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How to Improve Financial Performance of Airport?

How to Improve Financial Performance of Airport?


1 Answer

Having an idea of cost and revenue structure of an airport is essential before, we move to look for ways of improving financial efficiency. Depending on the ownership pattern and organizational structure of an airport the cost structure varies. At many airports the financial and operational relationship between the airport operator and air carriers serving the airport is defined in legally binding agreements that specify the risks and responsibilities of running the airport.

Average cost structures of airports constitute staff or labor salary, capital charges, other operational expenditure, services maintenance and administration. The revenue generation of each airport may vary but we can divide the sources broadly in two categories i.e. Revenues from traffic and revenues from commercial services/activities. Rigas Doganis has suggested two alternative strategies for the airport operators in order to pursue commercial strategies.

The traditional strategy of government-owned airports, operated and managed by a Ministry of Transport or Department of Civil Aviation is to meet basic and essential needs of passengers, airlines, freight forwarders and other direct airport customers such as retailers. Such a strategy will have significant implications, for airport planning and design. In particular, the airport will be primarily oriented to facilitating passenger handing and throughput, with all extraneous or unnecessary activities kept to a minimum and with relatively little space allocated to them. Within imposed design and space constraints, airports following this traditional strategy can still try to maximize commercial revenue.

In contrast, a commercial airport will exhibit critical differences in both its strategic mission and its inherent Marketing implementation, when compared to the traditional airport concept. The aim in this case is income maximization from any airport activity. This also means that one regards the airport as a business. opportunity, which not only serves its, direct and traditional customers airlines, passengers, cargo shippers and so on but also a wider range of potential customers including airport and airline employees, Visitors, people meeting passengers, local residents in surrounding communities as well as local businesses and industries.

This strategy has several design implications. While every effort is made to facilitate movement of passengers and cargo through the airport, every effort is also made to maximize opportunities for additional commercial income generation even from activities indirectly related to air traffic-such as light industry or even leisure complexes. The following activities may help in generating resources:

  • Car parking,
  • Catering facilities,
  • Leisure facilities,
  • Rent generate by providing space,
  • Advertisement in and around airport,
  • Duty and tax-paid shopping,
  • Duty and tax-free shops.
The functions of the airport are divided into following divisions:
  • Finance,
  • Administration,
  • Personnel,
  • Engineering,
  • Operation,
  • Safety and security.

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June 24, 2019