AviaDev Africa 2022

#AviaDev

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WELCOME FROM AVIADEV

Dear Colleagues, After a three-year hiatus, AviaDev Africa finally returns in its live format and I couldn’t be more excited.

I know that the last years have been testing for all of us, both professionally and personally, but we have no choice but to look forward and use these experiences to inform how we can create a more resilient and connected industry.

Our theme this year is Connect, Collaborate and Change.

In 2022’s digital world, connecting with someone online is easy but making a real connection is harder than ever before. Therefore, live platforms such as AviaDev are vital in creating personal and business relationships and building trust. It is this trust that enables us to discuss Collaboration and “win-win” partnerships that will ultimately Change the fortunes of our great industry.

AviaDev Africa 2022 has attracted a record number of airlines of all shapes, sizes and ownership structures, which is an indication that the industry is willing to come together to craft a more robust and resilient future. The meetings that will take place over the coming days will play a part in the future connectivity of Africa, driving economic development, creating jobs and opportunity for the next generation.

Our conference programme has been curated and developed by our advisory board, comprising a huge range of experience. The topics and speakers have been identified to offer thought-provoking, real-time experiences and ideas of how to move the industry forwards.

None of this would be possible without our wonderful hosts, Cape Town Air Access, a division of WESGRO, for supporting us to host AviaDev in Cape Town for a third time. A note of thanks to the South Africa Tourism team who provided the welcome reception and continue to offer wonderful support to the airlines serving South Africa.

I am delighted that our friends from Ravinala Airports are also with us this year as we hoped to be able to deliver the event on the Treasure Island of Madagascar and I’m sure we will get another chance one day.

Our incredible sponsors include a wide variety of service providers and OEMs from across the African continent and the globe with us this week.

This shows that there is real belief and interest in seeing African Aviation thrive.

Finally, we are delighted to be able to deliver a sustainable conference. We have made a real effort to both minimise our impact on the environment, whilst maximising our impact on the local community with our charity run, ambassador and outreach initiatives.

I wish you a productive, energising and fun conference and my team and I look forward to engaging and supporting you over the coming days.

Warmest regards

Jon Howell CEO and Founder AviaDev

FLOORPLAN

Meeting Room

PSFA

Sustainability Village

GFPA

CTT Registration

stage

Sustainability Village

Ravinala

Main Conference Room

Refreshments and Networking

MEETING ROOM FLOORPLAN

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PROGRAMME

WEDNESDAY 29 JUNE 2022 09:00 - 13:00

Training Session: Route Development John Grant, Partner, AviaDev Consult, powered by MIDAS aviation Sabine Reim, Principal, Arthur D Little Juraj Toth, Managing Director, AviaDev Europe

18:00 – 20:00

Welcome Reception at Century City Conference Centre Hosted by

THURSDAY 30 JUNE 2022 09:00 – 09:10

Welcome and Opening Remarks Jon Howell, CEO and Founder, AviaDev

09:10 – 09:20

The City of Cape Town Welcomes AviaDev James Vos, Mayoral Committee Member for Economic Opportunities and Asset Management, City of Cape Town

09:20 – 09:30

Welcome to the Western Cape: Open for Business Mireille Wenger, Western Cape Provincial Minister of Finance and Economic Opportunities

09:30 – 09:40

Global Trends and Sustainability Wrenelle Stander, CEO, Wesgro

09:40 – 10:00

Post-Pandemic Africa - Opportunities and Challenges Daniel Silke, Director, Political Futures Consulting

10:00 – 11:00

PANEL: Building profitable, sustainable and equitable airline partnerships The recent past has seen an increasing trend towards interlining and co-operation between airlines. How are these performing and what are the potential pitfalls to avoid? How do we ensure that all partners are treated and compensated fairly?

