Perspectives
9 June 2025
Following the unprecedented disruption caused by COVID-19, global commercial air traffic returned to pre-pandemic levels in 2024, with passenger traffic reaching a record high, according to the International Air Transport Association (IATA).1
So far this year, demand in both the passenger and air cargo markets has proven resilient in the face of ongoing geopolitical and economic uncertainties, growing strongly – up 8.0 and 5.8 per cent respectively.2,3
Buoyed by increased affordability of air fares, GDP growth and moderating inflation, IATA expects passenger growth over the course of 2025, as measured in Revenue Passenger Kilometers (RPK), to be 5.8 per cent higher than last year.3
Demand for air cargo – which benefitted in the first few months of this year from front-loading ahead of US tariff changes – is expected to slow as disruption plays out in global trade markets and to supply chains, growing nonetheless at 0.7 per cent in 2025.3
Source: Airports Council International (ACI)
Increasing demand for aviation, along with the speed of the industry’s recovery from the pandemic, serves to highlight its indispensable role in today’s world. By connecting communities, enabling tourism, facilitating international trade flows and creating employment, it is key to the functioning of the global economy and a contributor to long-term economic growth.
At the industry’s core is the need for high-quality airport infrastructure that both enables the movement of people and cargo and acts as a catalyst for socio-economic development at a local, regional and national level.
To meet future demand, global airport capital expenditure in the two decades to 2040 is forecasted to reach $US2.4 trillion, according to the industry association Airports Council International (ACI), a level necessitating an ongoing “vital role” for private investment in airports.4
For much of the 20th century, the world’s airports were publicly owned and operated.5 As commercial air travel became more affordable in the 1980s and demand started to grow, so too did the need for capital investment to upgrade and enable airports to respond to expanding market needs. With public finances constrained, governments sought to leverage private capital and expertise to help prepare the sector for the future.
The UK Government’s sale of the British Airports Authority (BAA) in 1987 initiated a period of significant structural change for global aviation that saw airports and other related infrastructure around the world either sold or leased on a long-term basis to private owners/operators. By 2020, almost a fifth of the world’s airports had seen some form of private sector participation (rising to over half for the busiest 100 airports by passenger traffic).6
Private sector involvement, together with well-designed economic regulation, has unlocked new sources of capital – allowing significant investment in upgraded and expanded airport infrastructure to meet growing capacity needs. Overall, this has contributed to improved passenger experiences, expanded connectivity, and fostered greater economic development around airport locations.7
A 2023 study by the National Bureau of Economic Research found that airports with private sector equity funds invested tend to perform better than their peers across a wide range of operational, infrastructural, financial and performance metrics.8
According to research conducted by industry association Airports Council International (ACI) in 2018, airports with private sector participation invested 14 per cent more in capital expenditure than public airports.9
Where direct public subsidy has been removed, the link between airport charges and the actual cost of operating and developing airport facilities has been reinstated. A degree of market forces has been introduced, incentivising competition between airports and contributing to innovation, greater operational efficiencies10 and additional value and choice for passengers.11
Most hub and regional airports exercising a degree of monopoly pricing power in their catchment areas continue to operate under economic regulation to ensure airport charges remain proportionate while expected service and investment levels are maintained. However, a shift in many markets from ‘single till’ to ‘dual till’ regulatory models – in which aeronautical activities are separated from non-aeronautical activities when calculating airport charges – has encouraged airport owners/operators to diversify their potential revenue streams and allocate investment more efficiently.
Previously untapped commercial opportunities – both airside and within the broader airport vicinity – have been developed as a result.
Retail opportunities, such as parking, shopping, dining, car rental and similar passenger-facing services – often underdeveloped while airports are in public ownership or operated under single till regulatory frameworks12 - have been expanded. As well as delivering a much-improved passenger experience, this model can incentivise the development of non-aeronautical revenues which can be reinvested more efficiently into required airport infrastructure improvements, reducing the need to raise additional capital.13
In Europe, for example, private sector involvement has over time improved passenger services, delivered higher-quality facilities than public airports, and brought greater success in attracting airlines and developing airport connectivity.9
In 2014, Macquarie Asset Management partnered in the creation of AGS Airports – uniting Aberdeen, Glasgow and Southampton Airports under one group with the aim of advancing their contribution to the UK’s regional development, enhancing the passenger experience, and delivering more sustainable air travel. With more than a decade of support, the partnership between Macquarie and Ferrovial enabled AGS Airports to invest £250 million into three important economic centres across the UK, helping to unlock the full potential of the portfolio.
In 2002, the Australian Government completed the privatisation of the country’s largest airport by traffic volume, Sydney Airport (which today accounts for around 40 per cent of Australia’s international passenger movements14 and 45 per cent of international air freight15), to a Macquarie Group-led consortium, under a 99-year lease arrangement. In the two decades following, over $A3bn of investment was made to improve capacity, efficiency and the customer experience, allowing the airport to increase service levels, enhance safety and security, deliver environmental improvements and meet growing demand.16,17
Airports often have a unique opportunity to position themselves as centres of economic growth due to the quality of their transport (both air and ground) connections, proximity to metropolitan areas, and the existing commercial relationships they have with a range of industries and sectors.
