Remarks of Angela Gittens Director General, ACI World – Informal briefing of the Council of ICAO on the state of the industry (Montreal, Canada)
Hello and thank you for inviting me to give you an update on the state of the industry from an airport perspective.
What I’m going to go through are: traffic statistics from our soon-to-be-released World Annual Traffic Report; economic data from our upcoming Economics Report; and then an update on some activities at ACI.
First: traffic. Keep in mind that as we are counting the passenger at both the departing and arriving airport our numbers will be about double those of IATA.
In spite of worldwide economic uncertainty and political instability in many countries in 2013, airports accommodated over 6 billion passengers. Passenger traffic grew at 4.8% vs. 4.4% in 2012, and cargo traffic remained sluggish, with under 1% growth, although that was almost twice the growth in 2012.
Continuing the trend, aircraft movements grew at practically the same rate as the previous year at 0.7%, reflecting continued capacity control by the air carriers pushing up load factors.
The overall World statistics hide some widely divergent experiences by region. As we see here, the Middle East, Asia and Latin America-Caribbean regions took the lead in passenger growth with 9.8%, 8.7% and 6.1% respectively, while Europe was more modest at 3.1%, again masking large differences between Western Europe and countries like Turkey and Russia. North America had slight growth while Africa was flat, reflecting the downturn in large airports in Egypt offsetting gains in other countries.
The regional story is similar when we look at cargo. Although Asia-Pacific only grew 2.1% in cargo, it managed to pull the rest of the world into positive territory due to the fact that it handles 38% of the world’s total cargo throughput. Cargo in the Middle East region grew 5.0% in 2013, and while the Latin America-Caribbean region was down 1.5% as compared to 2012, the overall picture shows us that the vigorous activity in emerging markets is driving growth in the air transport industry.
With 43% of the world’s population and 51% of the world’s GDP, we have reason to expect that emerging markets will continue to perform strongly. The combination of large and growing populations of many of these emerging economies combined with rising incomes represents opportunity for aviation. As many emerging economies have huge demographic bases, rising incomes would mean that a high proportion of their populations would become middle-income earners. While passenger traffic in the emerging aviation markets makes up 33% of global passenger traffic, ACI forecasts that in less than two decades these markets will represent as much as 45% of global passenger traffic.
We can see this starkly looking at the period from 2000 to mid-2013, where the compounded annual growth rate for emerging markets and developing economies in terms of passenger traffic was 8.2% compared to 1.5% for advanced economies, reflecting the relative maturity of the latter’s aviation markets.
Based on reports from over 1,105 airports worldwide, ACI’s preliminary passenger traffic results for 2013 show that while the top six busiest airports remained unchanged as compared to the previous year, there are some exciting growth stories coming from emerging markets. Although Atlanta (-1.1%) remains the world’s busiest airport, Beijing (+2.2%) continues to close the gap in second position. London-Heathrow (+3.3%) remains in third while Tokyo-Haneda (+3.2%) preserves fourth position.
One of the fastest-growing airports in the world is Dubai, moving from 10th to 7th rank. Dubai’s passenger traffic grew by over 15% in 2013. Istanbul (18th rank) and Malaysia (20th rank) were two other airports experiencing double-digit growth rates, increasing by 13.6% and 19.1% respectively.
Comparing the latest rankings with those of a decade ago, we can see that here too emerging market airports are making their mark, with huge jumps from Incheon, Kuala Lumpur, Istanbul’s Ataturk, Guangzhou, Changi, Soekarno-Hatta in Jakarta, Dubai and Beijing Capital. To give you an idea of the impressive growth we’re talking about, ten years ago Dubai and Beijing Capital occupied the 54th and 32nd ranks respectively. Jakarta represents another major accomplishment, moving from 45th to 10th over the last decade.
Let me turn now to airport economics. As I mentioned, we are about to release the 2013 ACI Airport Economics Report, which contains data from 683 airports that handled nearly 4 billion passengers, about 70% of worldwide passenger traffic in 2012. This is the most comprehensive gathering of data on the business of airports.
Industry income as a whole in 2012 grew by 4.4% over 2011, reaching over US$117 billion. Regionally, European airports held the greatest percentage of total global airport income at 38%, with Asia-Pacific in the number two spot with 27%, followed by North America at 22%.
The main sources of aeronautical income are from charges related to aircraft and charges related to passengers. The worldwide ratio of aircraft-based revenue to passenger-based revenue has remained relatively constant over the last three years, with passenger-based revenue having the greater proportion.
Aeronautical revenues alone are not sufficient to cover the cost of running an airport. With market constraints on airport charges, airport managers have increasingly focused attention on generating non-aeronautical revenue. The move to revenue diversification has been a key to the financial resilience of airports and has been the primary source of infrastructure financing support.
Retail continues to be the leading source of non-aeronautical income for airports at 29% of the total. Property income and rent is tied with parking as the second-largest source of non-aeronautical income at 20% each.
And there are some pretty big regional differences, with North American airports generating well over half of their non-aeronautical revenue from parking and car rentals, while retail remains king in the Middle East and Asia.
