Airport operators and investors SWOT Analysis – Global Infrastructure Partners (GIP)/BlackRock

Formed out of Credit Suisse and General Electric investments, GIP seems to have been around forever

To anyone involved in the business of financing and operating airports, Global Infrastructure Partners (GIP) seems to have been around forever, although it is less than 20 years since its first appearance in the sector - indeed, its first appearance at all.

GIP makes equity and selected debt investments across markets, worldwide, specialising in infrastructure in the energy sector, and also in transport, digital, and the water and waste sectors.

GIP was established in May-2006 as an infrastructure investment firm with two founding investors in its first fund, 'GIP I': namely Credit Suisse and General Electric, together committing almost 20% of the USD5.64 billion that was GIP I's committed capital.

Both Credit Suisse, the investment bank and financial services firm that was subsequently taken over by UBS, and General Electric, the conglomerate that has since been broken up, were active in the airport M&A space at that time.

Headquartered in the US, GIP has only one tentacle in airports there, but that is dictated largely by circumstances.

GIP's headquarters are in New York, but it has rarely invested in airport assets in the US. Mainly because it has not had the opportunity owing to the failure of the privatisation process there, which was unable to gain traction.

That isn't to say that it hasn't tried.

Over the years GIP has pitched for the Chicago Midway Airport lease (which was held twice), the public-private partnership development of New York LaGuardia's Central Terminal, and the St Louis Lambert International Airport lease in 2019, in which the tender was withdrawn by the city (despite huge worldwide interest).

Finally, in Oct-2019 GIP took on the role of manager of the investment made by the Washington State Investment Board, one of the top 10 pension funds in the US as measured by total assets (more than USD100 billion), in the Everett Paine Field Airport near Seattle.

GIP employs approximately 150 investment and operational professionals and has offices in New York, London, Stamford (Connecticut), Sydney, Melbourne, Brisbane, Mumbai, Delhi, Singapore and Hong Kong.

In total, as of 2023, its portfolio companies employed approximately 100,000 people.

The takeover by BlackRock was completed on 01-Oct-2024

In Jan-2024 Global Infrastructure Partners and BlackRock Alternative Investors entered into an agreement for BlackRock to acquire GIP, for a total consideration of USD3 billion and approximately 12 million shares of BlackRock common stock.

This was analysed in 'BlackRock's takeover of GIP potentially creates a colossal global force in the airport sector', a Jan-2024 CAPA - Centre for Aviation report on that transaction.

The transaction closed on 01-Oct-2024, creating "an industry leader in infrastructure across equity, debt and solutions - providing a diverse range of infrastructure sector expertise and exposure across developed and emerging markets".

The combined infrastructure platform has been branded 'Global Infrastructure Partners (GIP), a part of BlackRock'.

With approximately USD170 billion in AUM (assets under management), the platform will field a 600-person-strong global team that manages a diversified portfolio of more than 300 active investments, with operations in over 100 countries, and with GIP taking the lead as the active infrastructure investor.

The global infrastructure market is - perhaps surprisingly, in view of the COVID-19 pandemic and the continuing conflicts in Ukraine, and the Middle East forecast and general economic lethargy - to be one of the fastest growing segments of private markets in future years.

Three funds have been instigated since 2006, the latest raising USD22 billion

In Sep-2012 GIP's second fund, GIP II, completed fund raising, with USD8.25 billion in investor capital commitments, making it the largest independent infrastructure fund in the world at that time.

GIP's third fund - GIP III - completed fund raising in Jan-2017, with approximately USD15.8 billion in investor capital commitments, followed by GIP's fourth equity Fund, GIP IV, which completed fund raising in Dec-2019, raising USD22 billion.

GIP also manages several other funds that focus on investments in infrastructure in other asset classes, or target specific regions. GIP's Credit business manages over USD4 billion across three Funds.

Energy is the largest investment sector

GIP's current and previous investments can be categorised into 'Energy' (by far the main one), 'Ports', 'Digital', 'Water & Waste', and 'Rail' as well as 'Airports', as in the table below.

