Passenger growth major airports Europe falling behind

08 October 2015 Consultancy.uk

21 major European airports have, for the most part, been able to cut costs while passenger numbers are on the increase, boosting EBITDA growth, research by Strategy& finds. Although the airports saw an average 15% increase in the number of passengers, their growth remains below wider European (at 24%) and international (at 32%) increases experienced between 2010 and 2014.

Airports are an important commercial establishment, providing easy access to regions for both business as well as pleasure seekers. Airports themselves are often run as commercial enterprises by large conglomerates with a wide range of other entities under management. In a recent study from Strategy&, in a report titled ‘European airport operating cost benchmarking, 2010–14*’, the consulting firm explores the commercial activity of 21 major European airports. The report uses the annual reports from those controlling the airports. Estimates are made in operating profiles where accounts do not provide clear separation from wider business activities of conglomerates.

Airports in study

Passenger numbers
The number of passengers passing through 21 of Europe’s major airports is growing steadily. Brussels and Geneva airports saw the largest growth between 2010 and 2014, up 28% each to 21.9 million and 15.2 million respectively. Oslo airport saw 27% more passengers to hit 24.3 million in 2014, while Amsterdam saw the number of passengers grow 22% to 54.9 million. The largest airport in Europe is London’s Heathrow, which grew 12% to 73.4 million, followed by Paris Charles de Gaulle at 63.6 million. Two airports saw decreases in numbers; Athens experienced a decrease of 1% in total passengers to 15.2 million and Stansted a decrease of 4% to 18 million.

Although passenger growth stood at 15% between 2010 and 2014 on average for the 21 airports, this is 9% below the passenger growth across all European airport passenger numbers – at 1.8 billion per year. Globally, passenger numbers grew even faster, up 32% to 6.6 billion in the same period.

Passenger traffic by airport 2014

Operating cost per passenger
The operating cost per passenger varies considerably across different airports. In a bid to remove the local macroeconomic factors affecting different operators, the consultancy adjusted estimates for expenses related to personnel, contracted services, and energy and utilities, indexing everything to London’s Heathrow. According to the standardised operating costs, Munich has the highest operating cost at €17.2 per passenger in 2014, followed by the benchmark Heathrow at €17 per passenger. In Paris Charles de Gaulle a passenger costs €16.1 in operational costs and in Amsterdam €12.5. The lowest operating costs are booked in Copenhagen and Dublin, both at €6.6 per passenger.

Operating costs have been falling steadily between 2010 and 2014, according to the report, with Dublin shaving 20% off the total cost per passenger. Hamburg managed to cut costs by 17% and Amsterdam by 13%. On the other side, Oslo saw its costs increase by 15% and Manchester by 14%. Across the board operating cost dropped an average of 7%, with the improvements in operating efficiency and growth in passenger volumes cited as the most important contributing factors.

Change-in-operating-cost-per-passenger

Revenue per passenger
The revenue per passenger is also assessed in the report. London’s Heathrow attracts the most money from passengers at €43.3 per passenger on average, followed distantly by Munich at €31.8 and Zurich at €31.1. Revenue from passengers in Amsterdam stands at €23, while the lowest revenues per passenger are found at Edinburgh and Birmingham, at €13.5 and €15.3 respectively. 

According to the report, the biggest factor correlated to low passenger revenue is low passenger volume. The proportion of transfer passengers, the proportion of premium passengers, and the number of runways are all correlated to higher revenues. Large hubs have the advantage that they can use their high demand to levy tariffs which drive high revenue, while their larger terminal size allows them to increase non-aeronautical revenue.

Revenue growth has stayed relatively flat over the period 2010-2014, with Athens and Hamburg seeing the largest falls, at 12% and 11% respectively. Heathrow saw the largest increase, at 17%, mainly on the back of increases in tariffs.

Revenue per passenger

EBITDA per passenger
The EBITDA** garnered per passenger is by far the highest at Heathrow, at €26.3 per passenger, followed by Zurich at €16. Athens, while coming at the bottom in most metrics still generates a healthy €13.4 from each passenger. Brussels Airport pulls in €13 and Amsterdam manages a middle of the road €9.7. Luton comes in last at €5.2.

EBITDA has gone up and down based primarily on cost reductions rather than increases in revenue per passenger – with the major exception Heathrow. Heathrow has seen its EBITDA jump 41%, by far the largest jump. Vienna saw an increase of 33%, followed by London Gatwick, up 27%. The biggest drops were at Oslo Airport, down 15%, and Manchester, down 13%.

EBITDA per passenger

* Authors of the report are John Potter and Andre Medeiros, both London based partners.

** EBITDA stands for earnings before interest, taxes, depreciation, and amortisation.

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