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The Future Development of Airports: A Multidimensional ExaminationMilan Janic a

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To cite this Article Janic, Milan(2008)'The Future Development of Airports: A Multidimensional Examination',Transportation Planningand Technology,31:1,113 — 134

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ARTICLE

The Future Development ofAirports: A Multidimensional

Examination

MILAN JANIC

OTB Research Institute, Delft University of Technology, Delft, The Netherlands

(Received 31 August 2007; Revised 8 November 2007;In final form 29 November 2007)

ABSTRACT The development of airports as the main component of air transportsystem infrastructure is influenced by direct external developments (such as theglobalisation and privatisation of the airline industry, deregulation of domesticand liberalisation of international markets, increased airline competition andvolatile prices of the major airlines) and indirect external developments (such associo-economic forces and political events influencing the growth of air transportdemand). This paper examines the past, current and future development ofairports through four dimensions: (i) operational, sizing, and design of the airsideand landside infrastructure; (ii) economic; (iii) environmental; and (iv) social.The prospective future development of airports through these dimensions issynthesised using cases from the European and the US air transport systems.

KEY WORDS: Airports; future development; airline trends; multidimensionalanalysis

Introduction

Airports have played an important role as the air transport infra-structure and service providers for their main users � airlines,passengers, and freight. In general, most have grown steadily during

Correspondence Address: OTB Research Institute, Delft University of Technology, Delft, The

Netherlands. Email: [email protected]

ISSN 0308-1060 print: ISSN 1029-0354 online # 2008 Taylor & Francis

DOI: 10.1080/03081060701835803

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the past two decades. However, their role has been changing,particularly after deregulation/liberalisation of air transport markets.The most visible changes have been to become the hub in an airline’shub-and-spoke network or to remain the base of an airline’s point-to-point network. Their role has been dictated by the pattern, volumes,and structure of their traffic: relatively frequent and repetitive, highintensity in short periods of time during the day with a substantivetransfer component in the former case, and relatively voluminous moreconcentrated during few peaks during the day with a predominantorigin/destination (O/D) component in the latter case. In addition, thechanges have taken place in combination with external demand-drivenforces, in terms of the weakening of the previously high airportdependency on dominant airlines, developments of airports as partiallyor fully privatised entrepreneurships emphasising efficiency, effective-ness, and profitability, and strengthening of the different environmentalconstraints. Under such circumstances, we examine the past, present,and future development of airports in four dimensions: (i) operational,sizing, and design of the airside and landside infrastructure; (ii)economic; (iii) environmental; and (iv) social.

This paper presents the author’s view on the future development ofairports based on the analysis of past and current trends in the airtransport industry and on other global trends. This paper consists offour sections: section ‘Some Past and Current Trends in AirportDevelopment’ briefly summarises some past and current developmentsthrough the four dimensions, mainly referring to large airports inEurope and the US; section ‘Prospective External Trends’ describes themain factors influencing future airport development; section ‘Implica-tions of Prospective External Trends’ elaborates the implications ofthese factors for future airport development through the four dimen-sions; and the final section presents some conclusions.

Some Past and Current Trends in Airport Development

Scope of the Approach

Development of airports has inherently been a multidimensional issue.However, particular dimensions have not always been of equalimportance, explicit consideration, and/or explicit transparency. Inthis paper, four dimensions of airport development are examined asdirectly influenced by airline industry trends and indirectly by globaltrends. In this context, global trends are assumed to directly influenceairline industry trends, and vice versa. These dimensions are: (i)operational, sizing and design of the airside and landside infrastructure;

114 Milan Janic


(ii) economic; (iii) environmental; and (iv) social. Figure 1 shows theschema.

The operational dimension implies utilisation of existing airside andlandside capacity. Sizing and design imply provision of existing andnew capacity of adequate size, function, and flexibility in terms ofadapting to the volatility of traffic demand in the broadest sense, andeffectiveness of operations. In addition, the security recently influencingthe effectiveness and efficiency of the demand-serving processes isincluded as a part of this dimension. The economic dimension embracesdependency of a given airport on the number of (dominant) airlines,costs and revenues (i.e. the overall profitability), privatisation, andallocation of the scarce capacity (slots). The environmental dimensionincludes managing growth while maintaining the impacts of external-ities, such as noise, air pollution, and land use under control. Finally,

• Airside and landside infrastructure capacity;

• Security.

• Dependency on single airline;

• Costs, revenues; and profitability;

• Privatisation; • Allocation of

scarce capacity.

• Noise; • Air pollution; • Land use; • Other external

impacts.

• Employment; • Direct & indirect

contribution to the regional GDP.

Equal and simultaneous consideration

Operational, sizing, and design

Economic Environmental Social

Development of (future) airports

Dimensions for examination

External developments

Global trends Airline trends

Figure 1. Schema for examining airport development

The Future Development of Airports 115


the social dimension considers a given airport as an important factor inthe regional (and in many cases national) economy.

