ADP/green travel: French regulators move de Gaulle posts

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Airports naturally have ups and downs. But they should provide investors with decent returns on hefty capital inputs over the cycle. Politics is getting in the way of that in France.

New regulators want to change the way airports are paid for their facilities. Legal changes are likely. The tacit approval of transport minister Clément Beaune is causing turbulence. Shares in ADP, whose properties include Paris’s two largest airports, fell as much as 6 per cent on Monday in response.

The jet lag from the pandemic is finally dissipating from the European travel industry. Traffic levels are almost back to 2019 levels. At ADP they might hit just over 90 per cent this year. 

Paris Charles de Gaulle airport is not only mainland Europe’s busiest airport. It is also a nexus for international travel for France’s luxury industry. It is highly profitable for ADP. Those earnings have so far largely fallen outside the reach of regulators. That may change as France pushes ahead with efforts to green up its aviation industry.  

Regulators assess airport profits in two ways; dual till or single till. ADP has been mainly subject to the first approach. That means most of the money it makes from selling sandwiches and handbags goes to shareholders.

Regulators consider the whole take in single till systems, at London Heathrow, for example. That increases the amount of investment in green infrastructure they can mandate. This means lower returns for shareholders, notes Andrew Lobbenberg of Barclays.

ADP’s position is now uncertain. That explains the near one-fifth underperformance of its shares compared with peers this year. The shares previously commanded a premium. This has now all but disappeared.

The French government plans to move single till airports to a new hybrid model. Whether ADP will be moved from dual till to the new model remains unknown. But France is leading Europe’s push to green its aviation industry and some will have to pay for it.

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