The seven pillar airport survival strategy
There is no doubt the Covid19 pandemic has had an unprecedented impact on airlines and airports and air transportation suppliers. The sector has suffered from a drastic reduction in the number of passengers, with airports operating near a zero-revenue environment, while at the same time new costs have emerged for operators, including terminal and facility disinfection and cleaning associated with the pandemic.
While Aci World has recently issued a brief to help airport operators survive, René Armas Maes, vice president commercial of Jet Link International LLC and Aci Instructor suggested in an article for Aci a seven pillar airport survival strategy. Here below a summary of his proposals. To access the full version of the article, please go to: https://blog.aci.aero/the-seven-pillars-of-an-airport-survival-strategy-during-and-post-covid-19/
- The first pillar, according to Maes, is closing terminals partially or completely to reduce costs. “To execute a successful bare minimum cost operation while still be able to provide safe operations, airports should review all commercial scheduled flight itineraries as well as cargo, medevac, charter, humanitarian and military activities”.
- Considering that cash is king during uncertain times, the next “must” would be to focus on liquidity and raising cash, evaluating all potential funding sources. “On the private side, extend existing lines of credit and consider raising cash through share issues targeting large institutional investors and existing shareholders. (…) Exploring mandatory (or not) convertible bond mechanism. (…) Focus on negotiating with entities that have bought debt securities from the airport. (…) On the public side, cash advances, state and bank guarantees, grants and subsidies can be negotiated”, among other things.
- The third pillar consists in negotiating special concessions with governments and valued partners, making sure relief packages target the entire air transportation ecosystem (including for example retail shops, restaurants, lounges, offices, car rentals and parking operators).
- Reducing, postponing or cancelling large investments and capital project is another essential step in the plan for survival and recovery. “A one-time pause in demand as this one – writes Maes – can be the perfect opportunity to continue, accelerate and finalise existing capital improvement projects”. In this climate contractors might be willing to renegotiate conditions and operators might position themselves ahead of competitors while being ready to optimise revenues when traffic recovers. “Even if a business is navigating through the current economic shocks, planning ahead for the next stage of the crisis and beyond the pandemic is key.
- It is also time to redraw the budget, re-adjusting and resizing costs, and re-positioning the business for growth. The challenge here is, as Maes points out, that while “forecasting the future is impossible, preparing for it is essential. Domestic markets are expected to recover faster than international. As a result, airports serving large domestic markets could expect a faster recovery than those serving small markets and countries with large domestic markets will have an advantage”.
- Those who continue to build their commercial strategy and brand even during uncertain times, will be more likely to ripe benefits in the future. Operators should keep in mind that safety, sanitation, corporate responsibility and sustainability are particularly important today for passengers and they should target their audiences accordingly. “to drive more value, airports should concentrate on loyalty programs, strategic pricing and partnerships with employees/communities/governments/tourism associations and chambers of commerce”.
- Last, but not least, technology, digitalization and innovation: “it is expected that touchless technology will accelerate in the near future including touchless biometrics to verify passenger identity. It will help to reduce wait times while improving passenger experience.” Furthermore, “Technology, automatization and innovation will play a key role to re-launch operations and differentiate one airport offer from another”.
Every crisis contains the seeds of opportunity and the one brought about by the Covid 19 pandemic is not exception, provided we use the current situation as a chance to accelerate overdue changes, innovation and transformation. “Careful planning and strategy are needed in order to meet the future successfully”.