Income statement as an assessment tool of an airport operator: A case study of Polish airports

Abstract

Objective: This article aims to show the characteristics of airport finances and its implications for operational management. It presents comparative case study analysis and tools to evaluate income statement data as a basis for assessment of the financial condition of an airport operator.

Research Design & Methods: The paper is divided into three parts. The first one focuses on the characteristics of airports’ typical revenue structure and is operational consequences to the managerial board. It is discussed how to resolve infrastructure bottleneck problems with financial techniques. The second part is devoted to the operational cost analysis with an attempt to check whether popular hypotheses concerning airports’ finance specifics apply to Polish regional airports. The analysis examines the elasticity of fixed costs regarding the number of passengers served. The last part of this paper contains a break-even point analysis of Polish regional airport as a benchmarking tool of comparative analysis.

Findings: An analysis of costs at Polish airports was carried out confirming the thesis about a very high share of fixed costs in the total operating costs of aviation activities and its small elasticity regarding number of passengers served. Profitability thresholds at Polish airports were examined, confirming the thesis that profitability is usually achieved after exceeding the 1 mln number of passengers served annually. This number corresponds to annual revenues of about PLN 50 million.

Contribution & Value Added: Investigation of the measures and determinants of airports finance characteristics gives insight into the relationship between infrastructure throughput and break-even point.