Heavy debts and light volumes test a supposedly stable asset class

ONE by one, the claims made by modern finance have been tested during this crisis and usually found wanting. The merits of infrastructure investment are the latest to come under scrutiny. Infrastructure assets-roads, airports, utilities and the like-are supposed to provide stable if unspectacular long-term returns that are relatively immune to the peaks and troughs of the economic cycle.

That assumption is being tested by the severity of the economic downturn. On May 5th BAA, the main operator of British airports, reported a 10% fall in passenger volumes at its three London airports in the first quarter of the year, on a par with the drop it saw after the terrorist attacks on September 11th 2001. Ports on the west coast of America have suffered huge declines in volumes of container traffic. "Revenue is not as sticky as once thought," says the head of a large infrastructure fund.

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Posted by boyang at May 7, 2009 8:53 PM