Contact us Connecting Australia Australian Airports Association Unit 9, 23, Brindabella Circuit Brindabella Park ACT 2609 The economic and social Tel: +61 6230 1110 contribution of Australia's airports Fax: +61 6230 1367 C Email: [email protected] Prepared for Australian Airports Association M www.airports.asn.au May 2012 Y CM Deloitte Access Economics MY Level 1, 9 Sydney Avenue CY Barton ACT 2600 CMY PO Box 6334 Kingston ACT 2604 K Australia Tel: +61 2 6175 2000 Fax: +61 2 6175 2001 Email: [email protected] www.deloitteaccesseconomics.com.au The economic and social contribution of Australia’s airports Contents Acronyms ................................................................................................................................... i Key points ................................................................................................................................. ii Executive summary ................................................................................................................... v 1 Introduction .................................................................................................................... 1 2 Australia’s airport sector ................................................................................................. 3 2.2 Composition and structure of the industry ........................................................................ 5 2.3 Role of airports in the economy ........................................................................................ 6 2.4 Market dynamics and changing business models ............................................................. 12 2.5 Investment in airport infrastructure ................................................................................ 15 2.6 The economics of airports ............................................................................................... 19 3 Connecting the economy, connecting the community ................................................... 28 3.1 The economic contribution of Australia’s airport network ............................................... 28 3.2 Linkages with other sectors of the economy .................................................................... 36 3.3 Social contribution of Australia’s airport network ............................................................ 43 4 Future growth in airport traffic...................................................................................... 52 4.1 Overarching drivers and trends ....................................................................................... 53 4.2 Overview of the modelling approach ............................................................................... 54 4.3 Airport traffic projections ................................................................................................ 55 5 Strategic implications .................................................................................................... 59 5.1 Macroeconomic outlook ................................................................................................. 59 5.2 Exposure to airline related risks....................................................................................... 61 5.3 Technology issues ........................................................................................................... 62 5.4 Development costs ......................................................................................................... 63 5.5 Industry challenges ......................................................................................................... 64 Appendix A : Economic contribution studies ........................................................................... 68 Appendix B : Airport traffic forecasting ................................................................................... 72 References .............................................................................................................................. 74 Limitation of our work ............................................................................................................... 75 Liability limited by a scheme approved under Professional Standards Legislation. 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Please see www.deloitte.com/au/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. © 2011 Deloitte Access Economics Pty Ltd The economic and social contribution of Australia’s airports Charts Chart 2.1 : Historical regional passenger movements and regional airports served .................... 4 Chart 2.2 : Fly-in Fly-out employment patterns ......................................................................... 7 Chart 2.3 : Investment patterns at airports.............................................................................. 16 Chart 2.4 : Additions to long term aeronautical assets ............................................................. 17 Chart 2.5 : Industry revenue by state, $ millions ...................................................................... 19 Chart 2.6 : Sources of revenue at Australian airports ............................................................... 22 Chart 2.7 : Industry costs by state, $ millions ........................................................................... 22 Chart 2.8 : Profitability by airport size ..................................................................................... 25 Chart 3.1 : Air transport use across industries, 1999-2008 ....................................................... 38 Chart 3.2 : Main reasons for outbound travel, 2011 ................................................................ 44 Chart 3.3 : Key social contributions to the local economy ........................................................ 46 Chart 4.1 : Passenger movements at international and capital city airports ............................. 56 Chart 4.2 : Passenger movements at selected regional airports ............................................... 57 Chart 4.3 : Freight movements at international and capital city airports .................................. 58 Chart 5.1 : Australian real and nominal output growth ............................................................ 60 Tables Table 2.2 : Number of regional airports served, 1985, 2000 and 2010 ....................................... 4 Table 2.3 : Privatised airports .................................................................................................... 5 Table 2.4 : Aeronautical revenue structure, major and major regional airports ....................... 20 Table 2.5 : Non-aeronautical revenue structure, major and major regional airports ............... 20 Table 2.6 : Non-labour cost structure by airport size ............................................................... 23 Table 3.1 : Economic contribution of the core airport sector, 2011.......................................... 30 Table 3.2 : Total economic contribution of Australia’s airports, 2011 ...................................... 33 Table 4.1 : Airports for which forecasts were developed ......................................................... 52 Table B.1 : Main data sources for airport traffic modelling ...................................................... 73 Deloitte Access Economics The economic and social contribution of Australia’s airports Figures Figure 2.1 : Wider revenue sources ........................................................................................... 8 Figure 2.2 : Anatomy of a metropolitan airport ....................................................................... 10 Figure 2.3 : Anatomy of a regional RPT and charter services airport ........................................ 11 Figure 2.4 : The economic regulation of Australian airports ..................................................... 26 Figure 3.1 : An economic profile of airports ............................................................................. 28 Figure 3.2 : Economic relationship between core airport activities and the airport precinct .... 29 Figure 3.3 : The various parts of the economy supported by airports ...................................... 37 Figure 5.1 : The skewing of Australian investment ................................................................... 60 Deloitte Access Economics The economic and social contribution of Australia’s airports Acronyms AAPS Australian Airspace Policy Statement ABS Australian Bureau of Statistics ACCC Australian Competition and Consumer Commission ASGC Australian Standard Geographical Classification ALOP Aerodrome Local Ownership Plan BITRE Bureau of Infrastructure, Transport and Regional Economics CASA Civil Aviation Safety Authority CCA Competition and Consumer Act CAGR Compound Annual Growth Rate CBD Central Business District CPI Consumer Price Index EBITDA Earnings before interest, tax, depreciation and amortisation FAC Federal Airports Corporation FIFO Fly-in Fly-out FTE Full-time equivalent GOS Gross Operating Surplus GRP/GSP/GDP Gross regional/state/domestic product IMF International Monetary Fund NTAMS Northern Territory Aerial Medical Service RAAF Royal Australian Air force RASP Remote Aerodrome Safety Program RASS Remote Air Subsidy Scheme RFDS Royal Flying Doctor Service RPT Regular Public Transport