ACI calls for government support to underpin aviation restart

Summary

• Airports Council International (ACI World) calls for government action to underpin the operational restart.
• Airports set to lose half their passengers this year and almost USD100 billion in revenues.
• Airports employ more than six million people globally.
• The cost of 'health-related' measures could be high.
• Calls for an end to slot use waivers.

Just one of many industries asking governments to intervene

Airports Council International (ACI World), the organisation representing many of the world's airports, has called, again, for urgent government assistance and relief for airports to underpin operational restart and sustain long term industry recovery.

According to ACI, the effect of the COVID-19 pandemic is estimated to result in a reduction of more than 4.6 billion passengers, with a decline in total airport revenues on a global scale of more than USD97 billion for 2020.

ACI World is urging the adoption of policy responses covering the protection of aeronautical revenue, tax relief and concession fee waivers, evidence based and data driven approach to slots, continued support for air cargo, and comprehensive financial relief to help the industry as it recovers.

Of course, just about every industry is asking for much of the same relief, especially the airline one, and it would be unrealistic for governments to put airports at the top of the list every time.

ACI World argues that airports remain important engines of economic growth, wealth creation and employment. They employ - either directly or indirectly - more than 6.1 million people globally, which makes up 60% of all employment in the aviation sector, and they provide direct societal and economic benefits to the local, regional, and national communities they serve.

However, contrast that with the hospitality industry just in the UK alone, where it is reported that 3.5 million jobs could be lost permanently if bars and restaurants are not allowed to reopen soon.

Expenses related to measures brought on by the pandemic "should be covered by governments"

As airports in some regions embark on the first steps in restarting operations and make plans for a sustained, long term recovery, ACI World said that this recovery needs to be underpinned by financial assistance and relief to safeguard essential operations and to protect millions of jobs.

ACI World is urging the adoption of the following policy responses to help the industry as it recovers:

1. Protection of aeronautical revenues: because of the sharp downturn in revenues, operators need to protect revenues such as airport charges. In a context where commercial revenues from retail, food and beverage and car parking have experienced a significant downturn, aeronautical revenues remain the sole source of funding for airports to continue to ensure the basic services required by airport passengers and users. To avoid impacts on the airport cost base, expenses related to new health related measures brought on by the COVID-19 pandemic should be covered by governments.

Costs will come from both infrastructure and resources needs

The cost of health-related measures will tax airports and governments alike, because no-one yet knows what they will amount to. While the cost of supporting infrastructure need not be high, it is the cost in human resource terms and in the amount of unused space that will tell, as is evident from the airport authorities which have already made their measures public, such as Istanbul Airport, which was the subject of a recent CAPA report (Istanbul Airport's 'Safe Travel' illustrates airport challenges).

The 'space' part of the issue will continue to be a problem as long as social distancing requirements are in place, but there are signs that they are being relaxed in some countries. That may however not become permanent.

The other concern must be regulatory arrangements on airport charges, where non-aeronautical revenues are taken into consideration against aeronautical ones when setting aeronautical charges. The almost complete collapse of non-aeronautical revenues rendered such measures virtually meaningless but now they are making a return - in Germany, for example, where shops and FBOs are open at many airports but servicing few flights - they could skew the calculations for future financial years, and not in favour of airport operators.

ACI calls for tax relief and waiving of rental fees

2. Tax relief and concession fee waiver: urgent tax relief will provide much-needed financial oxygen to airports to ensure continuity of operations and safeguard airport jobs. Additionally, airport rents and concession fees should be waived or postponed in the form of a one-time measure for a defined period.

This is optimistic. GDP has collapsed in many countries, along with income and corporation tax revenues.

Meanwhile, governments have racked up huge debts merely by way of the furloughing of employees and paying part of their wages out of national resources.

The idea that they might offer further tax relief seems very unlikely; taxes are likely to go up dramatically. Governments could defer rents and concession fees, which would be less costly but effective, for example in countries such as Canada, where those rents are high.

ACI concerned that there is a hidden agenda in slot waivers

3. An evidence-based and data-driven approach to slots: regulators worldwide should consider the needs of travellers and of the overall aviation ecosystem before deciding to extend airport slots waivers into the winter 2020-2021 season. Noting that several airlines have already made public announcements regarding fleet reductions, ACI World has become concerned that waivers could be used as a mechanism to isolate slots from market realities during the recovery period. In situations where waivers would be extended, strict conditions should be attached to incentivise airlines to return slots they will not use to ensure that consumers are protected from last-minute cancellations, avoid unintended impacts on the competitive landscape, and enable airports to plan operations safely and cost-effectively.

Industry agreement is lacking

There is a continuing disagreement between IATA and ACI on the waiving of the rule on penalising airlines for operating less than 80% of the initial schedule at the world's slot-coordinated airports - a waiver and measure that IATA supports.

IATA argues that carriers require more than the usual flexibility in planning their schedules, and that airlines cannot be expected to know with certainty how demand for air travel will evolve in two to seven months, therefore there is an urgent need to extend the rule waiver. Common sense would suggest that IATA carries the logical argument this time, but it is evidently a situation that could not be allowed to carry on into 2021.

Air cargo

4. Continued support for air cargo operations: airports should continue levying charges on air cargo operations to maintain essential airside and cargo facilities as passenger operations continue to be slow.

A logical proposal

Logic would seem to be on ACI's side here. Many passenger aircraft are being used as cargo flights but the conundrum would be what to charge aircraft carrying, for example, medical supplies.

Wage programmes and financing to underpin recovery

5. Comprehensive financial relief: this should include wage subsidy schemes to help restart operations and underpin recovery. Grants and subsidies, secured financing, loans at preferential rates, and bank guarantees should be made available. Financial relief should benefit all actors in the aviation ecosystem.

Can the private sector step in?

With governments otherwise preoccupied, there will probably be an enhanced role for the financial private sector in kick-starting a recovery in the sector, but infrastructure 'risk-takers' may become an endangered species.

ACI comments, in summary: "Airports need urgent relief and assistance"

In summary, ACI World Director General Angela Gittens said:

"Airports need urgent relief and assistance to help them as they begin to restart operations, weather the far-reaching economic ramifications of the crisis, and help lay the foundation of a balanced recovery.

With the massive revenue shortfall, airports continue to face high fixed costs and rising costs related to health measures at airports coupled with creeping increases in the cost of capital are new challenges brought on by the pandemic. ACI World believes these costs need to be considered by governments and the impact they have on the airport cost base.

Airports are keen to support traffic growth but the allocation of airport capacity also requires a balanced approach for all aviation stakeholders. Waivers on slots, or a suspension on the use-it-or lose rule, could potentially limit choice for travellers and weaken competition among airlines as part of industry recovery efforts.

ACI World urges regulators to follow a data-driven and evidence-based approach to assess whether further blanket slot waivers are the appropriate measure in re-establishing local, regional and global connectivity."