Overview of the Literature

The literature dealing with the analysis and evaluation of the past,current, and particularly future development of airports is generallyscarce. This is particularly visible if general trends are consideredinstead of individual airport cases. There is, however, an exception: thestudy of future airport developments by the Boston Consultancy Group(BCG, 2004). In addition, some other studies have dealt with thedevelopment of the entire air transport system in given regions andtackled the problem of airports in a given context (DETR, 2002; EC,2003; FAA, 2003).

On the other hand, studies dealing with development of theindividual airports by emphasising only particular dimensions of theproblem have been relatively numerous (ACI, 2002, 2005; BAA, 2005;CAA, 2001, 2002; Fraport, 2001; GAO, 1996; Ott, 2003; SH&E,2002).

The academic literature dealing with the development of airports inmultiple dimensions, and particularly with the airports of the future, isalso scarce. An exception has been with respect to future airport designand security issues (Goerling, 2002). This literature is generallydedicated to individual dimensions of airport development. Someexamples are: airport planning and design (Horonjeff & McKelvey,2004); analysing the efficiency in planning the airport airside andlandside capacity (Laborie, 2003; Kaiser & Zografos, 2006; Boatright,2001); flexibility of use of existing capacity and impacts of changes ofairline behaviour (Kraus & Koch, 2005; Ott, 2003); and charging theairport services including the scarce capacity (Brueckner, 2002; Janic,2005; Nilsson, 2003; Yamanaka et al., 2005).

Therefore, this paper should be considered as an attempt to integratedifferent dimensions of the past, current and future airport develop-ment, indicating their interrelationships, and synthesising generalprospective trends.

Global Trends and Airline Industry Developments

Airports have been mostly dependent on their main users � airlines andtheir passengers and freight shippers. In turn, the airline industry andindividual airlines have been influenced by global, and in some caseslocal�regional, economic and political developments. Thus, the analysisof airport developments should include some overview of theseinfluencing trends.

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The main global and regional economic developments have beenGross Domestic Product (GDP), international trade and investments,and generally diminishing airfares as the main driving forces of airtransport demand. The political crises, economic and social instabilityand stagnation, terrorism, regional wars, and some diseases (SARS)have always acted as deterring forces on air transport demand.Consequently, airport traffic has grown or stagnated, respectively.

The most important forces driving the development of the airlineindustry have been the deregulation/liberalisation of air transportmarkets, ‘open sky’ agreements removing barriers in internationalmarkets (the most recent is the ‘open sky’ agreement between the EUand the US), airline privatisation, and generally diminishing airfares(Janic, 1997). In Europe and the US, these and other factors have led tothe emergence and consolidation of two broad categories of airline �the full cost (legacy) airlines and low cost carriers (LCCs). Consolida-tion of full cost (legacy) airlines and their alliances, mainly operatinghub-and-spoke networks and some of them point-to-point networks,has resulted in developing hub airports and the consolidation of someimportant base airports (BTS, 2007). In both Europe and the US, theseairports have been exposed to new operational, sizing and design,economic, and environmental requirements in accommodating growingdemand of the changed structure and time pattern efficiently andeffectively.

The emergence of LCCs operating ‘point-to-point’ networks hasgenerally influenced airports through: (i) generating substantive de-mand in the short- to medium-term mainly at smaller regional airports;(ii) affecting the market share of large airports in the multi-airportsystem; (iii) affecting the incumbent full cost (legacy) airlines at theirhub airports; and (iv) developing specific relationships with hostairports (CAA, 2006; DETR, 2002).

Airport Development

Operations, sizing, design dimension. The operational, sizing, and designdimension embraces provision of adequate airport airside and landsidecapacity and security. Airports hosting airlines operating point-to-pointnetworks have continued to operate their single and/or multiplerunways and their linear or transporter configuration of passengerterminal(s). When it has been necessary, these terminals have beenmodularly expanded to accommodate growing demand, usually con-centrated in a few daily (shorter or longer) peak periods (Boatright,2001; FAA, 2003; Horonjeff & McKelvey, 1994).

Airports becoming airline hubs have usually operated one or a fewpairs of parallel runways and passenger terminals of the satellite and/or‘hybrid’ configuration designed to accommodate almost simultaneously



the relatively large volumes of the O/D and transfer traffic during theshort but relatively frequent peak periods created by the airlines’complexes of flights (FAA, 2004, 2007).

The peak periods in either case have implied congestion and flightdelays, usually with two general implications for the operation andsizing of the airport capacity. On the one hand, they have indicated theattractiveness of a given airport and high utilisation of its capacity. Onthe other, they have indicated the scarcity of existing capacity,implicitly lowered quality of service, and increased delay costs forusers � airlines and passengers. Consequently, the persistent and highcongestion and delays have been considered as an important sign forincreasing the airport capacity and/or introducing market-led mechan-isms for their proper balancing (FAA, 2004).

