Investors considering Paris’ third airport at Beauvais as concession draws to an end
France's secondary and tertiary level commercial airports are owned and managed by an assortment of local government offices such as Chambres de Commerce, and private companies.
One of them is Paris Beauvais Tillé Airport.
The airport's concession will end in the summer of 2023 and already some powerful companies in the French airport-operating fraternity are reported to be investigating the potential the airport might offer them.
That potential hangs on Beauvais Tillé's position as the leading low cost airport serving the Paris region, but weighed against that are concerns about an overreliance on budget airlines, and on surface transport connections that do not compare with those of its main rival.
- The concession on Paris Beauvais Tillé Airport will expire in 2023, attracting interest from potential investors.
- Beauvais is the tenth busiest airport in France and primarily serves as a low-cost airport for the Paris region.
- Ryanair is the main airline operating at Beauvais, accounting for 79% of seat capacity.
- Surface transport connections to Paris from Beauvais are limited and need improvement.
- Beauvais has experienced strong passenger growth, but not exceptional, with an average growth rate of 4.7% from 2009 to 2019.
- Potential downsides for investors include the risk of airline downsizing or exit and the impact of government taxes on the airport's operations.
Summary
- The concession on Paris Beauvais Tillé Airport will expire in 2023 and several investors are said to be interested in it.
- Beauvais was France's tenth busiest airport before the pandemic, but it remains relatively unknown outside France.
- Traffic growth has been strong, but almost exclusively within the low cost domain and led, as ever, by Ryanair.
- The airport has a broad catchment area to the north of Paris, but downsides include inadequate public transport and overreliance on the low cost model.
It is often forgotten that Paris has a third airport, even though it is France's tenth busiest
The two main Paris airports, Charles de Gaulle (CDG) and Orly, along with the business jet-oriented Le Bourget, come under the auspices of Groupe ADP, the partially stock market-listed company by way of its parent Aéroports de Paris, SA.
CDG, in particular, counts amongst the busiest airports in Europe and is a true international and intercontinental hub.
Several European cities have two or more commercial airports serving them, including London (six), Rome (two), Stockholm (two, for now) and Amsterdam (eventually). Others that have peripheral airports 50km or more away, of the variety championed by Ryanair in the 2000s, include Barcelona, Frankfurt, Munich, Oslo, and (again) Stockholm.
It is sometimes forgotten that Paris has a third airport, even though it carries the 'Paris' moniker.
Paris Beauvais Tillé Airport (hereafter Beauvais) is located in that city (or more correctly - close to the village of Tillé), which is 80km (50 miles) from Paris, in the Hauts-de-France region.
That is three times as far out as CDG is, but Beauvais also serves the Paris metropolitan region, and despite being at least 20km further out from Paris than is the furthest airport from the centre of London.
In 2019 Beauvais was the tenth busiest airport in France for passengers.
Beauvais Airport and Paris - relational map
As is often the case - Ryanair has been the main route developer
The airport has achieved that position mainly due to the efforts of Ryanair, which set up a USD200 million base there in Dec-2020 as its unique presence in the Paris region - having flown there for two decades, and rather than pay the fees demanded by the (then) Aéroports de Paris.
Ryanair does not operate at CDG or Orly, in the same way that it has always shunned making any attempt to get into London Heathrow.
Paris Beauvais-Tillé Airport: network map, week commencing 26-Sep-2022
Ryanair has 79% of the seat capacity at Beauvais, followed by Wizz Air and with the other players being peripheral, meaning that low cost accounts for 98% of capacity at Beauvais, compared to 12% at CDG and 61% at Orly.
Beauvais is the undisputed 'budget airport' for the heavily built up area to the north of Paris.
And that 79% eclipses Ryanair's capacity share of 74% at London Stansted Airport.
Paris Beauvais-Tillé Airport: system seats for all business models, week commencing 26-Sep-2022
Surface transport could be better
Beauvais is an isolated airport promoting itself as serving a major city, even by Ryanair's standards.
Travellers into Paris have the choice of the 'Ryanair bus', which takes about 80 minutes, or the local (and infrequent) train from Beauvais, which takes two hours, including the time taken to access the station by taxi. Or a taxi all the way to Paris.
Strong passenger growth, but not exceptional
Beauvais has experienced strong passenger traffic growth over the past decade, but not exceptional.
In the 11 years from 2009 to 2019, and before the COVID-19 pandemic, there was growth in every year except two (2016-17), but it was only in the early years that it was in double digits. Hence the average growth in that period was only 4.7%, compared to 2.1% at CDG.
