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  • Writer's pictureHeini Noronen-Juhola

Does an airport have to be profitable?

When you think about aviation, what do you think? I bet that most of the times people think about flying and all the processes related to that. You might think about the airport related processes as well, but mostly as a part of the flight journey. So what about the airport; what kind of a business is it or should it be business itself in the aviation ecosystem?

After the second world war the aviation industry started to grow intensively. Aircrafts became more and more technologically advanced, the amount of flying grew rapidly and new airports were opened all over the world on top of the old military airports. The whole aviation industry was focusing on the flights and the flight related services. The airports were mainly owned by the governments and they were understood as a part of the aviation infrastucture. They were not treated as business units as such.

The situation today is quite different. Airports have become an industry. Many airports are still owned by the governments, but many are owned by investors. On top of the basic tasks like serving the flights and supporting the aircraft turnaround processes, the airports have developed a wide range of other services, mainly focusing on the commercial passenger services like shops and restaurants. Some airports resemble shopping centres with a wide range of different kinds of shops, restaurants, well being services, entertainment, etc. These services have become a major source of revenue to the airports on top of the traditional aeronautical revenues from the flight operations.

Shops or not, the aeronautical side of the airport business is highly regulated and very investment intensive. The airfields are large areas and they need a lot of maintenance. Keeping runways and taxiways in a safe condition requires inspections, surface reconstructions and other actions like for example at Nordic airports snow clearance. Terminal buildings are vast constructions that need heating, air conditioning, water, etc. Other infrastructure like baggage sorting system, jet bridges and remote aircraft stands are also needed. Keeping the infrastructure and the equipment in a good and a safe condition is a difficult task with only the aviation related revenues from the landing and the passenger charges. Therefore the revenues from the commercial passenger services are very important also to keep an airport operable.

As long as the airport has a lot of flights (landing and passenger charges), it has a lot of passengers (commercial passenger revenues) and on top of being able to maintain the infrastructure, it is typically also very profitable. The big hub airports like London Heathrow or Hong Kong are great businesses as such. But if the airport has a limited amount of flights, the airport shops and the restaurants don't have a large amount of customers either, then at some point the airport might reach the line where it isn't profitable any more. What then?

If the airport is owned by private investors, it's clear that profits are wanted. Usually the ownership structure is profit seeking at airports that are naturally located at busy areas that support a large amount of flights during the day. The airports around London are a good example of that. But if we take for example rural airports in Finland, they have very few daily flight operations and therefore their potential to become profitable is poor. So should those airports be closed down?

Most of the rural airports in Finland are owned and operated by Finavia, which is the 100% Finnish government owned airport company. In Finland only Helsinki Airport can be identified as a large airport and before pandemia and the war in Ukraine it was very profitable. The situation is obviously different now. The idea is that the losses at the rural airports are covered with the profits from Helsinki Airport. A rural airport can even be closed down if there is no regular air traffic for two years. The pressure to close down airports with no regular air traffic exists.

The good question is, should an airport be profitable? Or how close to the profitability should it be? How do we define profitability? I think that we should merely ask that what meaning does the airport have? The small rural airports around the world are very important for the areas where they are located. They can serve general aviation, charter flights, business jet flights, helicopters, etc. They are valuable as an aviation infrastructure. The usage that they might have, might be extremely important for the businesses at the area. A great example are the seasonal tourist airports at Alpine area in the Central Europe or in Lapland in Finland. If the community gets the ownership of that kind of an airport, the ownership becomes strategic. Then the airport doesn't have to be profitable as such.

In the future we will probably see electric aeroplanes as well as vertical landing and take-off aircrafts even at the most rural airports. Creating profitable and environmentally sustainable flight operations with these new kinds of flight solutions might revive even the smallest airports. These can also give birth to new business opportunities that can use the airport as a platform. Whether an airport can become profitable with these solutions, that remains to be seen. Anyway the value for these new developments is very high for the community.

So, the airport must be profitable or the ownership has to be strategic. The government really needs to have a strategic focus only at military airports because of the national security. If the non profitable non military airport is owned by the government, it would be desirable if the owner would have a positive, strategic and a long term development focus on the community's benefit. Otherwise we are talking about lousy ownership. In that case the ownership is better in the hands of the community. The aviation business is changing, so is the airport business. Right owner gives justice for the business.

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