Airport Groups Report Earnings

Madhu Unnikrishnan

February 18th, 2020

  • Groupe ADP, which manages 26 airports in Europe, Asia, and the Middle East, reported its full-year 2019 traffic was down almost 17%, but this was mainly due to the shift of the bulk of Istanbul’s commercial traffic to the new airport from Ataturk, which ADP manages.

    The Turkish government gave ADP about $432m in compensation for the closure of Ataturk, and this helped ADP’s bottom line, the company said in its earnings call. Without the effect of Ataturk’s closure, ADP said traffic at all its airports grew by 3%. Its flagship Paris Charles de Gaulle saw traffic in 2019 rise by 5%.

    Orly, on the other hand, fell by 4%, due in part to the XL Airways and Aigle Azur bankruptcies, and in part to a runway closure at the airport. Orly is positioned well for this year with new terminal improvements and the recommissioning of the runway that was closed last year, ADP said. From France last year,

    North America routes grew by 7% and Latin America routes grew by 6%. Asia traffic was up by only 1%, but traffic to both Japan and China was up by 7%. ADP noted that the flight-shaming movement has made sustainability an “existential” concern for aviation, and the company said it is aiming for carbon-neutral operations by 2050.
  • Another airport management company, a unit of the Vinci conglomerate, also reported strong traffic growth last year. Vinci reported traffic up by 7% at its airports in Portugal, 8% in France, 6% in Chile, 7% in Japan, and 9% in Serbia. The company runs 45 airports in 12 countries (including London’s Gatwick Airport). The company attributes this strong traffic growth to the development of new routes throughout its system.

    Sustainability is a growing concern, however. Vinci is pledging that it will cut carbon emissions by 40% by 2030. Passenger traffic so far has not been adversely affected by the coronavirus, but the company’s executives said they are monitoring the situation but do not expect the disease to have a dramatic effect on either its airport traffic or construction businesses.
  • The battle over airline taxes in the U.S. continues as Congress considers the country’s budget for the next fiscal year. The White House has proposed increasing security fees levied on passengers, and the airline industry’s main trade group, Airlines for America (A4A), is asking Congress to reject the request.

    Among the proposed fee hikes are an 18% increase in the Passenger Security Fee, a 35% rise in the U.S. Customs Inspection User Fee, and a 29% rise in the Immigration User Fee. These fees will add $2.7b to the $26b U.S. passengers paid in fees last year, A4A says, and would dampen demand for air travel.

    The U.S. Federal government will run something like a $1.1 trillion deficit this year, its highest level since the aftermath of the great recession. That’s also more than double what it was in 2015. 
  • New York Kennedy’s Terminal 4 is expanding with a 16-gate project that will consolidate Delta’s operations at the airport to a single terminal. Delta currently operates out of Terminals 2 and 4. The project will move all its flights and ticketing to Terminal 4, allowing the airport to demolish Terminal 2. Delta currently operates 240 peak daily departures from JFK to 100 cities in 30 countries, and this is expected to expand in 2023, the Atlanta-based carrier said.
  • European airports reported their weakest traffic growth in five years in December, trade group ACI-Europe said in a report. Traffic in the 46 countries the group tracks grew by just over 3% y/y, but this was a record 2.4b passengers for the full year.

    Domestic traffic at airports not in the European Union fell by 1%, but international traffic grew by 5%, leading to an overall growth rate of 3%, far lower than the 8% growth reported in 2018. Airports in the EU saw traffic rise by more than 3%, to 58m passengers in December. The picture for freight was not at all rosy, however.

    Freight traffic declined by 2% all over Europe, which translates into a 3% decline in EU airports but a 2% uptick in non-EU airports. The overall cargo traffic figure was the worst recorded by ACI-Europe since 2012. 
  • Grupo Aeroportuario del Centro Norte, which operates several airports in Mexico, reported traffic in the fourth quarter rose 8% y/y, to 6m passengers.

    The group’s five most important routes in the quarter were: Monterrey-Mexico City, Monterrey-Cancun, Monterrey-Guadalajara, Culiacan-Tijuana, and Chihuahua-Mexico City. These five routes grew by 5% in the quarter. The company cited recent expansion by VivaAerobus and Volaris for its healthy traffic growth.

    The company believes the cancellation of the new Mexico City airport project could actually help it by encouraging airlines to start new routes from its own airports to Toluca and Santa Lucia, which will serve as relief airports when Mexico City reaches capacity. Also, its airport at Monterrey could benefit as more passengers seek to overfly Mexico City and fly point-to-point rather than connecting in the capital.

Madhu Unnikrishnan

February 18th, 2020