- -

=m -
CIRCULAR
C

M A Y 1948

AIRPORT ECONOMICS
(Preliminrry Study)

Prepared in 'I:= k : ,- ---,--,n--+ TI---C~Iz

azd published by a u t h o r i t y
of the Seoretary General
INTERNATIONAL
C I V I L AVIATrON
O R G A N I Z A T I O N
+ MONTREAL CANADA
 This R ~ b l i c a t i o ni s issued i n &glish, French and Spanish.

Published i n K o n t ~ e a l ,Canada, by the

International C i v i l Aviation Orpanization.
Correspondence concerning the publications
should be addressed t o t h e Secretary General
of ICAO, Dominion Square Building,
Elontreal , Canada.

Orders f o r ICAO publications should be sent, on payment:

I n Canadian _cmwrency($1, t o the In E m ~ t i a ncurrency (dms), t o t h e

Secretary General of ICAO, fCBO Representative,
Dominion Square Building, Middle East Office,
Montreal, Canada. 10 Sharfa Lotfallah, Apartment 7,
;
(Cable address : ICAO l~fJTlUU) Zamalek,
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(Cable address : IGAOREP CAIRO) ;
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ICAO Circular 3 . AT/^ Page 3

TABLE OF CONTENTS
Page
Foreword .............................................. 5
Conclusions ........................................... 7
Chapter 1 - A i r p o r t Organization ................... 9
......
The Meaning of t h e Term " a i r p o r t n 9
Hangars. B u i l d i n g s and Landing Area .... 12
Types of A i r p o r t Administration ........ 14

Chapter I1 - A i r p o r t Finances ...O................... 16

Airport costs .......................... 16
Main Items of Operating and
Maintenance Expenses ................. 19
A i r p o r t Cost V a r i a t i o n and i t s R e l a t i o n
t o t h e Requirements of A i r c r a f t ...... 20
The E f f e c t of O p e r a t i o n a l Requirements
on A i r p o r t Costs ..................... 22
The R e l a t i o n of A i r p o r t Costs
t o A i r p o r t Revenues .................. 26
Variation i n A i r p o r t Revenues .......... 27
F u t u r e Trends i n Landing Charge Revenues
f o r International Airports ...........
30

Chapter I11 . Airport Charges ........................ 33

The Level of Landing Charges ........... 35
page 4 ICAO C i r c u l a r 3 - '!I'/I-

Page
L i m i t a t i o n s on t h e Level
of Landing Charges .................... 38
I n t e r n a t i o n a l Treatment
of Landing Charges .................... 40
Landing Charges Compared t o T o t a l C o s t s
and Revenues of A i r l i n e s .............. 41
How Much Would Landing Charges Have
t o be Increased t o Cover A i r p o r t
Expenses? ............................. 45
The E f f e c t of Increased Landing Charges
on T r a f f i c Volume ..................... 47
Landing Charge Formulae .......me......,. 48
Weight-Scales and o t h e r Bases f o r
Charges per Landing ................... 50

The tiWeight-Scalefl T a r i f f and

"Valuew Received ...................... 51
V a r i a t i o n s on t h e S t r a i g h t wWeight-Sc,~eN
Landing T a r i f f .......,................ 53

Appendix I - Landing Charpes i n R e l a t i o n t o T o t a l

Expenses of a Typical I n t e r n a t i o n a l
A i r Service .......................... 57

Appendix I1 - F i n a n c i a l Operating R e s u l t s f o r
2 1 U.S. A i r p o r t s ...................... 59
ICAO Circular 3 - AT/1 Page 5

F O R E W O R D

The purpose of the study of airport economics being

carried on in ICAO is to assist authorities in the Organiza-
tion and in Gontpacting States in their consideration of
the complex problems connected with airport charges and
finance in the international field, This preliminary report
is an endeavour to set forth. the main aspects of the problem,
together with what statistical information is available to
give balance and perspective to the theoretical discussion,
Grateful acknowledgments are made to the authors of the study
made by the Harvard Graduate School of Business Administra-
tion frequently cfted in the text and to the United States
and Canadi.an Governments who have made a number of official
records available for study,
THIS PAGE INTENTIONALLY LEFT BLANK
ICAO C i r c u l a r 3 - AT/1

COBCLUSIONS

I t would be premature t o reach f i n a l o r d e t a i l e d con-

c l u s i o n s from a preliminary study of t h i s type, b u t c e r t a i n
g e n e r a l i n f e r e n c e s stand out with s u f f i c i e n t c l a r i t y t o m e r i t
s p e c i a l menti on,
a) Mos%, i f n o t a l l , i n t e r n a t i o n a l a i r p o r t s a r e
being operated a t a s u b s t a n t i a l l o s s a t t h e p r e s e n t
time. If a i r t r a n s p o r t continues t o expand i n t h e
f u t u r e a s i t h a s i n t h e p a s t a number of major a i r -
p o r t s may become s e l f - s u p p o r t i n g w i t h i n a period of
from f i v e t o t e n years b u t o t h e r s a r e l i k e l y t o
remain on a d e f i c i t basis i n d e f i n i t e l y , The develop-
ment of concession revenues and i n c r e a s e s i n a i r p o r t
charges might produce g r e a t e r revenues a t c e r t a i n
a i p p o r t s b u t have d e f i n i t e l i m i t a t i o n s and can prob-
a b l y n o t s o l v e the b a s i c problem,
b) C e r t a i n i n t e r n a t i o n a l a i r p o r t s may t h u s r e q u i r e
i n t e r n a t i o n a l support, F u r t h e r study i s needed t o
e s t a b l i s h which a i r p o r t s come i n t h i s category,
q h a t s u p p o ~ ti s necessary and how it should be
organized,
c) The l e v e l of l a n d i n g charges a t a l l i n t e r n a t i o n a l
a i r p o r t s cannot s a t i s f a c t o r i l y be standardized owing
t o t h e widely d i f f e r e n t economic p o s i t i o n s sf a i r p o r t s
of d i f f e r e n t types, On t h e o t h e r hand t h e basis of
such charges might be s t a n d a ~ d i z e dwith g r e a t b e n e f i t
i n s i m p l i f y i n g c a l c u l a t i o n and checking i n a i r l i n e
offices,
d) The weight-scale type of t a p i f f f o r landing
charges appears t o be t h e s i m p l e s t and most s u i t a b l e
f o r g e n e r a l use, D i f f e r e n t u n i t charges can be made
a t d i f f e r e n t a i r p o r t s , but t h e g r a d i e n t and s t e p s of
t h e s c a l e could be standardized, A i r l i n e payments
under a g e n e r a l system of weight-scale landing t a r i f f s
Page 8 ICAO C i r c u l a r 3 - ATJl

would, however, n o t be i n c o r r e c t p r o p o r t i o n t o t h e i r
e a r n i n g s p e r landing, A i r l i n e s o p e r a t i n g s e r v i c e s
w i t h long average s t a g e d i s t a n c e s would pay l e s s t h a n
i n p r o p o r t i o n t o t h e i r e a r n i n g s per l a n d i n g , w h i l e
a i r l i n e s o p e r a t i n g s e r v i c e s w i t h s h o r t average s t a g e
d i s t a n c e s would pay more, Adjustments t o remove t h i s
anomaly based on s t a g e - d i s t a n c e s flown could be i n -
c o r p o r a t e d i n the standard t a r i f f system a t some
s a c r i f i c e of s f n p l i e i t y ,
ICAO C i r c u l a r 3 - AT/1 Page 7

CHAPTER I - AIRPQRT ORGANIZATION

The Meaning of t h e Term a t a i r p o r t "

1, The simple word " a i r p o r t t 8 seems t h e most s a t i s f a c t o r y
term t o d i s t i n g u i s h t h e l a n d i n g p l a c e f o r comrner.cia1 a i r
t r a n s p o r t a i r c r a f t from landing p l a c e s f o r o t h e r t y p e s of
a i r c r a f t , The phrase " t e r m i n a l t y p e a i r p o r t n used i n t h e
United S t a t e s b e s i d e s being l e n g t h y f o r f r e q u e n t u s e , con-
t a i n s t h e misleading s u g g e s t i o n t h a t i t r e f e r s t o a n a i r -
popt a t t h e terminus o r end of a r o u t e , The word " a i r p o r t "
i s analogous t o t h e word " p o r t n , and can be d i s t i n g u i s h e d
from a m i l i t a r y " a i r s t a t i o n n , a c l u b , p r i v a t e , o r t r a i n i n g
" a i r f i e l d n and a n emergency "landing groundn j u s t a s a p o r t
i s d i s t i n g u i s h e d from a naval s t a t i o n and v a r i o u s t y p e s of
harbour. U1P c l a s s e s of "land? ng ground p l u s f a c i l i t i e s n ,
i n c l u d i n g a i r p o r t s , can be c l a s s e d a s 88aerodromesni f a
g e n e r i c term i s r e q u i r e d ,
2a The word " a i r p o r t t 8 used i n i t s s t r i c t sense t h e n r e -
f e r s t o t h e p h y s i c a l e n t i t y c o n s i s t i n g of a l a n d i n g p l a c e
f o r a i r c r a f t w i t h a number of b u i l d i n g s housing vapious
f a c i l i t i e s f o r t h e a i r c r a f t i n q u e s t i o n and t h e i r p a s s e n g e r s ,
crews and l o a d s , I t i s convenient, however, t o u s e t h e word
t o r e f e r a l s o t o t h e economic e n t i t y t h a t comprises t h e
o r g a n i z a t i o n and management of t h e p h y s i c a l e n t i t y , t h a t h a s
c a p i t a l a s s e t s and l i a b i l i t i e s , i n c u r s running c o s t s and r e -
c e i v e s revenues, The two meanings of t h e word a r e i n common
u s e and c a u s e l i t t l e confusion s o long a s i t i s r e a l i s e d
t h a t t h e y e x i s t and t h a t a t most a i r p o r t s t h e economic e n t i t y
does n o t i t s e l f o p e r a t e many of t h e a i r p o r t f a c i l i t i e s b u t
merely r e n t s ground o r b u i l d i n g space t o t h e i r o p e r a t o r s ,
The a c t i v i t i e s c a r r i e d on by t h e management of an a i r p o r t a r e
a s m a l l p r o p o r t i o n of t h e t o t a l a c t i v i t i e s c a r r i e d on a t a n
a i r p o r t by a i r l i n e o p e r a t o r s , maintenance o r g a n i z a t i o n s ,
government a g e n c i e s and c o n c e s s i o n a i r e s ,
30 The a i r p o r t i t s e l f normally l o o k s a f t e r t h e l a n d i n g
a r e a , runways arrd buildings; upmtes the l a n d i n g l i g h t s ,
l o c a l r a d i o - a i d s , c o n t r o l tower, and emergency s e r v i c e s such
a s f i r e t e n d e r , ambulance and snow-removal; and, f o r t h e r e s t ,
Page 10 I C A O Circular 3 - AT/^

a c t s a s l a n d l o r d t o a i r l i n e staffs who look a f t e r passengers,

t i c k e t s , l o a d i n 6 and unloading, and of t e n a i r c r a f t maintenance;
t o s p e c i a l i s t , m a i n t e n a n c e end f u e l supply o r g a n i z a t i o n s ; t o
c o n c e s s i o n a i r e s running r e s t a u r a n t s , shops e t c , ; t o meteoro-
l o g i c a l and t e l e c o r h m u n i c a t i ~ nu n i t s and t o governmental
a g e n c i e s such as customs, immigration and p o s t o f f i c e . The
v a r i a t i o n s from t h i s o r g a n i z a t i o n a l p i c t u r e a r e g e n e r a l l y i n
connection with f l y i n g c o n t r o l , which i n t h e United S t a t e s
i s normqlly operated by a government agency b u t elsewhere i s
more g e n e r a l l y regarded a s p a r t of t h e a i r p o r t o r g a n i z a t i o n ,
l o c a l r a d i o - a i d s , and communications which may be operated
p a r t l y o r wholly by t h e a i r p o r t i t s e l f , by a i r l i n e s , by i n -
dependent p r i v a t e o r g a n i z a t i o n s or by gove~nmenta?.agencies.
4, The number of employees a t an a i r p o r t t h a t a r e a c t u a l l y
employed d i r e c t l y by t h e a i r p o r t i s n o t l a r g e even a t major
a i r p o r t s as t h e f o l l o w i n g t a b l e shows:
U, So Domestic A i r p o r t s
C i v i l A i r p o r t Bmployees a s of December 1941*

nr and over ....

3. Airport managers, clerks, secretaries, e t c .

2 Those employed f o r repair and maintenance o f f i e l d s , hangars, grounds.
3 Control-tower operators, guards, gas and o i l service men when employed
SOURCE^, -
d i r e c t l y by t h e a i rport,
CAA Airports S e m i ce $ecords.
4 The c l a s s i f i c a t i o n i s according t o sf ze, Class I being the smallest.

* Prom nCfvfl Avf atfon and f he National Economyn CAA September 1945.
 ICAO Circular 3 - AT/^

5 0
No comprehensive s t a t i s t i c s of o t h e r employees a t
t h e s e a i r p o r t s a r e a v a i l a b l e , b u t t h e y would c e r t a i n l y be
c o n s i d e r a b l y more numerous t h a n t h e a i r p o r t employees,
E s t i m a t e s f o r t h e f u t u r e o p e r a t i o n of La Guardia, f o r example,
p u t t h e number of a f p p o r t employees a t 128 as compared w i t h
10,000 a i r l i n e and 1,280 concession employees working a t t h e
a i r p o r t , * The number of a i r l i n e employees a t La Guardia i s
i n c r e a s e d by t h e l a r g e a i r l i n e maintenance o r g a n i z a t i o n s
e s t a b l i s h e d t h e r e , b u t even a t a i r p o r t s without such e s t a b -
l i s h m e n t s , n o n - a i r p o r t employees g e n e r a l l y outnu~nbera i r -
p o r t employees,
6, The p i c t u r e o u t s i d e t h e UoSo appears t o be s i m i l a r ,
~t Dorval, Idontreal, f o r i n s t a n c e , t h e number of people
working i n t h e a i r p o r t i s about j9500, while a i r p o r t employees
t o t a l 250-300 according t o t h e season, and h e r e t h e number
of a i r p o r t employees i s increased by s p e c i a l snow-clearance
squads i n w i n t e r and by the f a c t t h a t t h e a i r p o r t c a r r i e s
o u t i t s own runway maintenance instead of having i t done by
t h e l o c a l highways department a s i s f r e q u e n t l y t h e c a s e ,
7 ‘, A t remote a i r p o r t s such a s Gander, a i r p o r t employees
may form a h i g h p r o p o r t i o n of t h o s e working a t t h e a i r p o ~ t ,
b u t i t may probably be accepted t h a t g e n e r a l l y , throughout
t h e world, t h e g r e a t rnaaarity sf a c t i v i t i e s a t a i r p o r t s a r e
c a r r i e d on by a i ~ l f n e s ,independent maintenance o r g a n i z a t i o n s ,
government a g e n c i e s and c o n c e s s i o n a i r e s , w i t h respec t o
whom t h e a i r p o r t i s i n the p o s i t i o n of l a n d l o r d ,
8, ~ o s tte n a n t s on a i r p o r t p r o p e r t y a r e c a r r y i n g on
a c t i v i t i e s d i r e c t l y connected w i t h a v i a t i o n , The a i r p o r t
o b t a i n s r e n t a l revenue from them b u t t h i s revenue i s dependent
upon a v i a t i o n and p a r t l y comes out of a v i a t i o n revenues; i t
i s n o t wholly a d d i t i o n a l revenue t o air t r a n s p o r t i n t h e same
way as, f o r ins%ance t h e ground r e n t of a g e n e r a l e n g i n e e r i n g
f a c t o r y b u i l t on r a i l w a y p r o p e r t y near a s t a t i o n i s a d d i t i o n a l
revenue t o t h e r a i l w a y t r a n s p o r t system, The day may come
when c e r t a i n s p e c i a l i s e d i n d u s t r i e s uhconneeted w i t h a v i a t i o n
may be prepared t o pay h i g h r e n t s t o develop p l a n t s on o r
near a i r p o r t s , and t h e ground on o r near a n a i r p o r t may t h e n
become a v e r y p r o f i t a b l e p o s s e s s i o n , b u t a t t h e p r e s e n t time
t h e a c t i v i t i e s c a r r i e d out a t a i r p o r t s a r e comparable t o t h o s e
carpfed o u t w i t h i n t h e a c t u a l a r e a of a r a i l w a y s t a t i o n n o t t o
t h o s e c a r r f e d o u t i n surrounding development p r o j e c t s ,

le
Sumruary Proposal f o r t h e Development o f New York C i t y Airports,
The Port o f New York Authori%y,December 1946,
 Page 12 ICHW Circular 3 - AT/1

90 ~ s s at % ~ p o r r$e n t s a r e t h u s paid d i p e c t l y OP i n -
d i r e c t l y by o p e r a t o r s of a i r c r a f t , The only p a r t of the
a c t f v i t i s s at a n a i r p o r t % h a t can be regarded a s b r i n g i n g
add%%%onal revenue into the world of a i r t r a n s p o r t are t h e
eoncessions - res$auran%, shops, cloak moms etc, The
revenues of t h e s e come from passengers arnd a i r p o r t v i s i t o r a
and a f r p o ~ temployees, b u t s o long a s %he p r i c e s charged are
no h i g h e r t h a n elsewhere, they wPBB 00%a f f e c t t h e public's
demand for air % r a n s p o r t and hence can be c l a s s e d as in-
dependent revenues,
10, Using t h e analogy of &he railway station, a n a i r p o r t
may be regarded as a combined airway s t a t i o n for a number
of a i r l i n e s , pubB%cl? or independently owned, b u t l a r g e l y
opekated by t h e a i r l i ~ e sthemselves who ppovide the staff
f o r moat sf' the f a c i l i t i e s and r e n t space for t h e p w p o s e
From t h e a i ~ p o r t ,

