Aviation Statistics show Irish airports growth of 5.8% y/y in passenger travel

12 Dec 2018

The latest Residential Property Price Index (RPPI) release from the CSO shows that prices rose 0.3% m/m in October, extending the sequence of growth in prices to 22 months. On an annual basis, prices were +8.4%, representing the slowest rate of increase since October 2016.

Irish Economy: Residential property prices and airport passenger traffic data both show increases 

Separately released Aviation Statistics show growth of 5.8% y/y in the number of passengers handled in Irish airports in Q3, matching the annual rate of increase for the year to date. This latest increase brings the cumulative recovery in prices since the early 2013 trough to 83.8%, led by Dublin where prices have now risen 98.0% from their respective low point. 
The overall national index is 17.6% below the credit-fuelled Celtic Tiger peak while prices in Dublin sit 20.1% below their nominal high water mark. These peak-to-current moves compare favourably with the 30-40% assumption that we understand the domestic banks incorporate into their provisioning models. In terms of recent regional trends, annual price inflation outside of Dublin outpaces the capital (10.6% versus 6.3%), with this differential explained by the effect of Central Bank rules which place LTI and LTV limits over the majority of new mortgage lending. 

Prices in Dublin are, on average, 78% higher than in the rest of Ireland, while disposable incomes in Dublin are only 20% above the national average. Turning to the airports, the number of passengers handled in the first nine months of 2018, at 28.1m, is +5.8% y/y. The airport that experienced the strongest growth is Kerry (+9.0% y/y), followed by Dublin (+6.1% y/y). The growth in passenger numbers augurs well for the tourism industry in particular, although it is not a surprise given the buoyant data emanating from the Irish hotel sector. 

AIB Group: Project Beech to include up to €3.4bn in NPLs? 

The Irish Times is this morning reporting that AIB’s next planned NPL portfolio disposal, aka Project Beech, may include up to €3.4bn in par value non-performing loans. Project Beech is believed to be made up of BTL and CRE related assets, and at €3.4bn would represent almost half of the remaining €7.2bn (Q318) in non-performing assets on AIB’s balance sheet. 

However, as was the case with the eventually downsized Project Redwood earlier this year (€1.1bn par value disposal vs initial suggestions of €3.76bn of loans in scope), the final Beech disposal may be significantly smaller than the initial €3.4bn in scope. Nevertheless, it does suggest the Beech transaction, which is expected to occur in H119, will have a material impact on AIB’s stated intention of getting NPLs down below 5% of gross lending (c.11.5% Q318) by the end of FY19, with this then freeing up excess capital on the balance sheet.

IRES REIT: Board changes

IRES REIT announced yesterday that David Ehrlich, its former CEO and IRES Fund Management Limited’s nominee on its board, will step down as a non-executive director at year end. He is to be replaced by Mark Kenney. Mr. Ehrlich’s departure comes on the heels of last week’s news that he would be retiring as CEO (but remaining on the board as a trustee) of CAPREIT, also effective 31 December. CAPREIT, through its subsidiary IRES Fund Management, is IRES REIT’s largest shareholder, and its President and COO Mark Kenney will succeed Mr. Ehrlich on the board of IRES REIT with effect from 1 January. He has been with CAPREIT for 20 years, during which time he has been actively involved in creating and implementing company policies; directing the property management team; and oversight of the marketing, procurement, development and acquisitions departments. 

UK labour market data:

The unemployment rate remained at 4.1% in the three months to October, in line with consensus and Investec estimates. In number terms, the rise in jobs over the three months equated to 79k. What was interesting was the pay numbers. Headline earnings growth rose to 3.3% (again during the three months to October - Investec 2.9%, consensus 3.0%), but the ex-bonus series firmed to 3.3%, a tick above the street’s and our own forecasts. Indeed the latter figure represents the fastest growth of regular pay since December 2008. UK markets have their sights trained on other matters right now – sterling is more or less unmoved since before the release at $1.2615. However the Bank of England will feel that its wariness of tight labour market conditions is vindicated and will probably be looking to raise rates again early next year, clarity on Brexit notwithstanding.