Sunk costs: Airports take action against rising seas, storms
SINGAPORE: Global airport operators, faced with rising sea levels and more powerful storms as the climate changes, are starting to invest in measures including higher runways, seawalls and better drainage systems to future-proof immovable assets. In early September, a seawall at Japan’s Kansai International Airport built on a reclaimed island near Osaka, was breached during Typhoon Jebi. The runway was flooded and it took 17 days to fully restore airport operations, at a high cost to the region’s economy as well as the dozens of airlines that cancelled flights.
Major airports in Hong Kong, mainland China and North Carolina were also closed due to tropical storms last month. Such incidents highlight the disaster risks to investors and insurers exposed to a sector with an estimated $262 billion of projects under construction globally, according to Fitch Solutions. There is a kind of one-way direction with regards to the frequency and severity of climate change-related events,” said Fitch Solutions Head of Infrastructure Richard Marshall. “If people aren’t taking that seriously, that is a risk.”
Fifteen of the 50 most heavily trafficked airports globally are at an elevation of less than 30 feet above sea level, making them particularly vulnerable to a changing climate, including rising sea levels and associated higher storm surges. You see it at individual airports that are already seeing sea rise and are already dealing with water on their runway,” Airports Council International (ACI) Director General Angela Gittens said, citing examples in island nations including Vanuatu and the Maldives.
“But even in some of these mature economies they are having more storms, they are having to do more pumping. My old airport in Miami is in that scenario.” A draft copy of an ACI policy paper reviewed by Reuters and due to be released this week warns of the rising risks to facilities from climate change. It encourages member airports to conduct risk assessments, develop mitigation measures and take it into account in future master plans. The paper cites examples of forward-thinking airports that have taken climate change into account in planning, such as the $12 billion Istanbul Grand Airport on the Black Sea, set to become one of the world’s largest airports when it opens next month.
Debt investors in particular have high exposure to airports, most of which are owned by governments or pension funds. Ratings agency Moody’s alone has $174 billion of airport bonds under coverage. Earl Heffintrayer, the lead analyst covering U.S. airports at Moody’s, said the risk of climate change became apparent to investors after Superstorm Sandy closed major New York airports for days in 2012.
Sandy led to the cancellation of nearly 17,000 flights, costing airlines $500 million in revenues and disrupting operations around the world, according to a 2017 presentation by Eurocontrol on climate change risk. Investors are increasingly asking about mitigation plans at low-lying airports like San Francisco and Boston as they look to invest in bonds with terms of up to 30 years, Heffintrayer said.
San Francisco International Airport, built on reclaimed land that is slowly sinking, has completed a feasibility study on a $383 million project to make the airport more resilient to sea level rises on its 8 miles (12.9 km) of bay front shoreline by 2025. We are seeing a lot more thought going into protection against flood damage, catastrophe, making sure that the storm drains around the airport are fit for purpose,” said Gary Moran, head of Asia aviation at insurance broker Aon. “There definitely is a lot more thought going into potential further worsening in weather conditions further down the line.” — Reuters