If you look up to the empty skies around major airports today, the economic impact of the Covid-19 pandemic becomes very tangible. Only a fraction of pre-crisis flights is currently in the skies. Global aviation has literally collapsed. The sector is in an epic crisis and many aviation companies – airlines and ground service providers alike – are scrambling to stay afloat until the market starts to recover, recaps Swissport International executive Luzius Wirth in this guest contribution.
Occasional sights of aircraft in the sky are seldom flashes of normality in times when nothing is normal. And with a more positive outlook they are hopefully a glimpse into a not too distant
future. In any case, chances are we are observing a cargo flight and not an aircraft carrying tourists. Many of the airplanes currently still flying carry cargo. Even passenger aircraft are
temporarily repurposed to transport goods. They are aerial bridges contributing an efficient supply of goods between countries and continents, ensuring international supply chains continue to
function – now more than ever.
But appearances are deceptive.
Missing belly capacity hits Swissport’s cargo business hard
The airfreight industry, too, is experiencing an unprecedented disruption and supply chains are affected around the globe. Most passenger aircraft have been grounded for weeks and with them the underfloor cargo capacity in their bellies has disappeared. Cargo volumes remain high at airports with a traditionally high share of full-freighter business. However, the great majority of Swissport’s 115 cargo centers are running far below their capacity due to the missing underfloor cargo holds of passenger aircraft. This so-called “belly capacity” accounts for about 50% of global cargo capacity.
The impact on our business and the business of any company in the sector is dramatic. Swissport took early and heavy blows as airline after airline grounded growing parts of their fleets and entire airport hubs went offline. April revenue is down about 80 percent versus last year. Demand collapsed within a couple of months. The slump has a magnitude that no company could deal with by applying standard cost reduction measures. Of course, we swiftly implemented an investment stop and a far-reaching hiring restriction, but with personnel cost accounting for some 70 percent of our total cost, it became soon clear that painful measures were inevitable. Of our formerly 64,000 employees, who proudly served customers around the world at the beginning of the year, fewer than 15,000 will be in active service by the end of April. Some 40,000 will be on state-supported furlough or on short-time work models, or they have had to be let go where no such mechanisms were available.
At Swissport we are taking our fate in our own hands, too. To ensure that the company emerges from the current hibernation structurally intact and fully functional, we are exploring all avenues to secure additional liquidity. These includes capital markets and various forms of state support. We are confident to make it through this market crisis, but it will take efforts and sacrifice on all fronts.
Political support is imperative
Around the globe, our regional executives, jointly with country management teams, are engaging with governments to make them aware of our industry’s challenges and the major risks for aviation, if ground handling companies are forgotten in the rescue and support schemes. Swissport is active at 300 airports in 47 countries. At all these airports our mostly invisible hands and minds contribute to a smooth-running aviation eco-system. Without the work of our staff on the ground, travelers would not take to the skies and supply chains would not run smoothly. Therefore, political decision-makers are well advised to look at the entire aviation system, if they wish to protect the sector in this perfect storm. Airlines and airports may come to mind first, but there are more parts to the clockwork.
Restoring disintegrated structures becomes costly
There are signs that this is increasingly understood, but more needs to be done. Furlough schemes for staff must be seamlessly extended, respecting local notice periods. Appropriate measures should be put in place for airports, enabling them to grant their tenants temporary reductions in rental fees. We are all in the same boat and the last thing any country or city needs after overcoming this health crisis is a dysfunctional aviation sector and unstable logistics. If the system is allowed to disintegrate, it will be expensive and complex to restore its structures.
Especially for export-oriented economies, experiments in this area involve incalculable risks. These risks should not be taken, be it knowingly or unknowingly. Only an intact aviation system can support our societies in getting back on track swiftly once things start to normalize.
That’s what we should all be aware of and it is what we should jointly work to achieve. Here too, it is in everyone’s interest to build (air) bridges for each other.
This guest article was contributed by Luzius Wirth, EVP EMEA and Member of the Group Executive Management / GEM, whom we thank for submitting his views.
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