Airports are more than gateways to travel—they’re financial powerhouses. While many assume ticket sales drive airport profits, the reality is quite different. Airports generate revenue from multiple streams, with concessions—those shops, restaurants, and services inside terminals—playing a significant role. But there’s more to the story. --- ### 1. **Building Rentals and Landing Fees: The Core Revenue Drivers** Airports earn substantial income by leasing buildings and land to airlines. Airlines pay for hangars, cargo storage, and even runway space. For example, Atlanta’s Hartsfield–Jackson Airport, the world’s busiest, relies heavily on such fees. Additionally, landing fees, calculated by the aircraft’s weight, bring in significant sums. A fully-loaded Boeing 737 could cost an airline £15,000–£35,000 per landing—a tidy sum when multiplied by hundreds of flights daily. --- ### 2. **Concessions: Small Spaces, Big Revenue** Concessions cover everything from Starbucks to luxury retailers like Louis Vuitton. These businesses pay rent based on a percentage of sales and often commit to a Minimal Annual Guarantee (MAG), ensuring consistent revenue for airports. For instance, Starbucks earned £3.2 billion from airport locations in 2024, demonstrating the immense potential of terminal foot traffic. Additionally, niche services like luggage wrapping and airport spas (e.g., Be Relax Spa, backed by private equity) are growing industries, capitalising on passengers’ willingness to splurge during travel. --- ### 3. **Why Concessions Work: Traffic, Wealth, and Exclusivity** Airports offer unmatched advantages for businesses: guaranteed foot traffic, extended dwell times (often exceeding three hours), and a captive, affluent audience. Many frequent fliers earn £100k+ annually, which explains the presence of luxury retailers. Even brands that sell little benefit from airport exposure. Louis Vuitton and Burberry, for example, value brand recognition over sales at airports, ensuring their presence among high-net-worth travellers. --- ### **So What? Actionable Takeaways** For investors, the airport concession economy offers lucrative opportunities. Private equity firms like Morgan Stanley Capital Partners and Activa Capital have profited handsomely from strategic acquisitions, such as Hojeij Branded Foods and Be Relax Spa. Meanwhile, businesses eyeing airport spaces should focus on proven profitability and innovation to win competitive bids. For smaller players, initiatives like the ACDBE programme offer a lifeline, albeit a challenging one. As travel rebounds and passenger numbers soar, the airport economy remains a vibrant and growing market worth exploring. ✈️ ![[Pasted image 20250119173455.png]]