Mais conteúdo relacionado Freshfields analysis of airport privatisations, asset sales and PPP deals1.
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.
2. 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
3.
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
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