Buried within Aena's recent earnings transcripts lies a subtle, yet potentially game-changing shift. While most analysts focus on the welcome return of passenger traffic and the company's robust EBITDA margins, a quiet revolution is brewing in Aena's commercial revenue segment. The evidence suggests that Aena is strategically laying the groundwork for a commercial revenue explosion that could far surpass even the most optimistic projections.

The company's approach to minimum annual guaranteed rents (MAGs) is central to this hypothesis. Aena has relentlessly pursued higher MAGs in its new contracts, securing a staggering 130% increase in 2023 compared to 2019 levels. This aggressive strategy, combined with the reopening of specialty shops and the introduction of new, enticing retail concepts, is already paying dividends. Notably, specialty shops, a segment severely hit during the pandemic, are exhibiting a robust rebound, growing 6.4% in Q2 2023.

The potential lies in the interplay between Aena's MAG strategy and the resurgence of international travel, particularly long-haul flights. While domestic traffic spearheaded the initial recovery, international passenger numbers are swiftly catching up. Long-haul traffic, a key driver of high commercial spending per passenger, is already exceeding 2019 levels. As this trend strengthens, Aena is positioned to reap the rewards of its forward-thinking MAG negotiations.

Consider this: Aena's 2026 target for commercial revenue per passenger is €5.38. However, the current performance, fueled by higher penetration rates in food and beverage, price increases in car parking and VIP lounges, and the new duty-free contracts, already suggests this target is easily achievable. In fact, duty-free and food and beverage alone contribute approximately €0.6 per passenger, leaving ample room for growth across other segments like specialty shops and car rental.

Further fueling the potential for a revenue explosion is the accounting treatment of MAGs under IFRS 16. Aena spreads MAG revenues evenly across the contract duration, regardless of when the cash is collected. This means that in the early years of the new duty-free contracts, Aena's reported commercial revenues will be significantly higher than actual cash flows, potentially leading to a 'flattering' of reported profitability. However, this accounting quirk should not overshadow the underlying strength of the commercial revenue trajectory.

The looming question is: how high can Aena push commercial revenue per passenger? The company remains coy, opting to unveil a comprehensive update to its strategic plan later this year. However, based on the current data, breaching the €6 mark, a level well above pre-pandemic peaks, seems entirely plausible.

This potential commercial revenue surge has profound implications for Aena's overall profitability. While operating expenses are increasing due to inflationary pressures and the reopening of airport facilities, Aena's focus on securing favorable contracts and optimizing commercial operations can more than compensate for these cost pressures. The company's reiterated commitment to a 55% EBITDA margin, a figure achieved ahead of schedule, is a testament to this strategy.

Aena's success story isn't limited to Spain. The company's international ventures, despite inherent margin dilution due to concession fees and accounting rules, are contributing double the EBITDA compared to 2019. The full integration of the newly acquired Brazilian airports, including the crown jewel of Congonhas, is expected to further bolster this international growth.

Aena's transformation from a primarily aeronautical revenue-driven business to a commercial powerhouse is unfolding before our eyes. While the company's consistent performance and prudent guidance may lull some into complacency, the signs of a commercial revenue revolution are unmistakable. As international travel continues its vigorous comeback and Aena's strategic contract negotiations bear fruit, the stage is set for a commercial revenue explosion that could propel the company to new heights of profitability.

Aena's Commercial Revenue Growth

The following chart showcases the growth in Aena's Commercial Revenue based on information extracted from their Q2 2023 Earnings Call Transcript and Q3 2023 Earnings Call Transcript.

"Fun Fact: Aena manages a diverse array of 46 airports across Spain, making it one of the largest airport operators globally. From bustling international hubs to charming regional airports, Aena's network connects Spain to the world."