On the comeback trail
We review some of the highlights of ACI EUROPE’s Annual Congress & General Assembly in Rome.
Cautious optimism about the future might be the best way to sum up the mood of the over 300 delegates who gathered in Rome recently for ACI EUROPE’s 32nd Annual Congress & General Assembly.
For although traffic figures are rapidly rising and everyone expects a strong summer with passenger numbers at some airports already above 2019 levels, doubts remain about growth in the final quarter of 2022 and beyond due to a host of economic and political issues and the acceptance that the world probably hasn’t seen the last of the COVID pandemic.
Indeed, the ongoing challenges of the global pandemic, conflict in Ukraine, rising inflation rates and fuel prices, and sustainability – the latter effectively ensuring aviation’s license to grow – were covered extensively in the opening sessions of the event.
They included arguably show-stealing presentations from Kyiv Boryspil Airport’s director general, Oleksiy Dubrevskyy and Odessa Airport’s chief commercial officer, Dr Vyacheslav Cheglatonyev, about the war in Ukraine and the devastating cost of the conflict in terms of the destruction of the country’s infrastructure, economy and loss of lives.
As is tradition, the conference was officially opened by the host, which in 2022 meant that Aeroporti di Roma’s CEO, Marco Troncone, welcomed delegates to the 32nd Annual Congress, which had the theme of ‘Turning the Corner: Shaping our new Normal’.
After his positive opening remarks about how rising passenger volumes showed that the desire to travel by air was still strong, he chose to focus on the bigger picture and issues such as aviation’s net zero emissions by 2050 challenge and funding new infrastructure.
In his ‘State of the Industry Address’, ACI EUROPE’s director general, Olivier Jankovec, began by revealing that Europe’s airports had lost 3.1 billion passengers over the last two years – equivalent to twice the growth the continent’s airports had achieved over the previous 25 years.
He pulled no punches in admitting that the continent’s airports were still reeling from the unprecedented collapse in revenue caused by the pandemic, resulting in pre-tax losses of more than €20 billion over the past two years.
With little support from government, he said Europe’s airports had no other option but to pile on debt, resulting in total airport debt and liabilities having increased by a massive €60 billion compared to pre-pandemic.
Although passengers are returning to the skies this summer, he noted that the traffic recovery for airports “remains revenue weak and cost intensive” with traffic volumes still below 2019 levels for most airports and demand tending to be concentrated on peak periods, causing significant stress on operations due to acute staff shortages.
He warned that there is no escaping the fact that airports are facing an investment crunch. The reduction in capital expenditure from Europe’s airports over the past two years amounted to €7 billion – with yet more to come as inflationary pressures only make the situation worse.
In fact, Jankovec revealed that inflation had already started to hit airports hard, impacting on investment decisions and driving operating expenses up – in particular for staffing and energy costs, which together amount on average to 45% of an airports’ operating costs.
The situation is particularly serious as European airports are projected to need around €360 billion in capital expenditure to 2040, according to the latest ACI figures.
“Over the past year, we have been warning of the risk of an airport investment crunch due to ballooning debt levels and much challenged revenue generation,” said Jankovec. “There is no question that the inflationary spiral we are now in is only making things worse. Airports will simply not be able to pay back their debt and invest at the same time.
“This is about our ability to finance the decarbonisation of our facilities, but also support airlines’ efforts to do so – and thus, aviation as a whole. And yes, it is also about our ability to address current operational disruptions caused by staff shortages now and in the medium-term.”
With European airports seeing their economics being turned upside down by structural revenue pressures and cost increases, Jankovec outlined what he called a necessary transition and transformation of airports towards a new value creation model based on three pillars – sustainability, innovation and diversification.
Indeed, he stated that airports are now working in these strategic directions, charting the way forward as ‘glocal’ businesses delivering value both to their stakeholders, and to society as a whole.
Next up was ACI Europe president and managing director of Spanish airport operator, Aena, Javier Marín, who called upon EU Institutions, European governments and regulators to work with industry so that aviation policy enables a strong and sustainable reset for the entire sectoral ecosystem.
Marín tackled issues as diverse as slot regulation, regional air connectivity, airport charges, decarbonisation and the handling of resurgent viral variants.
He opened by tackling staff shortages and the severe disruptions suffered by air travellers in several European markets. The root cause, he said, is the combination of a stronger than expected surge in demand alongside very tight labour markets – affecting not just airports but all actors in aviation including airlines, ground handlers, police and border control.
Asked if the industry could have been better prepared, he replied: “I honestly do not think so. We got little advance notice of the lifting of travel restrictions by governments, so had very little time to scale up our facilities and resources.”
And as the aviation industry was no longer as attractive as it was pre-pandemic, he noted that recruiting new staff isn’t easy and will take time.
“When you look at ground handling in particular, we have to find a better balance between competitiveness and the social sustainability of the employment on offer,” said Marín.
The eagerly awaited ‘Ukrainian airports: reflections and realities’ session followed, during which both Dubrevskyy and Cheglatonyev shared videos of missile attacks on Kyiv Boryspil Airport and residential areas across Ukraine.
