Dubai International Airport expects a sharp rise in passenger numbers once a coronavirus vaccine reduces the fear of travelling, its chief executive said, but until then the world’s busiest aviation hub is reducing its cost base and cutting spending to maintain liquidity.
“Until there is the sort of proven level of confidence medically that people can safely travel without fear of contracting or spreading the virus, unfortunately the situation we find ourselves in will likely continue for some time,” Dubai Airports chief executive Paul Griffiths told Bloomberg TV on Thursday. “Gradually we’ll start to see some confidence build,” starting with countries that have the spread of the virus under control.
Passenger flight operations have reduced significantly at Dubai’s mega airport, which last year handled 86.4 million passengers, in the wake of the coronavirus pandemic that has brought the global aviation industry to a near halt.
Dubai International Airport is an important strategic asset for Dubai and it not only has to “survive” the current economic shock, it also has to be ready to “spring back into action when air travel resumes” to help Dubai connect with the rest of the world, Mr Griffiths said.
Because of the outsourced nature of its business, the airport was able to renegotiate with its suppliers and reduce their workforce by 50 per cent, he said.
“The residual 50 per cent, we are going to redeploy into frontline operations to recover, without incurring the additional cost,” he said. “We [have] also cut our capital and operational expenditure to take immediate steps to shore up our liquidity,” he said, without giving details of the cost cuts.
Asked if Dubai Airports, which owns and operates both Dubai International and Dubai World Central, will look to tap the debt market, Mr Griffiths said it is not a decision for the company to take as it is the purview of the emirates’ Department of Finance.
For the company, the immediate responsibility is to preserve liquidity as much as possible by reducing expenses, he noted.
The coronavirus pandemic has led to a near-total shutdown of global travel leading to expectations that it will cut airlines' passenger revenue by more than half, or about $314 billion (Dh1.15 trillion) this year, according to the International Air Transport Association. The global aviation industry body said about 25 million jobs in the sector are at risk.
Although a number of countries in Europe have started relaxing travel restrictions and opened their borders, quarantine restrictions for inbound passengers will continue to affect the demand for travel. Last month Iata said the impact of the Covid-19 on economic conditions will also damage passenger confidence and slow the recovery of air travel demand over the next six months at least.
Mr Griffiths expects a "hockey stick"-like recovery in traffic due to the pent-up demand once a vaccine provides a safety cushion to travellers. The aviation hub is potentially looking at a capacity reduction down to 30 per cent and it could take as long as two years for the passenger traffic to return to the 2019 level, he said.
“In the long term, we need a proper end to the virus before we can get a sustainable, economic and reliable way of getting back to normal travel pattern,” Mr Griffiths said.
Since the coronavirus-forced shutdown, Dubai Airports has closed Terminal 1 and international carriers are operating out of Terminal 2. Emirates is operating from part of Terminal 3 as it has “hibernated” concourses A, C and D as well. Dubai Airports in an April 22 statement said it plans a "gradual remobilisation" once travel restrictions are lifted.
Emirates said on Wednesday it is resuming regular passenger flights to nine destinations - London Heathrow, Frankfurt, Paris, Milan, Madrid, Chicago, Toronto, Sydney and Melbourne – from May 21, just before the Eid Al Fitr holiday. These will be the first regular, non-repatriation flights out of Dubai since March 24.
“We’re still trying to find that sweet spot between cost control and still being able to function and be ready for the recovery,” Mr Griffiths said. “We’ve sized our infrastructure according to the operation that we have both now and what we foresee in the near future. What we are doing is putting plans in place to ensure we can recall our infrastructure.”
Since the travel restrictions were put in place, 52,000 passengers have gone through Dubai airport to take repatriation flights to India, the UK, the Netherlands, Iraq and the Philippines. Cargo operations, however, have risen with around 700 weekly flights now bringing in essential cargo for the city to survive, he said.
