Patrick Lucas: The global lockdown has resulted in massive revenue shortfalls. This has meant that airports are operating at a significant loss. It is a situation where you have high fixed costs that remain constant irrespective of a shutdown or downturn. As a business per se, airports are not designed to be closed and shut down. Certain levels of traffic are required to even break even.

There is a huge correlation between traffic and revenues – and, yes, you can argue good intentions and that health takes precedence over everything else – but regardless of that, it has huge ramifications.

The consequence is that the industry is threatened in terms of liquidity and solvency. We have already seen credit rating downgrades by Moody’s, Standard and Poor’s, and Fitch on airport debt. The cost of capital will rise, which in turn will raise the cost of providing infrastructure.

Certain airport operating expenses might be easier to adjust as they include more variable costs. The largest categories include personnel expenses, contracted services, utilities and energy.

To offset their personnel expenses to sustainable levels considering their revenues, airport operators worldwide are implementing unpaid leave plans as well as temporary and permanent layoffs across all areas of their business.

Another consequence is the significant loss of jobs and a domino effect on other industries. Personnel employed by both airport operators and outside entities represent more than 6.1 million jobs globally. The entire aviation sector accounts for 10.3 million jobs, so 60% of employment in the aviation sector is generated “on the ground” at airports.

According to the Air Transport Action Group (ATAG), aviation’s direct, indirect, induced and tourism catalytic employment effect is in the realm of 66 million jobs. This is comparable to the populations of France or the UK.

For decades, aviation has remained a major catalyst in supporting growth in other industries such as tourism. In fact, as much as 57% of international tourism is supported by air travel as the leading mode of transport.

The industry is hugely important to the social and economic welfare of millions of people across the planet. According to the United Nations World Tourism Organization (UNWTO), tourism accounts for 10% of global GDP with one-in-ten jobs linked to tourism.

Having a blanket waiver on all airport charges – meaning those charges that are levied on passengers and airlines – just doesn’t make financial sense in terms of the sustainability of the business.

Recognising that airlines are also in financial distress, many airport operators have removed parking charges for grounded aircraft to help alleviate airlines – airport infrastructure is not designed for all of this grounded fleet.

Therefore, whatever little revenues are available in terms of cash flow, airport operators need this to sustain themselves through the crisis.

During business as usual times, when we look at taxes in comparison to all costs that include operating expenses and capital costs, taxes and related fees account for ~10% of total costs.

Private airport operators tend to pay an even higher stake. Tax relief means cash savings which could go against the cost of airport operations. It is the sum of various cost alleviation measures that will help airports to sustain themselves.

It’s many little ingredients to support and every little piece helps.

The original reasoning is based on the idea that the situation would improve in the second half of the year. While we still see an uptick in traffic as travel bans are lifted over the summer months, the revenue shortfall will persist.

We are estimating that it will take three years to get back to 2019 levels of traffic and up to ten years to get back to the underlying trend. Thus, to answer the question, longer-term support would need to be considered or extended deferrals on corporate taxes and payroll taxes.

Part of what governments need to do is help the industry stimulate demand and in rebuilding consumer confidence. Airports and airlines are significantly restricted in what they could do given the liquidity crunch they are facing. Some taxes levied on passengers in certain jurisdictions represent a more significant proportion of airfares in the double digits (in terms of percentage).

The reduction of taxes induces traffic gains, which results in employment gains and contributions to national income (GDP). Thus, any tax policy should take a cost-benefit-analysis in terms of its implementation or removal.

Airport operators are often required to pay a fee to governments against the right to occupy land and/or to operate irrespective of their ownership status. This is especially true for airports operated under the build-operate-transfer (BOT) model and its variations, whereby the concessionaire of the airport is generally required to make ongoing payments to the government.

While every airport operator requires financial alleviation to speed up the industry recovery to deliver on the economic and social benefits that it brings, airport operators with some form of private sector involvement are bearing the brunt of the financial shortfall with very high fixed costs as a proportion of their total costs. The higher fixed costs are not due to inefficiencies. The fixed cost these operators face is largely exogenous to business operations and mainly due to higher payments to government or related financing costs.

The vast majority of concessions that have private stakes are found in LAC and Europe both in terms of airports but also in terms of traffic handled by private airport operators.

I think air cargo operations should probably be exempt to some of the stringent quarantine rules, so exclude air cargo operations from any Covid-19-related travel restrictions and exempt air cargo crew members, who do not interact with the public, from 14-day quarantine requirements.

The best thing to do is not to engage in trade wars and heighten economic uncertainty regarding tariff increases. High value-added goods are flown by air, including consumer technology goods, pharmaceuticals, medical supplies and perishables.

Air transport carries around 35% of world trade by value and less than 1% by volume.