- Email: [email protected]
Investment spending
Investment spending
8
Chapter Outline 8.1 Introduction 115 8.2 Capital projects and funding requirements 115 8.3 Capital expenditure relative to output 121 Feature 8.1 Airport collaborative decision making 123
8.4 Summary 125 References 126
8.1
Introduction
The crucial need for aviation development was emphasized repeatedly by IATA, complaining about the inability of airlines to use their aircraft fully for maximizing efficiency since governments were not meeting their responsibility to supply infrastructure as demanded. It emphasized governments, since they are afraid of potential drawbacks resulting from profit-oriented private investment in airport infrastructure. The criticism was even turned into a campaign against airport privatization and for tighter economic regulation of airports, starting at their Annual General Meeting (AGM) in June 2018 (CAPA, 2018; IATA, 2018). As a matter of fact, the industry’s success in terms of healthy growth rates requires huge investment and it is questionable, whether or not this can be funded by public money, taken into consideration the budget constraints of literally all countries. What is more, airport infrastructure projects usually have long lead times and the lifecycle can span decades, while numerous challenges may occur along the way.
8.2
Capital projects and funding requirements
For illustration of the necessary capital investment of airports to remain competitive in the market, Table 8.1 lists a selection of current and future airport projects in excess of USD 1bn per region. These are subject to frequent changes due to constantly growing cost estimates. (Further details are attached in Appendix C, Selected current and future airport investment projects in excess of USD 1bn.) Regional subtotals and the global grand total summarize CAPA’s data per July 2017 (cf. Fig. 6.1 and Fig. 8.1).
Foundations of Airport Economics and Finance. DOI: https://doi.org/10.1016/B978-0-12-810528-3.00008-1 © 2019 Elsevier Inc. All rights reserved.
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Table 8.1 Selected current and future airport projects .USD 1bn per region Airport
Project type and status
Investment (USD bn)
Projected completion date
Country
New terminal, second runway New airport New airport New airport Terminal extension, airport city
1.0
2019
Kenya
1.5 3.8 4.0 14.5
2020 2019 2024 2035
Tanzania Angola Ethiopia Egypt
Africa Jomo Kenyatta New Dodoma Luanda Addis Ababa Cairo Subtotal
51.8
Asia-Pacific Chengdu Tianfu New Manila Sangley Beijing Daxing Long Tha`nh Hong Kong International Subtotal
New airport
12.0
2020
China
New airport
13.7
2025
Philippines
New airport New airport (phase 1) Third runway, ongoing work
14.0 16.0 18.2
2019 2023 2020
China Vietnam China
12.0
2044
Italy
12.2
2019 23
14.8
2023
The Netherlands Germany
23.2
2026
UK
36.4
2018
Turkey
525.4
Europe Rome Fiumicino Amsterdam Schiphol Frankfurt London Heathrow Istanbul Grand Airport Subtotal
New terminal, ongoing work Pier and new terminal Terminal 3, ongoing work Third runway, ongoing work New airport
191.5
Latin America-Caribbean Luis Munoz Marin Lima Chavez
Improve services
1.4
2052
Puerto Rico
New terminal, second runway
1.5
Start 2018
Peru (Continued)
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Table 8.1 (Continued) Airport
Project type and status
Investment (USD bn)
Projected completion date
Country
Juan Santamaria Sao Paulo Mexico City Subtotal
New airport
3.5
2027
Costa Rica
New airport New airport
3.8 9.4 54.2
2025 2020
Brazil Mexico
Ongoing expansion Expansion work New terminals, taxiways (3 Phases) Ongoing expansion project New airport
4.0 4.3 7.2
2018 19 2020 2018 35
Sharjah Kuwait Saudi Arabia
10.9
2020
UAE
32.3
2027
UAE
Middle East Sharjah Kuwait King Abdulaziz Dubai International Dubai World Central Subtotal
153.7
North America Orlando International New York LaGuardia Vancouver Philadelphia New York JFK Subtotal Worldwide
Ongoing work
3.1
2023
USA
Rebuilding central terminal, ongoing Terminal extension, taxiway, ongoing New runway, ongoing work Ongoing work
4.0
2020
USA
4.2
2037
Canada
6.4
2025
USA
10.0 123.4 1.100
ongoing
USA
Total
Note: Subtotals/Total per CAPA, July 2017. Source: Compiled by author from Center for Asia Pacific Aviation (CAPA), 2017. USD 1 Trillion for Airport Construction Globally—But It’s Not Enough. ,https://centreforaviation.com/insights/analysis/usd1-trillion-forairport-construction-globally---but-its-not-enough-capa-database-356495. (accessed 06.08.17.); Symonds, D., 2017. Construction update. Passenger Terminal World, 23, November, Annual Showcase 2018, 158 167; Albatross Airports Database, 2018. Marketing Data for the Airport Industry. Momberger Airport-Information, Sainte Anastasie; Airport websites.
The demand for airport infrastructure supporting air travel growth is everincreasing, since standstill is not an option. Airlines demand a growth perspective and address potential airport constraints by business and network strategies and may go (fly) elsewhere. In competing for the passengers’ preference for shortest
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trip times, networks are recently drifting toward more point-to-point connections (Boeing, 2017). According to CAPA, the future investment in worldwide airport construction projects was approximated to amount to around USD 385bn in 2014. This estimate increased to USD 543bn in 2015, over USD 900bn in 2016, and finally to USD 1.1tn in 2017 (CAPA, 2014, 2015, 2016, 2017). These global totals include improvements at and expansions of existing facilities as well as spending on new airports. Fig. 8.1 depicts the regional breakdown with Asia-Pacific clearly being the front-runner in both categories with 46% in brownfield and 52% in greenfield projects, respectively. Existing airports
LAC; 4% ASP; 46%
AFR; 4%
New airports
NAM ; 1% MEA ; 3% ASP; 52%
AFR; 8%
NAM; 14% MEA; 17%
EUR; 15%
LAC; 9% EUR; 27%
Figure 8.1 Projected share of airport investment spending per region as of 2017. Source: Author based on Center for Asia Pacific Aviation (CAPA), 2017. USD 1 Trillion for Airport Construction Globally—But It’s Not Enough. ,https://centreforaviation.com/insights/ analysis/usd1-trillion-for-airport-construction-globally-but-its-not-enough-capa-database356495. (accessed 06.08.17.).