Current distribution of GIP's investments

Energy	Ports & Container Terminals	Airports	Digital	Water & Waste	Rail
32	6	5	3	2	2

Source: Global Infrastructure Partners.

Some of these are realised assets - those that have been sold or disposed of.

Breaking the table down into Airports only, fully realised assets (sold in their entirety) are marked as 'R'.

Current GIP Airport investments

London Gatwick Airport

London City Airport (R)

Signature Aviation

Sydney Airport

Edinburgh Airport

Source: Global Infrastructure Partners.

Signature Aviation, sometimes mistaken for an executive jet operator, is a provider of FBO (fixed base operator) services for general and executive aviation, and is an operator of private terminals.

One evident benefit of this very broad portfolio of investments is the opportunity it affords between those companies in the air transport sector and those in energy, and to a lesser degree digital, ports, rail, and waste segments.

GIP says that it "aspires to be one of the world's leading owners, developers, and operators of renewable energy assets, in line with its commitment to facilitating the global energy transition. We have a team focused on decarbonisation investment opportunities across our targeted sectors".

That is a heaven-sent opportunity in the airport sector.

London City Airport - the first transaction, in London's financial district - was bought in 2006/8 and sold in 2016

GIP's first airport investment was at London City, the facility which predominantly serves the old and new financial districts of London, in 2006 and again in 2008: an appropriate deal for a financial services firm.

It was a 50:50 joint venture between GIP (75%) and American International Group (AIG) (75%) to acquire London City for an undisclosed sum.

As early as 2011 there were rumours that it would sell it (as there were about AIG, which had to be bailed out during the 2007-8 financial crisis), but it was not until Feb-2016 that GIP announced the sale of the asset for a reputed GBP2 billion, a significant multiple of its acquisition price, to a consortium of pension, investment and sovereign wealth funds.

London City has always been sold (three times) for high multiples and profit over the purchase price. It is a goldmine, because of where it is situated on prime residential development land, but operationally it is constrained by stringent planning regulations, and that may have influenced GIP's decision.

See this CAPA - Centre for Aviation report on the airport: The varying fortunes of three UK regional airports post COVID; part one: Intro + London City.

London Gatwick Airport's aspirations fell apart after the Airport Commission's runway decision in favour of Heathrow

When the British government decided to break up BAA plc, which operated the three main London airports and four others, GIP bid (via Ivy Bidco Ltd, a limited liability company established solely to make the acquisition) GBP1.45 billion to secure the entire share capital of Gatwick Airport Ltd, and the deal was completed in Dec-2009.

Subsequently GIP spread its risk, by inviting mainly foreign investors (sovereign wealth funds and pension funds) to obtain some of the equity.

Gatwick was, and remains, both London and the UK's second busiest airport, and GIP considered it, rightly, to be a landmark deal.

But Gatwick is constrained by having only one runway - the world's busiest single runway airport - and it lost out in its attempt to secure support from the Airports Commission, the independent body tasked with investigating current and future runway provision in the UK between 2012 and 2015.

Although the resurrection of what is now a taxiway (and was previously a runway) into a working runway again now looks likely within a few years, the commission's decision meant that Gatwick could never seriously rival the larger Heathrow Airport. And it was no surprise when GIP minimised its holding in Gatwick's operator in May-2019, when VINCI Airports took a controlling 50.01% stake for GBP2.9 billion - exactly twice what GIP paid for 100% 10 years earlier.

(GIP had gone on record in 2014 that it would be prepared to provide a legally binding promise that it would not sell out of Gatwick in the short term if the UK government approved expansion at the airport).

The remaining 49.99% continues to be managed by the existing shareholder GIP on behalf of itself and the other investors, which were also joined in 2019 by a Korean investment company.

So, in the space of 13 years GIP entered and then fully (London City) and partly (London Gatwick) departed from two of the six metropolitan region airports that are collectively the busiest in the world.

Edinburgh is another airport that attracted VINCI Airports

GIP's other UK investment was into Edinburgh Airport, another ex-BAA facility, which serves the capital city of Scotland - again, a significant financial centre in its own right, and one that is the second most visited city by tourists in the UK, after London.

