19-Mar-2022 1:10 PM

Passengers returning to AENA’s Spanish airports, but uncertainties remain

Analysis

Spain remains reliant on tourism. In 2019 tourism generated 12.3% of GDP, and in some areas it accounts for as much as 15%. So passenger numbers at Spain's airports are always important to the government.

In Feb-2022 those numbers shot up dramatically, by hundreds of per cent compared to 2021, and they even compared reasonably well in some cases with the 2019 figures. Although the highest number of passengers remains at Madrid and Barcelona, the recovery of the coastal and island airports was in some cases more impressive.

The question now is whether this signifies a major milestone in the recovery from COVID or whether it will turn out to be another false dawn.

Meanwhile Spain has to cope with the loss of visitors from countries like the UK (a loss that may turn out to be temporary), and Russia and the Asia Pacific region (which will be longer lasting).

Summary

Spain's airports experienced a significant increase in passenger numbers in February 2022 compared to the previous year, indicating a potential milestone in the recovery from COVID-19.
The recovery in passenger numbers was more impressive in coastal and island airports, suggesting a resurgence in tourism in these areas.
The nature of visitors to Spain is changing, with a decline in tourists from the UK and Russia, while the Asia Pacific region is unlikely to fill the gap.
International passenger numbers are growing at a faster rate than domestic numbers in Spain, reversing the trend observed in most countries in 2021.
Freight traffic at Spanish airports, particularly in Madrid and Barcelona, is performing better than expected.
The reduction in airport charges imposed by the Competition Commission may benefit airlines but is a loss for AENA, the airports operator.

Summary

Feb-2022 a good month for AENA's Spanish airports.
The nature of the typical visitor is changing, with a downturn in those from the UK and now from Russia, but Asia Pacific is unlikely to fill the gap.
Growth is more in the international than domestic market now.
While Madrid and Barcelona still had the highest passenger numbers in Feb-2022, the main coastal and island airports (Palma apart) generally performed better.
Freight is performing better than expected.
There are hopes for the return of UK and European passengers as the summer schedules begin, but it still depends on COVID levels in Spain and elsewhere.
A reduction in airport charges imposed by the Competition Commission may be anathema to AENA but should please the airlines.

Passenger and tourism data for Feb-2022 hopefully presage a strong main tourist season

The Spanish airports operator AENA has reported traffic statistics across its network for Feb-2022.

The second month of the year is not normally critical for the Spanish tourist industry. The main tourist season in the world's second most visited country begins at Easter and ends on the last day of September, although there are attractions such as festivals - a big part of Spanish culture - outside that period.

But this year (after two years of pandemic-related declines and with a milder form of the COVID prevalent, at least for now) hotels especially in the main commercial and tourist cities (Madrid, Barcelona, Seville and Valencia in particular), on the 'Costas' and in the Balearic and Canary islands, will be hoping to see a solid base being created for later in the year, even this early. In some cases hotels are only now reopening or returning to full staffing levels.

And while the Spanish themselves are seasoned travellers, both within their own country and abroad, the emphasis will be on attracting foreign visitors back to the country.

However, this will be within several new 'paradigms'. Competition will be more intense than it was before, with most countries fighting harder for a piece of a smaller cake for several years to come.

Big-spending Russians no more; Asia Pacific makes up a small segment of visitors to Spain

And several countries no longer form part of the equation.

Russia, of course, will not be sending many tourists, probably for a long time. Russians accounted for only 1.6% of visitors in 2019 but they are habitually big spenders who are worth much more than that in economic value. Even if they were to return tomorrow, their spending power would be considerably reduced.

As for China and Asia Pacific generally, the inbound tourist contribution of countries there was typically too small to measure individually (i.e. 1% or less of the total), but they had undoubtedly become target countries for the Spanish tourist agencies on account of the reduction in demand from Europe (especially the UK, which has been the leading market for many years).

The continuing prevalence of COVID-19 and the inability to eradicate it in so many Asia Pacific countries means that market will not grow as anticipated for quite a while yet.

