Airport charges are and will be a hot topic in aviation in our post pandemic world. Airport charges are based on the costs that an airport has for creating the infrastructure and the operations for the airline operations. The airport charges are paid by the airlines for the usage of the airport. The authorities and the airlines at a specific airport have a consultation process to agree on the charges for the coming year.

For a long time this worked well since the whole industry was doing well. The market was growing and there were business opportunities for all stakeholders of the aviation industry. But then the Covid-19 pandemic hit the industry. The hit was very hard and revenue streams of all parties were affected. All of a sudden airports were strained by a heavy cost structure and reduced revenues.

Airports cutting costs

During the pandemic the airports have tried to cut costs everywhere. Many projects that aimed to improve the functionality of the infrastructure were put on hold. Only the most important safety projects were completed, but probably in a smaller scale. Or they were put on hold.

Putting important projects on hold, eased the cost structure for a moment. As the projects remained in the portfolio and plans for new future projects were fed into the pipeline, the need for project funding for the coming years just kept escalating.

Airport revenue streams have been harmed

The airports have focused extensively on other revenues besides the airport charges just to avoid the dependence on the airlines. These revenues are often targeted directly towards the passengers. Services like the shops and the restaurants as well as car parking have been a growing revenue stream for the airports for many years. When the amount of flights go down, the amount of passengers go down. Thus, the pandemic has caused the airports big revenue challenges also in this context.

It is very unlikely that the airport charges will rise in the near future. Just like the airports, the airlines have suffered and endured great losses during the pandemic. Even though some of the airline costs are more flexible than the airport costs, many are fixed costs like the aircraft related costs. The airlines will fight heavily against any intentions to raise the airport charges.

Post pandemic airport charges

The crisis has led to some extreme decisions with airport charges. The acceptance of each other´s situations has changed into radical financial actions. The airports with solid attractiveness among the airlines have been able to make bigger financial decisions than the airports that are less attractive as a destination.

The range of the airport charges has become more polarized. The trust and the open discussion about the price levels and how to get out of the sad financial situation within the whole aviation industry is not very good.

London Heathrow is one of the most popular airports in the world. It is the honey pot where airlines want to fly and getting a slot there is very difficult. Heathrow is in a very good position concerning airport charges as the charges have been rather high before. Heathrow’s decision to raise the landing fee with 37 % for 2022 is, of course, heavily challenged by the airlines and IATA.

Airports that are at the outskirts of popular destinations haven´t been able to raise their charges. Some have even introduced new discounts to attract traffic. Airlines may find more profitable destinations somewhere else and thus, bring “losing” airports into even deeper crisis. It will take a long time for these airports to recover and investment projects will be pushed again further into the future.

The end user will pay the bill

When airline charges go up, ticket prices will be affected. Higher rates will discourage travelers from flying and this, too, will hurt the airports.

In the passenger transportation business it is the passenger who pays for all cost increases in the end. The vicious circle of the aviation ecosystem, where everybody is hurt and depending on each other, does not make it easy to find solutions without customers being affected. Thus, working for good relationships and building trust are absolute musts and the best way to consider the passengers as well as make the best possible recovery for the whole industry.

Picture: www.shutterstock.com