Latest News
HomeAssociationsEurope’s airports report strong growth, but rising costs & emerging risks
Air travel

Europe’s airports report strong growth, but rising costs & emerging risks

Frankfurt Airport.

Europe’s airports welcomed more than 2.23 billion passengers in 2017 – an absolute record. Over the past 5 years alone, an additional 513 million passengers have passed through their doors.

BRUSSELS – Brussels becomes the Global meeting point for the airport industry this week, as the joint ACI Europe & World Annual Congress & General Assemblies takes place today and tomorrow, hosted by Brussels Airport. This morning, ACI Europe addressed the immediate and longer-term outlooks for its 500-strong airport membership spanning 45 countries.

Air traffic developements and airport experiece
Europe’s airports welcomed more than 2.23 billion passengers in 2017 – an absolute record. Over the past 5 years alone, an additional 513 million passengers have passed through their doors. Demand this year remains strong, with passenger volumes having expanded by +6.9% since January.

Olivier Jankovec, Director General ACI Europe said “That kind of growth comes with significant operational challenges and puts a lot of pressure on our staff and facilities. As Eurocontrol’s latest data shows, congestion is becoming an issue at an increasing number of airports across Europe – especially at peak times. Yet, it is remarkable that European airports have not just maintained but actually improved quality for passengers. Our customer satisfaction ratings have increased in each of the past 5 years for all aspects of the airport experience¹.”

Market (im)maturity… but fading momentum
Passenger traffic at Europe’s airports is set to more than double by 2040 (+108%), driven by new fundamentals. These include changing consumer behaviours on the back of the emergence of ultra-mobile Millennials and affluent & healthy retired baby boomers – as well as rising inbound demand from emerging markets (the new Global middle class) and new aircraft technology enabling direct connectivity developments.

Jankovec commented “These new fundamentals are challenging the status of Europe as a mature aviation market. They are pointing to significant growth potential in the medium to long-term. The fact that last year EU airports alone were the largest contributors to global aviation growth along with Chinese airports is already reflective of that². However, the short-term is all about downside risks – with rising oil prices, trade wars and a possible economic deceleration. This is testing the resilience of our growth dynamic.”

Financial performance and increasing costs
The financial performance of Europe’s airports has kept improving, with the industry’s return on invested capital (ROIC) standing at +8.5% – up from +5.1% back in 2011. However, EU airports keep underperforming (+7.1%) their peers in other regions, even more so when compared to airports in emerging markets (+10%).

The key improving factors have been efficiencies and cost reduction – not revenue growth. These have pushed operating costs per passenger down by an impressive -17.8% since 2011, a reflection of increasing competitive and shareholder pressure.

Jankovec said “Our costs are set to rise in the coming years. First, because if cost cutting is the right thing to do, there is only so much you can squeeze the lemon when traffic keeps growing. Second, because we are facing a sharp increase in security costs – with an estimated 15bn euros investment between now and 2022 in new screening technology. And finally, because of rising interest rates. Airports are very capital intensive and with the industry’s debt standing at 86bn euros, the financial impact will be significant.”

Challenges to airports’ business model
Looking at revenues, airports are also facing a new reality. The fact that Low Cost Carriers are driving traffic growth comes with significant pressure on aeronautical revenues (airport charges). The convergence of airlines business models (hybridization) and consolidation will only reinforce these competitive pressures – including for larger airports.

Jankovec said “We now live in the era of rebates, incentives and ‘marketing support’ for airlines. 90% of Europe’s airports offer discounts to attract, retain and grow air traffic. This is truly emblematic of how the airport-airline relationship has changed.” 

But airports’ commercial revenues (from retail, food & beverage, real estate, parking, car rental and advertising) are also under threat. The combination of less affluent but more frequent travelers, endless online retail & advertising competition, restrictive airline cabin-bag policies and shared urban mobility are all combining to dilute these revenues. Since 2011, airports commercial revenues per passenger have fallen by -4.8%.

