As we usher in 2023, I’d like to take the opportunity on behalf of ACI World to wish all of our members and the travelling public a happy New Year! I’d also like to take the opportunity to reiterate ACI and airports’ commitment to maximizing the inclusive and sustainable growth of air travel as generators of socio-economic benefits for travellers and communities worldwide.
A key part of this commitment necessitates strengthening our sector’s collaboration with other sectors such as tourism and finance—the value of which I witnessed firsthand during my recent speaking engagements on behalf of the organization.
In November, I was thrilled to represent ACI World at the World Travel & Tourism Council (WTTC) 22nd Global Summit in Riyadh. It boasted an exceptional line up of 50 Ministers, 200 additional government officials, 150 CEOs and other global leaders from across the Travel and Tourism sector, with nearly 3,000 delegates and over 100 speakers ready to discuss the pressing issues affecting the sector. I thank the Ministry of Tourism of Saudi Arabia and the Saudi Tourism Authority for the fantastic set up. I was honoured to participate in the prestigious panel “Beyond the Terminal: Redefining the Modern Airport,” which brought together H.E. Abdulaziz Al-Duailej, President, GACA – General Authority of Civil Aviation of Saudi Arabia; John Selden, CEO, Neom International Airport; and myself, with moderator Nawied Jabarkhyl, Correspondent and News Anchor, CGTN.
I ended the year at the Airports National Meeting (ANM) 2022 held by Aeroportos do Brasil, former National Association of Airport Management Companies (ANEAA) where I joined panelists Fábio Rogério Carvalho, President, ANEAA; Ronei Glanzmann, Secretary of the Civil Aviation in Brazil; and Jurema Monteiro, Director, Institutional Relations of the ABEAR Associação Brasileira das Empresas Aéreas. ACI World contributed with key insights on the transformation of the sector, recovery in the country, and the socio-economic benefits of the airport group model. You can see a clip of my contribution to the panel below.
And most recently, I returned from the World Economic Forum in Davos. We are thankful to the Greek House Davos for their invitation to discuss the future of sustainable aviation. A key part of airports’ economic sustainability is our ability as an industry to meet our climate goals. With industry and governments now aligned on the goal of net zero carbon emissions by 2050, we need regulators to work with the industry to support and incentivize this energy transition.
It was a pleasure to share the airport perspective on a riveting panel moderated by Dr. Kostas Iatrou from the Hermes Air Transport Organization and with panelists Thomas Reynaert, Managing Director, Airlines for Europe (A4E); John Holland-Kaye, CEO, Heathrow; and, Riccardo Lambiris, Chairman, Athens International Airport. Michael Kasbar, Chaiman and CEO, World Fuel Services was present to enrich our discussions as well.
ACI and airports’ commitment to maximizing the inclusive and sustainable growth of air travel essentially means that passengers and communities are at the centre of everything we do. Besides being the gateways of air travel, airports facilitate tourism, trade, connectivity, generate economic growth, provide jobs, improve living standards, alleviate poverty, provide a lifeline for remote communities, and enable a rapid response when disasters occur. In fact, we would simply not exist without passengers, a lesson we learnt all too painfully during the pandemic.
The impact of COVID-19 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 up until today has resulted in capital expenditure reductions with many stakeholders re-evaluating the risk profile of airports. What’s more, in jurisdictions where government financial support or other relief measures were insufficient, many airports had to re-finance their operations creating a mounting debt burden.
As infrastructure intensive businesses, the contraction in airport infrastructure investments has also meant that meeting both current and future air travel demand as well as decarbonization targets are at risk. Despite the unprecedent downturn in the aviation sector, global passenger traffic is expected to reach close to 18 billion by 2040.
This situation does not just mean that the airport business is suffering. The risk of not being able to meet current and future air travel demand has real socio-economic consequences. For every 1 million foregone passengers due to airport capacity constraints in 2040, the global air transport industry would support 10,500 fewer jobs and US$346 million less in GDP. And, according to the WTTC, in 2019, the Travel & Tourism sector contributed 10.3% to global GDP, providing sustainable ways of life to millions of people around the world.
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 no matter the economic conditions and do not have the same level of flexibility in managing capacity like airlines.
So how do we rectify the situation and ensure that airports can invest in the infrastructure needed to accommodate the growth of air travel and meet decarbonization targets, while maximizing their contribution to the United Nations’ Sustainable Development Goals and wider socio-economic benefits?
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 model 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 means that costs 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.
It’s also important to view airport charges as a two-sided coin and place everything into context. Although aeronautical revenues make-up as much as 54% of total revenues for airports, they have a marginal impact on consumers’ pocketbook and airlines’ bottom line. As seen below, on average only 5.1% of the ticket cost paid by consumers globally in 2019 can be attributed to airport charges, which includes both passenger and airline charges.
As airport charges are variable operating expenses for airlines in that they vary with traffic levels, airport charges as a percentage of airline operating expenses have actually decreased during the pandemic. Therefore, the impact of increases in airport charges following the COVID-19 crisis relative to other airline cost items tend to be small in terms of percentage share.
Earlier this month we were pleased to welcome the Government of China’s plan to lift COVID-19 quarantine requirements for international arrivals. As the last major economy in the world to re-open its borders, the decision represents a key milestone in the recovery of air travel.
However, we must continue to protect air connectivity—which is vital to fully restoring travel, trade, and tourism that provide economic and social benefits to communities worldwide. On this front ACI World has been advocating that if any health-related travel measures are deemed necessary, that they be risk- and evidence-based. It is imperative for governments to have a harmonized response and to coordinate this response with other countries and aviation stakeholders.
ACI World has been working with ICAO and other international organizations and supports ICAO’s leadership in protecting air connectivity through its recently published recommendations on COVID-19 risk management for international air travel. The guidance is designed to help countries maintain air connectivity while taking prudent and evidence-based measures to mitigate ongoing risks of SARS-CoV-2 transmission.
Such guidance allows us to move forward with the valuable lessons learned from the past, without taking two steps backwards. Our passenger and communities deserve nothing less.