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Airport Operator Liquidity : Additional Financing Still Needed

2020 has been a challenging year for airport operators all around the world with the crisis caused by the COVID-19 pandemic resulting in the demand for air travel dropping to historical lows.

With the traditional sources of income from aircraft operators, tenants, concessionaires and passengers drying-up, maintaining cash for day-to-day activities have a priority for the airport operators.

In order to maintain their liquidity positions, airport operators are taking a double-pronged approached.

On one hand, cash outflows have to be minimized - and this is done by

- Reduction of operational expenses (e.g. reduction of staff headcount)

- Reduction of capital expenses (e.g. forgoing capital expansion projects).

- Negotiation with lenders to postpone/refinance existing loan payments

- Negotiation with governments for the extension of concession periods or reduction of concession payments

- Suspension of dividend payments

On the other hand, airport operators have to increase the inflow of cash. This could be done by

- Improving accounts receivable collection

- Drawing down on existing credit facilities

- Negotiating for additional loans

- Negotiating for government financial support

- Raising equity capital

- Sales of capital assets

The key indicator of liquidity for the airport operator in such times would be the current ratio (calculated by dividing current assets over current liabilities).

A current ratio of 1.5 for an airport operator would mean that the airport operator's current assets (which include cash and cash & equivalents held) would be more than sufficient to cover the airport operator's current liabilities (which would include payables and short-terms debts) over a period of one-year.


However, it has to be noted that airport operators are currently surviving in very volatile economic conditions where future cash-flow is almost unpredictable and existing current ratios do not fully indicate the liquidity situation over the course of the year.

We have compiled the current ratios of 36 airport operators based on their most updated publicly-released financial results in 2020.

It can been that the average (mean) current ratio of the 36 airports is 1.53, which is slightly above the 1.5 current ratio that puts the airport operator in a relatively safe liquidity position.

While this average current ratio may appear to be a positive indicator of liquidity, it should be noted that 60%(21) of the airport operators in this study have a current ratio below this average.

37%(13) of the airport operators in this study of liquidity positions have current ratios below the average number of as the end of June 2020.

17.1%(6) of the airport operators in this study have current ratios above 3, which while indicate their strong liquidity position, also skew the data towards a higher mean value.

Overall, this study of airport operator current ratios presents a concerning figure. It is evident that airport operators are still in need of greater financing in order to support the air transport system.

In a previous article, we have compiled a list of actions taken by airport operators to receive external financing in order to improve their liquidity position.

From our compilation of the information, we took note that airport operators were largely obtaining additional financing from commercial lenders (e.g. banks and other financial institutions) if they were able to obtain financing.

For this article, we have created a list of actions to secure external financing that have been taken up by airport operators that were covered in our study on current ratios. Most of the external financing for these companies so far has been from the private sector.

While airport operators in some countries (e.g. the United States) were provided financial support by the governments, government financial support for airport operators has not been seen to be widespread.

Airport Councils International (ACI) has also called for states to consider financial relief measures that will help to alleviate the significant drop in cash flows and to ensure operational and business continuity of airport activities, and to protect jobs.

In conclusion, we stand by our belief that airports are essential parts of the air transport economic system and the cessation of airport operations due to an inability to secure additional short-term financing will have long-term consequences. Airport operations are crucial to the recovery of the air transport industry and we hope for additional financial support from both the private and public sectors.

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