Madrid and Barcelona Airports, sell-side traffic forecasts

AENA

Generation of traffic forecasts to support the privatisation of Madrid and Barcelona Airports.

As part of the intended sale process of Madrid Barajas and Barcelona El Prat airports the advisors, Roland Berger and Analistas Financieros Internacionales (AFI), were asked to provide a fairness opinion report on AENA’s long-term traffic and aeronautical revenue forecasts. AFI approached Aviation Economics to provide an opinion on AENA’s forecasts and also to produce our own, independent traffic and revenue forecasts.

Aviation Economics examined the methodology and assumptions used by AENA management and checked the resultant projections using our understanding of air traffic trends and airline strategy relating to the Spanish market. Aviation Economics also considered the two airports’ competitive position in the Spanish market, and their positioning versus other competing hub airports in Europe.

We provided our own, independent traffic forecast for Madrid and Barcelona for the period 2011-2031. For the first period (2011-2015) our forecast was on a route-by-route basis, reflecting our assessment of airline plans, competitive situations and underlying economic conditions. Our second period forecast (2015-2031), was based on an econometric analysis, whose underlying driver was projected GDP for Spain and GDP for the major origin and destination countries/regions. We also generated passenger volume forecasts using traffic elasticities for the key segments - LCC, Full Service, Charters. Built up by segment and region, the forecast took into account maturity factors and capacity constraints.

Based on the traffic forecast, Aviation Economics provided an aeronautical revenue forecast for the period 2011-31. Average actual unit prices at Madrid and Barcelona were used as the base and the forecast took into account the following factors, amongst others: expected changes in the current single till regulatory regime, discounts and other rebates (those offered to new entrants for example).