< PreviousICAO WORLD CIVIL AVIATION REPORTINTERNATIONAL CIVIL AVIATION ORGANIZATION...................................................................................................................................................................30.............................................................................................................................................................................WorldREGIONAL DISTRIBUTION OF PASSENGER TRAFFIC IN TERMS OF RPKNorth America ranked first in the regional distribution of passenger traffic in 2005, followed by Europe and Asia and Pacific. North America lost 11 percentage points of traffic share from 2005 to 2015; the Middle East, Asia and Pacific, Latin America and the Caribbean gained respectively 4, 6 and 1 percentage point.Traffic shares of Europe (27%) and Africa (2%) remained stable.(Source: ICAO Form A and ICAO estimates).............................................................................................................................................................................REGIONAL DISTRIBUTION OF CARGO TRAFFIC IN TERMS OF FTKAsia and Pacific ranked first in the regional distribution of cargo traffic in 2005, followed by North America and Europe.North America and Europe respectively lost 7 and 5 percentage points of traffic share from 2005 to 2015 while the Middle East and Asia and Pacific respectively gained 8 and 4 percentage points.(Source: ICAO Form A and ICAO estimates)ICAO WORLD CIVIL AVIATION REPORTINTERNATIONAL CIVIL AVIATION ORGANIZATION.....................................................................................................................................................................31.............................................................................................................................................................................WorldLOW COST CARRIERS (LCC)In 2015, Europe had the highest LCC capacity share among all regions in 2015, measured by the number of available seats. In 2015, 41% of the available seats within Europe were offered by LCCs. Latin America and the Caribbean had the second highest LCC share, with 35%, followed by North America with 32%, Asia and Pacific with 23%, and the Middle East with 20%. Africa had the lowest LCC share in 2015 with only 9%.In terms of LCC market share growth, Middle East had the largest increase from 4% in 2006 to 20% in 2015: +16 percentage points. Both Europe and Asia/Pacific had the second largest increase of +15 percentage points, followed by Latin America and the Caribbean which grew by +10 percentage points, and Africa which increased by +6 percentage points. North America had the lowest increase from 28% in 2006 to 32% in 2015, +4 percentage points.The world average Intra-Regional LCC capacity share has grown from 21% in 2006 to 30% in 2015.(Source: ICAO, OAG)Intra-Regional LCC Traffic Share 2015 vs 2006(Source: ICAO, OAG)ICAO WORLD CIVIL AVIATION REPORTINTERNATIONAL CIVIL AVIATION ORGANIZATION...................................................................................................................................................................32Source: ICAO.............................................................................................................................................................................WorldAIR CARRIER FINANCIAL OPERATING RESULTSIn 2015, the operating profit based on available results was estimated at about 8.0% of operating revenues for the scheduled airlines of Member States. The operating profit is expected to be around USD 58 billion in 2015 based on operating revenues of USD 721 billion. More than half of global operating profits came from the performance of air Analysis of variance in operating results (2015 over 2014)Operating revenues, USD (millions)Operating expenses, USD (millions)Operating result, USD (millions)RTK (millions)ATK (millions)Yield, USD (cent)Cost/ATK, USD (cent)Weight load factor (%)Break-even weight load factor (%)2015720,500662,90057,600817,0301,221,22888.254.366.961.62014766,900725,20041,700771,5871,151,89499.4636763.3Difference-46,400-62,30015,90045,44469,333-11.2-8.7-0.1-1.8 Due to reduction in yield, USD (millions)Increase in traffic, USD (millions)Net increase in operating revenues, USD (millions)-91,568 45,168 -46,400 Analysis of difference in operating revenues (2015 over 2014) (A) Due to reduction in unit cost, USD (millions)Due to increase in capacity offered, USD (millions)Net increase in operating expenses, USD (millions)-105,950 43,650-62,300 Analysis of difference in operating expenses (2015 over 2014)(B) Net increase in operating results (2015 over 2014), USD (millions)15,900 (A-B) Source: ICAOWhile 2015 was an excellent year for the airline industry, a strengthening USD could see many air carriers being saddled with exchange losses. Material declines in jet fuel costs could impact major air carriers who have secured options and or future contracts at higher rates, exposing carriers in North America. The chart below indicates the regional distribution of the operating profits in 2015 compared to those of the previous year. Significant improvement in operating profits of air carriers in North America contributed to the strong operating profit results of 2015.them to hedging losses. A world economy that grows at a pace slower than initially envisaged could expose many air carriers to general economic risk leading to overcapacity and lower load factors. ICAO WORLD CIVIL AVIATION REPORTINTERNATIONAL CIVIL AVIATION ORGANIZATION.....................................................................................................................................................................33.............................................................................................................................................................................KEY FIGURESPASSENGERS +6.4%CARGO +2.6%2015(versus 2014)World