By Dr George Williams, BSc MA PhD FCIT FILT FRAeS, Senior Lecturer in Air Transport, Cranfield University, Department of Air Transport
SubscribeRecent years have seen the complete, or at least the partial, privatisation of airports across the world. It is therefore unusual when a State assumes responsibility for the management and operation of more airports.
This, however, was what occurred in Norway in 1995, where, as a result of a Parliamentary decision the then Luftfartsverket (Norwegian Civil Aviation Administration)1 took over responsibility for 28 regional airports from the local authorities. The policy change had been promulgated as a result of concerns over safety. With the change in ownership, capital could be earmarked for the lengthening of runways and the provision of more sophisticated navigational aids at these peripheral airports.
This would improve safety standards, increase service reliability, allow more aircraft types to be operated and so enhance the prospects for competition. In addition, rather than being a burden on the State, funding could be provided from the profits generated at the country’s busiest airports.
With 45 airports and one heliport now in their charge, the Luftsverket commissioned the Air Transport Group at Cranfield University to undertake a joint study comparing air transport provision in 13 European countries.
The study, which was completed in 1998, had four objectives, of which two were:
- to investigate how different airport systems are organised and managed;
- to compare the cost of providing airport infrastructure and related services;
The countries investigated in the study were Austria, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Norway, Spain, Sweden and the UK. To ensure consistency information relating to 1995 was used. Airports that handled at least 2,000 commercial passengers annually were included. This amounted to 429 airports in total, comprising 6 in Austria, 12 in Denmark, 21 in Finland, 68 in France, 33 in Germany, 38 in Greece, 13 in Iceland, 13 in Ireland, 36 in Italy, 51 in Norway, 36 in Spain, 44 in Sweden and 58 in the UK. Table 1 provides a breakdown of each country’s airports in terms of their passenger traffic throughput.
Table 1 Breakdown of each country’s commercial airports in terms of numbers of passengers
| Country | < 0.1 million | 0.1 to 1 million | 1 to 5 million | > 5 million | Total |
| Austria | 0 | 4 | 1 | 1 | 6 |
| Denmark | 7 | 3 | 1 | 1 | 12 |
| Finland | 10 | 10 | 0 | 1 | 21 |
| France | 37 | 20 | 8 | 3 | 68 |
| Germany | 12 | 8 | 7 | 6 | 33 |
| Greece | 16 | 15 | 6 | 1 | 38 |
| Iceland | 10 | 3 | 0 | 0 | 13 |
| Ireland | 9 | 2 | 1 | 1 | 13 |
| Italy | 11 | 14 | 9 | 2 | 36 |
| Norway | 32 | 13 | 5 | 1 | 51 |
| Spain | 4 | 16 | 10 | 6 | 36 |
| Sweden | 21 | 20 | 2 | 1 | 44 |
| UK | 25 | 17 | 11 | 5 | 58 |
It is immediately apparent that France, Norway, Sweden and the UK have large numbers of airports with low volumes of traffic. It is also clear that only Spain and the UK have a significant number of airports handling more than 1 million passengers per year. Wide differences in the operating economics of the airport systems of the thirteen countries are therefore likely.
European Airport Finances
A key element of the study involved a comparison of the finances of airports and associated services in nine European countries. Different accounting conventions, the often fragmented manner in which airports and related activities are provided and a general lack of relevant financial data though, made a comprehensive comparative analysis involving all these countries impossible. To enable meaningful comparisons to be made countries were divided into two groupings: the first incorporating those countries whose airports and ATC services are owned by one organisation (Finland, Iceland, Norway, Spain and Sweden), with the second comprising countries in which airport and ATC ownership is spread across different organisations (Denmark, France, Ireland and the UK).
The airport activities included in the financial data for each country are shown in Table 2. Direct comparison between Group 1 countries is clearly valid given that the same types of activity are incorporated in the financial statistics. It is clear however, that caution must be exercised when comparing these with Group 2 countries, as the data does not relate to the same set of activities. In France, for example, airport security is provided free of charge by the state, with the costs recouped through a departure tax levied on all passengers, for which data was unobtainable. For all other countries the costs of airport security are included.
Table 2 Airport Activities included in the financial data
Operating Costs
Using data for 1995, it is apparent from Figure 1 that in terms of cost per terminal passenger there are significant variations within each of the two groups. In Group 2 Ireland’s high figure is the result of having ATC costs associated with the provision of en-route facilities for transatlantic traffic included. As for Group 1, the large disparity between Norway’s and Sweden’s costs is of interest. Whilst the financial data for these two countries covers much the same sets of activities, the figures are affected by Norway having many more small airports than Sweden.
