Jacinda Ardern might (falsely) boast about her self-aggrandised “hard and early” response to COVID-19, but she is much less voluble about its economic effects – which are set to be just as hard, but much, much longer-lasting.

With tourism (formerly) providing a sizable proportion of New Zealand’s economy – nearly twice the relative contribution of Australia’s tourism sector – the nation’s airports are becoming the canaries in an economic coal-mine fast caving in.

Australia and New Zealand’s airport assets face a cash squeeze over the next year and a “slow and difficult climb” out of the deep hole created by the COVID-19 pandemic with a rebound in tourism and traffic flows not likely until 2022, says a report from ratings agency S&P Global Ratings.

The new report warned the outlook for the sector was negative as airport traffic recovery would hinge on domestic policies and travel, with international traffic key for earnings quality[…]

The sector has been crunched by the 90 per cent-plus reduction in airline capacity and border lockdowns which have almost completely shut down airline travel.

Of course, airports handle far more than tourist traffic.

Australia’s airports are a large driver of economic activity. The top 10 airports in Australia have an enterprise value of more than $60bn with the nation’s superannuation funds providing almost half the equity of our private airports.

[S&P Global Ratings credit analyst Parvathy] Iyer said domestic traffic would lead the recovery.

That leaves the question of how much that will apply in New Zealand, with its much smaller population and economy (both less than 20% of Australia’s). On the plus side, New Zealand’s domestic travel is recovering much faster than Australia’s.

“For high-value international traffic, a rebound is hard to predict unless COVID-19 is under control in major countries. While New Zealand’s domestic travel is steadily ramping up, Australia is facing some delays following a recent surge in infection rates, mainly in Victoria.”

Nonetheless, as the cobwebs gather in both nations’ airports, the implications for the wider economies are dire.

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