 5 2.1 Ownership of Vienna airport until 1992 15 2.2 Ownership of Vienna airport after IPO in 1992 15 2.3 Ownership of Vienna airport after secondary offering in 1995 15 2.4 Ownership of Vienna airport after changes in 2001 16 2.5 Total passengers at Vienna airport, 1979–2001 16 2.6 Total revenues – Vienna Airport Group, 1979–2001 16 2.7 Traffic at Australian airports, 1996–7 32 2.8 Profitability at Australian airports, 1996–7 32 2.9 External capital funding at large US hub airports, 2000 35 2.10 External capital funding at small US hub airports, 2000 35 2.11 Total passengers at Amsterdam airport, 1989–2001 38 2.12 Profitability – Schiphol Group, 1989–2001 38 2.13 Organizational structure within the Schiphol Group, 2002 40 2.14 Financial results of TBI, 1994–2002 44 3.1 Percentage share of aeronautical revenue at ACI airports by world region, 2001 57 3.2 Cost per WLU for European airports, 2001 67 3.3 Revenue per WLU for European airports, 2001 67 3.4 WLU per employee for European airports, 2001 68 3.5 Revenue per employee for world airports, 2000–01 69 3.6 Total factor productivity for world airports, 1999 70 4.1 Passenger survey results at Brisbane airport, 2001–02 90 Figures 5.1 Aeronautical charges and taxes for an international B737–800 turnaround in 2002 at world airports 105 5.2 Landing and passenger charges as a share of total costs for UK airlines, 2000 107 6.1 Non-aeronautical revenue per passenger at ACI airports by world region, 2001 147 6.2 Concession revenue: Brussels airport, 2001 147 6.3 Concession revenue: Washington airports, 2001 148 6.4 Airport retail revenue per square metre in 2000/2001 159 6.5 Non-aeronautical revenue share (%) at European airports, 1998–2001 163 6.6 Profitability – Aer Rianta, 1992–2000 167 6.7 Retail space at BAA UK airports, 1990–2002 169 6.8 Revenue sources for BAA, 1999–2002 171 6.9 Profitability – BAA, 1999–2001 172 7.1 Total passengers at Southampton airport, 1990–2002 199 7.2 Total passengers at Norwich airport, 1990–2002 201 8.1 The economic impact of airports 205 8.2 Employment at European airports in 1996 207 8.3 Employment at Gatwick airport in 1997 210 9.1 Existing and planned rail links to airports 231 9.2 Public transport usage by passengers to and from the airport, 2001 232 9.3 Mode of surface transport used by passengers at London Heathrow airport in 2001 233 9.4 Mode of surface transport used by employees at London Heathrow airport in 1999 233 10.1 Airport passenger growth by world region since 11 September 2001 254 10.2 Average annual pax-km forecasts of main regional flows, 2002–21 268 viii Tables 1.1 Growth in passenger numbers at the world’s 20 largest airports 6 2.1 Airport privatization through share flotations 20 2.2 Airport privatization through trade sales 22 2.3 Airport privatization through concession agreements 24 2.4 Airport privatization through project finance 25 2.5 Ownership patterns at main UK airports, 2003 29 2.6 Traffic and profitability growth at main UK airports, 1987–2001 31 2.7 Privatization details of Australian airports 33 2.8 TBI’s expansion into the airport business, 1995–2002 44 2.9 PlaneStation airports operated by Wiggins in 2003 50 3.1 Profitability for 30 major airport operators, 2001–02 55 3.2 Airport operating revenue sources 56 3.3 Average revenue and cost structures at European airports, 1983–2001 58 3.4 Revenue and cost structures at a selection of European airports, 2001 58 3.5 Performance indicators commonly used to assess economic performance 64 4.1 Service standards used by Manchester airport 76 4.2 Criteria most frequently used to measure quality of service at ACI airports 79 4.3 Summary of QSM scores 2001–02 at BAA London airports 80 4.4 Overall passenger satisfaction levels: best performing airports from IATA’s 2001 global airport monitor by size of airport 81 4.5 BAA London airport ‘best endeavours’ service level targets, 1999 83 4.6 GSSs agreed at Manchester airport in 2002 84 4.7 Increasing scheduled journey times at congested airports 86 4.8 Delays at major European airports on intra-European scheduled services, 2002 87 Tables 4.9 Proposed service quality elements to be included in the regulation of BAA London airports 88 4.10 Survey results of seven major airlines at Brisbane airport, 2001–02 90 4.11 Static quality indicators at Brisbane airport, 2001–02 91 5.1 Main aeronautical charges at airports 103 5.2 New growth and new route discounts available at Aer Rianta airports, 1994–9 on airport fees 109 5.3: Discounts given to each airline at Aer Rianta airports, 1998–2001 109 5.4: New route discounts available at Aer Rianta Airports 2001–03 on passenger, landing, and parking fees 110 5.5 IATA’s criteria for airport economic regulation 116 5.6 The ‘X’ value used for the UK airport price caps 117 5.7 The ‘X’ value
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