Europe's airports and toll roads to preserve strong credit quality despite slowing traffic growth in 2017

European toll roads and airport operators' credit quality will remain solid despite an expected slowdown in traffic growth in 2017, following a significant upswing in passenger volumes last year that will be tough to repeat, says Moody's Investors Service in a report published today. Macroeconomic improvements, rosier business sentiment, good weather and lower fuel prices fuelled 2016's rise in volumes.

"Traffic growth will slow but remain positive in 2017 after last year's jump," says Raffaella Altamura, Vice President -- Senior Analyst at Moody's. "Passenger volumes for European airports will grow by 4%-7%, outpacing the 1%-3% we expect for European toll road operators. While traffic at the UK airports we rate, excluding Heathrow, will likely expand by 2%-6%, Brexit-related uncertainty and the weak pound could act as a drag on passenger growth at UK airports."

Heathrow's capacity constraints mean that the airport is anticipated to continue to grow at a more modest rate of 0.5%-1% in 2017.

Moody's report, "Toll Roads and Airports -- Europe: Traffic growth set to continue in 2017 although at a slower pace," is available on www.moodys.com. Moody's subscribers can access this report via the link provided at the end of this press release. The rating agency's report is an update to the markets and does not constitute a rating action.

European airport and toll road operators reported healthy increases in traffic volumes in 2016. Improved economic prospects supported toll road traffic, with the largest European operators reporting traffic growth of 3.6%, on average, last year. The major toll roads in Spain and Portugal reported the strongest growth rates in 2016 compared to other European peers, with annual traffic volumes up 5.3% and 7%, respectively.

Rated European airports reported a 6.4% increase in passenger volumes on average in 2016. This reflected supportive trends in non-domestic demand, as well as one-off effects from shifts in airline capacity from regional or secondary airports to primary airports, particularly by low-cost carriers.

Spain recorded passenger increases of 11% in the airport sector last year, one of the highest among European peers. Some of this performance was driven by the shift in leisure traffic from countries with higher perceived geopolitical and terrorism risks to countries perceived as safer destinations. This has introduced a degree of de-linkage of traffic performance from purely macroeconomic factors. Passenger volumes at Brussels, Nice, Paris and Rome airports were dented by actual or perceived exposure to terrorism risk.