European traffic revs up

Moody’s is predicting traffic growth in sectors including toll roads, although low inflation will keep a lid on charges.

A report from rating agency, Moody’s Investor Services, indicates that European toll road and airport traffic has moved into the fast lane.

“We expect that traffic at toll roads and airports will continue to grow, driven by improved economic activity and business sentiment,” said Joanna Fic, Moody’s vice president and senior credit officer.

Moody’s report, entitled “2016 Outlook – European Transport Infrastructure: Traffic Trends Underpin Stable Outlook for the European Transport Infrastructure Industry”, points to toll road traffic growth across key markets.

For the full-year 2015, toll road traffic is expected to have grown by between 2 to 3 percent in France and Italy, and by 4 to 7 percent in Iberia. Next year, growth of between 0.5 percent and 2.5 percent is expected in France and Italy, and between 2 to 4 percent in Iberia.

Meanwhile, growth of between 3 to 5 percent is expected at European airports in 2015 with 2 to 4 percent growth next year. “We expect that positive traffic trends will underpin business and credit conditions in the toll road and airport sectors,” said Fic.

However, the ability of toll road and airport operators to raise charges appears limited. Moody’s says that, thanks to a combination of low inflation (around 1 percent) and competitive pressures, tariffs are expected to remain broadly flat.

Low inflation also has an upside, however. Moody’s believes that political and regulatory risk in relation to motorways is abating since low inflation has eased scrutiny of the affordability of tolls.

The report says that airports, operating within an economic regulation framework, are likely to see aeronautical tariffs either frozen in real terms or even slightly decreased. Moreover, those with the ability to increase tariffs may decide to focus on increased throughput rather than tariff hikes.

The outlook for sea ports, relative to airports and toll roads, appears bleaker. Moody’s says they will be vulnerable to global economic conditions and are likely to experience mixed performance. They will “continue to see pressure from customers to reduce charges in a more competitive environment and in the context of sluggish growth in trade volumes”.