"Alpha Airports Slowly Rebuilds Business"

Sunday, May 19, 2002

Opinion
Alpha Airports Slowly Rebuilds Business
United Kingdom - Sunday Business, London


Life has not been a bed of roses for Alpha Airports. The company
operates retail outlets and catering services at airports. Obviously, 11
September came as a blow, but this was on top of the terrorist attack on
the airport in Sri Lanka where it operates, and the loss of contracts in
duty-free retailing.

However, the management has cut costs and is gradually rebuilding the
business. The bad news, I believe, is behind them and the stock looks
like a cheap play on the global growth in airline traffic. The company
has two core operations, flight catering and airport retail. The
catering business is headquartered at Heathrow and has a substantial
share of the UK market.

While Heathrow is important and represents 12 percent of the business,
three-quarters of the business is in regional airports and the core is
short-haul.

There is the potential to grow the business internationally and the
company aims to build on its positions in the Middle East and Australia.
The retailing side has suffered from the loss of contracts, the
abolition of duty free and the minimum revenue guarantees to certain
airports that have caused losses on some contracts.

The company has learnt from past mistakes and now structures deals
without the guaranteed element and is, once again, growing the business.
As with the catering side, there is the potential to grow
internationally and the company has recently won the contract for the
whole of Manchester airport, where previously it serviced only one
terminal. Perhaps the biggest perceived threat in the future is
no-frills airlines. They require little catering and their passengers
spend less in the airports. Their growth has been phenomenal. But we
expect the traffic growth in full service airlines to still be above GDP
growth for the coming years and, while no-frills passengers may not be
as profitable, they will provide the icing on the cake.

The shares trade on half the market multiple and this looks too cheap.
The yield is also close to 5 percent. If the company can grow the
business, the shares could perform very well.


 Do you have an opinion about this story?
Share it with other readers in our CAA Discussion Forums

http://www.californiaaviation.org/cgi-bin/dcforum/dcboard.cgi?conf=DCConfID8

*****************************************