Airport Finance Research Articles

Economic Statecraft in Anglo-Chinese Relations: Recalling the Hong Kong Airport Negotiations

ABSTRACT This analysis demonstrates the use of economic statecraft in Anglo-Chinese negotiations over a new airport for Hong Kong. Leading to the signing of a memorandum of understanding in 1991, Chinese negotiators used bargaining leverage to withhold support for the airport and related projects to obtain British agreement for ‘consultation’ over major projects that straddled the transfer of sovereignty in 1997. Subsequent British flexibility on the timing of the project’s completion meant that Chinese attempts to use leverage on the airport in further talks after 1992 were somewhat less effective. Nevertheless, wider difficulties in the bilateral relationship and the legacy of distrust slowed detailed negotiations over airport financing, with the final pieces only put in place in 1995. Based on the perceptions of negotiators on both sides, there existed a tendency for each side to see their negotiating position as reasonable and justified, and the other as duplicitous or unreliable.

Analysis of Using Time Series Method for Prediction of Number of Passengers at the Airport

Abstract At present, one of the most frequently discussed topics, not only at international conferences, but also within the EU, is the issue of airport financing, as well as the thresholds at which airports can cover their operational costs and when the need for support is justified. The Strategic Airport Development Plan and the Airport Business Plan are one of the most important support documents for making the right decision for airport financing and prepare the project for operational and investment aid. For preparing these documents is significant the category of the airport, that means the number of passengers. This paper is focused on the methodology how can be predict the number of passengers from previous data by used the time series method.

China and aviation in Africa: context, thrust, novelty

ABSTRACTMainland China’s involvement in African aviation is qualitatively and quantitatively different to participation by European, American and Persian Gulf countries. This paper contextualizes and outlines the Chinese emphasis on airport finance, design and construction on the continent; Chinese airline service is secondary (and Africa-dominated), and joint operational ventures are in their infancy. The prominence of one foreign country in airport provision in Africa, the recency of Chinese involvement, its pace, its price-tag, its conditionality, and minimal concurrent Chinese airline route building to and from Africa, fix the novelty and perhaps significance of Chinese involvement in African aviation.

Financing of Berlin Brandenburg Airport ∙ SA.41342 ∙ Annotation by Antigoni Lykotrafiti

This annotation focuses on the latest (out of three) European Commission decisions on the financing of the new Berlin airport by its public shareholders. The decision is important because it deals with a case having a great impact on the Single Market. Moreover, it constitutes the first example of application of the private investor test in airport financing cases after the publication of the Commission Notice on the notion of State aid – the jewel in the crown of the State Aid Modernisation initiative. The commentary points to the link between politics, law and economics in high-profile State aid cases, questioning the effectiveness of EU State aid control. Keywords: Market Economy Investor Principle; Airport Infrastructure; Airport Operator; Traffic Forecast; Severability; Predictability.

Passenger facility charge vs. airport improvement program funds: A dynamic network DEA analysis for U.S. airport financing

Passenger Facility Charge (PFC) and the Airport Improvement Program (AIP) are two major sources to finance U.S. airports. This paper develops a novel dynamic network DEA framework to investigate the substitutability between PFC and AIP funds. We find that the studied U.S. airports can substitute PFC for 8–35% of the current AIP funds and contribute significantly to the proposed plan of the US congress to cut AIP funding. In addition, the amount of PFC-for-AIP funds substitution negatively correlates with the productive efficiency of airports. The findings send an important message for future policy reforms on U.S. airport financing.

The outlook for airport finance: How forecasting techniques can adapt to reflect changeable market conditions