Jankovec concluded “Airports have relied on ever increasing commercial revenues to offer airlines competitive user charges – and fill the 4bn euros gap left by these charges to cover the full costs of operating and developing their facilities. The headwinds we now face in growing these commercial revenues are clearly challenging our business model. Along with the wider impact of the mega digital platforms, this is something airports and airlines should look at together. Not to share the pie – but to look at how we could grow the pie by sharing data and leveraging its content through joint commercial initiatives.

New air connectivity ranking for Europe's airports released
At the 27th ACI Joint Europe & World Annual Congress ACI Europe released its latest annual Airport Industry Connectivity Report – with insights into the airports providing the best air connectivity to their communities & transfer passengers.

The EU Aviation Strategy launched by Transport Commissioner Violeta Bulc in December 2015 put a spotlight on the value of air connectivity for citizens and for the economy.

ACI Europe uses data harvested by SEO Amsterdam Economics to measure and analyse the level & quality of air connectivity in 3 key metrics:

  • Direct Connectivity – the number of direct air services offered by an airport.
  • Indirect connectivity – this measures the number of places people can fly on to, through a connecting flight at hub airport from a particular airport.
  • Hub connectivity – the key metric for any hub airport – it measures the number of connecting flights that can be facilitated by the hub airport in question, taking into account quality of connecting times.

Direct connectivity
Frankfurt Airport is now the No.1 airport in Europe in terms of direct connectivity, having jumped from 3rd position last year, as a result of significant network expansion of both the Lufthansa Group and Low Cost Carriers.

Amsterdam Schiphol now moves down to 2nd position for direct connectivity in Europe – still up from the 6th position it held back in 2008.

London Heathrow went from the 2nd to the 3rd position also not making any gains in direct connectivity this year (-0.2%) to due to lack of capacity.

In the past year, the UK is the only country in the EU to record a loss in direct connectivity (-0.8%).

Past 5 years
Here is a snapshot of the Top 5 airports across ACI’s 4 traffic groups, that have registered the highest growth in direct connectivity over the past 5 years:

Top 5s in growth in Direct Connectivity (2018 vs 2013)

Group 1 (over 25 mppa)

Group 2 (10 to 25 mppa)

Istanbul SAW +64.1%

Lisbon           +51.3%

Moscow SVO  +50.8%

Antalya         +45.3%

London STN      +43%

Berlin            +78.6%

Athens          +70.2%

Porto            +66.6%

Tel Aviv         +64.3%

Gran Canaria  +61.9%

Group 3 (5 to 10 mppa)

Group 4  (0-5 mppa)

Keflavik         +132.1%

Larnaca           +98.5%

Fuerteventura  +74.7%

Heraklion         +68.2%

Sofia                +60.8%

Balikesir        +1050.7%

Osijek             +763.5%

Craiova           +492.7%

Naxos             +322.2%

Nis                 +319.2%

Hub connectivity
Frankfurt also remains the airport offering the best hub connectivity not just in Europe, but also worldwide – having increased its hub connectivity by an impressive +12.8% over the preceding year. Amsterdam Schiphol also remains No.2 followed by Dallas Fort Worth, Paris CDG and the busiest airport in the world, Atlanta.

Smaller and nice hubs registered growth in connectivity at twice the pace of the major hubs, over the past 10 years – pointing to intensifying competition in the hub segment.

[1] Based on survey results from the ASQ programme (Airport Service Quality).

[2] In 2017, Chinese and EU airports respectively accounted for 22.8% and 20.4% of Global air passenger growth. North American airports (US & Canada) accounted for 11.2% and ASEAN airports for 10.8%.

Co-Founder & Chief Editor - TravelDailyNews Media Network | Website | + Posts

Vicky is the co-founder of TravelDailyNews Media Network where she is the Editor-in Chief. She is also responsible for the daily operation and the financial policy. She holds a Bachelor's degree in Tourism Business Administration from the Technical University of Athens and a Master in Business Administration (MBA) from the University of Wales.

She has many years of both academic and industrial experience within the travel industry. She has written/edited numerous articles in various tourism magazines.

28/03/2024
27/03/2024
26/03/2024
25/03/2024
22/03/2024
21/03/2024