Chapter 2020： The airport is not losing money

Quite different from the United States, the United Kingdom defines airports as operating assets and positions organizations like BAA as professional airport management companies to create maximum profits through diversified management models and effective operating methods;

Adopt a diversified management method, own partial equity and the right to operate and manage the entire airport, do not participate in equity but own the right to operate and manage the entire airport, control the airport management company, and have partial operating and management rights, etc.

BAA manages airport security, first aid, duty-free shops, some engineering and maintenance, inquiries, aviation display systems, and outsources ground services, catering, aviation fuel, some engineering and maintenance, retail, parking, and catering.

Provide equipment and facilities for air traffic control system, public security, border defense, customs and other public functions.

With more work to be done, more employees will naturally be hired, which will result in an increase in operating costs.

So Yang Cheng has to consider whether to invest in BAA.

To be honest, he has Delta Air Lines himself, so he thinks more from the perspective of airlines. In front of the airport, airlines have little say.

Of course, this is only for a single individual. Due to the market development strategy of competition and cooperation, the world’s major airlines have formed various air transportation alliances, forming five major global airlines such as Star Sky, One World, and SkyTeam. Transport Industry Alliance.

The member companies of the three famous aviation alliances account for more than 70% of the world's air transportation market.

If a family does not have the right to speak, it will have a greater right to speak together. These alliance companies require standardized and internationalized airport services in major airports around the world. This demand is an important driving force for the integration of airports, and BAA is therefore grow.

Following the trend, BAA has more powerful bargaining power. From an investment perspective, it seems that investing in airports has greater potential and more stable returns than investing in airlines.

People’s travel demand is actually positively correlated with the economic level. The better the economic level, the greater people’s travel demand. There are currently 1.4 billion people in country Z, and about 1 billion people have not yet taken an airplane. This is not because everyone does not need to fly. Airplanes, because a large number of people have no money or are reluctant to fly. With the continuous improvement of the domestic economy, some of these 1 billion people will become airline customers. Even if only 400 million people will need to fly, then airlines The income will also double.

Therefore, if you invest in an airline or airport in country Z, it is actually a trade that makes no money.

But foreign countries are different. Except for country Z, the economic levels of other countries in the world are regressing!

More than 90% of airlines’ revenue comes from passenger services. For the average consumer, when buying a ticket, they will weigh the time and the ticket price. Within the acceptable time frame, try to choose the lowest ticket ticket. As for which airline ticket to buy, everyone will be less concerned about it. Of course, there are also some local tyrants who buy tickets depending on their mood. After all, this is a minority.

Take the air ticket from Shanghai to Beijing. The cheapest air ticket in summer is 452 yuan and the highest price is 1490 yuan. The difference is about 1,000 yuan. For passengers, they will definitely come according to their own time. Choose the cheapest and most cost-effective airline ticket. If the final price is not much different from the time, then the airline with better service will be selected.

Therefore, the stickiness between consumers and airlines is actually very poor. In the case of similar security, airlines have relatively low brand value and poor bargaining power. This principle applies to the world.

The airport’s revenue is mainly divided into two parts. Aviation revenue (aircraft take-off and landing, passengers, cargo and mail) accounted for more than 40%, and non-aeronautical revenue (rent, advertising, catering, etc.) accounted for more than 50%. Sexual income standards are all set by the state, and there is little difference.

However, due to the large investment in the early stage of the airport and the high depreciation costs, the gross profit margin of this business is also relatively low. The core airport has a relatively high proportion of international passengers, and the gross profit margin is relatively high. Airports with less passenger flow may also lose money.

Therefore, the non-aeronautical income of the airport is more reliable. This aspect mainly comes from rent, catering, and advertising fees. Among them, the rental income of tax-free business accounts for a relatively high proportion, and the gross profit margin is extremely high. This is mainly because the airport area is limited and resources are tight. As a result, the rent is higher, the airport in the core area has a large passenger flow, and the surrounding area lacks strong competitors, so the bargaining power is stronger.

How strong is it? The Shanghai Airport Duty Free Shop covers an area of ​​about 16,900 square meters, and the guaranteed minimum rent is about 4.2 billion, which means that the guaranteed minimum rent per square meter per year is 248,000. Isn't it an exaggeration? But this is nothing. After 10 years, the rent per square meter may at least double, which is nearly 500,000. This tm is still a wholesale price, so can the airport not make money? Especially airports in core cities!

Therefore, on the revenue side, the bargaining power of the airport is very strong, while the bargaining power of the airlines is weak. In the future, as the passenger growth rate further declines, the competition of the airlines will become more intense, and price wars will inevitably occur at that time, let alone What's the bargaining power, and the bargaining power of the core airport will be stronger, because the overall passenger flow of the airport is increasing.

In terms of revenue, although large airlines such as Delta Air Lines are growing steadily, their gains are limited, and their net profit fluctuates greatly and is very unstable, often with substantial growth and sharp declines.

The airport is different. Although it is difficult to see explosive growth, the growth rate is extremely stable and the profit rate is good. Anyway, there is no problem with outperforming bank interest rates.

Don't forget In terms of risk, the risk of airports, especially the core airport, is actually very low, not to mention bankruptcy. Airlines have higher debt ratios and many influencing factors, so operating risks are greater.

This business risk can also be seen as the ability to resist risks. To put it bluntly, it depends on the quality of your fixed assets.

What does the airline have? Regardless of the market value of hundreds of billions, but 90% of fixed assets are airplanes. In fact, airplanes are like cars. They depreciate quickly after being purchased. There is basically no possibility of appreciation, and the asset quality is poor.

In addition to the top airlines in the world, the cash flow may be counted as one of the remaining airlines. The cash flow is very tight and the asset structure is very unreasonable.

But the airport is different. It has a high proportion of construction in progress, and more than 90% of the fixed assets are buildings, runways and aprons. Although the buildings and runways of large airports continue to be depreciated, the airport building construction Property and runway may continue to appreciate, so the asset quality is very high.

The key is that the cash flow is very stable, and there are very few large-scale cash losses. This is the confidence!

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