Hangars, B u i l d i n ~ sand Landinn AP&

11, I t bas become the practice t o break down airport
accounts sepakats1y f o r : .
a) Hangars, with which g e n e r a l l y g o work-shops
and a s s o c i a t e d o f f i c e s and f a c i l i t i e s !
b) Buildings, w i t h which u s u a l l y go t h e a f r p o r t
sffioes, c o n t r o l tower, a i r l i n e and government
a g e m y o f f i c e s , passenger f a c i l i t i e s , shops,
r e s t a u r a n t s e%@g
C ) Landing a r e a , w i t h which go runways, l i g h t s ,
emergency s e m ic e s , b l i nd l a n d i ng equf pment, local
f l i g h t control,
12, Thfs break-down accompPishes some sfrnpPificafion o f
t h e complicated economics of a i r p o s t s and i s followed In t h i s
pepopt9 b u t it should be remembered %ha%such d i v i s i o n s are
t o a large extent p u r e l y aecoun%ing procedures. Hangars
a d m i n i s t r a t i v e b u i l d i n g s and landing a r e a a r e all e s s e n t j a l
p a r t s sf an a f r p o ~ t ;no a i r p o r t can o p e r a t e p r o p e r l y w i t h o u t
any sf %he t h r e e and no a i r l i n e can make r e g u l a r use of an
a i r p o r t w i t h o u t making u s e , a t l e a s t o c c a s i o n a l l y , of a l l
three, Whew a government or^ m n i c f p a l f t y f s c o n s i d e r f ng
b u i l d i n g a new a i r p o r t it h a s t o c o n s i d e r t h e p l a n as a whole,
with t h e t o t a l c o s t s , and %he t o t a l a n t i c i p a t e d revenues.
The a%udy of accounting problems may be s i m p l i f i e d by s e p a r a t -
i n g the revenues and expenses of hangars, b u i l d i n g s and
P a ~ d i n garea: making t h e hangar accounts, f o r example* break
I C A O C%rcular 3 - Page 13

even, and taking whatever p r o f i t i s calculated on the build-

ings t o reduce whatever d e f i c i t i s calculated on the landing
area. But t h i s i s only a t i d y method of s e t t i n g the f i g u r e s
out. A l l the accounts of an a i r p o r t a r e i n t e r - r e l a t e d . The
p r o f i t on the buildings account i s made possible by the e x i s t -
ence of the landing area and might be destroyed i f lapding
charges were s e t so high a s t o c u t down the u t i l i z a t i o n of
the a i r p o r t , Instances have occurred where i t was found
d e s i r a b l e t o lower hangar r e n t s well below commercial l e v e l s
t o a t t r a c t a i r l i n e s t o u t i l i z e an a i r p o r t ,
13* Nevertheless, although there i s i n t e r r e l a t i o n , there
i s a l s o a c e r t a i n degree of independence between these accounts.
I t i s possible, within limits, f o r an a i r p o r t operator t o ex-
tend o r contract h i s investment i n hangars f o r example, so
t h a t t o t h i s extent they a r e economically independent,of the
r e s t of the a i r p o r t . Moreover, a i r l i n e s a r e f r e e t o choose
between a number of d i f f e r e n t a i r p o r t s where they s h a l l carry
out t h e i r maintenance, so t h a t the a i r p o r t operator i s not i n
a s secure a monopoly position i n renting hangar space a s he
sometimes i s i n providing landing f a c i l i t i e s , I n some in-
stances a l s o i t i s possible f o r aq a i r l i n e t o e r e c t i t s own
hangars a t t h a t OP some other a i r f i e l d . Competitive factors,
thus eventually tend t o operate on hangar r e n t s i n a t l e a s t
some cases and l i m i t them i n the lpng period t o approxima3ely
the c o s t of providing them includidg a r e t u r n on c a p i t a l ,
14, The same i s not true of o f f i b e ,and shop space i n a i r -
port buildings rented t b Q i r l i n e s , government ageficies, and
concessionaires. Here thb a i r p ~ r ti s i n a: strong monopoly
position with respect -tlo i t s tenant's ' s i n c e 2they cannot per-
form those p a r t i c u l a r $ e r v i c e ~elsewhere, !In the case of
a i r l i n e tenants the balance of dependence generally r e s u l t s
i n t h e i r being charged approximately break-even r e n t s f o r
space i n the terminal liuilding a s they a r e f o r space i n
hangars, Government tehants a t a i r p o r t s a r e a l s o normally
charged a t break-even levels, Concessdonaires, on the other

* The f u l l d e s c r i p t i o n o f ,Chis prgcess i s t h a t where an a i r p o r t

operator can g e t more than a reasonable-rdt,urn on h i s investment
on hangars he w i l l extend h i s hangars u n t i l he has absorbed the
e x c e s s demand; w h e p an a i r l i n e i s asked t o pay more than t h i s
f i g u r e it w i l l go elsewhere o r b u i l d i t s own hangars. Neither
process works e i t h e r rapidly or u n f v e r e a l l y , s o t h a t many rent
anomalies , w i l l e x l i t , The background p o s s i b i l i t y of competition,
however, s u p p l i e s a j u s t i f i c a t i o n f o r accepting t h e general
p r i n c i p l e t h a t hangar r e n t s shouJd be s e t at a p p r o x i m t e l y t h e
break-even p o i n t ,
 ICAO C i r c u l a r 3 - AT;^

hand, have no s p e c i a l s t a t u s t o a s s i s t them i n r e n t bargain-

ing. If one c o n @ e s s i o n a i r e t u r n s an o f f e r down when it would
y i e l d a r e a s o n a b l e p r o f i t t o him another w i l l a c c e p t i t , s o
t h a t concession r e n t s can be s e t a t a l e v e l based o n , p r o f i t -
ability t o t h e t e n a n t s , Normally t h e s e r e n t s a r e c o n s i d e r a b l y
h i g h e r t h a n t h e c o s t t o t h e a i r p o r t of providing and main-
t a i n i n g t h e space r e n t e d , s o t h a t t h e r e i s a n e t p r o f i t t o
t h e a i r p o r t from them and hence from t h e t e r m i n a l b u i l d i n g
as a whole.

Types of A i r ~ o r tA d m i n i s t r a t i o n
15. A i r p o r t s may be owned and operated by n a t i o n a l govern-
ments, m u n i c i p a l i t i e s o r p r i v a t e e n t e r p r i s e , i n c l u d i n g a i r -
l i n e s and a i r c r a f t manufacturers, Some a r e owned by govern-
ments and l e a s e d t o m u n i c f p a l i t i e s t o o p e r a t e , and some a r e
owned by m u n i c i p a l i t i e s o r governments and l e a s e d t o p r i v a t e
o p e r a t o r s , A number of a i r p o r t s were developed as m i l i t a r y
b a s e s d u r i n g t h e war and a r e s t i l l owned OP operated by
m i l i t a r y agencies,
16. The f o l l o w i n g f i g u r e s i n d i c a t e t h e p r o p o r t i o n s of t h e
chief' t y p e s of a d m i n i s t r a t i o n among a i r p o r t s of t h e United
S t a t e s a t mid 1947:-
Types of ~ i r p o r ti n t h e U.S. - June l 9 4 v
Commercial 2,383
Munf c ip a l 1,612
CAA Pntermedf a t e 189
Bdilf t a r y 660
Other 230

170 On t h e whole t h e l a r g e r a i r p o r t s i n t h e U,S. a r e owned

and operated by m u n i c i p a l i t i e s and most of t h e U,S. i n t e r -
n a t i o n a l a i r p o r t s a r e of t h i s type, I n s t a n c e s of l a r g e
p r i v a t e l y owned a i r p o r t s do however occur, t h e Lockheed a i r -
p o r t a t Burbank, C a l i f o r n i a , being one t h a t i s i n international
use,
18, No comprehensive s t a t i s t i c s of t h i s n a t u r e a r e a v a i l a b l e
f o r a i r p o r t s o u t s i d e t h e United S t a t e s b u t it i s ppobable t h a t

* CAA Journal, J u l y 1947 ,

ICbO Circular 3 - AT/^ Page 'C
-)

n e a r l y a l l l a r g e a i r p o r t s on t h e main world a i r r o u t e s a r e
p u b l i c l y owned and p u b l i c l y operated, Outside t h e United
S t a t e s t h e r e a r e , however, many n a t i o n a l l y owned a i r p o r t s .
I n t h e United S t a t e s t h e only l a p e a i r p o r t of t h i s n a t u r e
Q
i s t h e Washington a i r p o r t . The 1 9 i n t e r m e d i a t e l a n d i n g
f i e l d s i n t h e F e d e r a l ~ i r w a y sSystem l i s t e d i n the t a b l e
above a r e small l a n d i n g gr%unds used c h i e f l y f o r emergency
purposes o r t e c h n i c a l s t o p s ,
19. The United Kingdom i s a n example of a country where
a l l ;;ke a i r p o r t s a r e owned and operated d i r e c t l y by a govern-
ment-' department. Before t h e second world war some munici-
pali-i;ies i n t h e United Kingdom had a i r p o r t s of t h e i r own,
b u t t h e s e were a l l t a k e n over by t h e government d u r i n g t h e
war e i t h e r f o r m i l i t a r y o r s e m i - m i l i t a r y purposes. It
appears t h a t the i n t e n t i o n i s t o r e t a i n a l l a i r p o r t s i n the
United Kingdom under government c o n t r o l .
20. The New York a i r p o r t s a r e of p a r t i c u l a r i n t e r e s t from
t h e a d m i n i s t r a t i v e p o i n t of view. These a i r p o r t s a r e operated
by t h e P o r t of New York A u t h o r i t y , a s p e c i a l p u b l i c i n t e r -
s t a t e body s e t up t o o p e r a t e t h e p o r t and i t s f a c i l i t i e s ,
b r i d g e s , t u n n e l s e t c , A s an a i r p o r t o p e r a t o r t h i s A u t h o r i t y
combines many of t h e advantages of p u b l i c a d m i n i s t r a t i o n w i t h
some of t h e independence and i n c e n t i v e of p r i v a t e e n t e r p r i s e .
21, From t h e i n t e r n a t i o n a l p o i n t of view i t i s i:.lportant
t o n o t e t h a t while most a i r p o r t s used by i n t e r n a t i o n a l a i r -
l i n e s a r e c o n t r o l l e d by t h e government of t h e country where they
a r e s i t u a t e d , t h e r e a r e many, p a r t i c u l a r l y i n t h e United S t a t e s
t h a t a r e operated by m q n i c i p a l i t i e s o r p r i v a t e e n t e r p r i s e and
i n such c a s e s a government may r e q u i r e s p e c i a l powers t o con-
t r o l o p e r a t i n g o r f i n a n c i a l p o l i c y o r even t o o b t a i n informa-
t i o n concerning such m a t t e r s ,
I'a ge :1.6 I C A O Circular 3 - RT/P

CHAPTER 11 - AIRPORT FINANCES

Airport Costs
22, It is difficult to discuss airport costs for inter-
national airports in general terms at the present time for
the follovring reasons :
a) Few statistics concerning airport construction
and operations are available for airports
- outside
the united States;
b) Airport costs vary widely not only between
different sized of airport, but between different
airports of the same size;
c) Airport accounting methods vary greatly even
mithin a single country and still more between
different countries;
d) Many large international airports now in use
were originally constructed or were substantially
extended, for military purposes, and the capital
expenditures involved are not comparable with civil
expenditures,
23 o Certain general conclusions can however be drawn
from a study of the statistics available for United States
airports, and these can occasionally be supplemented by
data concerning other airports,
24, In the first place, it is clear that the constructional
costs of modern airports are very heavy, Most airports in
international use represent investments measured in millions
of dollars, In 1944 the total investment in civil airports
in the United States was estimated at a 19000million dollars
2nd a development programme costing a further 1,000 million
jollars was In contemplation, Idlewild airport, when taken
over by the Port of New York Authority recently, had cost
#62,000,000 and was not yet completed, ~ ~ h i lthe
e total
ICAO Circular 3 - AT/^ Page 17

c a p i t a l budget f o r I d l e ~ i l i iand La Guardia has been estimated

a t about 3191 m i l l i o n .
25. If we a c c e p t t h e view t h a t a reasonable i n t e r e s t and
some d e p r e c i a t i o n r a t e should be allowed on t h e s e heavy
c a p i t a l o u t l a y s , such charges would for^ a c o n s i d e r a b l e p r o -
p o r t i o n of a i r p o r t expenses. 8B
26. Diagra~nI i l l u s t r a t e s the s o r t of r e l a t i o n s h i p t h a t
might be expected between c a p i t a l charges and cash expenses
a t a medium s i z e d a i r p o r t i n t h e United S t a t e s : ?

Diagram 1.- TYPICAL ANNUAL EXPENSE PROPORTIONS FOR A

MEDIUM SIZED AIRPORT I N THE UNITED STATES

Hangars $ 30,000
Operation
and Airport B u i l d i n g s $ 35,000
Maintenance Landing Area $ 35,000
$ 100,000
Hangars $ 30,000
Airport B u i l d i n g s $ 23,000

Interest
and
Depreciation <
$ 250,000 Landing Area jb 200,000

\
i

B Summary proposal f o r the development of New York City a i r p o r t s ; the

Port of New York Authority, December 1946.
PP It i s a frequent practice i n a i r p o r t aocounting t o omit c a p i t a l charges
e n t i r e l y , no doubt p a r t l y beca.use revenues a r e generally i n s u f f i c i e n t
t o c w e r even the cash expenses of rmintenance a d operation and leave
nothing t o go towards a return on investment*

t Harvard School of Business Administration: Terminal Airport Financing

, ,
and Iknagement by Bolllnger Passen, 1.ZcElfresh.
Page 18 I G A O Circular 3 - AT/1

27, For i n t e r n a t i o n a l a i r p o r t s outside t h e United S t a t e s ,

t h e scale of building and c a p i t a l investment i s generally
on a smaller s c a l e so t h a t i n t e r e s t and depreciation although
generally s u b s t a n t i a l do not form such a l a r g e p a r t of t o t a l
costs, A t Dorval, f o r example, an a i r p o r t of medium s i z e
c a p i t a l i z e d a t $6,841,000 t h e t o t a l expense a n a l y s i s f o r
1946/47 was approximately a s follows:
Total Annual Expenses
a t Dorval 1946-47)C
Operation and Maintenance $ 893,000

I n t e r e s t and Depreciation ( a t 5%) 340,000

Total.
28, Airports constructional c o $ t s have been r i s i n g s t e a d l l y
f o r many years both because runway requirements of length and
strength have increased and because the standards of s e r v i c e
and s a f e t y have r i s e n , I n the United S t a t e s the cumulative
t o t a l c a p i t a l expenditure invested per a i z g o r t was $300,000
i n 1944 a s compared with $85,000 i n 1934, This increase was
probably r e f l e c t e d i n the i n t e r n a t i o n a l f i e l d ,
29 o I t i s i n t e r e s t i n g t o observe t h a t i n the United S t a t e s
the increase i n the c a p i t a l c o s t o f a i r p o r t s was oniy one
aspect of the general rapid growth of the airways system a s
a whole, I n the decade 1934 t o 1944, when the average invest-
ment per a i r p o r t increased between 3 and 4 times and t h e t o t a l
investment i n a l l the a i r p o r t s of the domestic system in-
creased about 5 times, the number of passengers c a r r i e d by t h e
domestic a i r l i n e s increased about 10 times, the number of
passengep miles flown increased 1 2 times and t o t a l domestic
a i r l i n e revenues probably increased about 4 times, I t i s
probable t h a t i n t e r n a t i o n a l a i r t r a n s p o r t a s a whole has

* Extracted fron s t a t i s t i c s reported t o ICAO by Canadian Government

authorities,
** From "Civil Aviation and the National Econoniye, CAA 1945. There
are many t h e o r e t i c a l and p r a c t i c a l ways o f estinlating t h e c a p i t a l
values of a i r p o r t s and f o r moat purposes t h e s t r a i g h t cumulative
t o t a l of d o l l a r s invested would not be s a t i s f a c t o r y . Here however,
it i s t h e conatant increase i n t h i s figure t h a t i s being considered
and t h a t i s contrasted with t h e general growth o f a i r transport*
I C A O Circular 3 - AT/1 Page 19

similarly grown as fast as the cost of the airports it uses,

Main Items of Operating and Maintenance Expenses

300 Airports vary so widely in their organization and
accounting practice,that it is not possible to allocate
even approximate dimensions to the various items of cost
that go to make up their total operating and maintenance
expenses, Many airports do not analyse their costs into
separate accounts relating to different types of activity,
but merely show such items as total wages and salaries as
distinct from the cost of equipment replacements and con-
suable stores, If, however, the airport expenses of a
number of international airports were analysed into the
type of cost analysis usual in other businesses, the
following items would probably be found to be the chief
omas common to a number of airports:
Landing Area: Runways - maintenance and repair,
Field Lighting - operation, maintenance,
pepair,
Grounds - general upkeep,
Snow removal,
-
Local Flying Control operation, mainte-
nance, repair,
-
Communications operation, maintenance,
repair,
Local Radio Aids - operation, maintenance,
repair,
Airport Buildings: Maintenance,repafr,
Light, heat, power, water, janitor
service
Hangars: Maintenance, repair,
Light, heat, power, water, janitor service,
31, At particular airports, some of these items may be
carried on by airlines or other tenants, or may not be carried
on at all; at other airports special additional costs not in-
cluded in this list may be of great importance, Runway mainte-
nance, for example, is often carried out by municipal highway
organizations sometimes without specific charge; in the United
States, flying control is normally provided by a government
agency; the costs of communications and radio aids are fre-
quently borne by government agencies: all hangar expenses may
be borne by their tenants; the hangars themselves may be owned
and maintained by airlines or other enterprises,
 Page 2 9 PCAQ Cf r c u l a r 3 - AT/I
A i r p o r t Cost Y z u l a t i o n and i t s R e l a t i o n
t o the Rsauf rementa of 'Aimrkf't
320 The wide v a r i a t i o n between t h e c a p i t a l c o s t s of air-
p o r t s of d i f f e r e n t s i z e s and a l s o between a i r p o r t s of t h e
same s i z e can be s e e n from t h e following t a b l e , This t a b l e
i s based on f i g u r e s c o l l e c t e d f o r United S t a t e s a i r p o r t s ,
b u t omits both t h e l a r g e s t ones such a s La Guardia and
I d l e w i l d and a l s o t h e v e r y s m a l l l a n d i n g grounds and s t r i p s , *
Range of v a r i a t i o n i n
Unf t e d S t a t e s A i r p o r t
C a p i t a l C o s t s , Omitting
Extremes
Low L i m i t s High Lfmi t s
t1,000 $1,000
Small A i r p o r t s
Landing Area 507 1,403
Terminal B u i l d i n g
Hangars -
110
76
385
162

