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Internet: www.gap-projekt.deContact: [email protected]
GERMAN AIRPORT
PERFORMANCEGERMAN AVIATION
BENCHMARKING
partner/sponsor:
Benchmarking selected European Airports by their Profitability Envelope – a Break-Even Analysis
Branko Bubalo
GAP Research [email protected]
GAB Final Project MeetingBerlin, June 20th 2012
GAB Meeting Berlin – 20.06.2012 – Branko Bubalo Page 1
GERMAN AIRPORTPERFORMANCE
GERMAN AVIATIONBENCHMARKING
Contents
1. Introduction
2. Theoretical Background and Data description
3. Application of the maximum profitability envelope
4. Break-Even analysis
5. Conclusions and Outlook
Page 2GAB Meeting Berlin – 20.06.2012 – Branko Bubalo
GERMAN AIRPORTPERFORMANCE
GERMAN AVIATIONBENCHMARKING
Introduction
• Results from benchmarking study on Norwegian airports• Extension and upgrade of GAP Database• Limited perspective on Profits (EBIT) and ratio ‘unit profits’
(EBIT per PAX) as one of the main chosen Partial Factor Productivity (PFP) indicators.
-> Intuition that this measure could be relevant and important, fuelled by pre-report of Ministry of Transportation in Norway (St.meld. nr. 48 [‘Report 48’]).
• There exist certain alternatives, such as ‘EBITDA per WLU’ (Earnings before Interests, Taxes and Depreciation/Amortization per Workload Unit).
Page 3GAB Meeting Berlin – 20.06.2012 – Branko Bubalo
GERMAN AIRPORTPERFORMANCE
GERMAN AVIATIONBENCHMARKING
Data: Total Costs and Revenues (log scale) and EBIT
Page 4
Revenues = 108.7 * PAX1.03142
R² = 0.96
Costs = 7841.136*PAX0.72307
R² = 0.92
EBIT = 0.0000006*PAX2 + 34.0532*PAX - 25,972,498R² = 0.84
-100
0
100
200
300
400
500
600
700
800
900
1,000
0
1
10
100
1,000
10,000
100,000
1,000 10,000 100,000 1,000,000 10,000,000 100,000,000
EBIT
in N
OK
(2-0
10 p
rice
s)
Mill
ions
Reve
nue
and
Cost
s in
NO
K (2
010
pric
es)
(log.
Sca
le)
Mill
ions
Passengers (log Scale)
Total Revenues
Total Costs
EBIT
Power (Total Revenues)
Power (Total Costs)
Poly. (EBIT)
Break-Even Line
• Trends for 210 European airports over 9 years (2002 to 2010*)
*except for Italy &
France until 2009
Break-Even Points
GAB Meeting Berlin – 20.06.2012 – Branko Bubalo
(Source: Own illustration)
GERMAN AIRPORTPERFORMANCE
GERMAN AVIATIONBENCHMARKING
Animation of Ebit and Ebit per PAX over time in Norway
• Critical Mass to make profits lies around 2 million PAX• Lower end of Airports has sharply increasing Losses per PAX
Page 5GAB Meeting Berlin – 20.06.2012 – Branko Bubalo
(Source: Own illustration)
GERMAN AIRPORTPERFORMANCE
GERMAN AVIATIONBENCHMARKING
Data points relative to the frontier and break-even line
• “Keep it simple” approach:
Page 6
Group 1 Group 2 Group 3 Group 4 Group 5
Break-Even line
EBIT per PAX
PAX
Losses -
Profits +
not profitable,benchmark not reached
not profitable,benchmark
break-evenpoint
profitable,benchmark not reached
profitable,benchmark
(maximum) Profitablity Envelope
: Data Point: Benchmark
GAB Meeting Berlin – 20.06.2012 – Branko Bubalo
(Source: Own illustration)
GERMAN AIRPORTPERFORMANCE
GERMAN AVIATIONBENCHMARKING
Algorithm:
Page 7
i = 1 to n # n = Number of airports in the sample.PAXi < PAXi+1 < … < PAXn # Sort PAX column in ascending order.Envelopei = EBIT per PAXi # Initialize with first data point in ‘EBIT
# per PAX’; i = 1.For i to n ≥ 2, # From the second entry onwards, theEnvelopei+1 = # new entry is compared, if larger than