Security has become of growing importance after 11 September2001. The procedures have been strengthened at most airports both inEurope and the US, which has prolonged the average time for passengerand baggage security processing. Consequently, this has slowed downthe entire processing procedure throughout the terminal. As well,additional facilities, equipment, space, and related staff have beenrequired. At many airports, the previously centralised security facilitieshave moved from the central locations in terminals (usually behind thepassport control counters) to the departure gates, thus also requiringtheir redesign.

Economic dimension. The economic dimension implies dependency of agiven airport on the dominant airline(s), the cost, revenues, andprofitability, the airport privatisation, and allocation of the scarceairport capacity.

In Europe, three large alliances have consolidated positions at theirmain hubs with rather modest market shares at each other’s hubs. Thishas increased the mutual dependency of these hub airports on givenairlines (EC, 2002, 2003). In the US, most major airlines have operatedmore than one hub airport, with substantive market shares at these, butalso at other non-hub airports. Consequently, each airport has arelatively modest market share from an individual (single) airline,which has generally implied its lower dependency on the dominant fewairlines (BTS, 2007).

The volume of traffic has mainly influenced airport revenues, costsand profitability. The costs have been generally dependent on theefficiency of spending and the price of resources (capital, energy, andlabour). These costs have consisted of capital, operational, and labourcost, with generally different average proportions at European and USairports (CAA, 2001; Doganis, 1992; EE, 2001; GAO, 1996). Airportrevenues have usually been obtained from charging for services

118 Milan Janic


provided for the aircraft, passenger and freight, as well as othercommercial activities. The former have been aeronautical and the latternon-aeronautical revenues. In most cases, the revenues have providedbreak-even profitability (ACI, 2002; CAA, 2001; Doganis, 1992; EE,2001; Nilsson, 2003).

Privatisation of airports, started in the 1990s in more than 50countries, has enabled the private sector to be involved � mainly inairport operations and financing (GAO, 1996). In particular, theprivate sector has operated the airport value-added chain (BCG,2004; SH&E, 2002). This has strengthened competition and dimin-ished average charges. The evidence across EU airports indicates suchdecreases while the quality of service has been rather unchanged. Inaddition, there has been some indication that airports have beenpartially losing control over the quality of service (SH&E, 2002).

Airport charges set up to cover costs, such as those of landing slots,have not automatically been at a level to clear the market. Thus, theyhave been considered as one of the causes of congestion and delays atbusy airports (Nilsson, 2003). The other main cause behind this hasbeen that the airlines and not the airport(s) have actually decided on thequantity (i.e. quota), distribution, and price of the (scarce) airportcapacity (slots). That has also implied that these airlines have alreadyinternalised their cost of congestion and delays (Brueckner, 2002;Nilsson, 2003).

Environmental dimension. Noise, local direct and indirect air pollution,and land use have become the most important externalities at manylarge congested airports. In particular, noise has become a matter ofconcern with traffic growth. In order to protect the affected population,noise quotas have been imposed and ‘converted’ into allowed annual,daily, and hourly numbers of aircraft operations (BAA, 2005; SchipholGroup, 2006). Air pollution has been of increasing concern as the localcontribution to the cumulative volumes of emitted air pollutants (CO2).Land use has been emerging as a more serious problem when particularairports have needed expansion of both airside and landside infra-structure. Construction of new infrastructure has most often been amatter of long public inquiries, taking on average at many airportsmore than 10 years (DETR, 2002; Fraport, 2001).

Social dimension. The social dimension of the airport developmentproblem has usually related to employment in the broadest context. Ingeneral, larger airports have employed more staff and thus beenconsidered as the greater contributors to the local and national GDPand overall welfare. In general, the number of employees has beenpositively correlated with the volumes of airport traffic. Typically, each



million of passengers accommodated at a given airport has generatedmore than one thousand employees (ACI, 1998).

Prospective External Trends

Global Trends

The future medium- to long-term global trends expected to influencedevelopment of most airports, particularly those in Europe and the US,are identified as follows:

. socio-economic growth, embracing growth of GDP, national andinternational trade as the main driving forces of the air transport andconsequently the airport demand, will continue. In addition, newmarkets, such as those of India, China, and entire Southeast Asia,will continue to grow and spread their global (demand growing)influence. Some regional crises and wars will temporarily affectgrowth of the air transport demand. Terrorist threats will remain amatter of the highest concern. Further actualisation of the impacts ofair transport on the environment in combination with introducingdifferent eco-taxes for air travellers will likely slow down growth ofthe generally price-sensitive air transport demand;

. many large airports will be faced with the requirements to be fullyincluded in integrated systems consisting of different transportmodes (surface and air) providing seamless door-to-door servicesfor the end users � passengers and freight shipments. They areexpected to be the integrative (network) nodes of such system(s)�network(s), intermodal interfaces, and service providers as well;

. growing airports will continue to be considered as very importanteconomic-driving forces of the regions they serve.

