Airport business interruptions: Developing and applying a scheme for the estimation of resulting cost impacts

Abstract

Even short interruptions of airport operations can have severe financial impacts on the air transport industry, its users and other economic sectors. Some interruptions are limited to single airports (eg infrastructure failure, fires or severe weather events) while those forcing the closure of airspace (eg air-traffic control strikes or volcanic ash) can result in the simultaneous closure of several airports. A systematic assessment of the potential types and economic impacts of interruptions is a fundamental step for risk management towards setting up and implementing business continuity strategies and plans; however, interruptions at airports have not yet been systematically dealt with in the scientific literature. This paper aims to be a starting point towards filling this gap. First, the different types of airport closures are classified by various characteristics, such as type of damage, responsible entity and liability. Secondly, a straightforward scheme is developed for estimating the potential losses due to airport closures from both the airline and airport perspectives. Using a sample interruption scenario, this paper finds that for the airport operator, one day without any services means a loss of 88 per cent of daily revenues, which is not compensated by any noteworthy cost reductions. These results and forthcoming work in this field not only might help airports and airlines to define their needs for business interruption insurances, but also could form the basis for the assessment of the macroeconomic effects of interruptions and a quick estimation or verification of industry-specific losses from a bird's eye perspective.