To meet demand, airports and flight carriers need to think strategically about how they plan to take advantage of the tourism boom or risk losing revenue to other countries.
I’ve talked a lot about technology in some of my previous articles, and it’s an issue that no organisation is immune to. Yes, technology can provide a huge opportunity for growth, but it can also require large amounts of capital, and this is only one aspect that airports need to pay for. Regulation changes and security, to name but a few aspects, can also be very capital intensive. As a result, forecasters expect a modest 2.3 per cent annualised growth until 2022.
Overcoming growth barriers
The sector is among the most capital intensive in the economy, with just 40 cents spent on wages for every dollar of capital outlay. These capital requirements are only likely to become more restrictive as innovations in automation, air traffic control and security infrastructure become more costly, while having shorter life cycles before being superseded.
With growing cost pressures from technological obsolescence and regulatory requirements, airport operators are expecting increased traffic to place the greatest strain on capex budgets. This rising demand will require operators to invest in a range of infrastructures such as runways and terminals, to minor assets such as lighting, seating and CCTV, much of which will require years of planning and long build times.