In addition, a higher proportion of the latter’s airports are operational 24 hours a day, 55% compared to 24%. Overall though, it is apparent that a key reason for the wide differences between countries is the variation in the number of large airports in each system. Spain, for example, had 16 airports of the 36 surveyed handling more than one million passengers in 1995, whilst Norway had six out of 46 and Sweden three out of 44.
Figure 1 Average airport operating cost per terminal passenger by country: all airports in each country (US$)
1 includes Scotland
Operating Surplus
Operating surplus is defined here as the difference between total operating revenues and costs (excluding depreciation), after deduction of interest and taxation. Table 3 reveals that the UK generated the largest surplus of all the seven countries surveyed, followed by France and Spain. Norway’s airport system generated a lower surplus than that of Sweden, whilst those in Finland, Iceland and Scotland generated net surpluses below US$60 million.
Table 3 Total airport operating surplus in 1995: all airports in each country(US$million)
| Group 1 | |
| Spain | 281 |
| Sweden | 134 |
| Norway | 112 |
| Finland | 59 |
| Iceland | 8 |
| Group 2 | |
| UK1 | 848 |
| France | 662 |
| Denmark | 153 |
| Ireland | 135 |
| Scotland | 52 |
1 includes Scotland
When averaged out on an individual airport basis, the UK2 generated the largest surplus per airport, followed by Denmark, Ireland, France and Spain, as Figure 2 reveals. The relatively high figures for these countries are partly the result of their largest airports being able to generate high levels of surplus. Airport operators that have focused on developing commercial activities have been able to generate higher surpluses than those that are dependent on deriving the majority of their revenues from airport charges. It is clear that countries deriving a higher proportion of their revenues from aeronautical activities generate lower surpluses per airport.
As far as airports in Group 2 are concerned, cross-subsidisation is considerably less evident than is the case in most Nordic countries. In the UK, for example, nearly all airports are managed by limited companies, in which the dividends from profits are paid to shareholders. Most UK operators consequently seek to run their airports at a profit, the necessity for cross-subsidisation is thereby reduced. The one exception are the airports in the Highlands and Islands of Scotland, which receive substantial subsidies from the Scottish Executive to offset their large operating losses. French airports are also run by separate organisations, but on a concession basis. The scale of state assistance in France however, is much higher than in the UK, with airports eligible to receive grants from both the government and local authorities. In Ireland, all three main airports, which are operated by Aer Rianta, generate a surplus, but of the remaining eight airports only Kerry is profitable.
Figure 2 Average surplus per airport: by country (US$million)
1includes Scotland
Table 4 below shows that only six out of the 47 Norwegian airports for which data was available, generated a surplus. The 41 loss making operations were sustained by large surpluses generated by the busiest airports. As far as other countries are concerned, a high proportion of airports in France and the UK generated a surplus. Those countries with many small, remotely located, airports have a much lower proportion of airports generating a surplus. For example, only five out of the 13 Scottish airports for which financial data could be obtained generated a surplus. The heaviest loss-makers in Scotland are Inverness (US$2 million) and Kirkwall (US$4 million). A slightly higher proportion of Swedish airports generate a surplus compared to Norway, 18% as opposed to 13%, but only one airport in each country (Helsinki and Keflavik) does so. Unfortunately, financial data for individual Spanish airports could not be obtained.
Table 4 Number of airports in each country run at a surplus
| total number of airports | number of airports making a surplus | number of airports making a loss | % in surplus | |
| France | 63 | 44 | 19 | 70% |
| UK | 35 | 19 | 16 | 54% |
| Ireland | 13 | 4 | 9 | 31% |
| Scotland | 13 | 5 | 8 | 38% |
| Sweden | 44 | 8 | 36 | 18% |
| Norway | 47 | 6 | 41 | 13% |
| Iceland | 17 | 1 | 16 | 6% |
| Finland | 30 | 1 | 29 | 3% |
Concluding Comments
Whilst much data was collected and analysed, it is clear that more work remains to be undertaken before a detailed and accurate comparison can be made of the financial performances of different airport systems. A rerun of the study using more recent data is planned for 2005 by AVINOR.
Dr. George Williams
January 2005
1Responsibility for the operation of the 45 airports was transferred to a new organisation, AVINOR, in January 2003
2It should be noted however, that profits from ATC services are only included for those UK airports where there is self-provision of this activity
