Growth in an uncertain world: Insights from Europe & North America

I recently returned from a two-week field trip to Europe and North America – meeting with company management, attending conferences and undertaking site tours of assets. Despite the relentless geopolitical and tariff headlines this year, it was interesting to see global transportation infrastructure companies remaining optimistic on the near-term outlook and anchored to their medium-term strategies. Companies appear to be side-stepping the uncertain investment environment narrative and, on the contrary, remain as confident as ever about the structural drivers underpinning growth within their respective markets.

• High-speed rail between UK and Europe is about to enter a new dawn of efficient, affordable and sustainable international travel.
• Intra-Europe air travel remains the choice for longer trips, with many airports looking to increase capacity after years of strong traffic growth.
• North-American toll roads in high-growth regions with flexible pricing regimes remain some of the most attractive infrastructure assets money can buy today.

European infrastructure outlook remains strong

For example, UK-EU channel tunnel operator Getlink is seeing significant demand for cross-channel high-speed rail services, as Europe continues to push for more environmentally friendly travel and trade. Eurostar, the incumbent rail operator, recently announced¹ plans to launch new 5-hour services between London-Frankfurt and London-Geneva by early 2030s using its incoming fleet of 50 new trains, as well as increased frequencies on the recently reopened London-Amsterdam route by the end of this year. Several low-cost competitors to Eurostar like Virgin, Evolyn and Heuro have also signaled intentions to launch new services by the end of this decade. Getlink receives an inflation-linked fee from rail operators for every passenger passing through the Channel Tunnel, and given the minimal costs with servicing this additional demand and ample capacity within existing infrastructure, additional revenues like this should mostly flow through straight to earnings.

Figure 1: Disembarking at London St-Pancras Station after a 2hr20m Eurostar trip from central Paris

Meanwhile, demand for air travel in Spain also remains strong – and airport network operator AENA is set to undergo its largest capacity expansion program since IPO just to keep up. This €10bn program will include refurbishments and modernisation of airport terminals at key hubs such as Madrid and Barcelona as well as tourist hotspots such as Canary Islands which are bursting at the seams. In June, governments even greenlit² a long-debated proposal to extend a runway at Barcelona airport which will accommodate higher-value intercontinental traffic. There is consensus among airlines, regulators and governments that these expansions are needed – which supports the case for value creation. As a vote of confidence, Iberia recently announced³ plans to boost its long-haul capacity at Madrid by 55% over the coming decade, highlighting it as an increasingly strategic gateway to a burgeoning Latin America. Indeed, a number of other airports across the UK and Europe such as Lisbon, Gatwick and Luton are also looking to expand capacity after years of strong traffic growth.

Figure 2: Waiting for my flight at Terminal 2 in Madrid Barajas Airport, which is about to undergo a €2.5b refurbishment program

Germany’s recent €500bn infrastructure and defence fiscal package announcement also continues to drive investor interest. While Europe’s push for defence, digital and energy sovereignty on the back of the Russia-Ukraine war should boost economic activity and orderbooks, vertically integrated players such as Vinci and Eiffage hinted this could take time – and suggested more immediate upside from demand for highly skilled workers, pricing power and higher margins instead. The corollary of higher fiscal spending across Europe is also tighter government purses, and French motorway concession companies argued these assets remain better off in private hands even after concessions come up for expiry – not just because they can provide the capital, but also the incentive and expertise to operate, maintain and invest in these assets efficiently and sustainably.

The growing North American infrastructure pipeline

Perhaps some of the most positive meetings during the trip, though, were my meetings with Ferrovial and visiting their assets in North America. Ferrovial is a global transport infrastructure player owning long-duration concessions with pricing power. These assets are in areas with strong economic growth (such as Toronto, Dallas, Charlotte and NYC), have flexible pricing frameworks (unlike traditional toll roads with fixed inflation-escalators), and are of long duration (average expiry in 54 years) providing ample runway for value creation. Ferrovial is also a developer of managed lanes⁴ which are risky and expensive projects to construct – and is one of only a handful of industrial players capable of participating in a $30bn pipeline of tenders across the US coming online over the next couple of years.

We’ve written about the 407ETR previously⁵, but it was insightful to visit Toronto and speak with management about the city’s sticky congestion problem and the pricing power we are now starting to see re-emerge in this asset. Population in the Greater Toronto Area (GTA) is set to grow by 50% over the next two decades, the city is sandwiched between Lake Ontario and the Greenbelt, and public transit alternatives are extremely limited. Conversely, the company is seeing low elasticity to toll increases and customers find value whenever they use the asset, which for many is less than 10 times per month. Some users choose to use the 407ETR just to eliminate the risk of being stuck in congestion in the event of an accident even if speeds are fine at the time of decision making – a prospect exacerbated by increasing number of lanes and ongoing construction works on free road alternatives such as Highway 401. Putting these together, it seems the asset could continue to command significant pricing power over the medium term – much like the years of 10% pa toll and revenue growth pre-COVID.

Figure 3: Meeting 407ETR company management at their headquarters in Toronto, Canada

Visiting the managed lanes in Dallas Fort-Worth also highlighted the drivers (literally) behind the double-digit % toll increases we’ve been seeing across these assets in recent years. The North Texas region is booming with strong population growth, business relocations, and a diverse economy. Logistics hubs such as Alliance Texas which house operations for companies like Fedex and Amazon are also located in this area. It was interesting to see people using the managed lanes during so-called “off peak” midday hours (even though the original business case was to provide a choice to bypass congestion during peak hours). Whilst partly due to increasing work hour flexibility post-COVID, it appears there is also a behavioural element to this trend, with many drivers using the lanes even when congestion is limited – perhaps due to the comfort of higher and consistent speeds, force of habit and low cost. Indeed, tolls remain affordable with most customers using the assets less than two times per week, spending less than $20 per month and many driving Fords and Chevrolets (challenging the ‘Lexus lanes’ nomenclature). During the visit, many commercial light and heavy vehicles such as trucks, vans and lorries were also seen which attract higher tolls and are even more agnostic about the toll price given the value of time relative to the cost.

Figure 4: Learning about traffic management operations at TEXpess Lanes Headquarters in Dallas

Figure 5: Driving alongside numerous vehicles during offpeak midday hours on the LBJ managed lanes in Dallas

In Summary

While the macroeconomic clouds may be looming, global listed transport infrastructure companies continue to look beyond the horizon and are seeing strong, long-dated demand for their assets as well as investing to accommodate future demand. The field trip reinforced our belief that the growth and optionality within this universe of stocks remains incredibly attractive and underappreciated today.

1  www.mediacentre.eurostar.com/mc_view?language=&article_Id=ka4Rz00000Frp0XIAR
2  www.aena.es/en/press/the-ministry-of-transport-and-sustainable-mobility-and-the-generalitat-de—catalunya-greenlight-aenas-plan-to-expand-the-josep-tarradellas—barcelona-el-prat-airport.html&p=1575086693589
3  www.iairgroup.com/media/esujzvq3/iberia-investor-day-june-2025.pdf
4  Managed Lanes (MLs) are congestion-free “express lanes” within a highway corridor managed through dynamic pricing. They offer users who are able and willing to pay the displayed toll a choice to bypass congestion on general purpose (GP) lanes and enjoy a faster, safer and more reliable trip.
5  www.maple-brownabbott.com/metering-the-tolls-of-toronto-s-407-express-toll-route/

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