Airports to take ‘two to three years’ to recover pre-covid passenger levels

S&P Global Ratings says it does anticipate secular change in the aviation sector, but that consumer confidence will take some time to return.

Airports will take “two to three years” to return to pre-coronavirus levels of passenger travel, according to analysis from S&P Global Ratings.

S&P set out its analysis of the transport sector as part of its latest Infrastructure Finance Outlook, published this month.

Richard Timbs, a Sydney-based analyst of Australian infrastructure and utilities for S&P Global Ratings, told Infrastructure Investor the pandemic would lead to a longer economic shock than the global financial crisis, with transport assets hit hardest.

“The key difference we see here is that with the GFC there was a liquidity crunch,” he said. “But most economies were still chugging along and came out of the GFC reasonably well. The impacts of this pandemic are just so widespread, we think the impacts on economies are likely to be not only more pronounced, but they’re likely to last longer as well.”

Timbs said this meant that any spike in economic growth next year would only replace what would have been lost this year, with changes in behaviours and societal norms that could have implications for some types of infrastructure assets.

S&P’s analysis has resulted in a “best guess” of a two- to three-year recovery period before airports have the levels of passenger travel that had pre-coronavirus. Assets such as toll roads would be likely to have a faster recovery path of around 12 months.

“We think roads will recover more quickly and more strongly, just because a lot more of that travel is essential day-to-day travel [rather] than airline travel, which is a lot more discretionary,” Timbs said.

S&P said in its Infrastructure Finance Outlook that it does not anticipate any change in long-term trends pertaining to the aviation sector, apart from some elements of business travel.

“A critical element to the industry’s recovery will be international co-ordination on rules and restrictions, including in the case of a resurgence of the virus,” S&P said. “This is particularly challenging because the pandemic and related lockdowns are not proceeding simultaneously around the world.

“The road to bringing back consumer confidence will therefore take time. However, we believe that commercial air travel – as the fastest, most affordable way to move people globally – will remain the preferred mode of transportation for long-haul trips.”

S&P added that business travel could decline due to a greater reliance on remote meetings.

In its analysis of other sectors, S&P said that the long-term momentum on the energy transition “remains intact” and that the pandemic could highlight the need for a global response to other crises, such as climate change. This, in turn, underscores the importance of considering environmental, social and governance risk factors, the ratings agency said.