How do airports make money: We all have been to the airport and have seen the lavish surroundings and the luxuries interiors of the airports. That itself brings in a feel of – “Man! These folks make big money”. Well, you are correct, but they don’t get to keep every penny they make. Let us how airports operate and make money from it. Most of the Airports in the world are own by the city or state municipality and a very few of them that are privately owned(mostly with government partnership). All the airports in the world operate under the – Airports Council International (ACI) which works with governments and airline companies to develop standards for air travel around the world.
These standards set by the ACI ensures the safe, secure and efficient air travel facility.
Now, let’s talk about the topic for which you have opened this post.
How do Airports make money?
There are two ways that airports make money!
1. Aeronautical earnings
2. Non- Aeronautical earnings
1. Aeronautical earnings of Airports
The aeronautical earnings of the airports constitute of the charges for the traditional airport activities. It is categorized into 6 types and they are as follow.
- Landing fees
- Parking charges
- Noise charges
- Passenger charges
- Security charges
Now that we have them listed let us see what all is actually included in those charges.
1. Landing fees
Landing fee is the fee paid to the airport by the airline to land their plane at that airport. This fee varies from airport to airport depending upon the local taxes and the airport charges. This is the major source of earnings to the airports.
The landing rates work on the principle of Demand and supply. Hence, the busy airports have a relatively high landing fees when compared to the airports that do not have so much of traffic.
Some airports charge on MTOW – Maximum Take Off Weight, for the landing fees and not on supply and demand. The MTOW is calculated according to the number of passengers that the particular airplane lands within the airport.
Some airports are good enough to charge a single fee on landing and provide gates and check-in facilities as a part of the landing fees. Whereas some airports charge separately for the landing fees and the usage of gates and check-ins. Usually, the landing costs of the airports that charge a single fee for landing, gates, and check-in is higher when compared with the airports that charge separately on all of them, these airports collect the equivalent or even more amount from the usage of gates and check-ins.
Landing fees include the cost of the landing slots. The airlines have to schedule their landings and book slots accordingly. The landing slots booking comes with a clause – the airlines should use 80% or more of the slots booked over a period of 6 months. Failing to do so will result in loss of slots. To manage this, sometimes the airlines have to fly empty planes or planes with fewer passengers to meet this requirement.
2. Parking fees
This is not the car parking fees as you might have though by now. This is the parking fee for the airplanes itself. The charges vary from the time and month of the year. Some of the airports also give up to 2 hours of free parking from the time of landing.
Usually, the parking time is calculated from the time of landing to the time of take-off. Depending on these factors the airlines are charged with the parking fees. Again, the parking fees are different for different airports.
3. Noise charges
We all know that airplanes make noise, a lot of noise, and the airports charge the airlines for the amount of sound that the airplanes produce. Nowadays, the planes are almost 50% less noisy than they were 25 years ago. Also, the standards in this aspect are not that clear on charging the airlines. Hence most of the airports tend to charge very carefully to avoid complications with the airlines. The airports do not make much of their income from this noise charges.
4. Infrastructure usage fees
The airport has got to maintain a lot of infrastructure for the easy flow of passengers and that comes with a cost. The airport charges the airlines for the usage of check-in areas, baggage equipment, and air bridges. Some airlines include these charges in the landing fees and some airports charge separately for these facilities.
5. Passenger charges
As the name says, the airport charges the airlines a fee for every passenger that comes onboard the flight. These charges are usually built on the airlines by the airport which is then passed over to the passengers by the airlines.
6. Security Charges
It is obvious that airport requires a lot of security measures to be taken care of for the safe and secure travel of the passengers. To do the same the airport authorities use the security staff and security gateway and checks. The maintenance costs of these factors mentioned above are put onto the passengers itself.
In the USA, a passenger is charged around $5.60 for a one-way trip and around $10 for a round trip as a 9/11 security fee.
2. Non-Aeronautical earnings of Airports
The aeronautical earnings of the airports are mostly used for the maintenance of airport facilities and staff. The real money for the airports is in the non-aeronautical earnings, airports make their maximum revenue from this stream. There are four(4) major streams of income in the non-aeronautical earnings of an airport and they are as follows.
- Car parking
- Food and beverages
1. Retail earnings of Airport
As you might have seen in the airports, there are a lot of retail shops that offer various products ranging from apparel to jewelry. People who are in these retail zones usually tend to buy a lot of stuff mostly because of the retail zones in the airports are duty-free which makes the customers go impulsive. Another added advantages of these duty-free retail zones are that they accept all currencies, which removes the payment barriers. The retail section of the airport makes up for 28% of the total revenue of the non-aeronautical earnings of the airport.
2. Car parking fees
Most of the two-way trip i.e. round trip passengers tend to travel to the airport in their own car and hence park them in the airport car parking space. This is one of the major sources of income of the airport. When I say major, I mean it. The car parking charges make up to 22% of the total airport earnings in the non-aeronautical division.
3. Food and beverages
This is quite common, isn’t it? The most common things that any person can get attracted to is Food and drinks and that entirely true even in the case of the airports. The food and beverages section of the airport makes up for 11% of the total revenue of the airport.
4. Other earnings of the Airport
These constitute of a lot of other factors related to the airport like the real estate, advertisements and car rental, etc. The rest of the earnings are from this section. The real estate division consists of the airport land utilized by other organizations to provide their services to passengers for which the organization pays the airport. The Car rental consists another major chunk of revenue, most of the airport offer car rental services to the passengers for which they tie up with different companies for which the companies have to pay a cost. Advertisements, on the other hand, constitute of around 3% of the revenue share of the total earnings.