Europe’s airports return to profitability

Europe’s airports celebrated a much-needed victory as they turned a profit of €6.4 billion ($7 billion) last year after suffering more than $54.8 billion in foregone revenues and accumulating losses exceeding $21.9 billion since 2019. . Despite the encouraging financial performance , European airports still face significant obstacles, with passenger volumes remaining 21% below pre-pandemic levels, Olivier Jankovec , director general of Airports Council International (ACI) Europe , said during an address at ACI’s 33rd annual Congress and General Assembly in Barcelona. [caption id="attachment_57133531" align="alignright" width="300"] Photo / Heathrow Airports Limited[/caption] Jankovec credited the financial achievement to airports implementing cost efficiencies amid inflationary pressures, and making substantial cuts to investments, reducing capital expenditure by $6 billion. He also attributed airport success to efforts to stimulate consumer spending, particularly in retail and food and beverage. Debt, inflation pose challenges The financial outlook for Europe’s airports remains uncertain and challenging due to a combination of structural cost increases and revenue pressures, Jankovec said. A major concern is the staggering debt and liabilities, which stand $51,5 billion higher than they were pre-pandemic. Unlike airlines, airports received significantly less financial support from governments, forcing them to accumulate debt, he said. Inflation has driven external costs to record levels, with operating costs like utilities and supplies rising by 78% and 62%, respectively, compared to pre-pandemic figures . Despite reducing investments, capital costs increased 22%, driven by rising interest rates and depreciation. Additionally, while airfares charged by airlines have surged by 32% compared to pre-pandemic prices, airport charges have only increased by 7%. Jankovec cautioned that the current dynamic is unsustainable, advising investors to exercise caution as the industry regroups and adapts. He emphasized the critical importance of airports’ ability to invest in decarbonization, resilience, digitalization and capacity enhancements. However, planned investments in airports have already been drastically reduced from $37.9 billion to $20.2 billion for 2023 and the subsequent two years, he said. To address these challenges, Jankovec advocated for adhering to the “user pays” principle, calling on regulators and governments to recognize the need for upward adjustments in airport charges to alleviate cost pressures and meet investment requirements. Prioritizing decarbonization The airport business model is undergoing a transformation driven by two interconnected factors: the post-COVID reality of the European aviation market and the imperative to decarbonize the industry. The European aviation market is witnessing relentless expansion by ultra-low-cost carriers while full-service carriers experience relative retrenchment and consolidation, Jankovec said. Concurrently, the industry faces a pressing need to decarbonize to maintain its operating license. Jankovec highlighted the ongoing competitive pressures on airports amid slower traffic growth. The key challenge for European airports lies in decoupling financial viability and profitability from volume growth to ensure resilience and futureproofing. Achieving growth in unit revenues will be crucial in this regard. In his concluding remarks, Jankovec outlined a new value creation model for airports based on sustainability, innovation and diversification. He emphasized that energy transition and decarbonization present not only challenges but also opportunities for airports to evolve into “ENERports.” These airports would act as energy hubs, providing green energy to meet the needs of air connectivity and their local communities. “The seismic shift in the economy as the decarbonization imperative gathers pace comes with the opportunity to redefine and enlarge the societal role and relevance of airports” Jankovec said. “The local value of an airport has long been part and parcel of our nations and regions. Now, we need to take this to the next level with the generation and supply of green energy for aviation and our surrounding communities alike.” This article was written using ChatGPT. Air Cargo Next uses published and non-published material, such as press releases and transcripts of live interviews, to generate AI-produced content. All AI-produced content is reviewed by Air Cargo Next editors. Join Air Cargo Next for the second Air Cargo Tech Summit on Monday, Sept. 18, and Tuesday, Sept. 19, at the Brussels Marriott Hotel Grand Place in Belgium. For more information on the summit and to register, click here .

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