Investors remain onboard despite growing spotlight on aviation's footprint
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?
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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.
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.
India’s aviation sector is set to soar. Here’s why.
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
Top ten most expensive projects of 2023
- 10. Otay Mesa Metropolitan Airpark
Location: San Diego, USA
Cost: $1 billion
The project involves the construction of aviation facilities and supporting non-aviation facilities on 134 hectares of land.
Scheduled to open in 2040. - 9. Henri Coanda International Airport new terminal
Location: Otopeni, Romania
Cost: $1.04 billion
The project involves the construction of a 100,000m2 new passenger terminal and is planned to have the capacity to handle 20 million passengers per year at Romania’s busiest airport from the current 8 million. Scheduled to be completed by the end of 2029. - 8. Vaclav Havel Airport Terminal 2 expansion
Location: Prague, Czech Republic
Cost: $1.19 billion
The expansion of Terminal 2 to handle 21.2 million passengers per year by the end of 2033. - 7. Burbank Bob Hope Airport new terminal
Location: Burbank, California USA
Cost: $1.2 billion
Construction of a 14-gate replacement terminal at BBHA in California, US. The project aims to increase low-cost-airport traffic counts and become a major centre for processing cargo. Scheduled to be completed by the end of 2027. - 6. Kaohsiung International Airport new terminals (Phase 1)
Location: Taiwan
Cost: $1.26 billion
Phase 1 involves the construction of a new terminal building, boarding halls, a multi-story car park, and the relocation of a taxiway. Is expected to be completed by the end of 2032. - 5. King Abdulaziz International Airport terminal expansion
Location: Jeddah, Saudi Arabia
Cost: $1.3 billion
Two terminals are being expanded to handle the increasing capacity required for pilgrims making the Hajj and Umrah pilgrimages to Meccah and will add an additional capacity of 15 million passengers per year to the airport. Expected to be completed by 2026. - 4. Sacramento International Airport expansion
Location: Sacramento California USA
Cost: $1.3 billion
The expansion involves the construction of new ticketing counters, a lobby area, a baggage claim area, office space, a walkway, and 5,500 new parking spaces.
Expected to be completed by the end of 2027. - 3. Brisbane Airport expansion
Location: Brisbane, Australia
Cost: $3.3 billion
The project aims to increase the airport’s capacity to 50 million passengers per year
and is part of the Australian government’s plan to prepare for the Brisbane 2032 Olympic games. Expected to be completed by the end of 2032. - 2. Viracopos International Airport modernisation
Location: Campinas, Brazil
Cost: $4.62 billion
The project will be developed in 5 Phases. Phase 1 of the project involves the construction of a passenger terminal with a 145,000m2 floor area to handle up to 25 million passengers annually, 28 boarding bridges, taxation areas, seven new aircraft parking spaces, three aircraft yards, a garage building, and parking spaces for trucks, cars, taxis, and vehicles. Phases 3-5 will gradually increase the capacity of the terminal until it can handle over 80 million passengers per year. Expected to be completed by the end of 2031. - 1. Dallas Fort Worth International Airport Terminal F
Location: Dallas, Texas USA
Cost: $4.8 billion
The project involves the construction of a 121,920m2 new Terminal F building. Expected to be completed by the end of 2026.