Infrastructure 2025: Is the Aviation Sector Ready for Takeoff?
Executive summary
- Investor appetite for airports has recovered, along with passenger kilometers travelled post-COVID, with several of Europe’s key airports now featured on the market this year.
- Despite the tailwinds, not all airports are created equal; turbulence remains on the horizon, taking on different forms across international hubs and destination airports.
- The ability to future-proof the carbon-intensive aviation sector remains top of mind for investors, driven by regulatory and technological considerations.
The aviation sector has reached cruising altitude but beware of clear-air turbulence
Transportation assets were among the worst hit during COVID-19, with preventative measures severely impacting traffic volumes. Airports were given no respite as global air traffic passenger demand fell 65.8% in 2020, met by a 70% drop in transaction volumes. Despite the dearth of activity in the last four years, the volume of passenger kilometers returning to and, in certain markets, exceeding 2019 levels has renewed interest in the sector.
Industry in recovery mode
As the aviation industry returns to cruising altitude back above the 2019 traffic threshold, the International Air Transport Association (IATA) projects that air passenger volumes are poised to grow from 4.7 billion in 2024 to 5.8 billion in 2027, reflecting that there is more runway for the sector in the years ahead. The optimism has lifted investor sentiment for airport assets, particularly in regions supported by strong passenger demand and government-backed expansions.
The infrastructure market has caught on to the recovery. During the COVID-19 period, investor appetite abated due to the knock-on effects of pandemic restrictions on airport profitability, with airport transaction volume as a proportion of overall transaction sector investment activity dropping from 14.1% in 2019 to 12.7% in 2024.
Transport Subsector Transaction Mix
By Volume
The normalization of passenger volumes coupled with future optimism has resulted in a pick-up in transaction activity across Europe and Asia, including transactions in AGS Airports and Malaysia Airports, and several airports already on or coming to the market for sale. A recovery in the subsector is greatly appreciated by the infrastructure industry; however, like that elite frequent flyer program you may have used to get to the latest conference, not all airports are created equal. The underlying risk profile of an airport can vastly differ due to passenger mix, the level of asset management control, flight route characteristics, and regulatory exposures, factors which are key to understanding and valuing these infrastructure assets.
Understanding your customer
Interestingly, the divergence between leisure and corporate travel has significantly widened. Business travel continues to lag the recovery in leisure and has historically underperformed leisure volumes after economic downturns, which could present a structural challenge for airlines and airport operators. The big questions in the industry now are: 1) how much of the phenomenon is exacerbated by the rise of virtual and hybrid work models, and 2) how does the industry adapt to a model where the mix may more heavily tilt in favor of leisure passengers?
U.S. Airline Tickets Sold
By Agency; % of 2019 Yearly Average
Can the recovery be too much of a good thing?
As leisure travel dominates aviation activity, select popular tourist destinations, including highly sought-after tourist destinations such as Barcelona, Venice and Amsterdam, have enforced actions, including tourist taxes and visitor caps, to curb overtourism.
Unlike international hubs where demand is typically constant, on the local and national level, tourism's impact on the quality of life could potentially affect flight demand and airport traffic patterns, an increasingly prominent factor when considering the business plan of a destination airport.
Fueling future aviation
Beyond capitalizing on future growth, the aviation industry must adopt measures in line with global megatrends to future-proof the asset base and broaden the buyer aperture. In Europe, the push for Net Zero has led regulators to curtail short-haul flights in regions where a rail alternative under two and a half hours exists, highlighting potential risks for airports reliant on short-haul traffic and the ever-looming threat that more expensive carbon taxes could impact the industry if it remains a material consumer of carbon-based fuels. As a result, business plans that factor in an element of onsite decarbonization and the supporting infrastructure to decarbonize the flights themselves may encounter a broader buyer pool at exit.
Technological advancements such as in Sustainable Aviation Fuel (SAF) also introduce an interesting challenge for the aviation sector. While SAF is a “drop-in” fuel that could theoretically replace traditional jet fuel, adoption remains limited due to higher costs and the need for scale. However, airports are increasingly playing a critical role in SAF deployment.
Prepare for takeoff
Buyers may be spoiled for choice in the near term with the number of airports in the market up for sale; however, as with any type of infrastructure investment, the “know thy asset” adage remains important. Not all airports are created equal, both in terms of tailwinds and turbulence.
For airport assets to truly take off, investors will need to deftly navigate both ends of the spectrum. Investors who can allocate capital to top-flight assets in up-and-coming regions should be able to capture the benefits of today's aviation infrastructure and tomorrow's megatrends. And by future-proofing airport assets to be sustainable in the long term, these investments can soar to new heights.
We provide further insights and observations across infrastructure in our 2025 Infrastructure Market Overview. Please complete the form below to receive an emailed copy of the report.
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