Airline Trends

The airline industry and individual airlines will continue to beinfluenced as usual by global economic and political trends. Accordingto this author, their development is expected to influence airports inboth Europe and the US as follows:

i. The European airline industry is going to experience further removaland/or significantly relaxation of the nationality rules (barriers) onairline ownership, which will further stimulate cross-border mergersand acquisitions, first between European and later between Eur-opean and non-European airlines. This process will additionallyconsolidate existing airline alliances, which will also develop from astrategy of reducing costs, in addition to the current strategy of

120 Milan Janic


generating revenues. This will be possible through joint ventures ofparticular activities and services. In addition, such consolidation willresult in decreasing the number of large airlines in the market, whichin turn may have implications for the further development of theairline hub-and-spoke networks as follows:

. the mega-airlines together with their non-European partners willtend to develop a rather smaller number of mega-hubs con-veniently located over the continent and serving mainly the long-haul profitable routes/markets;

. the hubs of most previously national airlines will become eitherthe secondary hubs of the associated alliances or their spokes,which will generally imply decreasing of their importance ascompared to the past and present; and

. the non-hub airports having ambitions to become hubs will haveto fulfil a complex set of requirements, including: (i) centralgeographical location as compared to the location of particularspoke airports in the airline network; (ii) sizeable airside andlandside capacity particularly respecting the great proportion oftransfer passengers; (iii) large economically powerful catchmentarea generating and attracting the voluminous O&D passengerdemand; (iv) sufficient number and convenient daily-timedistribution of slots; and (v) the economic/financial stability ofprovided by an incumbent airline or its alliance (Doganis, 2002).

ii. The US airline industry will continue to consolidate with furthermergers among the major airlines, implying the following:

. particular airlines will continue to operate a multi-hub systembut with a smaller number of more concentrated hubs; some ofthem, particularly those on the East and West Coasts of the US,will be developed into international�intercontinental mega-hubs;and

. the ‘conventional’ complexes of flights at existing and forth-coming hubs will continue to be modified in terms of the size andflight interconnection times, mainly because of the need forconstant reductions in airline costs.

iii. Strengthening of the LCCs, particularly in Europe, will continue tobe a real threat to eroding of the economics of hub-and-spokenetworks of the full cost (legacy) airlines in their hub andparticularly spoke airports, which may cause some instability intheir growth. In addition, the LCCs will continue to stimulategrowth of passenger demand throughout their networks, continu-ing to connect mostly the small- and medium-sized regionalairports with prevailing O/D passengers. The innovative LCCseconomic/business models will be developed in the long distance



markets, which will strengthen airline competition and very likelybring more traffic to the airports involved.

Implications of Prospective External Trends

The above-mentioned global and airline development trends will haveimplications for the future development of many, but particularly largeeither growing and/or stagnating airports, through all four dimensions.Generally, the components of particular dimensions will becomeincreasingly interrelated, and thus need to be considered simultaneouslywith equal importance.

Operational, Sizing, and Design Dimension

The operational, sizing, and design dimension embraces operating,sizing and design of existing airports and providing new airport airsideand landside infrastructure, including the nature of its planning andimplementation, and security.

Operations. In general, the growth of a given hub airport requiring acapacity increase is perceived to be as follows:

. the volumes, structure, and growth rates of demand will be essentialfor efficient utilisation of existing airport capacity on the one handand its further feasible sizing and design on the other; and

. the discrepancies between demand and capacity will continue toproduce congestion and delays during peak periods on the one sideand underutilisation of airport capacity during non-peak periods onthe other until the market-led mechanisms establish their balance.

Sizing and design. The sizing and design of the airport infrastructure tocope with growing demand will generally contain the followingelements related to the airport airside and landside area, includingthe ground access systems.

. In the airport airside area, new parallel runway(s) will usually beadded to the existing ones. For example, most US airports alreadyhave plans for constructing new runways, usually parallel to existingones. In addition, new technologies based on better understanding ofthe aircraft wake vortices will increase runway capacity throughdecreasing the present separation minima and diminishing depen-dency of closely spaced parallel runways (28 pairs at 31 US busiestairports and one pair at Frankfurt main airport) (FAA, 2004;Fraport, 2001);

. The apron/gate complex will be widened by new aircraft parkingstands/gates enabling flexible use, i.e. handling different aircraft

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types in case of changing the size of particular complexes of flights;at European hubs, the increasing of the size of particular complexeswill be more likely (e.g. the super-large A380 aircraft will contributeto the further consolidation of existing hub-and-spoke networks onthe one hand and require a dedicated runway�taxiway system, andapron parking stands/gates in combination with passenger terminalcomplex on the other (Laborie, 2003)); at the US hubs, the numberof the smaller but less expensive complexes of flights will likelyincrease;

