Although Budapest Airport counted on and planned with the crises during the concession period, there is still money that has to be spent on the airport. So is it time to sell it?
The aviation industry’s future is very much uncertain. Although the owners of Budapest Airport may not feel compelled to sell the airport yet, it is a move they might want to consider, primarily because of the costly and inevitable investments in Ferihegy, Ádám Samu, Editor in Chief of Airportal.hu told Világgazdaság.
The expert also revealed that the infrastructure of the airport which had been criticised by the government previously, is now in an acceptable state, thanks to the recent developments.
“Although the industry is in a difficult position, we are pleased with BA’s new passenger pier, which took the customer experience to a new level in August.”
Unfortunately, by the time the new developments could have come to fruition, 90-95% of the passengers disappeared from Budapest Airport because of the pandemic. Compared to last September’s 1.4 million passengers, this year there were only 88,000.
For the rest of the year, a few tens of thousands of passengers a month may become to normal, as airlines have cancelled numerous flights, and the winter schedule will take effect from October 25 as well. The construction of Terminal 3 will be inevitable because of the projected growth eventually. Still, due to the pandemic and declining number of passengers, it has become less urgent for a while.
“If the coronavirus doesn’t appear, it would be a hot topic now when the new host building will be completed, because the 2nd one cannot be expanded in merit,” said the Samu.
The value of Budapest Airport is estimated to be around €2-3 billion. Still, the amount of passenger traffic, as well as machine movement charges, property use and services, play an essential part in that valuation, as those are the things that the airport’s revenue comes from. Ádám Samu predicts that selling the airport may have to wait until 2024, as the rearrangement of all the airlines’ route networks and number of available seats will not happen from one day to another, it will be a process. Growth prospects could be significantly more modest than expected last year, even if passenger traffic returns to the level of 2019 by 2024. Still, if the recession lasts longer, the cargo business will suffer as well, although this has been put off so far because of the transportation of healthcare shipments.
The Hungarian government granted to owners of Budapest Airport the right of concession in 2005 for 75 years, for nearly €1.1 billion, which still has 60 years of it left, so a five-year cycle may be too short to pressure the owners to sell.
“In such a long period, crises may occur, this is taken into account in planning. A crisis usually does not change the value of long-term investment or the expectations associated with it. Our owners believe in the long-term growth potential of their investment,” the company pointed out.
There have been drastic changes in prices and values in the aviation industry, so the buyer received the offer made by the consortium represented by Indotek at the best possible time. Still, Dániel Jellinek, CEO did not want to reveal any details.
Profitability is the central aspect for the Budapest Airport’s majority owners, Canadian financial investor pension fund, which can strengthen their bargaining position, as the airport has been very much profitable in the past. Still, it will have to give up on profits and will most likely need external help to develop infrastructure for a while, and after the pandemic is over, it will have to ease up on profit margin in order to attract airlines.