Report: Q1 2020 estimates of Covid-19 impact in infrastructure companies future revenues

Related resources

Report: Q1 2020 estimates of Covid-19 impact in infrastructure companies future revenues

7 minutes
April 14, 2020 6:53 pm

By Jack Lee – Deputy Head of Data

In response to the coronavirus Covid-19, many governments have put their nations into “lockdown” measures and/or strict movement controls. These inevitably have a knock-on effect on various infrastructure business models and their relevant investments.

The business models most impacted include merchant and regulated arrangements, as per the TICCS® Business-Risk Classification, where revenues depend on the level of activity, making an investment more susceptible to external economic shifts. This is in contrast with contracted business models, where the income derives from fixed and pre-agreed amounts that are stated within a contract. This latter type should be far more insulated from shifting economic developments.

We have further filtered these companies based on the TICCS® Geo-economic Classification, and selected only those exposed to regional and global economic factors. We also included companies situated in countries under nationwide lockdown where we consider that both national and sub-national geo-economic elements will also come under pressure.

So far, we have also excluded social infrastructures from consideration. Our reasoning is that most of the assets within this Industrial Superclass, including the majority of Stadiums, are structured as contracted business models, providing some financial insulation as described above. However, a handful of social infrastructure companies within our sampled universe are structured as merchant business model, but these are not situated in countries currently under lockdown measures. We consider that it is too soon to make revenue forecasts for these names.

Based on our initial review of our TICCS® Industrial Classification, we forecast that the following sectors will suffer the most substantial shock from these various lockdowns:

Industrial Classes Under the Most Threat
Code Name
IC6010 Airport Companies
IC6030 Port Companies
IC6040 Rail Companies
IC6050 Road Companies

IC6010 Airport Companies

The airport sector has suffered the most immediate and severe financial impact from the Covid-19 pandemic. For example, airports in Australia, including the big player Adelaide Airport Limited, are slashing budgets and seeing earnings slump (Wiggins, 2020a). Companies are restricting business travel and cancelling large and global corporate events. The result has been a significant cut to airport revenue, particularly as revenue from business passengers far exceeds that of leisure travellers (Partridge, 2020).

Furthermore, many governments have instituted travel restrictions to minimise viral spread, including closing off borders and banning travelling to and/or from certain countries (highlighted in IATA Timatic, 2020). Passenger numbers have plummeted for both domestic, and international flights and initial loss estimations are in the range USD63bn-113bn for the year 2020 (IATA, 2020).

Rules applied:

The table below details the basis on which EDHECinfra has reduced revenue forecasts for our affected IC6010 constituents:

Countries Year Basis
Portugal, New Zealand, Italy, the UK, Germany, Chile, Australia & France 2020 Decrease forecast projection by 25%
2021 Decrease forecast projection by 15%
2022 Decrease forecast projection by 5%


We have estimated a larger decrease for the first year and subsequently lowered our forecasted decline. We assume that the sector will require time to return its economies of scale to how they were before the pandemic occurred, as well as to resume its steady long-term growth rate.

EDHECinfra’s estimates are aligned with the IATA’s projections, though more prudent when compared with its worst-case scenario, assuming that the Covid-19 spread is more extensive.

Table 1: IATA Scenario 2 – Extensive Spread

(USD bn)
Australia, China, Japan, Malaysia, Singapore, South Korea, Thailand, Vietnam -23% 49.7
Rest of Asia Pacific -9% -7.6
Austria, France, Italy, Germany, Netherlands, Norway, Spain, Switzerland, Sweden, UK -24% -37.3
Rest of Europe -9% -6.6
Bahrain, Iraq, Iran, Kuwait, Lebanon, the United Arab Emirates -23% -4.9
Rest of Middle East -9% -2.3
Canada and US -10% -21.1

Source: IATA (2020)

IATA’s projections on cash flow impact for the year 2020 are in a range of 23-24%. This is in line with our own forecasts, namely a hit of 25% to the cash flow of constituents located in these same countries and within the same sector.

Further, S&P estimates that global air traffic will drop by 20-30% this year alone, assuming that Covid-19 is contained by Q3 2020 (Wiggins, 2020d). This would result in a mean decline of around 25%.

Perth Airport, an international airport located in the city of in Perth, expects revenues to decline by USD100 million in the year 2019-20 from the USD497.2 achieved in the previous year (Sprague, 2020). This indicates a drop of some 20% over the financial year. However, we estimate that there may be further deterioration to revenues.

Subsequently, we have moderated our decrease estimates to 15% in 2021 and 5% in 2022, based on an industry recovery from this economic pandemic that is equivalent to previous economic recessions. Current predictions are that the global economy will see in the region of USD2.7 trillion wiped out by the pandemic (Orlik, 2020).