Total 693 1,950

Medium Sized A i r p o r t s
Landing Area 1,723 h673
Terminal B u i l d i n g 648 1,656
Hangars 660 2*420
Total 30031 8,%9
Large Aipporta '

Landing Area 3 9455 11,953

Terminal B u i l d i n g 6,000
Hangars 8,250

330 The v a r i a t i o n i n t h e c a p i t a l c o s t s of i n t e r n a t i o n a l
a i r p o r t s on the world r o u t e s a r e probably even g r e a t e r t h a n

- -- - - - -- -- -

* Harvard study - $ID. cite pages 119 - 121,

 ICAO Circular 3 - AT/1 Page 21

Diagram 11,- RANGE OF VARIATION I N UNITED STATES AIRPORT CAPITAL

COSTS, OM1 TTING EXTREMES
r

Million
-12 8 LOW Limits

11 -- a ~ i g hLimits
10 --

9 ..
Terminal
8 -- Building

7 -.
6 --
5 --
4 --
3 .-
2 --
1 --
- w++

t P ti3
YP, Y a
tr
Y Y
tzadBa
w--
*"
GC Y a Y Y
EF
--- cis: WEL'
tY F ~a Y
-I-' 'bw -09 CbC, C d F ' U r n 'dc, 'dm
qm
'UC*
O P
w
c+
-I*0
0
r+ rk
Q,
5
c+
$ 8 ct8 "
c+
v
r* ct
[n [no3 V, V, (nu3 [n 0 mu3 v,
w F C*
N N
(D
a
8a (D
a
Page 22 I O i i C Circular 3 - AT/1
t h o s e shown h e r e s i n c e c o n s t r u c t i o n a l c o s t s , f a c i l i t i e s pro-
vided and s t y l e of c o n s t r u c t i o n a s w e l l as wages and p r i c e s
d i f f e r more from country t o country t h a n w i t h i n t h e United
States,
34, Operating and maintenance expenses a l s o vary widely
between d i f f e r e n t a i r p o r t s , The Harvard s t u d y quotes f i g u r e s
of from P t o 28 c e n t s p e r square f o o t per annum f o r hangar
o p e r a t i o n and maintenance a t d i f f e r e n t a i r p o r t s ; from 44
c e n t s t o $3.33 p e r square f o o t p e r annum f o r o p e r a t i o n and
maintenance of b u i l d i n g s ; from 0 , 1 t o 2,2 p e r c e n t of i n -
vestment f o r o p e r a t i n g and maintaining t h e l a n d i n g a r e a ,
G r e a t e r v a r i a t i o n might be encountered a t a i r p o r t s o u t s i d e
t h e United S t a t e s , Many of t h e d i f f e r e n c e s h e r e a r e due t o
d i f f e r e n c e s i n accounting p r a c t i c e OP i n t h e scope of opera-
t i o n s c a r r f e d o u t by t h e a i r p o r t , a s d i s t i n c t from t h o s e
c a r r i e d o u t by a i r l i n e s o r o t h e r s , b u t such items as snow
c l e a r a n c e and d i f f e n f n g requirements f o r n a v i g a t i o n a l a i d s
and communications provide a r e a l b a s i s f o r d i f f e r i n g
o p e r a t i ng and maf ntenance expenses,

The E f f e c t of Operational Requirements

on A i r p o r t Costs
3 50 The g r e a t v a r i a t i o n i n a i r p o r t c o s t s due t o ,eographical
and o t h e r r e a s o n s makes i t extremely d i f f i c u l t t o a r r i v e a t
any assessment of t h e way i n which t h e s e c o s t s vary w i t h
o p e r a t i o n a l requirements such a s runway l e n g t h and s t r e n g t h
and t h e maximum number of l a n d i n g s p o s s i b l e p e r hour, These
a r e , however, t h e fundamental measures of t h e c a p a c i t y of a n
a i r p o r t 9 corresponding t o measures of o u t p u t i n o t h e r economic
s p h e r e s , and t h e i r importance i n connection with t h e economics
of a i r p o r t s i s t o o g r e a t t o permit t h e i r being passed over
w i t h o u t some d i s c u s s i o n , ,

36, I n t h e s i m p l e s t p o s s i b l e c a s e , where l a n d around a n

a i r f i e l d i s f l a t and w i t h o u t sepious v a r i a t i o n i n h a r d n e s s o r
c o s t of a c q u i s i t i o n and c l e a r a n c e , runway e x t e n s i o n s may r e -
p r e s e n t s c a r c e l y l a r g e p a d d i t i o n a l e x p e n d i t u r e t h a n a propor-
t i o n a t e i n c r e a s e i n t h e c a p i t a l c o s t of paving, S i m i l a r l y a
d i f f e r e n c e i n runway s t r e n g t h between two proposed a i r p o r t
p l a n s may i n t h e s i m p l e s t p o s s i b l e c a s e s r e p r e s e n t a r a t h e r
l e s s t h a n p r o p o r t i o n a t e i n c r e a s e i n paving c o s t p e r s q u a r e
yard, T o t a l paving c o s t s f o r a l a r g e a i r f i e l d a r e g e n e r a l l y
l e s s t h a n h a l f t h e t o t a l c a p i t a l c o s t , s o t h a t a simple i n -
c r e a s e of say 20 p e r c e n t i n runway l e n g t h o r s t r e n g t h would
r e p r e s e n t a l e s s t h a n 10 p e r c e n t i n c r e a s e I n t o t a l c a p i t a l
investment i n such c a s e s ,
I C A O Circular 3 - AT/1 Page 23

37. The simple cases, however, are virtually never met with
owing to variation in soil textures, gradients and drainage
requirements, the proximity of hills, bodies of water or
irremovable obstructions. It may be impossible to establish
any general relationship between runway length and strength
requirements and their capital or maintenance costs, that
would be applicable on a world-wide basis.
38. The position with respect to capacity is somewhat
similar. The capacity of an airport, in terms of the maximum
number of landings that it can handle per hour, can be in-
creased within limits by relatively inexpensive measures
such as increasing the control staff or improving the air-
ground communication facilities, Since overloading is
generally met with first during instrument landing conditions,
improved blind landing equipment may also increase the effec-
tive capacity of an airport, These increases in capacity
will probably represent a less than proportionate increase
in running expenses, and little or no increase in capital
investment,
39. When such measures have been exhausted, further in-
creases in capacity may be possible with new runways but
these in general require big alterations in the design of
the airport and frequently it is more satisfactory to build
another airport, Where qajor increases in capacity are in-
volved therefore, as in the case of increases in runway
length and strength, the expense that may be incurred is not
predictable on any general basis,
40. Certain generalizations can however be made concerning
the costs of an airport in relation to the requirements laid
upon it, and although these generalizations may seem somewhat
obvious they are extremely important when considering the
economics of airports,
a) Substantial increases in runway strength, length
and landing capacity are always expensive whether the
proposition is the alteration of an existing airport
or the choice of plans for a new airport. The amount
of the extra cost varies widely and is frequently so
high as to determine within rigsd limits the sort of
airport that can be built in a given place,
b) Since the requirements laid upon airports have
been steadily increasing, airports are normally con-
structed to deal withithe greater requirements ex-
pected in the future and their costs are related to
these expectations, Most airports are at present
operating at considerably less than their full poten-
tial even at peak load times, and this situation is
likely to continue for some time.
 Page 24 ICAO Circular 3 - 88h1

c) It is only i n a somewhat s p e c i a l sense t h a t i t

can be said t h a t a i r p o r t c o s t s vary with the landing
weight and take-off run of the a i r c r a f t t h a t u t i l i z e
i t , o r w i t h the number of landings made, A s between
one a i r p o r t and another, other things being equal,
c o s t s vary according t o the maximum requirements f o r
which they were b u i l t but these requirements may or
may not be s u b s e q ~ ~ e n t lproved
y necessary, As between
two periods a t one a i r p o r t , c o s t s a r e more l i k e l y t o
r e f l e c t vagaries of the weather o r changes i n a i r p o r t
management policy, than v a r i a t i o n i n the weight, take-
off run or landing frequency of a i r c r a f t using t h e a i r -
port, Only when one sf the maximum requirements f o r
which an a i r p o r t was b u i l t i s exceeded, do a i r p o r t
c o s t s manifest t h e i r r e l a t i o n t o these requirements
and t h i s occurs infrequently r e l a t i v e t o t h e numbe;
of landings t h a t do not exceed those requirements,
I n t h e g r e a t majority of cases when an operator i s
negotiating with an a i r p o r t f o r permission t o use t h a t
a i r p o r t a s a landing place, the weight and take-off
run of the a i r c r a f t i n question and even the number
of landings t o be made per month, w i l l have l i t t l e i f
any e f f e c t on the a i p p o r t Q sexpenses.
d) On the other hand an a i r p o r t operator i s deeply
concerned when a new a i r c r a f t type is adopted by the
a i r l i n e s if t h a t type exceeds t h e maximum l i m i t s pro-
vided by h i s runways in strength or length, An
a u t h o r i t y responsible f o r a l a r g e number of a i r p o r t s
o f varying standards u t f l i z e d by a wide v a r i e t y of
a i r c r a f t types w i l l experience a f a i r l y constant
pressure f o r a i r p o r t improvement expenditure t h a t w i l l
be r e l a t e d i n a general way t o the r a t e of increase of
the requirements of the a i r c r a f t u t i l i z i n g h i s a i r p o r t s ,
41, V i r t u a l l y a l l governments appear t o be l a r g e l y respon-
s i b l e f o r c a p i t a l expenditure with respect t o the a i r p o r t s on
t h e i r t e r r i t o r y since i f they do not otvn them, a s i n the
United Kingdom, they provide s u b s t a n t i a l grants towards t h e i r
construction o r improvement a s in the United states,** I n

* Many l a n d i n g s by a i r c r a f t t h a t a r e near t h e weight l i m i t may however

cause h i g h e r maintenance c o s t s on runways,
** The e x c e p t i o n s , which a r e h p o r t a n t i n o t h e r connections, a r e i n
t h o s e i n s t a n c e s where a i r p o r t s have been c o n s t r u c t e d o r a r e
operated f o r m i l i t a r y o r commercial reasons by i n t e r e s t s e x t e r n a l
t o t h e country where t h e y a r e s i t u a t e d ,
ICAO C i r c u l a r 3 - AT/P Page 25

t h e i r c a p a c i t y a s a i r p o r t buj2-ders, t h e r e f o r e , governments
have an i n t e r e s t i n preventin& any i n c r e a s e i n t h e runway
s t r e n g t h and l e n g t h requirements of t h e a i r c r a f t o p e r a t i n g
i n their territory.
42. Most governments however, have a counterbalancing
i n t e r e s t i n t h e development of t h e i r own a i r l i n e s and s o
f a r a s t h e i r domestic airways a r e concerned, these con-
f l i c t i n g i n t e r e s t s can be s e t a g a i n s t each o t h e r I n v a r i o u s
ways according t o t h e n a t i o n a l s t r u c t u r e of a i r p o r t f i n a n c e
and r e g u l a t i o n , I n c o u n t r i e s where government owns both
a i r l i n e s and a i r p o r t s , t h e p o s s i b i l i t y of being forced t o
r e b u i l d c e r t a i n a i r p o r t s may i n f l u e n c e the government
a g a i n s t adopting a new a i r c r a f t type with more exacting r e -
quirements. I n o t h e r c o u n t r i e s t h e a i r p o r t point of view
may n o t be taken i n t o account i n a i r l i n e d e c i s i o n s over new
a i r c r a f t types, but t h e r e s u l t s t o t h e various p a r t i e s may
u l t i m a t e l y a f f e c t t h e public purse o r t h e public good i n
such a way a s t o produce something of a balance.
43 I n t h e i n t e r n a t i o n a l sphere, t h e balance i s n o t so
s a t i s f a c t o r y . Many governments a r e more a f f e c t e d by t h e
c o s t of extensions t o t h e i r i n t e r n a t i o n a l a i r p o r t s than by
the b e n e f i t s t h a t might accrue t o them from t h e use, by
t h e i r own o r o t h e r a i r l i n e s , of heavier a i r c r a f t o r of a i r -
c r a f t w i t h longer take-off S ~ m s . Countries t h a t provide
more i n t h e form of only p a r t i a l l y paid-for a i r p o r t f a c i l i -
t i e s than they r e c e i v e i n t h e same form from o t h e r c o u n t r i e s ,
stand t o s u f f e r g r e a t e r l o s s i f a l l a i r p o r t s have t o be re-
b u i l t o r extended.
44. It i s n o t p o s s i b l e with a v a i l a b l e d a t a t o say which
c o u n t r i e s might thus be l o g i c a l l y a g a i n s t t h e general adop-
t i o n of a i r c r a f t r e q u i r i n g longer and s t r o n g e r runways, It
would depend on t h e number and s i z e of a i r p o r t s i n each
country, t h e number and s i z e o f t h e i r a i r l i n e s o p e r a t i n g
overseas, t h e i r f i n a n c i a l p o s i t i o n and a number of o t h e r
f a c t o r s . It can however be s t a t e d g e n e r s l l y t h a t a l l a i r -
p o r t owners a s such, whether government, municipal o r p r i v a t e
a r e , on t h e average and i n t h e Pone geriod, i n t e r e s t e d t h a t
a i r c r a f t requirements a t a i r p o r t s s h a l l r i s e a s l i t t l e a s
p o s s i b l e and s h a l l r i s e only when r e a l f i n a n c i a l b e n e f i t
accrues t o t h e a i r l i n e s , Moreover, i n s o f a r a s a i r c r a f t r e -
quirements do r i s e , t h e a i r p o r t owners w i l l on t h e average
and i n t h e long period have higher expenditure t o f a c e .
45, Thus although t h e r e i s l i t t l e t o j u s t i f y t h e view
t h a t t h e c o s t of providing ai-sport landing f a c i l i t i e s i s
p r o p o r t i o n a t e e i t h e r t o t h e number of landings made o r t h e
weight o r take-off run requirements of t h e a i r c r a f t making
such l a n d i n g s , n e v e r t h e l e s s t h e s e f a c t o r s a r e important.
Page 26 -
IChO C i r c u l a r 3 - AT11
f a c t o r s from t h e p o i n t of x - i .w of the a i r p o r t o p e r a t o r and
a f f e c t h i s c o s t s r a d i c a l l y ir. the long rune

The Relation of A i r p o r t Cost;:; t o A i ~ r .Rsvenues

t
46, The revenues of most a i r p o r t s t h r o u g h o u t the world
ap?ear t o be l e s s t h a n t h e i r o p e r a t i n g and maintenance
expenses. I n t h e United S t a t e s a c e r t a i n number of a i r -
p o r t s claim revenues exceeding t h e i r cash expenses, but
t h e y a r e i n the minority, I n Canada s government spokesman
r e c e n t l y s t a t e d t h a t a t the 2 3 main a i r p o r t s of the Canadian
domestic airways, t o t a l revenues were 33*2 pep cent of t o t a l
running c o s t s , e-y-clusive of any r e t u r n on c a p i t a l o f
47, The t a b l e i n Appendix TI shows the financial o p e r a t i n g
r e s u l t s of 30 U n i t e d S t a t e s a i r p o r t s a s e s t a b l i s h e d or e s f i -
mated i n t h e Harvard study, The a u t h o r s observe:*
"... . . .
, , , .among the 30 terrni rial-type s t u d i e d
1 4 f a i l e d t o meet t h e i r a n n u a l out-of-pocket
o p e r a t i n g c o s t s , On the o t h e r hand r e v e n u e s
a t 16 of t h e a i r p o r t s covered t h e s e a n n u a l
e x p e n d i t u r e s 3 n d c o n t r i b u t e d something toward
payment of d e p r e c i a t i o n , interest and i n - l i e u -
o f - t a x e s charge, N t h t h e full amount of these
l a t t e r expenses included, however, i t i s doubt-
f u l if. more t h a n one a i r p o r t i n the group can
be considered a s showing a true n p r o f l t l l , ( T h i s
one a p p a r e n t l y p r o f i t a b l e a i r p o r t i s s c a r c e l y
cornpar2ble because o f c e r t a i n wsrtfme a c t i ~ i t i e s . ) ~ ~

t PubUc hearing before the Afr Transport Board, Ot-LawapDecember 8th

194'7
ICk.0 Circular 3 - AT/^ Page 27

48. Later the same authors sugge'st the folloiving figures

as being representative of expenses and revenues for a
medium sized airport in the United States:
Re~resentativeAnnual Expenses and
Revenues for a Medium Sized Airport
in the United States
Cash expenses
Revenue
Cash balance 31,000
Interest and Depreciation 2 50,000
Net loss $ 219,000
49 Figures such as these would be regarded as exception-
ally good at many airports outside the United States where
there is in general no positive "cash balancen to contribute
anything towards capital charges. Dorval airport for ex-
ample was recently operating at an estimated net loss of
half a million dollars a year on running expenses alone, the
figures being:
Dorval, Montreal Year 1946/47*
Cash expenses $ 893pO00
Revenue
Cash loss $ 549,000
Interest and depreciation
(at 583 140,000
Total loss

Variation in Airport Revenues

50. Landing charges at international airports vary widely,
but total revenue from these charges often varies inversely
with the amount of the charge since the higher charges are
\

- --

'statistics reported t o ICAO by Canadian Government a u t h o r i t i e s .

