Submerged risks haunt low-level airports
By David Fickling
Airports have been a highly rated asset class over the past decade. The combined market capitalization of the companies that run the terminals in Paris, Shanghai, Sydney, Frankfurt, Copenhagen and Thailand has almost quadrupled in the past 10 years, and is up by about two-thirds since the end of 2016.
That makes the sector’s patchy disclosure around climate-change risk all the more extraordinary. Through most of the 20th century, the key requirement for building an airport was the availability of a large stretch of undeveloped and affordable flat ground close to a major city. In many cases, that meant building on low-lying marshes, or even reclaimed land as at Osaka’s Kansai. Almost by definition, a large number of the world’s airports are in locations most at risk from rising sea levels, high tides, storm surges, extreme rainfall, or a combination of all four.
Although most climate models predict between 0.2 meters and 2 meters of sea-level rise by 2100 (with a median estimate of 1 meter), the main risk to airports isn’t that they’ll be permanently submerged. Instead, it’s that elevated waters and more extreme storms cause flooding that had previously happened only rarely to become a regular threats, necessitating increased capital spending on prevention measures and pushing up insurance premiums. That in turn risks undermining valuations, resulting in writedowns for the asset owners and in a worst-case scenario the necessity of moving to higher ground.
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