In Europe, Scandinavian airports are rising to the economic challenge

31 May, 2012

Major European airports - some privatised, others in the public sector - have released financial results for 1Q2012 and in two cases for FY2011. Unlike the last time an across-the-board results survey was undertaken, in 2011, there is a greater degree of uncertainty in some countries in this first quarter that is reflected in these reports but there still remain more positive than negative results, especially in Scandinavia.

Positive outlook at Vienna

Flughafen Wien financial highlights (EUR million): Three months ended 31-Mar-2012

Measure

Amount

% Increase/decrease

Revenue

139

+5.7

(Airport)

66.2

+5.9

(Handling)

40.3

+1.4

(Retail & Properties)

28.8

+12.6

EBITDA

49.8

+12.6

Net profit

21.6

+9.1

Passenger numbers

4.5 million

+9.2*

Aircraft movements

56,238

(-2.0)

Cargo volume

65,173 tonnes

(-9.1)

Total assets

2073

3.6% when compared to period ended 31-Dec-2011

Cash & cash equivalents

43.7

-60.8% when compared to period ended 31-Dec-2011

Total liabilities

1240

(-7.4) when compared to period ended 31-Dec-2011

*Attributable to a 13.8% increase in passengers transported by Austrian Airlines and the absence of negative effects:

  • Transfer: +22.4%;
  • Eastern Europe: +24.1%;
  • Western Europe: +5.7%;
  • Far East: +5.1%;
  • Middle East: +7.9%;
  • North America: +37.3%;
  • Africa: +14.2%.

Vienna Airport appears to be reasserting its influence where it was previously particularly strong: transfer traffic hosted by Austrian Airlines between west and east Europe. Austrian has been able to increase passenger numbers despite a series of staff disputes.

The Flughafen Wien Management Board says, "All this provides the backdrop for a positive outlook: based on the sound development of traffic during the first four months, we have adjusted this year's traffic forecasts upward. Flughafen Wien AG is now expecting an increase of 4% to 5% in the number of passengers, a slight decline of not more than 1% in flight movements and a decrease of 2% to 3% in maximum take-off weight (MTOW) for 2012."

It continued: "However, we must also note that the start of operations in the terminal extension will have a significant impact on 2012 earnings. The projected additional income of approximately EUR20 million is contrasted by higher operating costs of EUR35-40 million. Depreciation will total nearly EUR40 million and interest expense will rise by approx. EUR20 million." The SkyLink terminal, which has been something of a political hot potato for the airport authority, involving environmental assessments and cost over-runs, is scheduled to open on 05-Jun-2012.

Preparations for the start-up are proceeding at "full speed", the airport said. The company also noted that of the EUR10.9 million invested in 1Q2012, the major component was directed to SkyLink at EUR8.5 million. Other projects included EUR2.1 million for a forwarding agent building and EUR0.5 million for quick boarding gates. Investments are expected to total a maximum of EUR160 million for the full 2012 financial year. Net debt should reach a maximum level in 2012, but will remain below four-times EBITDA, i.e. under EUR800 million.

'World Class Hub' strategy paying off

In common with other Scandinavian airport groups, where traffic has been on the increase generally, Copenhagen Airports' (CPH) financial results are solid at all levels.

Copenhagen Airports financial highlights (EUR million*): Three months ended 31-Mar-2012

Measure

Amount

% Increase/decrease

Revenue

103.3

+6.5

(Aeronautical)

55.7

+7.4

(Non-aero)

46.9

+5.4

(Concession)

29.9

+10.5

EBITDA

50.4

+9.6

Net profit

19.2

+22.2

Cap Ex

22.3

+18.4

Total assets

1234

+2.6

Cash

72.4

+55.2

Total liabilities

877.7

+8.2

The aeronautical segment of Copenhagen's business continued to grow, especially transfer traffic, which performed strongly in 1Q2012 with a 12.4% increase in passenger numbers.