The world remains in a phase of prolonged uncertainty, which causes particular problems for airport managers, investors and lenders as they look to develop business plans and models that are robust and credible. The often long lead times to plan and develop infrastructure capacity and the increasing diversity of airline service in the market demand a clear view of the future market and traffic. Underlying aviation activity and its growth over time, in turn, will affect virtually every part of an airport business plan. There remain many different approaches to forecasting and it may be difficult to demonstrate that any one is more valid than others at predicting the future; however, lessons from the past few years suggest that there is an increasing need both to consider risk explicitly and to understand the key drivers that will influence demand. While it is ultimately for the airport manager, investor or lender to judge the level of risk they wish to assume in business planning, enhancing the transparency of the forecasting process can allow for a more considered view of the implications. This in turn provides the basis for more informed judgment in decision making, balancing out the risks and opportunities to develop business plans that can better adapt to changing market conditions. This paper looks to outline some of the current global market trends and considers ways in which demand forecasting techniques can respond to enhance the overall business planning process. In looking at this challenge, three specific issues can be identified which need to be addressed: (1) What is the current outlook in demand for air travel? (2) What are the key issues which forecasting needs to consider? (3) How do we best manage the risks inherent in any future forecast?

New financing opportunities for airports: Exploring the possibility of a speciality REIT

Canada's airports have undergone a massive decentralisation initiative whereby the federal government has devolved responsibility for what was once considered a public utility to the private sector. While the role of airports in Canada still includes economic development and being responsive to local needs, it is important to note that there will not be any government funding for airport expansion or refurbishment. Paying for infrastructure development is expensive and airport financing traditionally has involved corporate debt instruments. This paper explores the possibility of using equity as a means of financing airports, specifically in the form of a real-estate investment trust (REIT). Using a REIT as a financing vehicle can provide increased funding and lower risk for the expansion and maintenance of airport facilities.

Improving efficiency in airport finance: A review of airport charging and slot effectiveness

This paper deals with the regulatory regime governing airport charges, and introduces the European Commission's current plan of 2005 for setting up a Community-wide framework in this area. It shows how airport charges can be used to improve airport efficiency and thus raise additional finance. More specifically, it recommends an ‘infrastructure fee’ as a tool to reduce no-show rates. Airport charge schemes for the attraction of low-cost carriers (LCCs) are also outlined, as well as the legal limits set by European Community law. Finally, ways to increase slot effectiveness are presented, and the paper describes the potential impact of slot trading as an element of future Community airport regulation.

SCHEDULING PURCHASE AND RENEWAL OF INTERNATIONAL AIRPORT DEPARTURE FACILITIES

This study formulates a dynamic programming model to determine the optimal facility purchase and replacement scheduling by considering facility renewal costs, aviation safety, passenger service level, and airport finance. The study constructs various cost functions on facility depreciation, operation, maintenance and delay for different facilities at different time stages according to passenger volume, facility reliability and utilization so as to reflect dynamic variations in those costs. Moreover, this study uses CKS international airport as an example to demonstrate the application of the model. The results indicate when the malfunction rate is higher than a certain level, such that the total maintenance and delay costs are higher than the total capital, depreciation and abandon costs to renew the facility, then the replacement must be done. This study provides the airport authority optimal strategic decisions on the purchase and replacement of various facilities in terms of quantities and timing.

Airport pricing systems in europe and an application of Ramsey pricing to Spanish airports

Abstract This paper describes the landing fee structures which are prevalent at most European airports: a mix of weight-based landing fees, passenger fees, and other charges. The paper describes alternative pricing systems which emphasize economic efficiency rather than airport finance considerations. Finally the paper calculates the structure of landing fees for a hypothetical uncongested airport using a Ramsey pricing formulation with data representative of uncongested Spanish airports. Further research is necessary before recommending implementation because the elasticities of demand and operating costs with distance are borrowed from North American studies.

Dollars and democracy in Hong Kong: Understanding the logic of Chinese policy

Recent disputes between China and Great Britain over political reform and airport financing in Hong Kong have helped clarify the logic of Chinese policy toward the territory. Despite appearances to the contrary, the disputes are only partly about democracy and money. For the PRC, they are fundamentally about creating the conditions for the Chinese government to exercise sovereignty after 1997 and about the fear that Great Britain will do anything possible to complicate China’s establishment of authority over the territory. This article thus rejects as inadequate several conventional explanations for China’s Hong Kong policy. Its conclusions hold significant implications for Hong Kong’s future and for our understanding of China’s foreign policy calculations elsewhere.

Airport Revenue Bond Financing

The author reflects on airport financing by public officials through the use of revenue bonds.

Terminal Airport Financing and Management.

Terminal Airport Financing and Management.