Topic: last week, we attended the first Vienna CESEE Airport Forum which had some valuable insights. In detail:

Outperformance in CESEE: 

according to an analysis conducted by the Vienna Institute for International Economic Studies (wiiw), the central-eastern and south-eastern European (CESEE) countries look set to outperform the Eurozone in terms of economic growth. With that, the overall rise in income and wealth among the population coupled with the still low propensity to fly bodes well for a strong passenger growth in the region. Concerning FWAG, this should bode well for the future, given that it operates as a meaningful hub between east and west. Moreover, a possible expansion of the EU (e.g. Balkan, Ukraine) should serve as additional growth factors.

Vienna and Austria as a tourist destination: 

73% of tourists in Austria come from foreign countries. As Vienna Airport is (1) the only intercontinental airport in Austria and (2) located directly next to the capital and tourist destination of Vienna, a significant part of incoming tourism is handled via the airport. Especially long-haul travelers (e.g. from Asia or North America) seem to have rediscovered Austria as a holiday destination.

Higher ticket prices for longer:

 A key topic of the conference were high ticket prices, which seem to remain higher for longer. First, the EU regulation to implement sustainable aviation fuel (SAF; 2% by 2025, 6% by 2030, 20% by 2035, and 70% by 2050), will likely drive costs as the fuel mix will gradually turn towards the higher price SAF. Secondly, national air taxes have risen sharply over the last years, burdening ticket prices even more. Third, the undersupply of airliners (Boeing and Airbus are producing at full capacity) should also lead to a capacity bottleneck in Europe, leading to higher prices from the airlines. High prices usually weigh on demand, however 2024 has shown that air travel seems to be prioritized consumer spending, implying a relatively price insensitive demand side.

In sum, the strong network towards CESEE bodes well for the company’s future. Nevertheless, the shares seem to be priced accordingly. Reiterate HOLD with unchanged PT of € 61.00, based on DCF.