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2018: airport sales, concession opportunities, main investors

Investor interest is currently concentrated on Brazil, Japan, France and Eastern Europe as the ‘pipeline’ of airport deals, mainly concessions and public-private partnerships to build and manage infrastructure, has dried up a little this year.

The nature of the business is that there is always a shock waiting side-stage, and right now it could be an announcement about London Gatwick Airport.

As for the investors themselves, there has been a hard core of them for the last two decades and many are still very active around the world. Some are only defined as investors in that they do not become involved in the day-to-day running of the airport, while others are fundamentally operators and bring their expertise in those activities, with the financing element a lesser part of their involvement.

This report summarises the leading operator/investors in 2018 and the location of existing and anticipated deals.  

(CAPA's Global Airport Investors Database, part of the CAPA Airport Database Suite, currently lists 886 current, lapsed, anticipated and ‘major’ investing entities in this sector, together with a real-time ‘news’ section (updated daily) on developments that concern them.)

Summary  

  • In 2018 and 2019 there will be several deals concluded in Japan.
  • The Brazilian concessions agenda is funnelling down to third-tier airports but there is still interest from big investors, and some concessions could change hands.
  • In Europe: the French government’s sale of its share of Groupe ADP, the potential for GIP to sell its Gatwick Airport stake, and opportunities in Eastern Europe are the main attraction.
  • In the U.S.: P3 transactions will probably increase.
  • Numerous Southeast Asian countries covet private investment into their airports but it is still unknown territory for firms from other regions, and government commitment is sometimes nebulous.
  • Vinci tops the list of the most involved operator/investors this year while many of the original players from the mid-1990s are still chasing deals.

Some recent stirrings of investment

It has been a thinner time for investors into airports this year, with fewer major transactions under way than usual and fewer in the pipeline, too.

But the continuing procedures in Japan and Brazil do underpin a slight improvement in recent weeks, with some additional opportunities arising in Eastern Europe and the prospect – again – of Global Infrastructure Partners’ stake in London Gatwick Airport coming to the market.

Japan – seven Hokkaido airports generate huge interest

In Japan the concessioning of a succession of regional airports is well under way, with the focus now turning to the package privatisation of seven of them on the northern island of Hokkaido. Three out of four bidders were selected by the Ministry of Land, Infrastructure, Transport and Tourism (MLITT) and a priority negotiation rights holder will be selected in Jul-2019.

Other airports to follow include, inter alia, Kumamoto, Hiroshima, Nagasaki, Tottori, and Okinawa.

Brazilian concession procedure not running out of steam yet as the economy improves  

In Brazil, the concession procedure there has already embraced most of the main gateways and secondary city airports. The next stage is of bundled packages of airports in three blocks, mainly at third-tier cities.

The previous tranches have not always been successful in that they sometimes lacked transparency, and some enormous premiums were paid to acquire operating rights. Moreover, the concession rights at Viracopos Campinas Airport, north of São Paulo, are again up for grabs after the incumbent concessionaire became weary of traffic and revenue failing to meet expectations.

A further factor that investors have to take into account is the uncertain future of the state operator Infraero, which has been successively sidelined and could now be privatised, possibly by an IPO, or could just disappear altogether. 

Nevertheless, these issues have not quelled interest in the next tranche from investors as Brazil’s economy improves and the country’s federal accountability office has unanimously approved Phase I analysis for a fifth round of airport concessions.

It is too early to say what the election of a new President, the right-wing Jair Bolsonaro, will mean for the concessions process.

New Mexico City airport scrapped – it could have become a concession opportunity

Elsewhere in Latin America all eyes were on the result of a public referendum launched by the incoming Mexican President Obrador, to decide whether or not the New Mexico City International Airport would continue to be built.

It had all the makings of becoming a P3 project, which is what it should have been in the first place, but the referendum decision was to cancel it and instead to “improve” the existing Juarez Airport, “reactivate” Toluca Airport (which is in private ownership), and add two runways at a military base. Some, perhaps all, of these actions are likely to need private sector assistance. After all, the cost of the new airport (up to USD5 billion already spent will be written off) was one of the factors in the decision to scrap it.

London Gatwick considers its options; France expects interest from big players

In Europe, attention is focused on the potential for GIP’s disposal of its 42% share in London Gatwick Airport as that airport languishes in no man's land after losing the “additional runway” debate to Heathrow and ponders converting a taxiway into a short runway instead.

