Heathrow, Model For EU Airports

Passengers at Heathrow's Terminal 5.

Santander | The growth in passenger numbers registered at Zurich in November (6.0 % vs. 6.0% est), Aena (6.9% vs 6.5% est) and ADP (5.4% vs 4.8% est) was more or less in line with our estimations, while the traffic in Fraport (4.7% vs 6.5% est) and Heathrow (3.3% vs 0.2%) remained below.

The strong beginning to the winter period reinforces our expectations of single digit growth of between medium and high in all the EU airports for the season which ends March 2019. However, uncertainty remains in relation to the summer, which could imply a disappointing forecast for the company for 2019.

ADP (Buy, OP €226.00/share) registered a solid growth in passenger numbers of 5.4%, with a robust demand from international travellers. The national traffic continues to fall (-2.1%). In 2019 ADP´s management team could deliver a positive surprise, given that we believe it is possible that its forecast could around 3%, as opposed to our current forecast of 2.2%.

The traffic of Aena (Underweight, OP €140.00/share) grew 6.9% thanks to a recovery in the number of international passengers (+6.7%): the Canary Isles is among the most popular destinations for the next holidays. In our opinion, Aenas remains the airport with the major chance of an upward deviation from the forecasts of the company (+2.0%; Santander forecast 2.0%); however, the ever greater chance of a hard Brexit could mean that the company´s forecast are again correct, as in 2018.

The growth in traffic of Fraport (Underweight, OP €82/share) of 4.7% was below our forecast, due principally to a higher comparison base in November 2017 (+21.1%). The story of Fraport in 2018 has been solid growth in continental passengers (+10.9% this year so far), but it is likely that continental traffic will normalise in 2019 as it reaches the capacity limit of the airport (Santander forecast for 2019: +3.0%). We would not be surprised if the forecast of the management team for the increase in traffic for 2019 was 2-3%.

Traffic grew 6.0% in Flughafen Zurich (Maintain, OP CHF186.00/share) due principally to the strong increase in traffic with the EU (+4.5%, thanks to the increase in winter capacity of Swiss Air) and comparative data easily beaten in transit passengers. Zurich confronts more demanding comparative data in 2019, after a second year of strong growth in traffic, with the finalisation of the renovation programme of the Swiss fleet (Santander forecast for 2019: +2.0%).

Heathrow (Ferrovial, Buy, €23.00/share) published a strong growth in traffic of 3.3% in November, despite the weakness in the national field (-7.5%), led by the increase in the number of passengers from North America (+5.8%) and stronger European traffic (+4.3%). Heathrow remains a good example of growth for other EU airports, despite operating at full capacity.