Over recent years when reading the regular announcements of Malta International Airport plc related to the monthly traffic results or the semi-annual financial statements, many would have taken for granted that the airport operator would register yet another record result. Despite the strong rate of growth in passenger numbers in recent years, and the expectation at the start of every year that it would be hard to achieve another record milestone, passenger numbers kept shooting higher. In fact, over the past 10 years, passenger numbers passing through MIA increased at a compound annual growth rate of 9.62 per cent reaching a record of 7.31 million in 2019 from just 2.92 million in 2009.

2020 was expected to be yet another record year for the airport as the company had issued its passenger and financial forecasts in January 2020 indicating it was anticipating achieving 7.5 million passenger movements this year which would have represented a growth rate of between two per cent and three per cent over the 2019 record figures. In fact, 2020 was off to a bright start with record figures in both January and February as passengers grew by 14.2 per cent and 17.3 per cent respectively over the comparative months in 2019.

The pandemic hit Malta in March and dealt an immediate blow to MIA and the aviation industry worldwide. The temporary ban of all inbound commercial flights to and from Malta as from March 21, 2020 led to a 64.5 per cent decline in passenger movements during March to just under 170,000 passengers. As the ban continued until July 1, virtually no passenger movements were recorded during the second quarter of the year between April 1 and June 30. With MIA recording just over one million passenger movements during the first half of the year, the company announced on July 29 it had incurred a loss after tax of €2 million during H1 2020 – something unimaginable until recently.

MIA held a virtual analyst meeting last week providing an overview of the COVID-19 impact, a review of the traffic and financial results so far this year and also to update the market on its investment programme.

Despite a resumption of commercial flights to and from Malta on July 1, seat capacity was weak and MIA only registered just over 150,000 passenger movements during the month of July representing a drop of 80.9 per cent compared to July 2019. The company had a better start to the month of August but following renewed travel restrictions as the number of virus cases started to increase once again across Europe, the company registered an immediate drop in traffic during the second part of August. In total, just over 250,000 passenger movements were registered in August (-69.4 per cent compared to August 2019). During the period from January to August 2020, only 1.4 million passenger movements utilised MIA representing a decline of 70 per cent.

In last week’s virtual meeting, MIA CEO Alan Borg made reference to a recent publication by ACI World which indicated global passenger traffic volumes are not forecast to recover to the levels prevailing in 2019 before 2023 and those markets largely dependent on international traffic are not expecting a recovery until 2024. Borg explained the worst-hit segments are the hub traffic as well as the long and super-long haul.

On the other hand, regional traffic (such as within Europe) is expected to make a quicker recovery when compared to cross-regional and transatlantic traffic. With this in mind, the CEO said that in a best-case scenario, in 2023 MIA will experience a recovery in passenger numbers towards the level of over seven million seen in 2019. While acknowledging significant uncertainty will prevail in the near-term, the CEO highlighted the fierce competition that will be emerging between airlines and destinations. Moreover, Borg argued that travel patterns are likely to change in due course and domestic travel will likely remain the preferred choice in the short-term.

Regional traffic (such as within Europe) is expected to make a quicker recovery

Some weeks ago, a foreign financial analyst reviewing Vienna International Airport, MIA’s parent company, disclosed financial forecasts also for MIA until 2022. This analyst anticipates that in 2022, MIA’s revenue will recover to €87 million compared to a record €100.2 million in 2019. During the current financial year, this analyst anticipates revenue at MIA will amount to €32 million before almost doubling in 2021 to €61 million.

In early April when the travel ban was imposed, MIA had retrieved its guidance for 2020 and in view of the fluidity of the situation, no further guidance was provided during last week’s virtual meeting.

Revenue of €32 million being forecast by this foreign analyst for 2020 should be seen in the context of the actual revenue of €14.9 million achieved by MIA during the first six months of the year. A significant level of uncertainty is still prevalent on whether MIA can truly achieve overall revenue of €32 million in 2020 since the revenue in the first half of the year includes the first two months pre-COVID when just over 840,000 passenger movements were registered.

With respect to the current investment programme and plans for the continued development of the airport, MIA’s CEO explained that since works at the multi-storey car park and the cargo village were at an advanced stage when the crisis commenced, both projects continued and are expected to be completed by end 2020. Meanwhile, the company is currently analysing the four bids submitted with respect to the operation and maintenance of the proposed business hotel forming part of the SkyParks 2 development. A decision on whether to proceed or otherwise with the overall SkyParks 2 development will be taken by the end of 2021 depending on circumstances.

Earlier this year, MIA had unveiled a €100 million investment in a major terminal expansion project which was then suspended in April 2020 in view of COVID-19. However, last week, the CEO clarified this major project was put on hold “temporarily” until MIA gains better visibility of the developments and the business dynamics going forward.

The extent of the recovery in passenger traffic is dependent on consumer confidence and the demand for travel. Improved consumer confidence and the resumption of travel is in turn impacted by the resurgence of virus cases in various parts of the world and, subsequently, the availability and effectiveness of a vaccine. MIA’s road to a recovery to attain passenger movements in excess of seven million registered last year could be a bumpy one in the near-term with the CEO anticipating a very tough winter ahead.

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