In general, new airports make up for a larger share of investment spending in emerging/developing markets. Improvements to existing facilities are more frequent in mature aviation markets, most notably North America but except for Europe. While the aviation industry in Asia-Pacific is expanding quickly, infrastructure capacity does not keep pace with growth in demand (InterVISTAS, 2015). Growing demand leads to airport congestion and requires the enlargement of airports in order to provide space for more and larger aircraft. Especially countries like India, China, Thailand, Indonesia, Australia, Malaysia, and the Philippines show significant growth. Consequently, Asia-Pacific is the leader in airport infrastructure investments (Airline Leader, 2016). Much of the existing airport infrastructure has been developed in the 1990s but has not encountered significant expansion or enhancement ever since. As a result, many airports are operating at or beyond maximum capacity, which causes significant delays. In 2013, 43% of all departures from Asia-Pacific were not on time (PWC, 2015). Fig. 8.2 shows Asian airports operating at high very capacity levels or even beyond capacity.
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119
CTU 93%
PEK 96% PVG 76% CAN 107%
DXB 77%
KUL 100% Under capacity
NRT 101% HND 79%
SHA 84%
HKG 104%
BKK 117%
DEL 56%
ICN 89%
SIN 78%
Over capacity CGK 288%
Figure 8.2 Asian airports operating at or beyond capacity as of 2014. Note: Bubble size 5 pax volume. Source: Adapted from PWC (Ed.), 2015. Connectivity and Growth—Issues and Challenges for Airport Investment. ,https://www.pwc.com/gx/en/capital-projects-infrastructure/publications/ assets/connectivity-growth-airport-investment.pdf. (accessed 09.04.16.).
Another problem this region is facing is the low ratio of airports per million of inhabitants. As compared to Europe and North America, it is extremely low in Asia-Pacific. Fig. 8.3 indicates that airport infrastructure is needed here more urgently than in any other region of the world. Only 0.22 airports are available per million passengers in contrast to 2.53 airports which are available to 1 million passengers in North America, for example.
Europe North America 2.53
0.98
Asia 1.08
0.22
1.75
0.91 Africa 0.30
0.25 Oceanic
Latin America 0.81
0.97
0.45
Number of airports/ mio. inhabitants
2.51
Average pax served/ airport
Figure 8.3 Ratio of Asian airports per million inhabitants as of 2013. Source: Adapted from PWC (Ed.), 2015. Connectivity and Growth—Issues and Challenges for Airport Investment. ,https://www.pwc.com/gx/en/capital-projects-infrastructure/publications/ assets/connectivity-growth-airport-investment.pdf. (accessed 09.04.16.).
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Reacting to that, several governments in the region are currently planning or have already embarked on mega-hub level airport projects, for example, Beijing Daxing International Airport, Hong Kong International Airport’s “three-runway system” (HKG), and Changi Airport’s “east extension” (SIN) (cf. Table 8.1). These are to be implemented within the next decade and shall provide capacity for at least 100 million passengers per year. It should be noted, however, that the project sponsors may also have to cope with some issues associated with projects of this scale, including construction risk and potential cost overruns—the new Berlin Brandenburg Airport (BER) being a well-known example for both, although situated in a developed country. Despite these activities, IATA has again expressed its concerns at the Singapore Airshow Aviation Leadership Summit in February 2018. From their point of view, the slow pace of infrastructure development may soon create a capacity crisis. This held especially true for the very Asia-Pacific region, where 3.5 billion trips were expected to be taken by 2036. At the same time it confirmed the reservations toward privatization as a way of financing vital airport capacity, since no adequate regulatory framework had been found yet for balancing investor and public interest. In the North American region markets are nearing saturation, hence growth is low and domestic travel is prevailing. Airport infrastructure investments are being made into existing rather than into new airports. This is partially due to the fact that less capacity of land is available for the construction of greenfield airports, which are highly relevant in emerging economies like Africa or Latin America (Airline Leader, 2016). Although Europe is also a more or less mature market and has a dense network with many airports competing for air travelers, projected investment spending is higher. This attributes to continuing strong traffic growth. Latin America Caribbean experienced a boost in airport infrastructure investments in recent years. It was the host of the 2014 Soccer World Cup in Brazil and infrastructure investments rapidly increased in advance of the tournament. The region experienced a drop in investments soon after its end. African activities in terms of investment in infrastructure are fairly comparable to the previous region. In general, the level of economic activity is distinctly different from more developed regions. Moreover, foreign investors might still be reluctant due to political instabilities and uncertainties regarding safety in the region (Airline Leader, 2016). The massive airport development projects in Dubai, Abu Dhabi, and Doha in combination with the aggressive expansion of local Emirates Airlines as well as Etihad and Qatar Airways advanced the Middle East aviation sector to the highest growth markets in the world. Capitalizing on the favorable geographical location and fostered by extensive political support it successfully alienated passengers from established carriers, thus bypassing their hub systems. As discussed earlier, siphoning off passengers by the “super-connectors” led to a redirection of global (long-haul) traffic flows away from Europe and significantly improved competitive position—to a certain extent also benefiting from new aircraft types such as the Airbus A380 and Boeing 787 Dreamliner (Grosche et al., 2017; Airline Leader, 2017). Despite slowed capacity growth in 2017/18 and possibly facing turbulence from regional geopolitics, the improved connectivity is continuing well into the current
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era of strong airline and airport competition (Hayward, 2017; Piltz et al., 2018). Furthermore, investments into airport infrastructure are far from a standstill. In addition to the aforementioned ones, a number of expansions are ongoing and future projects in the region include Dubai (DXB/DWC), Ajman International Airport (QAJ), Abu Dhabi (AUH), King Abdulaziz, Jeddah (JED), Bahrain International Airport (BAH), Sharjah Airport (SHJ), as well as Muscat (MCT) and Salalah (SLL) (cf. Table 8.1 and Appendix C). As stated above, cost estimates for future airport investment grow rapidly, and it needs to be noted that other parties’ forecasts are even more demanding as regards the resulting funding requirements. In its recent “Current Market Outlook,” Boeing (2017) states that latest projections for future investment amount to at least USD 2tn through 2030. Yet, the concern is with the order of magnitude rather than the most up-to-date guesstimate. The questions arising of how to finance this enormous future airport growth, and whether privatization may be a useful option, will be addressed in Chapters 9, Ownership structure and Chapter 13, Financing growth. To begin with, the implications of investment spending in terms of capital expenditure (capex) for infrastructure on airport economics will be analyzed.
