Stock story: AENA

Enjoying an unexpected recovery from the pandemic trauma. (Reading time: 2 mins)

Stock story: AENA

April 2022

The check-in desks and baggage carousels at Adolfo Suarez Madrid-Barajas Airport, normally so noisy, were quiet in May 2020. Travel restrictions, implemented to slow the spread of the coronavirus, savaged passenger flows across Aena’s network of Spanish airports to just over 1% of their level a year prior. Airlines, famed for their challenging economics under the best of conditions, clung to life with the support of government assistance or were forced into bankruptcy. The International Air Transport Association, a trade association for the world’s airlines, forecast in June 2020 that global passenger traffic would not recover to pre-pandemic levels until at least 2024. Airports, accustomed to passenger volumes growing at a multiple of GDP and formidable operating margins, closed terminals to reduce operating costs and deferred capital spending, hoping to preserve enough cash to survive until travel resumed. Pessimistic investors fretted that airports would succumb to a liquidity crisis if lenders refused to refinance their debt. More sanguine investors reasoned that airports were too important to the national interest to fail but were left to mull the risk that government equity injections could dilute their investments.

Almost two years from the onset of the pandemic, the worst fears of listed airport investors have dissipated: lenders obligingly refinanced airport debt, sometimes at rates below legacy issuances, and airports were able to endure the most desolate phase of the crisis without needing extraordinary government assistance.

Recent industry data may see airport investors’ relief turn to optimism. Passenger numbers at Aena’s airports increased to 73% of their pre-pandemic level in February 2022, ahead of management’s guidance for full-year traffic to recover to 68% of 2019 activity levels. Moreover, an Aena statement in March reveals that airlines have scheduled 215.6 million seats at the company’s airports during the forthcoming summer season, about 1% more than were scheduled during the corresponding period in 2019 before the onset of the pandemic. While Aena cautions that the scheduling of seats and movements remains subject to change by the airlines, the announcement points to the possibility of a materially faster recovery in aviation activity than investors anticipate.

That bodes well for Aena, the world's largest airport operator in terms of passenger traffic that generated 2.4 billion euros in revenue in fiscal 2021. The majority-Spanish-government-owned company earned that title, prior to the pandemic, by shuffling 275 million passengers through Spain’s 46 airports and two heliports and another 18 million people through its 51%-owned Luton in the UK, one of the 45 airports outside Spain in which Aena has a direct or indirect holding. At all these airports, there are lots of people making lots of noise, glad to be travelling again.

Sources: Company filings.

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