INTERNATIONAL. “We are looking at something like a quasi-U-shaped-L-shaped recovery. It will take at least three years to get back to 2019 levels. Some regions will take even longer, but we expect Asia Pacific to recover faster.”
The views of Airports Council International (ACI) World Economics Director Patrick Lucas, outlined during Duty Free World Council’s (DFWC) Planning to Restart webinar yesterday, underline the gravity of the COVID-19 pandemic’s impact on global passenger traffic and the difficult road that lies ahead.
Lucas said: “Many aviation economists thought at first that COVID-19 would resemble SARS where you had a six-month episode and then a bounce back. We now know that is definitely not the case.
“Right now we are in the abyss; we have sunk deep into the crisis. In Q2 we are seeing declines of up to -90% globally in terms of passenger traffic. This represents a loss of over 2 billion passengers in a single quarter.” – Patrick Lucas
Aviation experts have been debating if the recovery in traffic will be V-shaped (a sharp downturn followed by quick recovery), U-shaped (a lengthier period at the bottom) or L-shaped (a sharp turn then a lengthy recovery period).
Lucas said ACI was predicting a short-term U-shaped recovery and long-term L-shaped recovery because of the health and economic impacts of the pandemic compounding each other.
He added: “Right now we are in the abyss; we have sunk deep into the crisis. In Q2 we are seeing declines of up to -90% globally in terms of passenger traffic. This represents a loss of over 2 billion passengers in a single quarter.”
ACI is predicting US$97.4 billion of total airport revenue losses. “At the same time, you have these huge costs; airports are known for their high fixed costs, being infrastructure-intensive businesses that are not designed to be closed,” Lucas said.
China was the first country into the pandemic and is the first to be showing sustained signs of recovery. Lucas said that consumer confidence in China could therefore give an indication of the sentiment in other countries over the coming months.
“If we go back to February, we see 43% optimism regarding the [Chinese] economy, but by May this incrementally increased to 57%. These are some good indicators of one of the biggest markets in the world about the feeling regarding recovery,” he said.
“If we look at scheduled domestic seat capacity, we are looking at a recovery that is inching upwards. The June and July data will get adjusted and this is only scheduled seat capacity, so doesn’t mean a full aircraft, but there has been an uptick since March and April.”
Introducing the webinar, DFWC President Sarah Branquinho discussed the “key wins” for the duty free sector in the recommendations for resuming air travel announced by the International Civil Aviation Organization (ICAO).
“Typically ICAO’s policies can take two years from proposal to adoption but, faced with this pandemic, it established a COVID-19 aviation recovery taskforce and moved at speed to define and publish the measures that have just been announced,” Branquinho commented.
“There are some key wins for the duty free and travel retail industry: opening of duty free shops as traffic returns; no ‘essential retail only’ rules that we had seen proposed in many countries; recognising that shopping areas are part of the airport infrastructure; flexibility as to how measures are implemented; and no strict one-bag rule.
“ICAO does suggest the temporary suspension of inflight duty free sales. We will need to raise this with our airline partners and get them to work with us to bring this back at the first available opportunity.”
Regarding the return of cruises and cruise retail, Branquinho added: “We have been in contact with Cruise Lines International Association (CLIA). They openly admit that they expect cruise lines to come back into business later than air traffic, so we have concentrated over the last few weeks on the aviation sector, but we will be turning to cruise lines next.”
The DFWC’s regional members all gave updates on how COVID-19 was specifically affecting their territory, and what actions they had taken to support their members.
European Travel Retail Confederation (ETRC) Secretary General Julie Lassaigne talked about the prospect of borders reopening within the European Union.
“When it comes to internal borders, they have been closed within the EU for about two months but we expect they will start opening gradually,” she told attendees.
“The date we have been given and the date we are all looking forward to is 15 June when we expect the member states of the EU to announce the coordination of opening of borders so people can travel between EU countries again. That is a prerogative of member states, but we are pushing for a coordinated opening of borders to give consumers confidence in travel.”
Lassaigne added that, if there was no second wave of infections in Europe, EU member states and the European Commission were open to the prospect of travel corridors between the EU and low-risk countries outside of Europe as soon as July.
Middle East & Africa Duty Free Association (MEADFA) President Haitham Al Majali said: “MEADFA appointed an advocacy working group and they adapted a position paper tailored to the region for engaging with key governments and regional organisations.
“Two letters have been adopted by the board and sent. The first was a political engagement letter asking for financial support from the governments of the region. The second sought to engage with landlords and asked for a rent relief strategy to support retailers.”
ACI’s Lucas added that the Middle East’s historically strong levels of transit traffic meant that the region’s recovery will be linked to a resumption of travel in Asia.
Asia Pacific Travel Retail Association (APTRA) Executive Director Christina Oliver said she predicted a “phased” recovery in the region.
“We suspect that corridors will open up first. We are looking at New Zealand-Australia as one of those, as well as Malaysia-Singapore,” she added.
Moving on to the Americas, International Association of Airport & Duty Free Shops (IAADFS) Chairman René Riedi said: “Many legislators and lawmakers do not know much about the unique aspect of our industry and the particular hardship we face due to lack of flights. One of the main tasks for us was to educate legislators and make them aware of our unique situation.
“We hope in one of the upcoming stimulus and relief packages to get an allocation that is currently being discussed in the house and the senate.”
The border between the US and Canada has been closed to everything except essential commercial traffic since 21 April and Frontier Duty Free Association (FDFA) Executive Director Barbara Barrett said she expected the closure to extend beyond its current end date of 21 June.
“Until the border opens, only 25% of our stores are open and those that are open are only serving essential workers moving across the border for supply chain. That means there’s very little traffic and revenues are reduced for even the stores that are open,” she added.
Asociación Sudamericana de Tiendas Libres (ASUTIL) President Gustavo Fagundes said Latin America was a “step behind” the rest of the world regarding the pandemic, with several countries in the region currently seeing a peak in daily infections.
He added: “We will learn a lot from the recovery of other regions, and I am sure that we will do the best we can to pick up at pace as soon as possible.”
