No quick fix for airport woes warns S & P Global report

Two years of Covid-related hardship could take three years to overcome for Australia’s airports, a new report has predicted.

Sydney Airport is operating at close to pre-Covid domestic capacity putting pressure on the still depleted workforce. Picture: NCA Newswire/Gaye Gerard

The misery of the Covid pandemic for Australia’s airports is not likely to be over soon, with a new report predicting more hardship ahead, and a full recovery not expected until late-2025.

The Australia and New Zealand airports report by credit rating agency S & P Global said local gateways would take longer than their overseas peers to recover due to challenging economic conditions, the slow return of business travel and high fuel prices.

Other hurdles for the airports included uncertainty around Chinese and Japanese markets, likely extra costs to install contactless check-in and security, and potential caps on passenger numbers to reduce aviation emissions and noise.

Until Chinese travellers return, airport retail figures are expected to remain subdued, and the report also suggested current chaotic scenes at terminals could dampen demand for travel.

Although Australia’s reliance on air travel made any restrictions on movements seem unlikely, the report pointed to European moves to curtail flying to improve the environment.

“Global businesses are looking at environment, social and governance factors, as too are airlines,” noted the report author S & P credit analyst Parvathy Iyer.

“This could lead to some permanent erosion of business travel in the post-pandemic phase. Additional costs to cover emission and regulatory requirements will flow to consumers, affecting propensity to travel.”

International traffic was expected to take until late 2025 to recover while domestic traffic should be back to pre-pandemic levels by mid-2024, Ms Iyer said.

“While airline capacity is increasing and is likely to be at 100 per cent of pre-pandemic levels by the summer travel season in November-December 2022, a lack of strong competition among domestic airlines could also restrain capacity and keep airfares high,” Ms Iyer said.

Latest figures from the Bureau of Infrastructure, Transport and Regional Economics showed Darwin, Hobart and Gold Coast Airports exceeded pre-Covid domestic passenger numbers in May but larger airports continued to lag 2019 levels.

Sydney Airport domestic passengers were down 17 per cent on three years ago, Melbourne Airport was 14 per cent short of pre-Covid figures, Brisbane Airport down 11 per cent and Perth 12.8 per cent.

One aspect of airport revenue that is recovering faster than expected, is carparking and car rentals because of “increased use of self-transport instead of public modes and the associated health concerns”.

“We expect the pace in this revenue segment will return to modest growth as travellers shift to public transport,” Ms Iyer said.

“Property revenues remain strong and will post continued growth at most airports because of the strong demand for industrial space.”

With other revenue streams less robust, there was an expectation most airports would push back large-scale capital expenditure until there was a clear visibility on travel conditions.

Ms Iyer said she saw Perth Airport as having the “least flexibility to fund its larger strategic capital works” such as integrating the domestic and international terminals.

“Brisbane Airport may also need shareholder support for improvements to their terminal and facilities ahead of the 2032 Olympics,” she said.