In terms of bottom lines, the industry as a whole was profitable with a net profit margin of 13%, but profitability is primarily generated from the 20% of airports that carry the bulk of passenger traffic. It turns out that 80% of airports with fewer than a million passengers posted an average net loss of 6%. Worldwide, 80% of airports service fewer than a million passengers a year.
Indeed, 67% of airports globally operate at a net loss. The reason is that size matters. Due to the large percentage of fixed costs associated with major infrastructure investments, a critical mass is necessary to turn a profit. Airports spent an estimated US$43.6 billion in 2012, down 8% from the previous year.
Looking from the perspective of return on invested capital, which in many ways is more descriptive of airport financial viability, airports worldwide had an average return on invested capital of 5.9%, with the highest return generated by airports with passenger volume between 15 and 25 million. Airports with fewer than one million passengers had a negative return on invested capital of -1.1%.
Collecting and analyzing data is a large part of what we do. Let me now talk about what else ACI has been working on.
I’m happy to say that we have enjoyed more collaboration than ever. Together, ACI, ICAO and other stakeholders have made great progress on issues that affect airports and the industry at large, such as recognition of the central role that airports play to the development of better security; the need to develop a global market-based measures solution as a part of ICAO’s policy response to climate change; guidance on Runway Safety, including Local Runway Safety Teams; recommendation to involve airport operators when considering Performance-Based Navigation approaches; the publication in 2013 of a new edition of Annex 14, Volume I – Aerodrome Operations and Services, and the new Annex 19 – Safety Management; and continued development of these documents, such as the endorsement in April by the Aerodromes Panel of reduced taxiway separation standards. These standards include a 6.5-meter reduction for Code F aircraft and a 4-meter reduction for Code E aircraft. We are also pleased at the formation in April of a task force of the Aerodromes Panel to make recommendations on a regulatory package for the safety, efficiency and standardization of ground handling operations. We are similarly pleased about the formation in June of a secretariat group to develop guidance material on Airport Collaborative Decision Making (A-CDM).
Also on the topic of collaboration, ACI signed its first-ever Memorandum of Understanding with IATA last October: it was signed during the ICAO Assembly under the watchful eye of the ICAO President and Secretary General. The first projects under the MOU are a security access and egress project; cooperation on common use standards; automated border control; the development and maintenance of technical specifications for data exchange; ground handling best practices; and Smart Security.
This latter, Smart Security, is a blend of the former ACI Europe Better Security project and the IATA Checkpoint of the Future project. The steering body of the project consists of equal numbers of airports, airlines and governments, with ACI and IATA forming the Secretariat.
We are looking to collaborate more on conferences and with ICAO, IATA and others on selected events that can benefit our respective members, and to reach outside of the industry to kindred spirits like the World Travel and Tourism Council, with whom we have joined on projects of common interest.
And, of course, there is our longest-running collaboration with ICAO—training. ACI has developed an extensive training capability, ranging from single-discipline competency coursework, some with ICAO such as aerodrome certification training, to senior management coursework, including the Airport Management Professional Accreditation Program (AMPAP), run jointly with ICAO. Last year we developed a full on-line curriculum for an Airport Operations Diploma Program to address the call for affordable, multi-disciplinary education to develop and cross-train mid-managers to succeed in the evolving airport business model.
ACI Members develop and operate some of the busiest, most extensive and complex infrastructure in the world. From the beginning of ACI, we have promoted aerodrome safety by developing guidance materials in our strong Committees at World and Regional levels and via knowledge sharing from our conferences. Now, ACI has embraced the more direct, hands-on approach embodied in the APEX Excellence in Safety programme, where we currently have 19 commitments for APEX reviews this year and over 55 individual airport and airport operators serving as Safety Partners. We have had airports go on to achieve certification after having had an APEX in Safety peer review. We have also had airports that are already certified request peer reviews on their journey of continuous improvement. It is a programme for all airports in all parts of the world.
The programme has attracted the interest of governments that want to support the effort, that view it as a solution for them. ICAO of course has been a contributor from the very beginning, and now the U.S. Federal Aviation Administration has committed to providing inspectors, the Turkish Civil Aviation authority is participating and the European Civil Aviation Conference will likely play a role.
We have developed a set of Key Performance Indicators for airfield safety, which is a significant milestone for our sector since airports are notoriously difficult to compare and we tread carefully whenever we advance KPIs. But this will be a valuable tool for the APEX in Safety programme and a tool for all airports in their efforts for continuous improvement.
Continuous improvement goes beyond safety. We are able to assist airports with their efforts on continuous improvement in environmental mitigation with the ACI Europe Airport Carbon Accreditation programme, which now reaches three Regions and covers 21% of worldwide passenger traffic and 76% of European passenger traffic. We can expect that the programme will soon be available in every Region. For smaller airports, we have the Airport Carbon and Emissions Reporting Tool (ACERT), developed by Transport Canada, which can also serve as an entry level to the Carbon Accreditation programme.
We are now also able to offer objective evaluations to airport managers for their Human Factors in Security and their IT Security through a benchmarking tool. This tool, once proven, will be replicable for other benchmarking applications. And we will be collaborating with ICAO and industry partners in an initiative on Cyber-Security.
So, that’s an update on the state of the airport industry and a bit about how we’re working with ICAO and industry partners on issues that affect us all. I’m looking forward to working more closely together in the future for the betterment of the industry at large.