Moderator: Girma Wake, Chairman, Ethiopian Airlines Simon Newton-Smith, Chief Commercial Officer, South African Airways Getaneh WoldeMichael, Commercial Director, Air Botswana Nowel Ngala, Group Commercial and Ground Operations Director, ASKY Airlines and Chairman of the AFRAA Aero-Political Committee Surafel Saketa, Manager Group Business Development and Equity Partner Airlines, Ethiopian Airlines 11:00 – 11:55

PANEL: Air Cargo's role in African Route Development The discipline of air service development has changed forever. Air freight is playing an ever-increasing role in assessing the viability of new routes. Against the shifting sands of rapidly changing health and travel protocols, airline planners have had to be more responsive than ever before. Is this trend here to stay or are airlines taking a longer-term view?

Moderator: John Grant, Partner, AviaDev Consult, powered by MIDAS aviation David King, Cape Town Air Access Project Manager, Wesgro Sanjeev Gadhia, CEO, Astral Aviation Martin Gitonga, Head of Network Planning, Kenya Airways Zoe Rajohnson, Commercial and Marketing Director, Ravinala Airports

PROGRAMME

11:55 – 12:00

Maximising Airport Revenue through Connected Retail Manish Shrivastava, Founder and CVO, Swissynergizers GmbH

12:00 – 13:00

PANEL: Diversifying African airport revenues to build resilience 72% of operating revenue at African airports is derived from aeronautical sources. Covid exposed the need for airports to diversify their revenue, but how can this be done without huge capital expenditure?

Moderator: Marcel Langeslag, Director African Aviation, NACO (Netherlands Airport Consultants) Moritz Breickmann, Investment Director, African Infrastructure Investment Managers Namory Camara, Managing Director, SOGEAC – Aeroport International Ahmed Sekou Toure Julien Coffinier, Chief Executive Officer, Ravinala Airports Charles Shilowa, Group Executive: Strategy and Sustainability, Airports Company of South Africa (ACSA) 13:00 – 14:00

Networking Lunch

14:00 – 17:00

One-to-one Meetings

14:30 – 15:30

Hosted by:

ROUNDTABLE – Beyond The Recovery. Which aircraft will drive Africa’s growth?

Join an open discussion on which aircraft will drive Africa’s growth. Come with your questions and discuss solutions with your colleagues

Derek Nseko, Founder & CEO, Airspace Africa 15:30 – 16:30 Hosted by:

ROUNDTABLE – What’s the right aircraft for Africa?

Join an open discussion on which aircraft is right for Africa. Come with your questions and discuss solutions with your colleagues

Joanna Bailey, Managing Editor, Simple Flying 18:00 – 22:00

Gala Reception Delegates will enjoy a gala evening on the beautiful Eureka Estate.

Buses will leave from 6:00 pm and return from 10:30pm

Hosted by

FRIDAY 1 JULY 2022 07:15 – 08:00

Morning Charity Run / Walk Bring your running gear! Meet us at 07:15 in the Century City Hotel lobby for a morning jog that will take in the Century City park and waterways. We will give you a branded AviaDev T-shirt and donate $50 on behalf of every runner in aid of the Peninsula School Feeding Association.

09:00 – 09:10

Welcome back and opening remarks Jon Howell, CEO and Founder, AviaDev

09:10 – 09:30

Unlocking new routes in Africa with e-flight Christine Driessen, Airport Consultant, NACO – Netherlands Airport Consultants Marcel Langeslag, Director Aviation Africa, NACO - Netherlands Airport Consultants

PROGRAMME

09:30 – 10:30

PANEL: Where are the opportunities for the OEMs in Africa?

How will the African fleet mix develop? Is the freighter business here to stay? What role will sustainability play in the future of African aviation?

Moderator: Joanna Bailey, Managing Editor, Simple Flying Andrew Armitstead, Head of Airline Marketing, Airbus Kuljit S Ghata-Aura, President, Middle East Turkey and Africa, Boeing Hussein Dabbas, General Manager – Middle East and Africa, Embraer Jason Sutcliffe, Regional Marketing Director, Europe, Middle East, Africa and Central Asia, Rolls Royce Plc 10:30 – 11:15

PANEL: Implementing practical technology to propel African aviation How can airlines and airports take advantage of accessible, affordable technologies and an ever more connected world to deliver cost savings and a better customer experience?

