What is an airport?What is an airport?

What is an airport?What is an airport?

• Airport are complex industrial enterprises. They act as a forum in which disparate elements and activities are brought together to facilitate , for both passengers and freight, the interchange between air and surface transport.

What is an airport?What is an airport?

• An airport is essentially one or more runways for aircraft together with associated buildings or terminals where passengers or freight transported by the aircraft are processed.

What is an airport?What is an airport?

• Around the world the majority of airport authorities own and operate their runways, terminals and associated facilities, such as taxiways or aprons. But there are exceptions, notably in the United States where many terminals are owned by airlines, and in France where the ground facilities are sometimes owned by the government rather than the local Chambers of Commerce who run the airports.

What is an airport?What is an airport?

• Within the overall airport umbrella a wide range of services and facilities are provided which can be divided into three distinct groups: – essential operational services, – traffic-handling services and – commercial activities.

• Essential operational services and facilities– Such services are primarily concerned with ensuring

safety of aircraft and airport users. They include air traffic control (ATC) services provided at the airport to facilitate the approach and landing of aircraft, meteorological services, telecommunications, police and security, fire and ambulance services including those for search and rescue, and finally runway and building maintenance.

• Essential operational services and facilities– At the majority of European airports air traffic control

(ATC) and the associated meteorological and communication services are undertaken by government departments.

– The costs of such provision are handled in two ways First, at many airports such as the BAA airports (Heathrow, Gatwick and Glasgow), Amsterdam, Frankfurt, Geneva, Milan, Rome and Vienna the costs associated with these activities are not passed on to the airports. Nor do the airports themselves levy any charges on users for ATC, though the civil aviation authorities may do so. So there is no revenue generated for the airport.

• Essential operational services and facilities– With the increase in hijacking and terrorism, policing

and security is nowadays an airport service of considerable importance. Apart from the normal police duties required at any large public space, specialist staff are now also needed for passenger search, baggage search, access control and so on. activities but the distinction between the two is very blurred and so they are considered together.

• Essential operational services and facilities– Air traffic control services and policing/security are the

major operational areas where the most important discrepancies arise in their treatment by different airports. Differences associated with the other main operational activities, namely apron services, fire and ambulance services, cleaning and maintenance, are likely to be far less significant. Apron services such as 'follow me", marshalling, snow clearance and so on are nearly always undertaken by airport employees. Similarly fire rescue activities are provided by the airport authorities themselves at all but a few airports.

• Handling– A variety of handling activities take place at airports.

Some are associated directly with the aircraft itself and include cleaning, provision of power and loading or unloading of the baggage/freight hold. This is sometimes referred to as ramp handling. Other handling activities are more directly traffic related and cover the various stages of processing of passengers, baggage or freight through the respective terminals and onto the aircraft. Various parts of the handling process may be the responsibility of different authorities.

• Handling– At about half the larger European airports the airport

authorities have no involvement in any of these activities, which are provided by airlines or specialist handling agents. This is the situation that exists for instance at Amsterdam, Copenhagen, Dublin, Gatwick, Geneva, Heathrow, Marseilles and Nice. The airport authorities of some other UK airports, of Bordeaux, Lisbon and Stockholm provide a limited range of handling services required at an airport.

• Handling– But there are several airports that are very heavily

involved in providing such services. These include Paris, Frankfurt, Milan, Rome and Vienna. At the German airports and Vienna all the ramp handling is provided by the airport authority. Passenger and freight handling is undertaken by both the airport authority and the airlines at Frankfurt whilst at Vienna the authority itself provides freight handling. Passenger handling at Vienna is undertaken by both the airlines and the airport authority (who in fact subcontract Austrian airlines to carry out some of this work). Handling at many Italian airports is provided by the airport authorities.

• Commercial activities– At most of the European airports commercial facilities

are provided by concessionaires, who will be specialists in their own field of business. The airport authorities will collect concession fees or rents from these companies. But there are a few airport authorities who are themselves directly involved in running some or virtually all the commercial outlets.

• Commercial activities– In addition to the usual shops, restaurants, bars and

car-hire kiosks, some of the larger airports provide an extensive range of other services for their customers both within the terminal buildings and on airport land. The most notable example here is Frankfurt airport where the additional commercial activities include cinemas, bowling alleys, a discotheque, hairdressers, supermarkets and a conference centre and hotel. These are normally rented out as concessions.

Did you find out this?Did you find out this?

• one airport authority or operator can be very different from another and yet they are both in the airport business. Differences arise because most of the facilities and services previously mentioned may be provided by the airport operators themselves or they may all be provided by third parties, such as central or local government departments, airlines, specialist agents or private companies.