The Latin America market could also be a target for tourism chiefs; it has been discussed in some regions. Much would depend on recovery rates there, both medically and economically.

Hopes rise for a return of British holidaymakers

There may be another twist in the tale where that strategy is concerned.

On 14-Mar-2022 the UK government announced the end of the remaining restrictions on international travel. The UK is one of the first large economies to remove all remaining COVID-19 international travel restrictions, reflecting government confidence in its vaccination programme. And in the event of future COVID variants of concern, the UK says it will default to the "least stringent measures". This should give aviation operators and passengers greater security in planning for the future.

The UK is still only at 67% of its pre-pandemic seat numbers in the week of 14-Mar-2022, compared to Spain's 84% and a Europe-wide average of 71%, but the ending of the travel restrictions should give the Spanish tourism authorities confidence that the UK market can now grow again quickly.

The chart below is for visitor arrivals in 2019.

Visitor arrivals by market for Spain in 2019

The main changes that took place in 2020 and 2021 were that at first France (2020), and then France and Germany (2021), took over from the UK as the main source of visitors. In 2021 the UK was down to 13.8%. Some of this can be accounted for by the relative ease of driving into Spain from France and even Germany.

It is also useful to compare the numbers of tourist visitors overall with the number of passengers at AENA's airports, and for that reason a chart is provided below.

The start date is 2015 and it can be seen that between that year and 2019 there was a steady increase in visitors, but one that had tailed off in 2018/19.

Spain annual tourism: visitor arrivals/growth, 2015 to 2022

Visitor numbers were down by 77.4% in 2020 but recovered by 64.2% in 2021. In 2022 so far (only January statistics are available for tourism) the increase is 472.4% over 2021.

There is a slight contrast with AENA's passenger traffic data for the same period, which is presented in the chart below:

AENA Aeropuertos S.A. (ENAIRE): passenger numbers/growth, 2015-2022

Note that AENA has separated out the data from its non-Spanish airports, so a direct comparison can be made.

Returning vacationers may have been using surface and maritime transport

The decline in 2020 and partial recovery in 2021 were broadly comparable with the tourism data, but the 2022 AENA statistic shows an increase of 342.3%, which is 130 percentage points less, even allowing for the fact that AENA's data covers two months, Jan-2022 to Feb-2022. The explanation may again be influenced by accessibility by road, possibly cruise ship passengers and a return of foreign traders to Spanish coastal tourist cities from North Africa.

The critical figure for Feb-2022 is how the month compared to Februarys across the network. The decline was 26.8%, to 11.9 million, in Feb-2022 compared to Feb-2019, so AENA airports ran at approximately 2/3rds of the passenger numbers immediately before the pandemic, while the gain over the comparable month of 2021 was 434.1%.

Aircraft movements in the same period were only down by 15.9% compared to 2019 though, indicative of reduced load factors, whereas cargo volume did grow by 0.3%, to 78,764 tonnes.

Growth now more in the international than the domestic segment

Breaking down the 11.9 million passengers in Feb-2022, 7.3 million travelled on international flights, which was 30.7% less than in Feb-2019 and 754% more than in Feb-2021.

Passengers on domestic flights were 4.5 million, which was 19.6% less than before the pandemic but 234.8% more than in 2021.

So at this moment international passenger numbers in Spain are increasing at a considerably faster rate than domestic numbers - the reverse of what was the scenario in most countries throughout 2021.

The capital city's sole commercial airport, Adolfo Suárez Madrid-Barajas Airport, registered the highest number of passengers in Feb-2022 (as might be expected), with 2,877,221, which represents a decrease of 30.7% compared to Feb-2019 and an increase of 282.1% compared to Feb-2021. In Madrid's case the decrease was slightly higher compared to the national total when Feb-2022 is compared with Feb-2020, while the Feb-2022 growth figure was considerably lower than the national one.

