COVID-19: The pandemic’s impact on airport business planning

Written by Francesco Ciarmatori, Managing Partner, Aragon Partners

The COVID-19 pandemic has created a period of uncertainty and sudden, dramatic changes for airports worldwide. It will be of vital importance for the industry to prepare to perform fast and quantitative business simulations in evaluating future scenarios to organize strategic business recovery phases.

Today’s COVID situation and the first countermoves

After the dramatic falls in traffic that followed the COVID-19 pandemic and the consequent airport shutdowns, shareholders and management are pondering future business scenarios.

At the beginning of these events, the immediate and correct reaction of airport management were focused on budget review, the introduction of personnel layoffs, the renegotiations of service contracts, the postponement of some investment (those not related to security and concession obligation) with the intention of minimizing the short term impact on cash flow and financials.

Today’s COVID reality

Today, traffic is slowly recovering and the question begins to be what will happen when the traffic recovery will reach 40% or 60% of prior daily “business as usual figures”.

When this occurs the possible scenarios will vary and even when things seem to become clearer there will be new scenarios to be evaluated every week or, in some cases, every day.

The growing demand of business simulations

When the demand of business simulations grows to address uncertainty, job cuts will  still be prominent for many professionals. During this time two important points should be kept in mind:

• People who have been laid off will not be available to contribute, as expected, to the production of meaningful information for decision making resulting in less resources during a time of need
• Remote/smart working will still be the recommended practice for all but operations related activities

In this type of environment it will be really complex to answer quantitatively to questions like:

• What happens to the airport financials if we modify our investment plan?
• What happens to the airport business indicators if traffics falls/increases of an certain percentage?
• What is the financial impact of this new business scenario?

Actions to take today to be prepared for tomorrow

1. Preparation is key in times of crisis. The following are essential for business planning: Clearly identifying key players within an organization to make quantitative evaluations concerning the core aspects of the business.  Make this information  available when needed and share widely.
2. Quantitively modelling the key aspects of the airport business in advance. Have trusted and tested algorithms to provide fast answers to management/shareholders while ensuring  different scenarios  are correctly comparable.
3. Determine a consistent evaluation process and possibly structure and/or implement a coherent overall business plan and simulation IT application. Ensure that the maximum speed and quantitative precision in the evaluations is completed and that the maximum significance of different scenarios comparison and delta analysis is possible.

Airports that take this approach and pre-emptively prepare will be in the best position in taking the most effective and quantitatively based decisions to determine their future and success.

This could be proven vital in the coming months, right after the first emergency decisions were taken in the first weeks of the pandemic.

The article was provided by a third party and, as such, the views expressed therein and/or presented are their own and may not represent or reflect the views of ACI, its management, Board, or members. Readers should not act on the basis of any information contained in the blog without referring to applicable laws and regulations and/or without appropriate professional advice.