The financial outlook for Europe’s airports is clouded in uncertainty as revenue and cost pressures weigh heavily on operations in a post-Covid climate, according to Airports Council International (ACI) Europe.
Olivier Jankovec, Director General of the association representing the interests of regional operators, caveated his annual state of the industry address at yesterday’s 33rd Annual Congress and General Assembly in Barcelona with news that €50 billion/$54 billion in lost revenues and €20 billion in accumulated losses accrued since 2019 swung to €6.4 billion in net profit last year.
However, debt and liabilities are €47bn above pre-pandemic levels, with rampant inflation driving up operating costs such as utilities and supplies by more than 62% compared with the pre-pandemic period and capital costs up 22% as interest and depreciation costs rise.
As travellers feel the brunt of ballooning air fares – by as much as +32% versus 2019 – airport charges tend to remain below average at +7%, continued ACI Europe, a real-term decrease.
Seizing ‘momentum in consumer spending’
“What is at stake here is airports’ ability to invest in their decarbonisation, resilience, digitalisation and capacity where needed,” noted Jankovec. “Looking at 2023 and the next two years, Europe’s airports already cut planned investments from €34.6 billion to €18.4 billion. The investment crunch is not for tomorrow – it is already a reality.
“So there really is only one logical way forward, and that is adherence to the user pays principle. Regulators and governments need to accept the fact that cost pressures and investment needs require an upward adjustment of airport charges.”
The ‘relentless yet selective expansion’ of ultra-low cost carries coupled with the ‘relative retrenchment and consolidation’ of full-service carriers and the need for the industry to decarbonise to keep operating pose competitive pressures to airports in the context of more muted traffic growth, argues ACI Europe.
Jankovec says the key challenges facing airports are the ‘decoupling of financial viability’ and ‘profitability from volume growth’ – to ensure resilience and future proofing.
On the other hand, cost efficiency gains – despite inflationary pressures – and slashed investments with capital expenditure decreasing by €5.5bn, have helped to ease a scenario where passenger traffic remains 21% below 2019 levels.
Airports have also been working hard alongside their business partners to optimise consumer spending in the terminals, particularly from non-aeronautical sources such as retail and food & beverage activities, adds the association.
Jankovec concluded his address by identifying a new value creation model for airports based on three pillars: sustainability, innovation and diversification.
As reported, ACI Europe published its quarterly report this month predicting 2.9 billion air passengers in the third quarter of this year.