Aviation Struggles in the Face of COVID-19: Airlines, Airports and the Durban Aerotropolis
COVID-19 looms as the KwaZulu-Natal province is currently in the implementation phase of the airport city development masterplan for the Durban Aerotropolis. With this pandemic, disruption and uncertainty now plague every aspect of life as we know it. The aerotropolis is an urban development feature centred around an airport to drive industrial and economic development. With the airport being its engine and foundational pillar, the aerotropolis becomes inextricably interwoven with the aviation industry at large and thus experiences all the turbulence and turmoil in its operations.
Currently, the aviation sector is experiencing adverse impact from the COVID-19 pandemic. Airlines are struggling, airports are not getting the traffic to sustain their operations, businesses around airport precincts are heavily affected and confidence in air travel has deteriorated. Institutions such as the International Civil Aviation Organization have also highlighted some of the most difficult questions that the aviation industry is grappling with and these include:
• How long the pandemic will last and what its severity levels will be?
• How long the lockdowns and air travel restrictions will continue?
• How long it will take consumer confidence to be restored in air travel?
• How long the sector can withstand the current financial adversity?
• How deep and how long the global recession (which is economic decline due to the pandemic) will last?
These are legitimate questions which ought to find champions for airport-city developments ready as they tackle the realities of a changed landscape upon which their aerotropoli find their feet.
The success of an aerotropolis hinges on good airport planning, business site planning and urban planning. At this juncture, majority of the airport plans around the world are in disarray given the issues and questions raised above. Secondary to this is the inconvenience of business site plans which sees the disturbance in the public and private sectors’ aims to either attract into or retain the investment already in the airport precincts.
We have learnt that despite the G20’s commitment to keep foreign direct investment and international trade going during COVID-19, some countries are placing restrictions on incoming investment. COVID-19 has essentially disrupted all manner of business throughout the world and wreaked havoc within the global economy. Stock markets are plunging, companies are challenged and potential investors are cautious to not commit to significant transactions which would include setting up shop in any country during this time. Lastly, urban plans are affected and project deadlines on construction of some of the world’s biggest aerotropoli are heavily disturbed, eg: Dubai South in the United Arab Emirates.
So what does this mean for a province committed to strengthening the foundation for a 60-year masterplan? How does the Durban Aerotropolis grow when aviation, international trade, the global supply chain and the wider business sector have been adversely affected by COVID-19?
As it stands, King Shaka International Airport (KSIA) is on closure given the restrictions on travel, the terminals are empty and the pandemic is delaying the progress on various construction projects happening around the Dube TradePort precinct. This means that all urban planning with its related infrastructure developments are forced to be placed on hold given the potential compromise of the directive for social distancing. New investment initiatives are also halted in the various zones of the Dube TradePort enclave.
It is now becoming evidently important that our provincial government revisits its plans for the establishment of the Durban Aerotropolis. First on its cards is navigating the realities of a thinned air transportation network in and out of KSIA given the potential airline collapses due to the pandemic. Already in our shores, we have seen South African Airways and its alliance partner South African Express experience insolvency and liquidation respectively. We have also read reports of several other airlines either going bankrupt or finding ways to cut costs to stay afloat. Virgin Australia and Air Mauritius have been placed under administration while Delta Airline which is one of the United States of America’s leading airlines, is selling a portion of its fleet to cut costs. Lufthansa is in talks with the German government about a bailout that would give the state 25% stake in Europe’s biggest airline. It becomes important yet again to underscore that without an extensive flight network, airports will suffer and when airports suffer, all that is anchored around it becomes deeply affected.
The aerotropolis (Durban Aerotropolis) needs an airport (KSIA) to exist and an airport needs traffic to exist. This is traffic in the form of in-coming and out-going passengers and cargo. From these, an airport gains landing fees, aircraft parking fees and passenger service charges. An airport also needs business tenants to pay rental fees. In the absence of passenger traffic, these businesses may struggle to do this and may need to negotiate for rental fee deferral. Without these revenue generating streams, an airport is unable to meet its financial dues in the form of airport taxes which include amongst others regulated charges to be paid to the South African Civil Aviation Authority and Air Traffic and Navigation Services.
Secondly, the government needs to ensure that they rebuild investor confidence post COVID-19 (the zones of the Dube TradePort seek investment across sectors, namely, electronics, pharmaceuticals, aerospace manufacturing, assembling and distribution). Restoration of investor confidence is not an easy feat given the fact that economies around the world have been thrown into a decline. Naturally, investors consider certain indicators to safeguard their investment. These indicators serve as determinants for investment and they include competitiveness of the economy, political stability, exchange rate stability, labour force availability, affordability and flexibility, safety and security, control of corruption and quality of infrastructure just to mention a few. A government which can uphold a promise of all these considerations and more is well positioned to revive its economic development post pandemic. But what happens if our government struggles to make this commitment when state funds have been channelled into the Durban Aerotropolis for over 10 years?
Lastly, the provincial government may need to consider conceptualising innovation clusters with high investment returns to bolster the shock of COVID-19. The set-up of these clusters should not be divorced from the technological revolution that has fundamentally altered the way we live, work, and relate to one another. Perhaps a deliberate targeting of firms and investment on artificial intelligence, robotics, block chain, nanotechnology, the internet of things and mobility technology may boost the productive capacity of the Durban Aerotropolis and the province.
Dr Nomkhosi Luthuli is a lecturer at the Graduate School of Business and Leadership, UKZN. Her research interests are in the area of Regional and Local Economic Development and Leadership Studies.