Flight Plan

A crushing blow for airports

Ashwini Phadnis | Updated on May 12, 2020

At a standstill The Indira Gandhi international airport on May 8 during the lockdown to control spread of Covid-19 AP   -  Manish Swarup

International Airport during a lockdown implemented due to the coronavirus in New Delhi, India, on Wednesday, April 29, 2020. India won’t allow commercial flights to operate until it is confident that the coronavirus outbreak is under control, piling further pressure on the country’s cash-strapped airlines. Photographer: T. Narayan/Bloomberg   -  T. Narayan

The air-transport ecosystem, a key driver of economies worldwide, is floundering

Airlines are not the only ones that are going to be impacted by the Covid-19 epidemic. Airports too are going to have to bear their share of changed flying norms, and more importantly, severe losses.

On May 5, the Airports Council International (ACI) estimated a decline in airport revenue at more than $97 billion for 2020. “The impact of the Covid-19 pandemic on airports, the wider aviation ecosystem, and the global economy continues to worsen and represents an existential threat to the industry unless governments can provide appropriate relief and assistance,” ACI World Director General, Angela Gittens, said.

“As traffic and revenue have collapsed, the airport industry has taken all possible measures to preserve stability, but the challenge remains that a significant portion of airport costs are fixed. Airports are critical in the air transport ecosystem, which is a key driver of local, regional and national economies and the communities they serve, and this global economic multiplier effect needs to be safeguarded to help underpin recovery,” ACI, which serves 668 members operating in 176 countries, said. According to the Airports Services Association based in Brussels, airports operate on a low-margin model. “We are generally paid on a per-service basis or tonnage, so where flights are grounded, our provision is cancelled and our revenue cut off. Our main overheads are our labour force (70 per cent of expenditure). We have already been forced to pursue aggressive headcount reduction in recent weeks and days,” it says, adding that the more staff it lays off, the greater the challenges it will face.

For individual airports, this means bad news indeed. According to abc7news.com, San Francisco airport, which saw roughly 1,50,000 passengers coming and going, is now down to handling 4,000 passengers, thanks to reduced flights due to the coronavirus.

In India, Delhi Airport has decided to shift all operations to Terminal 3, even though it has three terminals. This, however, does not mean that the days of multiple terminals are over. Says Abhilash Abraham, Research Analyst, Aerospace, Defense & Security Practice, Frost & Sullivan, “Terminal expansion and developments are deferred owing to the current financial crisis faced by airports that restrict their capital expenditures. But once the industry recovers and enters the growth phase, it will again struggle with overcapacity constraints. Over the long term, new airports and terminals will be developed to manage the growing footfall in high-growth regions.”

Lewis Burroughs, Head of Aviation-India, ICF, adds that the costs associated with converting airports into single-terminal operations would mean this will not happen.

Delhi airport shifting operations to one terminal is a short-term solution for addressing the Covid-19 pandemic. It needs to do this as, according to CRISIL Advisory, airport operators in India are expected to run into losses to the tune of ₹5,000-5,500 crore because of the Covid-19 crisis while airport retailers (including retail, food and beverages and duty-free) are facing losses of ₹1,700-1,800 crore.

Ground handling hit

Ground handling too is going to be hit hard. On March 31, BBC reported that the four companies, Swissport, Worldwide Flight Services, Dnata and Menzies, which manage ground operations at UK airports, have warned that they are close to collapse, putting thousands of jobs at risk. Catering companies are not far behind either. Strait Times reported on March 9 that in its latest announcement, SATS, which provides services like baggage handling and in-flight food and beverage catering, warned that the coronavirus outbreak is expected to “substantially and adversely” affect profitability for its fourth quarter and full year ending March 31, 2020, when compared with a year ago.

Further, Carsten Spohr, Chairman and Chief Executive Officer, Lufthansa, said that the production of meals at the airline’s catering company LSG had decreased by 95 per cent and 23 facilities had been shut down till further notice.

Published on May 13, 2020

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