Page 28 ICAO C i r c u l a r 3 - AT,!1

mostly a t t h e a i r p o r t s with Power t p a f f f c d e n s i t i e s , and

t h e d i f f e r e n c e s between t r a f f i c d e n s i t i e s i s g r e a t e r than
between t h e c h a r g e s , Landing f e e s a t Shannon a r e , f o r ex-
ample, about t e n times what t h e y a r e f o r s i m i l a r a i r c r a f t
a t La G u a ~ d i a ,b u t s i n c e La Guardia h a s about 25 times a s
many l a n d i n g s p e r annum a s Shannon, La G u a r d f a g s reveriue
from l a n d i n g f e e s i s about 2,5 times S h n n o n o s ,
510 The most v a r i a b l e f a c t o r i n a i r p o r t revenues i s
however provided by t h e concessions, A t l a r g e a i r p o r t s t h e
amount of concession revenue per passenger i s o f t e n g r e a t e r
t h a n a t small a i r p o r t s , Since t h e number of passengers i s
a l s o g r e a t e r , l a r g e a i r p o r t s tend t o have more t h a n pro-
p o r t i o n a t e l y l a r g e concession revenues, I t i s by e x p l o i t i n g
t h i s s i d e of t h e i r a c t i v i t i e s t h a t some United S t a t e s a i r -
p o r t s succeed i n r e c o r d i n g a n o p e r a t i n g p r o f i t , The P o r t
of New York A u t h o r i t y proposes t o make t h i s o p e r a t i n g pro-
f i t on t h e New York a i r p o r t s g r e a t enough t o pay a normal
r e t u r n on c a p i t a l , Other l a r g e a i r p o r t s near b i g c i t i e s
may be a b l e t o f o l l o w t h i s example,
52 0 Many f a c t o r s c o n t r i b u t e t o make concession revenues
h i g h e r a t l a r g e United S t a t e s a i r p o r t s than elsewhere:
a) The United. S t a t e s h a s a network of airways
w i t h high t r a f f l e intenstties s o t h a t t h e number
of l a n d i n g s per a i r p o r t I s high, Many f n t e r -
n a t i o n a l airways have developed a s long l i n e
r o u t e s r a t h e r t h a n n e t w o ~ k sand t h e s e r o u t e s do
n o t a s ye-c have h i g h t r a f f i c i n t e n s i t i e s ;
b) Passengers on the United S t a t e s airways a r e
more prosperous and a r e accustomed t o spending
money on minor a c c e s s o r i e s more f r e e l y t h a n i n
most c o u n t r i e s ;
c) There a r e more motor-cars per head i n t h e
Unfted S t a t e s than elsewhere so t h a t t h e d i s t a n c e
between a i r p o r t s and g o p u l a t i o n c e n t p e s r a i s e s
l e s s of a n o b s t a c l e t o v i s i t i n g an a i r p o r t , &ny
Unfted S t a t e s a i r p o r t s a r e popular p l a c e s t o v i s i t
f o r meals o r i n t e r e s t ; elsewhere t h e r e are t o o few
people t h a t can g e t o u t t o t h e a i r p o r t c o n v e n i e n t l y
i n t h e i r own c a r s t o b u i l d up t h e same s o r t of
patronage;
d) Many i n t e r n a t i o n a l a i r p o r t s o u t s i d e t h e United
S t a t e s were b u i l t a s r e f u e l l i n g s t o p s and t h e c h o i c e
of s i t e was based on t h e geography of t h e r o u t e
r a t h e r t h a n on t h e proximity o f l a r g e towns, Thus
IChO C i r c u l a r 3 - AT11 Page' 29

a i r p o r t s such a s Gander, Goose, Reykjavik, Shannon,

P r e s t w i c k and many a i r p o r t s i n t h e Mediterranean
and Middle E a s t a r e a s have l i t t l e hope of develop-
i n g t h e l o c a l v i s i t o r t r a d e t h a t adds s o much t o
revenues a t United S t a t e s a i r p o r t s near l a r g e
cities,
530 These d i f f e r e n c e s between t h e p o s i t i o n of many United
S t a t e s a i r p o r t s and most a i r p o r t s on i n t e r n a t i o n a l r o u t e s
o u t s i d e t h e United S t a t e s have been mentioned i n d e t a i l
because of t h e important p a r t t h a t concession revenues play
i n a i r p o r t f i n a n c e , If by any means t h i s type of revenue
could be b u i l t up a t t h e a i r p o r t s t h a t now make such heavy
l o s s e s , t h o s e l o s s e s might be e l i m i n a t e d and l a n d i n g charges
might be lowered, I t h a s been suggested t h a t a s t h e world
economy r e t u r n s t o normal, c o n d i t i o n s a t t h e main a i r p o r t s
of t h e world w i l l improve and t h e e n e r g e t i c e x p l o i t a t i o n
of concession p o s s i b i l i t i e s should t h e n y i e l d b e t t e r r e -
s u l t s , I t i s pointed out t h a t t h e p o s s i b i l i t y of develop-
i n g concession revenues t o t h e e x t e n t where they pay t h e
major p a r t of an a i r p o r t o s expenses was only r e a l i z e d r e -
c e n t l y i n t h e United S t a t e s and s u c c e s s i n t h i s matte??
a p p e a r s t o depend as much on t h e management of t h e a i r p o r t
a s on i t s geographical p o s i t i o n . The management must not
only be e n e r g e t i c and imaginative, b u t , above a i l , must be
given e f f e c t i v e freedom t o experiment w i t h new i d e a s , A i r -
p o r t managers throughout t h e world who have n o t been a b l e
t o pursue t h i s l i n e of a c t i v i t y f o r t h e p a s t t e n y e a r s ,
w i l l be quick t o l e a r n from t h e i r American c o l l e a g u e s , b u t
i t w i l l r e q u i r e both rest:. nt and a d m i n i s t r a t i v e ingenuf t y
on t h e p a r t of governmen.la1 and municipal a u t h o r i t i e s r e s -
p o n s i b l e f o r a i r p o r t s , t , :.!-sure t h a t managerial in i t i a t i v e
i s given proper freedom of a c t i o n ,
54, One of t h e d i f f i c u l t i e s of a i r p o r t a d m i n i s t r a t i o n i s
t h a t while on t h e one hand t h e enormous c a p i t a l requirements
f o r c o n s t r u c t i n g a n a i r p o r t and f o r o p e r a t i n g i t i n i t s
e a r l y y e a r s make i t almost impossible f o r p r i v a t e e n t e r p r i s e
t o a t t e m p t t h e t a s k , on t h e o t h e r hand t h e management of
t h e whole concession s i d e of i t s a c t i v i t i e s i s p e c u l i a r l y
s u i t e d t o t h e q u a l i t i e s of p r i v a t e e n t e r p r i s e and p e c u l i a r l y
u n s u i t e d t o t h o s e of p u b l i c a d m i n i s t r a t i o n , The P o s t of New
York ~ u t h o r i t y ,tvl~ichi s now r e s p o n s i b l e f o r t h e New York
a i r p o r t s , and t h e adminf s t r a t i on of t h e Washington n a t i o n a l
a i r p o r t , seem t o have found ways of overcoming t h i s d i f f f -
c u l t y , b u t many municipal a i r p o r t a u t h o r i t i e s i n t h e United
S t a t e s have n o t been s o s u c c e s s f u l and t h e r e i s no doubt
t h a t t h e New York and Washington s i t u a t i o n s were t o some
e x t e n t s p e c i a , l l y f a v o u r a b l e , I t i s probable t h a t consider-
a b l e study m i l l be needed b e f o r e t h i s problem i s solved
g e n e r a l l y throughout t h e world,
 ICAO C i r c u l a r 3 - AT/1

55 Those a i r p o r t s t h a t a c t a s r e f u e l l i n g s t o p s and do
n o t s e r v e any l a r g e c e n t r e of population a r e unquestion-
a b l y i n s p e c i a l l y unfavourable p o s i t i o n s f o r t h e development
of l a r g e concessiori revenues, It i s p o s s i b l e t h a t i n some
i n s t a n c e s revenue might be obtained by e x p l o i t i n g o r c r e a t i l l g
l o c a l a t t r a c t i o n s . It has been suggested t h a t hunting
f a c i l i t i e s might be developed a t remote a i r p o r t s such as
Gander while f a c i l i t i e s f o r flyirlg and g r o ~ n dt r a i n i n g might
be l o c a t e d a t o r near some of t h e more a c c e s s i b l e a i r p o r t s .
I n o t h e r c a s e s a h o l i d a y r e s o r t might be developed i n c l o s e
a s s o c i a t i o r ; w i t h a n a i r p o r t , Such schemes should h e c a r e -
f u l l y s t u d i e d but i t i s u n l i k e l y t h a t t h e y co?lld be made
e f f e c t i v e f o r many y e a r s except i n s p e c i a l l y s u i t a b l e places.
I t must probably be assumed t h a t f o r t h e n e x t t e n y e a r s a
number of i n t e r n a t i o n a l a i r p o r t s w i l l have t o r e l y almost
e n t i r e l y on landing c h a r g e s f o r t h e i r revenues,

F u t u r e Trends i n Landing Charge Revenues

f o r International Airports
56 Apart from t h e p o s s i b i l i t y of a l t e r i n g l a n d i n g c h a r g e s ,
which w i l l be d i s c u s s e d i n t h e next c h a p t e r , f u t u r e revenue
from t h e s e charges a t a n i n t e r n a t i o n a l a i r p o r t depends on the
amolnt of t r a f f i c p a s s i n g throrigh t h z t a i r p o r t , S i n c e most
i n t e r n a t i o n a l a i r p o r t s charge more f o r l a r g e r a i r c r a f t , t h e
s t e a d y i n c r e a s e i n t h e s i z e of a i r c r a f t o p e r a t i n g oil i n t e r -
n a t i o n a l r o u t e s must be t a k e n i n t o account a s wel' a s t h e i r
frequency of landing. The e x t e n s i o n of a i r r o u t e s i n t o
nen a r e a s does not d i r e c t l y i n c r e a s e t r a f f i c a t e x i s t i n g
a i r p o r t s and o f t e n i n v o l v e s btlilding I:en ones o r extending
old ones, but a s t h e world r o u t e p a t t e r n f i l l s o u t , new
s e r v i c e s tend more and more t o u t i l i z e e x i s t i n g a i r p o r t s
and hence t o i n c r e a s e t h e volume of t r a f f i c a t e a c h a i r -
p o r t . A i r p o r t s a r e s t i l l t e i n g b u i l t and extended t o d e a l
with t h e expansion of i n t e r n a t i o n a l a i r s e r v i c e s , but t h e
period of maximum expansion of t h i s s o r t i s probzbly p a s t
and f u t u r e y e a r s sho?.zld s e e a c o n s i d e r a b l e c o n s o l i d a t i o n
of t h e e x i s t i n g p a t t e r n of g r e a t e r f r e q u e n c i e s and more
s e r v i c e s u t i l i z i n g e x i s t i n g a i r p o r t s e i t h e r along e x i s t i n g
r o u t e s o r a c r o s s them,
57 0 I t i s not p o s s i b l e t o p r e d i c t t h e f u t u r e t r e n d o f
n1or1d a i r t r a n s p o r t a c t i v i t y with any d e g r e e of c e r t a i n t y
a t t h e p r e s e n t time. The ,trend over t h e l a s t two y e a r s
seems t o have been good. The b e s t a v a i l a b l e e s t i m a t e s
i n d i c a t e t h e t t h e t o t a l passenger t r a f f i c on all t h e scheduled
a i s~e r v i c e s of t h e n o r l d increased from about 9,000 m i l l i o n
passenger m i l e s i n 1946 t o about 11,300 m i l l i o n i n 1947, a n
i n c r e a s e of 2 5 per c e n t , On most i n t e r n a t i o l i a l r o u t e s
 3CAO Circular 3 - AT/^

the increase was probably greater than this. The number of

passengers on the trans-Atlantic air route to and from New
York nearly doubled between 1946 and 1947, increasing from
*
105,000 to 194,000, and traffic on other international
services probably increased nearly as much. These increasek
between 1946 and 1947 cannot, however, be taken to repre-
sent a long period trend which might be repeated in 1948
and future years since they were at least partly the result
of the increase in the number of transport aircraft avail-
able after wartime shortage 8nd did not reflect a true in-
crease in the demand for international t~avel,
58 Nevertheless the present trends in world statistics
for the scheduled passenger services do not lend support to
a pessimistic view of the f u t u r e and international air cargo
services show evcry sign of extremely rapid expansion, So
long as stability and prosperity can be restored in Europe
and the Far East there is every reason to expect that most
international airports will experience steady increases in
traffic frequencies over the coming years particularly if
restrictions on international trade and travel can be pro-
gressively eliminated, Policy over air fares and freight
rates on international routes and over international regu-
lation of air services w i l l a l s o radically affect the
volume of traffic. The enormous waste represented by large
international airports used to only a fraction of their
capacity is an argument in favour of reducing air tariffs
and liberalizing regulations whenever possible,
59 0 Before 1939, statistics of world air transport showed
a fairly steady upward trend that resulted in passenger-
mileage totals doubling every two or three years, If this
trend were to re-establish itself now, international air-
:ports might expect their traffic frequencies to increase
also, not quite so fast, because some of that increase
would represent services at new airports, but at a rate
that would perhaps represent a doubling of frequency in
four or five years, Such an increase in frequency without
a decrease in fees would probably enable some of those inter-
national airports that charge landing fees in the higher
Yanges to become self-supporting with respect to operation
and maintenance expenses if not with respect to interest
and depreciation,

* Analysis of trans-Atlantic Wssenger Traffic; C. A. B. April. 1948.

Page 32 ICAO C i r c u l a r 3 - ATJP

60. The p r o s p e c t s f o r t h e f u t u r e s e l f - s u f r i c f e n c y 04
i n t e r n a t i o n a l a i r p o r t s i s t h e r e f o r e nsL s o gloomy a s a n
examination of their p r e s e n t f f n a n e i a l p o s i t i o n would
suggest, I n the first p l a c e i t should be p o s s i b l e t o
develop concession revenues I n c e r t a i n i n s t a n c e s ; i n t h e
second p l a c e the s t e a d y expansion of world a i r t r a n s p o r t
t h a t may r e a s o n a b l y be expected may wake a number of a i r -
p o r t s s e l f - s n p p s r t a n g on l a n d i n g f e e s a l o n e w i t h i n a
period of about f i v e years,
61, T h i s w i l l , however, ~ n d o u b t e d l yl e a v e a number of
i n t e r n a t i o n a l a i r p o r t s whose revenues w i l l not cover t h e i r
expenses and F w t h e r study i s needed t o shows
a) Whether I.ncxseases i n afrpozpt charges should
be made in t h e s e c a s e s ;
b) \mether commercial o r o t h e ~advantages a c c r u i n g
t o the community i n which such a i r p o r t s a r e s i t u a t e d
a r e suf'ffcfent t o o f f s e t t h e f i n a n c i a l l o s s e s fn-
c u r r e d by ths o p e r a t i o n ;
c) -Whether some form of j o i n t i n t e r n a t i o n a l s u p p o r t
should be organized for these a i r p o r t s and i f so,
how such s u p p o r t should be a s s e s s e d ,
ICAO C i r c u l a r 3 - AT/I

