The airport sector has probably been impacted the most by the COVID-19 pandemic, and the severity of these impacts is harrowing. With global travel bans and one-time passengers now avoiding flights, airport traffic has plummeted.
The most immediate impact on the industry has been the financial hit due to significant declines in passenger demand following the outbreak. On top of this, travel restrictions have caused revenue to plunge even further. Airport Council International has projected a decline in worldwide airport revenue by 50% this year – a sharp contrast to the projected 10% to 12% increase estimated at the beginning of the year. From a traffic perspective, travel bans have reduced passenger numbers by 90%, and airports are anticipating a 40% drop in total passengers for the year.
This scenario poses a great challenge for airports. Their ability to mitigate revenue losses tends to be limited because their fixed cost base remains largely unchanged. Airports must continue paying on debt and managing capital costs that stem largely from infrastructure depreciation. Additionally, airports employ more than 60% of the aviation industry’s total workforce. Essentially, every passenger lost by an airline is a passenger lost by the airport too, and they provide non-aero revenue totalling nearly 40% of an airport’s total revenue.
Airports are now faced with addressing rapid operational cost optimisation, while also trying to sustain CapEx costs. As the situation evolves, the usage of digital channels continues to accelerate. Airports are automating operations and implementing remote working to maintain health protocols and guidelines. Airports must take a strategic approach to navigating business operations, which focuses on ensuring readiness as travel begins to pick back up, all while implementing new guidelines and SOPs that drive safe and “Responsible Airports.” This includes abiding by the health protocols, as well as encouraging passenger behaviour changes that promote their safety and wellbeing.
Covid-19: Hong Kong Airport applies advanced disinfection technologies
Delhi International Airport unveils plan for passenger travel post lockdown
We predict that many airports will take a COVID-19-aligned Business Transformation Journey over the coming months and years. And CIOs can play a big role in this transformation journey, making sure that current operations run smoothly by leveraging digital technologies and contributing to savings for envisaged business changes in the future.
Taking a COVID-19-Aligned Business Transformation Journey
This journey includes the phases outlined below, and this article will primarily focus on the first of them – the “Survive” phase. This phase addresses immediate priorities and enabling rapid cost optimization.
The main areas of focus in this phase:
1. Business Continuity – Many airports probably did not include a “complete lockdown” scenario in their Business Continuity Plan (BCP) previously. However, they reacted in a timely manner, implementing temporary fixes for social distancing, remote working, screening standards, and more. In fact, the Greater Toronto Airport Authority recently created a playbook for pandemic situations. Some of the scenarios we’ve experienced were part of it while others were not, but the organization reacted in timely manner regardless.
These fixes are being made while passenger and airline traffic are at their lowest. Airports need to evaluate whether these measures should be included in their medium-to-long term BCPs.
How Pearson Airport has coped up with the pandemic
2. Cost Containment – Airports must examine current initiatives and programs, evaluating or prioritizing sourcing agreements, services, and discretionary expenses. This must be done considering current non-BAU circumstances, helping circumvent possible cash flow or liquidity challenges in the near and medium terms.
Here are some examples of immediate response made by large airports across the globe:
Frankfurt Airport responds to COVID-19 crisis with defined procedures and major cost-reductions
Dubai Airports waives minimum guarantees to its commercial partners as part of Covid-19 assistance programme
During this phase, airports must take on optimization and consolidation opportunities. Many BCPs now likely include scenarios that were not thought of earlier, and new passenger habits and behaviors will emerge as the world comes out of lockdown. Additionally, airports can leverage their observations and experiences, helping them strategizing a better future. Also, in this phase there is a great opportunity to look at consolidation across contracts especially the IT services that can not only provide major and immediate cost efficiencies, but also opportunity for digital partnership to set airports into the transform phase.
This phase can begin once airports start seeing some certainty. There will be opportunities to start exploring new remote and global models of service delivery, as well as the chance to adapt to a new emergent business model that can work in the best and worst situations.
Introducing business changes that cater to new passenger and airport stakeholder habits and expectations will happen at this time. This includes implementing digital platforms, self-service options, and automation opportunities for contactless, safe, and responsible experiences.
While it’s important to keep an eye on medium- and long-term plans, it’s more important to survive today’s circumstances. The current situation will take anywhere from 3 to 9 months for demand recovery to begin. Because of this, it’s important to focus on cost containment and business continuity while surviving in the meantimpact:
Shifting the Business Resiliency Framework for survival
During the “Survive” phase, there are several areas that can be analyzed for opportunities to contain costs, repurposing them for business continuity and future needs. Finding opportunities that give quick results is key during this time. We’ve provided a high-level framework with a cross-reference matrix of different initiatives and various dimensions below. The circles indicate high impact:
Figure 2. Business Resiliency Framework
Re-prioritization – Airports may have many transformation initiatives – programs/projects that are running or planned for the current financial year as a part of CapEx expenditure. It’s important to take stock of them, reprioritizing them or reducing their velocity for potential new scenarios that may emerge in the future. For example, the future of work shifted from medium-to-long-term priority to immediate priority. It would be prudent to divert some of these efforts and resources to current lockdown-introduced emerging needs e.g. Frankfort Airport undertook renovation projects that can be done easily and economically when traffic is limited.
Analysis for Quick Wins – Airports may have applications, infrastructure, processes, and certain elements of their IT operating model that are be redundant or dormant. Now is the time to quickly take stock of them and repurpose where possible. These quick wins may exist in the organization already – not necessarily due to COVID-19 – and can be accelerated easily.
Right Sizing – IT estate, IT operations, SLA, business processes, and sourcing need to be recalibrated to adapt to emergency situations. It’s important to look at every aspect, checking if it’s relevant to the current situation (ex. infrastructure consolidation and standardization of technology platforms across terminals). Also consider converting CapEx costs to OpEx through outsourcing.
Scaling and Automation – COVID-19 has accelerated digital integration, creating issues that were not envisioned earlier. They may come from using digital channels, sourcing, implementing collaboration platforms, launching full-time work-from-home paradigms, or automating new health and safety guidelines and procedures. You may find quick solutions to these problems by leveraging the cloud, automating new processes, redefining security policies for remote working, or using vendor support.
Change Management – COVID-19 has created an unprecedented business situation that airports are handling by quickly changing and aligning. They have primarily focused on business continuity, cost containment, and regulatory and compliance requirements. These changes can be best managed through change management, providing better consumer and stakeholder experiences.
Leveraging years of deep airport domain experience and strong digital and consulting expertise, Wipro has been partnering with our airport clients during these challenging times. Our combined success makes us confident that we’ll emerge victorious in spite these challenges, positioning us strategically for the “New Normal” that’s on the horizon.
About the author
Manish Ravindra Kumar
Global Practice Head , Engineering Construction & Operations and Airports, Wipro Ltd.
Manish R Kumar is the Global Digital & Consulting Head with the Engineering Construction & Operations and Airports (EC&O) vertical in Wipro Ltd. that includes Engineering Construction, Real Estate, Smart Cities, Airports & Ports competencies. He is a seasoned professional with over 20 years of diverse experience in the Infrastructure industry globally. Manish has been enabling digital transformation for global airports and construction and real estate enterprises, making them become more agile and productive.
Manish can be reached at email@example.com
Partner, CIO Strategy and Advisory Services, Wipro Digital Consulting
Rajnish has more than 22 years of experience in setting up and managing global teams’ proficiency in selling and delivering digital consulting engagements and architecture services across industries. He is continuously advising CXO and executive management on various aspects of IT and Digital.
Rajnish can be reached at firstname.lastname@example.org