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So the private sector owns and operates airports – nothing new there. But airport privatisations, asset sales and 
PPP deals have risen over the last two years, making airports a hot tip for infrastructure investors. What’s driving 
this? And why?
Airports cause headaches for governments 
Governments know that fit­for­purpose airport infrastructure promotes trade and tourism. But with their short­term 
electoral cycle mind­sets, they tend not to want to tackle the long­term funding needs of airport development. After all, 
the benefits often won’t materialise until that government has left office. Airport investment, then, is best left to those 
with the expertise to invest appropriately to increase capacity when demand rises. That’s why governments offload 
the risks to private sector owner­operators. 
 
Governments that grant long­term concession rights to private owner­operators transfer the burden of financing 
development and operational costs to the private sector. The concessions may oblige owner­operators to add 
terminals as passenger numbers grow and to maintain International Air Transport Association service standards. 
This in turn improves passenger experience.  
 
It’s also a moneymaking opportunity. Many governments, particularly in the EU, privatise their airports to help cut 
their public deficits. They realise airports are one of their most marketable assets. Vinci recently agreed to pay the 
Portuguese government €3.08bn to get national airport operator ANA, which came with a 50­year concession right to 
operate 10 of Portugal’s airports. Governments also often demand a share of an airport’s gross revenues during the 
concession. 
 
Greece also recently announced plans to privatise 37 of its regional airports. Plus, it wants to divest its 40 per cent 
stake in Athens International Airport. And Slovenia, to avoid a bailout from the EU, plans to privatise Ljubljana Airport. 
So it seems more capital­constrained governments may become tempted – or obliged, even – to privatise their 
airports.
What makes a good investment? 
Attract the best airlines
Strong customer and revenue profiles present instant cash­generating assets. And 
‘hub’ airports, where major airlines choose to base their operations, meet these 
criteria – say, Heathrow for British Airways and Dubai for Emirates Airlines. These 
airports attract most investor attention. 
Airlines are vital because most of an airport’s revenues are from the aviation fees it 
charges airlines (for take­off, landing, aeroplane parking, and so on). To attract the 
best airlines, airports must offer a high quota of origin and destination traffic. 
Specifically, customers who are willing to pay a premium for direct flights, who will 
subsidise connecting passengers who expect cheaper fares.  
 
Where customers prefer to fly from will help determine where airlines choose to 
base themselves. Hub airports often have good connecting transport infrastructure, 
which airlines know will attract customers. 
 
Air traffic growth follows economic growth. In 2007, for example, 240 million 
passengers passed through UK airports. Since then, that figure has dropped 19 
million to 221 million. But the decline isn’t uniform across all airports. Hubs have 
proved more resilient. It is the UK’s regional airports – Exeter, Doncaster, Blackpool, 
for example – that now struggle as demand for flights from these airports has fallen. 
In contrast, traffic remains high at Heathrow because it’s where airlines concentrate 
their efforts when the business cycle contracts.  
 
An airport’s success is linked to the success of the airlines that use it as a hub. The 
collapse of Malev, the Hungarian state airline, in February 2012, meant an instant 
loss of 40 per cent of the passenger numbers at Budapest airport, leaving a large 
gap in the airport’s revenues.
Mitigate currency risk 
Airports that serve international destinations can raise largely dollar­ or euro­based 
revenue from international airline customers. And this gives those airports access to 
global financial markets and foreign currency debt without government help to 
 
 
 
Airports – why so interesting all of a sudden?
Cash­strapped governments 
that wish to cash in their 
airports plus up­and­coming 
countries that wish for better 
airports make for an active 
sector.
Alex Carver, Partner
Many governments, 
particularly in the EU, 
privatise their airports to help 
cut their public deficits.
We can expect to see more 
airports privatised across the 
world.
What’s the future for airport deals? 
mitigate foreign exchange risk. So airport financings can succeed in emerging 
markets where international lenders might otherwise be unwilling to lend, as the 
success of the Pulkovo Airport PPP in St Petersburg, Russia, shows.
Competition and regulatory risk
Exclusivity is a big concern for investors. The government will usually need to agree 
not to allow competing transport infrastructure within a certain geographical radius. 
Investors also want as much certainty as possible, for example, around the level of 
aviation fees, which in many countries the aviation authority sets and periodically re­
bases. Also, financiers may want to see long­term airport use agreements with key 
airlines, locking them into using the airport under agreed pricing formulas for 10–15 
years. 
 
Low­cost air travel has increased competition and brought with it lower fares. 
Coupled with increasing fuel prices, this means airlines need to fight harder to 
make profits. So there’s a trend for airlines, perhaps following Ryanair’s lead, to 
negotiate harder with airports over aviation fees, to try to control costs. 
 