Moderator: Refilwe Ledwaba, Founder, Girls Fly Programme for Africa Kirby Gordon, Chief Marketing Officer, Fly Safair Khangi Khoza, Chief Executive Officer, Swissport South Africa Pty Ltd Blaine Powell, Chief Sales Officer, Ink Aviation Aditi Thaker, Account Director – Eastern and Southern Africa, SITA Middle East and Africa Ciaran Wilson, Head of Sales (Europe, Middle East and Africa), CellPoint Digital 11:15 – 11:20

Civil Aviation Safety: The need for technological change and the importance of Advanced Object Recognition Algorithms (AORA) Thapelo Mokwena, Divisional Head: Operations, Aviation Co-ordination Services (ACS)

11:20 – 12:15

PANEL: Financing African airlines. Navigating the route to profitability To buy, lease or look for creative, shorter-term solutions? What are the relative merits of each option and where can finance be found?

Moderator: Sean Mendis, Director, SeanMendis.com Sameer Adam, Senior Vice President, Commercial, ACIA Aero Leasing Helen Brume, Director - Project and Asset Based Finance, African Export Import Bank (AFREXIM) Federico Curto, Commercial Project Manager, Avion Express Rodger Foster, Chief Executive Officer, airlink Joao Jorge, Chief Executive Officer, LAM Mozambique Airline

12:15 – 12:30

AviaDev Future Leaders Panel After a rigorous selection process, we have selected some rising aviation stars who will propose their solutions for a more connected and profitable African aviation industry.

Moderator: Refilwe Ledwaba, Founder, Girls Fly Programme for Africa Ronnie Afema, Pilot and Aviation Journalist, AviaDev Ambassador Thabiso Thando Khoza, Drone Pilot and RPAS Maintenance Technician (GFPA Alumni); AviaDev Ambassador Mahek Shah, Student Pilot, Founder of Wings for Women; AviaDev Ambassador

PROGRAMME

12:30 – 13:00

Ato Girma award interview Since 2018, AviaDev has presented one distinguished leader in aviation with this annual award for their contribution to route development in Africa. Previous winners include Adefunke Adeyemi, Regional Director, Advocacy and Strategic Relations, Africa - IIATA; Raphael Kuuchi, Special Envoy on Aero-political Affairs, IATA and Chris Zweigenthal, Chief Executive, Airlines Association of Southern Africa.

We are delighted to announce that in 2022, this esteemed award will be presented to Sanjeev Gadhia, Founder and CEO, Astral Aviation.

Girma Wake, Chairman, Ethiopian Airlines Sanjeev Gadhia, Chief Executive Officer, Astral Aviation Adefunke Adeyemi, Regional Director – Advocacy and Strategic Relations Africa, IATA 13:00 – 14:00

Networking Lunch

14:00 – 18:00

One-to-one meetings

BOEING SEES HUGE POTENTIAL IN AFRICA FOR 737 MAX & DREAMLINERS The US planemaker anticipates a need for 1,000 new aircraft in the next 20 years

have a regional contender. Airbus recently noted that the A220 could be perfect for opening up intra-regional connectivity across Africa, but where does that leave Boeing?

Boeing’s opportunity in Africa The CMO identifies around 72% of the airplane need in Africa to be in the narrowbody sphere. For Boeing, that’s clearly the 737 MAX. But it sees a widebody opportunity too, as Ghata-Aura explained, When it comes to markets that are yet to fulfill their potential, Africa is a hotspot of opportunities.

While foreign airlines lay on capacity to snatch traffic away from the local carriers and China funds infrastructure developments, for the OEMs, the dangling carrot of airplane sales has not gone away.

