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Table of Contents

Executive Summary

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TABLE OF CONTENTS

Executive Summary

Market Definition

MARKET POSITION

MARKET SECTORS AND TRENDS

Table 1: Leading Passenger Airports in the World (rank by number of passengers), 1996

Table 2: Leading Cargo Airports in the World (rank by tonnes of cargo), 1996

Table 3: World's Top Ten Tourism Destinations by Number of International Tourist Arrivals (000 arrivals), 1996

Market Size

THE TOTAL MARKET

MARKET SERVICES

Table 4: The UK Market for Airports by Value and Volume (£m, million, 000, 000 tonnes), 1992-1996

Table 5: UK Airport Revenues by Type (£m and percent), 1995 and 1996

Table 6: Retail Revenues of BAA PLC (£m), Years to March 1990-1997

Table 7: Retail Revenues of BAA PLC by Product Area (£m), Years to March 1995-1997

Industry Background

RECENT HISTORY

INDUSTRY CONCENTRATION

EMPLOYMENT

REGULATORY AUTHORITIES AND ASSOCIATIONS

Table 8: Industrial Concentration of the UK Commercial Airport Sector (cumulative percent of terminal passengers), 1993 and 1996

Table 9: Industrial Concentration of UK Airport Ownership (cumulative percent of airport revenues), 1996

Table 10: Estimated Employment Levels of Major UK Airport Operators, 1993-1996

Competitor Analysis

THE MARKETPLACE

MARKET LEADERS

ADVERTISING AND PROMOTION

Table 11: Number of Terminal Passengers Using Major UK Airports (000 and percent), 1992-1996

Table 12: Amount of Cargo Passing Through Major UK Airports (000 tonnes and percent), 1992-1996

Table 13: Revenues of Leading UK Airports (£m), 1993-1997

Table 14: BAA PLC Performance by Sales, Pre-Tax Profit, UK Passengers, Air Transport Movements and Cargo (£m, million, 000 and 000 tonnes), Years to March 1993-1997

Table 15: Birmingham International Airport Ltd Performance by Sales, Pre-Tax Profit and UK Passengers (£m and million), Years Ending March 1992-1996

Table 16: Main Media Advertising Expenditure on Airports (£000), Years Ending March 1994-1997

Strengths, Weaknesses, Opportunities and Threats (SWOT)

STRENGTHS

WEAKNESSES

OPPORTUNITIES

THREATS

Buying Behaviour

INTRODUCTION

BAA'S STRATEGY

DEMOGRAPHIC PROFILE OF PASSENGERS

FREQUENCY OF FLIGHTS

PURPOSE OF FLIGHT

Table 17: Analysis of Airport Passengers at BAA's UK Airports by Age ( percent), 1996/1997

Table 18: Analysis of Airport Passengers at BAA's UK Airports by Sex ( percent), 1996/1997

Table 19: Analysis of Airport Passengers at BAA's UK Airports by Socioeconomic Group ( percent), 1996/1997

Table 20: Analysis of Airport Passengers at BAA's UK Airports by Residency ( percent), 1996/1997

Table 21: Analysis of Frequency of Flights of Passengers at BAA's UK Airports ( percent), 1995/1996

Table 22: Purpose of Visit of Outbound UK Residents by Air (million visits and percent), 1992-1995

Table 23: Analysis of Purpose of Passenger Usage at BAA's UK Airports ( percent), 1996/1997

Outside Suppliers to the Industry

INTRODUCTION

DUTY-FREE SHOPS AND RETAILING

BAGGAGE AND CARGO HANDLING

Table 24: Typical Airport Facilities and Services

Current Issues

PRIVATISATION, CONSOLIDATION AND OVERSEAS EXPANSION

ABOLITION OF DUTY FREE

INTER-GOVERNMENTAL BILATERAL AGREEMENTS

CAPACITY CONSTRAINTS

RETAILING

SECURITY AND TERRORISM

TRANSPORT INFRASTRUCTURE

PATTERN OF DEMAND

AIRPORT DEPARTURE TAX

OCCUPANCY OF TERMINAL 5

Table 25: Major UK Airport Expansion Projects, 1997

Table 26: Pattern of Demand of International Tourism Flows by Type (million visits), 1992-1996

Forecasts

TRENDS

FORECASTS 1997 TO 2001

Table 27: Forecast of the UK Airport Market by Value and Volume (£m, million, 000 tonnes), 1997-2001

Company Profiles

INTRODUCTION

DEFINITIONS

FURTHER INFORMATION

Further Sources

ASSOCIATIONS

PERIODICALS

DIRECTORIES

GENERAL SOURCES

HBI UK INFORMATION SOURCES

GOVERNMENT PUBLICATIONS

OTHER SOURCES

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EXECUTIVE SUMMARY

Key Note estimates that the revenues generated by UK airports increased by 7.9 percent in 1996 to reach £1.83bn. This increase in revenue was accompanied by a 4.9 percent increase in terminal passengers, a 4.6 percent increase in air transport movements and a 3.8 percent increase in freight tonnage.

Prices for commercial aircraft services and facilities are falling in real terms due to price controls and increased competition. The driving force for growth in airport revenues is the commercial revenue stream, particularly from retailing, rather than the aviation income. Key Note estimates that the commercial share of airport revenues increased from 45.9 percent to 47.7 percent in 1996. At its present rate of growth, commercial revenues will overtake aviation revenues within the next year or so.

The development of commercial revenues at airports is under significant threat if the abolition of intra-European duty-free sales goes ahead as planned in June 1999. The International Duty Free Confederation (IDFC) estimates that landing charges for European Union (EU) flights will have to rise by 30 percent to compensate for the loss of duty-free sales. The knock-on effect will directly push up prices within airport retail operations and indirectly put up ticket prices and the prices of some goods, such as prestige perfumes, outside airports.

Since the 1996 Airports Authority Act, the UK airports industry has embarked on a slow process of privatisation, consolidation and internationalisation. To some extent, the industrial development of UK airports is being dampened by the duty-free issue, but it is also greatly influenced by the lack of a complete Open Skies policy, particularly between the US and UK.

As the outcome of the duty-free issue and liberalisation of the air routes becomes clearer, successful UK airport operators will focus more on international joint ventures and take-overs of overseas airports. It is likely that within the next 15 years, European airports will be dominated by around ten major airport operating groups.

The largest airport operator in the UK, BAA PLC, commands around 75 percent of all UK airport revenues, and is ideally placed to take the airport privatisation opportunities opening up in the US, Australia, South Africa and some European countries as it already has a international foothold and a proven record of success in airport management and development.

Key Note forecasts that airport revenues in the UK will increase by 18.5 percent in real terms between 1997 and 2001 to reach £2.28bn.

Text © 1997 Key Note

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