The impact of COVID-19 on the airport business and the path to recovery

Montreal, 25 March 2021 – Airports Council International (ACI) World has published its sixth assessment analyzing the economic impact of the COVID-19 pandemic, its effects on the global airport business, and the path to recovery.

A year ago, on 11 March 2020, the World Health Organization (WHO) declared the COVID-19 outbreak a pandemic. Since then, daily life across the globe has changed. Air transport has remained one of the hardest-hit global industries since the very beginning of the crisis. The ongoing COVID-19 pandemic has resulted in a full-scale global transportation crisis. It became quickly evident that it would evolve in a crisis like no others bringing the industry into survival mode, impaired by the loss of traffic and revenues.

It is clear that the impact of this crisis reaches way beyond aviation. Since the COVID-19 outbreak started, more than 2.7 million people have died worldwide due this virus. Researchers have recently estimated that the world has lost 20.5 million years of life because of premature COVID-19 deaths, and this number will just continue to increase.

Along with the human tragedy, the crisis has also resulted in dramatic damage to the global economy, trade, and mobility. Practically all aspects of economic and social activity were, and are still, disrupted.

The health, safety and wellbeing of passengers and staff is the aviation industry’s number one priority. Airports have introduced many new health and biosafety measures to help ensure the health and safety of passengers, and that airport customer experience reflects their changing expectations and addresses their concerns.

Airports and airlines are united in the call for governments to partner with the industry to prepare to restart global connectivity when the epidemiological situation allows, and the unprecedented global vaccination effort offers a beacon of hope that a return to normality is a possibility in the near future.

Since the first vaccine dose was administered in late 2020, more than 450 million doses have been administered across more than 130 countries. The possibility that summer vacations abroad may happen this year is more likely than ever.

Many industry surveys have shown that “vacation deprivation” combined with an upsurge in confidence in air travel provided by vaccination and safety measures should result in the number of people traveling outside of their countries will start this spring and significantly increase by mid-year.

One of the keys to supporting a sustained recovery will be the establishment of an interoperable health data trust framework to facilitate safe border reopening and cross-border travel. As such, ACI is supportive of any system which will allow testing and vaccination data to be shared consistently, effectively and in a way that protects the personal data of those that use it.

Despite positive signs and prospects for recovery, COVID-19 remains an existential crisis for airports, airlines and their commercial partners. In this context, the current document seeks to highlight some key figures in terms of the impact of the COVID-19 pandemic on airport traffic and revenues and pathways to recovery.

1. COVID-19 crisis had an unprecedented impact on airport traffic

Last year marked the end of a decade of consistent growth in global passenger traffic. The ongoing COVID-19 pandemic brought airports around the world to a virtual halt in the second quarter of 2020, resulting in airport traffic —and revenue —losses across all regions. While many countries have since then started to gradually reopen many parts of their economy, many states were confronted with subsequent waves of infections and several jurisdictions opted for the re-imposition of partial lockdowns.

Countries like France, Poland, Canada, India, and Chile had to increase or re-instate partial lockdowns in an effort to control the spread of a second, third or even fourth wave of infection. Even though most countries have moved away from all-encompassing lockdowns and are now trying to limit the infections with targeted and less disruptive restrictions, most jurisdictions have retained either partially or totally restrictive regulations pertaining to international travel including self-quarantine on arrival.

In this context, ACI World has produced the latest estimates regarding impact on passenger traffic.

Looking back at 2020

• The impact of the COVID-19 crisis removed more than 1 billion passengers for the whole year 2020 compared to the projected baseline (pre-COVID-19 forecast for 2020), representing a decline of 64.6% of global passenger traffic (see Table 1). Compared to 2019 level, the decline is recorded at 63.3%.
• Europe and the Middle East were the two most impacted regions with similar declines of 5% compared to the projected baseline.
• After being hit first, Asia-Pacific embarked on recovery earlier and faster than other regions—mostly driven by China’s sizable domestic market— and closed the year 2020 with a decline of 61.3% compared to the projected baseline (59.8% decline compared to 2019 level). Asia-Pacific, however, recorded the highest traffic loss of all regions with a loss of 2.15 billion passengers in 2020 compared to the projected baseline.
• Latin America-Caribbean was the least impacted of all regions posting a decline of 61.1% compared to the projected baseline (-59.8% compared to 2019 level).
• Following the “Great Lockdown” of April 2020, international passenger traffic was virtually non-existent in the second half of 2020. International passenger volume ended the year below 1 billion passengers, a decrease of more than 75% compared to 2019 volume. (see Chart 2).
• Domestic passenger traffic volume was helped by the early recovery of major domestic markets like China, Russia and the US. Globally, domestic traffic volume for 2020 was recorded slightly above 2.4 billion passengers, a decline of 54.7% compared to 2019 volume (see Chart 2).