Speaking on the AviaDev Insight Africa podcast, Kuljit Ghata-Aura - President, Boeing Middle East, Turkey, and Africa – noted the importance of Africa to the US airplane manufacturer. He commented, “We've got a really rich history in Africa, and we're very proud of that … We’ve got 60 plus airline customers, 500 plus Boeing airplanes operating all over Africa. It’s really quite significant – 66% of all aircraft in operation are Boeing.”

Boeing’s annual Commercial Market Outlook (CMO) seeks to identify the need for new aircraft in various regions around the world. For Africa, its latest CMO identified the need for 1,000 new airplanes by 2040, with a total investment potential of $160 billion. Airbus came up with a similar number at 1,100.

But Boeing is slightly on the back foot here. It has a solid offering on the narrowbody side, with its various iterations of the 737 MAX, but it doesn’t

“Our prediction is that demand will be more for the mid-range widebody. For us, that's the 787-8 and 787-9. But the great thing about the 787 family is that you've got this great flexibility to go bigger or to go smaller. And I think that's going to be increasingly important for the African carriers as they compete against European carriers and the Middle Eastern carriers.”

Boeing currently has around 50 or so Dreamliners in operation across Africa. Those are flown by a handful of major airlines – Air Austral, Air Tanzania, EgyptAir, Ethiopian, Kenya Airways and Royal Air Maroc. Airk Air has some on order, but other than that, the penetration of the 787 into Africa is relatively light.

At present, only four 737 MAX are actively flying in Africa, according to data from ch-aviation.com.

Ethiopian Airlines flies three, while Royal Air Maroc has one. Both airlines have one more MAX each, both currently stored, while Mauritania Airlines has a single MAX, also in storage at present. However, orders are in for around 50 more 737 MAX for African airlines, with Air Peace, Arik, and Ethiopian Airlines the main customers for the type.

BOEING SEES HUGE POTENTIAL IN AFRICA FOR 737 MAX & DREAMLINERS The US planemaker anticipates a need for 1,000 new aircraft in the next 20 years

And the challenges Of course, to reach its full potential, Africa has a whole world of challenges to overcome. The first is breaking down some of the current barriers to regional travel, with the long-talked-about Single African Air Transport Market (SAATM). It’s been an issue ongoing for many years but is still high on the agenda of stakeholders on the continent. At the end of last month, it was a hot topic at the ICAO AFI Aviation Week event, while just last week, the Director-General of the Nigerian Civil Aviation Authority (NCAA) noted the importance of SAATM to the country’s aviation development.

aviation industry, noting, “If there's going to be growth here in these markets, we've got to create the talent pools that enable that growth across the entire aviation value stream, whether that's pilots, maintainers, managers … every professional associated with aerospace.”

And finally, the looming specter of sustainability is just on the horizon for aviation in Africa. The challenges of getting sustainable aviation fuel into regular use at African airports are immense and driving forward the switch to more sustainable technologies seems a million miles away for the cash-strapped airlines trying to scrape a living in the region.

Nevertheless, Africa is going to be bound by the same commitments being made by airlines and regulators all over the world. Boeing wholeheartedly supports the integration of SAF, including developing 100% SAF-compatible aircraft by 2030.

Kuljit summarized Boeing’s appetite for Africa, saying,

Liberalizing the market will make it easier for more startups to flourish.

Photo: Getty Images

For Boeing, it’s an initiative worthy of support, as Ghata-Aura explained,

“I think market liberalization is absolutely key … the single African Air Transport market - we're obviously huge supporters of that. We work very closely with the African aviation industry group to support as much as we can.”

“For air traffic growth over the next 20 years, Africa is predicted to outpace the rest of the world by almost two times. We're looking at 5.4% growth against a 2.7% average across the world. That puts, in terms of growth, this market on the same level as China. So there are huge opportunities here.

We're excited to be part of it.”

