As passengers we tend to take a lot for granted from airports. In reality airports are important service providers. Like any other business an airport is affected by market forces. After COVID-19 the sudden drop in air traffic paralyzed the revenues of airports. Here is a look at how they are coping, and what’s in store.
Why private ownership makes sense
Privatization of airports is a decades-old business model which benefits all stakeholders. Governments turned to privatizing airport operations to cope with the exploding demand for air travel. This opened the door for entrepreneurs to provide a much-needed service. According to the Economics Help blog, private airports face pressure from stakeholders to perform more efficiently. Inefficient and unprofitable airports can easily succumb to a takeover. State-owned airports don’t face these pressures and often continue to operate with inherent inefficiencies. By privatizing airports governments create a steady revenue stream in taxes, leases, and fees. Air travelers benefit from better technology and services, efficiency, better comfort, and shorter queues.
The situation of private airport owners
Since the start of the COVID-19 crisis airport owners are in dire straits. Income streams from airlines and passengers have nearly dried-up. Meanwhile the fixed costs remain high. These include taxes, interest expenses, leases, fee payments to governments, and others. Corporación América Airports (CAAP) is the largest private airport operator in the world with headquarters in Luxembourg. In 2020 CAAP recorded a decline in passenger traffic by 70%. , Cargo volume declined by 40% and aircraft movements were down 59%. Consolidated revenues fell by 61%.
According to Forbes, private aviation provided lifeline links to more than 5,000 airports in the US. Private airports like Teterboro (TEB) in northern New Jersey have seen traffic dwindle down to 30%. London’s Luton Airport saw passenger numbers drop by 90% in November 2020. When passenger traffic plummeted, the shops and restaurants at airports closed down. Airports lost another revenue source. McCarran International Airport in Las Vegas reported losses in income to the tune of $113 million in fiscal year 2020. According to The Las Vegas Review-Journal, the influx of tourists that fuels Las Vegas’ economy has yet to return in force. This is affecting all businesses in Vegas, including McCarran International Airport. America is home to millions of migrant professionals. These expat workers transfer money back to their home countries as remittances to support their families. There is an urgent need to resolve the unpredictable employment situation.
How airports will survive
Airports everywhere must prioritize the bottom-line. Many are reducing non-essential costs where possible. This includes closing some of the infrastructure including out-of-use runways. Furloughing staff, cutting salaries, reducing working hours, and hiring fewer contract services are other ways. McCarran International has shut down all gates at 2 concourses in response to decreased passenger traffic.
Going forward, technology will pave the way for saving money and improving services. CAAP CEO Martin Eurnekian noted that there is now an increase in the use of biometric technology at airports. It facilitates the entire flow of travelers, right from the point they enter an airport, till they get on a plane. The idea is for passengers to touch things less, interact less with other people, and observe the necessary social distancing precautions. It makes the flow smoother and speedier, while needing fewer airport personnel.
CAAP has successfully negotiated with regulatory bodies and governments to obtain economic compensation for the impact of the health crisis. CAAP has aggressively reduced personnel expenses in its countries of operations, including Brazil, Uruguay, Italy, and Armenia. It is finding ways of lowering maintenance and operating expenses. One part of this is improving efficiency through better technology. In September 2020 London’s Luton Airport introduced innovative robotic cleaning and sanitizing. Passengers and staff can be confident of the utmost cleanliness and hygiene standards. Making the passengers and airport staff feel more secure is important for getting business back on track in the current climate.
Airport automation is more popular and important than ever. Automation makes an airport more reliable and able to operate at a lower cost. Centralized common-use technology gives airports the flexibility to solve a range of challenges. Airports can accommodate kiosks, gates, and check-in equipment to meet the needs of a forecasted number of passengers. These systems are scalable when needed. They help airports operate efficiently at full capacity during demand spikes. When queuing is minimized, passenger frustration decreases and comfort improves.
About the author:
Hemant G is a contributing writer at Sparkwebs LLC, a Digital and Content Marketing Agency. When he’s not writing, he loves to travel, scuba dive, and watch documentaries.