Across the English Channel, the French government will sell its share in Groupe ADP but it cannot do that until 2019 while appropriate legislation is developed. Considerable investor interest is anticipated, from the big ‘players’ in the industry. Further regional airports concessions are expected at Bordeaux, Lille and Marseille.  

Eastern Europe offers opportunities to those with strong nerves

In Eastern Europe the Belgrade Airport concession in Serbia, which will be completed by the end of 2018, has offered hope to the Bulgarian government, which put the airport back on the market. Also to the Slovak government, which for the second time is seeking a concession deal for Bratislava Ivanka Airport, and to the Montenegro government, which wishes to concession Tivat and Podgorica airports. The privatisation of the three main Lithuanian airports seems to have stalled.  

However, potential investors here must beware of the region’s history of political interference in deals and of the fact that several smaller airport deals have been withdrawn or collapsed – such as at Plovdiv in Bulgaria. It is chiefly Chinese interests that covet these small Eastern European airports, mainly to act as cargo facilities because of their strategic position between Western Europe and West Asia.  

In Greece, the Hellenic Republic Asset Development Fund intends to sell its 30% stake in Athens International Airport early in 2019.  

P3 partnerships the pattern in North America

In North America there has been a renewed impetus in the United States towards the benefits of privatisation but more by way of public-private-partnership (P3) transactions, usually to build or refurbish terminals (New York La Guardia is possibly the best-known example), but they can be used for car parks, people movers and other reasons, rather than full-airport lease deals.

That said, St Louis Lambert Airport is edging closer to a lease deal with one or two others in the wings. Much depends on the implementation – or lack of it – of President Trump’s ‘Infrastructure Plan’, which was revealed earlier in 2018 and envisaged greater participation from the private sector.  

Some wariness in Asia Pacific

In Asia Pacific, there is an increasing likelihood, even though it is a much smaller project and the first option developer turned it down, that the Western Sydney Airport in Australia could be operated under a long term lease once the first stage is completed and it has been operational for a few years.  

Elsewhere in that vast region, apart from Japan and North Asia generally, foreign investors are often wary of committing to P3 projects in countries like Indonesia, the Philippines and Vietnam, where it is not always clear that the government is committed to such projects, even if they encourage them.

For example in Indonesia the two state airport operators, PT Angkasa Pura I and II, which may be privatised themselves, say they want to work with foreign companies but themselves keep gobbling up more airports from municipal control. The very concept of privatisation may be interpreted quite differently in these countries from the way it is in the west. For those prepared to take a risk, opportunities will emerge in Manila through the concession on the Clark Airport to the north of the capital, the refurbishment of the existing Manila Ninoy Aquino Airport, or the proposed new airport. But again, local investors seem to be preferred.

The main investors in the industry, as measured by the number of airports they have invested in, were identified and listed in the Airport Finance and Privatisation Review, which was published earlier in 2018. Apart from operators, they include international funds of several different types (private equity, pension etc.).  

To gauge who the most active investors are right now – those that are completing deals or registering interest in forthcoming ones, it is best to start with the serial investors.  

Vinci heads the list of global airport operators/investors

Top of the list is France’s Vinci; below are listed its activities in 2018.

  • Acquired Belgrade Airport under concession.
  • Is one of the leading bidders for the seven Hokkaido airports in Japan.
  • Through ANA Airports of Portugal – owned by Vinci – reached an agreement regarding the expansion of Lisbon's airport infrastructure, including the conversion of Lisbon Montijo Air Base and the expansion of Lisbon Humberto Delgado Airport.
  • Acquired Airports Worldwide's portfolio comprising eight airports in the US, UK, Costa Rica and Sweden.
  • Plans to submit a bid to acquire a stake in Groupe ADP.
  • Positioned to bid for the right to operate Lille Airport.
  • Submitted a bid to operate Paraguay’s Asunción Airport under concession.
  • Signed a management and development concession for Ancenis Airport.
  • Acquired nine airports across the US, UK, Costa Rica and Sweden following the acquisition of the portfolio held by Airports Worldwide.

Vinci is not only a global player; it works at both ends of the spectrum, from management contracts at small French airports to international multi-airport lease deals.

Active airports for Vinci Airports (Vinci Concessions)

TAV Airports will lose its major investment, Istanbul’s Atatürk Airport, as services are progressively transferred to the new Istanbul Airport, which opened on 29-Oct-2018 and in which it has no financial interest.  