This, according to Arup, the global engineering consultancy, has given rise to airports as ‘regional economic accelerators’ and the establishment of airport economic ‘hubs’ being put at the heart of commercial development plans, working collaboratively with local stakeholders to become drivers of social and economic benefit.18
Through the development of commercial facilities – such as office space, warehousing, and specialised logistics facilities – in and around airfields, airports have become more strategic about the role they can play in facilitating economic development and as long-term enablers of local employment.
In 2004, Macquarie Asset Management was selected by the Belgian Government to partner in the ownership and long-term development of Brussels Airport. Over its 15-year involvement, Macquarie oversaw more than €1 billion of capital investment, transforming the passenger experience and transforming the airport’s capacity, service and sustainability. The airport also made diversification a strategic priority, increasing the focus on innovation, partnerships and the further development of the aviation ecosystem. This involved the delivery of world-class cargo facilities and a new airport business district to further its position as a logistics hub – attracting other companies to its strategic location and facilities.
Macquarie managed an investment in Gold Coast Airport on Australia’s east coast between 2018 and 2024, facilitating investment to support the renovation and expansion of one of Australia’s largest regional airports. The Airport’s $A500 million investment program is delivering improved services and creating jobs and economic opportunities for the south Queensland and northern New South Wales regions.19,20 By doing so, the airport is attracting new international and domestic flight connections, facilitating a growth in tourism, and playing a part in the wider infrastructure readiness ahead of the 2032 Olympic and Paralympic Games in Brisbane.
At the regional level, airports can play an important role as engines of socio-economic development,” says Amanda McMillan, Operating Partner at Macquarie Asset Management. “By improving connectivity and facilitating the inflow of goods, commerce, and tourism from both domestic and international locations, they can stimulate economic growth and deliver commercial potential and additional employment at the local level.
“Working with experienced private sector partners enables airports to access funding that can be used to invest in new facilities and diversify revenue - such as through expanded retail, new commercial space and additional ancillaries – which were previously untapped under public management,” she adds.
Together with our partners and Gold Coast Airport, we supported management to make more efficient and effective use of their airport infrastructure, address capacity issues and improve the customer experience with new and expanded facilities, and to prepare for future passenger growth with additional capacity that allows them to attract new carriers and routes.”
Amanda McMillan
Operating Partner
Macquarie Asset Management
Decarbonising air travel presents a unique and significant set of challenges and airports have a leading role to play in reducing the industry’s carbon emissions. Alongside commitments to become net zero for those under their direct control (Scope 1 and Scope 2), they can help facilitate – through investment in new technology and infrastructure – a reduction in the indirect carbon emissions (Scope 3) from aircraft and ground transportation, for example.21
In the short- to medium-term, this will include initiatives to enable aircraft fleet efficiencies and investment in sustainable aviation fuels (SAF), before supporting longer-term solutions that replace the use of jet kerosene entirely become commercially viable – be that electric aircraft charging or hydrogen refuelling facilities.22 Both phases will require significant financial investment – estimates are that an annual average investment of $US175 billion will be needed from now until 2050 to decarbonise the sector – and fundamentally change airport infrastructure.23
Simon Geere, Chief Executive Officer of Farnborough Airport, believes early adoption of SAF within the business aviation segment could offer an early roadmap for the broader aviation industry to follow.
“The cost of fuel is generally a relatively small part of the overall investment decision when choosing to take a business aviation flight,” Geere explains. “Subsequently, business aviation passengers are more likely to pay a premium to use SAF to reduce their overall flight emissions when compared with the commercial aviation segment.”
To accelerate the uptake of SAF the whole industry needs to come together, and airports certainly have an important role to play. By making SAF more readily available, whether through investment in related infrastructure or incentivising its use, airports can help to create the demand conditions needed to increase supply and reduce the costs of SAF further.”
Simon Geere
Chief Executive Officer
Farnborough Airport
In 2019, a fund managed by Macquarie Asset Management acquired Farnborough Airport in the UK and began working with it to deliver essential capacity enhancements while reducing its environmental footprint. With Macquarie’s support, Farnborough Airport has set out ambitious sustainability plans. Building on its legacy as the world’s first business aviation airport to achieve carbon neutral status,24 Farnborough Airport committed to achieving net zero by 2030 for all emissions under its direct (Scope 1) and indirect (Scope 2) control. The airport also began exploring opportunities to help airport users reduce their emissions, including the rollout of electric vehicle charging infrastructure and schemes to accelerate the adoption of sustainable aviation fuel.
As current trends indicate will happen once again, over the long term, air traffic recovers from shock events and returns to its previous growth level.
Over the medium to long term, continued global interconnectivity and increasing economic expansion will lead to further air traffic demand, especially in emerging economies.
Source: ICAO
The ability of airports to adapt to this long-term trend, remain resilient in the face of future shocks, and play a central role in economic development will require them to enhance their capacity and become diversified businesses with sources of income that extend beyond the charges levied on the airlines and passengers.
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