Royal Schiphol (LUCSHI; A2/A Pos) Fundamentals

We will leave FV unch balancing BS positive governance (it's targeting A1/A+) and better standalone rating vs. Avinor with 1) €1b+/yr in capex which should see more frequent visits (says prefunded next years capex) 2) 3yr tariff reset coming up next year bringing some near-term financial/rating uncertainty 3) smaller scale 4) majority airline exposure to currently weak Air-France group.

€600m 12Y IPT MS+115a vs. FV 110 (5bp NIC)

• books>€2.6b, -25 in from IPT, upsized from exp. €500m
• CoC put at par, 3m par call, first issuance since April '21
• 100% ownership in Amsterdam, Lelystad, Rotterdam (all in Netherlands). 20% interest in Brisbane Airport (3rd largest in Australia), 35% interest in Hobart (8th largest in Australia).

Uplifts among Airports

• Royal Schiphol (A2/A): state owned by Netherlands (triple-A); 2-notch uplift from (Baa1/BBB+)
• Avinor (A1/A): state owned by Norway (triple-A); 4-notch uplift from (Baa2/BBB-)
• Fraport (unrated); 52% state owned by Germany (triple-A); unrated but uplifts would have been likely
• Aerports de Paris (NR/A-); 50.6% state owned by France (Aa2/AA-); 1-notch uplift was removed in June as French state rating too weak

• Main airline exposure is to KLM (part of Air-France group) at 52%. Another 20% is from others (making up <1% each). 8% in Easyjet, 7% in Transavia (again Air-France group) are the next largest and both budget carriers.
• €1.8b in revenues compares to Aeroport De Paris approaching €6b and Fraport at €4b. EBITDA margins are ~30% but this is regulated entity.
• The aviation business (61% of revenue, 25% of EBTIDA, 73% of capex) charges tariff's on a cost-plus model; recent increases are 9% in 2022, 12% in 2023, 14.8% in 2024, and 30% expected by S&P in 2025. Airlines have appealed the increases but the regulator has dismissed the claims. It expects (like S&P) for big increases to continue and says capacity constraints at Amsterdam airport will leave it still in demand.
• 62% of EBTIDA comes from commercial operations; retailing including terminal lounges
• The UoP is to prefund capex needs in 2025. It sees "well over €1b/yr" in capex until "at least 2030". It has a €180m line rolling off in April next year, only other maturities are funding from EIB (~€150m). Hard to know if it will come to issue next year.
• BS positives; it targets A+/A-, Netherlands state owned co's need to maintain a min. A rating. Given former target it does not see dividends till 2026 at earliest. It is currently net 6.7x levered, FFO/debt 12%, and FFO interest cover at a healthy 8.3x. S&P seems to be waiting for the 2025 reset in tariff charges (for 2025-27) before an upgrade.