Economic impact: costs for introducing NLA

Who will be serving the NLA


NLA will be firstly operating at the major airports which are currently serving international bound wide-body aircraft like the B747-400, the Lockheed L-1011, or the MD-11, because most NLAs are design group VI aircrafts, only those airports equipped to serve design group V wide-body planes, such as B747-400, are capable to upgrade in the quickest time to meet the criteria.
According to the FAA, only the following airports meet the design standards to operate A380:
Anchorage International Airport
Denver International Airport
Dallas-Fort Worth International Airport
John F. Kennedy International Airport
Los Angeles International Airport
Orlando International Airport
Miami International Airport
San Francisco International Airport
In addition, three airports can handle A380 cargo planes:
Memphis International Airport
Louisville International-Standiford Field Airport
Ontario International Airport (California)
Dulles International Airport and Los Angeles International Airport are close to being ready for the A380, according to the FAA. (U.S Department of Transportation, 19981)

However, for the future growth and guaranteed safe operating environment of NLA, almost all airports have to go under modifications sooner or later.

Estimated costs to modify airports


The Port Authority of New York and New Jersey (PANYNJ) concluded an investigation into the estimated cost of modifying their JFK International Airport to accommodate NLA in 1994, it concluded that with all of the appropriate modifications required to upgrade JFK International Airport to design group VI, would cost approximately $236 million dollars, includes the widening of runways and taxiways, extension of a runway, and the strengthening of several pavement surfaces (runways, taxiways, culverts, etc.), or $106 million assumes that not all runways and taxiways need to be widened. (U.S Department of Transportation, 19981) These figures can be used as an estimation guide for other airports.

Since 1 February 2009, Emirates A380 started to fly from Dubai to Auckland on a daily basis. Auckland Airport is the only airport in New Zealand capable of handling the NLA. The airport has already provided for the A380 as part of a $37 million upgrade and widening of the runway, and completed a $40 million dollar worth second pier that has two multi-function contact gates able to facilitate two A380s simultaneously, as well as other wide-bodied and smaller aircraft. Airlines servicing Auckland that have A380s on order are Singapore Airlines, Qantas, Thai Airways and Korean Airlines. (Auckland Airport, 20082)

The airport upgrade project also included arrivals expansion, baggage hall and Ministry of Agriculture and Forestry Biosecurity New Zealand ( MAF) processing area have all expanded in size to accommodate the passenger traffic brought by the NLAs. A new arrivals area opened on 1 April 2008, which includes an extra 12 passport control counters, and the ability to facilitate arriving passengers from both piers. (Auckland Airport, 20082) AIAL’s final stage of the runway rehabilitation project was completed, an important part of the project included the widening of the main runway to accommodate the new generation Airbus A380 aircraft. The runway rehabilitation programme replaced sections of the 300mm thick concrete slabs constructed when the airport was built in 1965, the new half-metre thick concrete pavement will extend runway life in the rehabilitated areas by an expected 40yrs, this upgrade work has been completed in sections over a number of years to minimise disruption to airfield activities, and as a result this project has been completed with a minimum of disruption to normal flight operations. (AusFlightSim, 20113)
Auckland Airport-Runway upgrade

Video embedded from YouTube on 1 September 2011

The good news is, much of the investment needed will be in the form of sunk costs, and the marginal costs of operating the extended facilities will often be negligible. Thus the costs imposed by the A380 using the runway will be small, and comparable to those of other aircraft. However, who should pay for the costs of the investment to make airports capable of accommodating the new aircraft?

Who should pay the bill?

After the airport privatisation, the airport infrastructure development usually raise sufficient fund from public or private sources, or a combination of both, which means the airport may take governmental or international organisation loans and grants, or borrow commercial loans from the financial companies. (United States General Accounting Office, 19985)


Due to the large amount of required capital, financing of large-scale airport projects is always a central concern of airport owners and operators.

