Airport Concession Research Articles

Public versus private airport behavior when concession revenues exist

The share of revenues from airport concession services among airports worldwide has reached an average level of roughly 50% today. Since concessions may exert downward pressure on the private aeronautical charge, the question is whether price regulation of private airports has become obsolete. The recent literature on airport concessions suggests that private airport pricing may still be excessive from the social viewpoint. This paper complements this literature by considering (i) two distinct types of concession services called retail services and car rentals, (ii) two-sided demand complementarity between aeronautical and concession services, and (iii) specific airport concession services that are welfare neutral in the sense that the surplus derived from concession services is independent of traveling activities. In this setting, airport price regulation can become obsolete, but concession services of the car-rental type can also increase the benefits of airport price regulation.

Assessing the development of airport concession models and financing in times of a financial crisis

The market for airport transactions presents a mixed picture. While numerous recent transactions have been cancelled, postponed or closed on terms and conditions far less favourable to concession grantors or sellers than those of previous years, other recent transactions have been successfully completed, important landmark transactions have achieved significant progress and roadblocks are being removed for investors. At the same time, investors, as well as their lenders, are taking a far more conservative approach when evaluating project and finance risks. What kind of price structures contribute to the sustainability of the project? How do mitigants against extraordinary project risks enhance bankability? What tools are available to manage financing shortfall events? How can direct agreements help? And why should a concession agreement contain fair terms and conditions that balance the interests of the parties involved in case of an early termination event? The tools to procure bankability do not need to be reinvented, but they were not always implemented during the times of an overheated market. This paper holds that the market will return as traffic picks up again, but that a more conservative investment and financing approach with more balanced concession agreements will dominate the market for the near and medium future.

Short-Term Infrastructure Concessions

This article introduces a new tool based on short-term infrastructure concessions. The newtool described in the work includes a final reversion value as the most relevant procurement variable in short-term infrastructure concessions. This method's main advantages are that it offers both the bidders and the administration the possibility to get a close forecast on key concession variables such as expected demand, and costs, as well as on the potential increase in competition all over the process. This article also looks into the risks associated with the implementation of the method together with some solutions to mitigate the risks based on short-term concession procurements. Finally, it provides a brief outlook into the New Access to the Madrid Barajas Airport concession contract, because this project has been developed following some of the procedures revised in this article. Once the method has been outlined, this research analyzes the prospective advantages and disadvantages related to its application.

The Abidjan Airport Concession

In July 1996, responsibility for operating and developing Abidjan Houphouet-Boigny airport, the main airport of Côte d9Ivoire, was transferred through a 15-year concession agreement from the government to AERIA, a French-led consortium. In the years that followed, traffic growth exceeded the forecasts of both the government and the concessionaire, leading to acceleration and revision of investment plans for the airport. But even as traffic grew, the external environment was on the cusp of significant change via an unprecedented initiative for the liberalization of civil aviation throughout the West and Central Africa region. While this initiative could spur increased demand for air-travel and cargo services, it also poses a potential threat to the Abidjan concession through enhanced competition for the airport9s largest airline, Air Afrique. Also, liberalization promises to increase competition among airports to serve as primary regional hubs.

A contextual investigation of the operation and management of airport concessions

Effective management of airport concessions has recently been considered an important variable for better performance of airports. This study examines the airport concession sector, the important attributes of concession for the increase of profit and customer satisfaction, effective methods of concession management, and various components of contracts between lessee (concessionaire) and lessor (airport authority). A small group survey of 12 experts in airport concessions reveals that location, price level, brand name and image, product quality, and service level are the most important characteristics of concession operation for both profit maximization and customer satisfaction. The master-concessionaire approach is found to be the most appropriate method of managing airport concessions, and related implications for contracts are discussed.