. In the airport landside area, the existing passenger terminals will beextended and eventually new ones built. Regarding flexibility ofexpansion and use, the satellite concept will continue to bepreferable. In addition, the two-level terminal for the verticaldistribution of passenger flows will become the rule rather thanthe exception. As well, further expansion of the already sizeableterminals will require increased efficiency and effectiveness ofpassenger processing and particularly movement along the longdistances within and between satellites (or particular fingers orpiers). This will require more automation � moving walkways insidethe terminal as well as the airport-internal road � and/or rail-basedsystems connecting distant terminals. Specifically, at the US largehubs aiming at developing as intercontinental gateways, there will bea challenge in providing adequate capacity of the passengerterminal(s) in order to accommodate relatively large volumes oftransfer passengers connecting between the incoming and outgoinginternational (and national) flights, or vice versa. Such rathervoluminous transfers will have to be carried out during relativelyshort connecting times under increasingly rigorous security control.Such requirements will certainly initiate developing innovativesecurity systems in order to maintain both operational and securityperformance at the required level. In addition, since in many casesthe available land for expansion will become an increasing problem,considerable parts of terminals will have to be undergroundconstructions, which will certainly increase investment costs; and

. Further development of airport ground access systems will continueto be of the greatest importance, particularly for the (hub) airportssurrounded by large catchment areas. More environmentally friendlyrail-based systems operating within the local, national, or interna-tional rail networks will become a common airport access mode. Inparticular, connecting the mega-hubs to the international High-Speed Rail network (Europe) might have two types of implicationsfor airport passenger demand: (i) eroding some short-haul airservices, either if competing or co-operating with the airlines; and(ii) widening of the airport catchment area thanks to access by high



speed, which is particularly important for the growing volumes of O/D passenger demand. In turn, this will contribute to buildingintegrated transport systems (networks), in which airports will playa key role.

The nature of the capacity increase. The planning and implementation ofcapacity expansion projects will be carried out according to different(usually ‘optimistic’ and ‘pessimistic’) scenarios of volumes of demand,both implying growth but at different rates in the following steps:

. forecasting the economic/financial strength of the dominant airline(s)and/or alliance and own role in their networks;

. forecasting the volumes and structure of demand by other airlinesexpected to operate at given airport;

. aggregating the volumes and structure of demand;

. determining the size and timing of the capacity expansion;

. using operational/planning/economic-business decision supporttool(s) for increasing the efficiency and effectiveness of the planningprocess, consistency and efficiency of the investments (Kaiser &Zografos, 2006); and

. determining the time and modules (increments) of the plannedcapacity expansion.

For example, in the airside area, the minimum increment of thecapacity increase is a new runway, taxiway, and/or the apron parkinggate/stand. In the landside area, this can be a new satellite, finger orpier, or entire passenger terminal. Figure 2 shows an example of threesolutions for expansion of the passenger terminal capacity at LondonHeathrow Airport based on the long-term scenarios of growingdemand.

351990 1995 2000 2005 2010 2015 2020

55

75

95

115

135raey/noillim

-sregnessaplani

mreT

Demand - Past: +4.2%Demand - "OptimisticDemand - "Pessimistic"

Solution 0Terminals 1-4: 58M

Solution 1Terminal 5: 85M

Solution 2Terminal 6: 125M

Figure 2. Matching airport passenger terminal capacity to demand at LondonHeathrow Airport (compiled from BAA, 2005)

124 Milan Janic


As can be seen, the new capacity would be constructed in relativelylarge modules (increments) at the times when demand is either wellbelow or just at the level of existing capacity. On the one hand, thisleaves additional ‘time and space’ for demand to grow withoutsignificant deterioration of the quality of service. On the other,utilisation of the installed capacity is lower, which might increase theoperational costs. However, due to the nature of adding the airportcapacity, this cannot be avoided. In the given case, the period betweentwo investment cycles will be from the year 2008 to 2014.

Security. Further globalisation and inherent political and economicinstability around the world will continue to strengthen requirementsfor security at large (international) airports. This has already sloweddown processing traffic and increased costs. For example, during theperiod 2000�2002 the security-related investments and other costs rosefrom t457 million (US$675 million) to t743 million (US$1097 million)at 34 European airports with 43% of the European air passengerthroughput (ACI, 2005). In order to prevent further deterioration of thevital airport-servicing processes, innovative security systems will haveto be developed and implemented. The ‘total security area’ concept,which would replace the current ‘security check point’ concept, seemsto be one of such possible solutions (Goerling, 2002). The new concept(system) would enable constant monitoring of the entire airport airsideand landside area, i.e. all persons (passengers and airport employees)who are there, automatically. For example, passengers would bemonitored continuously from entering the airside area at car parkingor station of public transport access mode (rail, bus) until boarding theaircraft, and vice versa. In the airside area, the aircraft-servicing staff,including about 12 aircraft-servicing vehicles, would be continuouslymonitored, too. For such a purpose, developing comprehensive securityscanners as parts of this complex monitoring system hidden from eyesof those being monitored will have to be developed and installed withinthe airport airside and landside area.

