Improving yet testing trading conditions for European airports: ACI EUROPE

ACI EUROPE Director General Olivier Jankovec announced (16-Jun-2011) that European air traffic "has shown some resilience and outperformed economic growth. However, this [growth in traffic] is not the bounce-back analysts expected after the enormous traffic losses of 2008/09." He warned that Europe is seeing "extreme disparities not just between national markets, but also between airports within the same market. This is a tangible sign of the varied performance of European economies and increasing competitive pressures on airports." Looking ahead to the next six months, ACI EUROPE considers that demand for air transport in Europe will continue to be affected by sluggish economic growth, especially in Western Europe where many economies are suffering due to ongoing uncertainties surrounding sovereign debt crises and inflationary pressures. "Moreover, aviation tax will continue to hold back air traffic growth in the UK and will also affect demand in Germany and Austria. The current level of oil prices is adding to the equation, leading airlines to remain cautious on route expansion and focus on network optimisation to protect yields." For full year 2011, ACI EUROPE forecasts total growth of +6% for passenger traffic and +5% for freight traffic. Other highlights of his speech at the ACI EUROPE Conference in Lisbon include: [more]

• Network volatility: Mr Jankovec noted that the traffic recovery to date has come with a great deal of network volatility for Europe's airports. More than 4741 new air routes were opened last year between European airports, with an equally impressive 3330 air routes being closed. "These figures are a sign of the changing structure of the European aviation market and the increasing flexibility of airlines in moving aircraft and crews - shopping around for the best airport-market location. Clearly, the low-cost operating model and product offering is becoming the norm for air travel within Europe. Though they would never admit it, airlines are the ones holding the market power";
• Economic and financial performance: The trading environment for European airports has improved, but the overall economic and financial environment has not, Mr Jankovec noted. "Air traffic growth has not led to corresponding revenue growth. This is the result of significant pressure exerted over aeronautical revenues (charges levied on airlines and passengers) and growing difficulties in generating non-aeronautical revenues. External costs have remained high, especially in relation to security - the largest functional cost area for airports in Europe. Capital costs are also a worry, as access to capital markets continues to be difficult for many airports. Significantly, almost all of the major European airports have yet to recover their pre-crisis credit rating levels." He noted that trading conditions are "extremely tough for smaller [regional] airports", which have been heavily exposed to airline network volatility. Last year, 47% of these airports kept losing traffic. A glut of counter-productive national aviation taxes isn't helping, according the Mr Jankovec.