Aviation and oil prices: potentially a negative for airport capital expenditure. Time for PPPs?

The price of a barrel of Brent Crude, the most popular method of tracking oil prices, is today around USD56 a barrel - and this follows a (brief?) rally. A year ago it was trading above USD100.

The falling oil price has already prompted the likes of BP, Shell, Chevron, ConocoPhillips, Russia's Gazprom and China's Cnooc to announce cuts in investment. It is occasioned, in the main, by steadily rising supply from non-OPEC countries, and especially from the US, and is, in theory at least, good news for air travellers, if and when airlines feel able to pass on any savings to their customers (assuming they are able to, they may be hedged at higher rates). Some airlines in Southeast Asia and China have already reduced their fuel price surcharge, at least.

But the other side of the industry coin is that some countries may feel the squeeze on their big ticket airport construction projects. Already, they are looking to trim them back. At the very least, smaller construction projects could be postponed or abandoned in many countries, either because the revenues to support them have been reduced or because of declining investment in neighbouring oil facilities and consequential effects on passenger traffic flows, as employees are laid off and executive travel cut back.

This could be the moment when the PPP, already gaining in popularity as a method of ensuring critical airport infrastructure is secured, makes a quantum leap - but the private sector must have confidence in its counterparts in the public arena.