Q2, 2023: Financially challenging

Domestic air transport movements increased by 2.7 per cent, while international air transport movements increased by 18.4 per cent, compared to the same period in 2022.

“Avinor is pleased with the delivery of this year’s summer operations. Traffic is still not back at the levels seen before the pandemic and this is having a significant financial impact,” says Avinor CEO Abraham Foss.

Traffic developments and travel patterns indicate that the strongest recovery was among holiday and leisure travellers, while business travellers remain below pre-pandemic levels.

“There is great uncertainty around the outlook for demand for air travel in the years to come, even more so given the ways in which technology, climate, the environment and the economy may result in changes to people’s travel habits. The ripple effects of the war in Ukraine are also causing increased uncertainty related to future demand for air travel and cargo flights. Previously, Avinor’s forecasts have shown that air traffic will return to 2019-levels in 2024/2025, but we are now estimating that traffic will not return to pre-pandemic levels until 2027/2028,” Foss adds.

Increasingly challenging financial situation
The need for a financially sound framework in relation to Avinor’s social mission was a discussion item on the agenda at the Annual General Meeting held on 6 June 2023. The Group’s financial framework conditions are followed up on an ongoing basis with the Norwegian Ministry of Transport.

“A significant part of Avinor’s operations is related to our social mission. In order to solve the mission successfully Avinor needs to cover its costs either through an increase of fees or commercial revenues. We have adjusted our finances and operations over the course of the pandemic and cut operational and maintenance costs in excess of NOK 1 billion. At the same time, Avinor has seen reductions in revenues of more than NOK 16 billion as a result of the pandemic. The loss of revenues in 2020 and 2021 were partially offset by government grants from our owner. From 2023 the parliament has reduced the tax free quote on tobacco by 50 per cent in the Norwegian state budget, which represents a reduction of annual revenues of around NOK 400 million for Avinor.

Fees to increase 
As outlined in the group consolidated accounts for Q2-2023, Avinor believes that a real-terms increase in aviation fees and/or other changes to the financial framework conditions are called for in order to justify the recognised values of the airport and air navigation services businesses. Avinor assumes that the Norwegian government will facilitate financial framework conditions that will ensure recognised values remain in place.

“We have managed to keep fees charged to airlines unchanged for many years due to Avinor’s commercial revenues and an active cost agenda, but in light of the declining revenue trends caused by weaker traffic development, we are unable to cover our costs and are thus obliged to increase fees,” Foss says. 

Avinor’s airline fees have been unchanged since 2019 in real terms, while the scope of Avinor’s societal role and tasks has been expanded while revenues have fallen.

“We adhere to the ‘single till’ principle, which means that fees levied from airlines must help Avinor to cover the costs of its services – no more, no less. At present, we are unable to cover our costs which is why we are proposing a necessary increase in fees. We are naturally also continuing our work to reduce costs and increase our commercial revenues.”

Avinor continues to carry out ongoing assessments based on various scenarios as to whether the reduced revenues will have consequences in terms of the potential need to write-down Avinor’s assets,” says Foss.

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