8.3
Capital expenditure relative to output
This section draws on empirical data provided by ACI’s airport economic reports (2014, 2015, 2016, 2017). Approximately 700 airports are included for the analyzed period, covering more than 70% of worldwide passenger volumes. The capex across regions is displayed by Fig. 8.4. On global average, airports invested marginally more than USD 5 per workload unit (WLU) annually between 2012 and 2015, which is equivalent to slightly more than 28% of total revenue. Distinct regional differences are visible in both actual values and in relative terms. In monetary terms, MEA is substantially, EUR slightly and NAM only marginally beyond average. In relation to total turnover, in contrast, NAM as well as MEA are considerably while LAC is only slightly above global average, followed by Asia-Pacific, European, and African airports. It needs to be emphasized that from the perspective of investment spending for expansion projects, the 4 years under scrutiny are still a relatively short period in time. Data for a limited period may be dominated by the actual capex of one or a few individual airports, depending on the size of the region. Indicative of such a significant impact on the given data is the increase for African airports from USD 3 to USD 9 per WLU or 15% to 44% of total revenue in 2015. On the other hand, the corresponding values for Middle East airports plummeted from USD 10 to USD 5 or 41% to 22% during the same year. This effect is based on the respective airports’ stage in the investment cycle, which necessitates expansions to accommodate traffic growth and to stay competitive. This cycle typically spans an extended period of time.
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CAPEX as % of total revenue
CAPEX US D/WLU $30
150% $5 22%
$25
$20
$10
$5 $0
30%
$5 30%
$15 $9 44%
$3 15% $4 12% $2 10% AFR
$5
$4 $4
$6 26%
25%
$3 21%
$7 27%
$5
ASP 2012
41%
20%
$4 34%
20%
26%
$10
38%
$5
$6 49%
$5 37%
$5
$5
$5
39%
$5
28%
$4
$8 32%
$3 22%
EUR
125%
$5
$5
28%
100%
27%
75%
30%
50%
25%
37%
$5 28% 0%
LAC
MEA 2014
2013
NAM
World 2015
Figure 8.4 Annual capex (USD/WLU) and percentage of total revenue per region. capex, Capital expenditure. Source: Author based on ACI data.
While subject to the same limitations of comparing capex volumes for a comparatively short period only, Fig. 8.5 illustrates the same data grouped per size category. It shows lower than average investment spending relative to total sales for airports between 5 and 15 million passengers and those between 25 and 40 mppa. All other size brackets exceed the mean of roughly 28%. A comparison of actuals during this phase gives a different picture again: airports pertaining to the size classes below 1 mppa, 15 25 mppa, and in excess of 40 mppa spent more than the annual average of USD 5 per WLU during the period under consideration. CAPEX US D/WLU $30 $25
150%
44%
$5
21% $3
$4 $5
$5
42%
47% $5
33%
$0
<1 m
1–5 m 2012
$5 $6
$4 $8
29%
34%
$7 29%
$10
125%
31%
$6
$20 $15
CAPEX as % of total revenue
40%
$4
30%
36%
$6 $5
30%
$6
29%
$5
24%
$4
19%
30%
29%
$5
29%
26%
$5
26%
5–15 m 2013
$4
15–25 m 2014
$5
100% 27% 75%
$5
36% $5 $6
37%
50% 25% 0%
25–40 m
>40 m 2015
Figure 8.5 Annual capex (USD/WLU) and percentage of total revenue per size category. capex, Capital expenditure. Source: Author based on ACI data.
The capex of airports is substantial across the board. This involves investment spending for continuous replacements and updating of existing facilities and of course expansion projects. The latter take place in intervals related to the lifecycle of facilities and is required to remain competitive and provide the basis for future revenue generation. Despite modular additions, these projects increase capacity in
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large units to accommodate growth of the years ahead. Aside from the sheer scale of investment required, the equally crucial issue is that passenger numbers usually grow at a relatively steady rate. Thus, any substantial investment in runway or terminal facilities tends to lead to a temporary underutilization of installed capacity. The economic implications of the investment cycle will be discussed in more detail in Section 11.4. As confirmed by Zuidberg (2017), capex has a significant effect on profitability. This Chapter’s Feature 8.1 is on Airport collaborative decision making. This approach to improve airport efficiency may also help to increase asset utilization and be supportive of investment management at the same time. Feature 8.1 Airport collaborative decision making The Airport Collaborative Decision Making (A-CDM or ACDM) concept was developed to enhance the efficiency of both airport and network operations by data sharing in a real-time environment. It is a process that allows air traffic control (ATC), airlines, airport operators, ground handlers, and other stakeholders to exchange operational information and work together to manage airport operations more productively and to reduce detrimental impacts to flight operations by optimizing the use of resources and improving the predictability of key events of a flight. Bringing together all parties concerned to share information and improve operational decision-making shall also enhance surface movement of air traffic and reduce emissions and noise from aircraft engines (Eurocontrol, 2016; ACRP, 2015). In Europe specifically, lacking capacity and resulting congestion appear to be a major bottleneck for aviation for many years already. This had intensified the search for innovations to improve efficiency and further optimize the use of existing facilities. Amongst these are advances in working culture and digital technologies, up to a joint-action plan with Eurocontrol to roll out A-CDM at European airports (Eurocontrol, 2009). In 2017, the concept was fully implemented at 26 major European airports, including prominent examples like Frankfurt (FRA), London Heathrow (LHR), and Paris Charles de Gaulle (CDG). Furthermore, A-CDM is also aligned with the airports’ investments which are part of the Single European Sky ATM Research (SESAR) deployment. SESAR is a key element in the EU’s long-lasting efforts to achieve the Single European Sky (SES). SES is supposed to reform ATM in Europe in order to cope with sustained air traffic growth and operations under the safest, most cost- and flight-efficient and environmental friendly conditions (ACI Europe, 2017; Eurocontrol, 2014). Europe is still leading the way in implementing the concept. Elsewhere, only a handful of airports including Singapore Changi (SIN) and Auckland International (AKL) have implemented versions comparable to Eurocontrol’s (Continued)
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Feature 8.1
(cont’d)
original. Related projects are in progress from South America to China and Australia. The objectives of reducing runway queues and taxi times are similar. Local activities differ, however, primarily due to diverse operational and governance structures. In the United States, the CDM process under the Federal Aviation Administration’s NextGen next-generation national airspace system is almost equivalent to Eurocontrol’s A-CDM initiative (ACRP, 2015). According to Eurocontrol’s (2016) impact assessment, the main benefits to airports from integrating processes and systems, while focusing on aircraft turnaround and predeparture sequencing specifically, were: G
G
G
improved predictability of operations for airlines, reduced aircraft holding times and resulting fuel savings, as well as improved airport slot performance.
