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Airports face capacity crunch as demand for air travel set to double

Jun 04 2018 22:00
Carin Smith

Sydney - The demand for air travel globally is expected to double over the next 20 years, leaving the aviation industry facing an airport capacity crisis.

This emerged at the International Air Transport Association (Iata)'s AGM on Sunday.

Iata earlier said in its 20-year Air Passenger Forecast that it expected 7.2 billion passengers to travel in 2035 – nearly double the 3.8 billion air travellers in 2016. This was based on the 3.7% annual compound average growth rate (CAGR).

Iata has concluded what it considers an important study on the performance of airports in the world before and after privatisation.

According to Brian Pearce, Iata’s chief economist, successful airport privatisation should bring about a more efficient, cheaper and better service for passengers and shippers. It should also have cost-effective and "fit for purpose" investment, and normal returns on capital for investors.

There should be economic benefits for the local community and the wider economy, he added.

The study found evidence that privatised airports were more expensive than public ones and that efficiency at privatised airports was not much better than at state-owned airports.

At the same time, however, profits at privatised airports were found to be much higher than at state-owned airports.

The report found that airport privatisations failed to deliver on expectations because governments only tended to focus on short-term gains, and alternatives were not considered. Furthermore, "robust" business cases were not built and there tended to be a lack of meaningful consultation with the aviation industry before such privatisation of airports.

"Governments struggle to move quickly, and the cash-strapped state of their finances, are fuelling a trend of looking to the private sector for solutions," said Nick Careen, Iata’s senior vice president for airport, passenger, cargo and security.

"Governments need to think carefully about how they incentivise airport matters. Iata’s research found that privatising airports [was] not necessarily the answer," said Pearce.

*Fin24 is a guest of Iata at its AGM.

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air travel  |  airports
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