Asian airports could lose $3 bn revenue due to Coronavirus

At a time when world growth is projected to slow down further as the coronavirus (Covid-19) epidemic spreads across continents, a new report has suggested that the prolonged duration of the outbreak will significantly set back the airports in the Asia Pacific region from the previously forecast growth prospects and result in $3 billion revenue loss.

According to the estimates of the Airports Council International (ACI) Asia-Pacific, the region is suffering the highest impact, with passenger traffic volumes down 24 per cent for the first quarter of 2020, compared to the forecast traffic levels.

Within the region, mainland China, Hong Kong SAR and South Korea remain at the centre of the effects with sizable losses in traffic volumes, the global airport grouping said in its report, adding that with the sharp spike in the number of Covid-19 cases in several countries in the Middle East, the traffic volume has gone down 4.2 per cent, as travellers and airlines adjust their plans and seat offers for the coming days and weeks.

"Against this gloomy background of sharp declines in traffic and passenger throughput, airports' aeronautical revenues and non-aeronautical revenues are rendering similar declines," ACI said.

The ACI World Airport Traffic Forecasts 2019-2040 predicts $12.4 billion revenue for the first quarter in the Asia-Pacific region in the "business as usual" scenario. The impact of Covid-19 is projected to cause a revenue loss of $3 billion.

The airport association has also urged regulators and governments to implement well-defined adjustments and relief measures tailored to suit the local level contexts.

The shortfall in the number of passengers and the cancellation of flights leads to reduced revenues from airport charges such as landing and parking fees paid by the airlines, and passenger service and security charges paid by the travellers.

While aeronautical revenues are under pressure, the cost base for airport operations remains unchanged as airports can neither close nor relocate their terminals amid the Covid-19 outbreak.

Non-aeronautical sources of revenues usually serve as diversification of airport income streams, but they also provide an additional cushion during economic downturns. "To a large extent, the COVID-19 is impacting Chinese passengers, the world's largest and highest-spending outbound travel group, creating a wider worldwide effect on airports," ACI estimates have said.

"Unlike airlines, who can choose to cancel flights or relocate their aircraft to other markets to reduce operating costs, airport operators manage immovable assets that cannot be closed down. They are faced with immediate cash flow pressures with limited ability to reduce fixed costs and few resources to fund capacity expansion efforts for longer-term future growth," said Stefano Baronci, Director General of ACI Asia-Pacific.

"For privately-held airports, the situation is even worse as they do not benefit from relief measure but are obliged to continue paying concession fees to governments. The blanket application of proposals to reduce airport charges or to freeze the application of the 80/20 rule on airport slots globally should not be supported without passing an economic feasibility test and justification by objective evidence."

Current slot allocation rules require airlines to use at least 80 per cent of their allocated slots under normal operations at an airport in order to keep them. The proposal for a global suspension of 80/20 usage recently made by the International Air Transport Association (IATA) is expected to give airlines the freedom to cancel flights to/from congested airports not necessarily linked to the COVID-19 outbreak, jeopardising the ability for countries to stay connected with the world, which in turn will have knock-on effects on their economies.