That transaction took place in 2012, for GBP807 million or 16 times its earnings in 2011 (EBITDA); a common multiple at the time, with the world still in the grip of the financial crisis.

BAA plc had decided to sell Edinburgh first, before Glasgow Airport, 40 miles to the west (which was subsequently sold to a Macquarie/Ferrovial consortium). Then it was an airport that was the busier airport, but it has since been overtaken by Edinburgh.

GIP took on GBP500 million of debt to finance the deal. Again, a couple of additional investors were brought on board later, including most recently (2024) the same Korean one as at Gatwick.

Despite regular denials (and as was also the case with Gatwick), there were consistent rumours that GIP intended to sell out its Edinburgh stake there. And eventually that was the case in Jun-2024, when an investment partnership was secured between GIP and (again) VINCI Airports, which saw VINCI acquire (again) a 50.01% stake in the airport from GIP for GBP1.3 billion.

The remaining 49.99% continues to be managed by GIP on behalf of itself and minority investors.

Irrespective of GIP's holding, the nature of VINCI Airports suggests that it will be the operator, manager and chief strategist at Gatwick and Edinburgh.

That accounts for three of GIP's four current day investment or management positions, with the exception of Sydney Kingsford Smith Airport, which follows later.

Active airports for Global Infrastructure Partners (GIP)

Source: CAPA - Centre for Aviation.

Many bids - little success

Along the road, since 2011, GIP has pitched in for, or at the bare minimum has declared an interest in, a large number of airports and airport groups not previously mentioned here.

Briefly these were:

GIP: bids and declared interest

Year	Activity
2011	Posited as a future investor in UK's National Air Traffic Services (NATS). Expressed interest in the Hochtief (subsequently AviAlliance) portfolio and subsequently shortlisted in a consortium, then withdrew (2011-13). Reported to be interested in AENA's Barcelona and Madrid concessions (before the partial privatisation of AENA in 2014, again possibly in a consortium.
2012	Linked with sale of ANA Aeroportos de Portugal as a bidder, with international partners.
2013	Successful at RfQ stage for second attempt to privatise Chicago Midway Airport by lease, as a solo bidder. (Tender withdrawn.) Expressed an interest in acquiring Aberdeen Airport from BAA plc, but did not make a formal bid.
2014	Shortlisted for Osaka Kansai and Itami airports concession in Japan.
2015	Understood to have expressed interest in the privatisation of Nice Côte d'Azur Airport and Lyon Airport in France, again in a consortium.
2018	Engaged in discussions with India's GVK Group to acquire a minority shareholding in the subsidiary GVK Airport Holding, and later a minority shareholding in Mumbai International Airport Ltd. Planned, with VINCI and Australia's Industry Funds Management, to submit bids to acquire a stake in Groupe ADP.
2019	Expressed interest in bidding on Airports Authority of India's tender to operate six airports under the terms of 50-year concession contracts. Expression of interest submitted for the acquisition of a 30% stake held by the Hellenic Republic Asset Development Fund in Athens International Airport (shortlisted in Jan-2020). Submitted one of 18 responses from US and international companies to a request for qualifications (RFQ) for potential private operators of St Louis Lambert International Airport.
2023	Submitted, as a minor partner in an alliance, Manila International Airport Consortium, an unsolicited offer to upgrade Manila Ninoy Aquino International Airport in the Philippines.
2024	Bid, along with Dexus Group, for a 74% stake in Queensland Airports, but lost out to KKR and Skip Capital. Submitted a bid, as part of the consortium Gateway Development Alliance to acquire all shares in Malaysia Airports. As of 14-May-2024, the consortium and its parent companies in aggregate own 41.1% of MAHB's issued share capital. Upon completion of the offer, Khazanah, the Malaysian sovereign wealth fund, would increase its ownership in MAHB from 33.2% to 40%. Malaysian investors would own 70% of MAHB. The Abu Dhabi Investment Authority and GIP would hold the remaining 30%. Malaysia's government would retain special share rights in MAHB. A formal offer for MAHB is subject to certain pre-conditions and, when made, will be subject to the consortium owning at least 90% of MAHB's issued share capital. If such conditions are met, it is expected that MAHB's shares would de-list from Bursa Malaysia upon completion of the offer, which is estimated to occur in 4Q2024.