CHAPTER I11 - AIRPORT CHARGES

A i r p o r t Charging P o l i c y
62. I n s ~ i t eof t h e g r e a t v a r i a t i o n of c o s t between d i f -
f e r e n t a i r p o r t s i n d i f r e r e n t p a r t s of t h e world, i n s p i t e
o f many b a s i c d i f f e r e n c e s i n a d m i n i s t r a t i o n , ownership and
f i n a n c i a l management and i n s p i t e of t h e f a c t t h a t i n some
c o u n t r i e s a i r p o r t s and a i r l i n e s a r e i n e f f e c t but two d i f -
f e r e n t branches of government while i n o t h e r s one o r b o t h
t y p e s of a e t i b f t y a r e p r i v a t e l y c a r r i e d on, t h e r e a r e never-
t h e l e s s some broad p r i n c i p l e s i n a i r p o r t charging p o l i c y
which i f n o t u n i v e r s a l a r e a t l e a s t g e n e r a l l y accepted i n
most c o u n t r i e s .
63. I t i s g e n e r a l l y agreed f o r example t h a t except where
a i r l i n e s own and o p e r a t e t h e i r own a i r p o r t s , a i r l i n e s s h a l l
pay something f o r t h e l a n d i n g f a c i l i t i e s provided a t an a i r -
p o r t . A u s t r a l i a n n a t i o n a l a i r p o r t s used t o provide an out-
s t a n d i n g e x c e p t i o n t o t h i s r u l e b u t r e c e n t l y a comprehensive
system of c h a r g i n g b o t h f o r a i r p o r t s and airway f a c i l i t i e s
has been adopted i n A u s t r a l i a . The p r o p o s i t i o n t h a t r e n t s
o f hangars and o f f i c e space i n b u i l d i n g s l e t t o a i r l i n e s and
government a g e n c i e s should be based on c o s t (maintenance
p l u s reasonable i n t e r e s t and d e p r e c i a t i o n allowances) i s
a l s o widely accepted a s a p r i n c i p l e although f r e q u e n t l y
depapted from i n p r a c t i c e . I t i s u n i v e r s a l l y agreed t h a t
r e s t a u r a n t and shop concessions should be charged r e n t s on
a normal commercial b a s i s , t h a t i s t o s a y a s h i g h a s econ-
o m i c a l l y p o s s i b l e , and t h a t any p r o f i t s a r i s i n g from t h e
f a c t t h a t such r e n t s w i l l normally be above t h e c o s t s of
providing t h e concession space w i l l be counted i n t o t h e
t o t a l revenues of t h e a i r p o r t .
64. I n a s e n s e i t i s n e a r l y u n i v e r s a l l y agreed t h a t a i r -
l i n e s s h a l l pay l a n d i n g charges *'per l a n d i n g n , b u t t h i s
generalization requires considerable qualification. A i r -
~ o r t si n t h e United S t a t e s (which c a t e r f o r more a i r t r a n s -
p o r t a c t i v i t i e s than a l l t h e r e s t of t h e w o r l d ' s a i r p o r t s
combined) have a s l i g h t l y d i f f e r e n t approach t o l a n d i n g
c h a r g e s . I n t h e United S t a t e s i t i s normal f o r a i r l i n e s
Page 34 ICAQ C i r c u l a r 3 - AT/I
t o s i g n l a n d i n g c o n t r a c t s w i t h a i r p o r t s f o r f a i r l y long
p e r i o d s and a l t h o u g h t h e p r i c e s paid a r e based on t h e number
of l a n d i n g s , i t i s t h e number scheduled, n o t t h e number
c a r r i e d o u t t h a t i s used. A i r l i n e payments t o a i r p o r t s i n
t h e United S t a t e s , f o r l a n d i n g f a c i l i t i e s , a r e more c l o s e l y
l i k e r e n t s than a t other a i r p o r t s .
65. This d i f f e r e n t approach t o landing charges may appear
of no g r e a t importance, b u t i n f a c t i t . h a s some important
i m p l i c a t i o n s . United S t a t e s a i r l i n e s do n o t , f o r i n s t a n c e ,
normally pay f o r t e s t f l i g h t l a n d i n g s , f o r p r a c t i c e and
training landings or f o r e x t r a service landings a t a i r p o r t s
where t h e y have l a n d i n g c o n t r a c t s . On t h e o t h e r hand, t h e y
do pay f o r l a n d i n g s t h a t a r e scheduled b u t c a n c e l l e d .
P o l i c y o u t s i d e t h e United S t a t e s w i t h r e s p e c t t o t h e s e e x t r a
and c a n c e l l e d l a n d i n g s v a r i e s b u t i n g e n e r a l i t appears t h a t '
t e s t f l i g h t l a n d i n g s a r e n o t counted while t r a i n i n g l a n d i n g s
a r e o n l y c a r r i e d o u t where s p e c i a l arrangements have been
made f o r them. On t h e o t h e r hand, e x t r a s e r v i c e l a n d i n g s
and scheduled c a n c e l l a t i o n s a r e g e n e r a l l y t a k e n i n t o account.
66. There i s f a i r l y g e n e r a l agreement o u t s i d e t h e United
S t a t e s t h a t l a r g e r a i r c r a f t should pay h i g h e r l a n d i n g c h a r g e s
p e r l a n d i n g t h a n s m a l l e r a i r c r a f t . U s u a l l y weight i s t a k e n
a s t h e c r i t e r i o n of s i z e , and maximum g r o s s take-off weight
i s t h e most popular measure of weight. I n t h e United S t a t e s
i t i s n o t s o g e n e r a l l y agreed t h a t l a n d i n g c h a r g e s e ~ o u l d
v a r y according t o t h e s i z e of a i r c r a f t b u t most a i r p o r t s
charge p r i v a t e and s m a l l c h a r t e r a i r c r a f t e i t h e r nothing o r
l e s s t h a n t h e scheduled a i r l i n e r s , and some a i r p o r t s make a
s m a l l excess-weight charge f o r a i r c r a f t above a c e r t a i n
maximum weight.
67. There i s l e s s agreement a s t o whether t h e l a n d i h g
charge should v a r y d i r e c t l y w i t h t h e weight of t h e a i r c r a f t
o r should r ' i s e more s l o w l y a t t h e upper end of t h e s c a l e .
The Canadian government r e c e n t l y introduced a s c a l e of
l a n d i n g c h a r g e s t h a t r o s e more s t e e p l y t h a n t h e weight
s c a l e , j u s t i f y i n g t h i s arrangement on t h e ground t h a t t h e
p o t e n t i a l e a r n i n g c a p a c i t y of a n a i r c r a f t r i s e s more s t e e p l y
t h a n i t s g r o s s weight. A v a r i e t y o f o t h e r r e l a t i o n s h i p s
between l a n d i n g f e e and weight have been adopted a t v a r i o u s .
a i r p o r t s . The p r i n c i p l e s involved h e r e w i l l be d i s c u s s e d
i n a l a t e r s e c t i o n of t h i s paper.
68. I n t h e United S t a t e s and i n a few o t h e r c o u n t r i e s i t
i s customary t o g i v e a s u b s t a n t i a l d i s c o u n t on l a n d i n g
c h a r g e s t o a i r l i n e s o p e r a t i n g a l a r g e number of schedules.
This p r a c t i c e probably r e f l e c t s t h e s t r o n g e r b a r g a i n i n g
p o s i t i o n of t h e l a r g e r a i r l i n e s which h a s a chance t o make
 ICAO C i r c u l a r 3 - AT11
i t s e l f f e l t i n t h e United S t a t e s where such m a t t e r s a r e l e f t
more f r e e l y t o b a r g a i n i n g than i n many o t h e r c o u n t r i e s . I t
h a s been c r i t i c i z e d a s favouring t h e l a r g e r and scheduled
o p e r a t o r s a s compared w i t h t h e s m a l l e r and non-scheduled
o p e r a t o r . Over t h e whole f i e l d i t probably does so, although
a t any i n d i v i d u a l a i r p o r t a small o p e r a t o r may c a r r y out
more l a n d i n g s per month than a l a r g e one and hence pay l e s s
p e r l a n d i n g , On t h e o t h e r hand i t i s probably n o t t r u e t h a t
such d i s c o u n t s f o r l a r g e numbers of l a n d i n g s provide a g r e a t
encouragement t o t h e development of a i r t r a n s p o r t s i n c e
l a n d i n g c h a r g e s a r e seldom a h i g h enough p r o p o r t i o n of a i r -
l i n e expenses t o a f f e c t expansion p o l i c i e s i n t h i s partie-
u l a r way. Many a i r l i n e o p e r a t o r s a p p e a r t o f e e l v e r y
s t r o n g l y t h a t t h e r e should be a d i s c o u n t f o r l a r g e numbers
of l a n d i n g s , no doubt looking t o t h e f u t u r e when-the e f f e c t
w i l l be s u b s t a n t i a l ,
69. Where n a t i o n a l governments o p e r a t e a i r p o r t s , a s i n t h e
United Kingdom, t h e B r i t i s h Dominions and many o t h e r c o u n t r i e s ,
i t seems t o be t h e g e n e r a l p r a c t i c e f o r a i r p o r t charges t o
be s t a n d a r d i z e d a t a l l t h e n a t i o n a l a i r p o r t s . Charges a t
municipal and p r i v a t e a i r p o r t s on t h e o t h e r hand a r e gen-
e r a l l y not standardized.

The Level of Landing Charges

70. ' I n s p i t e of t h e s e broad measures of agreement on some
a s p e c t s of a i r p o r t l a n d i n g charge p o l i c y , t h e r e i s wide d i s -
agreement on t h e whole q u e s t i o n of t h e l e v e l of l a n d i n g
c h a r g e s b o t h a b s o l u t e l y and i n r e l a t f o n t o a f r p o r t c o s t s o r
a i r l i n e revenues. A E-4 a i r l i n e r f l y i n g on a s e r v i c e from
Washington t o Bombay w i l l have t o pay $4 f o r l a n d i n g *at
Boston, $80 a t Gander, $12 a t Rome and $56 a t Athens,
P a r t o f such v a r i a t i o n might be accounted f o r by d i f f e r e n c e s
i n a i r p o r t c o s t s , o r i n t h e t r a f f i c volume over which t h e s e
c o s t s can be s p r e a d , b u t much i s a l s o due t o d i f f e r e n c e s i n
t h e p o l i c y of t h e v a r i o u s a i r p o r t a u t h o r i t i e s .

* S e e Appendix I. These r a t e s a r e c a l c u l a t e d from p u b l i s h e d t a r i f f

s c h e d u l e s f o r 1947 and may be d i f f e r e n t f o r 1948 o r f o r a i r l i n e s
w i t h s p e c i a l c o n t r a c t a r r a n g e m e n t s a t t h e s e a i r p o r t s . The r a n g e
of v a r i a t i o n i s , however, u n l i k e l y t o be s u b s t a n t i a l l y d i f f e r e n t
f r o u ~t h a t shown,
 Page 36 ICAO C i r c u l a r 3 - AT/1

71. The f i r s t b a s i s of disagreement i s a s t o whether a i r -

p o r t revenues should cover i n t e r e s t and d e p r e c i a t i o n on
c a p i t a l . For o t h e r t y p e s of e n t e r p r i s e , i n c l u d i n g govern-
ment and municipal e n t e r p r i s e , a l l a u t h o r i t i e s would a g r e e
t h a t some allowance should be made t o cover t h e s e overhead
c o s t s . The d i f f e r e n c e of opinion i n t h e c a s e of a i r p o r t s
a r i s e s c h i e f l y from t h r e e f a c t o r s :
a) A i r p o r t s a r e c o n s i d e r e d t o have s u b s t a n t i a l pub'lic
value t o S t a t e and m u n i c i p a l i t y f o r commercial, m i l i -
t a r y and p r e s t i g e rbbsons. It i s f e l t t h e r e f o r e t h a t
some p a r t of a i r p o r t c o s t s should be borne by t h e p u b l i c .
The amount o r p r o p o r t i o n of a i r p o r t c o s t s t h a t should
be paid o u t of t h e p u b l i c purse i s however d i f f i c u l t
t o d e c i d e . The p r o p o s a l t h a t t h e S t a t e should con-
t r i b u t e a l l c a p i t a l requirements seems t o many a
r e a s o n a b l e way o u t of t h e d i f f i c u l t y ;
b) I t i s s i m p l e ' a n d convenient t o be a b l e t o n e g l e c t
t h e troublesome problems of a s s e s s i n g c a p i t a l v a l u e s
and d e p r e c i a t i o n p e r c e n t a g e s i n p u b l i c e n t e r p r i s e s i
c) C a p i t a l appropri,ations o r grants f o r a i r p o r t s
a r e p o l i t i c a l l y f a i r l y e a s y t o o b t a i n and a r e needed
i n f r e q u e n t l y ; o p e r a t i n g d e f i c i t s on t h e o t h e r hand
come up each year and l o o k bad i n t h e annual r e p o r t s ;
d) Many a u t h o r i t i e s c o n s i d e r t h a t a i r p o r t revenues
cannot i n g e n e r a l be made t o cover even o p e r a t i n g anC
maintenance c o s t s , and t h a t t h e q u e s t i o n of c o v e r i n g
i n t e r e s t and d e p r e c i a t i o n a s w e l l i s t h e r e f o r e l a r g e l y
academic.
72. The c l o s e s t s t u d y of t h i s problem t o d a t e h a s been
made by t h e Harvard B r s i n e s s School, d e a l i n g w i t h United
S t a t e s a i r p o r t s only. The a u t h o r s c o n s i d e r t h a t an a s s e s s -
ment of t h e m i l i t a r y and p u b l i c v a l u e of a i r p o r t s c a n be
made and t h a t a f t e r allowing - f o r t h e s e f a c t o r s , i n t e r e s t and
d e p r e c i a t i o n charges can and should be covered when an a i r -
p o r t h a s reached m a t u r i t y . From t h a t time on t h e r e should
even be a s u r p l u s t o pay back t h e d e f i c i t s p r e v i o u s l y
incurred,

* Harvard School of Business A d h i n i s t r a t i o n - Op. cit.

 ICAO Circular 3 - AT/% P a m 37

73. Their proposal f o r s e t t i n g landing charges i s briefly:

a) Estimate landing area c o s t s including i n t e r e s t ,
d e p r e c i a t i o n , t a x e s e t c . , f o r a f u t u r e year when t h e
a i r p o r t can be considered mature, ( i . e . , when the
a i r p o r t i s o p e r a t i n g t o c a p a c i t y o r when t h e i n d u s t r y
a s a whole h a s ceased t o grow);
b) Deduct n a t i o n a l c o n t r i b u t i o n t o a i r p o r t f i n a n c e s ,
(Taken by t h e a u t h o r s t o be 50% of l a n d i n g a r e a
investment. This i s regarded a s a n a t i o n a l investment
p a r t l y r e p r e s e n t i n g t h e m i l i t a r y value of a i r p o r t and
a i r l i n e development and p a r t l y a i d t o an i n f a n t i n d u s t r y ,
t h e l a t t e r p a r t t o be r e c o v e r a b l e a t some f u t u r e
unspecified date);
c) E s t i m a t e n e t revenues from concessions, p r i v a t e
f l y i n g and a l l a c t i v i t i e s o t h e r than commercial a i r
t r a n s p o r t f o r t h a t year and s u b t r a c t t h e s e from n e t
landing area c o s t s ;
d) Divide t h e remainder between t h e commercial a i r
t r a n s p o r t o p e r a t o r s on t h e b a s i s of t h e number of
l a n d i n g s made, w i t h a weight-scale and d i s c o u n t s f o r
quantity i f desiree;
e) Put t h e s e charges i n f o r c e immediately and keep
them c o n s t a n t u n t i l t h e a i r p o r t r e a c h e s m a t u r i t y ,
d e f i c i t s being accepted f o r t h e p r e s e n t by t h e munic-
i p a l i t y t o be r e p a i d when t h e a i r p o r t makes a p r o f i t
a f t e r the maturity point.
74 The a u t h o r s c o n s i d e r t h a t on t h i s b a s i s most United
S t a t e s a i r p o r t s might be made s e l f - s u p p o r t i n g (excluding
t h e i t e m of n a t i o n a l a i d ) by 1954 w i t h e n e r g e t i c development
of concession revenues. R e p r e s e n t a t i v e c a l c u l a t i o n s of
l a n d i n g charges worked o u t on t h i s b a s i s g i v e $1.25 p e r
l a n d i n g f o r medium s i z e d a i r p o r t s and s l i g h t l y l e s s f o r
s m a l l a i r p o r t s . For l a r g e a i r p o r t s t h e a u t h o r s c a l c u l a t e
t h a t concession revenues would on t h e same b a s i s e l i m i n a t e
t h e need f o r a l a n d i n g charge by 1954, b u t suggest t h a t i t
should be s e t a t t h e same l e v e l as a t t h e medium a i r p o r t s
for t h e p r e s e n t .
75. I t i s d o u b t f u l t o what e x t e n t t h i s c a l c u l a t i o n i s
a p p l i c a b l e t o a i r p o r t s o u t s i d e t h e United S t a t e s where
t r a f f i c d e n s i t y and concession revenues a r e s o much lower.
The Harvard Business School s t u d y c a l c u l a t e s what t h e break-
even l a n d i n g charge would be, without any n e t income from
Page 38 ICkO C i r c u l a r 3 - ATjl

concession, w i t h o u t a n a t i o n a l c o n t r i b u t i o n , w i t h t h e a i r p o r t
o p e r a t e d a t o n l y h a l f c a p a c i t y , and w i t h c e r t a i n o t h e r modi-
f i c a t i o n s of a s i m i l a r n a t u r e and reaches a r e q u i r e d average
l a n d i n g charge of n e a r l y $10 per landing. This landkng charge
i s regarded by t h e a u t h o r s as "unduly burdensome t o t h e ai.r
c a r r i e r , and probably p r o h i b i t i v e " , b u t i t does n o t seem
h i g h when compared t o t h e c h a r g e s a t many i n t e r n a t i o n a 1 , a i r -
p o r t s . A DC-3 pays $45 per l a n d i n g i n t h e .Dominican Republic,
f o r i n s t a n c e , w h i l e a DC-6 pays $51 per l a n d i n g a t United Kingdom
n a t i o n a l a i r p o r t s and $113 a t Gander."

L i m i t a t i o n s on t h e Level of Landing Charges

76. There a r e , however l i m i t a t i o n s on a i r p o r t i a n d i n g
charges t h a t a r e l i k e l y in t h e f u t u r e t o p r e v e n t their being
a s high a s t h o s e quoted. One l i m i t a t i o n i s provided by t h e
f a c t t h a t a commercial a i r l i n e w i l l n o t schedule a s t o p a t
an a i r p o r t if t h e t o t a l c o s t of such a s t o p i s g r e a t e r t h a n
t h e a d d i t i o n a l revenue gained by t h e s t o p . Moreover, t h e
l a n d i n g charge i s n o t t h e only c o s t t o an a i r l i n e 0 f . a
l a n d i n g ; t h e r e i s a l s o t h e c o s t of the a i r l i n e s t a f f ' a n d
o f f i c t t L,ept a t t h e a i r p o r t , t h e e x t r a f u e l and time-loss
due t o descending, landing and ascending a g a i n , and t h e
a d d i t i o n a l wear and t e a r on t h e a i r c r a f t .
77. The a d d i t i o n a l revenue gained b y makfng a s t o p a t an
a i r p o r t may be from passengers o r f r e i g h t loaded o r unloaded
t h a t would n o t otherwise be c a r r i e d (assuming t h a t t h e space
would o t h e r w i s e go empty, which i s n o t always t r u e ) o r from
t h e i n c r e a s e d Load on a long hop made p o s s i b l e by r e f u e l l i n g
half-way ( i n t h i s c a s e assuming t h a t t h e a d d i t i o n a l l o a d i s
a v a i l a b l e ) . The a d d i t i o n a l revenues a c c r u i n g i n t h e s e ways.
from s t o p s a t t h e v a r i o u s i n t e r n a t i o n a l a i r p o r t s vaPy g r e a t l y .
A s t o p a t a l a r g e a i r p o r t on a popular r o u t e may add a s many
as 20 passengers t o an a i r c r a f t ' s load which a t an average
of $30 p e r f a r e w i l l add $600 of revenue. On t h e o t h e r hand,
many scheduled s t o p s average one passenger or l e s s loaded

* P u b l i s h e d 1947 rates, s u b j e c t t o siabsequent a l t e r a t i o n .

