SOUTH AMERICA/ITALY. Corporación América Airports (CAA) non-aeronautical income fell by -10.9% year-on-year in the three months to 30 September as currency depreciation in both Argentina and Brazil took their toll.

Revenues from the channel hit US$192.8 million* despite a total traffic increase of +5.8% to 22.1 million passengers in the period.

CAA – listed on the New York Stock Exchange – is a global private sector airport operator. Argentina, Brazil and Italy represent 81.4% of group passenger traffic and 77% of revenue, split 57%, 12% and 8% respectively.

In total, CAA operates 52 airports in seven countries across Latin America and Europe (Argentina, Brazil, Uruguay, Peru, Ecuador, Armenia and Italy). In 2017, the company served 76.6 million passengers.

The global operations of Corporación América Airports are driven by the three markets of Argentina, Brazil and Italy.

Corporación América Airports’ income was hit across the board in Q3.

While Q3 non-aeronautical income fell by -10.9%, the commercial revenue component – which includes, among others, warehouse services, duty free retail, car parking, F&B, advertising, and VIP lounges – fell more modestly by -3.0% to US$138.6 million.

Argentinean snapshot: Traffic increased in Argentina but not enough to counter the debilitating currency impact on revenue.

The softer landing for the commercial business was thanks to the Italian market offsetting sharp falls in Argentina and Brazil. In Q3, Italy produced a commercial revenue increase of +9.1% to US$11.5 million while Brazil slipped by -7.1% to US$15.1 million and Argentina slumped -12.7% to US$74.3 million.

In Argentina – which accounts for more than half of the group’s commercial income, led by Buenos Aires Ezeiza International Airport – traffic was up, but there was a slowing in international demand and a shift to domestic travel. CAA noted that the sharp depreciation in the Argentinean Peso impacted commercial operations.

Brazilian snapshot: New commercial initiatives were offset by currency depreciation.

Italy drives commercial increase

In Brazil – where 88.4% of CAA’s traffic is from Brasilia Airport – the company commented that “new commercial initiatives were offset by currency depreciation”.

In Italy, meanwhile, CAA noted: “Commercial revenue up +9.1% was driven by the recently-redesigned VIP lounge, new retail stores and new duty free shops and an increase in minimum fees and parking tariffs at Florence Airport.”

Commenting on the Q3 2018 results, Corporación América Airports CEO Martin Eurnekian – recently named ACI World’s new Chair of its Governing Board – said: “Our three key markets, Argentina, Brazil and Italy contributed to higher profitability in the quarter. Passenger traffic growth showed a slight deceleration this quarter while total revenue posted a high-single digit year-on-year decline, impacted mainly by an average quarterly depreciation in local currencies (-85% in Argentina and -26% in Brazil).

Italian snapshot: Steady development with commercial revenue jumping +9.1%.

“Additionally, in Argentina, we saw a high-single digit decline in international travel (and) an accelerated mix-shift to more affordable domestic destinations.

“Brazil’s revenue in local currency increased more than +10% reflecting continued traffic growth and the positive contribution from recent commercial activities. Our operations in Italy, continued to deliver a solid top line performance, supported by healthy traffic trends and the contribution from the redesigned VIP lounge, new retail stores as well as new space for duty free shops.”

Martin Eurnekian: “Our operations in Italy, continued to deliver a solid top line performance, supported by healthy traffic trends and the contribution from the redesigned VIP lounge, new retail stores as well as new space for duty free shops.”

Still bleak in Argentina

CAA’s outlook is mixed. Its biggest market of Argentina is expected to see weaker traffic trends continue this year “and to deepen in the first half of 2019, slowly recovering in the second half of the year”.

Profitability is expected to be impacted more as inflation in the country catches up with currency depreciation. However, the company believes there will be a gradual pick-up in inbound international traffic as travelling to Argentina becomes more affordable on the back of the weak peso.

Not surprisingly, CAA is looking to leverage growth elsewhere. Eurnekian said: “We remain focused on further strengthening our global airport platform, as well as developing new routes and frequencies.”

*From the third quarter of 2018, Corporación América Airports reported the results of its Argentinean subsidiaries by applying ‘hyperinflation accounting’ in accordance to the International Accounting Standards Board IAS 29 rule. The results reported in this story refer to revenue ex-IAS 29.