Another Stretch Year For Europe's Airports - Tania Tsoneva Director EMEA Infrastructure - S&P Global
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Another Stretch Year For Europe's Airports Tania Tsoneva
Director
EMEA Infrastructure
March 22, 2021
Key Takeaways
– European
Europeanair
airpassenger
passengertraffic
trafficand
andrevenue
revenuein
in2021
2021will
willrecover
recoverto
toonly
only30%-50%
30%-50%of
of2019
2019levels.
levels.
– Many
ManyEuropean
Europeanairports
airportswill
willstill
stillpost
postweaker
weakerratios
ratiosin
in2021,
2021,but
butthey
theywill
willstrengthen
strengthenin
ascoming
the recovery
years. unfolds.
– Airports
Airportshave
havedemonstrated
demonstratedgreater
flexibility
flexibility
to manageto manage
cash burn
cashand
burn
limit
andrising
limitdebt
rising
during
debt the
during
pandemic.
the pandemic.
– Permanent
Permanentcost
costsavings
savingsand
andvariable
variablecontracts
contractswill
willsee
seeairports
airports"building
"buildingbetter
betterfor
forthe
thefuture."
future."
– Domestic
Domesticand
andleisure
leisuretravel
travelisisset
setto
torevive
revivequicker
quickerin
incoming
comingyears,
years,while
whilehubs
hubsand
andbusiness
businesstravel
travelwill
willlabehind.
lag behind.European Air Traffic Outlook
2021 Air Passenger Traffic Likely To Stall At 30%-50% Of 2019 Level
S&P Global Ratings' Air Passenger Traffic Estimates
As A % of 2019 levels
– As in 2020, European air traffic is likely to
Global estimates European estimates underperform global air traffic in 2021, given
the prevalence of international travel.
– If the EU can accelerate vaccine production
2020 34.3% 30.1% and rollouts, we think it could achieve
widespread immunization by the end of the
third quarter, enabling air passenger traffic
to recover later in 2021
2021 40% - 60% 30% - 50%
2022 70% -80% 70% -80%
2023 85% - 90% 85% - 90%
Source: “Europe's 2021 Air Passenger Traffic Likely To Stall At 30%-50% Of 2019 Level,” Feb. 18, 2021, S&P Global Ratings. In RPKs – Revenue Passenger Kilometers. 2020--actual data based on IATA report.
37Falling COVID-19 Cases And Increased Vaccination
Can Create An Encouraging Path For Recovery
New COVID-19 Cases Per Million Of Inhabitants
U.K. France Netherlands Italy Switzerland Ireland Norway
1,500
1,000
500
0
-500
Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21
Vaccines Per Hundred Of Inhabitants
31-Dec-20 31-Jan-21 28-Feb-21 11-Mar-21
40
30
20
10
0
U.K. Switzerland Ireland Norway Italy France Netherlands
Source: OWID, as of March 11th, 2021
5Key Drivers Of Recovery
- Domestic and short haul - International and long haul
- Leisure and visiting friends and family - Business travel
- Hubs serving origin and destination travel - Regional airports
European Airports: Key Operating Statistics (2019 Data)
Heathrow Funding Aeroports de Paris Royal Schiphol Group Aeroporti di Roma
Flughafen Zurich AG Gatwick Funding Ltd. daa PLC Avinor AS
Ltd. S.A. N.V. SpA
Country of location U.K. France Netherlands Italy Switzerland U.K. Ireland Norway
Business risk profile Excellent Excellent Excellent Strong Strong Strong Strong Strong
Group passengers (2019 mil.) 80.9 108* 80.5 49.4 42.2 46.5 35.5 54
Heathrow Charles de Gaulle Amsterdam Fiumicino Zurich Gatwick Dublin Oslo
Passengers (mil.)
80.9 76.2 71.7 43.5 31.5 46.5 31.5 28.6
% origin & destination 70% 89% 63% 75% 71% 100% 93% 75%
% transfer 30% 11% 37% 25% 29% 7%
% long haul 53% 41% 29% 27% 26% 19% 16% 2%
% business 33% n.a 30% 20% 27% 17% 16% N.A.
British Airways
Air France (45%) KLM (50%) Alitalia (34%) Swiss (54%) EasyJet (43%) Ryanair Norwegian (38%)
(45%)
Top 3 airlines Virgin (5%) EasyJet (8%) EasyJet (8%) Ryainair (17%) Edelweiss Air (9%) British Airways (18%) Aer Lingus SAS (38%)
AA (4%) Transavia (5%) Transavia (7%) Vueling (7%) EasyJet (3%) Norwegian (11%) -- Widerøe (10%)
€2.4 bil. state-backed
NOK3 bil. state loan
€8 bil. approved commercial funding
€3 bil. package €1.4 bil. package for guarantee for
State support for the flagship airlines N.A. state aid package and €1 bil. direct N.A. N.A.
pledged to Alitalia Swiss Air Lines Norwegian: SEK3.3
for Air France government loans to
bil. state aid for SAS
KLM
*259.2 million including international airports. N.A.--Not available. Sources: S&P Global Ratings, airports; annual reports.
