Global Airport Finance and Privatisation: CAPA Review 2014. The big funds dominate transactions


CAPA'S Airport Finance and Privatisation 2013 report referred to a reduction in airport M&A transactions and particularly those involving secondary and tertiary level airports.

That trend has broadly continued into 2014. But this past year was also notable for the arrival or approach of a number of significant deals on the world stage involving mainly primary airports. In a handful of cases large tranches of regional airports.

The financing of airports is increasingly dominated by huge international funds. There is still great diversity amongst investors and operators but there is a constant shift towards funds – infrastructure; pension; sovereign wealth; and hedge funds and private equity, globally. Also there is an increasing propensity for strategic investors increasingly to invest in infrastructure assets in emerging markets where growth forecasts are significantly above the mature markets in Western Europe and North America.

This summary report outlines the main developments by region and by country.


1. Spain: Feb-2015 is crunch time for AENA’s much delayed privatisation

  • AENA Aeropuertos counts 46 airports and is the largest in the world by passenger numbers. The 2014/15 transaction entails the government retaining 51% of AENA, with 21% of the equity going to three cornerstone consortia – which is already agreed - and an IPO on the remaining 28. The cornerstone investors are Ferrovial Aeropuertos; Corporacion Financiera Alba; and the UK-based Children's Investment Fund. The IPO has been suspended momentarily for administrative reasons - while they found an acceptable auditor - but may be reinstated around Feb-2015. The valuation will be around 8-10 times earnings, which is low compared to some recent transactions but quite reasonable. There is still time for things to go wrong, and there is another general election due in 2015.
  • Abertis, the world’s largest toll road operator, hoped to draw a line under its multibillion-euro divestment programme by the end of 2014, when it aimed to have sold its last remaining airport assets.
  • Elsewhere in Spain the Ciudad Real Central Airport was put up for auction and remains so at the time of writing, while Castellon Airport, which at one time looked as if it might never open, at least now has a proactive owner in Canada’s SNC Lavalin. AENA may participate in a potential new tender to operate Murcia Corvera International Airport if bidding is re-launched.

2. France

  • The privatisation of Toulouse Airport in France in Dec-2014 came as a surprise but it was driven by political expediency. Toulouse was expected to go to French companies in consortiums but the 49.9% stake went instead to Hong Kong’s Friedmann Pacific Asset Management in league with China’s Shandong Hi-Speed Group. Eight other primary airports are expected to follow in 2015 or later.

3. Greece

  • A surprising number of investors were attracted to the privatisation of regional airports in Greece despite the parlous (though improving) state of the EU-bailed out Greek economy. 11 consortia expressed a non-binding interest, subsequently reduced to seven. The winner was Fraport/Slentel. The government also sought bids to finance, develop, and operate a new airport at Kastelli, on the island of Crete.
  • In Dec-2014 the Hellenic Republic Asset Development Fund launched the privatisation process for Athens International Airport by appointing an independent consultant to assess the value of the rights to operate the airport for 20 years.

4. Turkey

The government commenced the auction for the concession to operate Milas-Bodrum airport in Mar-2014 and in July it was transferred to TAV Airports, to operate it until 2035.

5. The UK

The interminable Airports Commission investigation into UK runway capacity, that is to “reach a conclusion” in summer 2015 has had some indirect effects on airport ownership.

Other privatisation developments in Europe

6. Austria

Shareholders of Flughafen Wien (Vienna Airport) found themselves on the end of a hostile bid for a non-controlling minority stake in its equity from IFM’s Global Infrastructure Fund. The deal was concluded on 21-Dec-2014. There was no change though to the equity held by municipal authorities and employees.

7. Italy

  • The Italian Government is likely to carry out a 49% sale of its state-run air navigation services provider ENAV in 2015, as part of wider privatisation efforts. Italian airports have also been traded throughout 2014, or at least attempts have been to trade them. They are popular, having significantly outperformed economic activity in the country.

Amongst the actual or attempted transactions in 2014 were:

8. Poland

  • Early in 2014 the Polish government was reported to be creating a holding company to own and manage, inter alia, LOT Polish Airlines and the management firm of Warsaw’s Chopin Airport. Then, in May, plans were announced to commercialise the entire Airports State Enterprise (PPL) that operates Chopin Airport.
  • Separately, the Mazowieckie (Mazovian) Voivodship decided in Sep-2014 to invite potential investors to buy shares in the raised equity of Warsaw Modlin Airport.

