Morningstar DBRS: climate change risk to airport performance low

Morningstar DBRS has highlighted that although the risk posed by climate change to airlines remains low in the near to medium term, airports with weaker economic and business profiles may be more challenged in mitigating the risks of physical and transitional issues as the industry seeks to decarbonise. Although airports are generally designed to be resilient to some extreme weather events, the increased frequency of things such as storms could damage facilities, while extreme heat waves could lead to take-off weight restrictions and elevated energy consumption, highlights Morningstar. Despite many airports typically carrying comprehensive insurance policies, it could be ‘concerning’ if the insurability of natural disasters become materially eroded. However, while Morningstar ‘do not expect physical risks to have a material impact on the airport sector in the near-to-medium-term,’ they caution that ‘the global airport industry may eventually evolve into a network that consists only of climate-resilient airports’. Instead, the transitional risks associated with climate change will be likely ‘more impactful and challenging,’ with the transitional risks for airport operators primarily relating to the evolving regulatory landscape. Specifically, bans on short-haul direct flights may have a notable impact on airports with a higher concentration of such services. ‘In particular, we believe the transition to greening the aviation sector will not negatively affect the airport operators’ financial performance materially,” concludes Morningstar, which considers ESG criteria in all of its credit ratings. ‘Climate and climate risk has not been considered relevant or significant for our credit ratings of airport operators’.