European airport traffic performance on track; 2010 growth likely

Most major European airports should perform as expected in 2009, and 2010 should see modestly higher growth than was anticipated in June 2009, Moody's Investors Service said in a new special comment.
In June, Moody's set out its guidelines for traffic growth for the major European airport cities, which suggested a material but not severe decline in traffic volumes in 2009, followed by very little, if any, growth in 2010.
"Major city airports will perform within Moody's guidance for 2009, and will generally be at the bottom end of the anticipated traffic declines," said Andrew Blease, a Senior Vice President in Moody's Infrastructure Finance Group.
"Furthermore, assuming that European and world economies do not see a further significant drop in demand or experience further major financial shocks, the major European airportcities are not likely to experience any meaningful further drops in passenger volumes over the next 1-2 years."
Moody's recognises that passenger numbers have generally held up better than flight volumes. "This reflects the significant cut backs in flights made by many airlines in Europe" explained Blease. "Nevertheless, the trend of both flight numbers and passenger numbers is similar across Europe as a whole."
Indeed, the total scheduled traffic volume changes are broadly in line with passenger volumes at European airports, with all routes, apart from Europe-Middle East flights, having similar patterns of decline. The Europe-Middle East traffic growth trends have been strongly positive throughout 2008 and 2009, and other traffic has seen only single-digit percentage declines.
Moody's also notes that low-cost carriers have continued to take European market share from the legacy carriers in 2009. In particular, Ryanair's growth has been exceptional over the past two years, which confirms its position as the largest airline in Europe by number of passengers boarded. As many low-cost carriers will endeavour to use secondary airports with lower aviation charges, the recent growth in the low-cost carrier market share should result in higher traffic volumes for many secondary airports.
Going forward, Moody's expects that passenger volume growth for major European airport cities in 2010 to be better than it originally projected in June. This is due to improved 2010 growth projections for many western European economies as well as cautious projected volume growth by aviation market participants. Thus, Moody's has revised its 2010 guidance to -1.0% to +4.0%, an improvement from its June 2009 guidance of -2.5% to +2.5%. This is a reasonable central case forecast, assuming a steady but modest recovery in the European economy. However, there remain material downside risks, as the forecast does not factor in the likelihood of a double-dip regional or global recession.
"It may take some time before airports see the year-on-year traffic volume increases that were experienced over the 1990s and in the first few years of the 21st century," cautioned Blease. "However, the recent peak-to-trough experience will help to frame future downside traffic projections in Moody's analysis. Thus, the recent recession will be informative in framing a view of revenue risk for major European airport cities over the next few years."