Analysis Reports

London Luton Airport, situated close to the centre of a declining industrial town north of London, has become the UK's fifth busiest airport and retained that accolade, built mainly on low cost and charter traffic to vacation destinations.

It was proposed as a four-runway alternative to London Heathrow Airport when the Airports Commission deliberated on that matter in the mid 2010s, but that was quickly swept under the carpet.

Subsequently, it was identified for more modest expansion and maximum passenger growth from 18 million annual passengers to 32 million.

The government has just agreed to support that application, and then almost in the same breath, announced the development of a huge US-owned theme park in the southern suburbs of Bedford - an inconspicuous county town 20 miles (32km) to the north of the airport.

Luton will be the closest commercial airport to the UK's first US-owned theme park when one is built by the Universal Music Group, to open in 2031.

Now calculations have to be redone, and the results recalibrated.

How will this amusement park, which is expected to receive 8.5 million guests in its first year - half of Luton Airport's annual passenger throughput in 2024 - influence demand there? Will the latest cap be adequate? How many visitors, from home and abroad, will use other airports? Or travel by rail or other surface methods?

And it hasn't even got planning permission yet (although the government will undoubtedly try to 'facilitate' that). Everyone knows what a pain getting planning permission can be in the UK.

Airports, typically, take many years from concept to completion, except within China and Türkiye.

But the decision on the location alone of the new airport to serve Addis Ababa, the capital of Ethiopia, took seven years.

It isn't that the existing airport, Bole, is ramshackle. It could continue to be patched up and moderately expanded, perhaps to last for another 10 years.

But courtesy of the success of Ethiopian Airlines, which is widely regarded as the premier airline on the African continent, ambitions are big. And the projected Abusera Airport, which should be open in its first phase in 2029, envisages total annual throughput eventually amounting to 110mppa, making it one of the biggest airports in the world, by today's standards.

It is a project, though, that might not have been feasible without the attachment of an airport city - one that will cost more than the airport.

The African Development Bank will probably provide loans, possibly syndicated ones, but the opportunity may still remain for the private sector investment fraternity to commit finally to a major African project such as this; one that is built on solid commercial acumen, with the state airline a major player.

Saudi Arabia's drive towards the expansion of its airports industry and attendant privatisation continues to gather pace.

Hard on the heels of 100 expressions of interest in the expansion of Abha Airport, and the announcement that the world's physically largest airport will be built at Riyadh, along come another 90 EoIs for the new airport at Taif to serve the region to the east of Mecca, which does not have its own commercial airport.

Some of the interested parties count amongst the world's largest operators and in many cases this is their first venture into the Middle East, while there are other nameworthy companies that are represented for the first time in the sector.

Of course, there will be challenges along the way, including managing a very large influx of visitors (most travellers to Mecca do so via the Jeddah airport), ensuring a sustainable tourism industry, and addressing potential over-tourism issues.

The Kingdom seems to have put behind it the bad press it accrued internationally in the late 2010s. It is rapidly reversing previous policies that strictly controlled tourist visits and to all intent and purpose it is 'open to business'.

With the Brazilian concessions, despite the occasional spurt, coming to their conclusion, and a hiatus in place in Japan, investors that retain an appetite for the airport sector will increasingly be drawn to Saudi Arabia.

For more than two decades a 'light touch' regulatory regime has existed in Australia (and New Zealand), which to all intents and purposes, allows airports to charge whatever they like to airlines that use their facilities.

It is so light it might blow away in a gust of wind, and it has enabled airports to make EBITDA margins (a measure of profitability) well above the average for other parts of the world, and even greater than found in the hi-tech sector globally.

While margins reduced during the COVID-19 pandemic, they were still very high even for normal times elsewhere.

The argument against this degree of profitability that is put forward by the airlines is that it is often not matched by the degree of investment into airport infrastructure that they require, although that is debatable.

With the pandemic coming to an end, this disagreement - which had gone on the back burner during its period of impact - is bound to raise its ugly head again.

Figures released by the Australian Competition and Consumer Commission will again put pressure on airports, either to reduce charges or to offer more bang for the airlines' buck.

Meanwhile, the position in New Zealand could become even more acute, with IATA demanding urgent changes to the country's Economic Regulatory Framework for Airports.

Reported comments in early Mar-2025 by IATA DG Willie Walsh have questioned aviation's commitment to net zero carbon emissions by 2050.

CAPA - Centre for Aviation's sister company Aviation Week quoted the global airline trade body's boss at the ISTAT Americas conference: "We are going to have to revisit [the net-zero target]".

This came only weeks after a Feb-2025 revised roadmap to 2050 net zero by 'Destination 2050', which represents European aviation across the supply chain.

More recently, on 27-Mar-2025, the European airline body A4E said it remained "fully committed" to net zero by 2050.

On the same day, a report by Boston Consulting Group forecast that aviation would fall significantly short of its 2030 SAF commitments, but noted "the long-term momentum for structural change in the aviation industry remains strong".

Mixed messages from aviation on this crucial issue could be counterproductive, when many politicians and a growing strand of public opinion are looking for ways to stifle the industry's growth.