Executive Summary

Key Note estimates that the revenues generated by UK airports increased by 7.9% in 1996 to reach £1.83bn. This increase in revenue was accompanied by a 4.9% increase in terminal passengers, a 4.6% increase in air transport movements and a 3.8% increase in freight tonnage.

Prices for commercial aircraft services and facilities are falling in real terms due to price controls and increased competition. The driving force for growth in airport revenues is the commercial revenue stream, particularly from retailing, rather than the aviation income. Key Note estimates that the commercial share of airport revenues increased from 45.9% to 47.7% in 1996. At its present rate of growth, commercial revenues will overtake aviation revenues within the next year or so.

The development of commercial revenues at airports is under significant threat if the abolition of intra-European duty-free sales goes ahead as planned in June 1999. The International Duty Free Confederation (IDFC) estimates that landing charges for European Union (EU) flights will have to rise by 30% to compensate for the loss of duty-free sales. The knock-on effect will directly push up prices within airport retail operations and indirectly put up ticket prices and the prices of some goods, such as prestige perfumes, outside airports.

Since the 1996 Airports Authority Act, the UK airports industry has embarked on a slow process of privatisation, consolidation and internationalisation. To some extent, the industrial development of UK airports is being dampened by the duty-free issue, but it is also greatly influenced by the lack of a complete Open Skies policy, particularly between the US and UK.

As the outcome of the duty-free issue and liberalisation of the air routes becomes clearer, successful UK airport operators will focus more on international joint ventures and take-overs of overseas airports. It is likely that within the next 15 years, European airports will be dominated by around ten major airport operating groups.

The largest airport operator in the UK, BAA PLC, commands around 75% of all UK airport revenues, and is ideally placed to take the airport privatisation opportunities opening up in the US, Australia, South Africa and some European countries as it already has a international foothold and a proven record of success in airport management and development.

Key Note forecasts that airport revenues in the UK will increase by 18.5% in real terms between 1997 and 2001 to reach £2.28bn.

More Information

  Denotes a required field.