Airport Business

DEC 2017 - JAN 2018

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TNC TECHNOLOGY 10 airportbusiness December 2017/January 2018 By Tom Kinton Airport Revenues Must Adapt to New Transportation Technologies As TNCs and autonomous vehicles grow in North America, airports need to adapt now to stave off losses in revenues on the horizon. Airports have become increasingly reliant on revenues from parking and rental car concessions, often using the funds to support continued oper- ations, new projects and to support bond ratings crucial for the healthy financing of future projects. Yet steadily increasing revenues from sources like these may be under threat from several new trans- portation technologies transforming how consum- ers get to airport. Airports in the United States face strict regu- lations that dictate where and how they can find revenue to support operating expenses or major development projects. Passenger airline landing fees and other aeronautical revenue is general- ly benchmarked, per regulatory requirements, against operating expenses. However, revenue from land leases, terminal retail and concessions, parking and rental cars have all become part of a diversified and profit- able income strategy for many airports in the U.S. Today, airports across the nation rely on these rev - enues to fund capital improvements and operating expenses not covered by agreements with airlines. Recent history shows these revenue streams have been quite healthy. Non-aeronautical reve- nue for U.S. airports grew more than 4 percent between 2004 and 2013, according to the Airports International Council, compared to a 1.3 percent growth rate in passenger enplanement. Parking, rental cars and terminal concessions are the three main sources of non-aeronautical revenue for U.S. airports, accounting for 45 percent of total revenue in 2013. More recent data from the FAA show the rising trend continuing through 2015: The direction of these trends has been good news for airport budgets. The high margins that come with these sources make them attractive places to find funding and they have become a principal source of financing for capital-intensive infrastructure improvements. According to the Airports Council International-North America, U.S. airports may need almost $100 billion over the next five years to fund capital projects already on the books. THE UNEXPECTED DISRUPTION Clearly, anything that disrupts the flow of airport funding from parking and rental car revenues puts airports in a financially precarious position. While the ups and downs of the economy may have dictated how those revenues will materialize in the past, today it is trends in new transportation technologies that will be forcing the adoption of new airport revenue models. R ide-hailing services, a lso know n as Transportation Network Companies (TNCs), like Uber and Lyft are already making impacts. Uber, one of the most successful TNCs, was founded in 2009 and is now valued at more than $70 billion, operating in 70 countries. An estimated $3.36 billion was spent on Uber rides in the first half of 2015, compared to $2.93 billion in all of 2014 — a tremendous rate of growth. According to Certify, a company that pro- vides business expense reporting software, ground transportation expenses attributed to E arly in spring, reports began to emerge from some airports that fewer travelers were choosing to park vehicles at airport lots and garages. At Dallas Fort Worth airport, parking revenues were forecast to be $10 million short this year, in part due to more people using services like Uber and Lyft to get to the airport. If these reports are the begin- ning of a larger trend, it will pose serious trouble to most modern airport financing models.

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