Written by Joanna Bailey, Simple Flying

Kuljit further noted the challenges of securing available talent to deliver a more comprehensive

Listen to the full podcast at AviaDev Insight

Growing Boeing's African footprint with President, Middle East, Turkey, and Africa, Kuljit Ghata-Aura www.aviadevinsight.libsyn.com

WHY AIRBUS BELIEVES THE A220 IS PERFECT FOR BOOSTING AIR TRAFFIC IN AFRICA Market intelligence and consulting director at Airbus, Geert Lemaire, shines a light on the post-pandemic plane for Africa - the A220

In terms of what airplanes will be needed, Airbus has been firm in its outlook. Over 800 of the 1,100 new airplanes will be in the ‘small’ aircraft category – that is, aircraft of 100 – 220 seats.

That’s all of the A320 family of jets, as well as the Airbus A220.

Africa’s aviation recovery is well underway, and traffic in the region is picking up fast. International traffic is rebounding, although not to the same extent as domestic, and airlines are busy once more. Despite a later reopening than some parts of the world, African aviation is on course to recover to 2019 levels within the next 18 months, all being well.

Speaking to Jon Howell, CEO of AviaDev, for his Africa Insight podcast, Geert Lemaire, market intelligence and consulting director at Airbus, shone a light on the planemaker’s outlook for the region, and its demand for airplanes. One airplane from the Airbus stable is a clear front runner for new orders, and it’s the post-pandemic golden child, the Airbus A220.

Africa is set for significant growth Airbus’s latest market outlook, issued in November last year, anticipates a recovery for the African air transport market in late 2023. From there, it’s all up, as the planemaker projects annual growth of traffic of 4%. To support this growth, Airbus believes 1,100 new planes will be needed in Africa, just 30% of which will be replacements for existing aircraft, while 70% will go towards growth.

Driving this growth is the move in Africa to adopt a more open and free environment. Free trade, free movement of people and the ever-elusive Single African Air Transport Market (SAATAM) will bolster demand, as will rising populations, GDP and wealth in many African countries.

Discussing where growth will happen, Lemaire noted, “There's two kinds of growth … we have, first of all, organic growth, which is simply the growth of the networks as they exist today - traffic picking up on the routes that are already served. Next to that, and where we actually see a significant potential, especially for the A220, is indeed the creation of new routes.”

The A220 is the platform Airbus foresees as being key to connecting the continent more effectively.

Photo: Airbus

WHY AIRBUS BELIEVES THE A220 IS PERFECT FOR BOOSTING AIR TRAFFIC IN AFRICA Market intelligence and consulting director at Airbus, Geert Lemaire, shines a light on the post-pandemic plane for Africa - the A220 Unserved city pairs Airbus does much research into where there is the potential for more aviation activity.

Part of this research looks at unserved connections, where passenger demand already exists but is not served by a direct flight.

Lemaire sees a huge amount of this in Africa, particularly in regional flying, with pre-COVID intra-African connectivity hovering at about 12% of the overall traffic contribution. By 2040, Airbus believes this will rise to 20%, and it’s these unserved city pairs that will drive that increase.

“What we typically find is, indeed, city pairs connecting cities in South Africa to West Africa, between South Africa and the eastern part of Africa, and also to a smaller extent between West Africa and North Africa. So we have city pairs, for instance, Johannesburg to Abidjan, Cape Town to Accra, Cape Town to Lagos, Cape Town to Zanzibar - to just name a couple of them – which clearly show the potential for the development of future direct routes, but that, unfortunately, today are not served yet.”

With a competent range and the right number of seats for lower-demand routes, the A220 could open up intra-African connectivity in the coming decade. Photo: Ibom Air Airbus believes that the A220 is the perfect fit for launching some of these underserved routes, and connecting these in-demand city pairs in a logical, step-by-step manner.

Lemaire noted, “[The A220s] have the performance to serve these kinds of routes. They have definitely the comfort onboard, because the comfort you find on an A220 is typically what you get a widebody aircraft, or even better. As such, we certainly have a lot of opportunities to open these routes. You don't have a massive capacity, and you can serve these routes on a decent frequency.”

