Airport Demand Forecasting for Long-Term Planning
Decisions on expanding airport capacity are often controversial. Environmental impacts mean airport planning decisions are subjected to thorough public scrutiny even when financed by private investors. Where public funds are to be invested, issues of competition between airports and between the regions they serve can be as important as efficient use of public funds. Demand forecasts are central to the case for investment.
Air passenger markets are highly dynamic and strongly influenced by the regulatory environment. Markets that have been de-regulated have seen rapid growth as prices fell and new, low-cost business models emerged. Liberalisation also stimulated re-organisation of network services with concentration of demand on a few hub airports. Demand for air services increases rapidly as incomes rise, but the market is not homogenous and understanding the drivers of each market is critical. Runway assets are relatively long lived and planning for the long term has to account for the risks entailed by these dynamics.
This report reviews the state of the art in forecasting airport demand. It focuses particularly on addressing demand risk, passenger behavior and uncertainty and discusses how to make more effective use of such analysis in planning decisions.
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Summary of discussions
International Transport Forum
Demand forecasts for the medium to long term are essential to the successful planning and delivery of major airport infrastructure but the track record of airport demand forecasting appears to be mixed. The first priority area is therefore to improve forecasts and the report puts forward four key recommendations:
- Use quantitative methods to analyse the key drivers of airport demand.
- Use expert guidance to help interpret the quantitative results.
- Quality-assure the analysis and counter the risks of optimism bias.
- Reflect the risks and uncertainties that arise in even the best forecasts.
The second priority is to make effective use of demand forecasts in airport infrastructure planning. The main purpose of recognising and quantifying risks and uncertainties in future airport demand is to help to develop useful risk management measures. Approaches divide into two broad groups:
- Risk sharing arrangements.
- Flexible strategic/dynamic strategic/adaptive planning.
Thirdly, it is important to recognize that however successfully all of the foregoing is carried out, there are likely to remain material risks and uncertainties in even the best airport demand forecasts. The challenge is thus to make the residual uncertainty apparent to decision-makers without undermining the value attached to the economic appraisal of prospective investments.
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