Airport revenue takes a hit from North Korea threat in 2017
The Guam International Airport Authority’s revenue dipped 1.6 percent in 2018 as a result of heightened North Korean missile threat in August 2017 that took its toll on Guam’s brand as a safe destination.
The regional anxiety had caused air traffic to shrink as several airlines pulled out of Guam, the airport authority said Friday.
“As a result, the number of enplaned passenger arrivals decreased from 1.86 million to 1.76 million in FY 2018, a 4.2 percent decrease from the previous year,” the airport authority said, citing Ernst & Young’s audit report.
Arrival numbers quashed President Donald Trump’s prediction that global attention on Guam at the height of tension would boost the island’s tourism “tenfold.”
On the contrary, the Guam Visitors Bureau later reported mass cancellations of bookings. “The island has had a 3.1 percent decline in total visitor arrivals in FY18, primarily due to the negative effects of the North Korea news and a loss of air seats from Japan include the exiting of Delta from Guam, Saipan and Palau,” GVB said in a September 2018 report. “The Japan market was the most negatively impacted with a 30 percent loss of seat capacity in June, resulting in a 23.9 percent decrease in arrivals.”
Delta Air Lines announced its corporate decision to cancel Guam service route. Low cost carrier HK Express followed with its suspension of direct services to Hong Kong. Cape Air’s code share operations with United Airlines was terminated for service to Saipan.
“Less passenger traffic and fewer flights negatively affected operational revenue derived from facilities and system use charges assessed per passenger and concession fees that include retail, ground transportation, food and beverage and in-flight catering,” the airport authority said.
The audit recorded operational revenue of $69.4 million in fiscal 2018 from $70.5 million in fiscal 2017, reflecting a 1.6 percent decrease.
“Mitigating the projected decrease in passenger traffic, expenses were held in check and is reflected in the audit results of a decrease of 2.45 percent in operating expenses from $48.05 million in FY 2017 to $46.87 million in FY 2018,” the airport said.
GIAA said Ernst & Young presented the results of the fiscal 2018 financial statements of the airport’s board of directors during a special board meeting held March 25.
“Summarily, GIAA was able to maintain debt service coverage of 1.51, sufficiently covering the 1.25 DSC required under bond covenants, and ended with slight increase in the Airport’s net position posting $280.5 million in FY2018, up from $280.2 million in FY 2017,” the audit
Since the third quarter of last year, however, Guam’s seat capacity has gone up as United reintroduced its Boeing 777-200 aircraft on two of three daily flights from Tokyo to Guam on Oct. 28, 2018. The airline also restored four weekly flights between Guam and Nagoya on Dec. 2, 2018.
The additional four flights add more than 1,000 seats per week and over 16,000 seats between Guam and Japan to meet the increasing demand during the upcoming winter season as well as add convenient evening departure times in addition to the current morning departures.
Japan Airlines has decided to extend its second daily flights from Narita to Guam through March 2019. Jeju Air’s daily flights between Osaka and Guam launched on July 21 on a Boeing 737-800.