Economic Dimension

The economic dimension embraces diminishing dependency on thedominant (few) airlines, management of profitability (costs, revenues),continuation of privatisation, and allocation of scarce capacity byinnovative market-led mechanisms.

Diminishing dependency on dominant (main) airline(s). Current and likelyfuture dependence of hub airports on the dominant (main) airline oran airline alliance will represent both advantages and disadvantagesfor a given airport medium- to long-term development. Generally, the



obvious advantage will be a rather simple managing of the relation-ship(s) with airline(s) while gaining relatively stable volumes of traffic,at least until the airline is prosperous and financially solid. Thedisadvantage will be: (i) sizing, operation and design mainly patron-ised by the dominant airline(s), thus often being insufficientlyconvenient for others; and (ii) the inherent risk of losing substantivedemand in cases of weakening or even collapsing of the dominantairline(s). Therefore, in the long-term, given airports will have toconsider reducing such high dependency by spreading the empty slotsand thus the market shares to several instead of one or a few airlines.However, since the airlines will likely continue to own the slots, anysignificant redistribution seems rather unlikely to take place soon.Such redistribution will, however, be possible with the slots obtainedfrom expansion of the airport capacity and after eventual implementa-tion of the market-led mechanisms of allocation of the scarce airportcapacity (slots).

Specifically, the evidence so far in Europe and the US shows that thecurrent pattern of dependency of an airport on airlines will likelycontinue. In Europe, the airline alliances will seemingly continue toconsolidate their positions at the large hubs, thus increasing the mega-airline/hub mutual interdependency. In the US, dispersion of the marketshare among several (at least five) airlines will seemingly continue, thusdiminishing the airport dependency on a single or just few airlines(BTS, 2007; EC, 2003).

Managing costs, revenues, and profitability. The existing endeavours forfurther reducing operational costs through increased efficiency andeffectiveness of using resources after partial or full privatisation willcontinue at most airports. In addition, competition within privatisedand deregulated value-added chain(s) will likely intensify. In turn, suchcost reduction will enable reducing the airport charges and airlineoperating costs on the one hand and improving the quality of serviceson the other (CAA, 2001). Consequently, airports, that can do this, willbecome more attractive for airlines and thus more competitive to otherairports. Nevertheless, the charges bringing the revenues to the airports,despite being based mainly on the above-mentioned lower costs, will bealso set up according to the free market rules, and very likely remain thesubstantive portion of airline operating costs. For example, thepassenger taxes in the US amount to about 16% (i.e. 15.4% at thefull cost legacy airlines, and 18.2% at LCC Southwest Airlinesalthough the latter charges the airfare of only 56% of the airfare offull cost carriers). In the EU, the average passenger taxes are about12.5% of the average airfare for the range of route lengths (Yamanakaet al., 2005).

126 Milan Janic


In addition, the airport will likely retain an integrative role over thevalue-added chains or leave it to the dominant airline(s). Thederegulated and presumably more effective value-added chains willalso contribute to speeding up passenger service processes, which inturn will require less space in the passenger terminals. On the otherhand, the faster processing of passengers will leave them with less timefor shopping, thus reducing the airport’s non-aeronautical revenues.However, more actors involved in the value-added chain might requiremore accommodating space, which will increase the size and cost ofpassenger terminals. Therefore, it seems complex to predict the actualinfluence.

Decreasing the volumes of demand will affect the airport’s aero-nautical revenues and make them inherently volatile. In order tomitigate such developments, respond positively to the requirements fordiminishing airline and passenger charges, and still achieve profit-ability, many airports already have, are, and will have to develop arange of commercial activities and services not directly related to airtraffic. The content of these will be very diverse at different airports,but certainly will increase proportions of the non-aeronautical revenueseven at the smaller regional airports. Thus, they will also be able toreduce charges and thus contribute to the airline economic/financialhealth on the one hand and reduce dependability of given airports onthe volatile and uncertain airline behaviour on the other. At someairports, there will be some increased uncertainty in growth of demand,mainly due to the increased volatility of the external and internaldemand-driving forces and particularly of the unpredictable behaviourof the incumbent airlines (local impact). In general, this will beconditioned by the economic/financial strength/weakness of the fullcost (legacy) airlines and the ambitions for profitability of the LCCs,which may easily come to an airport but also easily leave it.

Privatisation. Privatisation of airports will continue according todifferent privatisation models. As compared to current trends, threeadditional developments in the privatisation processes may be ex-pected: (i) spreading to airport airside infrastructure; (ii) involvement ofmore non-aviation-related firms; and (iii) freedom in disposal ofrevenues by airport owners�stakeholders. These will enable airportsto transform into real economic/business entities operating according tomarket principles, including freedom in setting up the prices of theirservices according to actual costs, thus fighting for profitability. Such astructure will make airports more attractive for external (also non-aviation) investors. In addition, as economic/business entities, theythemselves will have easier access to financial markets while looking forinvestments. However, obligations of such fully private airports as still



the assets of regional and national public interest will have to be agreed,as happened after privatisation of the national Air Traffic Control(ATC) services in some European countries.

