As the airline industry has been decimated throughout the pandemic, little attention has been paid to the equally airports that send passengers into the sky and welcome them back to earth. Yet those costly, crucial centers have been just as badly impacted by the collapse of air travel demand.
With fewer flights landing, and fewer passengers shopping and eating while passing through, airport revenue fell more than 65% in 2020 compared to pre-COVID-19 projections, according to Airports Council International. That comes paired with high fixed operating costs as airports work to maintain crucial infrastructure.
Airports, which largely take the form of private-public partnerships in the US, typically rely on a variety of ancillary sources for revenue. Things like parking, rental cars, revenue sharing schemes with in-terminal retailers, and more contribute. As travel demand has dried, airports have come to rely on airline landing fees as their primary source of revenue, according to a research note from analyst Julie E. Meyer at Moody's. And it's not enough.
Now, for the first time in months, there's a glimmer of hope. The $900 billion Coronavirus Response and Relief Supplemental Appropriations Act, which President Trump signed into law in late December, includes $2 billion for airport authorities.
Most of that — $1.75 billion — will go to "primary service airports," those with more than 10,000 annual departing passengers. Another $45 million is reserved for smaller and general aviation airports, while $200 million will provide relief for stores and restaurants in airport terminals on rent and other fees.
While that aid will help airports stay well-positioned to take advantage of an eventual recovery, Moody's writes, the situation remains grim.
Of particular importance, Meyer and the Moody's team wrote, is the assistance to airport tenants. While airports have implemented a variety of their own relief programs for these businesses, in the interest of keeping crucial relationships in place to enable an eventual recovery, they were unlikely to be able to afford them much longer.
The aid also makes it less likely that airports would need to increase costs on airlines to make up for the revenue losses, which could in turn lead airlines to reduce service, hitting revenue even further, and stalling an eventual recovery, Moody's notes.
However, the news is not all good, the analysts say.
The allocation of federal funds is skewed towards smaller airports when comparing to historic revenue and costs. Large, major international gateways, which are expected to be the slowest to recover, have proportionately less to work with.
Before the additional funding, those major airports were expected to completely exhaust their CARES Act funding by the end of 2021, despite the fact that the airline industry is not expected to fully recover until at least 2023 or 2024.
There's also the fact that this brief glimmer of light comes amid what Moody's expects will be an ongoing, protracted crisis for the airline and airport sectors.
The outlook for both areas remains negative for 2021, analysts for the firm say, citing worsening virus spread. Notably, the company published its 2021 outlook reports in late-November and early-December, when there was still optimism over early vaccine rollout. Even so, Moody's analysts wrote that they expected vaccine rollouts to occur too slowly to cause a sufficient return of travel demand.
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