World in motion – ACI News

ACI news is back, rounding up the latest announcements, initiatives and views from ACI World and across the ACI regions, this issue also featuring input from ACI EUROPE and ACI Asia-Pacific.

ACI World news: Restoring economic equilibrium

ACI World is urging regulators to support the economic sustainability of airports as social and economic engines of communities worldwide and for the benefit of the travelling public.

The call to action supports the recent ACI World Resolution Restoring Economic Equilibrium that urges governments to acknowledge the changed risk profile of airports in some jurisdictions due to the pandemic and to provide regulatory support to restore economic equilibrium for unrecovered costs, either as financial compensation or through future airport charges.

It also follows the recent outcomes of the Economic Commission of the International Civil Aviation Organization (ICAO) that recognised the need for the ongoing review of ICAO’s Policies on Charges for Airports and Air Navigation Services (Doc 9082).

ACI World director general, Luis Felipe de Oliveira, said: “It is vital that international and national regulators support the economic sustainability of airports as crucial players in the health of the entire aviation ecosystem.

“Restoring the economic equilibrium of airports through financial compensation or through future airport charges is necessary for investing in the infrastructure needed to accommodate the growth of air travel and meet decarbonisation targets, as well as maximise airports’ contribution to the United Nations’ Sustainable Development Goals and wider socio-economic effects.”

Lasting impact of the pandemic

The impact of the COVID-19 pandemic on airport passenger traffic resulted in a global decline of 61% in 2020 relative to 2019 (falling from 9.2 billion passengers in 2019, to 3.6 billion passengers in 2020).

The lasting effects on revenues in the years following the collapse has resulted in capital expenditure reductions. Furthermore, where government financial support or other relief measures were insufficient, many airports also had to re-finance their operations, creating a mounting debt burden.

A recent report by IATA states that both airports and airlines have the weakest economic performance among all sectors in aviation and all major global industries, underlining the need for increased collaboration between stakeholders in creating value for the travelling public and communities.

“This should not be a zero-sum game,” stated de Oliveira. “Like airlines and other aviation stakeholders, airports are businesses that continue to be affected by the pandemic’s economic impact, energy costs, staff shortages, and other inflationary pressures felt by the entire industry.

“However, what is unique to airports is that they face high fixed costs irrespective of economic conditions and do not have the same level of flexibility in managing capacity. With continued economic headwinds and global passenger traffic expecting a loss of 27% in 2022 as compared to 2019, a balance must be struck in order to restore the economic equilibrium of airports.

“Under a regulated regime of airport charges that do not adjust to actual market and demand conditions, there should be full awareness of the fact that the regulated formula that protects airlines in good times also requires protecting airports in bad times.

“This regulatory asymmetry needs full consideration and reconciliation in the post-pandemic recovery. This means that costs incurred for aeronautical services through the pandemic need to be recovered through charges and fees, especially in cases where government financial support was insufficient to cover those costs. In other words, there is currently a mismatch between costs incurred and revenues that need to cover those costs.”

Evidence-based research on airport charging models

InterVISTAS research provides in-depth evidence that supports the need for a shift towards light-handed airport charging models. The observed data shows that the direct cost of airport charges (levied on both passengers and airlines) to consumers is small in terms of the final ticket price, including airline ancillary charges.

Independently of the small impact of airport charges, industry indices of air fares show the significant percentage increases of double-digit proportions in 2021 and 2022 as compared to previous years. The drivers in the increases in air fares is largely a function of rises in the major cost items such as jet fuel and personnel costs, but also airlines’ ability to adjust pricing based on demand patterns aimed at improving economic performance.

Like airlines, ACI World advocates that new approaches for economic oversight should be considered to ensure better use of airport capacity through flexible pricing, the fostering of infrastructure development for connectivity, achieving decarbonisation targets, maximising socio-economic benefits, and providing charges incentives to address issues of congestion, noise, and climate change impacts.

All such advantages encourage the growth of a sustainable aviation ecosystem for the benefit of travellers and communities in all regions.

ACI EUROPE calls for EU to mirror US decarbonisation subsidy regime

ACI EUROPE president, Javier Marín, has addressed the specific challenge of the funding required to achieve the airport industry’s net zero carbon targets and compliance with ‘Fit for 55’.

Speaking at ACI EUROPE’s annual reception held in the European Parliament in Brussels, Marín, who is managing director of Spanish airport operator AENA, warned of the huge potential impact on the connectivity of regional airports given significant cost increases on intra-European routes.

He specifically referenced the imbalance in financial support for decarbonisation between the EU and the US – as laid bare by the recently adopted US Inflation Reduction Act.

“It’s clear that more support mechanisms and more incentives should be put in place. In other words, we need not just sticks from the EU but also carrots,” stated Marín.

“The current debate on how the EU should react to the US Inflation Reduction Act and its $370 billion subsidies makes that very clear well beyond our sector. In this regard it is essential that aviation be eligible for further support under the initiatives and instruments currently being devised by the Commission to keep pace with the US.”

Marín described an industry moving into 2023 with the fragility and volatility of financial recovery remaining a deep concern.

“Costs have increased with the hire of additional staff to handle peak hours and airports’ energy bills have exploded,” he noted. “Several major airlines posted record profits in the fourth quarter of 2022. This was not the case for airports… many are still struggling to reflect inflationary pressures in their charges.”

He also called for a passenger-centric approach to underpin regulatory decision making, ensuring that industry commitment to excellence and a desire to invest is matched by regulatory support.

“Airports are not bus sheds,” mused Marín. “They are one of the most regulated, complex and expensive modern infrastructures to run. We need regulators to put the passenger at the centre of airport regulation.

“Passengers expect a high-quality experience at the airport. This means airports must have the financial health to fund operations that
are resilient.

“Airports need visibility on future income to proceed with investments that meet not just the interests of passengers but also increasingly of our planet. To regulators we say: ensure that your decisions focus on long-term passenger interest, and not short-term airline costs.”

ACI Asia-Pacific welcomes opening up of China

Following China’s decision to reopen its border with quarantine-free travel, ACI Asia-Pacific has reiterated its call for a consistent and harmonised approach from governments in their response measures towards managing inbound international travel.

Commenting on the development, ACI Asia-Pacific’s director general, Stefano Baronci, said: “China has played a dominating role in the region’s economy and is anticipated to be one of the most vibrant aviation markets, contributing 16% of the global traffic by 2040.

“The decision to reopen borders is long awaited. China is a significant contributor to tourism in the region and the re-opening of the borders will be a huge boost for the industry as well as the economy of the region.”

China was the last major economy in the world to reopen borders after three years of lockdowns in accordance with its Zero-COVID strategy.

“The opening of Chinese borders completes the process of normalisation of freedom of movement of international passengers in the region that has already witnessed relaxation of travel protocols during the second half of 2022,” commented Baronci.

In order to ensure the smooth recovery of air traffic, ACI believes that co-operation and the establishment of standards that harmonise the processes for international travel between states are crucial.

Baronci said: “The latest introduction of inbound travel protocols in India and Japan confirms the need to improve the co-ordination of travel restrictions amongst States that should strengthen their dialogue for co-ordinated prevention, preparedness and response planning with the involvement of the aviation industry and more effective and aligned decision making for travel regimes.”