The global aviation industry is on track of growth again. While the sector has always bounced back strongly after external shocks, the current momentum provides faster than anticipated growth after COVID.

Flughafen Wien AG (FWAG), the operator of Vienna International Airport, has mastered the COVID impact well and looks set to emerge from the crisis even stronger. By covering the complete value chain, FWAG acts as a one-stop shop for its customers and without much competition in the metropolitan area of Vienna, relies on a highly defensive business model. Especially the highly profitable non-aviation business (45% EBIT margin) generates solid operating cash flows, well enough for the company's high CAPEX needs and a solid base for its renewed dividend policy (eNuW: 70% payout ratio in FY23e, +10pp yoy).

The unique location in the heart of Europe makes Vienna Airport a favourable hub, connecting Eastern and Western Europe, but also encircles a large catchment area of c. 12m people with above-average disposable income. Moreover, Vienna's position as attractive destination for tourism, businesses and international organizations, underpins the airport's stellar outlook.

After two years of lockdowns and travel restrictions, FWAG continues to capitalize on the strong passenger growth momentum.

Current traffic data indicates a faster than anticipated COVID recovery, as FWAG group passenger numbers (Jan-May 2023)

average is at 93% of 2019 levels. In our view, the FY23e guidance (81% - 86% of 2019) should be overachieved, giving potential to a guidance hike in the course of the year, as sales are highly dependent on passenger numbers.

We estimate

11%

sales CAGR 22-26e while net income should disproportionately grow

by 19

%

p

.a. until FY26e, thanks to operating leverage.

Furthermore, the special situation related to last year's unsuccessfull takeover offer by main shareholder IFM could also fuel stock price movements and limits the downside risk, in our view. However, t

he company's strong operating performance coupled with a positive outlook seems to be well reflected in the current share price.

Hence, w

e initiate coverage with HOLD and a PT of €

44,

based on FCFY24e and supported by DCF.