The total number of passengers is expected to increase in 2012 according to the interim report. Traffic, however, could be adversely impacted by the continuing economic uncertainty in the euro zone and any closure of routes due to airline reductions. The increase in passenger numbers is expected to have a positive impact on total revenue. Overall, a higher total profit before tax, when excluding one-off items, is expected for 2012. Under the charges agreement, Copenhagen must invest an average of DKK500 million (EUR67 million) annually in infrastructure enhancements, but expects to invest significantly more in 2012. Copenhagen says it will also be investing in other commercial projects for the benefit of airlines and passengers.

The "World Class Hub" strategy is reported to be producing results. Copenhagen is working to strengthen its position to be, at its objection, the best northern European hub. Another strategic focus is to increase accessibility to the growth markets of the world, especially the BRIC countries. No particular emphasis was placed in this quarterly report on the low-cost terminal, CPH Go, despite its strong passenger growth throughout 2011; the focus is on network airlines presently. This despite the fact LCC market share has grown to 17% at Copenhagen with that growth expected to continue.

The non-aeronautical part of the business also showed growth, of 5.4%. Revenue from the Copenhagen Airport shopping centre was up 16% due to changes in the shop and brand mix, and resulting in an increase in spend per passenger. There are no shop vacancies at the time of the report.

Copenhagen Airports Group confirmed that it plans to sell its 49% holding in the UK's Newcastle International Airport, a small-medium sized mixed traffic facility, in order to focus on the core activity of developing Copenhagen Kastrup Airport and "to secure our position in increasing competition with new airports as well as existing European hubs, by defining a new five-year growth strategy called World Class Hub" under the direction of new CEO Thomas Woldbye.

Avinor adding capacity at major airports

Copenhagen Airport has been attracting more transfer passengers from Norway but the owner/operator of Oslo Airport and most of the other significant airports there (46 in total), Avinor, which is also responsible for air traffic management, was also able to report positive financials for 1Q2012.

Avinor financial highlights (EUR million*): Three months ended 31-Mar-2012

Measure

Amount

% Increase/decrease

Revenue

271.6

+9.3

(Airport)

245.0

+10.4

(Oslo Airport)

131

+9.2

(En route charges)

29.6

+1.8

EBITDA

70.6

+11.2

Net profit

11.5

+18.3

Passenger numbers

10.5 million

+8.8

Avinor expects continued strong growth in air traffic and improved profit performance compared with 2011. The Group is continuing an extensive programme of adding capacity at the major airports that matches the expected traffic growth and demand from airlines and passengers.

Commercial revenue growth (13%) outstripped that of overall revenues (9.3%) during the period.

Domestic traffic increased by 7.5%, while international traffic increased by 11.3%. Domestic traffic made up 67% of the total traffic volume in the first quarter. 48% of the traffic growth in the first quarter was generated at Oslo Airport Gardermoen. The management points to continued high project activity levels with NOK722 million (EUR96 million) in investments in the period.

Avinor began to investigate the potential for investing in foreign airports during 2011 but no public announcement has been made as to the conclusions it drew.

Swedavia turns around a net loss

Sweden's Swedavia occupies a similar position to that of Avinor, except that it is smaller, is separated from the national ANSP (LFV), and has lost a few airports recently (Jonkoping, Helsingborg and Ornskoldsvik) to combinations of municipal authorities and the private sector. It also reported strong results in 1Q2012, turning around a net loss in the p-c-p.

Swedavia financial highlights (EUR million*): Three months ended 31-Mar-2012

Measure

Amount

% Increase/decrease

Net Revenue

519.8

+8.8

(Aviation)

263.2

+8.2

(Commercial services)

519.8

+8.8

Operating profit

81.6

+84.3

Profit before tax

53.4

+68.8

Net profit

41.5

compared to a loss of SEK45 million (EUR5.0 million) in p-c-p

Passenger numbers

31.5 million

+13

A total of 31.5 million passengers travelled through Swedavia's 11 airports during the year, which is an increase of 13%. Those 11 are part of an overall total of 40 with commercial scheduled or charter flights, and 10 of Swedavia's complement are contained within the national basic airport infrastructure. The fastest-growing airport in the period was Stockholm Arlanda, where Swedavia has a EUR110 million investment programme in place.

