COVID-19: People risk in the airport industry

Ilia Lioutov by Ilia Lioutov | Sep 8, 2020

Due to the coronavirus pandemic and the resultant transportation crisis, practically all aviation stakeholders had to resort to painful and costly layoffs and furloughs of personnel. Airports had to cut their payrolls to stay financially afloat.

The COVID19 pandemic has created strong pressures on the financials of the airport industry and posed a concerning financial risk to airport operators and owners. But as airports had to resort to leaving behind thousands of aviation professionals, the financial risk must not overshadow the people risk in the airport industry.

In some jurisdictions, wage subsidy programs have helped to minimize the adverse impact of the ongoing crisis on airport staff. However, this varies significantly from one jurisdiction to the next due to competing national priorities. As the revenue shortfall as compared to the projected baseline is expected to reach about 60% in 2020 and the aviation industry is set to structurally shrink over the medium-term, permanent job losses and a contraction of the airport workforce globally are expected.

On a typical year, personnel expenses are the largest component of airport operating expenses, accounting for 34%. Contracted services, which are activities outsourced to third parties, represent the second-largest component. These services account for 25% of operating expenses. The combined share of the two labor-related cost categories—personnel expenses and contracted services—has remained by far the largest cost center for airports, at around 60% of total operating expenses .

Airport jobs and workforce investment

On the global scale, 87.7 million jobs are supported by air transport, but about 60% of these jobs concentrate on airport site, making the airport sector an indispensable node of aviation employment. The typical airport hub has indeed as many as 40,000 employees working on site. This number includes employees from the airport operator; however, many other jobs are generated from numerous other businesses, government agencies and organizations. This is all as a result of airport traffic and the catalytic impact of aviation. 4.1% of global GDP is supported by aviation under normal circumstances, and air transport jobs are, on average, 4.3 times more productive than jobs in other sectors.

Cutting the airport workforce is a last-resort scenario when there is no other choice when all other cost-cutting options are exhausted.

Airports across the globe invest heavily in human resource development, which is exemplified by the number of in-class and online courses taken by airport professionals. Considering the ACI Global Training courses only, there are about 4,000 aviation professionals who take at least one professional development class during the course of a year. If all aviation training programs were considered, this figure would be multiple times higher.

This demonstrates the investment of airports into the development of their cadre of professionals. It always comes at a cost, but in normal times when aviation is growing, it is also associated with returns: a highly professional labor force is indispensable to the provision of airport infrastructure and services in a safe, secure, efficient and sustainable manner. Airports evolved from simple facilities to sophisticated businesses, which also had an impact on its workforce profile. Today, airports employ people specialized in a wide array of domains—civil, mechanical, electrical and computer engineering, data science, finance, economics, environmental planning and so on.

Mitigating the people risk

The longer aviation remains on the ground, the higher becomes the ‘people risk’. The professional development path is a matter of years, but many skills may be lost if not practiced daily. Aviation remaining at a standstill jeopardizes career continuity for a large number of professionals—in fact both inside and outside of the aviation domain, if considering the larger picture and intersectoral links.

Second, it is important to consider that professionals with transferable skills will not remain in the industry for long time if the industry will not provide them with further professional development and career advancement opportunities.

Lastly, the key pillar of aviation—safety—is more than set of written rules and procedures, but rather a unique culture which is built over many years and is embedded in those aviation professionals who dedicate years of their life to airports.

Governments have a key role to play to support airport jobs and incomes

The aviation industry is hugely important to the social and economic welfare of millions of persons across the planet. Governments should provide targeted fiscal stimuli to support the drop in income. Direct financial support should benefit the entire aviation ecosystem—airports, airlines and their commercial partners—to ensure that the multiplier effect is felt across economies.

Policy Brief: Path to the airport industry recovery ─ Restoring a sustainable economic equilibrium
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Ilia Lioutov

Ilia Lioutov

Senior Expert, Airport Economics and ESG at ACI Asia-Pacific
Ilia Lioutov is an air transport economist with in-depth expertise in economic and financial performance of airports and is currently a Senior Expert, Airport Economics and ESG at Airports Council International (ACI) Asia-Pacific. His core responsibilities include formulating advocacy strategies at national and international level and representing the airport industry interests within political, economic and regulatory institutions. Lioutov is the secretary for the ACI sub-committee on non-aeronautical revenues and activities (ANARA).
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