Projections for 2021

• The impact of the COVID-19 crisis is forecasted to remove additional 4.7 billion passengers by year end 2021 compared to the projected baseline (pre-COVID-19 forecast for 2021), representing a decline of 47.5% of global passenger traffic (see Table 1). Compared to 2019 level, the decline is forecasted to be -43.6% by year end. The first quarter of 2021 is expected to show little signs of improvement compared to Q4 2020. As the vaccination rollout and vaccine uptake increases, more passengers are expected to return to travel with the biggest surge in Q3 and Q4 of 2021.
• Similar to 2020, Europe and the Middle East are forecasted to remain the two most impacted regions with declines of 1% and 58.9%, respectively, compared to the projected baseline due to their high dependence on international travel and connectivity which are recovering at a slower pace than domestic travel.
• Following its early start to recovery, Asia-Pacific will outperform all other regions in each quarter of 2021 and is forecasted to end the year 2021 with an estimated traffic loss of 40.3% compared to the projected baseline (a decline of 35.1% compared to 2019 level). Driven by the combination of a fast-recovering US domestic market and strong vaccination rate, North America forecast for 2021 will significantly improve and the region is expected to end the year 2021 at -43.5% compared to the projected baseline (or -39.9% compared to 2019 level).
• International passenger traffic is expected to remain weak in the first half of 2021, but early signs are pointing to a significant surge in air travel demand for the second half of 2021 as an increasing number of people get vaccinated and international travel restrictions are gradually eased. While international passenger traffic volume will still lag behind domestic traffic in 2021, it is forecasted to end the year above 1.6 billion passenger or 4% of 2019 level (see Chart 2).
• Domestic passenger traffic started its path to recovery faster than international traffic. Globally, domestic traffic will continue to increase in 2021 to reach close to 5 billion passengers by the end of 2021 corresponding to 65.6% of the 2019 level (see Chart 2).
• Find more details as well as regional breakdowns in Table 1, Table 2 and Chart 1, Chart 2

2. COVID-19 outbreak catastrophic impact on airport revenues

Air traffic is the very lifeblood of the airport business.

Airports generate more than 95% of all revenue from two operating sources: aeronautical and non-aeronautical services.

Practically all aeronautical revenues are a direct function of traffic and include passenger-related charges from passengers and aircraft-related charges from aircraft operators.

As traffic declines, airports’ ability to collect those charges decreases proportionally. With little flexibility in operating expenditures coupled with capital costs that are largely fixed, the current crisis represents an unprecedented challenge for the airport industry’s financial viability.

In September 2020, the Air Transport Action Group (ATAG), a global association that represents all sectors of the air transport industry, estimated that the COVID-19 crisis will result in the loss of 46 million aviation-supported jobs (-52.5%) as well as a reduction of $1.8 trillion USD in economic activity supported by aviation (-51.5%) (Aviation: Benefits Beyond Borders, ATAG 2020).

The current assessment assumes constant airport revenues on a per-passenger basis, even though preliminary evidence suggests that unit revenues may both increase or decrease depending on a combination of airport-specific factors.

Every airport has a unique portfolio of non-aeronautical activities, but as a rule of thumb, a higher proportion of passenger-related activities, such as retail or food and beverage concessions, lead to a steeper reduction in commercial revenues, while higher reliance on real estate income and rents acts as a cushion in times of crisis.

In this context, ACI World forecasts the following related to airport revenues:

Looking back at 2020

• The airport industry was expected to generate about $188 billion in 2020 prior to the COVID-19 outbreak. The impact of the COVID-19 crisis on airport revenues was unprecedented, reducing close to 125 billion USD from airport revenues in 2020 compared to the projected baseline (pre-COVID-19 revenue forecast), a reduction of 66.3%. See Table 3.
• The second quarter of 2020 alone contributed to a reduction of close to $43.5 billion in revenues compared to the projected baseline, a decrease of more than 1%.
• Similar to passenger traffic, Europe and the Middle East were the most affected regions. In absolute terms, Europe recorded an estimated revenue shortfall of 4 billion for 2020. In relative terms, Europe and the Middle East recorded a reduction of 70.5% of their revenues for 2020 compared to the projected baseline.