 ICAO Circular 3 - AT/^ Page 39

p e r l a n d i n g , and t h e revenue generated by t h e s e s t o p s i s n o t

l a r g e . * The f i n a n c i a l advantage of r e f u e l l i n g s t o p s a l s o
v a r i e s . A s t o p a t Gander t o r e f u e l on a f l i g h t from Montreal
t o P r e s t w i c k may make i t p o s s i b l e f o r an a i r l i n e r t o c a r r y
f i v e more passengers on t h e A t l a n t i c r o u t e a t over $300 each,
b u t a t many s t o p s r e f u e l l i n g adds nothing t o p o t e n t i a l load
capacity.
78. Where t h e revenue produced by making a l a n d i n g i s l a r g e ,
a second r e s t r i c t i o n on l a n d i n g charges may come i n t o e f f e c t
i n t h e p o s s i b i l i t y t h a t i f an a i r p o r t ' s l a n d i n g charges a r e
t o o high, a i r l i n e s w i l l use a n o t h e r near-by a i r p o r t t o s e r v e
t h e same c i t y o r t o perform t h e same r e f u e l l i n g , o r w i l l
choose a d i f f e r e n t r o u t e e n t i r e l y . Where t h i s s o r t o f com-
p e t i t i o n from a n o t h e r a i r p o r t near-by e x i s t e d m t l n i c i p a l i t i e s
have i n t h e p a s t sometimes charged e x c e p t i o n a i l y l o r l a n d i n g
f e e s i n o r d e r t o a t t r a c t a i r l i n e s t o schedule a s t o p a t t h e i r
airports.
79. I n g e n e r a l , moreover, governments wish t o f o s t e r t h e
development of t h e i r a i r t r a n s p o r t i n d u s t r y and t a k e s t e p s
t o keep t h e i r own domestic a i r p o r t charges low. Such s t e p s
g e n e r a l l y i n v o l v e providing a d d i t i o n a l f i n a n c i a l a s s i s t a n c e
t o t h e a i r t r a n s p o r t i n d u s t r y i n t h e form of g r a n t s t o a i r p o r t s ,
b u t t h i s i s a form of a s s i s t a n c e t h a t i s sometimes e a s i e r
f o r a government t o g i v e than more d i r e c t s u b s i d i e s t o t h e
a i r l i n e s . The low a i r p o r t charges adoptkd i n one c o u n t r y
f o r i t s own a i r l i n e s become a p p l l e d t o v i s i t i n g f o r e i g n
a i r l i n e s (by n o n - d i s c r i m i n a t i o n ) and a c t t o some e x t e n t
a s p r e c e d e n t s and bargaining f i g u r e s i n neighbouring and
o t h e r c o u n t r i e s . Even fn c o u n t r i e s where b o t h a i r l i n e s
and a i r p o r t s a r e government owned and o p e r a t e d , and where
t h e r e f o r e a i r p o r t charges a r e i n t h e n a t u r e of i n t e r -
d e p a r t m e n t a l payments, t h e r e may be advantages i n keeping
such c h a r g e s a t a low l e v e l i n o r d e r t o improve t h e finan-
c i a l p o s i t i o n of t h e a i r l i n e s .

* The f a c t t h a t t h e amount o f t r a f f i c l o a d e d and unloaded p r o v i d e s a

p o t e n t i a l l i m i t o f a i r p o r t c h a r g e s h a s a b e a r i n g on i n t e r n a t i o n a l
a i r t r a n s p o r t a g r e e ~ e n t s , The e x t e n s i o n o f f i f t h - f r e e d o m r i g h t s
might f o r i n s t a n c e s o i n c r e a s e t h e l o a d i n g ahd u n l o a d i n g a t a n a i r -
p o r t as t o e n a b l e l a n d i n g c h a r g e s t o b e s u b s t a n t i a l l y r a i s e d ,
Landing c h a r g e s might t h u s become a method by which a c o u n t r y would
r e c o u p i t s e l f f o r t h e l o s s o f i t s t h i r d and f o u r t h - f r e e d o m t r a f f i c
by a g r e e ~ ~ e nt ot a n o t h e r c o u n t r y .
P ~ g e40 ICAO C i r c u l a r 3 - RT/I

80. These r e s t r i c t i o n s on t h e amount of l a n d i n g c h a r g e s

o p e r a t e somewhat unevenly according t o t h e p o s i t i o n of an
a i r p o r t i n t h e r o u t e p a t t e r n , i t s proximity t o l a r g e markets
f o r a i r t r a n s p o r t , i t s proximity t o o t h e r a i r p o r t s t h a t might
compete w i t h I t , and t h e p o l i c y of i t s c o n t r o l l i n g a u t h o r i t y .
The r e s u l t a n t v a r i a t i o n i n t h e l i m i t s t o which l a n d i n g c h a r g e s
c a n be r a i s e d , combined w i t h t h e wide v a r i a t i o n i n a i r p o r t
c o s t s , i n t r a f f i c frequency, and i n t h e a v a i l a b l e revenues
from concessions, makes i t extremely u n l i k e l y t h a t a s t a n d a r d
l e v e l of l a n d i n g c h a r g e s throughout t h e world w i l l prove
a c c e p t a b l e u n l e s s t h e s e charges were of a p u r e l y nominal
n a t u r e . T h i s does n o t however exclude t h e p o s s i b i l i t y t h a t .
a standard b a s i s f o r c a l c u l a t i n g landing c h a r g e s might be
adopted, a s d i s c u s s e d l a t e r i n t h i s paper,

I n t e r n a t i o n a l Treatment of Landing Charges

81. It has f r e q u e n t l y been observed t h a t t h e Conventiofi
p r o v i s i o n , i n A r t l c l e 15, t h a t a i r p o r t s s h a l l n o t charge
f o r e i g n a i r l i n e s more t h a n t h e y charge t h e i r own n a t i o n a l
a i r l i n e s under s i m i l a r circumstances, would provide l i t t l e .
p r o t e c t i o n t o a i r l i n e s l a n d i n g i n c o u n t r i e s where t h e
n a t i o n a l government r u n s b o t h a i r p o r t s and a i r l i n e s , o r
where c h a r g e s a t home a i r p o r t s form a s m a l l Broportion of
t h e t o t a l expenses o f t h e i n t e r n a t i o n a l a i r l i n e , or i n
c o u n t r i e s t h a t have no i n t e r n a t i o n a l a i r l i n e s . I t may
however n o t be t h e a i r l i n e s b u t t h e a i r p o r t a u t h o r i t i e s t h a t
w i l l r e q u i r e p r o t e c t i o n , i f t h e r e s t r i c t i o n s on a i r p o r t
c h a r g e s d i s c u s s e d above a r e a s p o t e n t i n t h e f u t u r e a s t h e y
appear t o have been i n t h e p a s t , A t t h e p r e s e n t time a i r -
l i n e s a r e u s i n g a i r p o r t f a c i l i t i e s throughout t h e world a t
c o n s i d e r a b l y l e s s than c o s t p r i c e while governments and
m u n i c i p a l i t i e s a c c e p t s u b s t a n t i a l and r e g u l a r l o s s e s on
t h e i r a i r p o r t accounts.
82, A v a r i e t y o f important f a c t o r s o f f s e t t h e s e l o s s e s o r
r e n d e r them more a c c e p t a b l e , b u t n e v e r t h e l e s s some i n t e r e s t i n g
i n t e r n a t i o n a l problems a r e r a i s e d :
a) Should a g e n e r a l i n t e r n a t i o n a l agreement be made
t o f i x a i r p o r t charges a t l e v e l s t h a t w i l l not r e s u l t
i n such l a r g e l o s s e s , t h e e x t r a burden on t h e a i r l i n e s
being compensated by one of t h e many methods a t t h e
d i s p o s a l of t h e governments concernel?
b) If such an agreement were sought what p r o p o r t i o n
of c o s t s should be met, should concession revenues
be taken i n t o account and how much allowance should
be made f o r t h e military,cornmercial and p r e s t i g e v a l u e s
of a i r p o r t s ?
 I C A O Circular 3 - AT/1 Pzge )+I

c) In view of the fact that most countriest airport

landing charges are set a t low imeconomic levels, is
there a justifiable complaint against a country whose
airport landing charges are set at the level that
would cover operation and maintenance costs, or alter-
natively at the level that would cover those costs and
also depreciation and interest costs, even f f these
charges were substantially higher than those at similar
airports in other countries?
d) If there is to be a general principle that certain
landing charges might be regarded as excessive under
certain circumstances, is this principle to be held
with respect to the actual charges (which are what
airlines are interested in) or to the relation of the
charges to the individual airport costs or revenues,
e.g. would it be a justification of a high charge to
point to high costs of operation, maintenance or con-
struction, or to low traffic volume ox low concession
revenue?
e) Should there be some planning of international
airports with respect to the structure of internat5onal
routes so as to avoid, where possible the more
destructive forms of competition and &he more wasteful
forms of duplication that are likely to appear as more
airports are built?
83. As airports grow in size and number, these questions
become more and more important. Fundamentally they are
political questions, but their economic inplications are of
considerable if not decisive influence: They cannot be
settled without a study of airport economics and organiza-
tion on a wider basis than has been possible so far.

Landing Charges Com~aredto Total Costg

and Revenues of Airlines
84. No published statistics are at present available to
show the relationship between landing charges and airline
revenues or expenses. United States airlines do not publish
figures of landing charges separately and little data on the
subject is available from elsewhere, Since, however, dis-
cussions on the subject frequently raise the issue as to
whether airlines would be able to pay higher landing charges,
an attempt has been made to form estimates of the required
figures for a few specific instances, basing these estimates
on what statistics are available combined with landing charges
published by the various airport authorities.
Paga 42 ICAO C i r c u l a r 3 - AT11

85. The table in Appendix I is compiled in this way. It

shows the monthly landiag charges that would be paid, according
to the published scales by a t y p i c a l international service
operated by DC-4's and Eonstella~ionsfrom Washington to
Bombax. The total expenses incurred on the same service can
be estimated by working out the total ton-kilometres made
available in the example quoted and a plying to this figure
R
an average total expense figure obtai ed from the published
statistics of such an airline. The results are as fallows:
Figures for a typical
trunk-line service
Total available ton-miles produced
per month by the service 2,750,000 ton-miles
Estimated total airline expenses
per ton-mile available $0.87 per ton-rnile
Hence total expenses of services
per month $2,400,000
Total landing charges per month $ 26,765
Landing charges as per cent of
total sirline expenses for the
route - . l.l$
86. In the United States, where landing charges are con-
siderably lower than those on this route, but where more
landings are made per thousand miles of route, the Harvard
study estimates that their proposed landing charge would
represent 1.39% of gross airlinest revenues.
87. Another way of looking at the way in which landing
charges fit i n t ~the total picture of airline finances is
to study the total financial figures of airports and air-
lines in a articular country. Variation and deficiencies in
the publish&d accounts of airports and airlines make figures
of this sort difficult to obtain and o f doubtful comparability
when obtained. The following table gives however a broad
picture of airport and airline finances in the United States
and Canada; there i s considerable doubt whether the figures
are comparable in each analysis, but their general relation-
ship is probably fairly close t o the truth.
ICAO Circular 3 - AT/^ Page 43

Airport and Airline Finances

i n the United States and Canada
United S t a t e s Canada
( 1946 ( 19451
Total a i r p o r t c a p i t a l
investment
A i r p o r t c a p i t a l expenses 46,200,000u 1,300, O O ~
A i r p o r t operating expenses 11,800,000Y 1,500.00d
Total expenses of airports 98,000,000Y 2,800,000
Total ton-mileage done by
scheduled services 792,000, 0 0 0 y ~~,OOO,OOO~/
Total exyenses of a i r p o r t s
per ten-mile done by
scheduled services using
them 7 cents 15 cents
Total a i r l i n e c a p i t a l
assets $580,000, O O $18,000,
~ 0 0 0 ~
Total a i r l i n e expenses 450,000,00~ ~~,OOO,OOO$~
Total a i r l i n e revenues 451,000,000 17,000,000
Total expenses of a i r p o r t s
. as per c e n t - o f t o t a l
a i r l i n e expenses 12 9% 16.4%
Total landing charges as
per cent of t o t a l a i r l i n e
expenses about 1% about 1% '

Harvard Business School Study, page 1680

CAB Report 1946,
CABReport and ICAO S t a t i s t i c a l Reporting forms,
Canadian Yearbook 1946, Page 700,
5% of t h e investment,
A round-figure e s t i m a t e f o r 1945, based on t h e 1946 f i g u r e of
$1,600,000 from a statement made at t h e public h e a r i n g held
a t t h e A i r Transport Board, Ottawa, 9 December 1947.
Report Department of Trade and Commeree 1945.
Lstimated Report Department' of Trade and Commerce 1946 and
S t a t i s t i c a l Reporting Forms I6AO.
Fage '-4 4 ICAO Circular 3 - AT,'l

88. In this analysis the statistics related to airlines

include the international airlines in each case since this
probably gives a more significant comparison than to omit
them. The complete correction for overseas operations in
such an analysis would~involveestimating services rendered
by the United States and Canadian airports to visiting air2
lines and by foreign airports to United States and Canadian
airlines as well as the operating statistics of United States
and Canadian airlines overseas and of foreign airlines in
the United States and Canada, It is not possible at present
to estimate these figures, but it is reasonable to suppose
that the four errors offset each other at least to some
extent.
89 The table shows some interesting points:.
a) Airport costs in Canada are higher than in the
United States when related to traffic volume or
airline expenses. This may be partly a reflection
of comparative weather conditions in the two countries,
but is aiso related to the lower traffic intensities
at Canadian airports than at United States airports;
t

b) The capital investment in airports is con-

siderably greater than that in airline equipment in'
each country;
c) If there were no revenues from concession holders
and government tenants, and airlines paid the whole
expenses of the airports they use in the form of
landing charges and rents for hangar and office space,
their resultant contribution would represent an
additional 10 or 15 per cent added to theip total
current expenses, Such additional payments would be
large enough to eliminate any profits that are likely
for same years, or to increase losses substantially.
90 Since airport landing charges, airline revenues and
airline costs all vary widely, and not necessarily in the
same direction on any particular service, there are many
services throughout the world where landing charges form a
very much bigger proportion of airline costs and revenues
than 1 per cent. It was recently stated for example that
landing fees on a certain London to Belfast service amounted
to 16.7 per cent of total passenger revenue even with the
aircraft full, while on the Cardiff-Weston-Super-Mare Services
landing fees were greater than maximum revenues for each flight.*

* Aeronautics December 1947, Page 39.

ICAOCircular 3 - AT11 Page 4T

Similar conditions may well p e r t a i n i n ather routes where

t h e r e a r e high landing charges and short stages between
airports,
91. I t may be concluded t h a t although the landing charges
paid by a i r l i n e s form a small percentage of a i r l i n e c o s t s and
revenues i n countries such as the United S t a t e s and Canada
where such charges a r e generally low, and a l s o i n those
i n t e r n a t i o n a l routes where a i r c r a f t are l a r g e and f l i g h t s
a r e long, elsewhere landing charges are often a more important
item i n a i r l i n e budgets.

How Bduch Would Landina Charpes Have t o be Increased

t o Cover Airport Expenses?
92 It may be of value t o consider b r i e f l y what s o r t of
*supporting.i n W
increases landing charges would make a i r p o r t s s e l f -
e have i n s u f f i c i e n t f i g u r e s t o make t h i s
c a l c u l a t i o n on a s t a t i s t i c a l basis f o r i n t e r n a t i o n a l a i r p o r t s
i n general, and i t wou)d of course be d i f f e r e n t f o r each
a i r p o r t . It would a l s o be dependent on the degree t o which
i t was assumed t h a t higher charges would reduce the volume
of a i r l i n e t r a f f i c . I

93. We have, however, some f i g u r e s on the t o t a l expenses

and revenues of Canadian a i r p o r t s from a statement by
Canadian government a u t h o r i t i e s , and these may throw some
l i g h t on the matter. The following f i g u r e s r e l a t e t o the
main a i r p o r t used by the Canadian a i r l i n e s :
Total f i g u r e s f o r chief .+
Canadian a i r p o r t s 1946-47
Total a i r p o r t landing
f e e revenues
Other a i r p o r t revenues -2z!&L
Total a i r p o r t revenues 533,135
Total a i r p o r t running
expenses
94. I t would thus appear t h a t Canadian a i r p o r t s would
have had t o increase t h e i r average landing f e e s charged i n
1946-47 by about eight times t o break even against running
expenses, even i f we assume t h a t t r a f f i c volume would be
unaffected. A f u r t h e r increase of about nine times (making

* F r o m a s t a t e m e n t xmde a t t,he p u b l i c h e a r i n g h e l d a t t h e Air

T r a n s p o r t Board, Ottawa, December 9th, 19478
 Page 46
-
ICAO Circular 3 - AT/1

a m u l t i p l i e r of 1 7 i n a l l ) would be needed t o provide 5 p e r

c e n t a s i n t e r e s t and d e p r e c i a t i o n on t h e e s t i m a t e d c a p i t a l
investment i n t h e s e a i r p o r t s ($26,000,000 i n 1345), a g a i n
assuming t r a f f i c volume u n a f f e c t e d . *

95- The t o t a l l a n d i n g f e e s c o l l e c t e d by t h e Canadian

a i r p o r t s i n t h e year 1946-47 were about 0.75 p e r c e n t of
t o t a l Canadian scheduled a i r l i n e revenues, and t h e y were
t h e c h i e f c o n t r i b u t o r s , If t h e y had been given t h e main
burden of i n c r e a s e s i n landing charges aimed a t making t.he
a i r p o r t s s e l f - s u p p o r t i n g , a s t h e y would probably have had t o
b e , they would t h u s have been r e q u i r e d t o c o n t r i b u t e about
5 per c e n t of t h e i r revenues t o nake t h e a i r p o r t s s e l f -
supporting i n c u r r e n t expenses, about 11 p e r c e n t t o pro-
v i d e enough a i r p o r t revenue t o cover d e p r e c i a t i o n and i n t e r e s t
charges, always assumlng t h a t t h e s e i n c r e a s e d f e e s d i d n o t
reduce t r a f f i c volume.
96 I n t b n ? a s e of a governmentally o m e d a i r l i n e u t i l i z i n g .
goverm1ent~q1J.ysunported a i r p o r i.:, ~ n c r e a s ei n payments
f o r a i r ~ o zciiarges ~ might be regarded a s l a r g e l y a govern-
rr.~;l t: 'l m a t t e r . P r i v a t e airlines, hard h i t by such r a d i c a l l y
~ n c r e a s e dc h a r g e s would probably need government support
t o approximately t h e ,extent of t h e t o t a l a d d i t i o n a l expenses
l a i d upon them. I t might however be claimed t h a t such a
procedure would provide a more c o r r e c t p i c t u r e of t h e c o s t s
o f a i r t r a n s p o r t t h a n t h e p r e s e n t method of charging t h e
o p e r a t o r s of a i r c r a f t l e s s t h a n c o s t p r i c e f o r t h e a i r p o r t
f a c i l i t i e s s u p p l i e d and making up t h e d e f i c i t by payments
t o t h e a i r p o r t s . 'Tihile a i r t r a n s p o r t pays l e s s t h a n t h e f u l l
c o s t of t h e a i r h o r t s i t u t i l i z e s i t i s n e c e s s a r y t o make allow-
ances f o r t h i s f a c t i n a number of ways, i n c l u d i n g :
a) When comparing t h e r e a l o p e r a t i n g c o s t s of
f l y i n g b o a t s w i t h t h o s e of land a i r c r a f t ;
b) When a s s e s s i n g t h e n e t valne t o t h e comnunity
of an a i r s e r v i c e i n a new a r e a where a i r p o r t s w i l l
have t o be b u i l t o r extended;
c) When comparing t h e t o t a l c o s t s of long-hop w i t h
short-hop a i r s e r v i c e s .
97 A t most i n t e r n a t i o n a l a i r p o r t s o u t s i d e North America,
current a i r p o r t charges a r e considerably higher than a t
Canadian a i r p o r t s and i t would probably n o t be nec'essary t o
i n c r e a s e t h e i r charges by a s much as e i g h t times t w make them
s e l f - s u p p o r t i n g , F i g u r e s a r e l a c k i n g , b u t i t i s probable
t h a t i n many i n s t a n c e s i n t e r n a t i o n a l a i r p o r t s could cover
t h e i r running expenses i f t h e y m u l t i p l i e d t h e i r l a n d i n g
ICAO Circular 3 - AT/^ Page 47

charges two or three times. On the other hand the fact that
charges at these airports are already relatively high would
mean that any increases would be all the more serious from
the point of view of the airlines.