Airport DataDEPARTURES +2.0%The data shown above represents the traffic going through the airports located in the countries of each Region. Traffic details for each of the six ICAO statistical regions are shown in Appendix 2.Additional airport traffic statistics are available to the subscribers to the online version of this publication.Departures (thousand)ICAO WORLD CIVIL AVIATION REPORTINTERNATIONAL CIVIL AVIATION ORGANIZATION...................................................................................................................................................................34.............................................................................................................................................................................WorldIn the top 15 airports by aircraft departures, there were::eight airports in North America:five airports in Europe:two airports in Asia and PacificIn 2015, for the top 15 airports, 10 recorded an annual growth in departures with four of them located in North America, four in Europe, two in Asia and Pacific.In the top 15 airports by passengers, there were::five airports in North America:four airports in Asia and Pacific:five airports in Europe:one airport in the Middle EastIn 2015, for the top 15 airports, all airports recorded an annual growth in passenger traffic.In the top 15 airports by freight tonnes handled, there were::seven airports in Asia and Pacific:five airports in North America:two airports in Europe:one airport in the Middle EastIn 2015, 12 of the top 15 airports recorded an annual growth in freight tonnes handled...........................................................................................................................................................................................................................................................................................................................................................Source: ACI ICAO WORLD CIVIL AVIATION REPORTINTERNATIONAL CIVIL AVIATION ORGANIZATION.....................................................................................................................................................................35.............................................................................................................................................................................WorldOn a regional basis, European airports hold the greatest proportion of global airport revenues (36%). This is followed by Asia-Pacific (29%) and North America (19%). The Asia-Pacific (28% in 2013) and Middle East (7% in 2013) regions acquired a slightly larger share in 2014 as compared to the previous year relative to other regions. Europe's non-aeronautical revenues rebounded in 2014, achieving growth of almost 6%. This comes after depressed revenues in 2013 brought on by the Euro area downturn. As expected, the regions with the highest growth in revenues also had the highest growth in passenger traffic. Latin America-Caribbean, Asia-Pacific Table 1: Estimated industry revenues and costs (millions USD) in 2014*Aeronautical revenue includes ground handling charges**Non-aeronautical revenue includes ground handling concessions revenueRegionTotal revenue2014/2013 % changeAero-nautical revenue*2014/2013 % changeNon-aeronautical revenue**2014/2013 % changeTotal cost (operating + capital costs)2014/2013 % changeAfrica 3,000 17.0% 2,100 18.8% 900 12.8% 2,000 2.2%Asia and Pacific 41,800 8.3% 20,600 10.2% 21,200 6.3% 27,200 9.4%Europe 50,800 7.0% 30,100 7.8% 20,700 5.8% 41,300 4.3%Latin America and the Caribbean 8,100 25.9% 4,800 17.1% 3,300 38.7% 6,500 29.4%Middle East 10,900 13.0% 5,200 11.8% 5,700 14.2% 9,100 12.3%North America 27,900 4.8% 14,500 6.8% 13,400 2.4% 25,100 5.3%World 142,500 8.2% 77,300 9.1% 65,200 7.2% 111,200 7.3%Source: ACI Airport Economics Survey (2015)and the Middle East saw overall revenues increase by 25.9%, 17% and 13% respectively. In Latin America-Caribbean, major airports such as Mexico City (MEX) experienced a huge jump in commercial revenues after taking over their commercial leasing activities from the company that previously managed their concessions. On the other hand, the growth in costs varies markedly from one region to the next. The Latin America-Caribbean region also recorded the greatest gains in total costs from 2013 to 2014, which exceeded growth in revenues. A rise in interest costs at major airports in Brazil, Colombia and Mexico has contributed to this jump in costs.The overall health of the airport industry was strong in 2014 as revenues grew in line with the robust growth rates in global air transport demand. Aeronautical revenues and non-aeronautical revenues, which are the main components of a typical airport's income streams, experienced sound growth rates in 2014 as compared to the previous year. The recovery in the Euro area and the United States, combined with the resilience of aviation in emerging markets in spite of impending downside risks, translated into gains in airport revenues. However, although revenues have risen by 8.2% reaching over US$142 billion, there was a corresponding rise in total airport costs (see Table 1). In fact, after adjusting for inflation in certain markets, costs rose faster than revenues. Thus, the analysis of actual net profits and returns on invested capital in later sections gives a clearer picture of financial health. In analyzing the relative amount of global revenues, if the industry were a country, its annual proceeds would approximate the GDP of the 60th-ranked country in terms of economic output out of a possible 200 countries. Since the 2008 Great Recession, overall industry revenues have grown by almost 4% on an annualized basis.1THE AIRPORT INDUSTRY 1 This excerpt is based on sections of the 20th edition of the ACI Airport Economics Report, which presents data and analysis relative to airport activity for the financial year 2014. The data in this edition covers an array