In an environment where investors are seeking to balance income generation with downside protection, infrastructure-backed assets are becoming increasingly attractive. James Durance, Portfolio Manager at Fidelity International, discusses the opportunities in airport debt and explains why this is high conviction area within Fidelity’s Global Income and Global High Income Bond strategies.
At first glance, airports may not appear an obvious source of opportunity given elevated geopolitical uncertainty, higher energy prices and ongoing pressures on consumer spending.
However, airport fundamentals have remained remarkably resilient, reflecting defensive business models, strong cash flow generation and infrastructure characteristics that continue to underpin credit quality.
The ability to access these high-quality assets at attractive spreads, especially in primary markets, has further strengthened the investment case.
From a credit perspective, airports possess several characteristics that make them attractive. Many operate within regulatory frameworks that provide valuable visibility over future revenues, while their strategic importance, high barriers to entry and limited competition reinforce long-term business stability.
Airports also benefit from diversified revenue streams. While aeronautical charges remain an important source of income, operators also generate substantial revenues from retail, food and beverage, parking and premium passenger services.
This diversification can support earnings resilience across different market environments.
These attributes align closely with the broader philosophy underpinning our Global Income franchise, which seeks to generate income through investing in issuers with durable fundamentals, rather than relying solely on economic growth or market sentiment.
Strong fundamentals support the sector
Airport credit profiles remain stable and are buoyed by robust EBITDA generation, even while operators undertake significant investment programmes.
Passenger traffic is expected to grow between 1-4% over the coming years, driven by resilient leisure travel demand and consumers’ continued willingness to spend on premium travel experiences.
While sustainability obligations continue to increase, airports generally face lower decarbonisation-related capital expenditure requirements than many other transportation sectors, supporting the ability to maintain strong credit metrics while investing for future growth.
Importantly, demand continues to outpace available airline capacity globally. Aircraft delivery delays and production constraints have limited the pace at which airlines can expand fleets, helping to sustain high load factors and passenger volumes and creating a supportive backdrop for airport operators.
For credit investors, capacity constraints can be a positive feature, helping to support traffic resilience and revenue generation even during periods of uncertainty.
London Heathrow case study
Heathrow airport has become one of our largest positions and is currently the second largest bond holding in the fund. From a creditor perspective, it benefits from a well-established regulatory structure.
Under its ‘Regulated Asset Base’ (RAB) framework, airport charges are set by the UK Civil Aviation Authority, providing visibility over future revenues and a degree of protection from economic volatility.
Importantly, the framework allows Heathrow to recover investment costs and earn a regulated return on its asset base over time, supporting cash flow generation even as significant capital expenditure is undertaken.
Heathrow handled a record 84.5m passengers in 2025 and is expected to approach its current capacity limits in the coming years, highlighting the strength of underlying demand.
An additional source of comfort for bondholders is the quality of ownership. Heathrow’s shareholder base includes long-term infrastructure investors and sovereign wealth funds that demonstrated support throughout the pandemic by accepting dividend suspensions and agreeing to covenant waivers.
In early June 2026, we built up our position in the issuer via Heathrow’s €4.375% 2037 bond issuance. The deal was met with robust investor demand and the bond has subsequently performed well, with spreads tightening meaningfully since issuance.
A natural fit for our strategy
Within the Global Income and Global High Income Bond portfolios, airports offer many of the characteristics we seek when allocating capital, including predictable cash flows, strong asset backing and durable long-term demand.
These qualities make the sector a natural fit within our income strategies and an area where we continue to identify attractive investment opportunities.
Main image: aeroplane, ross-parmly-rf6ywHVkrlY-unsplash
