Stefano Baronci, Director General, ACI Asia-Pacific.

Airports Council International (ACI) Asia-Pacific has warned that the prolonged duration of Covid-19 will significantly impact the forecasted growth prospects of the region’s airports.

ACI is, therefore, urging regulators and governments to implement adjustments and relief measures tailored to suit local level contexts. According to ACI World estimates, Asia Pacific is suffering the most from the outbreak. Passenger traffic volumes are down -24% for Q1 2020, compared to forecasted traffic levels pre Covid-19.

Within Asia Pacific, mainland China, Hong Kong and South Korea have experienced significant traffic volume declines. Meanwhile, the Middle East is experiencing a sharp spike in the number of Covid-19 cases. The rise in confirmed cases in the region is expected to spark a 4.2% traffic decrease, as travellers and airlines adjust their plans and seat offers.

Against a backdrop of sharp traffic declines and passenger throughput, non-aeronautical and aeronautical airport revenues are experiencing similar declines.

The ACI World Airport Traffic Forecasts 2019–2040 predicts revenue of $12.4bn for Q1, excluding the impact of Covid-19.  The impact of the coronavirus outbreak, however, is expected to prompt revenue loss of $3bn.

REDUCED REVENUES

According to ACI Asia-Pacific, the shortfall in passenger numbers and cancellation of flights leads to reduced revenues from landing and parking charges paid by airlines. It also also leads to lower revenues from passenger service and security charges paid by passengers.

In 2019, year-on-year international passenger numbers to December rose 3.7% in the Middle East. With the number of coronavirus cases in the region rising, traffic in the region is is expected to decrease significantly as travellers and airlines adjust their plans and seat offers, according to ACI Asia-Pacific.

With aeronautical revenues under pressure, the cost base for airport operations remains unchanged. This is because airports can neither close or relocate their terminals during the outbreak. Non-aeronautical revenue provides an additional cushion during economic downturns.

ACI Asia-Pacific says Covid-19 is significantly impacting Chinese passengers, the world’s largest and highest-spending outbound travel group, creating a wider worldwide effect on airports.

Stefano Baronci, Director General, ACI Asia-Pacific said: “Unlike airlines who can choose to cancel flights or relocate their aircraft to other markets to reduce operating costs, airport operators manage immovable assets which cannot be closed down. They are faced with immediate cash flow pressures with limited ability to reduce fixed costs and few resources to fund capacity expansion efforts for longer-term future growth.

“For privately-held airports, the situation is even worse as they do not benefit from relief measures, but are obliged to continue paying concession fees to governments.”

Airports such as Hong Kong International have experienced significant traffic volume declines as a result of Covid-19.

The severity of the situation requires close cooperation between airport operators and policy stakeholders to identify options to tackle the crisis. Baronci added: “For continued regional prosperity, as all the long-term forecasts suggest, we have to consider the overall sustainability of the sector, starting with the shortage of airport capacity. Asia already manages more than 50% of the super-congested airports in the world and will be required to build the large majority of greenfield airports globally.

“Furthermore, it is in the interest of the airports to explore relief measures at local level with their main partners to face the current challenges and recovery plans to incentivise the return to a normalised market. The blanket application of proposals to reduce airport charges or to freeze the application of the 80/20 rule on airport slots globally, should not be supported without passing an economic feasibility test and justification by objective evidence.”

ALLOCATED AIRLINE SLOTS

In order to keep airport slots, airlines must use at least 80% of their allocated slots at any given airport. The proposal for a global suspension of 80/20 usage recently made by the International Air Transport Association (IATA) would give airlines the freedom to cancel flights to/from congested airports not necessarily linked to Covid-19. This would make it more difficult for countries to stay connected with the world, which will have knock-on effects on their economies.

“We are sympathetic with airlines’ needs to avoid flying empty airplanes simply to retain airport slots. But this should not jeopardise the connectivity of passengers and distort the competitive field,” Baronci remarked. “ACI Asia-Pacific favours an evidence-based market-by-market review which evaluates rates of infection, load and scheduled bookings.

“While we prefer local measures, in the event of a global alleviation package, airports, airlines and slot coordinators should explore the feasibility of a relaxation of the 80/20 rule. The rule could be relaxed to a lower threshold, or the historic rights of airlines could be calculated based on a shorter period through their respective associations,” he concluded.