Pieter van der Hors: The fact that real estate operates on an entirely different business model to passenger-related revenues is key here. The additional “cushioning effect” that real estate brings through its constant stream of rents and leases provides some insulation from the negative financial effects of sudden, prolonged or fluctuating passenger numbers.

I would not position this as a “positive” that has come out of the pandemic. It is part of a wider need, however, to understand how best to absorb the shocks and mitigate the trends in diminishing revenues per passengers that are inherent in the airport business as a whole.

Currently, some 90% of airport revenues depend on passenger activity, which we have seen on various occasions can be sensitive to external events. Diversifying revenue sources is part of building that understanding and putting in place more proactive responses to these external shocks.

Having said that, our view is that airports still need to focus on a combination of non-aeronautical and non-passenger-related revenues. The big challenge for the short to medium term, however, will be in funding investments in non-passenger related revenue sources.

Cargo real estate is indeed one area where the share can be increased since there needs to be a cargo market.

The 1% figure quoted relates to the cargo-related aeronautical revenues (and excludes landing fees). In other words, these are the aeronautical revenues generated by cargo-only movements compared to all movements. There can be more cargo-related revenues, for instance in the handling concessions or the lease of cargo facilities, whether at or around the airport.

There are only a handful of airports worldwide, such as Leipzig, Liege, Memphis, Louisville and Anchorage, that focus primarily on cargo and do so successfully. Most of these airports also happen to be hubs for large cargo airlines.

Aside from these examples, most airports have both passenger and cargo traffic, as air cargo plays an interesting role in supporting airline revenues including on passenger flights in the form of “belly cargo”.

In the lease of land and/or facilities for cargo operations, or facilities that support the entire logistics chain. Building a cargo ecosystem that supports air cargo stakeholders like airlines, handlers, forwarders, trucking companies, express service providers [and so on] also creates an attractive environment for logistics, which in turn would support cargo revenues in the long term.

There are many options for real estate developments around airports. In addition to those already mentioned, cargo, logistics and light industrial facilities are also seen as real estate opportunities.

There is no generically beneficial option. Those options considered most beneficial will inevitably be dependent on the individual situation, the context and the business strategy of the airports concerned. Whatever the context, all options will require tailored approaches which may well incorporate a mix or blend of multiple options.

At NACO, we have defined a four-step approach to successfully developing airport cities and airport real estate. The key is to connect the airport with the needs of the surrounding areas. This is one reason why our initial step in the process is to develop bottom-up and top-down market assessments of economic sectors within the vicinity and region of the specific airport in question. This is the most critical, first piece of the airport city and real estate development puzzle.

Connectivity, routes served and landside connections are all key factors. In addition to this, economic indicators, governance structures and land use all play an essential role in the potential success of airport cities.

One common misconception is that airport cities are only feasible for large airports. But in reality, the airport city concepts are tailored to the size and role of the airport within its regional ecosystem.

Amsterdam Schiphol Airport, Munich International Airport, Helsinki Vantaa and Vienna International Airport are among some of the best examples of airport cities in Europe. As you might expect, this is not just a function of the location of the city itself. The extensive (and necessary) connections, stakeholder management, and cooperation with governmental and other bodies beyond the airport city all contribute to this.

The first instances of hotels going bankrupt as a result of the current pandemic are now beginning to emerge. In the Netherlands, two hotels located relatively close to Schiphol Amsterdam Airport have already gone bankrupt. These are just two examples, but it took four to five months for the bankruptcies to take effect.

Within the first two months of Covid-19 being declared a pandemic, the hotel industry had already initiated discussions on reduced rental rates with building owners. This would allow for lease payments to the airport to continue but at a lower rate.

What this shows, of course, is that management contracts can be risky. It also shows that even building and land leases will lead eventually to diminishing incomes for airports over time.

Management contracts would be impacted immediately should another Covid-19-type pandemic occur and that impact would most likely be significant. Put plainly, 90% passenger reduction results in 90% less income for the hotel and therefore for the airport. This makes management contracts one of the riskiest options.