Air transport: creative thinking for post-COVID take-off
21 July: Eleni Kaloyirou, CEO of Hermes Airports, the company that manages the two international airports of Cyprus, talks about the impact of COVID-19 on the air transport industry and its outlook for the future.
The tourist industry in Cyprus contributed over 14% to the country’s GDP and supported the employment of 53,000 in 2019. In previous crises, most recently in 2013, it was the tourism sector that enabled the country’s economy to recover faster than anticipated. However, under present circumstances, it needs support itself if it is to survive and recover from the pandemic.
A major setback for the air transport industry
In the current crisis, the air transport industry was the first to be impacted and has suffered the biggest blow, given the grounding of flights all over the world for such a prolonged time.
Flights to and from the two international airports of Cyprus were essentially banned through governmental decrees from 13 March and as a result, passenger traffic was reduced by 59% in March, followed by a 99% reduction in April and May, compared to last year’s corresponding months.
The blanket ban on flights was lifted on 9 June, but restrictions remain, based on a categorization of countries according to their epidemiological situation. The drop in traffic during June was 97% compared to last year and we expect a summer where passenger numbers will be significantly reduced compared to previous years.
The situation remains highly uncertain
It is almost impossible to predict what the rest of 2020 or even 2021 is going to look like in terms of passenger traffic or tourist numbers. Even though Cyprus has received international praise for how well it has dealt with the COVID-19 crisis, there are still so many variables at play. These include the status of countries from where we normally welcome tourists, as well as the willingness or financial ability of people to travel, even from countries that have fared well during the pandemic. All this means that any forecast at this stage would be premature.
We are confident that with the protective measures introduced during the whole travel process, as well as through the anticipated progress in the development of a cure and/or vaccine for the virus, the air transport industry will gradually recover to its pre-pandemic levels.
2021 expected to be significantly better
The million-dollar question is how long it will take for the industry to recover to its 2019 numbers. The currently accepted wisdom is that this could take between two to three years. Based on past experience, the tourism sector has proved resilient and has shown the ability to recover impressively after sudden and steep recessions. We expect that 2021 will be a significantly better year for the industry, even though the loss is so big that it may take several years to fully recover.
The airports in Cyprus never closed
Flights to our airports were allowed to resume, with restrictions on 9 June, following the period of lockdown. Even during lockdown, the airports were not closed: they had to stay operational as they offer essential services, maintaining connectivity with the rest of the world and serving crucial flights for the transportation of cargo (including medical supplies) and the repatriation of people.
In a period during which there was zero revenue, it was essential to reduce our expenses to the extent possible to safeguard our liquidity and ensure our business continuity. Unfortunately, in an airport, a large percentage of expenses are not variable and therefore hard to reduce. However, through our efforts and discussions with our service providers at the airports, we were able to reach an agreement to reduce our expenses where possible.
Safeguarding our staff
Our people are our strength, and one of the most significant factors for the smooth operation of our company and the airports. From the very beginning of the crisis, we took all necessary measures to be able to protect the health and safety of our staff and our passengers from the pandemic.
Our staff continued to work diligently throughout the lockdown period to ensure the smooth operation of the airports, even if this was significantly scaled down, with most of the office staff working from home during that period. Even though our operation remains very limited since officially restarting on June 9, all our staff have now returned to the office, taking all necessary protective measures based on protocols issued by the Government health services.
From the outset of the crisis, the Government of Cyprus was very keen to protect employment and put in place measures to support companies financially to encourage them not to make people redundant. We have received financial assistance under the Partial Suspension of Operations Scheme, without resorting to any reduction of staff numbers or pay.
Short-term goals amended, long-term strategy unaltered
Hermes Airports welcomed 11.3 million passengers in 2019, the most since taking over the airports in 2006. The target for 2020 was for achieving an even higher number, in line with our strategy of growing our passenger numbers and tourist visitors to Cyprus. In light of the situation created by COVID-19, this goal is currently unattainable. Similarly, some of the improvement projects we had planned for the current year had to be postponed.
However, we remain focused on our mission of providing an enhanced travel experience to all the people travelling through our airports, whether this concerns infrastructure or services. It is also important for all stakeholders working in airports and the tourist industry to work collectively to achieve our common goals. We aim to continue serving our passengers with the highest possible standards, even if their numbers are temporarily reduced.
Tourism should be supported
This crisis is different from previous ones we have experienced. In the past, tourism was the sector which led the economic recovery of the country, especially during the 2013 financial crisis. Hermes played an important part in that recovery through our contribution to the growth of connectivity and flight programs to Cyprus, resulting in significant growth in passenger numbers. This, in turn, benefited the whole of the tourism sector, enabling it to support the economy and lead the country out of recession.
In this case, the tourism sector is one of the first that needs to be supported to survive and flourish. Flexible policies and a creative strategy are needed, bringing together tourism stakeholders in Cyprus and abroad to secure our fair share of tourist travel this year and set the basis for a significant recovery in 2021 and onwards.
Opportunities can arise out of a crisis
The air transport sector has proved, perhaps more than any other sector, that it can respond successfully to the changes and challenges which arise from time to time. I believe that through this crisis there will also be opportunities.
We have already had one such success to celebrate in the midst of the crisis, which was the announcement by Wizz Air in May 2020 of the establishment of a new base in Larnaca with two aircraft from July 2020, increasing to three in August 2020. That was a long-term goal of ours which we were pursuing and the opportunity to make it happen actually came during the crisis.
We are optimistic that with hard work and creative thinking we can take advantage of other opportunities that may arise during this year, for example through attracting passengers from new markets or by extending the tourist season, which will help to alleviate the effects of the crisis in the coming years.
For the latest news and developments in the travel, tourism, and hospitality sector, join ICAEW’s Travel, Tourism and Hospitality Community for free. You can also check out our on-demand webinar, Moving Forward in Uncertain Times, which looks at how COVID-19 has disrupted the industry.