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?
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.
The ongoing airport mega projects and major renovations (see factbox) confirm 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.Increasing numbers of investors want reassurance they are investing in an airport making the utmost effort to limit its emissions. This means talking to their customers, their national carrier and other resident airlines, some of whom have been accused of greenwashing the matter in recent years.
In 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.
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Investment 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 of investors in general were 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. 2024 was another good year for the sector, generating a value of $41.8 billion in 88 new projects. A slight decline from the 117 in 2023 but more than the 71 in 2022. Broken down, over half (62.5%) of all airport construction projects to enter the execution phase were projects involving airport terminals – either expansions or new developments – totalling over $31.2 billion of combined investment.
In total, the top ten most expensive projects worldwide generated a value of $21.99.billion (see factbox), of which the most expensive was Dallas Fort Worth International Airport Terminal F, a $4.8 billion megaproject to construct a new terminal.
Proof the airport construction market is robust as ever
In terms of ongoing airport construction developments, Dallas Fort Worth International Airport is not the largest by far.
Easily the most expensive ongoing project 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.
But in 2024 alone, the busiest region was the USA with 32 projects entering the execution phase last year, representing 36.4% globally. Asia followed with 23 projects, representing a 26.1% share of global projects.
Development has been rapid in Asia and especially 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.
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