How to make money through the terminal
How Airports Actually Make Money
Has it crossed your mind that some airports are actually working at a loss despite the high traffic that passes through them on a daily basis?
Well, the truth is that there are two types of air facilities — some that are run as successful commercial companies and others that are governmentally supported and operating with minimum or no profit at all. When it comes to the question of how much do airports make, the answer is more complex. Basically, airport revenue depends on many factors — size, passenger flowairline routes, type of planes serviced, trends in the global economy and last but not least on the local and regional regulations.
How do airports generate revenue? Aeronautical Revenue form a little more than half of the revenue, according to ACI Economics Report How exactly do airports make money?
Overview: How Does the Port Make Its Money?
There are two basic sources of income for an airport: one is the commercial activity and the other type is based on aeronautical and other revenue. What actually lies behind these terms?
The aeronautical revenue comes from the main activity of the airport — airport fees that include, terminal, landing and passenger fees, noise and environmental charges and other payments related directly to the operation of the airport. The commercial activities performed on the territory of the airport are also a great source of income. Here we include revenue from retail concessions to duty-free shops, restaurants, etc.
Advertisement: In both cases the bigger the airport is, the higher the revenue.
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Does airport ownership matter? There are privately-owned airports and airports that are run by governments but in both cases, they are operated as businesses aiming to generate money. When it comes to how airports make money, the ownership is not of great importance.
The principle described above is valid for them all. Advertisement: In the EU, more airports are becoming privately owned, according to another ACI report There is a difference however when the size of the airport is concerned.
Many small airports are owned by the government and charge much lower fees just in an attempt to attract the airlines.
How Do Airports Make Money?
An airport that has less than 1 million passengers per year makes much less profit than international airports such as Heathrow, for example. The USA is lagging behind when it comes to privatization of air fields. As a matter of fact, there is only one single US airport that reviews of work on the Internet without investment commercial flights, which is completely privately owned — that is Branson Airport in Southern Missouri, which has actually been struggling to make a profit and to attract airlines for several years now.
The greatest difference between the UK and the USA when it comes to ownership is that in the UK the biggest airports are privately owned, while in the US privatisation started with smaller air fields. In the UK ten of the fifteen busiest airports are privately owned and doing quite well in terms of profit.
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Advertisement: Do airports make money from passengers? Despite the fact that there are many cargo flights and cargo airports, the biggest revenue for airports comes from passengers on commercial flights.
At present, it serves flights daily, which equals to 78 million passengers flying through the facility each year. The airport receives a cut of every sale made by the various retailers on its territory.
Note, that this is one of the highest retail revenues per passenger in the world. So, where does the rest come from? The answer is simple — from flights.
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How much do airports make from flights? The greatest part of the revenue that an airport makes actually comes from flights. Here is a summary of what Heathrow receives every time a plane lands or takes off from the facility.
The price varies depending on the size of the plane and larger ones pay higher fees that cover runway time, gate space, check-in area. Departing aircraft are charged again based on the number of passengers and their destination. Naturally, airlines with frequent flights from Heathrow have contracts for discounted prices.
The revenue is used for covering the construction of the new Heathrow runway or other airport facilities improving its work. How can airports make more money?
Arriving passengers generate less income because they usually get off the plane, go through the airport and leave while departing and connecting passengers are those who stay at the airport and actually dine at restaurants or use the airport retail shops. So, trying to keep those passengers longer at the airport facility is a way to make them spend more. Faster check-in services equal more free time for shopping. Passengers required to arrive at the airport earlier also spend a longer period at the facility that can possibly turn into revenue.
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Servicing more how to make money through the terminal than domestic flights is the other key to generating more profit. For airports such as Heathrow, that operate close to their maximum capacity out possible flights per day the only option is to welcome larger planes carrying a greater number of passengers.
A smaller plane will take the same time on the runway as a larger one but generate significantly less revenue. How to make money through the terminal is the reason why Heathrow operates just 8 domestic flights and focuses on long-haul services while expecting how Brexit will affect its overall performance.
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This is in a nutshell how airports make money — by being run as a smart business regardless of their ownership.