The Effect of Increased Landinn Charnes

on Traffic Volume
98 It is difficult to estimate whether traffic volume on
international routes would fall off if landing charges were
increased enough to enable all airports to become self-
supporting with respect to running expenses or with respect
to both running expenses and capital charges. It would depend
to a great extent on government and airline policy in the
matter. If gov~rnmentsmade additional payments to their
airlines, in the form of mail payments or otherwi~e,to cover
the additional landing charges so that passenger and freight
tariffs could be left unaltered, there would be no reason to
expect any reduction in total passenger and freight coming
forward to be carried. There would however be a strong
incentive to airlines to over-fly intermediate airports and
many airports would undoubtedly lose both revenue and service.
99 A compromise procedure that might achieve some of the
advantages of nself-supportingn airports without the dis-
advantages of excessive landing charges would be:-
a) Airlines to pay some agreed small charge for
each landing for the facility provided, this charge
to be graded according to size of aircraft and perhaps
also according to the nature of the airport3
b) The difference between this charge and the charge
necessary to make each airport self-supporting to be
paid partly by the government of the airline and partly
by the government of the airport, the proportions to
be agreed beforehand.
100. This scheme would amount in effect to joint inter-
national support of internationally used airports, with
each nation's contribution calculated on the utilization
of the airport by its airlines. It could be extended to
the support of emergency and little-used airports, (and
also of air navigation facilities in scme cases) by basing
contributions on route utilization instead of airport
utilization. It would remain for international action to
determine:
Page 2
3 IGAO Circular 3 - AT/^

a) What would be reasonable landing charges f o r

a i r l i n e s t o pay i n various ci~cwnstances;
b) A n acceptable basis f o r a i r p o r t c o s t ;

c) What proportion of the cost of each a i r p o r t

should be borne by the community i n which i t i s l o c a t e ? ;
d) What emergency and a l t e r n a t e a i r p o r t s are p a r t of
the ground f a c i l i t i e s of each i n t e r n a t i o n a l l y used
route.

Landing Charge Formulae

101. While a i r p o r t f a c i l i t i e s a r e being provided a t as
s u b s t a n t i a l a loss t o me owners a s they a r e i n many c o u n t r i e s ,
and while landing charges form as small a proportion of a i r -
line expenses and revenues as they appear t o do f o r many a i r -
l i n e s , i t can reasonably be maintained t h a t most of these
charges are of the nature of wnorninaln charges, and t h a t the
b a s i s on which they are calculated i s not,of great importance,
102. This b a s i s does, however, decide the d i s t r i b u t i o n
between the various users of a i r p o r t s of whatever t o t a l revenue
i s t o be collected I n t h i s , and although charges pa,-i by the
users may be small compared t o t h e i r aggregate expenses, the
absolute amounts a r e s u b s t a n t i a l . Individual a i r l i n e s and
individual a i r services may be considerably affected by t h e
method of d i s t r i b u t i ~ nchosen.
203. A s has been noted already, there i s general agreement
t h a t payment f o r the use of the landing f a c i l i t i e s of a i r p o r t s
s h a l l be based on t h e number of landings mads, with c e r t a i n
q u a l i f i c a t i o n s of the r u l e i n the case of Vnited S t a t e s a i r -
p o r t s where i t i s the nnmber of landings scheduled t h a t i s
counted and where there a r e b i g reductions i n t h e r a t e f o r
l a r g e numbers of schedules. There are however two main
subsidiary ways i n which a i r p o r t s c o l l e c t revenuesy
a) Fuel Taxes, Fuel taxes provide an a t t r a c t i v e l y
simple method of c o l l e c t i n g revenue a t a i r p o r t s .
Applied over thg whole of a self-contained airway
system they d i s t r i b u t e payments between a i r c r a f t
operators f a i r l y c l o s e l y according t o the amount
each c a r r i e r uses the airways, although not according
t o each c a r r i e r " use of a i r p o r t s , since some c a r r i e r s
operate services with longer average stages than others,
ICAO C i r c u l a r 3 - AT/1 Page %
and hence do fewer l a n d i n g s p e r mile flown o r p e r
g a l l o n of f u e l consumed; t h e y provide a s o r t of
" n a t u r a l n b a s i s f o r a l l o c a t i n g c h a r g e s between small
and l a r g e a i r c r a f t ; t h e y s o l v e t h e d i f f i c u l t problem
of c o l l e c t i n g charges from p r i v a t e owners; t h e y
s t i m u l a t e engine d e s i g n e r s t o produce economical
e n g i n e s ; t h e y have p r e c e d e n t s i n t h e many i n s t a n c e s
where automobile f u e l t a x e s have been u t i l i z e d a s a
method of f i n a n c i n g roads. A t a i r p o r t s whose c h i e f
f u n c t i o n i s t o provide a p l a c e where a i r c r a f t can
r e f u e l p r i o r t o a long f l i g h t , a f u e l t a x i s a type
of charge t h a t v a r i e s f a i r l y a c c u r a t e l y w i t h t h e
v a l u e of each landing t o t h e a i r c r a f t o p e r a t o r ,
The a i r p o r t f u e l t a x , however, produces eqtremelg
uneven r e s u l t s between a i r p o r t and a i r p o r t , p a r t i -
c u l a r l y ?t a i r p o r t s where r e f u e l l i n g i s n o t e s s e n t i a l ,
and any o p e r a t o r who o p e r a t e s o u t s i d e t h e system where
t h e t a x i s i n f o r c e can f r e q u e n t l y evade payment by
r e f u e l l i n g elsewhere. If t h e charge became sub-
s t a n t i a l , t h e r e might be l a r g e - s c a l e e v a s i o n by
operators refuelling a t private a i r f i e l d s since
aviation gasoline i s not s u f f i c i e n t l y d i s t i n c t i v e
a product t o be taxed st soyrce-
b ) . To charge f o r each passenger o r u n i t of c a r g o
loaded a t , unloaded a t , o r c a r r i e d through an a i r p o r t .
A few a i r p o r t s a t p r e s e n t ' f a v o u r c h a r g e s of t h i s
n a t u r e , g e n e r a l l y i n a d d i t i o n t o charges based on
t h e number of landings. Such " t r a f f i c " charges have
t h e advantage of d i s t r i b u t i n g payments more c l o s e l y
according t o t h e value of l a n d i n g s a t " t r a f f i c - s t o p "
airports,
An i n t e r e s t i n g e x t e n s i o n of t h i s p r i n c i p l e con-
s i s t s of r e l a t i n g t h e l a n d i n g charge d i r e c t l y t o t h e
"revenue generatedw by t h e l a n d i n g , t h a t i s t o s a y
t o t h e t o t a l a d d i t i o n a l payments r e c e i v e d by t h e a i r -
c r a f t o p e r a t o r as a r e s u l t of making t h e landing.
If t h e conception of nrevenue generatedr1 were t o
i n c l u d e some reasonable c a l c u l a t i o n of t h e " a d d i t i o n a l
revenue made p o s s i b l e n by r e f u e l l i n g s t o p s , t h i s b a s i s
o f charging might enable a i r p o r t o p e r a t o r s t o c o l l e c t
s u b s t a n t i a l l y more revenues than t h e y do a t p r e s e n t ,
s i n c e i t would a d j u s t c h a r g e s almost e x a c t l y t o
"value r e c e i v e d n . It would n o t be p o s s i b l e t o adopt
a s t a n d a r d percentage of revenue generated t o be
p a i d a s a l a n d i n g charge a t a l l a i r p o r t s s i n c e t h i s
would g i v e t o o high revenues t o t h e major a i r p o r t s
and t o o low revenues t o t h e o t h e r s b u t each a i r p o r t
Page 50 ICAO C i r c u l a r 3 - AT,'1

could work t o a d i f f e r e n t percentage. The c l e r i c a l

procedures involved i n t h i s scheme a r e g e n e r a l l y
considered t o o l a b o r i o u s f o r adoption w i t h r e s p e c t
t o scheduled a i r s e r v i c e s , but t h e scheme has been
accepted i n some l o c a l i t i e s f o r charging non-scheduled
operators.

Weight-Scales and Gther Bases

f o r Charges per Landing
lob. Eb'Iost a i r p o r t o p e r a t o r s o u t s i d e t h e United S t a t e s r e l a t e
t h e i r charges f o r t h e use of t h e a i r p o r t t o t h e weight - of t h e
a i r c r a f t , as w e l l a s t o t h e number of l a n d i n g s made, by i s s u i n g
a s c a l e w i t h d i f f e r e n t charges p e r landing f o r a i r c r a f t of
d i f f e r e n t weights, c o v e r i n g - p r i v a t e and c h a r t e r a i r c r a f t
a s w e l l a s a i r l i n e r s . The weight chosen i s g e n e r a l l y t h e
maximum g r o s s take-off weight under s t a n d a r d c o n d i t i o n s .
105. I n t h e United S t a t e s t h e g e n e r a l p r a c t i c e i s t o charge
one f e e p e r scheduled l a n d i n g f o r a i l l a r g e a i r t r a n s p o r t
a i r c r a f t and e i t h e r a d i f f e r e n t charge o r no charge f o r p r i m
v a t e a i r c r a f t . A s t h e new l a r g e a i r c r a f t a r e coming i n t o
g e n e r a l use on some of t h e United S t a t e s l i n e s , however, t h e
p r a c t i c e of making an e x t r a charge f o r excess weight over a
s p e c i f i e d l i m i t i s spreading.
logo I t t h u s appears t h a t t h e v a r i a t i o n of l a n d i n g charges
according t o an a i r c r a f t a s weight i s now widely accepted,
Other b a s e s t h a t have been suggested a s g i v i n g a v a r i a t i o n
c l o s e r t o t h e v a l u e r e c e i v e d o r t h e c o s t s i n c u r r e d when
d i f f e r e n t a i r c r a f t land a t an a i r p o r t , i n c l u d e t h e t o t a l
horsepower of t h e engines, t h e span m u l t i p l i e d b y t h e l e n g t h ,
t h e take-off weight m u l t i p l i e d by t h e take-off run, and t h e
payload c a p a c i t y .
107, For most of t h e f a m i l i a r types of a i r t r a n s p o r t a i r -
c r a f t t h e s e a l t e r n a t i v e s u g g e s t i o n s produce s i m l l a r s c a l e s
of landing f e e s s i n c e t h e r e i s c o n s i d e r a b l e c o r r e l a t i o n
between such measurements, The take-off weight m u l t i p l i e d
by t h e take-off run i s however an a t t r a c t i v e s u g g e s t i o n a s
a b a s i s f o r l a n d i n g c h a r g e s s i n c e its adoption would induce
c a r e over i n c r e a s e s i n t h e s e two f a c t o r s among d e s i g n e r s and
a i r l i n e a u t h o r i t i e s without c a u s i n g any s e r i o u s r e s t r i c t i o n s
of new d e s i g n s t h a t were e f f i c i e n t o A% p r e s e n t t h e r e a r e
the o b j e c t i o n s t h a t t h e "take-off runl"is n o t a recognized
and e s t a b l i s h e d f i g u r e f o r many a i r c r a f t , ( a l t h o u g h i t i s
l i k e l y t o be in t h e f u t u r e ) and t h a t a i r p o r t charges a r e i n
any event t o o s m a l l a p r o p o r t t o n o f a i r l i n e c o s t s t o a f f e c t
t h e d e c i s i o n s of d e s i g n e r s o r a i r l i n e a u t h o r i t i e s .
 ICAO C i r c u l a r 3 - AT/^

108. The nweight-scalev type of l a n d i n g t a r i f f i s popular

because i t i s simple i n a p p l i c a t i o n and i t i s f e l t t h a t t h e
r e s u l t i n g payments by a i r l i n e s t o a i r p o r t s v a r y b r o a d l y
according t o b o t h t h e " c o s t w and t h e "valuen of t h e s e r v i c e
supplied; A s h a s a l r e a d y been emphasized, t h e conception of
average ~ c o s t s wf o r l a n d i n g s by d i f f e r e n t t y p e s of a i r c r a f t
i s n o t a c l e a r one, b u t on t h e whole i t i s undoubtedly t h e
l a r g e r a i r c r a f t t h a t u l t i m a t e l y cause a d d i t i o n a l expenses t o
a i r p o r t o p e r a t o r s , and t h i s p r o v i d e s some j u s t i f i c a t i o n f o r
e x a c t i n g h i g h e r payments from t h e o p e r a t o r s of t h o s e a i r c r a f t .
More a c c u r a t e r e l a t i o n s h i p s between llcostt7and "payment s wi n
l a n d i n g charges c a n be obtained b u t o n l y a t t h e s a c r i f i c e of
simplicity.
109. A completely uniform weight-scale t a r i f f f o r a l l i n t e r -
n a t i o n a l a i r p o r t s would produce extremely i n e q u i t a b l e r e s u l t s
a s between d i f f e r e n t a i r p o r t s , whose need f o r revenue from
t h i s source v a r i e s g r e a t l y , b u t many of t h e advantages of t h e
system c a n be obtained by s t a n d a r d i z i n g t h e system of "weight-
s c a l e n l a n d i n g charges without s t a n d a r d i z i n g t h e l e v e l of
t h e s e charges. Thus a l l a i r p o r t s could use nweight-scalew
t a r i f f s b u t w i t h d i f f e r e n t u n i t c h a r g e s f o r a given weight
s o a s t o allow f o r v a r i a t i o n s between a i r p o r t s i n t r a f f i c
i n t e n s i t y , c o s t s and concession revenues. There seems no
r e a s o n why t h e a c t u a l s c a l e of weights should n o t be stand-
a r d i z e d by i n t e r n a t i o n a l agreement i n o r d e r t o achieve t h e
maximum s i m p l i c i t y . The a c t u a l l e v e l of c h a r g e s t o be paid
a t each a i r p o r t might be guided by i n t e r n a t i o n a l agreement
l a y i n g down maxima and minima f o r d i f f e r e n t t y p e s of a f r -
p o r t i n o r d e r t o avoid u n d e s i r a b l e c o m p e t i t i o n and t h o s e
extreme anomalies t h a t tend t o g i v e r i s e t o complaints,

The nWei~ht-ScalemT a r i f f and tlValueH Received

110, The c o r r e l a t i o n between l a n d i n g charges under a
mweight-scalew t a r i f f and t h e nvalueH of t h e s e r v i c e supplied
i s n o t s o c l e a r a s may appear a t f i r s t s i g h t . I t i s t r u e
t h a t l a r g e a i r c r a f t can e a r n more than small a i r c r a f t , and
t h a t i n g e n e r a l t h e y do so, b u t t h e r e l a t i o n s h i p i s n o t s o
obvious when we c o n s i d e r e a r n i n g s per l a n d i n g . Thus i f w e
examine t h e "valuev t o t h e a i r c r a f t o p e r a t o r s of a number
of i n d i v i d u a l l a n d i n g s a t a p a r t i c u l a r a i r p o r t , we may o r
may n o t f i n d a c o r r e l a t i o n between t h i s *lvaluefiand t h e
g r o s s weight of t h e a i r c r a f t i n q u e s t i o - . The T1valuenof
a l a n d i n g t o t h e a i r c r a f t o p e r a t o r i s -;;he a d d i t i o n a l revenue
he r e c e i v e s a s a r e s u l t of t h e l a n d i n g , which may be from
a d d i t i o n a l l o a d s on- o r off-loaded o r from a d d i t i o n a l l o a d s
 Page 52 ICAO C i r c u l a r 3 - AT/?-

made p o s s i b l e by r e f u e l l i n g . * A l a r g e a i r c r a f t can e a r n more

p e r landing t h a n a small a i r c r a f t i n both of t h e s e ways, b u t
whether i t does s o o r n o t depends p a r t l y on t h e p o s i t i o n of
t h e a i r p o r t i n t h e s e r v i c e p a t t e r n and p a r t l y on t h e chance
v a r i a t i o n s of t r a f f i c from day t o day.
111. If w e examine t h e l a n d i n g charge payments made by
d i f f e r e n t a i r l i n e s a t a p a r t i c u l a r a i r p o r t over a period of
time, t h e day-to-day chance v a r i a t i o n s w i l l even o u t , b u t
s e r v i c e - p a t t e r n v a r i a t i o n s w i l l remain and may i n some c a s e s
have more e f f e c t t h a n s i z e of a i r c r a f t . Thus a l a r g e t r a n s -
A t l a n t i c a i r c r a f t l a n d i n g a t anEuropean a i r p o r t towards t h e
end of i t s r o u t e may c o n s i s t e n L i y do l e s s b u s i n e s s a t t h a t
a i r p o r t than a r e l a t i v e l y small a i r c r a f t ofmEuropean service.
S i m i l a r l y a C o n s t e l l a t i o n on a s e r v i c e from London t o New
York w i l l c o n s i s t e n t l y d e r i v e l e s s a d d i t i o n a l revenue from
r e f u e l l i n g a t Shannon t h a n a DC-4 (of about h a l f t h e g r o s s
w e i g h t ) f l y i n g from B e r l i n t o New York, s i n c e t h e b e n e f i t
o f a r e f u e l l i n g s t o p depends t o some e x t e n t upon t h e l e n g t h
of t h e p r e v i o u s s t a g e a s w e l l a s on t h e f u e l consumption of
the aircraft.
112, I t i s o n l y when we c o n s i d e r t h e t o t a l payments made
b y a i r l i n e s t o a l l t h e a i r p o r t s t h e y use t h a t we f i n d a good
c o r r e l a t i o n between payments on t h e "weight-scalen b a s i s and
l f v a l u e n r e c e i v e d p e r landing. I n almost a l l c a s e s , a i r l i n e s
u s i n g l a r g e a i r c r a f t r e c e i v e a higher average revenue p e r
l a n d i n g than t h o s e w i n g smalger a i r c r a f t , If a l l a i r p o r t s
based t h e i r l a n d i n g c h a r g e s on t h e weight-scale p l a n , and i f
t h e r we arranged a l l a i r l i n e s i n t h e o r d e r of t h e average
l a n d i n g charge paid by each one (which would be approximately
i n t h e o r d e r of t h e average weight o f t h e a i r c r a f t used b y
each a i r l i n e ) , we should f i n d t h a t t h i s o r d e r would be almost
t h e same a s one obtained by a r r a n g i n g t h e a i r l i n e s according
t o t h e i r average revenue per l a n d i n g . The e x c e p t i o n s would
b e t h o s e a i r l i n e s t h a t u t i l i z e l a r g e a i r c r a f t on short-hop
s e r v i c e s o r s m a l l a i r c r a f t on long-hop s e r v i c e s , and s i n c e
b o t h of t h e s e asrange&ents a r e i n g e n e r a l uneconbrnic, such
e x c e p t i o n s would be few.

