Retail Impacts

Retail Impacts Concessionaires, airports discuss losses, rent relief, and opportunities By Lindsay M. Hitch January 2002 Estimated SHORT-TERM Impacts Operating Revenue Loss by Source 9/11-9/15 Shutdown/Severe Impact 9/16-9/22...

Retail Impacts

Concessionaires, airports discuss losses, rent relief, and opportunities

By Lindsay M. Hitch

January 2002

Estimated SHORT-TERM Impacts Operating Revenue Loss by Source
9/11-9/15 Shutdown/Severe Impact
9/16-9/22 Moderately Disrupted Impact
1 Year Impact (Sept. 2001-02)
Total Aeronautical
Total Non-Aeronautical
Estimated Total Reduction in Airport Revenues

NORFOLK, VA — Airline, airport, and concessionaire representatives met at the 2001 Airport Concessions Analysis Seminar held here recently. Rather than the anticipated heavy focus on security and its effect on concessions, much of the discussion at the conference focused on lost revenues, rent structures, and marketing opportunities.

The Airports Council Internation-al - North America (ACI-NA), which co-sponsors the event with Embry-Riddle Aeronautical University, conducted a survey of 50 large, medium, and small airports to determine the effects of September 11 on airports and concessions. Leonard Ginn, senior vice president of economic and associate affairs for ACI-NA, reports that airports lost $84 million from September 11-15 and $101 million from September 16-22. ACI-NA estimates that U.S. airports will lose $2.3 billion in the 12 months following September 2001.
Non-aeronautical losses (parking, concessions, rental cars, etc.) account for nearly two-thirds of lost revenues. Concessions revenues were down $16.2 million from September 11-15, $17.5 million from September 16-22, and are projected to be down $445 million for the year following September 11.
ACI-NA also conducted a survey of nine airport concessionaires to determine the impact of reduced passenger traffic and restrictions on "meeters and greeters" beyond security. The nine concessionaires operate 2,250 stores at U.S. airports with combined estimated 2000 total revenues of $4.3 billion. The nine companies surveyed will lose $854 million in total revenues over the year.
The survey reveals that the companies polled are in the process of laying off some 9,600 employees, and half plan to permanently close some airport locations while 70 percent are attempting temporary closings. Based on survey responses and their relation to the overall market, ACI-NA estimates that airport concessions losses will total nearly $1.7 billion over the next year, resulting in nearly 20,000 layoffs.


ATA: Carriers Could Lose $7 Billion in 2001

David Swierenga, chief economist for the Air Transport Association (ATA), shared some hard numbers with an audience of concessionaires and airport officials at the Embry-Riddle/ACI-NA Airport Concessions Analysis Seminar.

Swierenga says that the airline industry had been anticipating a loss of $2 billion for 2001 prior to the September 11 attacks. However, in the third quarter alone, the industry experienced a loss of $2.5 billion. As of November the industry had lost $4.7 in 2001, and Swierenga expects that to jump to $7 billion for the year.
He says that prior to September 11 airlines were operating below the break-even load factor (percent of seats filled). Airlines are forecasting 67 percent of seats filled in 2001 and 71 percent in 2002. The break-even load factors for 2001 and 2002 are estimated at 74 and 75 percent, respectively. To break even, the airlines would have to raise prices as demand is decreasing. Inevitably, says Swierenga, the airline industry will lose money in 2002 and possibly 2003 as well.
Labor costs account for 35 percent of an airline’s total operating costs. Flights have been reduced by about 20 percent, while layoffs have accounted for only a 14 percent reduction in the workforce. The majority of those layoffs have been lower-paid employees, rather than spread across the seniority scale.
Airport charges and passenger facility charges (PFCs) have been rising much faster than airline prices, according to ATA. Airline prices have increased 15 percent since 1982. Airport charges have increased 82.9 percent while airport charges including PFCs have increased 138.7 percent in the same timeframe.
Swierenga expects "normal" traffic levels sometime next summer, but says that he expects two very tough years for the airline industry and, in turn, for airports and concessionaires.

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