Allocation of scarce capacity. Improvement of utilisation of existing andconstruction of new capacity will remain the principal measures fordiminishing airport congestion and delays. However, in cases wheretheir application will not be possible, other measures will need to beapplied. They will mostly imply efficient allocation of scarce runwaycapacity (i.e. landing slots), which will be possible with market-ledmechanisms, such as peak-period pricing or congestion charging andslot auction. At these airports, they will replace present slot quotas(Brueckner, 2002; Janic, 2005; Nilsson, 2003). Peak-period pricing orcongestion charging will essentially include a charge for a slot theaircraft will have to pay if arriving during the congestion period. Thecharge would be based on the marginal costs that a given aircraft/flightimposes on all succeeding aircraft/flights during the congestion period.As such, it might make a given flight unprofitable and force it to arrivesometimes during the non-congestion time. The main advantage of thismarket-led mechanism is rescheduling the additional flights, therebyreducing congestion and delays, and providing more uniform (im-proved) utilisation of the available slots (capacity) (Nilsson, 2003). Theprincipal disadvantage is that this mechanism seems to still favour theairlines with already high market share using larger aircraft, anddisfavours the markedly weaker airlines using smaller aircraft to servesmall communities (Brueckner, 2002). However, it seems difficult toperceive when airlines will be ‘prepared’ to accept this mechanism,since it actually will take away from them their current power andinfluence in the slot-allocation procedure.

The auction of slots will be another (maybe alternative) market-ledmechanism, seemingly more attractive for airlines. In this case, againthe airlines and not the administrator will be asked to set up prices onslots during congestion period. The advantage of the mechanism is thatthe slots will be actually in the market with different prices (i.e. themarket values) for different periods of time, and thus differentiallyattractive for particular airlines. The principal disadvantage is againthat the large airlines will be in a position to dictate prices using theirmarket and financial power originating from inherited rights. Regard-ing disadvantages, protective measures for the smaller airlines will needto be found for either mechanism. Presumably, this will be categorisa-tion and separation of slots for particular airline and market categories.

These current and prospective developments suggest that, forexample, the US airports with the market shares dispersed amongseveral airlines will seemingly be more ‘convenient and prepared’ for

128 Milan Janic


introducing the above-mentioned market-led mechanisms. At theirEuropean large (hub) counterparts, where airline alliances will continueto consolidate their already strong market power, the opportunities (i.e.‘readiness and convenience’) for such changes will be much lower.Nevertheless, generally it seems that implementation of these mechan-isms will become easier after full privatisation of airports and operatingthem as the full-scale economic/business entities.

Environmental Dimension

The environmental dimension embraces noise, air pollution, and landuse at and around airports. The environmental constraints these posewill continue to affect provision of adequate capacity and its utilisationat many large hub airports in both Europe and the US. In particular,noise will remain a problem despite improved Air Traffic Management(ATM) procedures and aircraft guidance in the vicinity of airports andthe introduction of aircraft that are quieter. Most important, thepopulation exposed to given noise quota(s) will have to be kept undercontrol or even diminished. Figure 3 shows the example of the past,current, and prospective developments at London Heathrow Airport.

As can be seen, during the observed period the population exposed toa given daily nose quota has continuously decreased despite acontinuous increase in the annual number of aircraft operations.Construction of a new runway will increase the population exposedto noise, thus worsening the long-term declining trend.

Air pollution will continue to be an issue of concern, despitedecreasing of the aircraft fuel consumption and related emissions of

150300 350 400 450 500 550 600 650 700 750

250

350

450

550

650

Annual number of atm - 000

00-

atouqesion

nevignihti

wnoitalupo

P0 Two parallel runways

Three parallel runways (after 2015)

Noise quota: 35 NNI and 57 dB(A) Leq

Period: 1988-2020

Figure 3. Population exposed to given noise quota vs the number of air transportmovements � London Heathrow Airport (compiled from BA, 2004; CAA, 2002;

DETR, 2002)



air pollutants in relative terms. The concern will come from an absoluteincrease in the volumes of aircraft operations and non-aviation-relatedground-based activities.

Existing airports will continue to have a problem of scarcity of landfor expansion of the airside and landside infrastructure. In almost allcases, building new runway and/or terminal will require long publicinquiry, not only due to the scarcity of land but also due to concerns onthe other mutually related externalities. The cases of Frankfurt Mainand London Heathrow each demanding a new runway for a long timeare illustrative examples in Europe (BAA, 2005; Fraport, 2001).

New airports will be constructed using the experience on constraintsmainly in terms of providing sufficient airside and landside capacityand conditions (land) for the airport’s long-term unconstraineddevelopment.

