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Tuesday, June 10, 2008

How much does it cost your plane delay?

In 2007, travelers lost 320 million hours to flight delays. This means the airlines are paying extra for crew, fuel and maintenance. Passengers are missing connecting flights, business meetings, dinner and hotel reservations. A May report from Congress' Joint Economic Committee put the total losses at $40 billion annually.

Everyone is frowning, except the vendors in the terminal.

In Pictures: Who Profits While You Wait?
In 1990, only about 30% of airport revenue came from retail, parking, concessions and other business partnerships. The majority of revenue came from charges to the airlines: landing charges, passenger and cargo fees, security and hangar charges, and others.

In recent years, however, the portion of revenue coming from non-aeronautical sources has risen to 50%, and at larger airports as high as 60%. An International Civil Aviation Authority study released in September of 53 North American airports found that in 2005, a year in which the airlines lost $10 billion, the airports earned $2 billion. Only five airports failed to turn a profit.

The top 50 North American airports had $4.6 billion in sales, according to the 2007 edition of Airport Revenue News' annual Fact Book. The largest airports by sales volume, Atlanta and Chicago, each do nearly $300 million a year.

Ultimately, the airports don't want the delays, says Pauline Armbrust, the president of Armbrust Aviation Group, which publishes Airport Revenue News. "They need the repeat traffic. Airports don't want delays because it makes people too unhappy," says Armbrust. "But the concessionaires do benefit."

Nobody blames Starbucks when their flight is delayed; in fact, they'll likely buy a latte while they wait. What else is there to do?

"They can see big spikes in their sales when there are delays," says Armbrust.

The concessionaire industry is largely privately owned. Four of the five largest companies are private: the Paradies Shops, Hudson Group, Delaware North Companies and SSP America; the fifth, HMSHost, is owned by the publicly traded Italian firm Autogrill. These firms develop proposals for space in airports around the country and then assemble the shops, restaurants and other services in the space.

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