# last Benchmark. If yes, it is set as new #‘EBIT per PAX’ Benchmark (Envelope).
Loop:If EBIT per PAXi+1 > Envelopei
Then EBIT per PAXi+1
Else Envelopei
GAB Meeting Berlin – 20.06.2012 – Branko Bubalo
(Source: Own illustration)
GERMAN AIRPORTPERFORMANCE
GERMAN AVIATIONBENCHMARKING
Application of the Profitability Envelope on the dataset
Page 8
-3,000
-2,500
-2,000
-1,500
-1,000
-500
0
500
1,000 10,000 100,000 1,000,000 10,000,000 100,000,000
EBIT
per
Pas
seng
er in
NO
K (2
010
pric
es)
Passengers (log. Scale)
Profitability Envelope
Data Points
Break-Even LineBreak-Even LineBreak-Even Line
Break-Even Point
GAB Meeting Berlin – 20.06.2012 – Branko Bubalo
(Source: Own illustration)
GERMAN AIRPORTPERFORMANCE
GERMAN AVIATIONBENCHMARKING
Profitability Envelope by year (even years 2002-2010)
Page 9
-3,000
-2,500
-2,000
-1,500
-1,000
-500
0
500
1,000 10,000 100,000 1,000,000 10,000,000 100,000,000
EBIT
per
Pas
seng
er in
NO
K (2
010
pric
es)
Passengers (log. Scale)
Profitability Envelope 2002 2002
Profitability Envelope 2004 2004
Profitability Envelope 2006 2006
Profitability Envelope 2008 2008
Profitability Envelope 2010 2010
Break-Even Line
GAB Meeting Berlin – 20.06.2012 – Branko Bubalo
(Source: Own illustration)
GERMAN AIRPORTPERFORMANCE
GERMAN AVIATIONBENCHMARKING
Break Even analysis
• Cumulative EBIT and EBIT incl. efficiency gains for 140 Euro airports• Shift of Break-Even Point
Page 10
-10,000
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
0%10%20%30%40%50%60%70%80%90%100%
Earn
ings
bef
ore
Inte
rest
s and
Tax
es (
EBIT
) in
Nor
weg
ian
Kron
ers
(201
0 pr
ices
)
Mill
ions
Percentage Rank of Sample of 140 European Airports ordered by EBIT
Cumulative EBIT in 2005 Cumulative EBIT incl. efficiency gains in 2005
Cumulative EBIT in 2007 Cumulative EBIT incl. efficiency gains in 2007
Cumulative EBIT in 2009 Cumulative EBIT incl. efficiency gains in 2009
Shift of Break-Even point
Efficiency Gain
GAB Meeting Berlin – 20.06.2012 – Branko Bubalo
(Source: Own illustration)
GERMAN AIRPORTPERFORMANCE
GERMAN AVIATIONBENCHMARKING
Conclusions
• Maximum profitability envelope gives benchmarks relative to airport size without the need of arbitrary classifications.
• Feasible Efficiency gains, by adjusting to best practices, are substantial.
• Scenarios towards changes in Revenue/Cost structure can be quantified, e.g. in a cost-benefit analysis (CBA) regarding changes in Airport Charges scheme.
Page 11GAB Meeting Berlin – 20.06.2012 – Branko Bubalo
GERMAN AIRPORTPERFORMANCE
GERMAN AVIATIONBENCHMARKING
Thank you for your attention! Questions?
Suggestions and Comments are welcome.
Page 12GAB Meeting Berlin – 20.06.2012 – Branko Bubalo