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AVIATION DIGEST: How airports make money

FILE PHOTO: Entebbe Airport is the main entry point into Uganda for planes

The COVID-19 pandemic has fundamentally injured airport business

AVIATION DIGEST | JARED KALERA | The media has been awash lately with stories about African airports being taken over by China for none payment of debt.

While the stories have been disputed by government officials, the debate about the debts continues in the media. Which leads one to ask, can’t these airports make money to pay up for these loans?

How do airports actually make money?

Airports are big businesses without which air transport would be difficult to manage. They are mostly state owned although there are several around the world that are privately owned.

According to ‘US Global Investor’, the cost to operate an airport in 2020 was approximately $13.55 per passenger.

Airports make money from aeronautical and none aeronautical commercial sources, which are affected by a number of factors that affect their ability  to make money.

Currently the COVID-19 pandemic has fundamentally injured airport business. In normal times, route planning, passage flows, international and local regulations, global economic trends all have an impact.

There are four areas that airports rely on for revenue.

First, airports make money in real estate business. They hire out offices, restaurants, hotel and other space to different organizations and entities desiring to do business at the airport.

They also let out retail shops and duty-free centers . These all pay a fee to use the spaces

Airports are good places to advertise at ( none operating activities). Companies pay lots of money to the airport authorities to advertise within and without the airport premises.

On top of all this, there are parking slots for thousands of cars, vans and buses that deliver and pick up travellers.  If you do not have someone to drop you off at the airport, you will most likely leave your car at the airport for the duration of your trip and pay up when back.

Every car getting into the airport ground picks up a ticket which must be paid for on exit.

Most big airports have trains, bus and valet services which all yield income, plus cultural centres, conference facilities , tourism areas, theme parks  andrecreation centers.

Secondly, airports make money from percentages levied on every item sold at retail and duty free centres.

Duty free centres are strategically placed after check-in and within the waiting areas for  departing passengers. Many airports will normally not announce departure gates until about 45 minutes or so, so that passengers are kept around the shops.

Check-in times are limited so that passengers spend longer hours before boarding. These retail concessions earn the airport a handsome income per sale made.

Third, is cargo and storage handling.

Entebbe International Airport handled 5,371 metric tonnes of cargo in October 2021 which was still below expectation.

During the pandemic, airports changed their attention to this other side of business to salvage themselves as they sub-managed relief drugs needed around the world.

Airports have cargo handling hubs and these make lots of money depending on their locations in the world. Tons and tons of goods go through airports and services rendered are paid for .

Fourth, are earnings from aeronautical services. These are services which facilitate the comings and goings of crafts.

Crafts pay landing fees, parking fees depending on the size and weight of the craft and time taken on the ground. Passenger gates as opposed to remote stands, runway space and check in areas, terminal services , aprons …..are all paid for. However for crafts leaving, revenue is made from each passenger’s ticket.

Entebbe International Airport in October 2021 had 100,455 passengers of whom 54,656 were departing while Jomo Kenyatta International Airport had 1.6m passengers in 2020 compared to 5.8m in 2019 which was a 72% drop.

Long haul tickets make more money compared to short ones.

With the low traffic currently exacerbated by the Omicron variant of COVID-19 and a slump in global Economic activities, airports will have to employ all means not only to make the revenue but also to keep passengers traveling.

It will be much more difficult in Africa where air transport is playing catch-up on the global market. So can our African Civil Aviation’s salvage their Airports?

Your guess is as good as mine.

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Do you know how airlines decide where to fly? Our next article will explain that.

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Jared is an aviation researcher and trained motor rally safety official. He is the General Manager Legal Compliance and Human Resource, Muttico Technical Services Ltd and co director at Amputee Self Help Network Uganda.

 

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