While a surprising number of 'low cost' secondary level European airports have grown modestly over the same period, an average growth level of less than 5% must still be considered unimpressive by any standards within a medium where that business model continues to be a dominant one.
The ratio of LCC seats within Western Europe rose from 40.7% to 48.7% between 2012 and 2022, with particularly strong growth coming during the pandemic.
Paris Beauvais-Tillé Airport: annual traffic, passenger numbers/growth, 2009-2022
Airport concession to expire in Jun-2023; VINCI heads up the list of potential successors
The 15-year concession on the airport expires in Jun-2023.
In 2007 the state transferred ownership of the airport to the SMABT (Syndicat Mixte de l'Aéroport de Beauvais-Tillé - the Joint Association of the Beauvais-Tillé Airport), and the Beauvais airport management and operation company (SAGEB) was created in 2008, spurring new development.
More recently it has been operated by the Chambre de Commerce et d'Industrie (CCI) de l'Oise (51%) in conjunction with Veolia, which at one time became the 'third force' in airport privatisation in France, behind Vinci and Keolis. Veolia has been involved in management of a number of French regional airports.
SMABT is reported to be holding talks with potential successors, and they are said to include the French companies EGIS, Eiffage, Aéroports de la Côte d'Azur, and VINCI Airports.
EGIS has airport investments in Africa and South America (Brazil) and continues to seek ways to add to its portfolio internationally. Within Europe it is active in Belgium and at four French regional airports - Brest, Quimper, Bergerac and Pau.
Eiffage, a construction and real estate development company, is a comparatively recent investor in the sector. It arrived on the scene in 2017 as a (consortium) bidder for the concession on Belgrade Airport. Since then it has focused on the French regional airports, having acquired stakes in Toulouse (Dec-2019) and Lille (Jan-2020) airports.
Aéroports de la Côte d'Azur is the operator of the Nice airport, the country's third busiest, which also operates the Cannes and Saint Tropez airports on the same Mediterranean coast and is a shareholder in the Hermes Airports consortium that operates the Larnaca and Paphos airports in Cyprus. (Since Nov-2016 Nice Airport has been majority owned by Azzura Aeroporti [Atlantia and EDF Invest] within a consortium that also includes the local Chamber of Commerce.)
VINCI Airports is in a different league, although that does not necessarily give it an advantage. The largest private sector airport operator in the world as measured by the airports it owns or manages, VINCI has assets in all regions apart from the Middle East and Australasia; including - critically where this bid is concerned - 11 in France. They are a mixture of management contracts and concessions.
VINCI is undoubtedly the most experienced operator by far on a global scale, but global experience is not required at Beauvais, where all flights are within continental Europe. It is more likely to be judged on what it has done to the benefit of the French airports.
VINCI Airports: assets in France
Beauvais' main benefit is its catchment area to the north of Paris
What benefits can Beauvais offer these investors?
One is that it has established itself as the de facto low cost airport for the heavily populated area to the north of Paris at least.
The Paris population (2019) is 2.2 million, and that of Seine-St Denis 1.6 million. The northern part of Paris and Seine-St Denis, along with Hauts-de-France (6.0 million), should be considered as a direct catchment area.
Orly does handle a high degree of low cost demand, with over 60% of capacity on that business model, but its route network varies, with a greater focus on Africa (the old colonial countries) and on long haul.
Of course, a new concessionaire might well take a different view on the airline charging structure, as well as refocusing on different models. It would though be hard-pressed to encourage many full service operators to such a distant facility.
The only one at the moment is Air Moldova, which is presumably there on account of an attractive fee structure.
Uncompetitive public transport arrangements, potential network downscaling, and airline exit all need to be tackled
The operational downsides at present include the lack of adequate surface transport. There would need to be an improvement in the rail service.
Two hours from leaving the airport to central Paris is not appealing to most people, and does not remotely compare with the existing CDG-Paris rail service, not to mention the 20-minute CDG Express, which should come online in 2027.
And of concern to any investor would be the way that the second largest airline there - Wizz Air - dramatically downsized its operations at Doncaster Sheffield Airport in the UK several months ago in 2022, which is one of the factors behind that airport's owners deciding to close it down.
And Ryanair is known for its propensity to 'de-base' airports for reasons that are outside the control of the airport.
The French government is equally known for its propensity to apply such taxes.
That is a risk all small secondary level airports take when they are heavily dependent on one or two airlines.