SINGAPORE (June 25): Much has been made of Asia’s rising middle class. According to estimates by the Organisation for Economic Co-operation and Development, the global middle-class population will be 3.2 billion by 2020 and 4.9 billion by 2030. The bulk of this growth will come from Asia, with the region accounting for 66% of the global middle-class population and 59% of middle-class consumption.
There are many proxies for Asia’s rising middle class — smartphones, banks, tech companies and travel. The growing middle class in developing countries, changing demographics and liberalisation of the airline and aviation industry all point towards the growth of airports as new-economy millennials value experiences over material goods.
Airports, similar to the aviation and airline industry, possess strong moats, or structural economic competitive advantages. Unlike the players in the airline industry, which rely significantly on air traffic demand, cost of fuel and the efficiency of the competition to determine their margins, airports in most cases exist as a monopoly within their own geographic spheres. Operating an airport requires a licence from the state or federal government, and the metric for granting licences usually includes considerations such as environmental constraints, scarcity of land and potential overcrowding of flight pathways. As a result, most major airport operators usually operate solely within a city, are state-owned and have longterm concessions, which guarantee high margins of capital safety and an economic moat.
