Imagine if a hotel added an additional fee on your room rate to pay for the new spa they were planning to construct five years down the road. What if you were forced to pay that fee, would that be fair? You will not necessarily get to enjoy the spa. Would you not prefer the additional money went to something that would make your immediate hotel experience more comfortable? Or indeed, not to have to pay the fee at all? Of course, this scenario doesn't really exist because if a hotel forced guests to pay this kind of fee, people would switch to a competitor!
In the world of airport financing however, that exact scenario occurs all too frequently. What is referred to as "pre'funding" consists of charging current passengers more to pre-pay for improvement to the airport or, even worse, pay for future improvements at other airports where the passenger will never fly. In addition to the economics of this kind of arrangement not being fair or efficient, pre-funding projects does not encourage or incentivize the airport to be efficient in delivering the investments in a timely and cost-effective manner. After all, if the projects go over budget, the passenger will end up paying the difference anyway!
There is also, of course, the risk that pre-financed projects are canceled altogether, such as the Notre Dame des Landes airport near Nantes, France, which, after years and years of discussions, will never see daylight. Airlines paid upwards of 80 million dollars for an invisible airport! And we are yet to see where this money will go. This is why IATA’s position is to oppose pre-funding in nearly all cases.
When most businesses (airlines included) want to make investments, they seek financing from investors in the form of debt or equity. As low-risk businesses, airports could easily use these cost-effective financing options. Instead, airports often choose to add more charges and fees onto the airlines and their passengers. These costs have to be absorbed, either in higher airfares, or in reduced investment. In the worst case scenario, an airline may stop serving a destination entirely.
The reason average global airfares have fallen by 64% in the last 20 years is largely because of the competitive pressures on airlines, forcing them to constantly find efficiencies, which have been passed on to customers. In Europe, by contrast, airport passenger charges have doubled in last decade. IATA Regional Vice President for Europe, Rafael Schvartzman, recently made clear the airline view on this issue: “As consumers, we expect to get what we pay for, but this is often not the case when it comes to airport charges. It is high time airports and governments understood that pre-funding has a direct impact on investment, jobs, and ultimately even the passenger's wallet. It is not a victimless crime.”
