On Tuesday, FWAG decided against building the 3rd runway, as a result of a comprehensive cost-benefit analysis. In detail:
Decision to abandon plans for a third runway does not alter its medium- to long-term growth prospects. The key rationale for an additional runway was to circumvent a possible capacity constraint. Yet the sharp rise in aircraft efficiency over the past two decades has materially expanded effective capacity. Avg. passengers per aircraft have nearly doubled (71 in 2005 to 139 in 2024), allowing VIE to accommodate significantly higher passenger volumes without a corresponding increase in aircraft visits. On this basis, the airport's two-runway system can handle up to roughly 52 million passengers per year, providing ample headroom relative to expected traffic levels (NuWays: 32m in FY25e and 34m in FY30e). Even if passenger growth were to continue at a steady 2-3% CAGR, VIE would only approach its system limit around 2050e. In reality, the constraint is likely to shift further out as airlines regularly up-gauge their fleets, e.g. moving from A320 variants (c. 180 seats) to larger A321 configurations (up to 244 seats).
Avoiding high costs, low CAPEX recovery potential and long approval times. As additional capacity would not attract incremental airlines or passengers, a third runway would fail to achieve commercially healthy utilization. Therefore, the 3rd runway would not generate sufficient cash flows to recover the projected costs of € 2bn in CAPEX (runway, terminal buildings and surrounding infrastructure). Beyond sharply higher construction costs, the risk of excessively long approval processes have also posed a risk.
Temporarily higher dividends likely. With € 438m in net cash per 9M'25 (eNuW: 443m per Y/E'25e), FWAG has hoarded cash in order to have financial power if a positive decision would have been made. Now, the substantially high cash position has become obsolete, in our view. Therefore, we expect a temporarily higher dividend of € 3 per share for FY'25-27e (i.e. € 251m pay out annually, currently 5.4% yield). This would reduce the net-cash position to € 141m by FY'27e, while remaining at healthy levels. After FY'27e, the south expansion of terminal 3 will also be completed and thus FCFs will likely grow to € 250-300m p.a. (eNuW), suggesting that the conservative dividend policy (payout ratio of currently "more than 60%") could be loosended to higher dividends for longer, in our view.
As we have not reflected a 3rd runway on our estimates, they remain unchanged, except for our dividend assumption and a € 56m write-off (eNuW) in Q4'25e on capitalized expenses in relation to the project. However, this has no effect on our DCF-based PT of € 58.00. Therefore, we reiterate our HOLD recommendation as upside remains limited, in our view. However, dividend oriented investors should consider taking advantage of this (temporarily) higher yield.
ISIN: AT00000VIE62