Airports are essential to the economic development of cities, countries, and regions. They directly contribute to economies by providing services to airlines, moving passengers, and transporting cargo. The movement of goods and people also benefits governments, consumers, and industries.

However, the COVID-19 outbreak has hit airports hard.  As a result, air travel has fallen sharply, which has prompted airlines to cut capacity. Given the importance of airports to the economic development of cities, countries, and regions, the broader impact of COVID-19 on the global economy is enormous.

COVID-19 has had an immediate, dramatic impact on airport traffic and revenue. The economic crisis that will follow the pandemic will continue to drive lower demand for air travel in the immediate aftermath.

The sudden drop in air traffic has led to almost complete paralysis of both aeronautical and non-aeronautical revenues. As airlines cut capacity, the aeronautical revenues airports receive from airlines, such as landing charges for aircraft and security charges, fall. As people stop flying, non-aeronautical revenue, derived from airports’ parking facilities, restaurants, or duty-free, also plummets.

Many airports remain open for cargo operations, which should provide some relief to airports. However, cargo operations were affected by airlines’ capacity decreases as cargo often travels in the belly of passenger aircraft. As a result, both demand and capacity for air cargo has fallen even though rates charged by airlines were much higher. And in any case, cargo revenues represent only a small share of total revenues for airports (less than 10 percent).

Both the future prospects for airlines and a structural change in demand may exacerbate the current situation

  • The financial health of airlines: Potential airline bankruptcies present a major risk for airports, especially for airports that serve as hubs to struggling airlines
  • Structural demand change: Airports are likely to see structural changes in demand from the economic crisis that will follow the COVID-19 outbreak. Airports’ performance will continue to be affected by the lower-than-expected GDP growth around the globe after COVID-19.  As a result, industry experts project a much slower recovery than in previous shocks such as 9/11 or SARS.

 As a result of dramatic revenue losses and ongoing uncertainty surrounding COVID-19, major airport operators are revising their earnings expectations, and credit agencies have downgraded the long-term debt ratings of several and/or revised their outlooks to negative. European airports could see earnings fall by 30 percent in 2020.

Given the severity of the current crisis, trade associations and legislators are calling for government support to ensure aviation’s survival. At the same time, airports are cutting costs to preserve revenue.

Actions include:

Government support: Measures that:

(a) protect airport revenues,

(b) alleviate airport slot usage requirements (to free up slots for cargo requirements),

(c) reconsider concession fee payments,

(d) provide relief from airport taxes, and

(e) financial assistance from governments.

While airlines have already received some financial packages, airports have not.

In Europe, there is an urgent need for a relief program for the sector from the European Commission, including tax suspensions and deferment of concession fees.

Airports are reducing variable costs: While airports have high fixed costs, they are reducing variable costs where possible, by closing portions of infrastructure (such as certain runways), furloughing staff or cutting salaries, curtailing contract services.

Airports are cooperating with airlines: Many airports hold minimum revenue guarantee contracts with their tenants. However, in view of the COVID-19 pandemic, some airports are adapting payment conditions and relieving airlines and retail partners from some of their contractual obligations.

Historically, aviation has recovered from major shocks within five to seven months after events such as 9/11 or SARS. The impact of COVID-19 on airports will depend on the duration of the pandemic and how fast economic activity recovers after the pandemic. Many industry observers expect the recovery to be much slower than those of previous shocks, reflecting the double hit from travel bans and the economic fallout caused by lockdowns.

Traffic volume recovery will be long. Credit agencies have assigned a generally negative outlook to a large number of airports, driven by uncertainty about the containment of the virus and thus traffic recovery. Travel restrictions may continue for some time, even if the virus appears to be contained. Weaker global macroeconomic conditions may impact consumer spending and traffic recovery. And airlines—which have cut significant capacity in light of COVID-19—may experience weakening credit profile and competitive positions. The recovery of airports will also depend on the airport type and the host country’s response to COVID-19. Major airport hubs serving large urban centers and financially strong airlines (who are likely to receive government support) are more likely to recover quickly. Major to medium-sized tourist airports may see a slower recovery

Airport Economics (Estimates)

Operating expenses: 62 % of total costs

  • Personnel costs: 35%
  • Services: 23%

Capital costs: 38 % of total costs

  • Depreciation: 60% of capital costs  

Airport margins: 15% on a global level

Aeronautical Charges: 56%

  • Passenger and aircraft related charges: 62 % of all aeronautical revenues
  • Terminal rentals paid by airlines for space utilization: 12 % of global aeronautical revenues.
  • Landing charges: 76 % of all aircraft-related charges.
  • Passenger charges: 81 % of passenger-related revenues

Non-Aeronautical Charges: 40%

  • Retail concessions: 30 % of non-aeronautical revenues.
  • Car parking revenue: 20 % of non-aeronautical revenues
  • Property revenue/rent : 15 % of non-aeronautical revenues
  • Others: 34% of non-aeronautical revenues (car rental, food & beverage, advertising and more)

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