Social Dimension

The social dimension implies employment in the broadest sense. Ingeneral, it may be expected that both direct and indirect employment atairports as their most important social-economic dimension willcontinue to grow with growth of the air traffic. In particular, theindirect employment will seemingly increase faster after these airportsbecome real economic/business engines of the regions they serve, i.e.when converted into pure service providers, intermodal integrators andattractive locations for other mainly high-tech non-aviation-relatedbusinesses. Such increased employment will certainly contribute to agreater local and national GDP and overall welfare (ACI, 1998).

Stagnating and Declining (Hub) Airports(s)

Stagnation and decline of the (hub) airport will likely take place underthe following conditions:

. collapse of the incumbent airline, causing immediate falling of thesubstantive volumes of demand (the collapses at Zurich (Swissair)and Brussels (Sabena) airports are illustrative examples; in addition,after building a new passenger terminal at the Euro Airport Basel�Mulhouse�Freiburg airport, the airline Eurocross did not come (ACI,2005)); after receiving the airline, the role and position of givenairport can be changed, thus questioning the current investments andtheir content based on the requirements of the collapsed incumbent;

. abandonment of the airport by the incumbent airline, with an almostequivalent impact on declining of the volumes of airport demand asin cases of airline collapse;

130 Milan Janic


. substantive modification or complete change of the networks of theincumbent airline and its alliance partners, thus causing changes inthe pattern, volumes, and structure of demand and consequentlyleaving substantive free capacity (an example of such changes is BAat London Heathrow focusing more on the long-haul O/D marketswhile abandoning some of the short-haul national and Europeanmarkets (BAA, 2005));

. undermining existing hub-and-spoke network(s) of the incumbentairline and its alliance partners by the LCCs, which has already takenplace at some large hub airports in Europe and the US;

. strengthening of environmental constraints, mostly in terms of noiseand land use, which may constrain the airport’s growth (e.g. LondonHeathrow Airport has experienced the long-term public inquirybefore getting its new Terminal 5 (BAA, 2005) and Amsterdam’sSchiphol Airport has a cap of 460,000 ATMs per year because of thenoise burden (Schiphol Group, 2006).

The measures for handling these situations may include: (i) indefinitelyabandoning or temporarily ‘freezing’ current and prospective capacityexpansion plans; (ii) reconfiguring the passenger terminal complex inorder to make it more effective and efficient for accommodating thechanged volumes and structure of passenger demand, i.e. proportionsof O/D and transfer passengers; (iii) conserving and/or squeezing partsof the airport’s airside and landside infrastructure; (iv) reducing airportstaff in order to maintain acceptable productivity and costs; and (v)closing the airport.

Conclusions

This paper has elaborated the future development of airports based onan examination of some past and current trends in the US andEuropean air transport systems along four dimensions: (i) operational,sizing, and design of landside and airside infrastructure capacity; (ii)economic; (iii) environmental; and (iv) social. The findings can besummarised as follows:

. The behaviour and economic/financial strength of the airlineindustry and individual large airlines will continue to play a crucialrole in the future development of large airports. In turn, these will beclosely related to the external airline demand-driving forces, i.e.global economic and political developments.

. Many existing large airports will continue to experience the problemof providing sufficient airside and landside capacity. This will beachieved by new technologies and building new (usually parallel)



runways, which will in turn expand the airport area and eventuallygenerate new noise burdens. The midfield satellite passenger terminalconcepts will continue to be the most attractive and flexibleconfiguration for the airlines operating hub-and-spoke networks.The linear concepts will continue to be the most convenient forairlines operating point-to-point networks. The ‘hybrid’ concept willremain equally flexible for combinations of both types of airlinenetworks. The airport ground access systems with a rail-basedcomponent will continue to gain in importance due to increasingof the volumes of demand, requirements for reducing the environ-mental impacts, and forces driving some airports to transform intothe nodes of global transport network(s) offering integrated air andsurface seamless door-to-door transport services. Security willcontinue to gain in importance and will likely require developmentof new more efficient and effective systems covering the entireairport area.

. New airports will be designed and constructed by using the lessonslearned from the past and current experience. Securing sufficientland for provision of adequate airside and landside capacity for theultimately unconstrained growth will be crucial.

. Management of costs, revenues, and profitability will be of growingimportance, particularly for the fully privatised airports. Privatisa-tion will likely spread to the landside and airside infrastructure byinvolvement also of non-aviation companies. This will increase theairport economic/business entrepreneurship and create the opportu-nity for introduction of market-led mechanisms for allocation ofscarce airport capacity.

. The environmental impacts, such as noise and air pollution, willcontinue to be a matter of concern, mainly due to an absoluteincrease in the volumes of operations. The chronic scarcity of land atexisting locations will likely constrain growth of particular airports.Limited expansion will be carried out by putting more constructionin the landside area underground (more expensive).

. The partially and fully privatised airports will continue to beimportant direct employers and economic/business drivers generat-ing indirect employment and other welfare effects in the regions theyserve.

. The stagnating and/or declining airports will have to evaluate theirperspectives carefully, including identifying the causes and eventuallyfinding remedies for their problems, including temporal or evenpermanent closure.

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