Source: CAPA - Centre for Aviation Global Airport Investors Database.

So the MAHB deal apart, which itself is yet to be concluded, GIP has spent the last 13 years attracted to airports and groups around the world (with the notable exception of Brazil, where it is not believed to have submitted a bid at any time during the concessions procedure there since 2011) - without actually landing any.

For more on the MAHB deal see this May-2024 CAPA - Centre for Aviation report: Gateway Development Alliance to take a stake in MAHB as Asset Managers and SWFs influence its future.

'If you can't beat 'em, join 'em'

The reasons for this lack of success cannot easily be rationalised.

In some cases the composition of the consortiums it entered into may have not have been appropriate.

In others, tenders or bids were withdrawn, while in others still GIP fell early, or at the final hurdle, in the face of powerful local or international competition from the likes of Adani Airports in India, San Miguel Corporation in the Philippines and - on multiple occasions - the same VINCI Airports that took the majority of the equity at Gatwick and Edinburgh airports.

As the saying goes, 'if you can't beat 'em, join 'em'.

Sydney - a tough market and a competing airport on the way

The single exception not so far discussed is Sydney's Kingsford Smith airport, one of (arguably the principal one of) Australia's major gateways. It was privatised in 2002, when it was acquired by Macquarie Bank for AUD4.2 billion and then leased to Sydney Airport Holdings for a 99-year period, in connection with an IPO.

GIP became a minority shareholder in Sydney Airport in Mar-2022 by way of its acquisition by Sydney Aviation Alliance, an Australian-led consortium that also comprised IFM Australian Infrastructure Fund, the IFM Global Infrastructure Fund and QSuper.

Share trading was suspended, and the company was delisted from the stock exchange.

There, again, is no evident reason why GIP should have chosen to participate in this transaction, especially in light of the fact that Australian air transport was struggling to recover from the effects of the COVID-19 pandemic - more so than in most other regions (and to a lesser degree still is) - and that a rival airport is being constructed in Western Sydney. The new airport is scheduled to open in 2026, and will probably be operated either by the government, or together with another private sector operator. Originally perceived as a low cost carrier-oriented reliever facility, it is now projected to be the country's busiest airport by 2060.

One possibility is that GIP sees the Sydney Aviation Alliance as becoming the operator of both the airports (that would be possible, but competition rules might apply - it was originally intended that Sydney Airport Holdings would be given first refusal on the Western Sydney Airport, but that offer was rejected - in the same way, ironically, as BAA had almost total control in London before it was broken up, offering GIP the entrée to Gatwick Airport.

What impact will BlackRock's ownership have on GIP?

One important aspect of GIP's future ambitions in the sector is the impact that BlackRock will have upon it, irrespective of the fact that GIP's Chairman, Adebayo Ogunlesi, and senior executives will remain in situ - such as Michael McGhee, an 18-year London-based veteran, the deputy chairman who came from Credit Suisse and who leads GIP's transport sector industry investment teams, including airports, ports and freight rail, and who has been involved in all its deals.

That impact could come in various ways.

As an entity, BlackRock is already an investor in airports, with a sizeable holding in Beijing Capital International Airport Corporation, for example, but it can be expected to allow GIP to dictate strategy in transport infrastructure generally.

A greater focus on the US

It is likely to focus more on the US following the result of the presidential election on 05-Nov-2024, and possibly has been doing so already in anticipation of a change of government. There is every likelihood that president-elect Donald Trump will open the door to more public-private infrastructure projects, including airports and ATC, the former privatised to a tiny fraction of what is possible and the latter not at all.

Indeed Mr Trump did that in his previous term, but was thwarted by congress. (With that power at his disposal the US could be in for the 'Golden Era' of airport privatisation that was envisaged in 1996 when the pilot programme began, but which, frankly, simply never materialised.)

There will almost certainly be a surge in public-private transactions ('P3s' in US parlance) for terminals and other buildings, with full leases to regain ground later.

