ACI APAC: Airport revenues under pressure

A severe drop in passenger traffic is expected as many countries have imposed travel bans and direct flight cancellations in response to the outbreak, substantially decreasing air connectivity

NZ regional airports
An empty airport shows the current state of the industry due to the COVID-19 pandemic. (PHOTO: Shutterstock)

Airport revenues in the Asia-Pacific and Middle East regions “are under tremendous pressure two months into 2020 amid the impact of the COVID-19 outbreak, despite moderate growth in 2019”, according to ACI Asia-Pacific. The trade group released preliminary January 2020 airport traffic results that it said “reveal divergent performance among major aviation hubs in the region with some airports generating positive growth leading up to the Lunar New Year. However, with the outbreak of COVID-19 occurring in late January, contraction is anticipated”.

ACI Asia-Pacific said a “severe drop in passenger traffic is expected as many countries have imposed travel bans and direct flight cancellations in response to the outbreak, substantially decreasing air connectivity”. Scheduled capacity within Asia-Pacific has dropped drastically, in excess of 15 percent in February. According to the China Ministry of Transportation, the Chinese civil aviation sector handled 38.4 million passengers during the 40-day Lunar New Year travel period, representing a decline of 47.5 percent from the same 40-day period in the previous year.

According to the latest estimates by the UN’s International Civil Aviation Organisation (ICAO), more than 130 airlines have cut international services or cancelled all operations to/from mainland China since January.

“The impact of the travel bans and restrictions in response to the outbreak is having a drastic impact on scheduled capacity. It is concerning that China, which contributed close to 60 percent of the 2019 traffic increase, will no longer be able to fuel growth in this first part of 2020,” said Stefano Baronci, director general of ACI Asia-Pacific. “Airport revenue generation and growth are directly linked to traffic levels. We can therefore expect declines of significant proportion for airports in affected markets in the first quarter. However, the ripple effect will be felt across many airports beyond our region.”

Baronci said several hub airports in the Asia-Pacific region are “heavily reliant on non-aeronautical revenues, sometimes referred to as commercial revenues. These revenues are derived from rental income, car parking and concessions such as duty-free. On average, Asia-Pacific airports derive as much as 45 percent of their revenues from non-aeronautical sources. For some hub airports in the region, non-aeronautical revenues are the principal revenue source. Unfortunately, these airports also find themselves in countries that are at the epicentre of the confirmed cases of the coronavirus.”

Full-year 2019 passenger traffic in the Asia-Pacific region grew by 3 percent, less than half the region’s 8.1 percent growth in 2018. December 2019 figures showed an increase of 6 percent passenger traffic growth in Asia-Pacific.

Airports around the world are starting to suffer from a steep drop in passenger traffic. (PHOTO: Shutterstock)

“Both Asia-Pacific and the Middle East have experienced significant growth over the past five years. The 2019 traffic results indicate a contraction in terms of growth and confirm the concerns related to the negative impact of the trade war boosted by short-term commercial measures that frustrated the economic and social progress of the region,” said Baronci. “China as the world’s largest and highest spending outbound tourism market is giving signals of severe difficulty in the first two months of 2020. The aviation sector will need to rethink its connectivity strategy from its heavy reliance on Chinese outbound market.”


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