Limited Financial Impact on Group ADP, Air France, and SNCF SA Expected in the Wake of France’s Ban on Three Domestic Flights

Summary

The French government banned direct flights between Paris-Orly airport and the cities of Nantes, Bordeaux, and Lyon because these can be replaced by train journeys of less than 2.5 hours, current rail capacity can accommodate the additional passengers, and the frequency of trains during early mornings and late evenings is adequate. In the short term, we believe the new law is unlikely to have a meaningful financial impact on Groupe ADP, Air France, or Société Nationale SNCF SA.

Key Highlights

— The mainland France segment represented less than 15% of total passenger traffic in 2022 for Groupe ADP, which manages and operates more than 20 airports globally, including the Paris-Orly airport.
— In 2020, it was reported that Air France stopped offering short-haul direct flights between Paris-Orly airport and the cities of Nantes, Bordeaux, and Lyon as one of the conditions in exchange for receiving EUR 7 billion of liquidity support.
— However, as European policymakers race against time to introduce policies to reduce greenhouse gas emissions in 2030 by 55% from 1990 levels, further changes will be required.

“At this time, we believe that short-haul, direct flights are likely to face stiff competition from existing high-speed train journeys that can provide similar benefits to travellers (assuming there is sufficient rail capacity to take on more passengers),” states Valiant Ip, Vice President, Infrastructure Finance at DBRS Morningstar. “However, short-haul connecting flights (feeding to or from global destinations) may be more challenging for high-speed rail to replace at this time, in the absence of a seamless intermodal integration, which could cause considerable inconvenience to international air travellers who have to switch transportation modes in order to arrive at their final destinations.”