By Olivier Jankovec, Director General, ACI EUROPE
Just as things looked like they were stabilising, the Cyprus financial drama came as a stark reminder that Europe’s financial crisis is all but resolved – and that our continent remains a weak spot in the World economy. Indeed, the overall traffic trend for Europe’s airports remains negative. Only freight traffic seems to be finally picking up, although from a very low base. Unless you are a Turkish or Russian airport, this winter season bears all the signs of the much talked about triple dip recession. 2013 might well be a year to forget.
Yet, looking ahead, there are some good reasons for optimism that growth lies on the horizon. The latest forecast produced by EUROCONTROL shows that air traffic is expected to grow again as of 2014, in all European countries. Up to 2019, yearly average growth in aircraft movements will be close to 3%. This may be a slower pace compared to what we have been used to in the past – but it is still significant.
In a matter of days, EUROCONTROL’s predictions were validated by record orders from Ryanair and Turkish Airlines for a total of 314 short/medium haul aircraft. While this provides another confirmation of the structural changes at play in the aviation market, these orders are good news for Europe’s airports. Indeed, both Ryanair and Turkish Airlines have announced that most of these new aircraft will not replace the ones currently in service. They will be used to increase fleet size and grow capacity – with most of them destined to serve European airports.
At the same time, investors seem to have regained some confidence in the airport industry. The recent sales of ANA – the Portuguese airport system, and London-Stansted airport have delivered stronger EBITDA multiples, closer to pre-crisis levels. Interestingly, they have also allowed two European airport operators – VINCI airports and Manchester Airports Group (MAG) to achieve a step change in terms of their size and market positioning.
All this points towards the need for airports to keep the focus on the medium and longer-term. Easily said, but much less easily done, given the volatility of the current environment. While EUROCONTROL remains confident in its traffic growth forecast, it also cautions against short-term downward risks, which could result in traffic falling down by close to -3% this year. There is little doubt that these risks need to be taken seriously given the uncertainties surrounding Eurozone economies and the possibility of more airline failures.
This explains a cautious approach to future airport capacity planning and investment in Europe, which is even more pressing given the ballooning cost of capital. As a result, airport Capital Expenditure for 2014-2017 will decrease by €6.6 billion compared to 2013-2016. The EUROCONTROL forecast puts its own “price tag” on lower investment and increasing airport capacity constraints: as a result, 135,000 flights will not be accommodated with overall air traffic demand reduced by -1.2%. The repercussions of airport congestion will certainly be felt beyond aviation throughout European economies…
Investing in airports and growing traffic, revenues and shareholder value at the same time is something Charlie Cornish, CEO of MAG, is clearly focused on – as you can read in this issue. The publicly owned airport group has clearly raised its profile, delivering increasing community benefits in the process. We also bring more airport news from Germany, France, Turkey and the Gulf, together with the latest on EU policy for passenger rights and security.
Spring will be busy at ACI EUROPE as our 6th Regional Airports Conference hosted by Aéroports de Lyon in April is likely to coincide with the European Commission coming out with proposed new Guidelines for State Aid to airports. Of course, we are anxiously waiting to see whether these guidelines will adequately reflect the economics of our business and effectively protect our unique capabilities in driving local economic development. In other words, whether the Commission will be aligned with its own Growth & Jobs agenda.
From Lyon, we will then fly to Hamburg for our 22nd Trading Conference, dedicated to the ever-evolving arena of non-aeronautical activities – a part of the airport business that is only gaining in importance with each passing year.
All of these events will lead us up to the big moment on the calendar, in a city that just recently announced one of the most audacious airport projects in the world. Istanbul beckons us, you and anyone with an interest in the airport industry, for the ACI EUROPE & WORLD Annual Congress & General Assemblies from 10 to 12 June. It promises to be a major event – one you won’t want to miss.
