How Do Airports Make Money In 2020?
The drop in global passenger demand and travel restrictions continue to rock the aviation industry. Like airlines, airports… The post How Do Airports Make Money In 2020? appeared first on Simple Flying.
The drop in global passenger demand and travel restrictions continue to rock the aviation industry. Like airlines, airports have been seeing revenue fall over the last few weeks. With footfall likely to be low for much of the year, income is going to be minimal.
The standard approach
Usually, airports rely on passengers for a regular flow of revenue. They generally take a cut of every sale made by a retailer, which is why duty-free is often pushed. It costs around $1.5 billion to run Heathrow Airport each year, and with around 80 million passengers passing through, the London hub relies on each person to help it cover its fees.
On average, Heathrow’s sales cut is split by the following:
- Restaurants – $5.15.
- Retail shops – $5.15.
- Parking lots – $2.03.
- Car rentals and VIP lounges – $3.04.
- Express train to London – $2.15.
The airport also makes an average of $9,500 for each aircraft that lands. The charge depends on the size of the plane. For example, an operator of a Bombardier Dash 8 will pay just $999, while a company landing a Boeing 747 will fork out $11,600.
However, with around 75 percent of global flights grounded compared to this time last year, airports will be losing out on considerable chunks of revenue due to the lack of passengers and aircraft coming in. To help control costs, Heathrow is adjusting its runway usage from its usual two, down to a single strip.
Last month, Airports Council International (ACI) reported that airports in the United States are expected to lose $14 billion due to operational inactivity. ACI North America’s President and CEO Kevin M. Burke spoke of the damage that the downturn is causing. He feels that the struggles will continue long into the year.
“Our loss estimates are getting worse by the day as airports grapple with this abrupt, unexpected decline in passenger and cargo travel,” Burke said, as reported by the ACI.
“We fully expect these numbers to deteriorate even more as the financial pressure mounts on airports across the US. That is why we have asked for federal help so that airports get through this unprecedented virtual shutdown in American aviation.”
As a result of these losses, these airports are set to receive a total of $10 billion from the US government. This funding is from the CARES program and will assist them in covering operational costs, such as salaries.
With a source of money confirmed, for the time being, these airports are in a better position to focus on ensuring essential operations run smoothly. Several carriers are operating reparation flights, services carrying medical personnel, and cargo shipments. While this activity still goes on, airports can maintain some degree of income.
Shipping on the rise
These cargo operations have become the focus of many airlines in recent weeks. Therefore, airports will also be shifting their approach as these services will help give them part of the all-important funds that they need at the moment. The Guardian reports that Heathrow cargo flights are rising by 500% during the passenger downturn.
Just like airlines, several retailers have also been forced to be temporarily out of action recently. Therefore, members of the public are turning to online orders to receive their goods. Subsequently, there is a renewed demand for shipping solutions, and airports are set up to help fulfill it.
Ultimately, even though passenger activity at airports is at an extreme low, airports are essential facilities to keep economies moving. Therefore, governments will be keen to help them receive funds while times are uncertain. Income from cargo operations and critical commercial flights, along with state aid, will help ensure that they survive the 2020 lull.
What are your thoughts on the dire situation that airports face this year? Have you seen any noticeable changes at airports on your travels recently? Let us know what you think of the situation in the comment section.
The post How Do Airports Make Money In 2020? appeared first on Simple Flying.