IC6030 Port Companies

Port companies will suffer from the impact of the pandemic primarily because of disruptions to goods exports from China, which is one of the crucial global shipping links in the container sector. Ports in many cities have been under restrictions, and major shippers, including Maersk, MSC and CMA CGM, have reduced order for exports from China (The Straits Times, 2020).

Rules applied:

EDHECinfra has reduced revenue forecasts for affected IC6030 constituents on the following basis:

Countries Year Basis
Australia, France, the Netherlands, New Zealand, Spain and the UK 2020 Decrease forecast projection by 25%

It is our view that the revenue reduction should be projected only for a single year, with a subsequent return to steady growth. We believe the impact is likely to be only of short term duration. Our reasoning is that ports will be needed to deliver of essential goods during this critical period, regardless of whether other businesses are placed under a total lockdown, and port trading is a key driver of the economy. Countries would be unlikely to restrict supplies over the long term without a risk of worsening any consequent recession.

The estimated decrease in percentage is basing on a more prudent approach when compared with the current market outlook. For example:

  • The Port of Long Beach acquired by Macquarie already saw a 17.9% drop in imports over the course of February.
  • The Port of Brisbane has forecast a 30-40% decline in imports for March (Wiggins, 2020e), though these assumptions were made with limited available facts.
  • West coast ports in the US expect to see imports decline by some 15-20% (Andrew Vitelli, 2020).

Thus, our 25% estimate on the first year is larger and more conservative. However, it is certain that ports will see a decline in financial performance in the first half of 2020.

IC6040/50 Road and Rail Companies

Motorways and passenger rail lines are taking a hit from the slump of traffic flow triggered by government measures to control the spread of the virus. Actions in various countries include suspension of significant community events, closure of educational institutes and restricted air travel for inbound and outbound flights from high-risk countries.

Some countries, including France, Italy and Spain, have announced a nationwide lock-down, an emergency protocol that prevents people from leaving their residencies except for necessities such as grocery provisions or for visiting pharmacies and banks (Wilson and Moulson, 2020).

Many companies around the world have also started to implement their Business Continuity Plans, whereby employees work from home with restricted business travel and limited conference meetings.

Rules applied:

EDHECinfra has used the below calculations to generate revenue forecasts for the IC6040/50 constituents affected:

IC6050 Roads Companies

Countries Year Basis
Spain, France and Italy 2020 Decrease forecast projection by 40%
2021 Decrease forecast projection by 20%
2022 Decrease forecast projection by 10%
Australia 2020 Decrease forecast projection by 8-25%
2021 Decrease forecast projection by 4-15%
2022 Decrease forecast projection by 5%
Malaysia and Chile 2021 Decrease forecast projection by 5%
2022 Decrease forecast projection by 3%


Spain, France and Italy

Roads companies in Spain, France and Italy represent the majority of constituents within this sector. These companies have received the first hit in terms of revenue forecast as they are all in countries whose governments have issued nationwide lockdowns, resulting in a huge traffic drop.

Traffic flow is estimated to decrease by 40% this year, according to forecasts from the large road operators in Europe. This signals a market trend and outlook of poor financial performance. For example:

  • Atlantia SpA, an Italian road infrastructure company with more than USD11bn revenue, has suffered a massive sell-off, seeing its share price plummet by 40% in the month up to mid-March (Bloomberg, 2020).
  • Concessioni Autostradali Venete S.p.A, another operator of Italian roads, stated that traffic on its Veneto motorway fell by 30-51% in March (Cavspa, 2020), signalling a mean decline in the region of 40%.
  • Autostrade per I’Italia, one of Italy’s largest toll road operators, released data showing a 41% traffic decrease on the previous year (Fabrizo, 2020).
  • Autoroutes Paris-Rhin-Rhone, a toll road company crucial to the logistics network in France, saw an 83% decrease in earning contributions in just three days (Wiggins, 2020b).


Due to demographic variations, we have assessed Australian companies on a case-by-case basis. For instance, we have applied the same 25% reduction made to Airports to the Sydney M1 Eastern Distributor road, as its usage correlates closely to passengers travelling to and from Sydney Airport (Wiggins, 2020c).

Malaysia and Chile

To date, for constituents situated in Malaysia and Chile, we have applied only a 5% reduction over the first year. Our reasoning is that these countries are not in a nationwide lockdown, so any decline should be limited as traffic numbers are not being reduced significantly.

2021 & 2022

We have reduced our decrease estimates for 2021 and 2022 in keeping with the time taken to recoup from previous economic recessions.

IC6040 Rail Companies

Countries Year Basis
UK 2020 Decrease forecast projection by 10%
2021 Decrease forecast projection by 5%

Most rail companies’ business model are contracted basis; there is only one constituent in our sampled universe with a regulated business model. We have applied a forecast reduction of 10% for the year 2020 and subsequently 5% in the year 2021. These are smaller decrease expectations compared with roads in Europe because the UK government has applied a less severe nationwide lockdown. Consequently, the selected asset is running, but with a decrease in traffic resulting from movement control.