Consumer, Cyclical European Airports - Resetting traffic and retail expectations


European airports traffic recovery so far has been weaker in comparison with past recoveries.

04 Aug 2020

Recoveries from previous downturns in traffic on a monthly basis

Source: Company data, UBS estimates Note Month 0 represents the month in which the event causing a downturn occurred

The line chart illustrates how long it took airports to recover, in months, following various downturns.

Lowered estimates to reflect rising uncertainty

European airports traffic recovery so far has been weaker in comparison with past recoveries. A prolonged downturn increases the risks of structural disruption in the aviation ecosystem and shifting consumer behaviour, raising the uncertainty on the mid-term earnings power of European airports. To reflect these risks we have lowered our traffic and retail forecasts. We expect FY19 traffic to recover by FY23/FY24. The silver lining remains regulation where we see upside risks vs. expectations when regulatory frameworks are rolled-over. 

Retail – MAGs, mix and consumption repatriation

Recent evidence from international airports illustrates downside risks to minimum annual guarantees (MAGs). We take a more conservative view and have cut duty free MAGs mid-term. In terms of spend per passenger we expect: i) negative mix on the back of a slow traffic recovery on intercontinental routes; ii) increasing risk for travel retail consumption repatriation in China, supported by local policy initiative (e.g. the recent Hainan duty free policy).

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