Third quarter: Avinor in a strained financial situation for the next few years
"The Ministry of Transport and Communications stipulates that the basic structure of the company shall remain, but that the financial framework conditions must be strengthened. Avinor appreciates that. At the same time, we expect the financial situation to be strained for the next few years, also with the measures now outlined by the owner," says CEO Abraham Foss.
A real increase in aviation taxes as well as changes in other financial framework conditions is required to justify the recognized values in airport and air navigation operations. In the consolidated financial statements as of 30 September 2023, it is assumed that the state will secure financial framework conditions that defend recorded values.
"Traffic remains at lower levels than before the pandemic, and forecasts of future traffic growth indicate that recovery will take longer than previously anticipated. In addition, there has been a significant real decline in airport taxes, which account for 50 per cent of Avinor's revenues, since 2019," says Abraham Foss.
A total of 37.2 million passengers travelled through Avinor's airports during the first nine months of 2023, an increase of 12.2 per cent over the corresponding period in 2022. The number of aircraft movements increased by 2.9 per cent. Domestic air movements decreased by 0.2 per cent, while foreign aircraft movements increased by 14.3 per cent. Traffic is still not back to pre-pandemic levels. Compared to the first nine months of 2019, the total number of passengers is 10.1 per cent lower in 2023. Air movements are 7 per cent below 2019 in total for the corresponding period. Traffic trends and travel patterns indicate that it is within holiday and leisure travelers that the catch-up has been strongest. Business traveler numbers remain below pre-pandemic levels.
This indicates a weaker revenue development than previously assumed, while a cost base that does not vary with revenues to the same extent, as well as underregulated airport taxes, changed framework conditions in the form of the elimination of duty-free quotas, and the addition of new tasks and associated costs also have a negative impact. To retain sustainable financial framework conditions, Avinor has thus signaled the need for a real increase in fees. In a letter dated 16 November 2023, the Ministry of Transport states that the government will come up with measures to ensure that passengers and airlines continue to receive a good service across the country and that no airports will be closed.
Revenues increase, but not sufficient to cover costs
Operating revenues for the first nine months of 2023 amounted to 8717 million kroner (Nkr), representing an increase of 15.2 per cent compared to the corresponding period in 2022. As a result of traffic volume and strengthened commercial earnings, operating revenues in airport operations increased by 15.5 per cent compared with the corresponding period last year. Traffic revenues had a weaker development than traffic growth, with a reduction in traffic income per passenger of 1 per cent. For the first nine months of 2023, commercial revenues accounted for 57.3 per cent of airport operating revenue.
Total operating expenses in the first nine months of 2023 amounted to 5798 million kroner (Nkr) compared with 5273 million kroner (Nkr) for the corresponding period in 2022. This is an increase of 9.9 per cent. Higher volume-dependent costs for personnel and safety leads to an increase in operating costs, in addition to an increase in repair costs for operating equipment because of increased use, as well as increased costs of parts and labour. The cost development must be seen in conjunction with the increase in traffic volume, as well as generally high inflation.
Uncertainty related to changes in travel habits affects revenues
"There is uncertainty associated with future levels of air traffic, especially with regard to how technology, climate, and consumer economics may lead to changes in travel habits. Global geopolitical and economic developments also increase uncertainty," says Abraham Foss.
"Avinor is aware of the challenges the Group faces when growth and greenhouse gas emissions are to be combined in sustainable value creation. Together with the airlines, Avinor will work for innovation and technology improvements to reconcile the goals of emission cuts and expected traffic growth. Mobility and efficient air transport are central to societal development and crucial in the development of Norwegian travel and business. New technology will change aviation as we know it today. Avinor's social mission means that the group must facilitate further development and expected changes in air traffic," says Foss.
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Avinor is a wholly-owned state limited company under the Norwegian Ministry of Transport and Communications and is responsible for 44 state-owned airports. Avinor has taken a leading role in reducing climate gas emissions from the aviation industry, including the development of electric aircrafts and supplying sustainable jet-biojetfuel. Avinor provides safe and efficient travels for around 50 million passengers annually, half of which travel to and from Oslo Airport. Over 3000 employees are responsible for planning, developing and operating an efficient airport and air navigation service. Avinor is financed via airport charges and commercial sales. The air navigation services is organized as subsidiary wholly-owned by Avinor. Avinor's headquarter is in Oslo.
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Latest releases from The Avinor Group
Fourth quarter 2023: Reduced revenue due to changing travel patterns.12.2.2024 14:23:28 CET | Press release
“Avinor's main challenge is reduced revenues due to changes in travel patterns after the pandemic. There are far fewer business travelers than before, and Norwegians' domestic travel activity has levelled off. Lower traffic volume, lack of adjustment of airport taxes, as well as reduced revenue per passenger, largely due to reduced duty-free quota, challenge the Avinor model”, says Abraham Foss, CEO of Avinor.
The trend from 2023 continues in January: Growth abroad and flat development domestically9.2.2024 14:00:00 CET | Pressemelding
3.3 million passengers traveled to and from Avinor's airports in January. That is an increase of 2 percent compared to January last year.
Northern Norway's Skyward Surge: International Flights and Tourism on the Rise23.1.2024 13:22:01 CET | Press release
Northern Norway is experiencing a remarkable surge in international traffic, marked by a significant increase in passenger numbers and the establishment of new direct routes. This growth is most notably seen in Troms and Finnmark, with figures indicating a rapidly growing interest in the region. Avinor, in collaboration with local tourism actors and airlines, has played a crucial role in developing these routes.
Lufthansa Group Strengthens Its Commitment in Norway with New Routes and Increased Capacity in the Summer 2024 Program18.1.2024 11:00:00 CET | Press release
Avinor is pleased to announce that the Lufthansa Group is intensifying its focus on Norway as part of its 2024 summer program. This expansion is a response to the growing interest in Norway as a travel destination, especially from European travelers. Trondheim will be a new Lufthansa destination from Munich.
Discover Airlines opens Finnmark to Europe with new direct route16.1.2024 17:00:00 CET | Press release
Discover Airlines and Avinor are pleased to announce the launch of a new direct route from Frankfurt to Alta. This winter route opens the doors to a new chapter in Northern Norwegian tourism. "Alta deserves better accessibility to key markets for the local tourism industry," says Martin Langaas, Route Development Manager at Avinor. "Now that we can present the first air route dedicated to international tourism into Alta, we are opening up a whole new travel adventure for the entire Finnmark region."
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