Moreover, the implementation cost was typically recouped over 18 months by the 17 airports included in the study. A-CDM was developed to generate efficiency gains locally at the airport whilst optimizing resources and improving operational predictability, and as a result, decreasing environmental impacts. It is supporting tactical planning of airside operations by anticipating aircraft movements, which helps to improve gate management, reduce apron, taxiway, and holding point congestion (IATA, 2017; Frost & Sullivan, 2016, 2017). Thereby, turnaround management and flight departure planning are improved on and runway capacity is increased. Thus, A-CDM raises both productivity and cost-efficiency. It can also make a significant contribution in delaying and/or reducing the projected investment needs of the entire air transport system. Fig. 8.6 sketches the main effects for airports which Chapter 12, Managing the financial performance, will elaborate on further.
Digitization & A-CDM
• Stakeholder integration
• Process harmonization
OPEX • Enhanced A/C optimization movement & • Capacity Revenue increase growth
Operational efficiency
& Asset utilization
Figure 8.6 Improving operational efficiency and capacity utilization on the airside. Source: Author
For airports, in particular “sweating” the existing assets—instead of additional capex—will have a material impact on profitability via increased asset utilization. What is more, additional capacity allows for generating additional
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revenue thus also growing asset turnover, or how many times assets can be transformed into revenue during one period. In combination with integrated operational procedures and associated operating expenditure, additional revenue will grow operational efficiency, EBIT, and profit margin likewise. Establishing a culture of trust and collaboration amongst all stakeholders and the lack of commonly accepted performance measures are still perceived to be major challenges to a wider implementation of the concept. Once extensive data sharing and a real partnership among all stakeholders becomes a reality (ideally headed by a joint Airport Operations Center, APOC), the more recently devised Total Airport Management concept may finally be implemented, also referred to as A-CDM 2.0 or TotalCDM. It aims at providing the above-discussed tactical planning benefits across airside and landside operations. In combination with disruptive/smart technology and innovative processes (cf. Feature 2.1 on future airports and Section 4.4 on operational efficiency), a fully integrated methodology for addressing the operation of passengers (including baggage) and cargo in a holistic seamless way may cover the entire airport. Ultimately, this may even lead to Performance-Based Airport Management (PBAM), controlled by key performance indicators (KPIs) (Eleftheriou, 2017; Leidos, 2017; Feist, 2018). The introduction of data-driven decision making and increased automation availing of big data analytics, beacons, tracking, and automated recognition will have an increasing share in this. The development of new operational tools such as NATS’ Intelligent Approach (iA), a time-based separation tool, has significantly contributed to enhancing the resilience of the ATM operation delivery at LHR and other UK airports, as well as international airports (James, 2018; Peters, 2018). In summary, gains in efficiency and capital intensity bear the potential of eventually delaying infrastructure spending further—or to continue growing within the constraints of existing facilities, where expansion is not an option.
8.4
Summary
Since additional airport infrastructure is urgently needed to accommodate future traffic growth, this chapter introduced the total volume and regional distribution of current estimates—which are ever-increasing. The sheer volume is impressive, but realistic funding options are not (yet) in sight. A selection of major airport expansion projects in excess of USD 1bn was presented. Regional infrastructure requirements hence financing needs vary significantly, due to the underlying traffic development extensively discussed earlier. Recent and ongoing capex of airports were analyzed and put into regional and size perspective. During the period 2012 15, airports invested approximately USD 5 per WLU annually, which is equivalent to slightly more than 28% of total revenue on global average.
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A-CDM may be an adequate tool for improving airport efficiency, as elaborated on in the chapter feature. Once full integration of all stakeholders will be achieved, a higher utilization of existing assets may be expected. This should allow for higher traffic throughput and eventually delay additional investment in infrastructure capacity. “Sweating” the existing assets—instead of additional capex—will have a material impact on profitability via both lower unit cost and increased asset utilization at the same time.
References Airline Leader, 2016. Airport construction & investment back in fashion. Airline Leader (33), 80 88. Airline Leader, 2017. The route revolution: how next generation aircraft are transforming global route maps. Airline Leader (41), 12 16. Airports Council International (ACI), 2014. 2013 ACI Airport Economics Report. ACI World, Montreal. Airports Council International (ACI), 2015. 2014 ACI Airport Economics Report. ACI World, Montreal. Airports Council International (ACI), 2016. 2015 ACI Airport Economics Report. ACI World, Montreal. Airports Council International (ACI), 2017. 2017 ACI Airport Economics Report. ACI World, Montreal. Airports Council International (ACI) Europe, 2017. Airport Industry Braced for MultiFaceted Demands of Growth. ACI Europe, Brussels, Press Release 17_12_06_IP1. Airport Cooperative Research Program (ACRP) (Ed.), 2015. Guidebook for Advancing Collaborative Decision Making (CDM) at Airports. Transportation Research Board (TRB), Washington, DC, ACRP Report 137. Albatross Airports Database, 2018. Marketing Data for the Airport Industry. Momberger Airport-Information, Sainte Anastasie. Boeing, 2017. Current Market Outlook 2017 2036. Boeing Commercial Airplanes, Seattle, WA. Center for Asia Pacific Aviation (CAPA), 2014. Inside the World’s Biggest Airport Construction Projects in 2013/14. ,http://centreforaviation.com/analysis/inside-theworlds-biggest-airport-construction-projects-in-201314-147024. (accessed 13.03.14.). Center for Asia Pacific Aviation (CAPA), 2015. The World’s Biggest Airport Construction Projects 2015; Total Value Over USD500 Billion. ,http://centreforaviation.com/analysis/the-worlds-biggest-airport-construction-projects-2015-total-value-over-usd500-billion-part-1-205200. (accessed 18.02.15.). Center for Asia Pacific Aviation (CAPA), 2016. Global Airport Construction Review 1Q2016. ,http://centreforaviation.com/analysis/global-airport-construction-review-1q2016-almostusd200-billion-investment-in-394-new-airports-260864. (accessed 20.01.16.). Center for Asia Pacific Aviation (CAPA), 2017. USD1 Trillion for Airport Construction Globally But It’s Not Enough. ,https://centreforaviation.com/insights/analysis/usd1trillion-for-airport-construction-globally---but-its-not-enough-capa-database-356495. (accessed 06.08.17.).
