After a difficult year, the aviation industry and particularly airports were hoping that 2020 would prove to be a little brighter. However, just days into a new decade the world learnt of a new disease which we now know as COVID-19. The outbreak – which originated in Wuhan, China – has since spread to 89,000 people across 58 countries.
Current Impact
Airports, by their very nature, are identified in the disease control process as locations that if not closely monitored and controlled can act as devices to increase the rate at which a disease spreads. A particular concern that relates to COVID-19 is the fact that the infected person can carry and transmit the disease without ever displaying symptoms themselves. This makes the virus even harder to contain.
The impact of the outbreak on airports was felt immediately close to the origin of the disease. Elsewhere, the effect of COVID-19 on operations appears to be linked to the situation in the country the airports are located. Beijing/Capital is one of those that took the brunt in the immediate aftermath of the outbreak. Its passenger traffic figures for the week when the World Health Organization announced they had identified the virus (January 10-18) were down around 50% compared to the same period last year. The world’s second busiest airport saw a reduction in flights of 37%, down to 42,300 movements which equated to 5.7m passengers. All this unfolded against the backdrop of Chinese New Year which typically sees a large increase in air travel as people return home to celebrate.
In Singapore, Changi experienced a strong month of growth in January with passenger traffic increasing 5.2% to 5.95m compared to the same period last year. Aircraft movements also rose by 2.2% to 33,400. Unlike Beijing Capital, Changi felt the boost Chinese New Year normally provides in passenger movements. However, by early February, as the situation worsened in China, the demand for air travel at the facility began to be impacted. In the first two weeks of the month, total passenger movements decreased by more than 25% while traffic between Singapore and China plummeted by more than 85% year-on-year.
Knock-on Effects
An airport’s revenue stream can be divided into two sections: aeronautical and non-aeronautical. Not only has the COVID-19 outbreak had an impact on income related to aircraft movements but the reduction in traffic has had a knock-on effect on the revenue relating to retail concessions, car parking and property. According to the global industry representative, Airports Council International (ACI), non-aeronautical revenue accounts for around 40% of an airport’s income.
Hubs that have been heavily affected by a reduction in traffic have begun to take action to help soften the blow to concession operators. In late February, Changi announced that it would be offering a 50% rebate in monthly rent for a period of six months, to all concessionaires in the hub’s four terminals in both the transit and public areas.
Lim Peck Hoon, the airport’s executive vice president of commercial said: “The shops and restaurants in Changi Airport are very much dependent on passenger traffic. The COVID-19 situation has affected air travel significantly and there has been a marked drop in business for our concessionaires.”
She added that they had decided to reduce the rent to help their concessionaires “during this very difficult period.”
The facility itself is set to receive a 15% property tax rebate as part of a wider S$112m (£63m) aviation sector assistance package provided by the Government of Singapore, Civil Aviation Authority of Singapore (CAAS) and Changi Airport Group (CAG).
Following months of social unrest in Hong Kong, the operators of city’s airport announced a second round of relief measures for businesses operating at the airport. The scheme includes concessions as well as other businesses such as catering outlets, airlines, ground handling agents, aviation support service companies and many more. The relief measures, which started last year, coupled with the new round of measures amount to around £161m.
Controlling the Spread
With the disease showing no signs of stopping, airports are playing a vital role in helping to slow the spread of the virus across borders. ACI has guidelines on what hubs should do to prepare for outbreaks of diseases. It details that each facility should have a preparedness plan that addresses aspects such as: communication, screening, logistics (transport of travellers to health facilities), equipment, entry/exit controls and coordination with health authorities.
Angela Gitten, ACI World director general said: “The guidance we have issued reiterates a number of options and best practices that airports and national authorities can use to protect against communicable diseases that might pose a serious risk to public health.
She added: “The recommendations are designed to reduce exposure to an infectious agent at airports and to improve the response to health-related emergencies by establishing standards and procedures for rapid decision-making and action.”
Passenger screening is one way that airports can help slow the spread. China has begun a rigorous scheme of measures including closing outbound traffic from Wuhan while screening passengers and immediately admitting those with even the mild symptoms for hospital care.
In Singapore, temperature screening has been introduced for all flights arriving at Changi and Seletar. Thailand is in the process of implementing thermal screening at all 28 of its airports along with increased hygiene measures.
In Europe, COVID-19 has hit Italy particularly hard with the death toll rising to 21 and some 820 people have been infected. Following the news that the virus had spread to Italy, Rome/Fiumicino installed latest generation thermal scanners to monitor the body temperature of passengers arriving in the airport. Three reception areas for measurement have been setup in Terminals 1 and 3. In all there are 11 dedicated lanes, all with thermal scanners. A health worker, equipped with a tablet device, is on hand for each lane.
In the UK, the effect of the virus has been limited with 40 cases reported so far. John Holland-Kaye, Heathrow Airport’s chief executive, said that the hub’s four terminals were being deep cleaned and that hand sanitisers were being made available to passengers and staff. In an interview on BBC Breakfast, he said: “We’ve not seen much impact on the number of people travelling. We are [taking] reasonable precautions, which do go beyond the recommendations, just to make sure people stay safe and are reassured.”
British Airways, the largest operator at the facility has cancelled all flights to China until at least Easter. Chinese airlines however, still fly into the airport.
In the US, New York/JFK, Los Angeles and San Francisco were the first to start screening for COVID-19. Chicago/O’Hare and Atlanta/Hartsfield-Jackson followed shortly after eventually increasing to around 20 airports within a week.
Global Profitability
The longer-term impact of the COVID-19 outbreak on the global air transport industry remains to be seen. However, initial assessments by the International Air Transport Association (IATA) show a potential 13% full-year loss of passenger demand for carriers in the Asia-Pacific region. The knock-on effect to the airports these airlines serve is expected to be equally as bad. Elsewhere, IATA forecasts that carriers outside the region can expect total revenue loss of at least $1.5bn, if the reduction of demand is limited to markets linked with China. Overall, the association expects the global development of the industry at best, to contract by 0.6% with COVID-19 being held responsible for what effectively a growth plateau.
These estimates are based on a scenario where the virus has a similar v-shaped impact on demand experienced during the SARS outbreak between 2002 and 2004. A sharp fall and then an equally quick recovery.
Alexandre de Juniac, IATA’s director general and CEO commented: “The sharp downturn in demand as a result of COVID-19 will have a financial impact on airlines—severe for those particularly exposed to the China market. We estimate that global traffic will be reduced by 4.7% by the virus, which could more than offset the growth we previously forecast and cause the first overall decline in demand since the global financial crisis of 2008-09.
He added: “This scenario would translate into lost passenger revenues of $29.3bn. Airlines are making difficult decisions to cut capacity and in some cases routes. Lower fuel costs will help offset some of the lost revenue. This will be a very tough year for airlines.”
Images have circulated online and in the press since the outbreak, depicting deserted airports and shuttered retail outlets. These present a bleak situation for sites in the epicentre of the virus outbreak. The full effect of COVID-19 in the US and most of Europe hasn’t yet been felt, but with the disease showing no signs of slowing down, it is hoped that the measures implemented at airports will prevent at least some of the onward transmission of the virus.
