Plunged into a severe recession, accentuated by the health crisis and the sharp drop in oil prices, Algeria could be forced to resort to external debt. Anxious to preserve its sovereignty, Algiers has so far excluded all financing from the International Monetary Fund. But it may better to go early, while it still has room to negotiate terms.
Coronavirus shows African airports must cut reliance on passenger revenue
How to make money from airports without passengers? Coronavirus is showing African airports that they need to learn fast.
Non-aeronautical revenues represent 26% of total revenues for African airports, compared with a global average of 40%, says Marcel Langeslag, director of African Aviation at Netherlands Airport Consultants in Johannesburg. And most non-aeronautical revenue in Africa still depends on passengers being in the terminal, he adds.
According to Airports Council International, the trade association of the world’s airports, non-aeronautical revenues have the potential to be a major source of funds for African airport operators. Such revenues can help reduce reliance on aviation taxes for airport development, the ACI says.
Even in more normal periods, African passenger traffic is volatile. A 0.4% decline in passenger traffic in 2016 was followed by growth of 6.3% in 2017.
- Langeslag argues that the coronavirus-prompted collapse in passenger demand “underlines the importance of airports diversifying their incomes, towards non-aeronautical revenues and specifically those that are not directly passenger-related.”
- In the short term, airports will have to think creatively about how to put the idle time to best use.
- Partial or full closures of airports bring opportunities to carry out maintenance of infrastructure and facilities, without the normal disruption to operations. Langeslag points to runway repairs as an example.
Airports of the Future
John D. Kasarda and Greg Lindsay have described the future of airports in Aerotropolis: The Way We’ll Live Next. In the 20th century, airports were usually built on a city’s periphery. In this century, the growth in global business networks means that airports can no longer be simple waiting areas and are turning into urban microcosms around which cities develop.
But coronavirus creates the risk of a retreat into isolationism by Africa’s aeronautical industry. Africa would risk falling behind in developing the airports of the future.
Langeslag gives Airports Company South Africa (ACSA) as an example of how diversification can be achieved. The company provides technical advisory and consultancy services to other airports worldwide, and operates airports in India, Brazil and Ghana. Among the services that ACSA provides to other airports are:
- Engineering design reviews for airport infrastructure
- Designing baggage handling systems
- Auditing for safety, security and compliance.
- ACSA is also moving into land development. In February it announced the first phase of its Western Precinct development at the OR Tambo International Airport near Johannesburg.
- The project is planned to include retail, hotel, conferencing, logistics and parking facilities.
There’s no prospect of revenue from passengers returning to normal anytime soon. “Flight cancellations and reduced load factors will put tremendous strain on the cash flow of airlines,” he says. “Airlines with low liquidity are likely to be the hardest hit,” and some governments will need to bail out state-owned airlines, he says.
There could be a long-term silver lining: if governments were willing to finally implement liberalisation of the African airspace and create a more favourable cost environment for airlines, it could “give impetus for some efficient trans-national start-ups,” Langeslag says.
The Bottom Line
African airports need to use the crisis to rethink how they can develop more diversified revenue streams.