Retail and real estate operations is boosting European airport revenues and diversifying its income, said Fitch Ratings in a report on October 7, 2024. With airports in the region developing into complex hubs, retail revenue at EU airports has grown faster than passenger numbers.
Fitch said this has helped improve airport's profitability and diversifying from pure aviation activity.
"Retail revenue at European airports usually offers significant downside protections in case of passenger number contractions," said Fitch in its report. "These protections include minimum annual income guarantees in concession contracts, ensuring a predictable revenue stream even when sales decline."
With many EU airports using the dual till system - where aviation-related and concession revenues are separated, thus preventing a monopolistic retail division for these airports - investments into non-aviation businesses is further incentivised, despite somewhat limiting aviation revenues.
The report found that retail contributes up to 50% to airports' simplified free cash flow.
Location matters, according to Fitch, with it finding that retail operations are more profitable after security checkpoints at airports - 'airside' - rather than 'landside' retail operations. It suggested airports perhaps minimise the landside space, bringing security checkpoints closer to the entrance to maximise passengers' time spent airside.