* S t r i c t l y s p e a k i n g t h e r e i s t h e a d d i t i o n a l expense of making a
l a n d i n g t o be s u b t r a c t e d from t h e a d d i t i o n a l r e v e n u e o b t a i n e d ,
T h i s e x p e n s e i s , however, a f a i r l y c o n s t a n t figure and d o e s
n o t g r e a t l y a f f e c t t h e way i n which W v a l u e " v a r i e s w i t h s i z e
of a i r c r a f t ,
ISAO Circular 3 - AT/1

lljO The f a c t , however, t h a t average l e n g t h of hop a s w e l l

a s average s i z e of a i r c r a f t a f f e c t s a n a i r l i n e s s e a r n i n g power
per l a n d i n g means t h a t t h e r e l a t i o n s h i p between average a i r -
c r a f t weight and average earning power f o r d i f f e r e n t a i r l i n e s
i s n o t a simple p r o p o r t i o n a l one, Large a i r c r a f t a r e on t h e
whole used f o r long-hop s e r v i c e s , s m a l l e r a i r c r a f t f o r s h o r t -
hop s e r v i c e s , and hence t h e r e s u l t a n t r e l a t i v e e a r n i n g power
per l a n d i n g of t h e a i r l i n e s u s i n g t h e l a r g e r a i r c r a f t i s more
than i n p r o p o r t i o n t o t h e weight of t h o s e a i r c r a f t , T h i s c a n
be i l l u s t r a t e d by co~nparingt h e imaginary a i r s e r v i c e analysed
i n Appendix I , w i t h a t y p i c a l DC-3 s e r v i c e ,
114, The s e r v i c e d e s c r i b e d i n Appendix I u t i l i s e d D C - 4 ' s
and C o n s t e l l a t i o n s on a t r a n s - A t l a n t i c s e r v i c e e x e c u t i n g
610 landf nga and accomplishing 2,750,000 revenue ton-miles
i n a month, If we assume f o r t h e sake of argument t h a t t h e
a i r l i n e r e c e i v e d an average revenue of $1 p e r ton-mile, t h i s
s e r v i c e would b r i n g i n about $4,500 p e r landing, A t y p i c a l
DC-3 s e r v i c e i n Europe o r elsewhere, averaging say 1,5 t o n s
of payload p e r t r i p and w i t h a n average s t a g e d i s t a n c e
between s t o p s of 300 m i l e s , would r e c e i v e $450 per l a n d i n g
a t t h e same r a t e of $1 p e r ton-mile, Thus t h e DC-4 and Con-
s t e l l a t i o n s e r v i c e , w i t h an average a i r c r a f t weight about
t h r e e t i m e s t h e DC-3 s e r v i c e , wogld e a r n t e n times t h e revenue
of t h e DC-3 s e r v i c e per landing,

V a r i a t i o n s on t h e S t r a i g h t ltWeight-Scalet8
Landf n ~ T a r i f f
115, The f a c t t h a t t h e d i f f e r e n c e between t h e e a r n i n g
power p e r l a n d i n g of two a i r l i n e s u s i n g d i f f e r e n t s i z e d
a i r c r a f t on d i f f e r e n t r o u t e s is i n g e n e r a l much g r e a t e r
t h a n t h e d i f f e r e n c e between t h e weight of t h e a i r c r a f t
used, h a s l e d t o t h e suggestion t h a t Panding charge "weight-
s c a l e s H should have h i g h e r u n i t charges f o r a given weight
a t t h e upper end of t h e s c a l e , Thus i n Canada, t h e l a n d i n g
c h a r g e s r e c e n t l y adopted f o r Dominion Government owned

* Maximum l o a d e d w e i g h t s given i n Jane" A l l The W o r l d ' s A i r c r a f t ,

1945/46: DC-4, 65,000 l b s ; C o n s t e l l a t i o n , 86,000 l b s ; DC-3,
25,000 l b s ,
Page 54 ICkO Circular 3 - AT/^

a i r p o r t s , were based on t h e following r i s i n g s c a l e :

Gross Weight of A i r c r a f t Charge
up t o 10,000 l b s , PO c e n t s p e r 1000 l b s ,

10,001 l b s , t o 25,000 l b s , 1 2 , 5 c e n t s per 1000 l b s ,

25,001 l b s , t o 35,000 Pbs, 15 c e n t s p e r 1000 l b s .
35,001 I ~ S , t o 45,000 Pbs, 20 c e n t s p e r 1000 l b s o
45,001 l b s , t o 55,000 l b s , 25 c e n t s p e r 1000 l b s ,
o or each s t o p of 10,000 l b s , , add 5 c e n t s p e r 1000 l b s . 1

116, T h i s p a r t i c u l a r s c a l e of charges would r e s u l t i n t h e

DC-4 and C o n s t e l l a t i o n s e r v i c e paying a n average of about
$25 p e r l a n d i n g a s compared w i t h t h e DC-3 s e r v i c e which
would pay %3 p e r landing, T h i s would be c l o s e r t o t h e re-
l a t i o n s h i p of t h e e a r n i n g s p e r landing of t h e two s e r v i c e s ,
b u t o t h e r s e r v i c e s w i t h d i f f e r e n t e a r n i n g s p e r l a n d i n g would
be l e s s well f i t t e d , I n p a r t i c u l a r , as was pointed o u t i n
t h e subsequent o f f i c i a l h e a r i n g of complaints concerning
t h i s t a r i f f system, a s e r v i c e u s i n g four-engfned a i r c r a f t
on t h e same r o u t e a s one u s i n g twin-engined a i r c r a f t would
have t o pay e x c e s s i v e l a n d i n g charges i n r e l a t i o n t o i t s
competitor, No one s c a l e of charges based OD a i r c r a f t
weights w i l l f i t t h e e a r n i n g s p e r landfng of a l l a i r l i n e s
perfectly,
117, Another method of c h a r g i n g the Iflong-hop" s e r v i c e s
h i g h e r l a n d i n g c h a r g e s i n r e c o g n i t i o n of t h e f r g r e a t e r
e a r n i n g c a p a c i t y per l a n d i n g , i s shown i n t h e new a i r p o r t
t a r i f f s r e c e n t l y published f o r UoHo a i r p o r t s , These t a r i f f s
a r e based on a s t r a i g h t "weight-scalen b u t f o r l a r g e a i r c r a f t
l a n i n g p r i o r t o t r a n s - a t l a n t i c f l i g h t s , t h e charge- s c a l e f s
3
f n c eased 25 o r 50 p e r c e n t according t o whether t h e passenger
c a p a c i t y of t h e a i r c r a f t i s under o r over 40 persons, These
adjustments seem small when compared w i t h t h e adjustment of
about 300 p e r c e n t t h a t would be necessary t o b r i n g c h a r g e s
baaed on a s t r a i g h t "weight-scalen i n t o l i n e w i t h t h e e a r n i n g s
p e r l a n d i n g of four-engined and twin-engined a i r c r a f t i n the
i l l u s t r a t i o n above, T h i s , however, i s merely because t h e
adjustment f a c t o r s used a r e r e l a t i v e l y small, If s t a g e -
f l i g h t d i s t a n c e s a r e taken f u l l y i n t o account i n l a n d i n g
c h a r g e s , a s w e l l a s a i r c r a f t weights, t h e r e s u l t a n t c h a r g e s
can be made t o c o r r e l a t e c l o s e l y w i t h t h e e a r n i n g c a p a c i t y
of d i f f e r e n t a i r l i n e s ,
 ICAO C i r c u l a r 3 - AT/^

118, k f a i r l y simple system of l a n d i n g charges which would

e x a c t payments from a i r l i n e s c l o s e l y c o r r e l a t i n g w i t h t h e i r
e a r n i n g s per l a n d i n g would be one based on a i r c r a f t weight
m u l t i p l i e d by t h e d i s t a n c e of t h e next s t a g e - f l i g h t , Such
a system would l e a v e many anomalies between d i f f e r e n t a i r
s e r v i c e s a t p a r t i c u l a r a i r p o r t s , and t h e u n i t charge would
s t i l l have t o be v a r i e d from a i r p o r t t o a i r p o r t , b u t t h e
two important f a c t o r s of a i r c r a f t s i z e and s t a g e - f l i g h t would
be g i v e n approximately t h e i r c o r r e c t i n f l u e n c e i n t h e c a l -
c u l a t i o n , On t h i s b a s i s t h e DC-4 and C o n s t e l l a t i o n s e r v i c e
d i s c u s s e d above would pay l a n d i n g charges averagf ng about
t e n times t h o s e paid by t h e DC-3 s e r v i c e o * Large a i r c r a f t
and small a i r c r a f t on t h e saqe r o u t e would pay d i r e c t l y i n
p r o p o r t i o n t o t h e i r weights s i n c e t h e s t a g e - f l i g h t d i s t a n c e s
would be t h e same f o r each, The v a l u e of r e f u e l l i n g s t o p s
would be approximately r e f l e c t e d i n t h e l a n d i n g charges
- levied.
119. I t i s a m a t t e r f o r t h e d e c i s i o n of t h e v a r i o u s a u t h o r i -
t i e s concerned whether t h e c o r r e l a t i o n of l a n d i n g charges
w i t h "valueH r e c e i v e d i s of s u f f i c i e n t importance t o warrant
complicating t h e r e l a t i v e l y simple "weight-scalen t a r i f f by
t a k i n g account a l s o of s t a g e - f l i g h t d i s t a n c e s , i n some such
manner a s t h a t d e s c r i b e d , o r by t h e more complicated b u t
s t i l l more a c c u r a t e method of basing l a n d i n g charges d i r e c t l y
on t h e "revenue generatedn by each landing. Apart from being
g e n e r a l l y regarded a s e q u i t a b l e , charges based f a i r ? c l o s e l y
on ttvaluetf peceived hqve t h e advantage of c o l l e c t i n g revenue
w i t h t h e minimum d i s t o r t i o n of t h e economic development of
t h e a i r l i n e s , and t h i s may be of c o n s i d e r a b l e importance
where a i r p o r t c h a r g e s a r e r e l a t i v e l y high.
120. When t h e main system of l a n d i n g charges f o r scheduled
a i r c r a f t a t i n t e r n a t i o n a l a i r p o r t s h a s been decided, a t t e n t i o n
w i l l s t i l l be needed t o be given t o a number of s p e c i a l
problems :-
a) A p o l i c y h a s t o be decided over charging f o r
l a n d i n g s connected with e x t r a f l i g h t s , c a n c e l l e d
flights, t e s t flights, training flights, training
approaches (without l a n d i n g ) and emergency l a n d i n g s ;

* Assuming t h a t t h e a i r p o r t s used by t h e two s e r v i c e s were a p p r o x i ~ a t e l y

s i m i l a r i n t h e i r economic s i t u a t i o n s , No c h a r g i n g s y s t e m t h a t t a k e s
i n t o a c c o u n t t h e d i f f e r e n c e s between t h e econoxr.ic s i t u a t i o n s o f air-
p o r t s can charge d i f f e r e n t a i r l i n e s u s i n g d i f f e r e n t a i r p o r t s p u r e l y
according t o t h e e a r n i n g capacity of t h o s e a i r l i n e s ,
Page 56 I C A O CircUlar 3 - AT/I
b) Landings charges f o r c h a r t e r , c o n t r a c t , p r i v a t e *
and m i l i t a r y a i r c r a f t , w i l l r e q u i r e s e p a r a t e d e c i s i o n s j
c) The a b s o l u t e amount of an a i r p o r t charge may be
t h e s u b j e c t of complaint;
d) The q u e s t i o n a s t o whether a r e b a t e on l a n d i n g
charges should be given t o those a i r l i n e s making a
l a r g e number of l a n d i n g s per month a t an a f r p o r t
would s t i l l be a c o n t r o v e r s i a l one;
e) I t appears g e n e r a l l y a c c e p t a b l e t h a t hangar
c h a r g e s should be based on t h e s i z e of t h e a i r c r a f t
(span times l e n g t h ) and should be s e t s o a s t o cover
t h e c o s t of providing t h e hangars. Parking c h a r g e s ,
coming i n t o e f f e c t only if an a i r c r a f t i s parked
l o n g e r t h a n a day, can be an agreed f r a c t i o n of
liangar charges. Both t h e s e p r i n c i p l e s would, however,
r e q u i r e some discussiong
f) E x t r a c h a r g e s such a s a i r p o r t f u e l taxes. s e r v i c e
charges, c h a r g e s f o r passengers l o a d i n g o r unioading
etc., require discussion.

* With regard t o p r i v a t e a i r c r a f t , a s t r o n g p l e a has been p u t forward

by t h e I n t e r n a t i o n a l A e r o n a u t i c a l F e d e r a t i o n (FAI) t h a t w i t h i n a
more o r l e s s e a r l y period t h e l a n d i n g f e e s f o r p r i v a t e a i r c r a f t
should be g e n e r a l l y a b o l i s h e d . The income a c c r u i n g t o a i r p o r t s
from l a n d i n g f e e s of v i s i t i n g p r i v a t e a i r c r a f t i s of minor s i z e
and t h e b e n e f i c i a l impetus t o p r i v a t e f l y i n g by e l i m i n a t i o n o f
t h e s e l a n d i n g f e e s may be considered t o be d i s p r o p o r t i o n a t e l y
. greater.
ICAO Circular 3 - AT/l Page 57
A P P E N D I X I

LANDING CHARGES I N RELATION TO TOTAL EXPENSES

OiE" A TYPICAL INTERNATIONAL A I R SERVICE

T h i s t a b l e works o u t t h e t o t a l amount of l a n d i n g charges, as

i n d i c a t e d by published t a r i f f s , f o r a t y p i c a l i n t e r n a t i o n a l a i r s e r v i c e
and compares t h i s t o t a l w i t h estimated t o t a l expenses on such a s e r v i c e ,
The s e r v i c e t a k e n as a n example i s supposed t o have operated between
Washington and Bombay w i t h .DC-4s and C o n s t e l l a t i o n s a t t h e monthly
frequencies indicated,
Monthly Landings and Landinq--
Charges P a i d

DC -4 Constellations
Charge (Number of 1 T o t a l of P h a r g e i ~ u m b e rof l ~ o t a of
l
Airport Per Landings Landing
Landing P e r Month Charges
$ ___$__
Vashingon
' 4 x
Philadelphia 4 x
Boston 4 x
Chicago 7 x
New York 7 x
1 Gander 80
Shannon 72
Paris 27
Geneva 20 *
Rome 12
Athens 56 *
Cairo 24
Azores 54 *
Lisbon 21 *
Madrid 36 *
Algiers 39 *
Tunis 40 *
Tripoli 40 X
Lydda 41
Dhahran 47 *
Karachi 45
Bombay 45

-37.07 1 378 b4013

x Estimated. * Average of n i g h t and d a y arge ,
T o t a l a v a i l a b l e ton-miles produced p e r month by-the s
Estimated t o t a l a i r l i n e expenses p e r ton-mile
Hence t o t a l expenses of s e r v i c e p e r month o..ooo.....
.......
T o t a l l a n d i n g charges p e r month .....................
Landing charges as p e r c e n t of t o t a l a i r l i n e expenses
f o r the route
THIS PAGE INTENTIONALLY LEFT BLANK
ICAO Circular 3 - AT/1 Page @.

A P P E N D I X I1

FINANCIAL OPERATING RESULTS FOR 2 1 u .S

(in thousands of d o l l a r s )
. AIRPORTS*
( y e a r s 1943, 1944 o r 1945 as a v a i l a b l e )

A
B
C
rota1
i r p o r t Invest-
ment

(1416)
1895
5 35
1070
Total

48
33
9
22
Running
Revenue Expenses

----
.
19
44
12
36
.O pLoss

11
3
14
Balance
erating 0 p e r a t i n g

-
Profit

29
-
-
'

-
Amount needed
t o cover
I n t e r e s t and
Depreciatioe
a t reason-

78,7
107,2
30 0 4
59.7
-
I

(3570) 8 13 5 195.5

2118
(4450)
39
136
29
164 28
- 10
-
116
243,9
(700 6) 43 65 22 - 384.6
(3073)
3659
171
70
139
64
-- 32
6
168,8
211
1967
3598
55
26
17
34 8
- 38
-
109,4
195o 9
Y
N
(4475)
4143
91
148
69
115
-- 22
33
242,3
23204
0 (6000) 104 88 - 16 328
P 4936 12 21 9 - 27l03

9750 149 154 5 * - 584,7

S 2272 315
'

199
174
-- 5'40
141
1968,5
135.8
T 6211 84 102 18 - 349,7
U 16417 516 515 - 1 969,3
--A

* Harvard School o f Business A d m i n i s t r a t i o n , D_o, c i t , '

t F o r purposes of c o m p a r i s ~ n , pension expenses, t a x e s , i n s u r a n c e

and c o n t r o l tower s a l a r i o s were o m i t t e d ,

--
Noter- Figures i n brackets are estimates,