Lemaire mentioned the ‘route planner’s mantra’, which is to add frequency before increasing capacity. When the time does come to increase capacity, he believes the pairing of the A220-100 and the A220-300 will allow African operators to scale up in a gradual, manageable way.

In the past, routes calling for six hours in the sky typically attracted the widebody segment, in a bid to give passengers more comfort on the long flight. But these unserved city pairs do not have the demand level to support a 300+ seat aircraft.

Written by Joanna Bailey, Simple Flying

Listen to the full podcast at AviaDev Insight

Driving Intra-Africa connectivity with the singleaisle sector. A deep dive with Geert Lemaire, market intelligence and consulting director at Airbus. www.aviadevinsight.libsyn.com

FOUR WAYS TO DIVERSIFY AIRPORT REVENUE AND BUILD BUSINESS RESILIENCE The COVID-19 pandemic severely impacted air travel in every region of the world. In Africa, the Airports Council International has estimated that passenger traffic in 2020 was around two-thirds below its 2019 baseline, with a similar reduction in airport revenues. With global passenger traffic expected to return to pre-pandemic levels in 2024, airports are working hard to recover and are considering how to better prepare themselves for future shocks to the system.

Diversifying revenues is often mentioned in this context and can play an important part in building resilience. Here we explore ways in which airports can diversify their income and reduce their reliance on passenger traffic.

Diversity in aeronautical revenue The first, and perhaps most straight-forward way airports can diversify their income is by attracting traffic from different countries and regions, and by having a mix of international and domestic travel. Having a more diverse traffic profile spreads traffic risk and thereby improves the resilience of airports.

During the COVID-19 pandemic, no region was spared the impact of global travel bans, but domestic travel continued at a higher level and recovered faster than international travel; helping airports with a greater share of domestic traffic generate some income during the uncertainty.

We have also seen that different regions recover at different rates. Figure 1 illustrates the recovery of scheduled airline seat capacity in different regions in Africa. It shows a disparity between East and West Africa that restored significant amounts of lost capacity in 2021, while in Central and Southern Africa capacity declined further.

Figure 1: Scheduled seat capacity, indexed to 2019 (from: Diio Mi, 2022)

FOUR WAYS TO DIVERSIFY AIRPORT REVENUE AND BUILD BUSINESS RESILIENCE However, it may be difficult to develop connectivity to different regions at will, and aeronautical revenues are often regulated. For these reasons, we may look at non-aeronautical revenues for ways airports can better position themselves ahead of future downturns.

Opportunities for growth in non-aeronautical revenues Non-aero revenues can take many forms – with some being passenger-dependent like parking, retail, and food & beverage facilities, and others (cargo and real estate) offering revenues less dependent on passenger traffic.

Non-aero revenues are mostly unregulated and tend to be a larger contributor to overall profits – meaning growing non-aeronautical revenues is a good thing in itself; without even thinking about diversification.

Non-aero revenues today represent about 28% of total operating revenues at African airports. Globally, this figure is more than 40%, indicating there is room for growth in this area.

Airport retail – optimise and integrate Retail is one of the most important sources of non-aero revenue for airports, representing around 35% for African airports (see Figure 2). As such, strong retail performance is key for airports in ensuring a robust income stream.

Figure 2: Breakdown of non-aeronautical revenues at African airports (from: ACI Airport Economics Report, 2020)

Despite its importance, a number of trends highlight challenges for African airports when it comes to retail.

At around US$ 3300 per square meter of retail space, compared to a global average of US$ 5380, retail revenue at African airports is one of the lowest in the world. Secondly, Africa has the world’s youngest population with a median age below twenty – which means less spending power. At the same time, travel retail is transforming at a rapid pace, with 79% of purchases involving online search, particularly among younger generations and 65% of purchase decisions made before entering a duty-free shop at the airport.

FOUR WAYS TO DIVERSIFY AIRPORT REVENUE AND BUILD BUSINESS RESILIENCE

Figure 3: Duty free purchase decision moments (from: AOE)

These trends and insights highlight the need for optimization of physical retail space and integration with digital platforms. Airports must create an omnichannel experience that seamlessly connects in-store shopping with virtual environments.