• Nearly every airport in Europe seems to be directly involved with a different mixture of services.

Did you find out this?Did you find out this?

• The extent of an airport authority's involvement in the various functions of an airport will obviously substantially affect the cost and revenue structure of each airport. It will influence the overall employee levels just as significantly.

• Moreover differences between airports will be further compounded if the airport authority is not charged the full cost of any service provided by a third party. Like policing service by another government department.

So, is airport like a business?So, is airport like a business?

How does a business survive?How does a business survive?

The world’s major airportsThe world’s major airports

Work Load Unit (WLU)Work Load Unit (WLU)

• The need to obtain a standard measure of output combining both passengers and freight pushed the airline industry from the early days to convert passengers into a weight equivalent, namely passenger tonnes and also passenger tonne-km. One passenger (80 kg) and their baggage (20 kg) were assumed to be equivalent to 100 kg so that ten passengers made up 1 tonne. The rationale was that an aircraft could only lift a certain payload and that a passenger and their baggage could be directly substituted by their weight in freight. Passenger and baggage weights are now assumed to be lower. Most airlines use a figure of 90 kg so 11.111 passengers are equivalent to 1 tonne.

Work Load Unit (WLU)Work Load Unit (WLU)

• The International Civil Aviation Organization (ICAO) used the airlines‘ original 10:1 relationship (i.e. ten passengers = I tonne) to produce its traffic units as a combined measure of airport passenger and freight output. An ICAO traffic unit is 1,000 passengers or 100 tonnes of cargo. Since this is difficult to conceptualize it seemed easier to use the passenger as the basic unit of output. It is for this reason that the Polytechnic of Central London in its airport studies since the early 1970s has used the work-load unit (WLU) which is equivalent to one terminal passenger or 100 kg of freight or mail. This maintains the original 10:1 relationship used within the airline industry and has been widely adopted by many airport authorities.

Not all airports equally profitableNot all airports equally profitable

Not all airports equally profitableNot all airports equally profitable

• While the financial results of many airports have been steadily improving in recent years not all airports are equally profitable (See Table 1.3). Moreover, while the capital-city or largest airports in many countries appear to be making profits, many of the secondary or regional airports are loss-makers. This is the case for instance in Canada, Australia, Sweden or Malaysia. But the published financial results of the larger and apparently profitable airports may in many cases mask the true economic performance even of those airports.

Why the cost of an airport may be Why the cost of an airport may be underestimated?underestimated?

• (A)• At many airports, particularly those still run by government

departments, grants received from international aid agencies or even the airport's own government may not appear as a cost in the airport accounts. Assets financed from such grants may not be charged a depreciation cost, as was the case until the mid-1980s at municipally owned British airports. Furthermore, such grants may be interest free. The failure to allow fully for capital costs, depreciation and interest is a feature of many airport accounts especially where airports are still operated as little more than government departments. At least six of the airports listed in Table 1.3 have inadequate or no provision for depreciation. Their apparent profitability would be significantly reduced if full and proper depreciation were charged. Another shortcoming in accounts may arise where government grants or subsidies are used to cover annual operating losses and no interest charges are borne by the airports for such 'overdrafts' or 'loans'.

Why the cost of an airport may be Why the cost of an airport may be underestimated?underestimated?

• (B)• Where services at an airport are provided by other

government department, for instance runway maintenance by the Public Works Department, the airport may in some cases not be charged for such services. These costs may well not be reflected in the airport's accounts. This is most likely to happen with the costs of building, taxiway or runway maintenance, with fire services, and with airport policing and security.

Why the cost of an airport may be Why the cost of an airport may be underestimated?underestimated?

• (C)• Finally, there is the tricky question of air traffic control,

notably the aerodrome approach and control services provided at an airport. Since these facilities are an integral part of an airport, should their costs and revenues not be included in the airport accounts in order to assess an airport's overall profitability? Where airports themselves provide such services, as at several UK airports, this is exactly what happens. But in many instances such airport-approach air traffic control is operated at a loss by the respective civil aviation departments. Including such losses in airport's accounts would reduce or eliminate many apparent profits.

What have you learned today?What have you learned today?

• What is an airport?• What kind of services and facilities are

provided in an airport?• What can be categorized as essential

services and facilities of an airport?• What can be categorized as basic

handlings of an airport?• What are the commercial activities in an

airport?

What have you learned today?What have you learned today?

• What is WLU? What is it used for?

• Why the cost of an airport may be underestimated?

Student’s presentation for the next weekStudent’s presentation for the next week

• Go on the internet, select an airport web site, browse it and then tell us how many services and activities do you discovered in the airport, particularly on those you think interesting.