TAV remains active in its own country, taking a 49% stake in Antalya Airport, and earlier in 2018 it was a bidder for the short concession to operate Terminal 4 at Kuwait International – at which it was unsuccessful. It also had discussions with the Montenegrin government about the possibility of P3 deals there.  

TAV is taking stock of its current position and operationally is tied up with the move out of Atatürk, but it has been a ‘serial’ global investor in the past and will undoubtedly arise again, in conjunction with its 38% shareholder Groupe ADP (see below).  

Active airports for TAV Airports

Flughafen Zürich is Europe’s leading investor in Latin America

Flughafen Zürich, an operator/investor whose global history can be traced back several decades, continues to play an active role internationally.

With extensive existing investments in Central and Latin America, including Brazil, where it is a concessionaire at Belo Horizonte and Florianópolis airports, it seems set to participate in the next tranche there as well, and may bid for the proposed and aforementioned concessionaire change at Campinas Viracopos.

It has also bid for the development of the greenfield Bhogapuram Airport in India, after stepping away from previous investments in that country. 

Active airports for Flughafen Zürich

AENA playing more cautiously in 2018

Spain’s AENA Aeropuertos Internacional has been fairly quiet since AENA’s partial privatisation almost four years ago, but like Flughafen Zürich, it has a solid history in Latin America and in 2018 it has shown interest in a potential merger with Brazil’s Infraero.

Earlier in 2018, it began to prepare for the anticipated concession process for five airports in Cuba. In Europe it is less ambitious, and declined to purchase the 49% of the equity in the lease deal on London Luton Airport that it did not already own, from Ardian. 

Active airports for AENA Internacional

Groupe ADP bidding for Japan and Kuwait

Just as AENA was tied up in 2015 with its privatisation, which included an IPO, so too now is France’s Groupe ADP, operator of the Paris airports and with interests around the world as another historical bidder, as the government prepares to dispose of its share.

Even so, it is a bidder – through its subsidiary ADP International and along with Vinci – for the seven Hokkaido airports in Japan and bid for the Kuwait Airport T4 concession. As a shareholder in TAV, it is additionally bound up with whatever that entity bids for.  

The private Spanish company Ferrovial appears to have stepped back from further investment in the last few years but it is committed to the USD650 million project to renovate the Jeppesen Terminal at Denver International Airport, through a P3 project. P3s may be the future for it in this sector.  

Fraport concentrating on Greece and Brazil

Germany’s Fraport has long been a very active contributor to global airport investment and management, although it has slowed a little where new acquisitions are concerned.

It would appear that Fraport's strategy is to concentrate its efforts on infrastructure at Frankfurt Airport, on its investments in Greece (14 regional airports in conjunction with the Copelouzos family), and in Brazil, where it has the concession on the Fortaleza and Port Alegre airports, having been a latecomer to that market and not represented in either of the first two concession tranches.  

It is an active bidder for the 35-year concession to operate Sofia Airport in Bulgaria and was a bidder for Kuwait Airport’s T4, though it has also disposed of its entire 30% stake in the strongly performing Hannover Airport in Germany itself.  

Active airports for Fraport

Avialliance, also based in Germany though now controlled by a Canadian fund, is also attracted to the green field Bhogapuram Airport project in India, and in a minority shareholding in Mumbai International Airport. The sale of Hellenic Republic Asset Development Fund’s stake in Athens International Airport early in 2019 may also attract Avialliance, which is already a 40% shareholder.

A new arrival in the European foreign airport investment club is Manchester Airports Group (MAG), which has confirmed its participation in the Bulgarian Government tender process for the concession to operate Sofia Airport, supported by the Chinese company Beijing Construction and Engineering Group (BCEG), which is a key member of the consortium building the Airport City at Manchester Airport.

MAG had previously expressed interest in the proposed concession on Lithuanian Airports, a stalled procedure, and in the Belgrade Airport concession, its first foreign venture since the aborted bid to lease Chicago Midway Airport five years ago. MAG is the only UK airport operator known to be showing any interest in investing in foreign airports at this time. It is likely that any deal it chases will be in conjunction with its 35% shareholder, Industry Funds Management.

Corporación América could be moving into Europe

In Latin America, where in recent years numerous deals have been transacted, are pending, or have foundered, the biggest player is Corporación América and its subsidiary Aeropuertos Argentina 2000, which underwent an IPO on the New York Stock Exchange in Feb-2018.

