COVID-19 TURNING INTO CRISIS FOR EUROPE’S AIRPORTS
ACI Europe today admitted that the continent’s airports are now facing a full blown crisis as a result of the COVID-19 epidemic.
It says that while the impact of the coronavirus was initially marginal and limited to those airports with air services to affected countries in Asia, its extension into Europe is resulting in airports across the continent now facing a full blown crisis.
As if to prove the point, Norwegian this morning announced that it is preparing to cancel approximately 3,000 flights or 15% of its total capacity between mid-March and mid-June as a result of COVID-19.
”For now, airports in Italy are clearly the most affected. Even before yesterday’s decision to place the whole country under lock down, Italian airports were already confronted with a dramatic free fall in passenger traffic – with decreases exceeding 60% at most locations over the weekend,” commented ACI Europe director general, Olivier Jankovec.
“But what they are now bracing for is a total collapse in air connectivity and the prospect of losing most of their revenues. We urge the Italian government to respond quickly and positively to the request Italian airports have made for emergency supporting measures.”
Beyond Italy, ACI Europe adds, the situation for airports is rapidly deteriorating throughout Europe.
Jankovec notes: “Airlines are drastically cutting capacity and cancelling air services as they respond to falling demand resulting from loss of confidence, changes to corporate travel policies, and governmental measures which directly or indirectly restrict mobility in their efforts to contain the spread of the virus.
“As a result, the COVID-19 epidemic is turning into a shock of unprecedented proportions for our industry.
“Apart from Italy, we cannot rule out that airports elsewhere might at some point also need relief measures to address cash flow pressures and keep fulfilling their role as critical infrastructure. This will require the support of governments and the European Commission.”
ACI Europe’s initial assessment of the impact of the COVID-19 outbreak on the region’s airport operators shows:
– A loss of 67 million airport passengers in the first quarter of 2020, representing a 13.5% drop in airport passenger footfall compared to a business-as-usual scenario.
– An overall diminution of 187 million passengers for Europe’s airports in 2020, representing a decrease of 7.5% in a year which was predicted to see +2.3% passenger growth in a business-as-usual scenario.
– In financial terms, a loss of €1.320 million in revenues in Q1 alone compared to a normal financial quarter, as a result of lower aeronautical revenues, lower commercial (non-aeronautical) revenues, and foregone revenues from ground handling and other services.
Whilst the absolute priority for airports is the protection of passengers and staff along with co-operation with public health authorities and industry partners, this situation presents a unique set of operational and financial challenges, it says.
ACI Europe says: “Airports being critical infrastructure for the functioning of society, the need to keep them fully operational and maintain air connectivity is all the more relevant in times of health crises.
“This is made clear by the WHO (World Health Organization) in its COVID-19 recommendations to States. It is thus essential that, in adherence with these recommendations, governments only consider travel bans and other measures interfering with air connectivity as a very last resort and for the shortest period of time.
“Airports also need governments to consider enacting ad hoc sanitary protocols for dealing with airport staff infections, since standard ones may compromise operational continuity and may thus not be suited for purpose. European co-ordination is needed in that regard.”
On the financial side, the immediate cash flow pressures airports are facing are leading them adopt cost cutting measures – such as voluntary unpaid leave, recruitment freezes and deferral of non-essential investment.
However, the extent and scope for mitigation measures at airports is limited. The fact that airports must remain fully operational in all of their components coupled with their predominantly fixed cost structures limit the extent to which they can reduce operational costs in severe downturns.
And since airport facilities are by nature immovable, this means airports do not have the ability to redeploy their productive capacity to other markets.
According to ACI Euope, beyond the short-term impact on their financial standing, the COVID-19 epidemic could also have lasting implications – since future investments in sustainability, capacity and digitalisation all depend upon financially robust and stable businesses.
It says that to face the crisis, a collaborative approach between airports, airlines and governments and the EU is of paramount importance both now and as the situation develops.
Norwegian says that it made today’s announcment as a result of reduced demand on future bookings.
“This is a critical time for the aviation industry, including us at Norwegian. We encourage the authorities to immediately implement measures to imminently reduce the financial burden on the airlines in order to protect crucial infrastructure and jobs,” comments airline CEO, Jacob Schram.
“Unfortunately, cancellations will affect a significant share of our colleagues at Norwegian. We have initiated formal consultations with our unions regarding temporary layoffs for flying crew members as well as employees on the ground and in the offices.
“We will continue to engage in constructive dialogue with unions and employees to work through this difficult situation together.”
Norwegian says that will continue to share updates with its customers, the financial market and the media once new measures are implemented.