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Center for Asia Pacific Aviation (CAPA), 2018. Airport Privatisation: Varied Successes as IATA Takes Aim. ,https://centreforaviation.com/analysis/reports/airport-privatisationvaried-successes-as-iata-takes-aim-423851. (accessed 16.07.18.). Eleftheriou, V., 2017. Moving towards timely and successful A-CDM 2.0 implementation. Int. Airport Rev. 21 (5), 32 34. Eurocontrol, 2009. Airport CDM—Steps to Boost Efficiency. Eurocontrol, Brussels. Eurocontrol, 2014. SESAR Factsheet—Airport Operations Management. Eurocontrol, Bre´tigny/Orge Cedex. Eurocontrol, 2016. A-CDM Impact Assessment. Eurocontrol, Eurocontrol Experimental Centre, Brussels. Feist, A., 2018. Uniting the airport. Int. Airport Rev. 22 (3), 26 28. Frost & Sullivan, 2016. Digital transformation of airports: impact, opportunities, and threat of digital conformity. Whitepaper Presented at the Dubai Airport Show. Frost & Sullivan, Santa Clara, CA. Frost & Sullivan, 2017. Strengthening the Airport Value Proposition. Frost & Sullivan/ AMADEUS, Santa Clara, CA. Grosche, T., Klophaus, R., Seredy´nski, A., 2017. Competition for long-haul connecting traffic among airports in Europe and the Middle East. J. Air Transp. Manage. 64, 3 14. Hayward, K., 2017. Turbulence in the Gulf. Aerospace 44 (11), 14 17. International Air Transport Association (IATA), 2017. Airport—Collaborative Decision Making (A-CDM). ,https://www.iata.org/whatwedo/workgroups/Documents/AACG/ iata-acdm-recommendations-v1.pdf. (accessed 09.01.18.). International Air Transport Association (IATA), 2018. IATA Calls for Stronger Economic Regulation of Australian Airports. ,http://www.airportsinternational.com/2018/05/ iata-calls-for-stronger-economic-regulation-of-australian-airports/20068?dm_i 5 4JU% 2C5OBGL%2C55RJNO%2CM2XY3%2C1. (accessed 31.05.18.). InterVISTAS, 2015. Economic Impact of European Airports—A Critical Catalyst to Economic Growth. InterVISTAS, Bath. James, A., 2018. How Constrained Airports Can Still Expand Capacity. ,http://www.passengerterminaltoday.com/features.php?BlogID 5 2124. (accessed 09.02.18.). Leidos, 2017. Total Airport Management. ,http://more.civil.leidos.com/hubfs/docs/ Transport_Assets/Whitepapers/Leidos%20Addressing%20the%20Challenges%20of% 20Total%20Airport%20Management.pdf?t 5 1515431547728. (accessed 26.10.17.). Peters, J., 2018. Unlocking the value of data in air transport. Int. Airport Rev. 22 (3), 8 10. Piltz, C., Voltes-Dorta, A., Suau-Sanchez, P., 2018. A comparative analysis of hub connections of European and Asian airports against Middle Eastern hubs in intercontinental markets. J. Air Transp. Manage. 66, 1 12. PWC (Ed.), 2015. Connectivity and Growth—Issues and Challenges for Airport Investment. ,https://www.pwc.com/gx/en/capital-projects-infrastructure/publications/assets/connectivity-growth-airport-investment.pdf. (accessed 09.04.16.). Symonds, D., 2017. Construction update. Passenger Terminal World 23, November, Annual Showcase 2018, 158 167. Zuidberg, J., 2017. Exploring the determinants for airport profitability: traffic characteristics, low-cost carriers, seasonality and cost efficiency. Transp. Res. A 101, 61 72.
8
Chapter Outline 8.1 Introduction 115 8.2 Capital projects and funding requirements 115 8.3 Capital expenditure relative to output 121 Feature 8.1 Airport collaborative decision making 123
8.4 Summary 125 References 126
8.1
Introduction
The crucial need for aviation development was emphasized repeatedly by IATA, complaining about the inability of airlines to use their aircraft fully for maximizing efficiency since governments were not meeting their responsibility to supply infrastructure as demanded. It emphasized governments, since they are afraid of potential drawbacks resulting from profit-oriented private investment in airport infrastructure. The criticism was even turned into a campaign against airport privatization and for tighter economic regulation of airports, starting at their Annual General Meeting (AGM) in June 2018 (CAPA, 2018; IATA, 2018). As a matter of fact, the industry’s success in terms of healthy growth rates requires huge investment and it is questionable, whether or not this can be funded by public money, taken into consideration the budget constraints of literally all countries. What is more, airport infrastructure projects usually have long lead times and the lifecycle can span decades, while numerous challenges may occur along the way.
8.2
Capital projects and funding requirements
For illustration of the necessary capital investment of airports to remain competitive in the market, Table 8.1 lists a selection of current and future airport projects in excess of USD 1bn per region. These are subject to frequent changes due to constantly growing cost estimates. (Further details are attached in Appendix C, Selected current and future airport investment projects in excess of USD 1bn.) Regional subtotals and the global grand total summarize CAPA’s data per July 2017 (cf. Fig. 6.1 and Fig. 8.1).
Foundations of Airport Economics and Finance. DOI: https://doi.org/10.1016/B978-0-12-810528-3.00008-1 © 2019 Elsevier Inc. All rights reserved.
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Table 8.1 Selected current and future airport projects .USD 1bn per region Airport
Project type and status
Investment (USD bn)
Projected completion date
Country
New terminal, second runway New airport New airport New airport Terminal extension, airport city
1.0
2019
Kenya
1.5 3.8 4.0 14.5
2020 2019 2024 2035
Tanzania Angola Ethiopia Egypt
Africa Jomo Kenyatta New Dodoma Luanda Addis Ababa Cairo Subtotal
51.8
Asia-Pacific Chengdu Tianfu New Manila Sangley Beijing Daxing Long Tha`nh Hong Kong International Subtotal
New airport
12.0
2020
China
New airport
13.7
2025
Philippines
New airport New airport (phase 1) Third runway, ongoing work
14.0 16.0 18.2
2019 2023 2020
China Vietnam China
12.0
2044
Italy
12.2
2019 23
14.8
2023
The Netherlands Germany
23.2
2026
UK
36.4
2018
Turkey
525.4
Europe Rome Fiumicino Amsterdam Schiphol Frankfurt London Heathrow Istanbul Grand Airport Subtotal
New terminal, ongoing work Pier and new terminal Terminal 3, ongoing work Third runway, ongoing work New airport
191.5
Latin America-Caribbean Luis Munoz Marin Lima Chavez
Improve services
1.4
2052
Puerto Rico
New terminal, second runway
1.5
Start 2018
Peru (Continued)
Investment spending
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Table 8.1 (Continued) Airport
Project type and status
Investment (USD bn)
Projected completion date
Country
Juan Santamaria Sao Paulo Mexico City Subtotal
New airport
3.5
2027
Costa Rica
New airport New airport
3.8 9.4 54.2
2025 2020
Brazil Mexico
Ongoing expansion Expansion work New terminals, taxiways (3 Phases) Ongoing expansion project New airport
4.0 4.3 7.2
2018 19 2020 2018 35
Sharjah Kuwait Saudi Arabia
10.9
2020
UAE
32.3
2027
UAE
Middle East Sharjah Kuwait King Abdulaziz Dubai International Dubai World Central Subtotal
153.7
North America Orlando International New York LaGuardia Vancouver Philadelphia New York JFK Subtotal Worldwide
Ongoing work
3.1
2023
USA
Rebuilding central terminal, ongoing Terminal extension, taxiway, ongoing New runway, ongoing work Ongoing work
4.0
2020
USA
4.2
2037
Canada
6.4
2025
USA
10.0 123.4 1.100
ongoing
USA
Total
Note: Subtotals/Total per CAPA, July 2017. Source: Compiled by author from Center for Asia Pacific Aviation (CAPA), 2017. USD 1 Trillion for Airport Construction Globally—But It’s Not Enough. ,https://centreforaviation.com/insights/analysis/usd1-trillion-forairport-construction-globally---but-its-not-enough-capa-database-356495. (accessed 06.08.17.); Symonds, D., 2017. Construction update. Passenger Terminal World, 23, November, Annual Showcase 2018, 158 167; Albatross Airports Database, 2018. Marketing Data for the Airport Industry. Momberger Airport-Information, Sainte Anastasie; Airport websites.
