Swine Flu Threat Checks In

6 May 2009 (Last Updated May 6th, 2009 18:30)

During the 2003 SARS outbreak, some airports in Asia saw international traffic figures drop by 80%. With fear of swine flu becoming a global pandemic growing each day, Alex Hawkes talks to Frost & Sullivan's commercial aviation consultant Diogenis Papiomytis to discuss if airports today could be facing a similar situation.

Swine Flu Threat Checks In

Alex Hawkes: To date, how costly has the swine flu outbreak proved to airport operations worldwide?

Diogenis Papiomytis: So far in Europe we have not witnessed much reaction from airports in terms of implementing flu pandemic security methods. In Mexico and some Asian countries that have experience in dealing with SARS, the infrastructure already exists to screen all incoming and outgoing passengers.

Because we don't yet know if the swine flu is going to be a pandemic or just how far it will stretch across the world, it is difficult to know what the reaction will be from the respective government authorities.

AH: In particular, what are the potential financial implications for airports wishing to implement the quarantine methods required to prevent a flu outbreak from spreading?

"Authorities are more prepared today than in 2003 when China failed to ask for help to deal with the SARS outbreak."

DP: The main problem for airports is not how much it costs to implement enhanced security methods, such as screening, but the overall impact a pandemic can have on revenues. Scanners, for example, typically cost from between $20,000 and $40,000 each. If a normal-sized airport requires eight scanners, then they are looking at an outgoing cost of $500,000. This amount is insignificant compared to revenues being slashed by 50% as we witnessed in some SARS-affected airports in Asia Pacific during 2003.

That said, if the swine flu goes global, airports could need extra personnel to operate the scanners and could also require medically trained employees for a period of five or six months.

AH: So is five to six months the rough timeframe airports could be looking at to handle swine flu?

DP: The SARS crisis back in 2003 essentially lasted six months. If something similar happens now the subsequent drop in revenues, however, will be much graver because of the recession.

The authorities are more prepared than back in 2003 when China failed to ask for help to deal with the outbreak or even report the first SARS incidents. This essentially allowed for the outbreak to happen. This time, everyone worldwide is more aware of swine flu so I think the reaction will be much quicker and possibly not something that will take six months.

AH: What other lessons learnt during the SARS outbreak will help minimise disruption at airports?

DP: Following the SARS outbreak in 2003, the International Air Transport Association (IATA) put new measures in place for airports and airlines operating in the Asia Pacific region handling flu outbreaks. Some of these measures involved cutting down on airport charges during periods of potential outbreaks, as if flu goes global there is inevitably a need to cut capacities.

If we compare today to 2003, then up to 50% of flights could be cut overnight. This means airlines could be grounding aircraft while still paying airport charges leading to a steep loss of revenues. IATA urges airports to cut charges or defer payments for a period of six to seven months to ease such a situation.

AH: With passengers now postponing or cancelling trips to affected regions, how will dwindling tourism figures affect airport and airline operations?

"Up to 50% of international flights could be cut overnight due to the swine flu outbreak."

DP: If you look back at some of the results at airports in Beijing, Hong Kong and Malaysia during the SARS outbreak in 2003, within a month some of them saw up to 80% of their international traffic cut. We are talking about two million passengers a month down to maybe 400,000. It is obviously a huge decrease.

So far I haven't heard any reports from the Mexican airport authorities but I would predict that international traffic could be down as much as 50% to 60%.

Domestic traffic is unlikely to be as affected and cargo will probably not be affected at all – except perhaps livestock.

AH: So in the short term, what drop in revenues could airport operators in affected regions be looking at?

DP: In 2003, it took six months for airports in Asia Pacific to recover from the SARS outbreak, but the major impact took place in the first three months. A lot of airports in that region saw a 30% to 40% fall in revenues in the second quarter of 2003.

If the situation with swine flu continues to worsen in those areas already affected outside of Mexico – most notably the US – airports could experience a 20% to 30% drop in revenue on a monthly basis.

AH: And in the long term, what potential risk is the global airport sector facing?

DP: The next three months will be crucial. At the moment, it is still too early to tell if swine flu will have a similar impact to SARS. What is slightly concerning is that, to a certain extent, swine flu has already gone global – it has affected parts of Europe and more remote countries like New Zealand and Australia.

SARS was almost specific to airports in the Asia Pacific region, so potentially a much bigger danger is afoot but it is still too early to know what impact this will have to airports worldwide.

AH: Could swine flu jeopardise future expansion plans at airports worldwide?

"It is still too early to tell if swine flu will have a similar impact to SARS."

DP: That has already happened because of the recession. Any investment that has not been signed off – so in discussion or negotiation stages – will probably be postponed. These investments that have already started and where construction is underway will probably not be affected.

AH: So the timing of this flu outbreak is a potentially severe blow to the global airport sector?

DP: For the airline sector this comes at the worst possible time. Globally, airlines are struggling to cope with falling demand, following substantial losses due to jet fuel price fluctuations in 2008 and the impact of the economic recession.

In 2009, IATA expects global losses of more than $4.5bn for the airline sector, a figure that may well seem optimistic a month or two from now if the swine flu expands geographically or we see a rapid increase in affected cases.