Brief Summary
This video explores why airport prices are so high, examining the historical context, deregulation, the rise of airport malls, and the lack of competition among concessionaires. It highlights the pricing policies, the concept of "dwell time," and alternative business models, while also noting the potential breaking point for passengers due to increasing costs.
- Airport prices are significantly higher than street prices due to factors like security costs, higher wages, and percentage-based rent.
- Deregulation in 1978 led to increased passenger numbers and the transformation of airports into shopping malls to generate revenue.
- A few large corporations dominate airport retail, leading to a lack of competition and higher prices.
- "Dwell time," or the time spent waiting in the terminal, has been capitalised on to increase food and retail revenue.
- Some airports, like Portland, Oregon, use clean street pricing, while others are moving away from pricing caps, potentially leading to even higher prices.
Intro
The video introduces the concept of inflated prices at airports by comparing the cost of identical items purchased inside and outside the airport. It highlights a specific example of a chocolate bar costing 120% more at the airport and a burger marked up by 46%. The video poses the question of how airport prices became so high and why some airports are raising them even further, pointing out the lack of competition as a key issue.
The Rise of Airports
In the early 20th century, airports were basic and often unpleasant, unlike the glamorous experience of flying itself. To grow, airports needed to improve and generate revenue. They experimented with various amenities like observation decks, oil wells, swimming pools, and parking fees. By the mid-20th century, airports added restaurants to attract both passengers and locals, becoming destinations for special occasions. The 1960s saw the construction of architecturally impressive terminals. These amenities aimed to attract people, encourage flying, and increase revenue, marking the golden age of flying, although air travel was still relatively expensive and limited to the wealthy and business travellers.
Deregulation
In 1978, the deregulation of the airline industry allowed airlines to set their own rates and routes, leading to lower ticket prices. This deregulation resulted in "fare wars," but also reduced in-flight services, such as gourmet meals and free cigarettes. The number of people flying in the US nearly doubled in the following decade due to cheaper tickets and larger planes. The increase in connecting flights during the 1980s meant passengers spent more time waiting in terminals, which overwhelmed airports.
How Airports Became Malls
To keep passengers happy during longer waits, airports began transforming into malls. The Pittsburgh airport pioneered this concept in the early 1990s with over 100 shops and restaurants, significantly increasing revenue by 75% within six years without raising prices, using a "street pricing" model. Other airports invested heavily in renovations to replicate Pittsburgh's success, and some adopted street pricing in response to passenger complaints.
Why Airports Are So Expensive
While street pricing was implemented in the past, most US airports now use "street pricing plus," adding an extra 10 to 15%. The airport authority sets this price cap, but the determination of "street price" can be inconsistent. An example is given of a chocolate bar at LaGuardia Airport, where the cited street price was higher than what was actually found outside the airport. Despite pricing policies, a lack of enforcement often leads to businesses charging more than the allowed percentage above street price.
Operating an Airport Business
Some argue that charging street prices is unsustainable due to the higher costs of operating inside an airport. These costs include security for employees, products, and equipment, which increases construction and labour expenses by 30 to 40%. Some cities also mandate higher minimum wages for airport workers, and businesses are expected to operate from early morning to late at night, adapting their menus accordingly. Additionally, businesses pay a percentage of their sales to the airport as rent, typically between 10 and 16%.
Lack of Competition
The lack of competition is a significant factor in high airport prices. In the US, the majority of airport food and retail is managed by six large corporations. These companies operate thousands of locations worldwide. For example, at Minneapolis St. Paul airport, many seemingly different restaurants are operated by the same company, HMS Host, which is owned by Avolta, also owning Duty-Free and Hudson News stores. Mergers and acquisitions are further consolidating the industry. These large concessionaires often push for airports to raise their street pricing caps, as seen in Phoenix, Arizona, which abandoned street pricing entirely in 2019 after requests from HMS Host and SSP.
Dwell Time
Increased security measures after 9/11 led to longer "dwell time," or time spent waiting in the terminal. Studies show that more waiting time translates to higher food and retail revenue for airports. Approximately 63% of passengers make a purchase after passing through security, driven by boredom, as the average time spent at an airport is about two hours. Airports aim to move passengers through security quickly to maximise their time and spending in the post-security area.
Airport Revenue Streams
US airports generate nearly half of their revenue from non-aeronautical sources, such as parking and food sales. Diversifying and increasing non-aeronautical revenue is a high priority for airports to protect themselves from unforeseen circumstances. In 2024, US airports made over twice as much from food and beverage revenue compared to 2010.
A Different Way of Doing Business
Portland, Oregon's airport (PDX) is one of the few that uses clean street pricing, charging the same prices as downtown locations without additional fees. PDX's percentage taken by the airport is relative to a business's sales volume, fostering a successful environment. Passenger spending per plane passenger at PDX is about $15.3, which is 20% higher than the national average of $12.50. Despite its success, the industry is unlikely to widely adopt this model.
Airports Are Getting More Expensive
Some airports are moving away from pricing caps. LAX removed its street pricing plus 18% cap on most items in 2025 due to rising airport minimum wage complaints. The airport restaurant and retail association advocates for flexible pricing, or no limit, arguing that overall passenger satisfaction is more important than price. However, the six major airport food and retail operators are primarily focused on increasing profitability, with strategies to continuously drive spend per passenger.
Passenger Breaking Point
Passengers may be reaching a breaking point due to rising costs. A 2024 survey found that passengers spent less in the terminal than the previous year, and food and beverage prices have consistently scored the lowest in passenger satisfaction surveys. In May 2025, members of Congress requested the Federal Trade Commission investigate concession prices at airports and stadiums, citing extreme markups due to limited options. Some industry professionals believe that amenability and profitability are linked, suggesting that a friendlier space could lead to more revenue.
