CHAPTER 1

Introduction

Purpose of This Guide

The COVID-19 pandemic has made clear the vulnerability of the aviation industry (along with many other sectors of the economy) to shock events. As documented in this guide, government measures to control the COVID-19 pandemic resulted in sharp declines in air traffic (except for air cargo in some instances) followed by a prolonged and uncertain period of traffic recovery. While the pandemic is one of the largest events to impact the aviation industry, other previous shock events have also exerted profound impacts on the aviation industry. Most recessions are not so unusual as to be totally unexpected, but the scale of the 2008–2009 Great Recession was greater than anything experienced since 1929 and resulted in a significant downturn in traffic as well as changes to the structure and development of the aviation market (e.g., airline consolidation). The terrorist attacks of September 11, 2001 (9/11) impacted traffic development, industry structure, and airport facility requirements (security screening, etc.). Other terrorist events, while not impacting traffic significantly, led to changes in airport facilities and processes, such as hold-baggage screening; reconciliation following the 1988 Lockerbie bombing disaster; and the banning of liquids following the 2006 terrorist liquid-explosive plot.

Typically, the long-term forecasting, management, and planning of airports are based largely on a continuation of “business as usual” and generally do not give much focus to the possibility of shock events, even though they have led to material changes in airport management and design. One reason is that predicting the nature, timing, and scale of such events is almost impossible; many are “black swan” events—unexpected, high-impact events that are without precedent. While airport forecasting and planning have tended to focus on gradual and incremental change—rising traffic levels as the economy grows—it is arguable that infrequent, one-off events have had as much impact on airport development as long-term, gradual growth. Clearly, the future is uncertain, and airport forecasting and planning need a way to recognize and address the risks and uncertainties facing the development of airports.

The purpose of this guide is not to provide a means of predicting the exact timing and scale of shock events as this is largely impossible in any practical sense. Rather, the guide provides a methodology to aid airports in identifying and describing relevant shock events, understanding their potential impact on various aspects of the airport business, and developing approaches and strategies to enable the airport to better withstand and respond to shock events if they occur. The objective is to contribute to a more resilient airport business model by assisting the airport to better respond to shock events robustly. While not all shock events can be identified or foreseen, the intent is that an airport would be better positioned for these eventualities generally and can benefit from past expertise and experience drawn from the COVID-19 pandemic and other shock events from within both the airport industry and other sectors.

How to Use This Guide

The guide is designed to be relevant and accessible to a wide range of users. The findings and methodology apply to those involved in air traffic forecasting and airport planning, whether internal to the airport organization or external consultants. However, one of the key findings from the research is the need for full organizational engagement in addressing shock events. Many of these events have had significant implications for the finances, operation, management, and strategic development of airports. Therefore, the guide will be of interest to a wide range of practitioners and stakeholders involved in the airport sector.

The guide is organized into four main parts plus a concluding section and appendices.

Part I discusses the nature and impact of shock events that have affected the aviation sector starting with 1970 and leading up to an examination of the impact of the COVID-19 pandemic on U.S. aviation and airports. This includes the national impacts on airport traffic, operations, and finances as well as the response of airport management and government. Findings are also provided from 11 case studies at airports that were affected by the pandemic in different ways. In addition, Part I looks at other shock events impacting the aviation industry, such as the SARS (severe acute respiratory syndrome) pandemic, 9/11, Hurricane Katrina, the 2008–2009 Great Recession, and examples of airline exit and entry. While history is an imperfect guide to the future, this part provides lessons learned from previous shock events.

Part II provides an overview of existing approaches for identifying, understanding, addressing, and mitigating shock events, both in the aviation industry and in other industries and sectors. It provides a baseline understanding of approaches developed to handle shock events specifically or uncertainties more generally (which can be applied to shock events). This is supplemented with more detailed information in the appendices.

Part III outlines a systematic methodology to understand and address shock events in airport forecasting, management, and planning, drawing on findings from the research in Parts I and II as well as prior experience in risk identification and risk management exercises in a range of economic sectors. It builds on established methodologies but is tailored to the circumstances and requirements of the airport sector. The methodology is general enough to be used for airports of all types and sizes and includes guidelines for simplifying the methodology for small airports with limited time and resources.

Part IV illustrates the methodology by applying it to example airports of different sizes and traffic mixes and facing different market and economic conditions.

Part V provides some overall conclusions from the research and identifies areas for further or related research.

It is not necessary for the reader to review the entire guide to understand the methodology provided. Some users may prefer to skip the historical and background information in Parts I and II and focus instead on the methodology in Part III and its application in Part IV, referring back to Parts I and II for additional information where needed.

How the Research Was Conducted

The ACRP research team was made up of members with extensive experience in airport forecasting, planning, and finances as well as specialists in risk analysis and modeling. The team’s combined knowledge and experience helped shape the project research and findings. The key research activities are summarized below:

• The impact of the COVID-19 pandemic on aviation and airports was researched using various traffic and financial data sources (such as U.S. DOT, FAA, individual airport statistics and annual reports, and subscription data), published articles, and contemporary news stories. Remote interviews were conducted with 11 case study airports including personnel involved in planning, forecasting, air service development, and finance.
• Previous shock events were researched using a combination of published traffic data, airport annual reports, academic articles, and contemporary news stories.
• To examine existing approaches for identifying, understanding, addressing, and mitigating shock events, the research team conducted an extensive literature review. The literature review examined a range of industries and academic disciplines, including the aviation and transportation industry, risk and decision analysis, management theory, the financial and insurance industries, as well as other network industries such as telecommunications and energy generation and distribution.

Based on this research and drawing on the ACRP research team’s collected experience, a systematic methodology was developed and refined that could be incorporated into existing airport practices that would aid in the identification, understanding, and management of potential shock events. This methodology was tested and modified through application to two example airports: Birmingham-Shuttlesworth International Airport and San Francisco International Airport. The application of the methodology was carried out by the ACRP research team, with draft versions sent to the respective airports and their feedback incorporated into the final write-up.

Related Materials

The guide touches on many related areas, including airport forecasting, planning, financial management, emergency response, and addressing uncertainty. While the guide is designed to be stand-alone, there are related ACRP publications that may benefit the reader. Most notably, ACRP Report 76: Addressing Uncertainty about Future Airport Activity Levels in Airport Decision Making (Kincaid et al. 2012), which, while not covering shock events in any detail, does cover the issue of risk and uncertainty in airport forecasting and planning. Other related ACRP publications that may be of interest include

• ACRP Synthesis 2: Airport Aviation Activity Forecasting (Spitz and Golaszewsi 2007);
• ACRP Report 18: Passenger Air Service Development Techniques (Martin 2009);
• ACRP Report 20: Strategic Planning in the Airport Industry (Ricondo & Associates et al. 2009);
• ACRP Report 25: Airport Passenger Terminal Planning and Design, Volume 1 Guidebook (Landrum & Brown et al. 2010);
• ACRP Report 48: Impact of Jet Fuel Price Uncertainty on Airport Planning and Development (Spitz and Berardino 2011);
• ACRP Report 74: Application of Enterprise Risk Management at Airports (Marsh Risk Consulting 2012); and
• ACRP Synthesis 115: Practices in Airport Emergency Plans (Murphy et al. 2021).