The fairy tale of the fabulous wealth of private airport investors has been nourished by spectacular deals, billions of dollars in profits after a few years of holding and exaggerated valuations based on market-driven (but not always economically justified) EBITDA multiples. Too much inexperienced money, trusting in the supposedly crisis-proof and constantly growing airport investment, has driven prices up - that is now over. The Covid-19 crisis has suddenly shown that an entire industry can be economically destroyed in days.
So, what does it take to manage an airport profitably? Some airports are managed as if it were enough to build a runway and a terminal. But without additional income from non-aeronautical revenues an airport cannot survive. An airport ecosystem of airlines, shops, restaurants, hotels, suppliers, service companies has usually been cultivated over decades. It requires active promotion, partnership contracts, joint decisions, involvement of politicians and tourism promoters, marketing at home and abroad. The Corona crisis has destroyed the sensitive airport ecosystems.
Such a crisis was foreseeable, but hardly any airport has mitigated the risks in terms of processes or, more importantly, with its cost and capital structure - neither private airports, nor those in government ownership.
In an article published by ACI Airport World News Issue 3 2020, Associate Partner Catrin Drawer and Managing Director Dr. Andreas Jahnke discuss the following points:
• Airports have never been a risk-free investment class
• The Covid-19 crisis will accelerate airport sales and lower market prices
• Not all airports will recover from the crisis; it is important for new investors to choose the right airports and manage them actively
Read the full article in Airport World News here
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