GERMAN AVIATION
GERMAN AIRPORT
BENCHMARKING
PERFORMANCE
Internet: www.gap-projekt.de
Contact: info@gap-projekt.de
Benchmarking selected European Airports by their
Profitability Envelope – a Break-Even Analysis
Branko Bubalo
GAP Research Project
partner/sponsor:
branko.bubalo@googlemail.com
GAB Final Project Meeting
Berlin, June 20th 2012
GAB Meeting Berlin – 20.06.2012 – Branko Bubalo
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GERMAN AIRPORT
PERFORMANCE
GERMAN AVIATION
BENCHMARKING
Contents
1.
2.
3.
4.
5.
Introduction
Theoretical Background and Data description
Application of the maximum profitability envelope
Break-Even analysis
Conclusions and Outlook
GAB Meeting Berlin – 20.06.2012 – Branko Bubalo
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GERMAN AIRPORT
PERFORMANCE
GERMAN AVIATION
BENCHMARKING
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).
GAB Meeting Berlin – 20.06.2012 – Branko Bubalo
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GERMAN AVIATION
BENCHMARKING
GERMAN AIRPORT
PERFORMANCE
Millions
• Trends for 210 European airports over 9 years (2002 to
2010*)
*except for Italy &
France until 2009
100,000
1,000
Total Revenues
Total Costs
900
Millions
Data: Total Costs and Revenues (log scale) and EBIT
EBIT
10,000
Power (Total Revenues)
800
Revenues = 108.7 * PAX1.03142
R² = 0.96
Poly. (EBIT)
700
1,000
600
500
100
Costs = 7841.136*PAX 0.72307
R² = 0.92
400
300
EBIT in NOK (2-010 prices)
Revenue and Costs in NOK (2010 prices) (log. Scale)
Power (Total Costs)
10
Break-Even Points
200
100
1
Break-Even Line
0
EBIT = 0.0000006*PAX 2 + 34.0532*PAX - 25,972,498
R² = 0.84
0
1,000
-100
10,000
100,000
1,000,000
10,000,000
100,000,000
Passengers (log Scale)
(Source: Own illustration)
GAB Meeting Berlin – 20.06.2012 – Branko Bubalo
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GERMAN AIRPORT
PERFORMANCE
GERMAN AVIATION
BENCHMARKING
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
(Source: Own illustration)
GAB Meeting Berlin – 20.06.2012 – Branko Bubalo
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GERMAN AVIATION
BENCHMARKING
GERMAN AIRPORT
PERFORMANCE
Data points relative to the frontier and break-even line
• “Keep it simple” approach:
EBIT
per PAX
Profits
Group 1
+
Group 2
Group 3
Group 4
Group 5
(maximum) Profitablity Envelope
Break-Even line
Losses
PAX
: Data Point
: Benchmark
not profitable,
benchmark not reached
not profitable,
benchmark
break-even
point
profitable,
benchmark not reached
profitable,
benchmark
(Source: Own illustration)
GAB Meeting Berlin – 20.06.2012 – Branko Bubalo
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GERMAN AIRPORT
PERFORMANCE
GERMAN AVIATION
BENCHMARKING
Algorithm:
i = 1 to n
PAXi < PAXi+1 < … < PAXn
Envelopei = EBIT per PAXi
For i to n ≥ 2,
Envelopei+1 =
# n = Number of airports in the sample.
# Sort PAX column in ascending order.
# Initialize with first data point in ‘EBIT
# per PAX’; i = 1.
# From the second entry onwards, the
# 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
(Source: Own illustration)
GAB Meeting Berlin – 20.06.2012 – Branko Bubalo
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GERMAN AVIATION
BENCHMARKING
GERMAN AIRPORT
PERFORMANCE
Application of the Profitability Envelope on the dataset
Passengers (log. Scale)
1,000
10,000
100,000
1,000,000
10,000,000
100,000,000
500
Break-Even Line
-500
Break-Even Point
-1,000
Profitability Envelope
Data Points
-1,500
-2,000
EBIT per Passenger in NOK (2010 prices)
0
-2,500
-3,000
(Source: Own illustration)
GAB Meeting Berlin – 20.06.2012 – Branko Bubalo
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GERMAN AVIATION
BENCHMARKING
GERMAN AIRPORT
PERFORMANCE
Profitability Envelope by year (even years 2002-2010)
Passengers (log. Scale)
1,000
10,000
100,000
1,000,000
10,000,000
100,000,000
500
Break-Even Line
-500
-1,000
Profitability Envelope 2002
2002
Profitability Envelope 2004
2004
Profitability Envelope 2006
2006
Profitability Envelope 2008
2008
Profitability Envelope 2010
2010
-1,500
-2,000
EBIT per Passenger in NOK (2010 prices)
0
-2,500
(Source: Own illustration)
GAB Meeting Berlin – 20.06.2012 – Branko Bubalo
-3,000
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GERMAN AVIATION
BENCHMARKING
GERMAN AIRPORT
PERFORMANCE
Break Even analysis
• Cumulative EBIT and EBIT incl. efficiency gains for 140 Euro airports
• Shift of Break-Even Point
Percentage Rank of Sample of 140 European Airports ordered by EBIT
80%
70%
60%
50%
40%
30%
20%
10%
0%
80,000
70,000
60,000
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
50,000
40,000
Efficiency Gain
30,000
20,000
Shift of Break-Even point
10,000
0
(Source: Own illustration)
GAB Meeting Berlin – 20.06.2012 – Branko Bubalo
Earnings before Interests and Taxes (EBIT) in Norwegian Kroners (2010 prices)
90%
Millions
100%
-10,000
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GERMAN AIRPORT
PERFORMANCE
GERMAN AVIATION
BENCHMARKING
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.
GAB Meeting Berlin – 20.06.2012 – Branko Bubalo
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GERMAN AVIATION
BENCHMARKING
GERMAN AIRPORT
PERFORMANCE
Thank you for your attention! Questions?
Suggestions and Comments are welcome.
branko.bubalo@googlemail.com
www.gap-projekt.de
GAB Meeting Berlin – 20.06.2012 – Branko Bubalo
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