The impact of airline lease agreements on the financial performance of US hub airports

• Financial performance of US hub airports varies with airline lease agreements.
• Compensatory airports perform best overall.
• Residual airports benefit from vertical airport–airline relationships with enhanced cost efficiency.

This paper employs benchmarking analysis to examine the financial implications of the different types of airline lease agreements used by US airports. Five key financial performance areas relating to cost effectiveness, revenue generation, commercial performance, financial profitability and capital investment are analysed using financial data from 2011/12 for 23 of the 29 large-hub airports. The results show that compensatory airports are the most financially efficient, particularly in terms of debt efficiency, revenue generation and profitability while the vertical airport airline relationship that is common at residual airports delivers higher levels of commercial performance and cost efficiency.