While corporate travel managers are focused on the recovery
of their programmes and keeping travellers safe as air travel returns, there
has been a sort of quiet battle raging within the aviation industry over the disparity
in financial support offered to airlines and airports.
Airports Council International (ACI) Europe recently pointed
out that many major airlines have availed of around €30 billion in government-backed
funding during the Covid-19 crisis in Europe alone, yet specific support for
airports has yet to materialise across much of the continent. The council also
called out a further inequality in this situation – the money provided to
airlines is not trickling down to airports and other suppliers because carriers
have not been paying charges for using their facilities during the downturn.
Airports face very similar problems to airlines in the
current climate – their outgoing costs remain disproportionately high compared
to the severe drop in revenue experienced by the industry as flights were
grounded at the start of the pandemic. Even now, as flights resume and people
in Europe decide to chance a summer holiday despite the risks, demand has not
recovered enough to make up the shortfall. ACI Europe’s data shows June traffic
was down 93 per cent compared to the same period last year, and the council now
says the recovery is happening much slower than it had originally anticipated.
Call to action
Thus far, with a few exceptions, airports across the continent have only
benefited from temporary unemployment schemes designed to prevent mass layoffs
during lockdowns. Many of those schemes will cease to exist by the end of the
summer season in October, and with demand remaining low many airports and airlines say
they will need continued support to retain talent through the winter season,
which has always been slower for the industry in terms of passenger numbers.
ACI Europe addressed the Aviation Summit last week and urged
European Union leaders to include targeted support for airports in the EU’s
recently agreed €750 billion NextGenerationEU recovery package. It suggested
measures such as financial compensation for airports that remained open in
order to accommodate cargo flights carrying essential goods, extending temporary
unemployment schemes and allowing EU airports to offer duty-free sales in
arrivals terminals to generate more revenue.
President Jost Lammers also called on governments to force
airlines that have received bailouts to pay their airport charges and asked
them to consider airports’ resourcing plans in any extension to the existing
slot waiver scheme. The waiver, introduced near the beginning of the pandemic
and running until 24 October, temporarily eliminates a rule that says airlines
must use their allocated airport slots 80 per cent of the time or lose them. It
has meant that carriers have not had to operate empty flights in order to keep
their slots during the downturn – something that saves both money and the
environment but means airports are losing out on potential traffic.
And airports have seemingly had enough of the inequality.
Speaking at the Aviation Summit, Lammers said: “The economic
and financial situation of airports is disastrous, and the recovery is
proceeding at a much slower pace than we had hoped for. Financial aid to
airlines does not address and solve airports’ own financial issues and ongoing
business continuity risk in the recovery. Such one-sided financial aid to airlines
creates massive imbalances in the Single Aviation Market and threatens its
integrity. It will end up damaging air connectivity and consumer interest.”
The UK’s Airport Operators Association issued a similar plea
to the government last week, saying airports in the country could lose £4
billion this year as a result of Covid-19. Its analysis shows that airports
lost more than £15 million each day in the first four months of the pandemic.
The association is asking for targeted measures such as
Business Rates relief for 2020 and 2021 in line with the relief granted to the
hospitality and retail sectors, a guarantee to somehow support airports with
their employment costs when the Coronavirus Job Retention Scheme comes to an
end in October, guaranteed funding for the sector’s regulator the Civil
Aviation Authority for 2020/2021, and a six-month suspension of Air Passenger Duty
(APD) to stimulate demand for air travel.
AOA chief executive Karen Dee commented: “Airports have done
everything in their power to weather the storm and have done so without the
specific government support afforded to other sectors. That our airports lost
close to £2 billion during the lockdown should serve as a wake-up call to
government and lead them to finally grasp the severity of the challenge and
threat that the pandemic has posed and continues to pose to the sector.”
Asking for more
And yet while airports are crying out for support, airlines are asking for an
extension to the slot rule waiver and changes to regulation on airport charges
in addition to any financial aid they have received during the crisis.
For years the EU has been considering changes to the Airport
Charges Directive, which dictates greater transparency on airport costs covered
by the charges, how airports can determine the level of charges for different
types of services, consultations between airlines and airports and the designation
of a supervisory authority to settle disputes between airports and carriers.
The European Commission had originally planned to table a
review proposal in the fourth quarter of this year, but it has been delayed
indefinitely – something Airlines for Europe (A4E) finds “worrying”.
On the slot waiver issue, there has been some dispute even
between airlines.
Air France-KLM chief executive Benjamin Smith, who is chair
of A4E, recently said ongoing travel restrictions across Europe and localised
outbreaks are making it “very difficult to operate and plan”. He said the
pressure to operate more slots than they need will “exacerbate losses” and “have
a negative impact on the environment”. As such, A4E is asking for the waiver to
be extended through the 2020/21 winter season. Air France-KLM has received more
than €10 billion in emergency funding from the French and Dutch governments in
recent months and is planning to make thousands of redundancies at Air France
and its subsidiary Hop!.
But Hungarian low-cost airline Wizz Air said prolonging the
waiver would only protect “incumbent airlines with weak business models, while
airlines like Wizz Air are ready to take up new market opportunities”. Wizz Air’s
UK subsidiary received a £300 million loan through the government’s Covid
Corportae Financing Facility and furloughed its employees under the various
schemes offered throughout Europe.
Wizz Air chief executive Jozsef Varadi accused the carriers
asking for the waiver to be extended of having a “history of poor cost
management”. He also pointed out that the move would adversely affect airlines
and the cities they serve by causing a shortfall in passenger numbers.
“The current plan to prolong the waiver until March 2021 is
against free competition,” Varadi added.
ACI Europe’s solution is for any extension to include “strict
and enforceable conditions which allow airports to plan their resource levels
in an efficient manner”. It says this would allow airports to ensure unused
slots can be reallocated to other airlines during the recovery rather than
suffering a reduction in traffic until carriers decide it’s time to start using
their slots again. This could be particularly crucial for hubs such as Gatwick,
where Virgin Atlantic is planning to completely cut services but maintain its
slots so it can restart operations at some point in the future.
Whatever the solution, it is clear the end of the dispute
and subsequent successful recovery for both airlines and airports will need to
be facilitated through government support in several different forms. Considering
the various approaches to travel restrictions taken by individual countries
within the EU thus far, the question is whether the bloc will be able to come
up with a unified plan to protect its aviation industry.