· From the Report & Accounts:-
DSA, like most other UK airports, has a high fixed cost base arising from the regulatory environment in which it operates and is capital intensive due to its necessary operating infrastructure. This cost base is high even for a relatively low level of sales, unlike businesses in other sectors which often start with a low cost base which then scales up with demand in a linear fashion, It is necessary therefore to achieve a critical mass of passenger and / or freight traffic to generate the revenue required to offset high fixed costs.
By the time that DSA commenced operations, the majority of the volume passenger carriers in the UK capable of delivering large scale passenger programmes already had a strong presence in DSA's core catchment by virtue of operating at DSA's competing neighbouring airports (Manchester, East Midlands and Leeds Bradford). Such carriers therefore had no need to put material traffic into DSA and would incur significant cost and therefore risk in doing so. Attracting a major carrier was therefore extremely challenging.
The corollary of a relatively weak bargaining position is a requirement to heavily incentivise or even subsidise the flight programme of airlines, producing a longer and lower payback for DSA on any deals done.
Where freight-only traffic (freighters) is concerned, the larger hubs in the UK such as East Midlands have dedicated and substantial infrastructure in place (warehouses, transit sheds and distribution centres) sometimes operated by Integrators such as DHL. These have been developed over decades along with the staffing and processes but are not in place at DSA. Wthout these, winning new scheduled freighter business was very difficult and it was not commercially feasible to put such operations in place speculatively.