Coronavirus social distancing ‘ruinous’ for travel industry: Dubai Airports CEO

DUBAI, United Arab Emirates — Passenger travel through Dubai International Airport, one of the world’s largest travel hubs, dropped by a fifth in the first quarter of the year as lockdowns and border closures triggered by the coronavirus pandemic dealt a hammer blow to international travel. 

“Dubai Airports today confirmed that Dubai International (DXB) recorded a total of 17.8 million customers during the first quarter of 2020, a year-on-year contraction of 19.8{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f}, a direct result of the COVID-19 pandemic which dampened demand and reduced flight numbers,” a statement from Dubai Airports, which owns and manages Dubai International (DXB) and Dubai World Central Airports, revealed Thursday. DXB in 2019 was ranked the world’s largest hub in terms of passenger traffic.

Aircraft movements dropped 18.7{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} year-on-year — from 95,857 to 77,920 — due to flight suspensions from select coronavirus hotspots beginning in February, followed by the complete halting of passenger flights by the UAE government from March 24, with the exception of emergency repatriation flights. Those exceptional flights, arranged through UAE authorities and foreign embassies, allowed more than 50,000 people to return to their home countries, Dubai Airports said.

For Dubai Airports CEO Paul Griffiths, the social-distancing measures mandated by health authorities globally are economically catastrophic — but they must be followed until there is a viable antidote for the virus, and the timeline for that is nearly impossible to predict.

“I think social distancing as a concept will be quite ruinous for the travel and tourism industry, as it will be for many other industries around the world,” Griffiths told CNBC’s “Capital Connection” on Thursday. “So we’ve got to find a primary way before we can get back to normal travel, and that means easing restrictions and an end to social distancing. There are so many variables in that equation, so many things that we cannot predict and are not within our control, that it is quite impossible to say. But we are planning around an 18 month to two-year time horizon,” before returning to any semblance of normality, the CEO said.

The dive in traffic numbers is a particular hit for the emirate’s economy. The transport and storage sector, which includes land, air and water transport but is led by aviation, comprised 18.5{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} of Dubai’s gross domestic product (GDP) in 2017, and was the “most active driver” of its economy in the first half of 2019, according to the Dubai Statistics Center.

Country-wide, aviation and tourism account for 13{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} of the UAE’s GDP, according to International Air Transport Association figures from 2019. But the Gulf country is far from alone. The pain is being felt the world over, and is set to worsen in the second quarter. In April alone travel restrictions led to a 90{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} drop in global air traffic, PVM Oil Associates reported in a research note Wednesday.  

Cargo tonnage for Dubai Airports also fell 16.8{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} year-on-year to 533,291 tons from January through March, the company said, reflecting a reduction in hold capacity. But cargo operations, which are exempt from the ban, have actually surged at DXB since then as a dozen airlines including Emirates SkyCargo and flydubai “have been given permission to operate an average of 110 flights weekly in response to heightened demand for pharmaceuticals, food, and other essential goods,” the release said.  

“Cargo is actually already registering levels which are greater than last year, so cargo is already a very vibrant sector for us,” Griffiths told CNBC.

For its continued operations, the airports are implementing broad social distancing and sanitization measures in its efforts toward passenger safety. All staff and passengers are required to wear personal protective equipment and maintain social distance, and passengers will be able to receive thermal screening or antibody tests carried out by Dubai Health Authority’s Airport Medical Center team, the statement said. Dubai Airports has also conducted a phased fumigation of its facilities and fitted screens over its check-in and immigration counters to protect staff. 

More space for social distancing means lower capacity at airports and on planes, Griffiths explained.

“It’s going be difficult for airports to operate at the same level of capacity that they have before. And if these restrictions are limited bilaterally, to countries that have beaten the virus, then I think you’ll see a reduction in demand. So we are planning around having in the short term a lower capacity level, which means there won’t be inconvenience at the airport, it just means we’ll be geared up for lower passenger numbers.”

The CEO predicts travel will be able to recommence based on agreements between countries that have similarly low rates of infections. 

“We believe in future there will be bilateral agreements very similar to the one that is being brokered between Australasia and New Zealand at the moment, where governments will be sufficiently confident of the health risks being under control between certain countries that have similar levels of progress on recession of the virus. And I think those bilateral agreement will allow us to start to gradually restart.”

Dubai International Airport is home to flagship state carrier Emirates and its budget carrier flydubai. Emirates is the world’s largest A380 operator, and for the past several years has been among the world’s top-five largest airlines in terms of passenger and freight ton miles flown. 

Emirates released its 2019 full-year earnings on Sunday, which saw a 21{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} profit but revealed steep declines beginning in February and a loss of over 3.4 billion dirhams ($930 million) in revenues in March. The airline warned that the pandemic would have a major effect on its performance for the rest of the year and into 2021. This week it announced it would resume operating flights to nine destinations in Australia, Europe and North America from May 21 — but so far they are only outbound flights, with no returns.

One of the most urgent measures remains testing, Griffiths said, as it would help ensure safety for travelers and staff.

“I think it really is essential that we have a rapid and accurate way of testing passengers for Covid-19 before they board the aircraft,” he said. “That is an essential part of it — but really, economically and to encourage people back to travel, we’ve got to have a primary means of dealing with the virus so that we can go back to the normal type of operation, because social distancing is just not economically sustainable for so many industries, including airlines and airports.”