of different themes that include airport infrastructure, capacity, employment, airport efficiency, ownership, regulatory models, capital expenditure and financial performance. An in-depth analysis of industry revenues (aeronautical and non-aeronautical), costs (operating and capital) and their evolution continues to be the bedrock of the report. To learn more about the Airport Economics Report and Key Performance Indicators visit: http://www.aci.aero/Publications/ACI-Airport-StatisticsICAO WORLD CIVIL AVIATION REPORTINTERNATIONAL CIVIL AVIATION ORGANIZATION...................................................................................................................................................................36.............................................................................................................................................................................WorldAirport RevenuesAirports receive their revenue from two primary sources: aeronautical and non-aeronautical activities. Non-operating revenue represents a smaller proportion of the total. While non-aeronautical revenue continues to be an .............................................................................................................................................................................Source: ACI Airport Economics Survey (2015)Aeronautical RevenuesAeronautical revenue is generated from an array of charges and fees that are levied on users of airport facilities and services, which are required by the users to perform their respective aeronautical activities. Aircraft operators typically pay charges for the use of aviation infrastructure (including runways, taxiways, aprons and parking stands) at airports; these charges are usually based on an aircraft weight formula. Typically, passenger service charges are collected on a per passenger basis and are normally collected by aircraft operators on behalf of airports in order to avoid delays and bottlenecks in facilitation.important source of income for airports, the major share of revenue remains aeronautical, representing 55.5% of the total. Non-aeronautical and non-operating revenues make up 40.4% and 4% respectively.Chart 1 provides a detailed breakdown of global aeronautical revenue. As shown, passenger and aircraft-related charges represent a combined 66% of all aeronautical revenues. Terminal rentals paid by airlines for space utilization account for 11% of global aeronautical revenue and are mainly limited to North America.After adjusting for inflation, the greatest increase in aeronautical revenue comes from passenger charges, which increased by 10.3% year-over-year in 2014 as compared to the previous year. Landing charges were a close second, growing by 9.4%.ICAO WORLD CIVIL AVIATION REPORTINTERNATIONAL CIVIL AVIATION ORGANIZATION.....................................................................................................................................................................37.............................................................................................................................................................................WorldNon-aeronautical RevenuesRevenue sources on the commercial side of the airport business (non-aeronautical) tend to be more diverse than the traditional aeronautical revenue streams. Non-aeronautical sources of income not only provide diversification in an airport's income portfolio, but also serve as an additional cushion during economic downturns. This revenue may be derived from rents charged to concessionaires offering a wide range of services to passengers, including car parks within the airport boundary, or retail, banking, advertising or car rental facilities on the airport site. Non-aeronautical sources of income may also be rents for office accommodation on airport land, either in the form of rents for offices built by the airport operator or rents for Source: ACI Airport Economics Survey (2015)*Car parking revenue includes revenue from airport-operated parking lots and car parking concessions revenue.airport throughput, the expansion of such facilities inevitably increases the personnel expenses, maintenance costs, utilities and capital costs related to operating these fixed assets.airport land leased to third parties on which offices or other facilities have been built. Other, minor sources of non-aeronautical revenue may include various fees, such as those for third-party employee security passes, pass-through charges for utilities consumption or access charges to public transport operators. Chart 2 provides the global breakdown of non-aeronautical revenue by source. Retail concessions remain the leading source of non-aeronautical revenue for airports, representing 28% of non-aeronautical revenue. Car parking revenue and property revenue/rent follow retail concessions as the secondary sources of revenue at 22% and 15% respectively.Airport CostsAirport cost structures are characterized by predominantly high fixed costs in the operation and maintenance of major infrastructure components, such as runways and terminal buildings. As airports in many regions of the world reach full capacity due to growth in ICAO WORLD CIVIL AVIATION REPORTINTERNATIONAL CIVIL AVIATION ORGANIZATION...................................................................................................................................................................38.............................................................................................................................................................................WorldAirports saw their operating expenses, capital costs and total costs increase year over year by 7.3%, 7.2% and 7.3% respectively in 2014. As can be expected, though, there is variation in costs from one region to the next. With higher growth in economic output, emerging markets face greater upward pressure on prices. The Latin America-Caribbean, Middle