  • Airlines: In 24 February 2005, Air New Zealand published a media release which indicated that they will not subsidise competitors flying Airbus A380 to Auckland International Airport Ltd (AIAL), Air New Zealand has no plan of purchasing A380 aircraft, but their Managing Director and Chief Executive Ralph Norris said, AIAL would be looking to recover costs associated with the A380 from all carriers, including Air New Zealand, make them pay for facilities that they have no intention of using, and pay for their competitors who are planning to fly A380 in and out of Auckland. (Air New Zealand, 20054)
  • Airport: Who should pay for airport modifications is a global scale question, and has been a popular topic around many aviation forums. Many said it is the airline who wants to purchase and operate A380, not the airport, therefore, the airlines should footing the bill. However, the government has budget for airport upgrade from time to time.
  • Government: Most national governments provide sizable grants and other financing to their airports because regional and local governments have recognized the direct and indirect benefits that generated by their air transportation industries. For example, the United States federal government has been providing since 1946 sizable annual grants for airport development under federal assistance programs. The Airport Improvement Program (AIP) distributed $1.8 billion annually to airports throughout the 1990s. However, most of the AIP funding doesn't go to the largest airports because the states is confident that, these airports can find alternative sources, and as the leaders of this mature industry, they are able to self-sustaining, including paying directly or indirectly for its infrastructure needs. (Neufville & Odoni, 20036)
  • Tax payers: Airport projects finance usually involves special purpose user taxes, this is familiar to most of the air travelers. A few years back in New Zealand, before passengers can check-in, they have to purchase a $15-$25 dollar worth of airport tax, this still exists in many countries. This tax is referred to the airport improvement fee, used for airport expansions.
  • International or national development banks: There're a number of international and national development banks and funds specialise in financing important infrastructure projects through low-cost loans. The world bank, Inter-American Development Bank and European investment bank are examples of international institutions that are active for this sector. Many countries have also established government owned export credit agencies that play a similar role. (Neufville & Odoni, 20036)
  • Operating surpluses: A few busiest and economically strongest airports in the world have now be able to generating sufficient economic surpluses to pay for small to medium size capital improvement projects within their own organisation. More and more airports are reaching this level nowadays.
  • Commercial banks: Many large commercial banks have been able to provide short to medium term loans for airport capital projects, this option is quite attractive to qualified airport operators due to its flexibility and ready availability. However, They haven't been popular for large scale projects because of the higher interest costs. (Neufville & Odoni, 20036)
  • General-obligation bonds: It is a common type of bond in the United States, issued by national, regional, or local governments, secured through the full taxing power of the government entity. Interest paid by these bonds is typically exempt from taxes of the issuing authority, as being tax free and highly secure, general obligation bonds usually sold at very low interest rates, therefore, they're very attractive to airport operators.
  • Revenue bonds: Revenue bonds may be issued by airports that are in a position to service debt entirely through their own revenues, rather than from tax. Its interest rates is higher than general obligation bonds, and depend on how secure these bonds are. National laws in many countries doesn't permit the issuance of revenue bonds by airports, therefore it hasn't been a popular way for airport capital improvement finance except the United States. (Neufville & Odoni, 20036)
  • Private financing: The new power of airport capital improvement finance in developed and less developed countries is the private financing. Airport will sign a building, operate, and transfer (BOT) contract with a private organisation that provide funds to part or all of a development project against specified rights to its future revenue. If this organisation has fully fund a large scale project, such as a new airport, then itself will become the airport operator for an agreed period. (Lehm An, 20037)
1. U.S Department of Transportation. (1998). Impact of New Large Aircraft on Airport Design Washington D.C.: Federal Aviation Administration
2. Auckland Airport. (2008). Auckland Airport welcomes A380 announcement Retrieved from on 1 September, 2011
3. AusFlightSim. (2011). Auckland Airport now A380 Ready Retrieved from on 1 September, 2011
4. Air New Zealand. (2005). Air New Zealand will not subsidise AIAL's A380 Facilities Auckland: Air New Zealand Ltd.
5. United States General Accounting Office. (1998). Airport Financing-Funding Sources for Airport Development Washington D.C.: Resources, community, and economic development division.
6. Neufville, R. & Odoni, A. (2003).Airport systems.USA: The McGraw-Hill Companies.
7. Lehm An Brothers. (2003).Combining Private Equity, Economic Development and Transportation Retrieved from on 10 October, 2011
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Want to know more?

Airport improvement fee
General obligation bond
Revenue bonds
Airport funding reduced in 2012 FAA budget
The History of Government Airport Funding
Funding airport infrastructure

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