Projections for 2021

• The impact of the COVID-19 crisis on airport revenues will still be deeply felt in 2021. It is estimated that globally, airports will suffer the loss of more than 94 billion USD of revenues by year end of 2021 cutting in half airport revenue expectations (-50.0%) compared to the projected baseline (-48.1% compared to 2019 level). See Table 3.
• It is expected that each quarter of 2021 will show improvements compared to the previous one, moving from a decline of 7% in the first quarter of 2021 to a decline of 35.2% in the fourth quarter compared to the projected baseline.
• Europe will remain the most affected region in absolute terms, with an estimated loss of revenues of more than 4 billion USD by year end 2021. In relative terms, the Middle East and Europe will suffer the biggest hit with decrease of 58.9% and 58.1% respectively. Asia-Pacific will record the strongest recovery, reaching 59.7% of the projected baseline.
• Find more details as well as regional breakdowns in Table 3 and Table 4

3. Path to Recovery

With the biggest vaccination campaign in history underway, we were seeing some positive signs and prospects for recovery. Both travellers and industry stakeholders are eager to resume traveling. Many industry experts forecast a surge in travel for the second half of 2021. Some are even referring to this potential increase as a “post-war like surge” in travel.

Much uncertainty still surrounds the recovery of the aviation industry, however, and projecting the path to recovery at this point is an exercise requiring prudence. Three scenarios are used to look at the potential recovery trajectory using the following assumptions.

The three scenarios use the following assumptions.

WATF 2020–2040: Developed in December 2020 and published in January of 2021, the WATF 2020–2040 was based on the assumptions of effective vaccines largely distributed in the second half of 2021 in addition to an enthusiasm from passengers to start flying again and a reasonable airlines fleet recovery. This scenario remains achievable but contingent to the ability of governments to contain the spread of new variants of the virus.

Revised Projection (Baseline): Effective vaccines largely distributed in the second half of 2021 in addition to an enthusiasm from passengers to start flying again in the second half of 2021 and a reasonable airlines fleet recovery. Third and fourth waves of infections are possible but rapidly contained and limited to specific regions.

Pessimistic: Effective vaccines in 2021 but complex distribution in many emerging and developing countries and/or limited vaccine supply. Fear of traveling still present amongst passengers, coupled with prolonged economic downturn and slow airline fleet recovery. Third and fourth waves of infections are likely and could spread to multiple regions.

Under those assumptions, ACI World forecast the following related to the recovery of airport passenger traffic:

• Under the baseline scenario, global passenger traffic is now expected to recover to 2019 levels in 2024 mainly driven by the recovery of domestic passenger traffic but now slightly dampened by a slower recovery of international travel (globally, domestic traffic accounts for 58% of total passenger traffic as of 2019).
• If new variants of the virus are effectively contained, the WATF 2020–2040 is still the most likely scenario, resulting in a recovery to 2019 level by the end of 2023.
• Domestic passenger traffic is expected to reach 2019 levels in the second half of 2023. The recovery of international passenger traffic will require one more year, thus getting back to 2019 levels only in 2024.
• At the country-market level, markets having significant domestic traffic are expected however to recover in 2023 to pre-COVID-19 levels while markets with a significant share of international traffic are unlikely to return to 2019 levels until 2024 or even 2025 in some cases.
• The pessimistic scenario calls for a delayed recovery with the appearance of new variants of the virus resulting in governments introducing more restrictive measures, creating new lockdowns and travel restrictions, severely hampering efforts to safely restart. Under this scenario, 2021 passenger volume will remain weak, ending the year at only 46.5% of 2019 level.
• In the long run, it is predicted that the global traffic may take up to two decades to return to previously projected levels (pre-COVID-19 forecast). A structural change (traffic will never return to pre-COVID-19 forecasted level) is still a possibility.

Ends

1. Airports Council International (ACI), the trade association of the world’s airports, was founded in 1991 with the objective of fostering cooperation among its member airports and other partners in world aviation, including the International Civil Aviation Organization, the International Air Transport Association and the Civil Air Navigation Services Organization. In representing the best interests of airports during key phases of policy development, ACI makes a significant contribution toward ensuring a global air transport system that is safe, secure, customer-centric and environmentally sustainable. As of January 2021, ACI serves 701 members, operating 1933 airports in 183 countries.
2. Download the PDF version of the Advisory Bulletin.