Both explained how everything changed for their airports and all of Ukraine at 4am on February 24, 2022, when effectively decades of peace, prosperity and traffic growth for the country’s airports was brought to a shuddering halt by the war with Russia.
“Most Ukrainian airports have been severely damaged with the losses to date amounting to $6.8 billion,” said Dubrevskyy.
The dramatic and moving session was followed by the usual highlight of the conference, the ‘Airport leaders symposium’, which this year comprised Istanbul Grand Airport CEO, Kadri Samsunlu; Hermes Airports CEO, Eleni Kaloyirou; Athens International Airport CEO, Yiannis Paraschis; Hamburg Airport CEO, Michael Eggenschwiler; and Aéroports de la Côte d’Azur’s chairman of the management board, Franck Goldnadel.
Hermes Airports’ Kaloyirou said she was expecting a good summer and end to the year, meaning that passengers numbers through Cyrpus’ Paphos and Larnaca airports should be back to 70% to 80% of their pre-COVID levels by the end of the year.
Aéroports de la Côte d’Azur’s Goldnadel, however, said it was difficult to predict the final quarter of 2022 and beyond as some airlines said their future forecast was good, while others didn’t know. He commented: “In the circumstances, we have to remain flexible and reactive so that we can adapt to different scenarios.”
IGA’s Samsunlu noted that although traffic at Istanbul Airport was now back to pre-COVID levels, he was worried that rising fuel prices and inflation might damage consumer confidence and potentially slow down traffic growth next year.
Talking about what he has learned as a leader over the last two years, Samsunlu said: “What the pandemic has taught me as a leader is you have to watch out for the mental, physical and professional wellbeing of your employees as every single one of them is important to you.
“A second take-away for me is that we need to make our businesses as resilient as possible so that they can cope with anything. And lastly, we need to improve co-operation with our airlines, which in my case is Turkish Airlines.”
In answer to the top three challenges faced by their airports over the next few years, Hamburg’s Eggenschwiler said: “To learn to live with the unknown and today’s new normal where we don’t really know what is going to happen next year. Finding the right balance between having the adequate number of staff in your organisation mixed with the appropriate technology.
“And the third is to return to profitability, which will allow us to self-finance ourselves and then get on with other projects such as becoming carbon neutral and all the infrastructure that will need to be developed and maintained.”
Athens International Airport’s Paraschis said: “To continue to attract and develop human capital. Complete out net zero carbon emission projects. And manage the expansions and CAPEX programmes on time and on budget.”
While Istanbul’s Samsunlu said: “Fix my financials. Persuade Turkish Airlines to bring more airlines to Istanbul that is not going to hurt their business model. And hire top quality people, which isn’t easy in my country because of the competition.”
A very busy afternoon on Day 1 included a ‘special address’ from Professor Enrico Giovanni, Italy’s Minister for Infrastructure & Sustainable Mobility; an interview with Henrik Hololei, director general of DG MOVE for the European Commission; and ACI EUROPE’s annual General Assembly.
In between the former and the latter there were also panel discissions on ‘The new reality of airport and airline relationships – from infrastructure charges and airport slots to network development and operational efficiency’; ‘Decarbonisation: what is achievable, and how long will it take?’ and ‘The air rail debate: from confrontation to co-operation’.
The day ended with a Gala Dinner at the spectacular Villa Piccolomini overlooking Rome, where ACI EUROPE recognised the winners of its Best Airport Awards.
The second day of the conference had a lot to live up to, and it got off to the liveliest of starts with EUROCONTROL’s director general, Eamonn Brennan, arguing that airports should look at themselves and take more responsibility for the current delays at Europe’s airports rather than blaming everyone else for the current problems.
He said: “In reality, it’s the system [to blame], in which airports have a pivotal role to play, and you haven’t done it very well this year. In fact, I think you’ve lost the PR battle, and if you lose the passenger, you’re in big trouble.”
Next up was a debate about the current investment landscape in Europe and whether airports are still attractive to potential investors, moderated by ICF’s managing director for aviation, travel and tourism, Kata Cserep.
In the hot-seat, and basically agreeing that airports still remain much sought after assets, were Luke Bugeja, CEO of Ferrovial Airports; Giovanni Cavallaro, ADR’s vice president of strategic planning and regulatory; Elisabetta de Bernardi, Atlantia’s investment director for Europe; and Joanna Fic, Moody’s senior vice-president for infrastructure and finance.
Bugeja said: “Things have clearly changed because of COVID, but as an asset class, are airports still interesting and are investors still there? Absolutely! Strategic and insitutional investors still have confidence in the market and can see through the current downturn.”
While Atlantia’s de Bernardi reminded the audience that her company was a long-term investor and, although she accepted that today’s market was difficult, noted that it didn’t stop Atlantia-owned ADR recently opening the impressive new Boarding Area A linked to Terminal 1 at Rome Fiumicino.
The conference closed with a debate about innovation and how technology is shaping our new normal and the Grand Finale where London City Airport CEO, Robert Sinclair, and Frontier Economics’ board director and head of aviation practice, Dan Ellott, shared some final thoughts with moderator and managing director of Aviation Advocacy, Andrew Charlton.