The Covid-19 pandemic is a once in four generations shock to the aviation sector. The impact in 2020 was sudden and severe; passenger kilometres flown have reset to levels not seen since 2001.

This short overview provides a summary of the full 2020 impact in the APAC region and a look ahead to the potential implications for 2021.

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The Covid-19 pandemic is a once in four generations shock to the aviation sector. The impact in 2020 was sudden and severe; passenger kilometres flown have reset to levels not seen since 2001.

International and Long Haul services are most impacted; International capacity reduced by -63% in 2020 versus -30% reduction in Domestic capacity.

Full Service Carriers are more impacted than LCCs and will also be slower to recover.

2021 traffic forecasts from leading providers have generally become more pessimistic throughout 2020. Since April 2020, AviaSolutions and Bain&Co have consistently forecast a recovery to 2019 passenger levels by 2023-2024.

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To find out more, please get in contact with one of our expert aviation consultants.

In autumn 2020, AviaSolutions conducted a detailed review of Sponsor’s traffic forecasts for Zagreb Airport and revisions following the impact of Covid-19.

The forecast period was 2020 through 2045 and traffic was segmented into International/Domestic/Transit, Scheduled/Non-Scheduled/GA and airline type.

We reviewed the reasonableness of multiple assumptions driving the forecast and assessed the historic and potential strategy of key carriers, particularly Croatia Airlines.

To find out more, please get in contact with one of our expert aviation consultants.

Most sector observers and investors will be familiar with the operating model at the larger airports, which in more normal circumstances feature annual incremental traffic growth with revenues closely linked to volume, and operating costs generally more fixed. EBITDA and EBITDA margin typically improve accordingly.

However, in these far from normal times caused by the Covid-19 pandemic the typical relationships between an airport’s volume, revenue and operating costs are fractured, certainly in the short-term.

In Q2 2020, airport passenger volumes dropped more sharply than at any time in living memory. The outlook for the return of air traffic remains very uncertain with business and leisure air travel still highly vulnerable to national and local rates of Covid-19 infection.

Aeronautical revenue at the larger airports is typically subject to economic regulation (e.g. price caps) which are linked to capital investment plans and volume projections. In the near-term this relationship is also broken, with most regulators deferring regulatory pricing resets until some degree of market stability returns.

Equally challenging is how airports can manage their operating cost base in the short term given the precipitous fall in traffic and the absence of visibility as to how the aviation market will recover in the coming months and years. There are also significant one-off cash costs associated with re-structuring an airport business at a time when airports are seeking to preserve liquidity.

A number of listed European airport groups have published 2020 half year results in the past month. Whilst at first glance the half-year passenger volume and EBITDA results do not appear too alarming, the quarter-on-quarter results illustrate just how much of a challenge these airports are facing as we move into Q3 2020. In this bulletin we present and compare the latest financial results from the following airport groups: AENA, Groupe ADP, Fraport, Heathrow and FHWG.

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