As passenger numbers fall in the wake of COVID-19, airports need to diversify their revenue streams in order to reduce both revenue volatility and the immediate negative effects of declining passenger traffic on their business.
The world-leading airport consultancy and engineering firm, NACO (Netherlands Airport Consultants) published a white paper that reveals the immediate impact of the pandemic. The paper finds the almost total contraction in passenger-related revenues has led to a near evaporation of earnings for airports. This in turn will make post-crisis levels structurally lower for years to come and change the landscape of the aviation industry.
The paper brings together research and wide-ranging data compiled by NACO, a company of international engineering consultancy Royal HaskoningDHV.
Speaking about the reasoning behind the white paper, Pieter van der Horst, Airport City Development Expert at NACO said: “We are approaching what would have been the busiest days of the year for major airports like Schiphol and others across Europe and the world – which are now close to empty as fleets are grounded, flights cancelled and many nations across the world are still in various stages of lockdown.
Van der Horst continues: “We see three developments at play which strengthen the case for diversification in non-passenger related revenues. Firstly, the pre-pandemic trend of decreasing retail revenues per passenger; secondly, major uncertainty around recovery of air travel; and finally, the introduction of green taxes and conditions for government support to airlines which add to the uncertainty.”
These developments, according to van der Horst, will inevitably impact passenger-related airport revenues. However, the green initiatives could provide an opportunity for airports to extend their networks with rail services, create multi-modal hubs and become more attractive overall for commercial real estate development.
Airport Cities comprise the developments and infrastructure that surround airports. The developments and infrastructure are also influenced by the presence of the airport. Airport Cities can extend up to 5km from an airport and incorporate commercial elements such as offices, hotels, conference centres and shops, as well as manufacturing and logistics facilities.
The white paper makes the case for airports – including smaller, regional airports – to develop Airport Cities through long-term lease-contracts and fixed charges that ensure a stable revenue stream from airport real estate. This applies even in times of decreasing passenger numbers or economic downturn.
Van der Horst added, “In many ways, COVID-19 is a test in the run-up to bigger questions facing the industry such as climate change and potentially declining passenger traffic. Those who understand this then develop and diversify their airports to address these questions will be better positioned to ride out periods of uncertainty.”
To download and read the full findings of the white paper, click here.