By Debby McElroy
Most people don’t think of an airport as a business, but that is exactly what it is. It is a business that depends on passengers choosing to travel through that facility and airlines selecting that community to connect to their network. And it’s about controlling costs and increasing revenues. Roger Yu’s article in today’s USA Today provided good information on airport revenues in 2008 and we were pleased that data collected by ACI-NA was featured prominently in his story.
While the data from 2008 represent the most recent figures available at this time, it is important to remember that the economic situation for airports steadily declined in 2009. While airlines began to reduce flights in the last quarter of 2008 (with cuts of 6.0% for large airports in December 2008 versus December 2007, 14.1% for medium hubs, 9.1% for small hubs and 7.4% for non-hub airports), the hits kept coming in 2009. Airports have seen additional reductions, with airline schedules filed for December 2009 showing cuts of 1.3% for large hubs, 4.7% for medium hubs, 3.1% for small hubs and 6.4% for non-hubs, compared with December 2008.
Airports have responded to 15 months of flight cuts by decreasing their budgets wherever possible and in some cases laying off staff or implementing furlough days. About half of the 30 airports that participated in a short survey in June 2009 said they were cutting their existing 2009 budgets and the vast majority had also deferred capital projects. There was a scramble to raise non-aeronautical revenue, in order to maintain or even reduce airline fees to retain air service. Almost everyone raised parking and advertising rates and enhanced their terminal concession programs to provide more options for passengers, with the hope of retaining retail revenue.
We expect that the 2009 numbers will not be as positive as 2008, for both non-aeronautical and aeronautical revenue. At last week’s ACI-NA Concessions Conference, Stephen Palmer of Lonely Planet reminded us that globally inbound tourism is down 7%, meaning there were 40 million fewer travelers in 2009 than in 2008. When asked if business travel will recover, he noted that American Express says it’s “brutal” and predicts no pick up until end of 2010. Today Morgan Stanley released a report with information from its 2010 Corporate Travel Survey. The report said that “corporate travel managers expect overall travel budgets to be up modestly next year, on average. Specifically as it relates to air travel spending, the majority of surveyed dollars anticipate bookings and airfares will be “Flat” to “Up 1% – 5%” next year…” Also “Should economic activity surprise to the upside in 2010 relative to corporate travel managers’ current expectations, any adjustment to budgets will likely take at least 2 to 3 quarters.”