Just as restaurants and casinos have come roaring back after shutting down during the worst days of the COVID-19 pandemic, Fidelity's Pranay Kirpalani sees considerable room for airports to see elevated traffic and profits, aided by easing travel restrictions across most geographies.
"It took until November 8, 2021, for the U.S. to allow vaccinated foreign passengers from the European Union, China, and elsewhere to travel to the U.S. by air, and I think it's a positive step forward for global air travel," says Kirpalani, portfolio manager of Fidelity® Infrastructure Fund (FNSTX).
The fund invests at least 80% of its assets in the stocks of companies involved with developing or managing infrastructure-related assets. This often includes firms tied to highways, railroads, marine ports, and airports.
As Kirpalani explains, many airports are essentially local monopolies that earn revenue through a combination of a regulated aeronautical business and an unregulated commercial business. He believes airports that operate this way could be in a strong position to profit from heightened travel demand.
Kirpalani is particularly bullish on leisure-focused travel and counts two Mexico-based airport operators—Grupo Aeroportuario del Sureste (ASR) and Grupo Aeroportuario del Pacífico (PAC)—among his core holdings as of November 30. He says each has seen tourist-related passenger volume improve, especially among U.S.-based vacationers. He notes that traffic for these operators has started to approach pre-pandemic levels.
Spain-based airport owner and operator Aena (ANYYY) was another sizable investment at the end of November, Kirpalani says. This company's asset base includes Barcelona and Madrid, as well as some of the world's best coastal destinations, such as Mallorca and Malaga. Aena's traffic base is mainly leisure-driven and short-haul in nature, he says, which could help drive a rebound in 2022.
He's especially bullish on the opportunity for the airports to see a near-term increase in traffic from other parts of Europe.
"I think both policymakers and consumers are ready for a return to vacation travel, which I think could help to fill up airports with travelers in 2022 and beyond," Kirpalani says.
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Pranay Kirpalani is a research analyst and portfolio manager in the Equity division at Fidelity Investments.
In this role, Mr. Kirpalani is responsible for providing research and recommendations on several stocks across Global Infrastructure and serves as portfolio manager of the Fidelity Infrastructure Fund. He has been in the financial industry since 2013.
Mr. Kirpalani earned his bachelor of arts degree in economics from The University of Pittsburgh.