SWOT Analysis – Corporación América Airports S.A., a powerful force in LatinAm now looking to expand

A highly significant division of Corporación América

Corporación América Airports S.A. (CAA) is a significant division of the Argentine international holding company and conglomerate - Corporación América.

Diagrammatical representation of the holding company and its core airports division

Source: Corporación América.

Based on the number of airports under its control, and in which it is an investor, CAA is the second largest wholly private sector concession operator in the world. It totals 52 airports, in six countries, and handled collectively 81.1 million passengers in 2023 (3.6% fewer than in 2019), at an average of 1.6 million at each airport.

Mainly operating smaller facilities

By definition that makes it primarily an operator of smaller facilities.

And by comparison, the number one operator, VINCI Airports (which featured in this previous SWOT report) hosted 267 million passengers in 2023 at its 73 airports in 14 countries, at an average of 3.7 million at each airport.

Both these giants have both very small and very large airports in their portfolio, and CAA's are evidently smaller overall.

The company's portfolio comprises 10 divisions across six countries that are wholly or privately owned and which are shown in this graphical representation on the corporate website.

Corporación América Airports portfolio of companies

Source: Corporación América Airports.

More passengers in Argentina than in all other countries combined

As measured by the total number of passengers flown in 2023, the countries where CAA is active are listed in order here:

Country	Total passengers 2023 (millions)
Argentina	43.4
Brazil	19.1
Italy	8.2
Ecuador	4.5
Armenia	3.2
Uruguay	2.2

Source: Corporación América Airports.

Its busier and more commercially significant airports are (and were) found mainly in Latin America, in its home base of Argentina; in Brazil; and in Uruguay.

They include:

CAA airport profiles, South America

Airport	Country	Passenger numbers 2023 (millions)	Growth vs. 2022 (+/-)	Notes
Buenos Aires Ezeiza	Argentina	10.8	+44.1%	CAA operates both the main airports in Buenos Aires.
Brasilia	Brazil	14.9	+10.3%
Montevideo Carrasco	Uruguay	1.8	+38%	Concession extended in 2021 by 20 years until Nov-2053, with a USD67 million investment across 6 regional airports.
Natal Aluízio Alves	Brazil	2.2	(-1.6)%	The Natal airport is mentioned specifically because it was the first Brazilian concession, in 2011, a greenfield airport, and predating by a year the first tranche of the formal concession procedure in 2012. So in this instance CAA was distinctly a first mover, as indeed it had been in Argentina, with what is now Aeropuertos Argentina. However - the concession was annulled late in 2020 at the request of the consortium involving CAA (Inframerica) on account of the negative impact on passenger traffic as a result of the 2016 and 2017 economic crisis, and other reasons.
Guayaquil JJ de Olmedao	Ecuador	4.3	+13.7

Source: CAPA - Centre for Aviation Airport Profiles.

Italian presence is not insignificant

However, CAA's Italian division, Toscana Aeroporti, should not be overlooked.

Those Italian airports include Pisa and Florence, which counted 5.1 million (+13.7%) and 3.1 million (+38.1%) passengers respectively in 2023.

A presence in Armenia (Zvartnots Airport) may seem unusual, but that country is the original home of the Eurnekian family, which includes the Argentinean-born entrepreneur Eduardo Eurnekian. He is the owner of CAA, and is reputed to be the fourth richest person in Argentina; he is a staunch supporter of recently elected President Javier Milei.

The company is now overseen by Eduardo's son, Martin, as CEO.

From textile shops to glamorous airport lounges

Corporación América was originally founded as a textile business, which changed direction into broadcasting and publishing when the textile operation collapsed.

In the 1990s the holding company acquired several highway concessions in Argentina, then entered the wine industry, and later the petroleum business.

It wasn't until 1998 that Corporación América entered the airport sector, when it won the concession to operate 33 airports that are part of the Argentine national system - with its company 'Aeropuertos Argentina 2000' (now known simply as Aeropuertos Argentina).

In Dec-2020 the original concession on those airports was extended by the government from the original 30 years by a further 10, to 2038.

There was some controversy in 1998 about the conditions under which the original bid for the airports was made, and the legal conflicts that ensued, to the extent that some neighbouring companies checked their own ambitions in that respect for a while.

But overall the privatisation of those airports, the first of their kind in Latin America (predating those in Mexico by a year, and initially more ambitious in their scope), and second only to those in Australia, is generally regarded in Argentina as being advantageous to the country as a whole.

