Greece Tourism Report Q2 2008

Tourism Overview Latest official data show foreign tourist arrivals to Greece rose by 5.7% year-on-year (y-o-y) in the tenmonth period January to October 2007. This represents a slowdown in growth compared with a year earlier and can be attributed, in part, to a weaker number of tourist arrivals to the Ionian islands, Crete and the Dodecanese. A spate of wildfires throughout the country in the summer may also have influenced arrivals in 2007. Overall, the country's tourism performance was disappointing compared with other competitor countries such as Turkey, Croatia, Portugal and Egypt.

Forecast Scenario Despite slowing over our five-year forecast period, economic activity will remain buoyant over the medium term. However, structural reforms are crucial if Greece is to sustain economic growth above the EU average over the longer-term.

BMI has edged down slightly its estimate for growth in foreign tourist arrivals in 2007 as a whole to 5.5% y-o-y. This would represent the third year running that Greece has recorded growth in arrivals although, due to a revised data series, growth has slowed in the last two years. Over the medium term, BMI maintains a reasonable outlook for foreign tourist arrivals, although annual growth rates are likely to moderate slightly from 2008. Our annual average growth rate for foreign arrivals over the forecast period to 2012 is now about 3.5% (revised down this quarter). Of particular note is that economic conditions in Greece's main source markets in the UK and the eurozone are forecast to weaken in 2008, but recover slightly in the following year. In addition, the continuing strength of the euro makes non-eurozone countries and traditional rivals such as Croatia, Turkey, Tunisia and Egypt, more attractive.

Athens International Airport Recently released traffic data for 2007 at Athens International Airport (AIA) are particularly impressive and show total passenger numbers increased 9.7% y-o-y, with the number of international passengers up a slightly stronger 10.1% y-o-y to almost 10.6mn passengers (indicating the airport's significant contribution to the Greek tourism industry). The domestic market also climbed strongly, up 9% y-o-y, posting an all-time record with nearly 6mn passengers. There was also dynamic growth among the 19 low-cost airlines now operating to or from the airport, connecting Athens with 31 destinations (up from 21 in 2006). A total of 2.3mn foreign tourists are estimated to have arrived at the airport in 2007, up a buoyant 18% y-o-y. The strong increase in tourist traffic was driven by the burgeoning low-cost airline market and favourable developments in the US and Eastern European markets (mainly Russia). Indeed, overall, Eastern Europe was the fastest growing region for passenger traffic in 2007, up over 23% y-o-y, with North America up a similarly strong figure, while the Middle East posted an increase of 15% y-o-y.

The airport's largest market, Western Europe, meanwhile, enjoyed a near 8% increase compared with the previous year.

Aegean Airlines After relatively strong growth in passenger traffic in 2005 and 2006, Aegean Airlines reported more significant growth in 2007, up 18% y-o-y to over 5.2mn passengers. International traffic rose by a substantial 35% y-o-y, reaching almost 1.9mn passengers, while domestic traffic increased 10% y-o-y to nearly 3.4mn passengers. The buoyant growth was attributed to further international network expansion, initiation of its fleet renewal investment programme and strengthening of the company's brand awareness. In 2008, the company plans to expand its network further, by adding new domestic and international destinations. The airline also reported very favourable results for the first nine months of 2007, with revenues totalling some EUR371mn (US$524mn), an increase of 22% y-o-y, while net profit increased 45% y-o-y to EUR33.4mn (US$47.2mn).