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Developing markets have helped push airport traffic growth in the past decade to its fastest rate in 40 years. Airports in Asia and Latin America look set to be the source of global growth for the industry for many years to come, Fitch Ratings says.
Disruptive technology could become a threat to traffic volumes in the long term, along with geopolitical and climate-change related developments. But there is nothing in sight that could displace flying as the main mode of transportation for medium- and long-distance travel.
Our analysis of airport trends over the last decade shows global traffic volumes outpaced economic growth rates even during the worst of the global recession, with traffic over the decade rising at three times the rate of GDP, compared to two times GDP over the previous 30 years. This growth has been unevenly distributed and is largely from countries where increasing economic development, affordability and offerings boosted the propensity to fly.
We think this trend is far from over. Improving household incomes, better local infrastructure and more competitive pricing will all contribute, particularly in Asia and Latin America, but also at some point in Africa. Greater ability to connect with hubs will also benefit long-distance flights and therefore provide some growth potential for airports in developed markets.
Performance across the airport sector has been strong, as demonstrated by very stable ratings, but large international gateway airports have, on average, performed better in economic downturns than origin and destination (O&D) airports. The stronger performance at gateway airports reflects the reduced dependency on local economic conditions and the ability to benefit from supporting traffic from other regions that remain more active. The competitive landscape for airports is also a differentiating factor. Our analysis also shows that airport performance is not closely correlated with the financial condition of airlines.
In the long-term, airports could face challenges to growth. While there is currently little competition in certain markets for medium- and long-distance travel, new technologies could start to take market share. Projects such as the Hyperloop concept between San Francisco and Los Angeles could eventually displace some shorter air traffic routes, or force price reductions that weaken profitability. Climate change considerations will also almost certainly have an impact. This may not result in fewer flights, but more fuel-efficient planes could fly further without stopovers, displacing some hub airports on long-distance routes.
Other major factors that could affect long-term prospects include geopolitical and security risks and the emergence of ultra-low cost carriers. For more information on how airports have performed in the last decade and how this could change in the next decade see "Airports - 10 Years in Infrastructure" available from www.fitchratings.com or by clicking the link above.
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