22 Oct 2020
6 MINS READ
There’s never been a more vital time to consider the digital technologies that can boost resilience and bolster the recovery of airports worldwide.
The unprecedented spread of COVID-19 globally is demanding drastic actions across the airport industry. Due to the pandemic, there have been official travel bans, visa cancellations, an increasing number of flight cancellations, aircraft groundings, border closures resulting in traffic decline, fewer flights, lower load factors, revenue loss proportionate to traffic loss and a decline in unit revenues. Airports are even incurring additional operational expenses for extra cleaning and sanitization and to enable touchless/frictionless travel. Due to all this, some airports/airport terminals have practically closed their commercial operations. However, many airports remain open for cargo operations to maintain continuity of the air cargo business that is essential for many households, communities and industries.
An economic analysis by Airports Council International (ACI) World has found that, at a global level, the COVID-19 pandemic is predicted to wipe out two-fifths (38.1%) of passenger traffic (i.e., equivalent to 3.6 billion passengers) and almost half of revenues for airports in 2020. Revenue channels are paralyzed by the unprecedented drop in aviation and commercial activity. While the industry was expected to generate about $172 billion, it is now predicted it could lose about 45% or more than $76 billion by the end of this year. Additionally, potential airline, ground handling and other airport-related service provider bankruptcies represent a major risk for airports.
The airport industry is extremely asset-intensive; airports are subject to high fixed costs, which are difficult to adjust in such a time of crisis. Airports continue to meet their capital expenses (almost one third of total airport costs) and other contractual obligations as far as possible. At a minimum, airports are reducing variable costs by closing areas of infrastructure, postponing capital expenditures and addressing staffing costs. The direct pressure on airport operating expenditure is still unbearable to maintain with current airport staffing levels. According to ACI World Director General Angela Gittens: “A drastic decline of such magnitude for the global airport industry represents an existential threat.”
The airport industry and bodies such as ACI are pushing for a swift, effective and equitable economic policy response from governments to protect essential operations, millions of jobs and give the industry the greatest chance to weather the storm and recover quickly. Safeguarding continuity of airport operations when the current health crisis gets resolved is of common interest to both the air transport ecosystem and the wider economy. ACI has made many global policy proposals for the protection of airport revenues, temporary global suspension of the 80/20 slot rule, waiver on airport concession fee payments, tax relief for the aviation sector, government assistance (grants and subsidies), etc. The recovery timeline is expected to differ significantly based on the regions and countries within them, largely because of the variation in government responses and support levels. According to ACI, despite these industry and airport actions, recovery may take 12-18 months or more to reach pre-crisis traffic levels. The airport industry is not expected to record pre-COVID-19 traffic volumes again before the end of 2021.
There aren’t many silver linings to what the industry is currently experiencing. But if there is something the industry can learn, it is that a slowdown presents an opportunity for improving cost efficiencies, productivity, automation and digitization, streamlining operations, lowering risk via improved reliability to prepare for when the demand does come back. Although airports will face short-term losses, they must bolster recoveries with renewed digital investments and continue to forge ahead with measures that will boost resilience in the long term.
The current COVID-19 pandemic is adversely impacting and changing how airports and the airport industry do business. During these challenging times, while moving swiftly is paramount, there is also the risk of wasteful spending or loss of revenue due to gaps in productivity, poor process optimization or subpar customer experiences. Purpose-driven alignment around airport strategies and initiatives are the key. By focusing and smartly prioritizing some of the strategies proposed above, airports and the airport industry should stand a better chance at recovering relatively well from the crisis, driving the possibility of future growth and building resilience. These transformation initiatives will provide opportunities to reduce costs, bring better speed and agility, cost efficiencies and innovate to remain ahead of the curve and be prepared to thrive before, during and after the next pandemic or economic downturn.
Hexaware is committed to working closely with the airport community to overcome the challenges in adopting these transformation initiatives and implementing innovative solutions based on its core principles of ‘Automate EverythingTM’, ‘Cloudify EverythingTM’ and ‘Transform Customer ExperiencesTM’. Hexaware’s new-age service offerings include an intelligent smart automation re-platforming product ‘AmazeTM’ for cloud transformation, modern delivery services, autonomous digital assurance services, unified communication and self-service COCO platform, predictive analytics for asset maintenance, etc. all of which will surely help in driving airport transformation.
(1) aci.aero (Airports Council International)
(2) Futuretravelexperience.com
About the Author
Rahul has been part of the Aviation & IT Industry for more than 20 years now. He has worked with several Airlines, Airports, Online Travel Retailers as a product manager, solutions architect, IT development manager & as a principal consultant advising on data exchange & industry standards, conceptualizing & developing new IT solutions, leading industry segment working groups, driving large re-engineering, data analytics & implementation engagements.
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