6Accelerated Disruption Slows Growth Below The 4%-5% Of The Past
Digital Decarbonization
– Remote working and virtual meetings will – Air France to reduce domestic flights as
reduce commuter and business travel part of COVID-19 state aid package
– Online shopping and hybrid (part online) – Environmental tax on flights on the
teaching change travel patterns agenda in many European countries
– New technologies could lead to – Physical climate risks--heatwaves,
permanent cost savings for companies extreme weather events, flooding, and
rising sea levels--are key considerations
for airports*.
*Scenario Analysis Shines A Light On Climate Exposure: Focus On Major Airports, S&P Global Ratings, published on Nov. 5, 2020.
7Social Risks Reposition Modes Of Transport
Once COVID-19-Related Restrictions Are Lifted For You, When Will Your Spending
Return? (%, per age category)
40 – Social risks are just as important as
environmental risks.
35
– We expect slower return to air travel,
30
followed by public transport.
25
– “Fear of catching the virus” dominates
20 financial reasons to spend on air travel, in
%
38
particular for older people (65+).
15
28
25 24 25
10 22
18 19
5
0
Air travel Public Air travel Public Air travel Public Air travel Public
transport Transport transport transport
Immediately Within 3 months Longer than 3 months Don’t know
Source: 451 Research, VoCUL, Connected Customer, Loyalty and Retention Q1 2021, S&P Global Market Intelligence.
8Focus on European Airports
Air Passenger Numbers Collapsed During COVID-19 Lockdowns
Hub Airports
140 Heathrow
Royal Schiphol
120
ADP
100
Index: May 2019 = 100
80
60
40
20
0
May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20
Source: S&P Global Ratings.
10Air Passenger Numbers Collapsed During COVID-19 Lockdowns
Non-Hub Airports
140 Orly
Flughafen Zurich
120
Gatwick
100
Ciampino
Index: May 2019 = 100
80 Fiumicino
Cork
60
Dublin
40 Avinor
20
0
May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20
Source: S&P Global Ratings.
11European Airports | COVID-19-Related Rating Actions
– Most European airports have been downgraded since the start of the pandemic, and all ratings have a negative outlook.
– Given their strong market position and often-regulated earnings, we typically use a longer forecast horizon for airports.
Notches Notches
To From
Rating SACP
Flughafen Zurich AG A+/Negative AA-/Stable -1 -1
NATS (En Route) PLC A+/Negative A+/Negative 0 -1
Aeroports de Paris S.A. A/Negative A+/Stable -1 -2
Royal Schiphol Group B.V. A/Negative/A-1 A+/Stable/A-1 -1 -2
Avinor AS A/Negative/A-1 AA-/Stable/A-1 -2 -2
daa PLC A-/Negative/A-2 A/Stable/A-1 -1 -1
Class A: BBB+/Negative Class A: A-/Negative
Heathrow Funding Ltd. -1 -1
Class B: BBB-/Negative Class B: BBB/Negative
Gatwick Funding Ltd. Class A: BBB/Negative Class A: BBB+/Negative -1 -1
Aeroporti di Roma SpA BB+/Developing/B BB+/Watch Neg/B 0 -2
SACP--Stand-alone credit profile. Source: S&P Global Ratings. Data as of March 15, 2021.
12Airports Cutting Capex Due To Low-for-Longer Passenger Scenario
Cash Burn For Rated European Airports
Current versus pre-COVID-19 forecasts
9,000
Pre-COVID-19
8,000 forecast
7,000
-48% Current
-58% forecasts
6,000 -82%
-92%
5,000
Mil. €
-66%
-56% -54%
4,000
-52%
3,000
2,000
1,000
-80%
-100% -100% -99%
0
2020 2021 2022 2023 2020 2021 2022 2023 2020 2021 2022 2023
Capex Dividends EBITDA
Capex--Capital expenditure. Source: S&P Global Ratings, rated European airports.
13Credit Ratios Recovery Through 2023
Supported by mitigating actions such as:
– Continuing furlough schemes and relief in business rates.
– Equity or quasi-equity injections, hybrid capital, or optimization of the capital structure (for instance, through reprofiling of swaps).
European Airports: Funds From Operation To Debt
70
2019
60
50 2021
40
%
2022
30
20
2023
10
Downgrade
threshold
0
(10)
ADP ADR Avinor Daa Flughafen Zurich Gatwick Heathrow Schiphol NATS
ADP--Aeroports de Paris. ADR--Aeroporti de Roma. Schiphol--Royal Schiphol Group. NATS--NATS (En Route). Source: S&P Global Ratings. 2020 figures not meaningful.
