ABSTRACT
This chapter analyses the location aspect of airports, and the factors that determine the demand for airport services by airlines and passengers. Airports compete with other uses for available land. Typically, an airport’s location was decided many decades earlier, when aviation was in its infancy. Airport surface access is a challenge and access costs—that is, social marginal generalised transport access costs—can be substantial. Airports can generate regional external economies. In metropolitan areas, airports can also be responsible for substantial negative environmental externalities (e.g., noise) that can lead to protracted conflict with neighbouring communities. Demand for air transport at an airport is derived from demand. It is income elastic but price inelastic in many cases. The chapter reviews the accuracy of long-term traffic forecasts for airports, taking into account uncertainty and risk. It is shown that most traffic forecasts are systematically over-optimistic, and therefore overstate the benefits of expansion at an airport. This leads to airport overcapacity and in extreme cases to “white elephant” airports.
