At the ACI Europe Airport Commercial Retail Conference in Helsinki this week, a shift in the balance of airport traffic in Europe – the world’s second most important region for duty free and travel retail sales – was spotlighted.

“For the first time since the global crisis in 2008 EU airports led the growth [at +5.6%]… double digit in some locations,” said Olivier Jankovec, Director General of ACI Europe, in his State of the Industry address covering 2015. “Non-EU airport performed less well [at +3.9%] because of Russia and Ukraine – although there was some impressive growth in Iceland and Turkey.”  In total traffic reached 1.95bn at Europe’s airports.

Of note to DF&TR operators was that in 2015, it was the larger hubs (>25m pax) and the smallest (<5m) that saw the least growth – both at under +4%. This compares with traffic growth for medium-sized airports of 5-10m growing at +7.1%, possibly reflecting low-cost carriers’ expansion of their networks at gateways that are easily accessible but less expensive.

NEW MARKET FUNDAMENTALS

Jankovec noted that there are also new conditions to be considered. “Historically, air traffic performance has been double that of GDP but what we’ve seen since 2008 is that air traffic has very significantly outperformed economic growth.”

In the EU it has been five times more, and in the Eurozone it has been by a factor of 28. “This is unheard of in the past and really points to aviation becoming a commodity and playing an increasingly important role for the economy,” said Jankovec.

However, another way to look at it is to ask: if airport traffic is so crucial to the economy why are GDP levels rising so slowly and so out of step? After the global financial crisis is there simply more of a disconnect between air traffic development and the GDP growth of Europe?

THE 2016 YEAR – RISING EXTERNAL RISKS

On the rest of this year, Jankovec comments: “It’s looking good – we’re a bit surprised ourselves at how good. There is a ‘but’ and that’s getting bigger and bigger: external risks are really increasing.”

While an air freight rise of +2.9% this year (in January and February) points to improving economies, and higher movements (+7.2%) mean that airlines are putting more capacity in the market, the whole picture is not quite so rosy.

ACI Europe notes external risks such as the weakness in the global economy. “Brazil is a mess, China is having a soft landing and emerging countries are struggling. The IMF and the World Bank are holding their spring meeting this week where they’re likely to announce they will revise their forecasts for the world economic growth downwards,” said Jankovec. That will be another downward revision after one in January.

The bigger worry in many cases is the home-growth risk. “That starts with Russia which is not new, but in the wake of the euro crisis we have a migration crisis and the possible UK Brexit. These are existential threats to the EU, but they are not good for business,” the Director General noted.

Then he added: “Of course we also have terrorism. With Brussels and with Paris, we are clearly living in a new era. The impact on aviation of these events has been mainly local so far but we know we’re likely to get more (attacks) and it will test the resilience of our industry to external shocks. This, at the moment, is our main worry.”

TERRORISM & SEAT CAPACITIES

The reality-check for DF&TR operators and airport landlords is that there could be a very real correlation between terrorist activity and passenger numbers.

Traffic-wise, winter 2015/16 showed that the biggest growth came from intra-European growth (+10%) while extra-Europe was up by just +3%. By region, Asia [sensitive to terrorism and health scares] was down by -1.8%, while Africa [where numerous terrorist atrocities have been perpetrated in the east, north and north-west of the continent] was down by -4.1%.

Counteracting that to some degree has been North America up +5.6% driven by a strong US dollar and weak euro [though it’s not so weak in 2016] and the Middle East (+11.2%) helped greatly by its global hubbing strategy.