Navigating the COVID-19 Crisis

June 22, 2022

Geraint Harvey, Dancap Private Equity Chair in Human Organization

COVID-19 was unlike any previous global crisis to befall the civil aviation industry. Passenger numbers fell drastically, leading to a dramatic loss of revenue. Within the industry, Air Navigation Service Providers - the organisations who provide air traffic control – faced particular challenges.

An international research team consisting of Professor Geraint Harvey, (DAN Department of Management & Organizational Studies, Western University) Professor Peter Turnbull (University of Bristol), and Dr Huw Thomas (University College Dublin) spent the past 2 years researching the impact of COVID-19 on Air Navigation Service Providers (ANSPs).

“The impact of the crisis on civil aviation has been catastrophic. It has led to a reduction in passenger numbers around 70%,” said Harvey, Dancap Private Equity Chair in Human Organization in DAN Management. “It has had a huge negative financial impact on airlines and a huge financial impact on air navigation services providers, especially those that rely on the airline user pays model. The cost worldwide is in the region of $13-billion US dollars for 2020.”

In response to the decline in passengers, airlines parked aircraft and laid off staff. Many other planes, however, were still flying, and ANSPs kept the skies open for all aircraft permitted to fly, including military, emergency and repatriation flights, domestic travel, general cargo, and medical supplies.

The research team has produced as a report on the impact of COVID-19 on ANSPs.

“We began by looking at the business model, in particular the funding models of Air Navigation Service Providers. This study spanned 17 countries around the world, including the UK, the US and Canada,” said Harvey. “We’ve considered how the crisis has impacted the funding of this public good. It’s incredibly important to commercial navigation, it’s important to safety. Irrespective of how many aircraft fly, you still need to coordinate the skies in order to ensure safe travel.”

For ANSPs that are now funded from ‘user chargers’ levied on airlines, for example Nav Canada, revenues dried up while costs accumulated and key investments in new technology were put on hold.

There have long been concerns about the commercialisation of ANSPs and the user pays system that funds ongoing operations, future investment in equipment and the training of staff. The report demonstrates that the COVID-19 pandemic exposed structural flaws in the commercialised provision of ANS. The report argues that ANSPs that provide a public good should receive funding from the state to provide essential levels of services and staffing.

“I think what the pandemic has done is shown us just how problematic some of the business models have been, particularly the commercialized business models for air navigation services provision, which are, under usual circumstances, effective. These organizations have managed to achieve cost savings and efficiencies, but of course when we have a downturn in demand and airlines aren’t flying, there’s a problem in terms of where that financing comes from,” said Harvey. “What is important about what we’ve done is to highlight the importance of a threshold funding model – a government funding model – which can then be supported by commercial payments made by customers – that would be airlines – on top of the baseline threshold funding from government.”

Read the full report here – Navigating the COVID-19 Crisis: Air Traffic Charging Models and Financing of Air Navigation Service Providers