There are two key attractions of infrastructure assets – the first being that their revenues are inflation proofed and the second that high barriers to entry reduce competitive price pressures. This article evaluates that proposition in the context of airports, one of the darlings of the infrastructure investment world. For reasons of data availability, this article focuses on the UK.
So, how have airport revenues stood up to the inflation test? Here, we are interested in the development of “airport charges” – the bundle of tariffs that airlines pay to access airport infrastructure. A first point is that we are more concerned with “yields” (i.e., revenue from airport charges divided by passengers) than prices here. Whereas airport tariffs (usually in the airport’s “Conditions of Use”) continue to appear on UK airport websites, those documents are increasingly a dead letter as airlines agree to off-menu, five or ten-year deals, at least for regional airports. In this context, “yields” provide a more accurate indication of the extent of airport’s inflation proofing.