MIA reports a record year

The Malta International Airport (“MIA”) reported a record financial performance in 2018. Profits were up to €30.3 million from €24.2 million in 2017, an increase of 25.6%. Revenues in 2018 amounted to €92.2 million, a growth of 11.9% from prior year, where revenues amounted to €82.4 million.

The exponential growth in the passenger movements has directly affected both the aviation and non-aviation revenue of MIA. Traffic movements stood at 6.8 million in 2018, a growth of 13.2% compared to the prior year. In 2017, traffic movements stood at 6.0 million representing a growth of 17.5% over 2016, where traffic stood at 5.1 million. Interesting to note is that the highest growth in percentage terms in 2018 occurred during the shoulder months, being Jan to May and Oct to Dec. The airport has outperformed when comparing traffic movements with the European average, which stood at a growth of 6.1% in 2018.

It is imperial to note that MIA has experienced a significant growth of 14.5% in the Retail and Property revenue segment, which represents mainly the commercial outlets within the airport, the rental of office space generated from SkyParks, the VIP Lounge and the car park. As a result, the revenue contributed by this segment to the total revenue has increased to 28.5% in 2018 from 27.9% in 2017, representing the strength of MIA in diversifying its revenue stream.

Increase in costs were mainly characterised from an increase in the staff costs, marketing costs, and the legal and professional fees. Staff costs increased due to the onboarding of additional employees, with the average number of employees increasing by 33 in 2018 (total 340) when compared to prior year, where the average of MIA stood at 307 employees. Marketing costs increased by €1.0 million in 2018 as a result of an intensive advertising campaign. Legal and professional fees experienced an increase of €1.2 million due to extra costs incurred on accounting consultation services and professional fees in relation to the masterplan.

MIA generates an impressive cash from operations of around €30 to €40 million yearly. As at end of 2018, the company has a zero-leveraged balance sheet, following the repayment of a €33 million loan. MIA’s management plans to finance short-term capex through accumulated capital, despite its financial strength that enables it to obtain credit at a relatively low interest cost. This in itself is an opportunity for MIA, as it will enable it to reduce its cost of generating capital.

An important metric in aviation is the seat load factor, which measures the capacity of occupied seats as a percentage to available seats. The seat load factor stood at a healthy level of 81.8% in 2018, experiencing a slight decline when compared to 2017, where it stood at 82.4%.

Moving forward, will Malta International Airport be able to maintain the abnormal growth experienced in recent years?

Personally, I believe that MIA has arrived at its mature part of its life cycle. Inherently being an island, Malta cannot cater for an unrestricted amount of tourists. Moreover, the economic pressures of European countries, with the European Union decreasing its’ growth forecast for 2019, will largely affect the surge in tourist growth, which Malta has seen in the last few years. This argument is substantiated by MIA’s outlook for 2019 where it predicts a growth of 5.8% (7.2 million) in passenger movements for 2019 and also the recorded passengers traffic for January 2019, where the growth in passenger movements was 4.1% (January 2018: 16.7%), with a seat load factor of 69.0% (January 2018: 71.6%).