Do privatized airports add financial value?

The airport business is very capital intensive and substantial investment is needed to accommodate traffic growth. Since there is basically no research on the resulting dilemma of capital funding requirements and delivering shareholder value, the aim of this paper is to explore this issue in depth. In order to address the question if privatized airports earn their cost of capital, 2003–2009 data is used for a long-term trend analysis, comparing the financial performance of ten publicly quoted European airports. The majority of sample airports generate a negative economic value added for most of the seven years and correlational research reveals that traffic-induced investment spending is the single most influential factor. Airport management can improve the value-added margin between the return rate generated by the capital permanently employed and its weighted average cost via optimal phasing of investment activities, gearing of the balance sheet and financing of capital expenditure.