When CAPA last contrasted Danish and Swedish airport operators (Aug-2011, three months ended 30-Jun-2011) Copenhagen's bottom line had decreased as costs increased while Swedavia's profits had shot up by 370%. The latter seems to have retained its edge in this latest quarter.

Fraport looks to new Frankfurt runway

Germany's Fraport is set to benefit from the opening of Runway Northwest at home airport Frankfurt International.

"The new runway finally provides Fraport with the necessary capacity gain to guarantee (the state of) Hesse's and Germany's long-term international connectivity," according to CEO Stefan Schulte, whilst criticising government taxes, the European Union's Emissions Trading Scheme (EU ETS) and the EU's latest draft resolution for a new regulation concerning slot allocation at European airports and the ground handling market. But from a financial point of view, Fraport performed well in business year 2011 and into 2012.

The company expects annual passenger numbers at Frankfurt International to increase from 56 million in 2011 to 80 million following the opening of a planned third terminal in 2016. However, it is unlikely there will be any other runway additions amidst strong objections from local residents. Fraport will accept a court ruling that there could be no night flights at Frankfurt, even though it was damaging for both the group and Lufthansa.

Fraport financial highlights: (EUR million): Three months ended 31-Mar-2012

Measure

Amount

% Increase/decrease

Revenue

537.9

+5.8

(Aviation)

179.9

+8.6

(Retail and real estate)

19.4

+16.5

(Ground handling)

155.3

(-2.2)

EBITDA

138.2

+7.6

(Aviation)

26.7

+23.0

(Retail and real estate)

81.6

+10.6

(Ground handling)

28.8

+3.2

Net profit

15.4

(-36.4)

Total assets

9345

+1.3% when compared to period ended 31-Dec-2011

Total liabilities

6472

+1.5% when compared to period ended 31-Dec-2011

Passenger numbers

17.5 million

+3.9

(Frankfurt Airport)

12.2 million

+3.5

Cargo volume

546,509 tonnes

(-1.9)

(Frankfurt Airport)

488, 719 tonnes

(-11.7)

Across the group, passenger numbers increased by 3.9% to approximately 17.5 million in the reporting period. Group EBITDA grew disproportionately to revenue, by 7.6% to EUR138.2 million. The net position declined because of higher depreciation and amortisation.

Fraport is looking for investment in emerging countries in Africa, Asia and Latin America and its clear strategic intention is to add airports to its portfolio. While the company missed out on a bid for Sao Paulo International Airport, Fraport remains interested in Brazil, citing possible privatisations of airports at Belo Horizonte, Manaus and Rio de Janeiro. Fraport would consider acquiring airports in developed countries, but understands that prices tended to be high due to competition from financial investors. In Mar-2012 a third passenger terminal was completed at Xi'an Airport in China, to handle 21 million passengers p/a. Xi'an Airport has been part of Fraport's portfolio since Aug-2008.

Celtic turmoil inspires 'resilient' DAA performance

There has been turmoil in Ireland, one of the EU countries most affected by the economic downturn and bailed out in late 2010, and there is no absolute certainty over the future of Dublin Airport Authority (DAA), which operates Dublin, Cork and Shannon airports. It now seems that Shannon Airport is to be combined into the operation of the Shannon Development Corporation in a new entity, in a move that substitutes one branch of government for another, rather than the outright privatisation that some, like Ryanair, seek. Passenger numbers at Shannon have declined from 3.6 million to 1.6 million in the five years to 2011. The airport lost around EUR8 million in 2011.

Cork Airport will be maintained within the DAA for the time being. To take account of this decision, the DAA will be renamed to reflect the fact that there are now two airports and international businesses in the group structure. The Minister for Transport, Tourism and Sport will be making an announcement in the near future on this issue.

Despite the financial situation (Ireland is about to vote on the EU/IMF's austerity package at the time of writing and, like the Greeks, could reject it), Dublin Airport at least has been able to claw back some of its lost passengers (up to six million a year) in FY2011, with a small increase of 2% to 18.7 million.

