International Air Traffic Expansion Will Confront Margin Squeeze

Key Takeaways

• Management guidance for slower growth and rising costs challenges optimistic forecasts for revenue, margin expansion, and earnings resilience.
  
• Heavy reliance on international tourism and increased sustainability investments expose the business to macroeconomic and regulatory risks not fully reflected in market expectations.
  
• Accelerated capacity expansion, strong retail growth, operational efficiency, stable financing, and favorable tourism trends position Athens International Airport for lasting revenue and earnings resilience.

Catalysts

Engages in the design, development, financing, construction, commissioning, maintenance, operation, and management of airport in Greece.

• The recent record growth in international passenger numbers (up 15.7% YoY), supported by above-average tourism demand for Mediterranean destinations, has led investors to extrapolate continued rapid expansion in international traffic and revenue; however, management now guides for much lower mid-single-digit growth in the near term and a convergence to low-single-digit growth in the long term, suggesting forward revenue expectations may be too optimistic.
  
• The acceleration and scaling of the capacity expansion program-bringing forward 40 million passenger capacity by 2032 and increasing commercial space by 150%-may have led to expectations of sustained margin expansion; yet, competitive and regulatory pressures, plus operating cost inflation, are already pressuring margins and will likely constrain further EBITDA or net margin improvement over time.
  
• Positive long-term global air travel trends and Athens' connectivity upgrades are perceived as catalysts for structurally higher aeronautical and non-aeronautical revenues; however, the company's heavy reliance on continued demand growth from international tourists exposes its financial results (revenue and earnings) to macro and geopolitical shocks, which are not always priced in during periods of optimism.
  
• The focus on non-aeronautical revenue growth (retail, F&B, real estate) from expanded commercial space creates high expectations for per-passenger revenue increases and earnings resilience, but guidance and recent commentary indicate limited upside during the construction phase and more stepwise rather than linear gains, challenging bull assumptions on earnings trajectory.
  
• Heightened pressures around decarbonization, more stringent environmental regulation, and the ramp-up of sustainability initiatives (e.g., terminal electrification, photovoltaic park) will require material ongoing capex and increase compliance costs, likely constraining net income growth and free cash flow beyond what current market valuation reflects.

Athens International Airport Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Athens International Airport's revenue will grow by 1.8% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 35.5% today to 29.4% in 3 years time.
• Analysts expect earnings to reach €206.1 million (and earnings per share of €0.66) by about July 2028, down from €235.9 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 20.7x on those 2028 earnings, up from 13.3x today. This future PE is greater than the current PE for the GR Infrastructure industry at 13.1x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 11.81%, as per the Simply Wall St company report.

Athens International Airport Future Earnings Per Share Growth

Risks

• Athens International Airport is undergoing a significant capacity expansion project, accelerating its completion timeline and increasing projected terminal and commercial space, which will enable it to accommodate higher passenger volumes and substantially grow both aeronautical and non-aeronautical revenues; this supports future revenue and EBITDA margin growth.
  
• The company's non-regulated activities, especially terminal retail, have shown impressive growth in revenue per passenger (18.9% increase in 2024), and the planned 150% expansion of commercial space (from 13,500 to 34,000 square meters) will further diversify and boost high-margin, resilient non-aeronautical income streams, positively impacting net margins and earnings stability.
  
• Despite already strong profitability (adjusted EBITDA margin of 63.8%), cost discipline and successful implementation of operational efficiencies-alongside modular, stepwise delivery of retail and passenger capacity-should enable Athens International Airport to maintain solid margins even during investment and construction phases, supporting sustained high earnings over the long term.
  
• The company has secured the support of cornerstone shareholders for its Scrip Dividend Programme, ensuring access to equity financing for the expansion while maintaining a healthy net debt/EBITDA ratio (target range 2x–3x), which lowers financial risk and sustains dividend capacity, positively influencing investor confidence and share price resilience.
  
• Secular trends, such as ongoing robust international air traffic growth outpacing the European average, heightened tourism demand for Mediterranean destinations, and Athens Airport's status as a top-performing major European airport, all underpin sustained long-term passenger and revenue growth potential, contradicting expectations of a share price decline.

Valuation

• The analysts have a consensus price target of €9.9 for Athens International Airport based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €11.0, and the most bearish reporting a price target of just €8.4.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €701.7 million, earnings will come to €206.1 million, and it would be trading on a PE ratio of 20.7x, assuming you use a discount rate of 11.8%.
• Given the current share price of €10.14, the analyst price target of €9.9 is 2.4% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.