Locally, the company has acquired the concession for the administration, exploitation and operation of Buenos Aires El Palomar Airport and extended the concession period for Guayaquil José Joaquin de Olmedo Airport by five years, from 2024 to 2029.

In Europe, together with the Investment Corporation of Dubai, it acquired shares in Toscana Aeroporti (Airports of Tuscany) and set up Corporación América Italia, which suggests more activity in that country.

Active airports for Corporación América

Separately, the company has said that it is seeking emerging markets to support its international expansion, highlighting Brazil and India as potential investment targets, though it was not successful in the Kingston Airport concession process in Jamaica.

Another emerging power in the region is Mexico’s GAP (Grupo Aeroportuario del Pacifico), which in Sep-2018 was selected as the provisional preferred bidder to operate, improve and expand Kingston's Norman Manley International Airport under the terms of a 25-year concession contract. GAP already operates Jamaica’s Sangster International Airport at Montego Bay.

GAP looks set to join Grupo Aeroportuario del Sureste (ASUR), which is involved in concessions to operate several airports outside Mexico, including Puerto Rico’s San Juan Luis Muñoz Marín Airport, as a significant operator/investor in the region.

Changi Airports International mixes up its remit, broadens its advisory role

Turning to the Asia Pacific region, Changi Airports International (CAI) still mainly works around management consultancy projects rather than outright investment, for example the MoU it signed in Sep-2018 with Hunan Airport Management Group and with the Maharashtra Airport Development Company for the new Pune Airport. Moreover, it is a ‘technical advisor’ to a ‘super-consortium’ bidding to redevelop and manage Manila Ninoy Aquino International Airport in The Philippines.

However, it did bid for the Kuwait T4 concession and the seven-airport Hokkaido island concession package in Japan, as it did (successfully) for Fukuoka Airport in a consortium, and has talked to GVK Power & Infrastructure about obtaining a minority shareholding in Mumbai International Airport.

On the downside, Saudi Arabia’s GACA has terminated its concession agreement with CAI and its partner Saudi Naval services at Jeddah Airport.  

GMR still looking for investment opportunities but selling Indian assets

In India, GMR Infrastructure is still concerned mainly with developments at home – for example, the aforementioned green field Bhogapuram Airport and the Nagpur Sonegaon Airport, where it submitted the highest bid.

On the other hand, it may sell off part of its existing holdings in Indian airports to raise funds for an IPO.  

Beyond India, GMR was awarded the contract for the development and operation of New Heraklion Airport in Crete. It is understood that it put forward a bid for the Sofia Airport concession.

It is part of one of the two consortiums proposing to redevelop and manage Manila Ninoy Aquino International Airport and the operations and maintenance contract for the nearby Clark International Airport. Earlier in the year, GMR purchased Malaysia Airports Holdings Bhd (MAHB)’s entire 23% holding in GMR Male International Airport Ltd, making it the sole owner.

GMR’s great rival, GVK Power & Infrastructure, is yet another bidder for the new-build Bhogapuram Airport, and earlier in 2018 expressed interest in operating the Airport Authority of India's Ahmedabad and Jaipur airports under a maintenance and operation contract.

But like GMR it is selling off existing equity, such as Mumbai International Airport. The measure is partly aimed at raising funds for the development of the USD2 billion Navi Mumbai Airport. It aims to raise up to USD1 billion and may also consider a merger of the airports subsidiary, GVK Airports, with Bangalore International Airport Development Ltd.

In Aug-2018 it was reported that Malaysia Airports was considering purchasing a minority stake in GVK Airports as part of an overall evaluation of the potential for investment in India.

Abroad, GVK is a bidder for the Clark Airport O&M contract in The Philippines.

Clearly, not all the actual and potential airport deals can be covered in this short report, nor can all the investors be listed, and it has been limited to a selection of operator/investors. For a full briefing on global airport finance and privatisation, we recommend the 186-page Airport Finance and Privatisation Review 2018.

See Airport Finance & Privatisation Review 2018. (Discount price available for CAPA members.)

Separately, the Global Airport Investors Database, part of the CAPA Airport Database Suite, currently lists 886 current, lapsed, anticipated and ‘major’ investing entities in this sector, together with a real-time ‘news’ section (updated daily) on developments that concern them.

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