GIP might start to take an interest in smaller airports, having gained experience of their milieu in the Washington State and with the Signature Aviation takeover and in anticipation of more P3 deals at that level as above.

See this related CAPA - Centre for Aviation report on the outlook for US aviation in the wake of the US Presidential election: What Trump's election might mean for US airports, infrastructure, ATC and their financing 2.0.

BlackRock does carry political baggage

But there are other ways in which politics can impact on GIP's future prospects, and they are not all positive ones.

For example, in the case of the Malaysia Airports Holdings Berhad (MAHB) takeover deal, which is still ongoing, and by which GIP leads a consortium - Gateway Development Alliance. Early in Nov-2024 it became clear that the Malaysian Public Accounts Committee wants to investigate the sale of MAHB shares, specifically to GIP.

The concerns appear to arise over the links between BlackRock and Israel.

However, the Malaysian Aviation Commission (MAVCOM) issued a "final decision" on 08-Nov-2024 on the anticipated merger of Gateway Development Alliance, Pantai Panorama, Kwasa Aktif and GIP Aurea in relation to the proposed privatisation of MAHB, declaring the merger "would not infringe the prohibition in section 54 of the Malaysian Aviation Commission Act 2015", which adds weight to the likelihood of the deal being concluded.

It would be naïve to believe though that in an increasingly fractured world such demands are going to decrease.

Similarly with Ukraine.

No one knows for sure how that conflict will end. Organisations like BlackRock might have been expected to be at the forefront of reconstruction there on behalf of the country that has contributed by far the greatest amount to the war effort, but any deal that is stitched up with Russia could affect the reality in any number of ways.

The environment remains top of the agenda, but the political agenda on that might change

Then there is the fact that in 2018 BlackRock was the world's largest investor in coal-fired power stations.

Such activities fly in the face of convention in the air transport business, which is desperately trying to clean up its act in advance of deadlines such as '2030' (although another consequence of the new US presidency may well be that the environment as a whole is marginalised).

However, to be fair to BlackRock, since then it has shifted its investment policy towards environmental sustainability with ESG topping its corporate agenda, saying that would be a key goal for investment decisions.

And in that respect GIP's various divisions that have experience of the energy provision and distribution business will be a boon for the combined entity.

SWOT Analysis

To conclude, on this evidence the following SWOT Analysis for GIP and BlackRock's future involvement in the airport sector can be offered.

GIP's strengths are self-evident, and easily outweigh its weaknesses.

The future is the great unknown, and while new markets will open to the combined GIP/BlackRock entity much will depend on how they integrate, the autonomy offered to GIP in making deals and on how the airport business reacts to an organisation which some might regard as controversial.

Strengths:

• GIP continues to be led by time-served executives, with lengthy experience of arranging deals, and who are not compromised by the BlackRock takeover;
• Management continuity since the days of Credit Suisse;
• Wide experience gained with a range of airports, including major gateways, and of infrastructure investments into them, and of business and leisure markets and relevant airline business models;
• Familiar with sovereign and other legal issues;
• Consistently profitable on-sales;
• Likes consortiums and able to work within them, but can also bid alone;
• Little in the way of baggage from previous failed or troubled deals;
• Successful fund raiser several times over;
• Knows how to attract and retain co-investors.

Weaknesses:

• Inconsistency of longevity in investments and the suggestion of a dominant buy to sell philosophy;
• Lack of presence in some key world regions - mainland Europe; Latin America & Caribbean; Africa; Asia Pacific;
• Possibly sold off London City Airport too early;
• Declining reputation as an operator in favour of VINCI.

Opportunities:

• Developing relationship with VINCI;
• Synergies with energy related companies in respect of environmental and eco-friendly energy storage projects at airports;
• US presidential election outcome and the potential, where BlackRock has considerable sway already, for more investments in the airport sector there, including PPPs (P3s) and in ATC services.

Threats:

• Association with BlackRock's investments into certain countries;
• Future competition from Western Sydney Airport (would be an opportunity if Sydney Aviation Alliance was to operate it, as well as Kingsford Smith airport);
• Future fragmentation of the business, including divisional sales that would reduce its opportunities for synergies;
• Emergence of discord with VINCI.