By welcoming 2.34 billion passengers in 2018, Europe’s airports set yet another record for air traffic. In the past 5 years alone, demand for air transport on our continent has increased by an impressive +36%.
This was primarily driven by improved economic conditions globally, low oil prices & airlines expanding capacity as well as airports actively supporting the further development of connectivity.
Such growth has of course put significant pressure on airport staff and facilities. In that context, one could have expected service quality to tumble. On the contrary, what we saw was continued improvement. Indeed, it is quite remarkable that over those same 5 years, passenger satisfaction at Europe’s airports increased by +4.18%.
This performance illustrates how passengers (along with other airport visitors) are now at the very heart of the airport business. First and foremost, this reflects a competitive and financial imperative. With the rise of social media and Top 10 Travel listicles over the past decade, the passenger experience is both a key factor of airport differentiation and an essential driver of airport income. Data unambiguously shows that an efficient and pleasant airport experience translates into higher passenger spend at airports. And with user charges paid by airlines not covering the full cost of operating and developing airport facilities, revenues from non-aeronautical activities such as retail, food & beverage, parking and advertising are a vital component of any airport’s bottom line.
So, it is no surprise that our annual retail & commercial conference has become a staple of the airport industry calendar. The 28th edition gathers airports and their commercial partners this March in Reykjavik, hosted by Isavia. It will look at addressing the challenges coming from the digital revolution and ever-changing consumer behaviour. These can essentially be summed up in one question: Why buy at the airport and carry the stuff with you, when you can order the same thing - and more – online and just get it delivered straight to your home?
Now competing with the vast choice and rapidity of internet retail, airport retail is in danger of losing its specialness. For now, the dynamic increase in passenger numbers still ensures that non-aeronautical revenues keep growing. But, that growth has generally slowed - and there is no escaping that on a per passenger basis, non-aeronautical revenues have fallen by -6% between 2012 and 2017. These new competitive challenges on the non-aeronautical side just add to those relating to fast changing aviation market dynamics – think LCC revolution, consolidation and increasing airline dominance over airports.
Everybody agrees trading conditions last year were at their very best. But, looking at the coming months, uncertainty and risks dominate. Airports (and airlines) will not remain immune to deteriorating economic conditions in Europe and beyond, Brexit (finally) getting real, fuel price volatility and trade wars. Freight traffic entering negative territory in the final months of 2018 is a warning signal that is hard to ignore.
At the same time, the EU is about to embark on a new 5 year political cycle – with elections in May in the European Parliament and a new European Commission taking office in October. There is every reason to believe that changing societal values & politics at national level will make a deeper (and potentially disruptive?) impact on the EU institutions and policies. Climate change & sustainability, social inequality and protectionism vs. liberalisation are set to become defining EU political drivers. They will affect all sectors of the economy – and they have already started to question the value of aviation.
ACI EUROPE is gearing up for these changes. Beyond our work in Brussels, we are also engaging our industry on this new reality - and charting the way forward by working on a sustainability strategy for Europe’s airports. Ultimately, this may not just be about our license to grow, but also about our license to keep operating. This means that aviation no longer just needs to win over consumers – it will need to win back citizens.