The latest findings in Airport Economics Report and Key Performance Indicators for the financial year 2018 suggest that as much as 56% of all airport revenues are generated from aeronautical sources.
Aircraft-related and passenger-related charges are the two major income streams vital for continuous airport operations and are dependent on passenger and cargo traffic in the context of commercial flights.
Typical aircraft-related charges include aircraft landing and takeoff fees, aircraft parking fees, boarding bridge fees and other smaller items typically levied based on an aircraft parameter. As for passenger-related charges, these typically comprise of passenger service charges (PSC), passenger security charges and other charges levied based on passenger throughput.
Non-aeronautical revenues, which make up 40% of airports’ total income, are equally dependent on traffic. As such, there is a clear link between traffic and airport revenues. It takes steady flows of confident and free-of-anxiety travellers to spend money in stores, shops, restaurants, and other commercial outlets.
Under the current situation, one can expect not only a decline in revenues proportionate to traffic, but also a decline in unit non-aeronautical revenues of a double-digit magnitude, as typical spending patterns are equally disturbed by the outbreak.
The COVID-19 global health crisis resulted in a significant decline in demand for air transport. At the global level, ACI estimates that airport passenger traffic volume for the first quarter of 2020 will be down at least 12 percentage points compared to what ACI previously projected for the same quarter.
Asia-Pacific is the most impacted region with passenger traffic volumes down 24 percentage points as compared to previous business as usual forecasts for the first quarter of 2020. Europe and the Middle East are also expected to be significantly impacted by reductions in traffic.
Both aeronautical and non-aeronautical revenues are under serious threat. The shortfall in the number of passengers and the cancellation of flights leads to reduced revenues from the above mentioned airport charges paid by both airlines and passengers to offset the cost of using airport aeronautical facilities and services.
Non-aeronautical revenues, which usually serve as an additional cushion during economic downturns, are not able to play that role in the COVID-19 outbreak context. Passenger traffic from China and Eastern Asia tends to generate comparatively high revenue for retail concessions and other non-aeronautical services, but this typology of traffic is most affected by the outbreak and seriously challenges the ability of airports to continue generating much-needed commercial income.
It additionally takes steady flows of contented travellers to spend in stores, shops, restaurants and other commercial outlets. Under the current situation, one can expect not only a decline in revenues proportionate to traffic, but also a decline in unit non-aeronautical revenues of a double-digit magnitude, as typical spending patterns are equally disturbed by the outbreak.
Prior to the COVID-19 outbreak, global airport revenues for the first quarter of 2020 were forecast to reach close to $39 billion USD. ACI now estimates a loss of revenues of at least $4.3 billion USD. Most of the loss in revenues is expected to occur in the Asia-Pacific region with a difference of $3 billion USD. This is approximately equal to the total annual revenues of two major European or Asian hubs combined. Europe is the second most-impacted region, while all other regions will see the impact of the loss of passengers as more data becomes available.
While the airport industry is fully cognizant of the dramatic situation experienced by its airline partners, it is equally impacted by the COVID-19 outbreak. The financial sustainability of the airport industry is under threat. As such, alleviating the collection of airport charges from airlines and passengers through suspending the collection of charges or granting blanket discounts is not conceivable.
The direct pressure on airport operating expenditure would simply be unbearable to maintain current staffing levels. Safeguarding continuity of airport operations when the current health crisis will be resolved is of common interest to both the air transport ecosystem and the wider economy.
Airports must also continue to meet their capital expenses obligations as they remain characterized by predominantly high fixed costs necessary for maintaining and operating the infrastructure components of the airport, such as runways, taxiways, aprons, parking stands, and terminal buildings. Unlike aircraft, these are not movable assets. Consequently, airports must continue to be able to levy both aeronautical and non-aeronautical revenues from their users and end-users. Making requests to alleviate the collection of airport charges in the context of the COVID-19 outbreak is ill-advised and incognizant of the fragile financial sustainability of airport operators. Enhancing the dialogue and cooperation between the major industry players and their regulatory authority is the key to overcoming the current crisis and ensuring that everyone survives once the storm is over.
For more information read the ACI Advisory Bulletin on The impact of COVID-19 on the airport business.