In April, the Federal Aviation Administration announced approximately $116 million in Coronavirus Aid, Relief, and Economic Security (CARES) Act funding was designated for PHL (as well as $157,000 for PNE). For PHL, that was the equivalent to a little over 100 days of cash on hand to support airport operations, including covering payroll, paying vendors and making debt service payments—enough to get through to end of the fiscal year. With COVID-19 cases on the rise and international travel restrictions still in place, where does the airport stand as the new fiscal year begins?
“The CARES Act funding gave us a shot in the arm during a time when there was no revenue coming into the airport,” said PHL CEO Chellie Cameron. “At the lowest point in April, our passenger volume dropped to less than 95 percent of what it was the previous year. Although there has been a slight uptick in passenger volume and airlines have restored some service, we estimate our passenger totals will be more than 50 percent less than in fiscal year 2020. The volatility of COVID-19 and continued outbreaks could dramatically reduce the demand for air travel. I can’t overemphasize how serious this is for our financial situation if additional relief funding is not received.”
U.S. Congress is currently considering additional COVID-19 relief packages. “We have been talking to our elected officials and their staff members, reminding them of PHL’s importance to our regional economy in hope that, if more relief is granted, the airport will receive a share that is equivalent to our role as a major economic generator,” said Cameron. Although owned and operated by the City of Philadelphia, PHL does not receive local taxpayer dollars. The airport covers its operating costs and generates revenue through leases, parking, concessions and other fees. In 2019, the Airport generated $16.8 billion for the regional economy, supporting 106,800 jobs with $5.4 billion in earnings.
When the COVID-19 crisis began in March and air travel demand plummeted, PHL’s leadership team offered a three-month rent deferral for airline and concessions partners and revised the airport’s budget, eliminating spending wherever possible, all while remaining open and operational to ensure the transportation of critical supplies and personnel throughout the country. “The airport is a delicately-balanced ecosystem,” said Cameron. “We are concerned about all of the stakeholders who depend on passenger volume and spending to survive, especially the small, local and women- and minority-owned businesses.”
Despite a drastically scaled back budget, with little revenue coming in this year, the Division of Aviation estimates it will overspend by more than $41 million by the end of FY21. By utilizing the CARES Act grant, the airport was able to reduce that deficit to approximately $23 million. That amount, however, could increase if:
- Passenger and flight activity drop below current estimates of more than 50% less than FY20
- PHL does not receive “funneling airport” status by October and is not able to accommodate transatlantic service
- Facility closures are required
- The airport encounters major stakeholder bankruptcies
To cover the FY21 shortfall without further relief funding, the airport will need to do a combination of the following:
- Further tap into its limited cash reserves;
- Suspend capital investment, resulting in layoffs of contractual staff
- Layoff a substantial amount of its workforce; and/or
- Significantly increase rents and fees charged to the airlines, which could possibly reduce the number of airline carriers servicing our region.
“There are very few additional cuts we can make to what is now an extremely lean budget, without closing terminals or other facilities,” said Cameron. “When we look ahead to fiscal year 2022, the situation could be even worse.”