Survive to transform
The COVID-19 pandemic is without doubt the worst crisis the aviation industry has ever faced and could permanently change the way we travel, writes Armando Brunini, CEO and general manager of SEA Milan Airports.
Like other airport operators, SEA Milan Airports, responded to the pandemic by implementing a number of measures aimed at safeguarding the health and safety of passengers and staff and mitigating financial distress.
From our perspective, these efforts have led to Malpensa and Linate airports gaining accreditation under ACI’s Airport Heath Accreditation programme and ‘Hygiene Synposis’ certification from TÜV SÜD Italia.
Airports are a typical, if not extreme example, of capital intensive assets with high fixed costs, which makes downturns in volumes, such as the one we are experiencing, extremely painful.
In Milan, we addressed this aspect of the crisis through:
– Halting all new CAPEX projects unless related to safety and compliance
– Renegotiating contracts with suppliers
– Leveraging as much as possible on the temporary furlough scheme made available by the government in order to reduce staff costs
In times of crisis, “cash is king”, and we secured our financial position through the issue of new bonds and mid-term loans with the banking system.
We also listened to a request for help from our retail partners by providing them with greater flexibility on a temporary basis in order to keep them in business and ready to re-open fast.
Notwithstanding this wide package of measures, in 2020 we will incur in a huge loss.
The need to co-existing with the pandemic before it becomes history
With most of Europe currently experiencing a second wave of the pandemic, it is now clear that it will take some time before COVID is defeated.
This means that for the foreseeable future we must continue to mitigate the financial impact of the crisis; enhance our health protocols; and become more agile in how we use the infrastructure we manage due to the volatility of the market (i.e the opening and closing of terminals).
At the same time, we have to sustain at least a minimum level of connectivity for the regions we serve.
Talking of connectivity and how things have changed in 2020. It is hard to believe that Europe and the USA – which have such strong historical, commercial and cultural bonds – have been substantially isolated from each other for nearly a year.
Last year, 42 weekly flights with average load factors of 75% to 80% connected Milan Malpensa with New York. Today we have only 3 flights a week with just 15% occupancy.
Not surprisingly, all incoming travel to Milan is down. In the hope of addressing the situation, in co-operation with the city’s destination management organisation, Milano and Partners, and hotel trade association, Federalberghi, we recently launched a ‘Fly To Milano’ campaign which effectively offers a free night’s stay at a Milan hotel to all inbound passengers handled at our airports during 2021.
But, of course, our whole industry is in agreement that the best way to restore a baseline level of international passenger traffic is through replacing quarantines with testing.
We have learned a lot from the new testing protocols at Malpensa, Linate and other Italian airports over the last few months.
The pharmaceutical industry is progressing with faster and more reliable products and digital solutions are being piloted to facilitate and streamline the process. It is now time for a step change and for a much wider use of testing.
We need to transform our businesses
Airport managers are used to adapting to a growing and evolving market. However, for the short to medium-term, we are likely to face reduced traffic volumes and, on a more structural level, abrupt changes.
It is too early to have a clear and definitive view of these structural changes but, looking through the mist, we are beginning to see what might emerge both in terms of demand and supply side of things.
Leisure travel will bounce back while business trips will permanently decrease, passengers will remain health conscious forever. Consequently, point-to-point LCCs will further gain market share while hub carriers dependent on long-haul and transfer traffic will struggle more in the context of a general consolidation across the airline industry.
All this while stakeholders (and ourselves) place the environmental sustainability of air travel even higher in the priority list of the global agenda.
Airport leaders will need to take the initiative and transform their businesses. For the next few years, maybe for the first time, instead of managing growth we will have to focus on lowering the level of fixed costs and in becoming more agile in order to be in a better position to face the next shock.
Terminals and their commercial areas will need to be redesigned and a more seamless and possibly touchless experience should be offered to passengers, including health related screening.
Of course, digitalisation will be key and is something SEA Milan Airports has been working on for some time. At the beginning of the year, for example, we launched ‘FACE BOARDING’, a pilot programme based on the use of facial recognition system at Linate.
We have also just become the first airport operator in Italy to introduce ECAC Standard 3 technology for screening cabin baggage.
Besides providing advanced explosives detection with low false alarm rates, the CT technology deployed in these scanners allow electronic devices and liquids to remain in bags, which will help protect the health of travellers by minimising points of contact at security lanes on top of improving queuing and passenger experience.
Furthermore, in co-operation with a leading producer of copper, we are in the process of covering with a copper coating many objects and surfaces that are frequently touched by passengers so as to exploit copper’s antiviral and antibacterial properties.
SEA Milan Airports will guarantee a safer, healthier and more seamless journey even when we are out of this unprecedented crisis.
COVID has postponed the need for our industry to invest in terminals and runways in order to avoid the ‘capacity crunch’, but in the forthcoming years intensive CAPEX programmes will still be needed to address the environment and digital transition.
Governments need to implement enabling measures
These are the most challenging of times and airports will need their senior managers to step up accordingly and prove themselves by leading their companies through resilience and transformation.
With airports currently haemorrhaging cash, surviving the crisis without significantly reducing staff numbers or cutting back on investments to enhance their environmental sustainability or digitalisation may seem like ‘mission impossible’.
Airport leaders are required to demonstrate a number of different skills. These include having the will power, creativity and ability to make quick decisions and inspire and engage their teams. All are still required, of course, but without government support it might not be enough to ensure the survival of every airport.
We need governments to create the right regulatory framework and support packages to allow airports and the aviation industry to survive this crisis and eventually come back stronger than before.