Argentina's precarious economic state has not helped CAA

That is not to say there have been no bumpy rides along with the way; there have been, and mainly brought about by Argentina's precarious economic state, along with a political one which often causes eyebrows to be raised elsewhere in the world.

Moreover, Argentina and other Latin American countries were unduly impacted by the coronavirus pandemic.

Subsequently CAA went on to expand its network in Argentina and to obtain concessions for airports in Uruguay, Brazil, Ecuador, Peru, Armenia and Italy.

Its breakthrough moments, when it became an investor/operator in the two Brazilian airports (including the one in the capital), alongside other investors of global repute there - like VINCI, Fraport, Flughafen Zürich and Changi Airports International - are what propelled it into the global league, one that is not occupied by any other South American investor in the sector apart from Brazil's CCR Aeroportos.

Active airports for Corporación América Airports S.A consortium, including Aeropuertos Argentina

Source: CAPA - Centre for Aviation.

Bless the 'planes' down in Africa

More recently, CAA has attempted to spread its wings, expanding into Africa, bidding for concessions in Nigeria and Luanda.

However, as has been the case for many years in Nigeria, there has been staunch resistance to the concession procedure there from politicians and trade unions alike, and it has not proceeded with anything like the comparative ease of those in Argentina and Brazil.

A deal for the concessions on Abuja's Nnamdi Azikiwe International Airport and Kano's Mallam Aminu International Airport was approved by Nigeria's Federal Executive Council in May-2023 and awarded to a consortium of CAA, Mota-Engil Africa and Mota-Engil Nigeria, as the preferred bidder.

The consortium committed to making upfront payments of USD7 million for Abuja Airport and USD1.5 million for Kano Airport, with in excess of 70% of the revenues payable to the Federal Airports Authority of Nigeria.

But then, in Jul-2023 Nigeria's Senate adopted a motion entitled 'Urgent Need to Reverse the Concessioning of Mallam Aminu Kano International Airport, Kano and Nnamdi Azikiwe International Airport, Abuja', as it was "based on an incurably faulty foundation" and "urged the Federal Government to review the entire exercise and give a level playing field to all stakeholders".

As of Sep-2023, the deal was suspended "until all processes that are ALLEGEDLY (sic) non-transparent and leading to those decisions are reviewed and all complaints are assessed for the benefit of Nigerians and [Nigerian President Bola Tinubu] is fully briefed".

A year on, this procedure remains in limbo.

This is an important juncture for CAA, as it attempts to enter what is alien territory (having, no doubt, observed how VINCI was able to take control over Cape Verde's commercial airports, but they are a completely different kettle of fish), likely with the intention of applying the lessons it learned from the concession on Brasilia Airport in Brazil's capital city, one that has been less impacted by recriminations than others in Brazil.

Nigeria's recent history in this regard suggests these are deals that will not go through in a way that is acceptable to CAA.

The hiatus in Nigeria has not stopped CAA from further attempts to expand in Africa, which it has evidently identified as having considerable potential, and where it is acting as 'first mover' to a greater degree than any other foreign investor apart from Qatar Airways, with that airline's financing of a new airport in Rwanda and associated deals with Rwandair.

In fact, in 2022 Martin Eurnekian said that the company was planning to build a business unit capable of operating in "several countries" in Africa.

Chasing a 25-year concession in Angola; interest in Montenegro; Uruguay extension

In Jul-2024 Angola's Ministry of Transport announced that it had received two bids for the concession of Luanda António Agostinho Neto International Airport.

One was from a consortium comprising CAA, Mota-Engil Engineering and Construction and Bestfly. The concession will be granted for a 25-year term, with an option to extend for a further 15 years. That bid is still in train.

Separately, and in a pandemic-interrupted process (like many others) dating back to 2019, Montenegro has narrowed down proposed airport developer/operators there to three: CAA, Incheon Airport, and Aeroports de Paris/TAV Airports. The 30-year PPP concession would be for the country's two largest airports: Podgorica and Tivat. The government aims to make its decision by the end of 2024.

Also this year, in May-2024, CAA extended its concession of the Punta del Este Airport in Uruguay until 2043 with a new investment agreement. The previous concession was scheduled to expire in 2033.

Historical bids include those in Greece, Barbados and the US

According to the CAPA - Centre for Aviation Global Airport Investors' Database, other bids or expressions of interest made by CAA in recent years include:

• Dec-2022: the concession of Kalamata International Airport (with a local Greek company);
• Aug-2020: Bridgetown Grantley Adams International Airport pre-qualified 13 parties to bid on the PPP for the operation, financing, development and maintenance of the airport. Parties qualified included CAA;
• Nov-2019: the City of St Louis in the US received 18 responses from companies to a request for qualifications (RFQ) for potential private operators of St Louis Lambert International Airport, including CAA. (Subsequently cancelled).