The demand for airport infrastructure supporting air travel growth is everincreasing, since standstill is not an option. Airlines demand a growth perspective and address potential airport constraints by business and network strategies and may go (fly) elsewhere. In competing for the passengers’ preference for shortest
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trip times, networks are recently drifting toward more point-to-point connections (Boeing, 2017). According to CAPA, the future investment in worldwide airport construction projects was approximated to amount to around USD 385bn in 2014. This estimate increased to USD 543bn in 2015, over USD 900bn in 2016, and finally to USD 1.1tn in 2017 (CAPA, 2014, 2015, 2016, 2017). These global totals include improvements at and expansions of existing facilities as well as spending on new airports. Fig. 8.1 depicts the regional breakdown with Asia-Pacific clearly being the front-runner in both categories with 46% in brownfield and 52% in greenfield projects, respectively. Existing airports
LAC; 4% ASP; 46%
AFR; 4%
New airports
NAM ; 1% MEA ; 3% ASP; 52%
AFR; 8%
NAM; 14% MEA; 17%
EUR; 15%
LAC; 9% EUR; 27%
Figure 8.1 Projected share of airport investment spending per region as of 2017. Source: Author based on Center for Asia Pacific Aviation (CAPA), 2017. USD 1 Trillion for Airport Construction Globally—But It’s Not Enough. ,https://centreforaviation.com/insights/ analysis/usd1-trillion-for-airport-construction-globally-but-its-not-enough-capa-database356495. (accessed 06.08.17.).
In general, new airports make up for a larger share of investment spending in emerging/developing markets. Improvements to existing facilities are more frequent in mature aviation markets, most notably North America but except for Europe. While the aviation industry in Asia-Pacific is expanding quickly, infrastructure capacity does not keep pace with growth in demand (InterVISTAS, 2015). Growing demand leads to airport congestion and requires the enlargement of airports in order to provide space for more and larger aircraft. Especially countries like India, China, Thailand, Indonesia, Australia, Malaysia, and the Philippines show significant growth. Consequently, Asia-Pacific is the leader in airport infrastructure investments (Airline Leader, 2016). Much of the existing airport infrastructure has been developed in the 1990s but has not encountered significant expansion or enhancement ever since. As a result, many airports are operating at or beyond maximum capacity, which causes significant delays. In 2013, 43% of all departures from Asia-Pacific were not on time (PWC, 2015). Fig. 8.2 shows Asian airports operating at high very capacity levels or even beyond capacity.
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119
CTU 93%
PEK 96% PVG 76% CAN 107%
DXB 77%
KUL 100% Under capacity
NRT 101% HND 79%
SHA 84%
HKG 104%
BKK 117%
DEL 56%
ICN 89%
SIN 78%
Over capacity CGK 288%
Figure 8.2 Asian airports operating at or beyond capacity as of 2014. Note: Bubble size 5 pax volume. Source: Adapted from PWC (Ed.), 2015. Connectivity and Growth—Issues and Challenges for Airport Investment. ,https://www.pwc.com/gx/en/capital-projects-infrastructure/publications/ assets/connectivity-growth-airport-investment.pdf. (accessed 09.04.16.).
Another problem this region is facing is the low ratio of airports per million of inhabitants. As compared to Europe and North America, it is extremely low in Asia-Pacific. Fig. 8.3 indicates that airport infrastructure is needed here more urgently than in any other region of the world. Only 0.22 airports are available per million passengers in contrast to 2.53 airports which are available to 1 million passengers in North America, for example.
Europe North America 2.53
0.98
Asia 1.08
0.22
1.75
0.91 Africa 0.30
0.25 Oceanic
Latin America 0.81
0.97
0.45
Number of airports/ mio. inhabitants
2.51
Average pax served/ airport
Figure 8.3 Ratio of Asian airports per million inhabitants as of 2013. Source: Adapted from PWC (Ed.), 2015. Connectivity and Growth—Issues and Challenges for Airport Investment. ,https://www.pwc.com/gx/en/capital-projects-infrastructure/publications/ assets/connectivity-growth-airport-investment.pdf. (accessed 09.04.16.).
