Challenging times

How are Europe’s airports faring one year and counting on from the outbreak of COVID-19? ACI EUROPE’s director general, Olivier Jankovec, provides a progress report.

Although far from alone in suffering from the impact of COVID-19, the past 17 months has been a period like no other for Europe’s airports, which have faced a near total collapse of air traffic and connectivity, bringing with it very harsh economic consequences.

In fact, Europe is the world region where the passenger traffic decrease has been the harshest, and where the recovery, to date, has also been the slowest.

This is down to the combination of extremely restrictive travel policies enacted by our governments in a totally uncoordinated manner, and the fact that domestic markets – which have been more resilient – are comparatively smaller in Europe compared to North America and Asia for instance.

With the epidemiological situation now firmly improving across our continent thanks to vaccination programmes, we can finally see light at the end of the tunnel.

EU States in particular are easing travel restrictions and implementing common and interoperable digital health certificates, which should effectively allow vaccinated people and those having recovered from COVID-19 to travel without hindrance.

The UK, however, is lagging behind, maintaining restrictions which are no longer risk-based nor warranted by where the country itself and the rest of Europe now stand in terms of their epidemiological situation.

At the same time, the medium to longer-term impacts of the COVID-19 pandemic on our industry are becoming clearer. While we are all talking about and longing for the recovery, it is actually a word that does not fit with what lies ahead.

Recovering means going to back to the status quo ante. This is not what will happen with this crisis.

We will, of course, go back to pre-pandemic passenger traffic levels at some point – 2025 based on our latest forecast for Europe’s airports. But for the rest, the aviation market that will emerge from the pandemic will be structurally very different, and airports – along with the rest of the aviation sector – will be facing renewed challenges.

Looking at our European aviation market first, the damage caused by the pandemic is unprecedented. But what is making this even more difficult to overcome for airports is the way in which governments have reacted.

By and large, European governments have chosen to focus their financial support on their national airlines, leaving airports and the rest of the aviation ecosystem in a precarious situation.

Simply put, Europe’s airlines have so far received more than €34 billion in direct financial support, while Europe’s airports only got €2 billion. This is creating massive imbalances in our largely integrated European aviation market.

The generous aid granted to airlines has not trickled down to airports, which now find themselves in a situation of systemic financial weakness. The situation has led to the debt load of Europe’s airports increasing by a massive €20 billion in just a year, and this is effectively what is allowing most of them to keep going and finance current operations.

At the same time, the recovery will not instantly improve their financial standing – as it will initially be cash intensive (scaling up facilities and resources to accommodate traffic peaks) and revenue weak.

As a result, Europe’s airports are now facing an investment crunch – with AlixPartners estimating that revenues will remain insufficient to meet capital expenditure until at least 2032. This threatens not just our ability to deliver on our NET ZERO 2050 pledge, but also our digitalisation agenda and the development of future capacity and connectivity.

The impact will thus be felt across the aviation system – down to consumers and our communities.

At ACI EUROPE’s Airport Economics Symposium in June, we raised the alarm. It is high time European governments took care of their airports, and come to terms with the fact that aviation is an ecosystem, and that its positive externalities can only be secured if all components of that ecosystem are financially sustainable.

The EU and the European Commission in particular have a crucial role to play in this regard – not least because in 2022 it is bound to review the EU Regulations on airport charges and slots.

Absent public financing, airport investment will essentially depend on the ability of airports to keep recovering their cost and recoup at least part of their massive losses. Slot rules are also very much relevant – as the current regime comes with cost inefficiencies for airports and results in airlines alone benefitting from considerable scarcity rents.

But beyond our financial standing, the COVID-19 pandemic is putting the spotlight on the sustainability challenge – especially climate change. In fact, the pandemic has given us a foretaste for what life with uncontrolled climate change would be like.

This is increasingly resonating with European citizens and across our societies. This means that ‘Building Back Better’ to control climate change has now become not just a scientific imperative, but also a societal and political imperative. As a consequence, there is no escaping that this must be a business imperative for all sectors.

The EU is currently marshalling an ambitious political and regulatory agenda, all focused on making Europe the first climate neutral continent. By mid-July, legislative proposals will be tabled to boost the use of sustainable aviation fuels; get airports to provide electricity for stationary aircraft; set more stringent rules when it comes to the inclusion of aviation in the EU Emissions Trading System; and most certainly a tax on kerosene.

Together with the trade associations of Europe’s airlines, ANSPs and OEMs, ACI EUROPE has launched DESTINATION 2050 – a roadmap for the decarbonisation of European aviation.

Accordingly, the entire European aviation sector is now firmly and jointly committed to Net Zero CO2 emissions by 2050.

But delivering on this will be no easy feat. A major revamp of business models across the aviation ecosystem is unavoidable – and securing truly supportive regulatory and financial frameworks will be crucial. This is far from being guaranteed.

The risk of punitive regulations towards aviation to reduce demand has never been higher in Europe.

As airports, we therefore find ourselves with a double challenge: securing our financial recovery at the same time as earning societal acceptability – in effect, our license to operate and grow. The first, very much shapes our ability to address the second, but it also creates tensions with airlines.

Yet, the scale and almost existential nature of the environmental sustainability challenge aviation faces means that we must find ways to resolve these tensions and work together. This will require bold transformative industry leadership – from all parties.

“No flying machine will ever fly from New York to Paris… because no known motor can run at the requisite speed for four days without stopping.” These words, pronounced by Wilbur Wright in 1909, are a crucial reminder that aviation is about making the impossible happen.

First came distance, then speed – next is net zero CO2 emissions.