The impact of Covid-19 on airport business

Covid-19 has been classified as a black swan event.  This is used to describe unexpected events with a major impact. There have been arguments that Covid-19 should have been foreseen. What cannot be denied now is that the planning and forecasts for airport business post Covid-19 will no longer ignore such a global pandemic as a possible scenario. Lessons learnt from this pandemic will hopefully be shared among the airport business community for future business continuity planning were such a disruption of business to reoccur – and it is likely to.

Airports Council International (ACI) is the trade association of the world’s airports.  It has in her latest advisory for April 1, 2020 stated that two – fifths of passenger traffic and almost half of revenues will be wiped out in 2020.  This is a revised impact assessment of Covid-19 on airport traffic and airport revenues.  This revision became necessary due to the scale of travel restrictions, global quarantine measures and other major events that were not foreseen.  It does appear that the Covid-19 pandemic has reached its peak and may witness a decline. As such there may likely not be any more surprise measures that would further negatively impact airport business.

ACI had forecast that global passenger traffic would reach 9.5 billion passenger target in 2020, an unattainable target as the events in recent months have virtually grounded air traffic. ACI estimates that the decline in global passenger traffic for first quarter 2020 is equivalent to a reduction of 620 million passengers. Airports in all regions of the world are expected by the global body to lose passenger traffic at double digit rates. An 11.2% decline is expected for Africa region based on the forecast losing up to 80 million passengers. IATA the airline association expects that Nigeria will have 3.5million fewer passengers resulting in a $0.76 billion revenue loss, putting 91,380 jobs at risk and losing $0.65 billion contribution to the Nigerian economy.

This is an opportunity for airports and airlines across Africa region to facilitate intra African trade and connectivity. The African Continental Free Trade Agreement is a pointer that this can be actualized. These should be top agenda at ACI Africa region meetings. Previous airport slot rules are being relaxed and reviewed. African airports need to collaborate to grow intra-regional traffic and commerce going forward in the face of potential global recession.

Airports do not only make money from passengers and airlines. There is a lot of commercial activity that goes on in an airport due to footfalls – people moving through the airport. These are usually classified as non-aeronautical revenues. Commercial activities are for now stifled and seriously weakening. Loan covenants by concessionaires, car hire operators and other businesses that rely on air transport for their passengers will be difficult to meet with. ACI posits that the industry will lose about $76 billion revenues by end of 2020 with Africa region accounting for about $1.6 billion. Losses suffered will be proportionate to size and market position. Indeed the

entire industry value chain will be impacted by the stifling of activities in the industry. This of course includes travel agents and hospitality and tourism that rely on air travel.

National governments across the globe have implemented travel bans for foreign visitors, for places with confirmed cases and general lockdown as measures taken in response to the pandemic and these have brought down demand and supply very significantly such that ACI  believes that we may not see pre- COVID -19 traffic volumes return before the end of 2021. Presently second quarter 2020 predictions are in suspense due to the general uncertainty about air travel. The global body is not able to foresee when the pandemic will be considered under control so that air travel restarts on a wide scale from its near comatose state. Additional impacts on airport business could be as a result of COVID-19 or induced by COVID-19. The good news for now is that there are still some cargo flights.

Airports have high fixed and unavoidable costs. They will respond to contracting revenues by reducing their variable costs and will also close some portions of their infrastructure, postpone capital expenditure / delay some ongoing projects and take a more serious look at staff costs. A stronger advocacy for the airports will be required for them to be able to absorb the losses coming from this pandemic. So, also, will other industry stakeholders who will be impacted by this pandemic. Indeed, this is time for all stakeholders across the industry value chain to collaboratively restart aviation business and reposition domestic flights that are likely to fully commence before international flights.

IATA is calling for a mix of responses from governments to help the industry back to its feet namely: direct financial support, loans, loan guarantees, support for corporate bond market and tax relief. Also, key priorities to be addressed are: to provide a package of measures to ensure air cargo operations, put in place fast track procedures for overflight and landing permits, exempt flight crew members from 14 day quarantine, remove economic impediments ( overflight charges, parking fees and slot restrictions), provide financial relief on Airport and Air Traffic Control charges and taxes and ensuring aeronautical information is published, timely, accurately, and without ambiguity, so the airlines can plan and execute their flights.

Today’s challenge of working remotely from the airport makes it important for heads of IT in the airport community to work together to ensure that security is not compromised and connectivity bottlenecks are minimized or eliminated. Going forward CIO’s will need to build a business continuity plan collectively that will be incorporated into the organisational IT strategic plans of both the airport operator and other members of the airport community for positive customer experience.

Increased global connectivity bringing along the ability of such germs as Covid-19 travelling fast across the globe, Nassim Nicholas Taleb in 2007 wrote in his book The Black Swan: “As we travel more on this planet, epidemics will be more acute – we will have a germ population dominated by a few numbers, and the successful killer will spread vastly more effectively”. This is an advice on possible future planning scenarios.

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• Ekelem Airhihen, is an airport customer experience specialist and former Secretary, Air Transport Services Senior Staff Association of Nigeria, Murtala Muhammed International Airport, Lagos