January 11, 2018 / 3:57 PM / a year ago

Budapest Airport expects first significant profit in 10 years

BUDAPEST (Reuters) - Budapest Airport expects to make its first significant annual profit for 10 years in 2018 after a 14.5 percent rise in passenger traffic last year, its chief executive said on Thursday.

Jost Lammers, chief executive of Budapest Airport, speaks during an interview with Reuters in Budapest, Hungary, January 11, 2018. REUTERS/Krisztina Than

The business is benefiting from continued growth in passenger and cargo traffic, lower debt servicing costs and a strong operational performance as the Hungarian economy powers ahead with growth at about 4 percent.

“Budapest is a very strong destination ... tourism is booming here,” CEO Jost Lammers told Reuters. “For 2018, that is when we now expect (we will) make a profit ... (for) the first time in 10 years.”

Over the past 10 years 2016 was the only year in which the company posted a small profit, helped by a one-off gain from tax changes.

UBS said in a note on Thursday that Hungary is expected to achieve the biggest growth in short-haul capacity among major European countries in the first half of 2018 — 19.7 percent in the first quarter, with 12.2 percent projected for the second.

Budapest Airport, owned by Canada’s Public Sector Pension Investment Board (PSP Investments), another Canadian pension fund and a Singapore fund, made a loss in 2017, Lammers said, attributing that partly to a one-off upfront fee for a debt restructuring.

“Due to Hungary being investment grade, Budapest Airport being a strong asset with strong operational performance, we were able to get much, much better conditions going forward,” he said of its debt. “That will help us a lot for 2018.”

Lammers declined to give more specific profit guidance.

The European Bank for Reconstruction and Development said last July that it was taking part in the financial restructuring of the airport operator, providing a loan of 100 million euros (88.51 million pounds) as part of an overall package worth up to 1.32 billion euros.

Budapest Airport plans 160 million euros of investment through to 2020, and has already invested one third of this amount.

Lammers said the company conservatively forecasts 5-6 percent growth in passenger traffic this year, adding that the double-digit growth of the past three years was probably unsustainable.

Cargo volumes, meanwhile, jumped 13.4 percent year on year to 127,145 tonnes, with further growth expected.

“Now we start the tender for the construction of a new Cargo City project,” Lammers said, adding that the company aims to focus on both passenger and freight traffic.

He said it is targeting pharma companies and suppliers for carmakers Daimler and Audi, aiming to persuade the businesses to fly spare parts to Asia directly from Budapest rather than trucking them to Germany first.

Reporting by Krisztina Than; Editing by David Goodman

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