The core activities of Schiphol Group are split into aviation and non-aviation, which both contribute to the revenue.
The total revenue of Schiphol Group encompasses airport charges, retail sales, concession income from shops and catering outlets, rents, media, property development, car parking charges and income from international activities.
Dual till regulation
For Amsterdam Airport Schiphol, the charges for aviation activities are regulated, whereby the maximum return for these activities is determined periodically in accordance with legal provisions. The non-aviation activities are not regulated. These are all the activities in the area of shops, restaurants, property rentals, media, real estate development and car parking. They also include the international activities. The financial result of the non-aviation activities offers opportunities for realising economic profit. This is called the dual till system.
Airlines pay airport charges for each take-off and landing and a passenger service charge and security service charge for each departing passenger. Schiphol sets its charges each year, after extensive consultation with the airlines and under supervision of the Dutch Competition Authority (NMa).
The manner in which the airport charges for Amsterdam Airport Schiphol are determined is described in the Aviation Act (Wet luchtvaart) and is based on the principle that the charges should be cost-related and transparent. Schiphol is only allowed to charge airport costs directly relating to primary airport operations, infrastructure and security to its users. The attributable costs are not determined on the basis of the IFRS accounting principles, which means that the charged costs are lower than the actual costs incurred by Schiphol Group. The return on aviation activities may not be higher than the regulated cost of capital of the regulated asset base (the part of the airport infrastructure that may be included in the calculation). In the event that the actual revenue turns out to be higher or lower than the permitted level, usually due to a possible difference between actual and forecasted volumes, the difference is incorporated in the charges for the subsequent period. In 2012, we applied a regulated weighted cost of capital (regulated WACC) of 4.5%. The realised returns on the aviation activities are well below this level as a result of the voluntary contributions by Schiphol Group from its non-aviation activities. This is one of the reasons why the return of the business area Aviation has been exceptionally low for a number of years and is why RONA amounted to 2.3% in 2012 (2011: 1.8%).
Schiphol Group's efficient business operations are aimed at keeping the operational costs per passenger as low as possible. This keeps the charges for the airlines at a competitive level.
Its commercial activities are another important source of revenue for Schiphol Group. These include retail sales, concession fees for shops, catering outlets and services, rents, media, property development, car parking charges and income from international activities. The offering of shops, catering and services is increasingly important for the way in which passengers experience Schiphol. In response to this, we offer specific shopping, catering and convenience concepts that anticipate the needs of the passengers. We also create an inspiring environment to work or stay in. The non-regulated income streams contribute substantially to the financial result and is are important pillar supporting the healthy financial position of the company as a whole.
Income from regional airports and international activities
The regional airports are not regulated and their income comes mainly from airport charges and parking charges. Our international activities also generate income. This is mainly recognised as result from participating interests, including financial income and dividend.
Economic regulation according to the Aviation Act
The Aviation Act, the act that specifies the economic regulation of Amsterdam Airport Schiphol, actually defines it as a hybrid dual till system, since it results in subsidisation by the non-aviation activities. This is because legislation requires Schiphol to apply accounting rules for the allocation of investment amounts and costs, that differ from IFRS accounting rules. The legislation also specifies a regulated weighted average cost of capital to determine the maximum allowed return, instead of a higher market-based cost of capital.
Furthermore, Schiphol has, since the introduction of the regulation in 2006, voluntary refrained from applying the maximum allowable rates, in part to further strengthen its long-term competitive position and also because it believes that this is a logical choice in the interest of aviation in the Netherlands, given the challenging conditions in the aviation sector in recent years. Such a moderate airport charges policy can only be applied with contributions from the successful non-aviation activities.
The evaluation of Aviation Act is not yet completed. The first cabinet led by Prime Minister Rutte informed the Lower House in April 2012 by letter of the results of this evaluation so far.
In recent years, Schiphol Group has not incorporated the full increase in costs resulting from investments in the 70 MB baggage handling programme and in security measures in the airport charges, even though it was permitted to do so under the statutory regulations. Given the challenging market conditions in the aviation sector, we have opted for a gradual increase of the airport charges. The total amount of non-realised income from airport charges over the period 2007-2012 is approximately 170 million euros.