14Digital Solutions Could Drive Permanent Cost Savings
Large-scale voluntary redundancies, mothballing of facilities, and implementation of digital solutions can improve airports' ability to reduce
the cost base and investment budgets when traffic is low.
European Airports: EBITDA Per No. Of Passengers Carried (PAX)
30.0
2019
25.0
S&P Adjusted EBITDA per pax in € Mil.
20.0 2021
15.0
2022
10.0
2023
5.0
0.0
Heathrow ADP Flughafen Zurich Gatwick Schiphol ADR Daa Avinor
Data excludes international business operations for Aeroports de Paris, DAA, and Flughafen Zurich. 2020 figures not meaningful. Source: S&P Global Ratings. Data as of end-December.
15Profitability Is Set To Remain Under Near-Term Pressure
– Stable earnings from other sources, such as renting real estate or international operations, can support airports.
– That said, if the terms of post-pandemic minimum revenue guarantees are less favorable, revenue from nonaeronautical sources could
fall.
European Airports: EBITDA Margin
BRP: excellent BRP: strong
70%
60%
2019 A
50%
2021 P
%
40%
2022 P
30%
2023 P
20%
10%
0%
Heathrow ADP Schiphol ADR Flughafen Zurich Gatwick Avinor Daa
a--Actual. p--Projected. BRP--Business risk profile. ADP--Aeroports de Paris. Schiphol--Royal Schiphol. ADR--Aeroporti di Roma. Source: S&P Global Ratings. 2020 figures not meaningful.
16Focus On Affordable Charges Will Dominate The Future Of
Regulation
- Counterparty risk for airports is on the rise via exposure to ailing or defaulting airlines.
- Airports with lower charges stand a better chance of attracting more traffic.
European Airports: Revenue Per PAX In 2019
50 108.1 120
Others
45
100
40
80.5 Real estate
35
80
30 80.9 Car parking
Mil. £
Mil. £
54.7
25 49.4 60
46.5
20 35.5 Retail
31.5 40
15
10 Aeronautical
20
5
PAX (left scale)
0 0
Heathrow Aeroports Flughafen Gatwick Royal Aeroporti di daa Plc Avinor AS
SP Ltd. de Paris Zurich AG Funding Ltd. Schiphol… Roma SpA
Source: S&P Global Rati ngs. Data as of e nd- December 2019, except for Gatwick Funding (M arch). Data e xclude s inte rnatio nal busine ss operations for Aero ports de Pari s, DAA, and Flughafen Zurich. PA X--No. of passengers
carried.
17COVID-19: A Test of Government Support
S&P Global Ratings’ Likelihood of Extraordinary State Support For Government-
Related Entities
– Little direct support to rated airports so far,
SNCF SA
apart from in Norway and Italy.
Integral
Ferrovie dello Stato Infrabel
Italiane SNCF Réseau
SNCB – European airports have called on the
GRE link with the government
European Commission to relax state aid
Very Strong
Deutsche Bahn
Vygruppen
Avinor
Russian Railways rules.
VR Group Transnet
Georgian Railways
Havenbedrijf Rotterdam
Strong
daa plc
N.S. Groep NATS (En Route)
Royal Schiphol Group
Kazakhstan Temir
Aeroports de Paris SA
Limited
Flughafen Zürich
Limited Important Very important Critical
Importance of GRE role to the government
Almost certain Extremely high Very high
High Moderately high Moderate
GRE--Government-related entity. Source: S&P Global Ratings.
18EMEA | Related Research
– Europe's 2021 Air Passenger Traffic Likely To Stall At 30%-50% Of 2019 Level, Feb. 18, 2021
– Heathrow Funding Class A 'BBB+' And Class B 'BBB-' Ratings Taken Off CreditWatch Negative And Affirmed; Outlook
Negative, March 4, 2021
– Gatwick Funding Ltd. Class A Debt 'BBB' Rating Removed From CreditWatch Negative And Affirmed; Outlook Negative,
March 10, 2021
– NATS (En Route) PLC 'A+' Rating Affirmed And SACP Revised Down On Delay To Revenue Recovery; Outlook Negative,
March 12, 2021
– How Covid-19 and ESG Factors Are Weighing on Airports’ Credit Quality, Dec. 10, 2020
– Scenario Analysis Shines A Light on Climate Exposure: Focus on Major Airports, Nov. 5, 2020
19Pablo Lutereau Tania Tsoneva
Head of Infrastructure, EMEA Director
+54-9-11-5850-9406 +44 20 7176 3489
pablo.lutereau@spglobal.com tania.tsoneva@spglobal.com
Juliana Gallo Beata Sperling Tyler Annabelle Teo
Director Associate Director Associate Director
+44 20 7176 3612 44 20 7176 3687 +39 342 9565744
juliana.gallo@spglobal.com beata.sperling-tyler@spglobal.com Annabelle.teo@spglobal.com
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