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Reacting to that, several governments in the region are currently planning or have already embarked on mega-hub level airport projects, for example, Beijing Daxing International Airport, Hong Kong International Airport’s “three-runway system” (HKG), and Changi Airport’s “east extension” (SIN) (cf. Table 8.1). These are to be implemented within the next decade and shall provide capacity for at least 100 million passengers per year. It should be noted, however, that the project sponsors may also have to cope with some issues associated with projects of this scale, including construction risk and potential cost overruns—the new Berlin Brandenburg Airport (BER) being a well-known example for both, although situated in a developed country. Despite these activities, IATA has again expressed its concerns at the Singapore Airshow Aviation Leadership Summit in February 2018. From their point of view, the slow pace of infrastructure development may soon create a capacity crisis. This held especially true for the very Asia-Pacific region, where 3.5 billion trips were expected to be taken by 2036. At the same time it confirmed the reservations toward privatization as a way of financing vital airport capacity, since no adequate regulatory framework had been found yet for balancing investor and public interest. In the North American region markets are nearing saturation, hence growth is low and domestic travel is prevailing. Airport infrastructure investments are being made into existing rather than into new airports. This is partially due to the fact that less capacity of land is available for the construction of greenfield airports, which are highly relevant in emerging economies like Africa or Latin America (Airline Leader, 2016). Although Europe is also a more or less mature market and has a dense network with many airports competing for air travelers, projected investment spending is higher. This attributes to continuing strong traffic growth. Latin America Caribbean experienced a boost in airport infrastructure investments in recent years. It was the host of the 2014 Soccer World Cup in Brazil and infrastructure investments rapidly increased in advance of the tournament. The region experienced a drop in investments soon after its end. African activities in terms of investment in infrastructure are fairly comparable to the previous region. In general, the level of economic activity is distinctly different from more developed regions. Moreover, foreign investors might still be reluctant due to political instabilities and uncertainties regarding safety in the region (Airline Leader, 2016). The massive airport development projects in Dubai, Abu Dhabi, and Doha in combination with the aggressive expansion of local Emirates Airlines as well as Etihad and Qatar Airways advanced the Middle East aviation sector to the highest growth markets in the world. Capitalizing on the favorable geographical location and fostered by extensive political support it successfully alienated passengers from established carriers, thus bypassing their hub systems. As discussed earlier, siphoning off passengers by the “super-connectors” led to a redirection of global (long-haul) traffic flows away from Europe and significantly improved competitive position—to a certain extent also benefiting from new aircraft types such as the Airbus A380 and Boeing 787 Dreamliner (Grosche et al., 2017; Airline Leader, 2017). Despite slowed capacity growth in 2017/18 and possibly facing turbulence from regional geopolitics, the improved connectivity is continuing well into the current
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era of strong airline and airport competition (Hayward, 2017; Piltz et al., 2018). Furthermore, investments into airport infrastructure are far from a standstill. In addition to the aforementioned ones, a number of expansions are ongoing and future projects in the region include Dubai (DXB/DWC), Ajman International Airport (QAJ), Abu Dhabi (AUH), King Abdulaziz, Jeddah (JED), Bahrain International Airport (BAH), Sharjah Airport (SHJ), as well as Muscat (MCT) and Salalah (SLL) (cf. Table 8.1 and Appendix C). As stated above, cost estimates for future airport investment grow rapidly, and it needs to be noted that other parties’ forecasts are even more demanding as regards the resulting funding requirements. In its recent “Current Market Outlook,” Boeing (2017) states that latest projections for future investment amount to at least USD 2tn through 2030. Yet, the concern is with the order of magnitude rather than the most up-to-date guesstimate. The questions arising of how to finance this enormous future airport growth, and whether privatization may be a useful option, will be addressed in Chapters 9, Ownership structure and Chapter 13, Financing growth. To begin with, the implications of investment spending in terms of capital expenditure (capex) for infrastructure on airport economics will be analyzed.
8.3
Capital expenditure relative to output
This section draws on empirical data provided by ACI’s airport economic reports (2014, 2015, 2016, 2017). Approximately 700 airports are included for the analyzed period, covering more than 70% of worldwide passenger volumes. The capex across regions is displayed by Fig. 8.4. On global average, airports invested marginally more than USD 5 per workload unit (WLU) annually between 2012 and 2015, which is equivalent to slightly more than 28% of total revenue. Distinct regional differences are visible in both actual values and in relative terms. In monetary terms, MEA is substantially, EUR slightly and NAM only marginally beyond average. In relation to total turnover, in contrast, NAM as well as MEA are considerably while LAC is only slightly above global average, followed by Asia-Pacific, European, and African airports. It needs to be emphasized that from the perspective of investment spending for expansion projects, the 4 years under scrutiny are still a relatively short period in time. Data for a limited period may be dominated by the actual capex of one or a few individual airports, depending on the size of the region. Indicative of such a significant impact on the given data is the increase for African airports from USD 3 to USD 9 per WLU or 15% to 44% of total revenue in 2015. On the other hand, the corresponding values for Middle East airports plummeted from USD 10 to USD 5 or 41% to 22% during the same year. This effect is based on the respective airports’ stage in the investment cycle, which necessitates expansions to accommodate traffic growth and to stay competitive. This cycle typically spans an extended period of time.
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CAPEX as % of total revenue
CAPEX US D/WLU $30
150% $5 22%
$25
$20
$10
$5 $0
30%
$5 30%
$15 $9 44%
$3 15% $4 12% $2 10% AFR
$5
$4 $4
$6 26%
25%
$3 21%
$7 27%
$5
ASP 2012
41%
20%
$4 34%
20%
26%
$10
38%
$5
$6 49%
$5 37%
$5
$5
$5
39%
$5
28%
$4
$8 32%
$3 22%
EUR
125%
$5
$5
28%
100%
27%
75%
30%
50%
25%
37%
$5 28% 0%
LAC
MEA 2014
2013
NAM
World 2015
Figure 8.4 Annual capex (USD/WLU) and percentage of total revenue per region. capex, Capital expenditure. Source: Author based on ACI data.
While subject to the same limitations of comparing capex volumes for a comparatively short period only, Fig. 8.5 illustrates the same data grouped per size category. It shows lower than average investment spending relative to total sales for airports between 5 and 15 million passengers and those between 25 and 40 mppa. All other size brackets exceed the mean of roughly 28%. A comparison of actuals during this phase gives a different picture again: airports pertaining to the size classes below 1 mppa, 15 25 mppa, and in excess of 40 mppa spent more than the annual average of USD 5 per WLU during the period under consideration. CAPEX US D/WLU $30 $25
150%
44%
$5
21% $3
$4 $5
$5
42%
47% $5
33%
$0
<1 m
1–5 m 2012
$5 $6
$4 $8
29%
34%
$7 29%
$10
125%
31%
$6
$20 $15
CAPEX as % of total revenue
40%
$4
30%
36%
$6 $5
30%
$6
29%
$5
24%
$4
19%
30%
29%
$5
29%
26%
$5
26%
5–15 m 2013
$4
15–25 m 2014
$5
100% 27% 75%
$5
36% $5 $6
37%
50% 25% 0%
25–40 m
>40 m 2015
Figure 8.5 Annual capex (USD/WLU) and percentage of total revenue per size category. capex, Capital expenditure. Source: Author based on ACI data.
