How Do Airports Make Money?
Airports are commercial enterprises that operate to make money. They aim to generate profit and diversify their revenue streams in order to sustain operations for the long term.
The main source of income is from aeronautical revenues which are mainly charged by airlines to use the airport space for their flight operations. The charges include landing fees, terminal space rental fees, aircraft parking fees, usage fees and storage facility costs.
The next big source of revenue for an airport is the commercial activities it performs on its territory, including shopping, dining and entertainment. These revenue streams account for 40% of the total revenue generated by an airport.
A busy airport can earn huge amounts of money from these sources. In fact, airports that have a high traffic volume tend to be the most profitable.
One of the major sources of non-aeronautical revenue is ground transportation fees which are paid by passengers who get dropped off at the airport and picked up when they return from their journey. There are thousands of cars, vans and buses that pick up passengers from the airport and drop them off in different destinations.
Another source of revenue for an airport is retail concessions, such as duty free shops. Airports earn a percentage of every item sold in these shops. Moreover, the more retail outlets they have, the more revenue they will generate.
The third big revenue stream is cargo and storage handling. Many airports have specialised cargo handling facilities for international flights, such as Entebbe International Airport in Uganda which handled 5,371 metric tonnes of cargo in October 2021.
Some airports also lease out space to local businesses for a variety of business activities, such as movie theaters, art installations and conference halls.
Unlike airline profits, which are largely based on the number of passengers, non-aeronautical revenues are more reliant on passenger satisfaction with their overall experience at an airport. This means that a good customer service culture can help the airport earn money even during a period of reduced travel.
In addition, the growing popularity of ‘pop-up’ stores and local businesses at some airports can also increase revenue. In Newark, for example, the Port Authority has been encouraging small businesses to open up their own airport stores in order to boost footfall and improve customer satisfaction.
These types of non-aeronautical revenue can help offset the impact of sudden traffic downturns that can deplete traditional airport retail and property revenues. In turn, these revenue sources allow the airport to maintain a strong bottom line and avoid the need to sell off or deconstruct terminal space in order to survive.
In addition, some airports are repurposing unused land into logistics and e-commerce hubs or solar farms, which generate additional revenue for the airport and can help meet sustainability targets. In fact, the recent rise in demand for air travel has led to a sharp spike in non-aeronautical revenue at many airports.