Digital transformation is a complex process that requires organizations to invest in digital capabilities. We have previously written about this in the context of the future passenger experience and visa processing in Africa.

Air Cargo Air cargo is one area that offers airports an opportunity to diversify away from a reliance on passenger traffic. While revenues from cargo are estimated to represent less than 10% of airport revenues (in a regular year) spread across both aero and non-aero streams – they did provide vital income to airports during the COVID-19 pandemic.

Cargo volumes have also recovered much faster than passenger volumes, with cargo traffic in 2021 already exceeding pre-pandemic 2019 levels. While the financial contribution of cargo to the airport bottom line may be limited, the strategic and economic value is perhaps more important – supporting local industries, creating better trade linkages and employment opportunities.

In a previous article we explored the close links between trade, air connectivity and air cargo in Africa.

Airports that are an integral part of a cargo ecosystem realize both direct and indirect value that contributes to profitability and resilience (see Figure 4).

Figure 4: Airport cargo ecosystem (from: NACO & ACI World, 2021)

FOUR WAYS TO DIVERSIFY AIRPORT REVENUE AND BUILD BUSINESS RESILIENCE While cargo infrastructure capacity is important, successful cargo development depends on much more. To develop a strong cargo ecosystem many aspects, need to come together, and this takes time and effort. As described in our recent guideline document, it starts with understanding the current situation, gathering data and consulting with stakeholders. Based on this, a cargo vision and plan can be defined that describes the way forward for enhancing capabilities and developing infrastructure.

Airport real estate Finally, but perhaps most importantly, there is airport real estate – which presents a big opportunity for diversification and building resilience. Many airports have large land areas at their disposal and are often located in strategic locations near cities and transport links. This makes them well suited for the development of prime property and real estate.

In 2018, real estate revenues made up approximately 14% of non-aeronautical revenues at African airports, compared to more than 26% in the Middle East (see Figure 5). Apart from the direct financial contribution, real estate provides a ‘cushioning effect’ for airport revenues. In a 2020 White Paper we analyzed this effect for a number of airports in Europe, North America, Asia and Africa. The data showed that growth in real estate revenues was significantly higher than growth in air traffic.

Figure 5: Contribution to non-aeronautical revenues by property and real estate revenue or rent (from: ACI Airport Economics Report, 2020)

This effect is also seen in recent data from ACI’s Airport Economics Survey. In 2020, passenger traffic was around 63% lower than in 2019, retail revenues dropped by 66% - but real estate revenues reduced by ‘only’ 12%. Commercial real estate operates on a different economic cycle than the aviation industry and lease contracts typically have a duration of five to ten years. As a secure form of income real estate can reduce airport’s revenue loss during downturns, enhancing business resilience.

FOUR WAYS TO DIVERSIFY AIRPORT REVENUE AND BUILD BUSINESS RESILIENCE

Figure 6: Comparison of passenger traffic and real estate revenues at AMS, HKG, DFW and VIE airports, indexed to 2005 (NACO analysis)

Property development at airports requires careful spatial planning to ensure integration with both onand off-airport infrastructure and facilities. Moreover, airports must select the appropriate business models to balance capital investments needs with risk exposure and expected returns.

Resilient business - where to from here?

A broad revenue base with income from a variety of sources is important for airports to deal with inevitable downturns. Building income streams that are not linked to passenger traffic, such as cargo and real estate, reduce business risk in the case of an economic downturn, crisis, or pandemic.

Growing revenues in those areas starts with insights into the situation at your airport and a good relationship with stakeholders. Gathering and analysing relevant data is key to preparing targeted plans and making the right investment decisions. Investments in staff capabilities and stakeholder relationships may be as important as bricks and mortar.

When it comes to capital expenditures for infrastructure or facilities, involving specialists to determine capacity needs and appropriate business models can be key to success. Keeping these aspects in mind can support airports in building business resilience.