The capex of airports is substantial across the board. This involves investment spending for continuous replacements and updating of existing facilities and of course expansion projects. The latter take place in intervals related to the lifecycle of facilities and is required to remain competitive and provide the basis for future revenue generation. Despite modular additions, these projects increase capacity in
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large units to accommodate growth of the years ahead. Aside from the sheer scale of investment required, the equally crucial issue is that passenger numbers usually grow at a relatively steady rate. Thus, any substantial investment in runway or terminal facilities tends to lead to a temporary underutilization of installed capacity. The economic implications of the investment cycle will be discussed in more detail in Section 11.4. As confirmed by Zuidberg (2017), capex has a significant effect on profitability. This Chapter’s Feature 8.1 is on Airport collaborative decision making. This approach to improve airport efficiency may also help to increase asset utilization and be supportive of investment management at the same time. Feature 8.1 Airport collaborative decision making The Airport Collaborative Decision Making (A-CDM or ACDM) concept was developed to enhance the efficiency of both airport and network operations by data sharing in a real-time environment. It is a process that allows air traffic control (ATC), airlines, airport operators, ground handlers, and other stakeholders to exchange operational information and work together to manage airport operations more productively and to reduce detrimental impacts to flight operations by optimizing the use of resources and improving the predictability of key events of a flight. Bringing together all parties concerned to share information and improve operational decision-making shall also enhance surface movement of air traffic and reduce emissions and noise from aircraft engines (Eurocontrol, 2016; ACRP, 2015). In Europe specifically, lacking capacity and resulting congestion appear to be a major bottleneck for aviation for many years already. This had intensified the search for innovations to improve efficiency and further optimize the use of existing facilities. Amongst these are advances in working culture and digital technologies, up to a joint-action plan with Eurocontrol to roll out A-CDM at European airports (Eurocontrol, 2009). In 2017, the concept was fully implemented at 26 major European airports, including prominent examples like Frankfurt (FRA), London Heathrow (LHR), and Paris Charles de Gaulle (CDG). Furthermore, A-CDM is also aligned with the airports’ investments which are part of the Single European Sky ATM Research (SESAR) deployment. SESAR is a key element in the EU’s long-lasting efforts to achieve the Single European Sky (SES). SES is supposed to reform ATM in Europe in order to cope with sustained air traffic growth and operations under the safest, most cost- and flight-efficient and environmental friendly conditions (ACI Europe, 2017; Eurocontrol, 2014). Europe is still leading the way in implementing the concept. Elsewhere, only a handful of airports including Singapore Changi (SIN) and Auckland International (AKL) have implemented versions comparable to Eurocontrol’s (Continued)
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Feature 8.1
(cont’d)
original. Related projects are in progress from South America to China and Australia. The objectives of reducing runway queues and taxi times are similar. Local activities differ, however, primarily due to diverse operational and governance structures. In the United States, the CDM process under the Federal Aviation Administration’s NextGen next-generation national airspace system is almost equivalent to Eurocontrol’s A-CDM initiative (ACRP, 2015). According to Eurocontrol’s (2016) impact assessment, the main benefits to airports from integrating processes and systems, while focusing on aircraft turnaround and predeparture sequencing specifically, were: G
G
G
improved predictability of operations for airlines, reduced aircraft holding times and resulting fuel savings, as well as improved airport slot performance.
Moreover, the implementation cost was typically recouped over 18 months by the 17 airports included in the study. A-CDM was developed to generate efficiency gains locally at the airport whilst optimizing resources and improving operational predictability, and as a result, decreasing environmental impacts. It is supporting tactical planning of airside operations by anticipating aircraft movements, which helps to improve gate management, reduce apron, taxiway, and holding point congestion (IATA, 2017; Frost & Sullivan, 2016, 2017). Thereby, turnaround management and flight departure planning are improved on and runway capacity is increased. Thus, A-CDM raises both productivity and cost-efficiency. It can also make a significant contribution in delaying and/or reducing the projected investment needs of the entire air transport system. Fig. 8.6 sketches the main effects for airports which Chapter 12, Managing the financial performance, will elaborate on further.
Digitization & A-CDM
• Stakeholder integration
• Process harmonization
OPEX • Enhanced A/C optimization movement & • Capacity Revenue increase growth
Operational efficiency
& Asset utilization
Figure 8.6 Improving operational efficiency and capacity utilization on the airside. Source: Author
For airports, in particular “sweating” the existing assets—instead of additional capex—will have a material impact on profitability via increased asset utilization. What is more, additional capacity allows for generating additional
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revenue thus also growing asset turnover, or how many times assets can be transformed into revenue during one period. In combination with integrated operational procedures and associated operating expenditure, additional revenue will grow operational efficiency, EBIT, and profit margin likewise. Establishing a culture of trust and collaboration amongst all stakeholders and the lack of commonly accepted performance measures are still perceived to be major challenges to a wider implementation of the concept. Once extensive data sharing and a real partnership among all stakeholders becomes a reality (ideally headed by a joint Airport Operations Center, APOC), the more recently devised Total Airport Management concept may finally be implemented, also referred to as A-CDM 2.0 or TotalCDM. It aims at providing the above-discussed tactical planning benefits across airside and landside operations. In combination with disruptive/smart technology and innovative processes (cf. Feature 2.1 on future airports and Section 4.4 on operational efficiency), a fully integrated methodology for addressing the operation of passengers (including baggage) and cargo in a holistic seamless way may cover the entire airport. Ultimately, this may even lead to Performance-Based Airport Management (PBAM), controlled by key performance indicators (KPIs) (Eleftheriou, 2017; Leidos, 2017; Feist, 2018). The introduction of data-driven decision making and increased automation availing of big data analytics, beacons, tracking, and automated recognition will have an increasing share in this. The development of new operational tools such as NATS’ Intelligent Approach (iA), a time-based separation tool, has significantly contributed to enhancing the resilience of the ATM operation delivery at LHR and other UK airports, as well as international airports (James, 2018; Peters, 2018). In summary, gains in efficiency and capital intensity bear the potential of eventually delaying infrastructure spending further—or to continue growing within the constraints of existing facilities, where expansion is not an option.
8.4
Summary
Since additional airport infrastructure is urgently needed to accommodate future traffic growth, this chapter introduced the total volume and regional distribution of current estimates—which are ever-increasing. The sheer volume is impressive, but realistic funding options are not (yet) in sight. A selection of major airport expansion projects in excess of USD 1bn was presented. Regional infrastructure requirements hence financing needs vary significantly, due to the underlying traffic development extensively discussed earlier. Recent and ongoing capex of airports were analyzed and put into regional and size perspective. During the period 2012 15, airports invested approximately USD 5 per WLU annually, which is equivalent to slightly more than 28% of total revenue on global average.
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A-CDM may be an adequate tool for improving airport efficiency, as elaborated on in the chapter feature. Once full integration of all stakeholders will be achieved, a higher utilization of existing assets may be expected. This should allow for higher traffic throughput and eventually delay additional investment in infrastructure capacity. “Sweating” the existing assets—instead of additional capex—will have a material impact on profitability via both lower unit cost and increased asset utilization at the same time.
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