Benjamin Franklin once observed that “in this world nothing can be said to be certain, except death and taxes”.
But he was writing before the age of flight, and it is with confidence we can add another item to the list: investment in air travel.
The pandemic did its best to ground the industry, but aviation’s recovery demonstrated its resilience: not only of the airports and airlines, but also the supply chain and governance.
But is there a bigger predicament than the pandemic in the making: aviation's growing footprint and its failure to be totally transparent about its emissions?
So far it has failed to dent the interest from investors in new airport projects across the world, but will the industry need to change its practices to safeguard future investment?
Why it's vital for governments to invest in airports
Despite the pitfalls of a pandemic, the odd natural disaster and the occasional airline going bankrupt, air travel has always been a sound choice for investors, if not a necessary one.
According to the report 'Future of Airport: To 2030 and Beyond', global annual investment in the sector will grow by a CAGR of 14.4 percent over this decade and the next, jumping from 200 billion in 2021 to 2.4 trillion in 2040.
Governments will be the first to agree that air travel is essential to their ongoing prosperity: both ensuring that their major cities are accessible to business travellers from all over the world, and that their own people have easy access to the outside world.
For every country that doesn’t make air travel a huge priority, there are 50 that do, or they risk being left behind, and it is quite common for governments to take major ownership shares in airlines to strengthen their standing, and to bail them out if need be.
Thefirm how big a priority air travel is not just to governance but the business and tourist industries.
And it is increasingly important that new projects are sustainably-focused – after all, it's an opportunity for governments to promote themselves as green frontrunners.
Airlines learning the hard way not to greenwash
Airports would not be built without the support of investors, and despite their obvious appeal, they can no longer take investor backing for granted in light of the increased focus on sustainability.
some of whom have been accused of greenwashing the matter in recent yearsIn 2023, a formal complaint was made to the European Commission about the greenwashing practices of 17 European airlines.
The attitude of the airlines is typical of an even wider malaise across the corporate world. According to the Science Based Targets initiative, just 20 percent of G20 companies have climate targets that are science-based – in line with the Paris Agreement goals.
In some countries, like the UK and France, 41 and 33 percent of the companies were making progress, but in others, like Saudi Arabia and Russia, the share of companies was at zero percent. According to 2022 research carried out by Green Gumption on behalf of climate charity Possible, the airline industry has only managed to achieve one out of 50 climate targets it set in 2000. Increasingly in the future, promises will no longer be enough: investors want to see data. Common reporting standards are paramount to the integrity of the industry.
READ MORE: How hydrogen-focused MROs are preparing aviation for the futureInvestment looks assured for the time being, though
Nevertheless, while there has been a noticeable shift in attitudes over the last decade, most investors remain comfortable with aviation’s large carbon footprint. More important are profits. According to a PWC study in 2021, 81 percent owere either unwilling to accept any reduction on returns or would accept only a drop of 1 percentage point or less.
So for the time being, there is no shortage of investment in the airport construction sector. Today the market is worth 1.21 trillion, and it is projected to increase in value to 1.35 trillion by 2028, although another projection has it reaching 1.8 trillion by 2030. 2023 was another stellar year for the sector, generating a value of $51 billion in 117 new projects – up from 71 in 2022.
Broken down, 49.6 percent were either new or expanded terminals, and a further 18.8 percent involved runway development.
In total, the top ten most expensive projects worldwide generated a value of $24.7 billion (see factbox), of which the most expensive was Central Communication Port, a $4.8 billion megaproject to service the Polish cities of Warsaw and Lodz.
Proof the airport construction market is robust as ever
In terms of ongoing airport construction developments, Central Communication Port is only the eighth largest.
Easily the most expensive is the expansion of Al Maktoum International Airport in Dubai to make it the biggest in the world by 2050. The first phase will see it increase its capacity from 66.1 to 130 million passengers by 2030 and then to 255 million upon completion.
The total makeover of JFK (18 billion – see factbox) is at number two, followed by the much-delayed expansion of London Heathrow (17.4 billion), Long Thanh International Airport (16 billion – see factbox) and a massive upgrade of Los Angeles International Airport (14 billion) in time for the 2028 Olympic Games.
Completing the top ten are the construction of Sangley Point International Airport in the Philippines (11 billion), Changi Airport Terminal 5 on Singapore (10 billion), U-Tapao Aviation City in Thailand (8.8 billion), Poland’s Solidarity Transport Hub (see factbox), and Noida International Airport in India (4.0 billion), which is due to be completed this year.
Development has been rapid in India in recent years, where the current market value is $32 billion – third behind only China and the US.
By 2030, the global market could be worth as much as $1.8 trillion, with China accounting for 201.6 billion.
SATAIR TAKEAWAY
The airport construction market remains robust for now, but pressure is growing on future airports to adopt more sustainable practices, or else their owners might miss out on investment in the future. So far, however, there is nothing concrete to suggest there might be another crisis incoming, but the clock is ticking towards 2050, the year by which aviation has assured the world it will run at zero emissions. It remains to be seen how many investors remain onboard should it be clearly failing in this mission.
Cover image credit: Free Malaysia Today