East and Asia- Pacific regions saw their airport costs jump up by 29.4%, 12.3% and 9.4% respectively in 2014. In particular, while Latin America-Caribbean faced an increase in operating expenses, the largest jump pertained mainly to the rise in capital costs within the region.In 2013, Africa and Europe saw declines in total costs of 3.7% and 2.5% respectively, which was a result of cutbacks and downward pressure on input prices in the weakened economies of the Euro area and Northern Africa. By 2014, activity picked up in both regions, although growth was more subdued in other regions, with costs growing moderately in North America, Europe and Africa by 5.3%, 4.3% and 2.2% respectively.From a historical perspective, 2014 had the sharpest increase in airport costs over the last six years, although to begin with, year-over-year growth was not significantly high. These increases are largely attributed to a rise in capital costs and personnel expenses from 2013 to 2014. After adjusting for inflation, the evolution of industry costs demonstrates that only modest growth levels are apparent over the period of 2008 to 2013. In fact, by 2009 industry costs dropped by 2.7%, coinciding with the Great Recession. Having said this, unit costs on a per passenger basis have remained relatively stable. Over the six-year period, annual growth rates on a per-passenger basis oscillated between -1% and +1%.Airport costs can be classified as operating or capital costs. Chart 3 provides breakdowns of airport costs and operating expenses. Capital costs, which represent 38% of total costs, are made up of depreciation and interest expenses. In particular, depreciation makes up almost a quarter of all costs on aggregate.The largest component of operating expenses continues to be personnel costs, which account for 22% of total costs and 35% of operating expenses. Contracted services, which are comprised of activities outsourced to third parties, represent the second-largest component of operating expenses. These services make up 15% of total costs and 23% of operating expenses. Personnel costs refer to salaries, pensions and other employment costs relating to an airport's staff. The extent to which an airport chooses to operate essential services using its own employees (insourcing) or by contracting services out to third parties (outsourcing) will inevitably affect the proportion of costs in the two main categories of operating expenses.Operating expenses related to leasing, rent and concession fee payments, which make up 3% of these costs, saw the largest increase in 2014 at 13.6% year over year after adjusting for inflation. The principal components of operating expenses—personnel expenses and contracted services—underwent increases of 7.5% and 5.6% respectively in 2014. ICAO WORLD CIVIL AVIATION REPORTINTERNATIONAL CIVIL AVIATION ORGANIZATION.....................................................................................................................................................................39.............................................................................................................................................................................WorldAirport Profitability and Airport SizeTypically, airports that are gateways to centres of commerce or major tourist destinations, or that are situated in strategic geographic areas for connecting traffic, often have the lion's share of their respective countries' passenger and air cargo traffic. Smaller airports have neither sufficient traffic to drive down costs and achieve economies of scale nor to generate significant aeronautical revenue or commercial opportunities. Given that airports are asset intensive businesses, they require large minimum investments to accommodate a single landing. Thus, there is a critical mass that must be achieved before an airport can start recovering its large operating costs and infrastructure investments. This is true for the industry as a whole, irrespective of the region where the airport is located, the ownership model that governs it and the regulatory till. Investment in the airport business model is largely dependent on higher levels of traffic density with the potential of future traffic growth.Source: ACI Airport Economics Survey (2015)A facet of costs that has a significant impact on an airport's bottom line is capital costs. These costs include interest on outstanding debt and depreciation on airport infrastructure. When capital costs are taken into consideration within the overall cost structure, the significant weighting of depreciation as part of capital costs relative to operating expenses is indicative of the role that fixed assets and infrastructure play in airports' income statements and balance sheets.Depreciation, which is the cost of a fixed asset allocated over time, makes up as much as 60% of capital costs and more than one fifth of all costs and expenses incurred by a typical airport. Chart 4 shows the breakdown of capital costs.The reason smaller airports remain in operation hinges on the idea that they contribute to the social and economic development of the surrounding communities. Largely because these are positive externalities, government intervention in the form of subsidies or grants may help to cover shortfalls. In the case of major airport operators around the globe, profitable airports tend to cross-subsidize or compensate the net losses of smaller airports. Thus, airport size plays an important role in determining profitability. In order for airports to achieve economies of scale, characterized by declining average cost curves, total costs need to be spread over the airports' outputs (i.e., passengers, cargo and movements). At a given airport, this can only be achieved with significant traffic throughput. Consequently, smaller airports with fewer than one million passengers tend to have negative margins.Interest expenses13%Other capital costs2%Depreciation/amortization23%Next >