Moody's expects a slowdown in traffic growth at UK airports as airlines move capacity elsewhere

Rebecca Smith
The report said significant event risks around Brexit could slow the pace of passenger growth at UK airports
The report said significant event risks around Brexit could slow the pace of passenger growth at UK airports (Source: Getty)

While Europe's airport sector as a whole is poised to reap the rewards from robust traffic growth over the next year and a half, the UK faces the prospect of a slowdown as airlines shift capacity elsewhere, according to a new report from Moody's.

The influential ratings agency said the 2018 outlook for European airports overall was positive, as traffic growth looks set to remain strong, though it did forecast a slowdown at UK airports, reflecting "the UK's more subdued macro prospects".

Moody's also flagged the decision by some airlines to move some capacity away from the UK to "more profitable markets, such as Germany", resulting in lower capacity rises than those reported in recent years.

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Continental airports are expected to report traffic growth in a range of five to seven per cent, while the UK is expected to post three to six per cent growth.

Over the first nine months of 2017, the 10 largest European airports reported average passenger growth of 4.9 per cent, and Heathrow remains Europe's busiest, despite its capacity crunch. It reported a three per cent rise in passengers over that period, boosted by larger and fuller aircraft.

"An improved economic environment, particularly in continental Europe, combined with continued low fuel costs, relatively contained air fare inflation, and growing airline capacity, will continue to stimulate demand for air travel and support the European airport sector's positive outlook," said Xavier Lopez del Rincon, vice president - senior credit officer at Moody's.

The outcome of Brexit negotiations also weighed on Moody's consideration, saying Britain's departure from the European Union brings in further downside risks for UK airports.

The report said:

While Moody's base case is for new aviation agreements to be put in place post-Brexit, in the most extreme case, if no new aviation agreements are reached, UK airports would be exposed to a sudden loss of air traffic rights covering around 80 per cent of current passenger traffic volumes.

The UK's aviation industry has been vocal about the need to secure certainty over future flying rights, with the outgoing boss of London City Airport saying last month he was "incredibly worried" about the "level of complacency that appears to be drifting into our thinking".

"I see no clear path, all I see is a huge degree of uncertainty facing the industry, and I think it's bad for the UK, and it's bad for the EU," Declan Collier said.

The government meanwhile, has said it is committed to getting the right deal for Britain, calling aviation "absolutely crucial" to the UK's economy.

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