The airport business is experiencing unprecedented change. The world’s airlines are undergoing global liberalisation and consolidation, and competition between airports is increasing. Tremendous investment programs are required simply to keep pace with the projected growth in air travel demand, while governments are reducing their funding for airport projects. These factors are literally changing the face of the world’s airports.
Today, only an estimated 2 percent of the world’s commercial airports are genuinely managed or owned by the private sector. However, an expanded private sector role is inevitable. Its evolution is seen in varying stages around the world, in opening up ground handling to additional competition, outsourcing activities such as facility management, developing long-term management contracts, initiating public/private joint ventures, Build Operate Transfer (BOT) project financing, and in the case of a few airports so far, outright equity offerings.
New airport transactions are proceeding at an unprecedented pace, and so far, no major transaction has failed. New players are entering the global airport management market, driving the stakes (and risks) even higher. As with any major new product, however, the window of exceptional opportunity lasts a limited time, as forward-thinking business leaders claim their stakes across a new airport management value chain.
Air transport is a growth industry. While global GDP doubled between 1970 and 2000, passenger traffic quadrupled, while cargo grew six times. Governments across the world have found it hard to sustain the capital investments necessary to cope with this growth. Hence, the need to bring private players into the airport infrastructure space is driven substantially by fiscal constraints, and partly by ideology. Key drivers affecting the air traffic volume
The five fundamental traditional drivers of long term international air passenger growth are 1.GDP growth:-,
2. political disruption,
3. cost changes (e.g. fuel costs),
4. service quality changes and
The net impact of all of these factors could be traffic growth at 80 percent of what it was in the past; markets forecast to grow or actually growing at 4 percent will grow at 3.2 percent. This, could occur with slowing trade growth, slower GDP growth, higher costs from fuel and taxes and a slowdown in route development, this in the business as usual model
Relationship between air transport growth and GDP
Air Transport can play a key role in economic development and in supporting long-term economic growth. It facilitates a country’s integration into the global economy, providing direct benefits for users and wider economic benefits through its positive impact on productivity and economic performance Investment in aviation can generate significant wider economic benefits. There are significant and positive benefits generated by investment in aviation infrastructure and services, particularly in developing economies. By increasing a country’s connections to the global air transport network, investment in aviation can boost its long-term productivity and economic growth.
The business model for airports has changed. The regulatory framework for Airport operations, planning, and capital projects was instituted when the airport’s principal mission was to provide basic infrastructure for airlines and other aeronautical users. Today airports support a wide array of businesses, more like an industrial or commercial center or in some cases, a small city. The major areas of changes are :-
Privatization of airlines
Privatization of state owned airline has been one of the prominent transformations in international air transport, where airlines in all but a handful of states had been government...