How can airports become financially resilient?
Posted in: Aviation
For any airport, diversifying revenue streams is an important part of remaining financially resilient. While most airports do have resiliency plans, they tend to focus on immediate responses to short-term problems. But as we have seen with the advent of COVID-19, long-term planning is equally essential.
Airports of all sizes are exploring ways to diversify their revenue streams. I recently wrote an article published in American Association of Airport Executives (AAAE) Airport Magazine on this topic. Aeronautically derived revenue includes revenues that depend on passengers and aircraft movements, like landing fees, terminal rents, food and retail sales, and auto parking. Non-aeronautically derived revenue, however, does not depend on airport activity. This includes sources like commercial and industrial ground leases, resource extraction, and power generation.
While aeronautically derived revenue sources are important, non-aeronautically derived revenues can help airports weather periods of uncertainty. We saw this after the 2008 recession—revenue streams that were not tied to the amount of air travelers were the more stable sources of revenue. This is vital as air travel did not reach pre-recession levels until 2013. As airports face a similarly uncertain future due to the current pandemic, it makes sense to implement lessons learned from the past.
In this article, I discuss several examples of how airports have successfully diversified their revenue using non-aeronautical sources. Recent changes in Federal Aviation Administration policy, combined with the latest industry guidance, make the process much less daunting than it once was. Ultimately, non-aeronautical development on and near airports can generate jobs and keep a regional asset financially self-sufficient in uncertain times. You can read the whole article here.
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