2023 will represent a turning point for year over year comparisons by analysts.
Until the end of 2022, analysts were appraising revenue and income targets of airlines and airports against 2019 figures. This was due to the mandated travel restrictions issued in many countries by numerous governments in efforts to reduce the spread of Covid-19. Comparing 2022 against 2019 is far from an optimal approach as there was a great deal of pent up demand and this exploded globally during 2022.
The question posed by investors to analysts throughout 2022, one which was never satisfactorily answered, was “what is the normalized growth rate once the travel backlog of several years has been removed from the mix?
At Grupo Pacifico, we now have that initial indication of normalized 2023 travel patterns.
Fiscal 2022 now becomes the baseline for normalized traffic volumes and year over year comparisons, on a go-forward basis, will hold relevance.
For 2023 and using the midpoint of their guidance, PAC is guiding towards passenger traffic volumes of +7%, total revenue growth of 13%, EBITDA growth of 11% and an EBITDA margin of 70%. 2023 EBITDA should surpass $1 billion US for the first time in corporate history.
The greatest variability to the revenue forecast, at the present, looks to be less travel related, more forex based.
This guidance places revenues above the top of the most optimistic analyst expectations for 2023.
Lacking a base-line for analysis, Wall Street had far too much variability in their assessments. The street’s average forecast of 2023 earnings was a full 50% below the top estimate. Corporate initial revenue guidance for PAC now makes the solitary outlying bullish analyst report appear unduly conservative. Presumably, with this assessment, analysts will greatly tighten up their forecasts, such as they are.
Upside to the forecast might occur if/as/when the airline industry increases capacity.
United, American and Delta, the leading US based carriers by revenues, are reporting that their total capacity still remains about 8% below the 2019 peak. Should they add more planes to their schedules at some point in 2023, the guidance would, of course, be subject to adjustment.
Analysts are now anticipating that 2022 figures will be a representative base, but in reality, there is still one aspect of air travel that remains well below 2019 figures and that is the ability of the airline industry to move passengers to/from an airport for emplaning/deplaning. I think that this third party capacity constraint, if alleviated, offers an additional element of potential growth for airport volumes worldwide, one yet to be considered.
Of course, in the event of a travel pullback, it could be as readily argued that airline capacity would presently be rightsized. I remain a bit more bullish than many on the outlook for vacation travel, but that’s just me.