So CAA is clearly ambitious to explore opportunities around the world while its strength remains in Argentina, where it covers the main metropolitan areas.

Operating in countries 'with compelling economic trends' may be an exaggeration, but the main ones are in a better place nowadays

In 2023 35% of passengers were international, 56% were domestic and 9% were transit passengers. The airports that CAA operates are, it says, "...located in countries with compelling macro-economic trends and in key cities within those countries".

It could have been argued in the past that such a statement could not apply to Argentina, but in the first five months of 2024 the government achieved a primary fiscal surplus of 1.1% of GDP - a feat not seen since 2008.

The challenge ahead is to sustain this fiscal consolidation, replace distortionary taxes and solidify expenditure cuts. Analysts forecast a primary fiscal surplus of 0.1% of GDP for the year.

The company likes to stress its presence in primary tourist areas, such as the Pisa and Florence airports in Italy, and at the Galapagos Ecological Airport in Ecuador, but these are quite insignificant in the broader scheme of things.

It is also confident that it has created what it calls "a global platform", with operational expertise and resources to support its organic growth plan and global expansion strategy.

Share price close to highest level in five years

CAA has been listed on the New York Stock Exchange since 2018.

At close of business on 24-Sep-2024 the share price was USD17.59, which was close to its highest level in five years (USD18.80 in May-2024). Share value has increased consistently throughout that period, even quickly riding out the COVID-19 pandemic.

Corporación América Airports: share price over five years

Source: Google Finance

Positive results and outlook in recent financial statements

In the 12 months ended 31-Dec-2023, total revenue amounted to USD1,400.0 million, (+1.6% year-on-year). Growth came from aeronautical revenues rather than non-aero ones, which were negative.

Costs were reduced by 18%, leading to an operating profit of USD540.6 million, (+77.5%), and a net profit of USD540.6 million, (+77.5%).

The current ratio (assets to liabilities) was 1.29.

In 1H2024 revenue increased by 8.8% compared to the previous year to USD880.4 million, and with increases across all areas of the business.

The operating profit was USD227.7 million, +6.5%, and net profit USD219.9 million, +115.4%.

The current ratio was 1.53.

These figures are indicative of a business which, if not actually thriving, is well on its way to putting the impact of the COVID-19 pandemic behind it.

But the latest passenger figures across the portfolio are disappointing

On the other hand, there will be concern about recently released passenger traffic figures for Aug-2024, which reveal a 3.8% reduction in their numbers overall, although that is in the domestic segment (-12.6%) rather than the international one, and mainly affects Argentina and Brazil.

It is not a Latin American problem per se, as Uruguay saw an increase of 13.4%.

Nevertheless, that statistic compares badly with VINCI's for the same month, which was an overall growth of 6.2% and with Mexico being the only weak market.

It is one that serves to emphasise exposure to potentially difficult markets such as Argentina and Brazil, which historically suffer periods of financial failings and disruption - even if they are not evident at this stage.

SWOT summary

Strengths

• Most concessions are long-lasting (30 years), and many are extendable.
• Extensions have taken place for up to 20 years beyond the original agreement.
• CAA rarely loses concessions once it is embedded in an airport.
• Public listing on major stock exchange in the USA.
• Strong stock market performance.
• Identified 'First Mover' status in several countries.
• Location in some tourist areas.
• Ambitious globally.

Weaknesses

• Despite the NYSE listing, is not at 'the centre of things' globally compared to European operators, for example.
• Little in the way of growth, either organic or by acquisition, in recent years.
• Current bids stalled by political opposition, and slow timescales could lead to inertia.
• Bad taste may still remain in some quarters over the original Argentinean concessions.
• The fact that it operates mainly smaller airports, with a maximum of 15 mppa, might count against it in a competitive tender.

Opportunities

• Improving financial situation in primary (Argentinean) market.
• Also improving economy in Brazil, with GDP set to hit 2.3% in 2024.
• Potential to build an African network of airports if the Nigerian bid is successful and then expanded on.
• Potential concession in central Europe.

Threats

• Political turbulence in Argentina.
• Open to taking its eye off the ball and potential hostile bids on concession renewals in Argentina, if shown to be devoting more time abroad.
• Exposure to South American countries which have periods of financial instability.
• Open to all the time-consuming problems that managing airports in Nigeria and Africa would bring with them.