Airport owners that try to raise fees to fund redevelopment will need to show how the 
proposed upgrade would give the airlines a good return on investment.
Shopping malls on the end of runways
Investors become more comfortable once satisfied that an airport will retain good 
airlines that will attract customers willing to spend at the airport. And airports offer 
scope for additional revenue streams from duty­free shops, advertising, cafés, 
restaurants, hotels and parking. So, airport financings can often succeed without 
relying on government demand risk mitigation guarantees.
A buoyant M&A market 
M&A deals have risen. And this looks set to continue with EBITDA­benchmarked 
asset values also on an upward trend, moving towards pre­financial crisis levels 
when London City Airport was sold for 29 x EBITDA.
In the UK, Ferrovial’s sales (forced by Competition Commission rulings) of Gatwick 
in 2010 for £1.5bn (12 x), Edinburgh in 2012 for £807m (16 x) and Stansted in 2013 
for £1.5bn (15.6 x) illustrate this upward trend.  
 
As highlighted above, various factors can influence the valuation of an airport. 
However, the price paid for Stansted is particularly interesting because passenger 
numbers have in fact been in decline for the past six years. Some experts don’t view 
Stansted as the same quality as Edinburgh. Stansted is one of many airports that 
competes in the south east, and most of its traffic is from low­cost airlines. Whereas 
Edinburgh Airport is the only airport that serves Edinburgh, and it includes national 
airlines. 
 
The prices Ferrovial’s airport sales achieved surely encouraged Abertis’s and 
Hochtief’s recent decisions to divest all or part of their airport portfolios. Hochtief 
agreed in May 2013 to sell its airport unit, Hochtief AirPort GmbH, to Canada’s Public 
Sector Pension Investment Board for €1.1bn. Abertis, with stakes in 29 airports 
across the globe, is in the process of divesting its airport business in separate lots, 
including an imminent sale of its 90 per cent stake in London Luton Airport.
More and more privatisations
We can expect to see more airports privatised across the world. And these won’t be 
confined to cash­strapped eurozone countries either. Japan recently announced a 
privatisation programme for up to 94 of its airports. 
The US has by far the most airports in the world – 503 commercial airports. It has 
been the slowest to embrace privatisation due to federal legal restrictions making 
the economics of such transactions effectively impossible. With a pilot programme 
under way to remove key regulatory hurdles, the US could become a buoyant market 
for airport investors in the next few years.
PPPs for new airport capacity
There is a growing market for PPP deals. To date, most have been brownfield deals 
to redevelop and expand existing airports. Here, investors and their lenders have an 
asset that can generate revenue during the riskier construction phase. Europe has 
had a few notable PPPs in the airports sector – the Athens Airport PPP in 1996, 
Cyprus Airports PPP in 2006 and the ongoing Zagreb Airport PPP. A growing number 
of airport authorities across the US are also turning to PPP procurements, which do 
not need pilot programme approval.
In developing economies with limited airport capacity yet greater growth potential, 
the market for PPPs is likely to be greatest. The Philippines and Vietnamese 
governments each launched PPP procurements at major international airports. India 
used PPPs to upgrade its two main airports at Delhi and Mumbai and to build 
greenfield airports in Bangalore and Hyderabad. Such has been the commercial 
success of these airports that more PPPs are likely. Many governments in Africa are 
also using PPPs to develop, or upgrade, airport capacity. 
 
Qatar is planning a PPP to buy a major new airport for Doha with a capacity of up to 
 
To sum up 
48 million passengers a year, with intentions to create a regional hub to rival Dubai. 
Turkey, with its ambitions to become a top 10 world economy, wants to create a 
major international airport hub. Having already carried out three PPPs – Ataturk 
Airport in 2005, Sabiha Gokcen Airport in 2008 and Izmir Airport in 2011 – in May 
2013, it awarded a tender to build what is projected to be the world’s largest airport, 
able to handle up to 150 million passengers a year. 
 
Russia and Brazil, two fast­growing economies that will host Olympic Games (Sochi 
2014 and Rio 2016) as well as football world cups, are also in a rush to modernise 
and expand their airports. The Pulkovo Airport PPP, which closed in 2011, was the 
first PPP in Russia to close without state guarantees. A further 24 airports in Russia 
have been highlighted as needing investment, so more PPPs are likely. Passenger 
numbers in Brazil have doubled in a decade, and growth at the rate of 10 per cent a 
year is expected to continue. Estimates suggest Brazil needs to at least double its 
airport capacity by 2030.
With little incentive for governments to own airports and advantages in transferring 
the risks to the private sector, opportunities to invest in airports look set to remain 
high. The prices investors paid for the rights to build, own or manage airports in 
recent years suggests confidence in airports as an asset. Of course, there are risks. 
But the right airport seems, in many investors’ eyes, an asset worth paying a 
premium for. 
Alex Carver  
Partner  
London 
Keith Gamble  
Senior associate  
London 
Contacts
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