Dublin Airport Authority financial highlights (EUR million): 12 months ended 31-Dec-2011

Measure

Amount

% Increase/decrease

Revenue

557

(-0.2)

(Aeronautical)

225

+9.8

(Commercial/Ireland)

202

(-5.2)

EBITDA

160

+8.8

Net profit

30

(9.1)

Net assets

1056

+3.1

Passenger numbers

22.7 million

+0.5

Dublin Airport

18.7 million

+2.0

Shannon Airport

1.6 million

(-7.0)

Cork Airport

2.4 million

(-3.0)

The DAA considers it put up a "resilient" performance in 2011 in the context of a weak economy both in Ireland and in the country's main trading partners.

EBITDA increased by 9% to EUR160 million in 2011, boosted by improved aeronautical revenue and a continued focus on cost reduction. Turnover was effectively flat during the year at EUR557 million, while Group profit declined by 9% to EUR30 million, due to the impact of higher interest and depreciation charges.

Costs were reduced by 1% to EUR275 million, despite the inclusion of a full year's operation of the Terminal 2 facility at Dublin Airport for the first time. DAA has reduced its total costs by 11% since 2008.

DAA's net debt was reduced by EUR30 million to EUR735 million in 2011 and the company redeemed or repurchased EUR300 million worth of its bonds during the year. DAA claims to have a strong liquidity position and is funded until 2018 based on current requirements.

DAA provided EUR14 million worth of incentives to support its airline customers in the development of new routes and additional business at the three airports during the year. A similar incentive scheme is in place at Dublin, Cork and Shannon airports for this year. Overall passenger numbers for 2012 are likely to be in line with last year or could show some modest growth.

Aer Rianta International leads the way

DAA also reported the overseas arm of its Aer Rianta International (ARI) subsidiary reported a big increase in profit from its overseas business.

ARI, which operates in 12 countries, recorded strong underlying sales growth during the year. ARI's overseas business made profits of EUR32 million last year, a 69% increase on the previous 12 months. Profits were boosted by disposals and continued strong returns from its investment in Düsseldorf Airport, but the retail business also saw good growth in India and North America during 2011. ARI, which is currently bidding for the duty free contract at Los Angeles International Airport (LAX), will open its first Chinese outlets later this year at the new Kunming Changshui International Airport in southwest China.

If there is one outstanding aspect of DAA, apart from Dublin Airport's T2, which has won several awards but cost an enormous amount of money when the country could least afford it, it is ARI.

Italian airports just keeping their heads above water

In Italy, Gemina, the parent company of Aeroporti di Roma (AdR) reports 'stable financial results', an achievement in itself in another country racked by debt issues, and with an interim government.

Gemina financial highlights (all financial figures EUR million): Three months ended 31-Mar-2012

Measure

Amount

% increase/decrease

Revenue

130.2

+0.9

(Aviation)

66.1

+0.2

(Non-aviation)

64.1

+1.7

EBITDA

50.4

Stable

Net profit (loss)

11.7

compared to a loss of EUR12.5 million in p-c-p

Net assets

2805

(-1.5% when compared to period ended 31-Dec-2011)

Passenger numbers

8.5 million

(-1.4)

Rome Fiumicino Airport

7.4 million

(1.2)

Rome Ciampino Airport

1.1 million

(2.6)

Cargo volume

34,224 tonnes

(-9.3)

In 1Q2012 the Rome airport system recorded a fall of 1.4% in passengers over the corresponding period in 2011 (-6.4% aircraft movements), influenced by the negative effects of the general macroeconomic trend and by adverse weather conditions recorded in Feb-2012. Thanks to the positive trend in Apr-2012 (+0.9), in the first four months of 2012 passenger traffic showed a decrease limited to 0.7%.

Consolidated revenues for the first three months of 2012, a period of low season for the sector, amounted to EUR130.2 million (+0.9% over the same period in 2011), due to the contribution of non-aviation activities (+1.7%), while aviation revenues are aligned with those of 2011 (+0.2%), not having benefited yet from the tariff increase planned for the projected inflation. EBITDA amounted to EUR50.4 million, unchanged from 2011. Group net losses were EUR11.7 million (compared to a EUR12.5 million loss in the first three months of 2011).