The table below represents the next busiest airports in Feb-2022 after Madrid and there is a clear variation with 'normal years', as Palma de Mallorca is historically the third busiest Spanish airport after Madrid and Barcelona and has been for many years. In Feb-2022 it was sixth.

Coastal and island leisure airports performing well

This may be accounted for by tougher restrictions being applied for some time in the Balearic Islands and the fact that many foreign visitors to Mallorca are from Germany, a country that has moved on from restrictions more slowly than, say, the UK.

That, conversely, might account for high numbers in the Canary Islands, Málaga and Alicante, which historically attract British visitors first and foremost, with the Canary Islands particularly popular in the winter months in any year.

The result at Alicante, the airport for Europe's largest tourist resort at Benidorm, is especially noteworthy.

Key Spanish airports: comparisons 2019, 2021, 2022

Airport	Passengers Feb-2022 (millions)	Feb-2022 cf. Feb-2019, (percentage)	Feb-2022 cf. Feb-2021, (percentage)
Barcelona El Prat	1.98	-39.3%	+591.9%
Gran Canaria	0.89	-20.9%	+385.9%
Málaga	0.87	-17.2%	+728.6%
Tenerife South	0.82	-13.6%	+915.2%
Palma de Mallorca	0.71	-20.3%	+403.9%
Alicante-Elche	0.58	-25.5%	+1,447.7%
Average	0.97	-22.8%	745.5%

Good results from the freight segment

Briefly, with regard to freight traffic, the airport that registered the highest cargo traffic was Madrid, with 44,043 tons, which was 6.9% more compared to the same month of 2019 and an increase of 20.1% compared to Feb-2021.

It was followed by the Barcelona airport, with 11,422 tons (-7.5% vs. 2019 and +26.8% vs. 2021); then Zaragoza, Spain's fifth largest city and one whose airport is more freight than passenger oriented, which registered 11,240 tons (-19.6% and -16.5% respectively); then Vitoria, another designated freight gateway, with 17.9% more than in the same month of 2019 and 3.7% more than in Feb-2021.

One might glean from these data that the freight component of AENA's business is performing well, and especially so in Madrid and Barcelona.

COVID under a degree of control in Spain, but how much it is in other countries counts equally

The passenger figures will make for comfortable reading for the government and for tourist agencies throughout the country, although there have been false dawns before, in each of the two preceding years.

The hope and expectation now will be that this particular version of the virus will prove to be the last one, global pandemics usually lasting 2-3 years, and that its effects will be insufficient to dissuade people from travelling or require the reimposition of restrictions.

At the time of writing, Spain has got on top of its infection rate and has got it down to 36,000 on 15-Mar-2022 from a peak of over 200,000 just before Christmas 2021.

Spain: COVID-19 data to 15-Mar-2022

Statistics like that should encourage foreign travel but the statistics in the supply country count almost as much.

For example, the infection numbers in the UK have risen to 120,000 on the same day (15-Mar), which raises the prospect of fresh restrictions being placed on incoming passengers to Spain from countries like the UK, or of those countries reimposing their own rules yet again, even if they said they would not do that.

The best the Spanish authorities can hope for is that cases will plummet across the board in most countries from April onwards, as they did in 2021, as people spend more time outside.

That, and the wish that no new coronavirus variant will suddenly appear.

Airlines happy at Competition Commission decision to reduce AENA's charges; AENA isn't, but might be, eventually

So the airlines will be happy at recent outcomes and even more so at the news that in Feb-2022 Spain's National Markets and Competition Commission approved a 3.17% reduction in AENA's airport charges for FY2022, resulting in a rate of EUR9.95 per passenger.

The Spanish Government recently rejected AENA's proposal to increase charges as a means to recover EUR2.3 billion in COVID-19 related losses. The new charges will come into effect from Mar-2022.

The airlines' gain is AENA's loss unless the income generated exceeds what would have arisen out of AENA's proposal, in which case it is a 'win-win'.

That depends on the airlines passing savings on to their customers, but since airlines are also heavily out of pocket owing to COVID, that would seem to be an unlikely outcome right now.