Meanwhile, the SAVE Group, which operates the two Venice airports and a handful of others, as well as railway stations, offered up a slightly depressing set of statistics for 1Q2012. The fall in EBITDA was "in line with management expectation, due to higher labour costs, operating cost (utilities and taxes) and material costs (de-icing"), another reference to bad weather in Feb-2012.

Venice is Italy's fifth busiest airport and Treviso, home mainly to LCCs, comes in at sixteenth. SAVE also has a minority stake in Belgium's Charleroi Airport.

SAVE Group (Italy) financial highlights (all financial figures EUR million): Three months ended 31-Mar-2012

Measure

Amount

% increase/decrease

Revenue

72.5

+0.3

(Airport management)

25.9

+0.4

(Aviation)

n/a

(-0.7)

(Non-aviation)

n/a

+1.2

EBITDA

8.3

(8.5)

(Airport management)

7.2

(-12.1)

EBIT

1.6

(-49.7)

Profit before tax

1.1

(-62.2)

Net indebtedness

90.3

+15.3% when compared to period ended 31-Dec-2011

Passenger numbers

1.9 million

(-0.7)

(Venice)

1.4 million

+2.2

These figures are in contrast to the FY2011 SAVE result and the management will be hoping they are no more than an aberration brought about largely by factors beyond their control.

See related article: Italy's S.A.V.E. airport operator invests and prospers

Slovenia's Ljubljana, like other small regional airports, encountering difficulties

Slovenia's Ljubljana Airport, privatised since 2003 in a local IPO, released some simplified financials for 1Q2012, which only serve to emphasise how small regional airports, even if they service capital cities, are having a hard time of it.

Ljubljana Airport (Slovenia) financial highlights (all financial figures EUR million): three months ended 31-Mar-2012

Measure

Amount

% increase/decrease

Operating revenue

6.5

(-6.9)

EBIT

0.99

n/a

Net profit

0.3

n/a

Passenger numbers

n/a

(7.8)

Cargo volume

n/a

(-14.4)

Aircraft movements

n/a

(5.6)

Ljubljana already lost 7.27% passenger traffic between 2010 and 2011.

However, the management reported passenger numbers transported by foreign airlines exceeded expectations even while passenger numbers on domestic airlines fell in the first three months of 2012. The airport also reported a better than expected net profit for the period, 6.5% higher than anticipated. The 2012 forecast is as follows:

  • Revenue: EUR32.3 million, -4.9%;
  • EBITDA: EUR1.9 million;
  • EBIT: EUR6.5 million;
  • Net profit: EUR5.9 million;
  • Passenger numbers: -3.7%;
  • Cargo volume: -10.9%;
  • Aircraft movements: -2.6%.

Stobart Air revenue growth outstrips that of the Group

Finally, the Stobart Group's Stobart Air division, which is bogged down in red tape at its (original) Carlisle Airport close to the English/Scottish border, but which is making a real go of expanding (London) Southend Airport, reports that revenue growth at Stobart Air outstripped that of the Group in the full year ending 29-Feb-2012.

Stobart Group (UK) financial highlights (all financial figures in GBP million): 12 months ended 29-Feb-2012

Measure

Amount

% increase/decrease

Revenue

551.9

+10.3

(Stobart Air)

8.8

+29.4

Underlying profit before tax

35.2

+2.0

(Stobart Air)

0.4

compared to a profit of GBP0.2 million in p-c-p

Profit before tax

30.5

+3.4

Net profit

29.2

+25.9

Total assets

814.0

+31.1

Cash and equivalents

31.0

+688.5%

Total liabilities

341.3

+18.0

The Group's main activities, which include port and rail but which are mainly road transport (the famous Eddie Stobart brand), still provide most of the profits but Stobart Air doubled its underlying pre-tax profit in the period, even if the amounts remain modest for now.

Most of the aviation focus is on Southend Airport, where the first and main phase of a redevelopment is complete. Two major airlines, including easyJet, are now operating to 13 European destinations. The Dublin route enables passengers to pre-clear US immigration, while there are up to eight trains per hour operating between the new airport railway station and central London.

Looking to the future, construction of the passenger terminal extension is scheduled for the latter part of 2012. This phase two development will see it more than double in size.