9. Serbia

10. Slovenia

  • The sale of the majority of the equity (70%) in Aerodrom Ljubljana involved more than 20 Expressions of Interest. On 24-Oct-2014 Fraport issued a notice of takeover and said it was seeking to purchase the remaining shares, to 100%, as it attempts to extend its international reach even further.

Asia Pacific

1. China: Public and private sectors work together to build airports - but foreign companies remain disadvantaged

Lack of profitability again remains a critical factor for China’s airports. Of the country’s approximately 200 working airports, only 50 are profitable.

As reported in 2013 big western companies like Fraport, AdP, Vinci and Copenhagen Airports, along with Singapore’s Changi Airport International, have progressively reduced their presence and activities in China, which has included hands-on management as well as investment, in the past.

  • A Civil Aviation Investment Fund is expected to raise USD3.1 billion in its first phase of ‘social capital’ fund raising, with 80% of the funds to come from private sector. The fund is designed to help finance airport infrastructure development as well as other aspects of the aviation business.
  • The foreign airport investment community looks set to remain on the periphery though. Ownership in general is a murky area in China and foreign ownership of Chinese assets in their entirety remains banned.

2. India: changes direction on the preferred model for next round of privatisations

  • In India the Civil Aviation ministry expected to finalise a public-private partnership model for the operation of another six Airports Authority of India-operated airports in the country before the end of 2014. The PPP model was eventually rejected at the two largest airports, Chennai and Madras, in favour of management and operation contracts with unspecified private sector involvement, while the modernisation of other airports will continue through the PPP route.
  • The Goa Mopa BOOT (Build, Own, Operate, Transfer) airport project anticipates environmental clearance by Mar-2015.
  • The Navi (new) Mumbai Airport project – another PPP - between Airports Authority of India (AAI), the Government of Maharashtra, and yet-to-be-determined private sector partner(s), is progressing more slowly towards a conclusion; hampered by environmental factors.

3. Japan

  • The Kansai and Itami airports at Osaka have been merged in anticipation of a 45-year concession to operate the two airports, with a short-list to be announced in Feb-2015 and with selection of the winner targeted for this coming June. Given the airports’ debt of USD11.7 billion, the government is hoping to raise at least USD20 billion from the transaction. 
  • If it is successful a total of 94 airports in Japan may be privatised. Next on the immediate list are Sendai and Fukuoaka airports. However, these all appear to be quite strictly controlled concessions that may be of more interest to the growing band of home-grown Japanese transport infrastructure investors than foreign ones.

4. Indonesia

  • In 1Q2014 the Ministry of Transport (MoT) announced it intended to commence Phase I of a PPP drive by opening management bids for Bandar Lampung Radin Inten II, Komodo and Palu Mutiara airports; the first of 10.
  • The biggest project facing the Indonesian aviation sector is a long anticipated third airport primarily to relieve congestion at Jakarta’s Soekarno Hatta Airport. A draft design was presented in Jun-2014 for a new facility in northern Jakarta mainly to handle freight, owing to its proximity to seaports in the region. A row broke out as to who owns the city’s second airport, Halim Perdanakusuma, between Lion Air and the Ministry of Defence, with the former coming out on top in the legal dispute, at least thus far.

5. Vietnam

  • Vietnam is calling in the first instance for domestic investors to participate in airport PPPs and the government has recently recommended the privatisation of Airports Corporation of Vietnam (ACoV) in its entirety. ACoV will launch an IPO in the first quarter of 2015.
  • The biggest project there is the proposed Long Thanh airport which is under discussion against a backdrop of concerns over the country's public debt issues. It would appear there is no immediate future for Long Thanh unless a big and committed foreign investor can be found.

6. The Philippines

  • Much talking about PPPs finally reached fruition in the last quarter of 2014 as the government announced it would offer for tender in 2015 six airport projects under a public-private partnership to help upgrade the country's infrastructure and attract more tourists. The airports featured are Davao, Iloilo, Bacolod, Puerto Princesa, new Bohol and Laguindingan.
  • In Apr-2014 a consortium of GMR (India) and Megawide (Philippines) won a 25-year concession to upgrade The Philippines’ second busiest airport, Mactan-Cebu International.

7. Thailand

8. Myanmar

9. Australia

  • The Federal government has, after decades of procrastination, decided that a second airport to serve Sydney would be built but there are still more questions than answers, such as whether it be a full service reliever airport or one just for budget airlines. Also, who will pay for it? Sydney Airports, operator of Kingsford Smith Airport, has the right of first refusal to operate it.
  • As with Italy, earlier, there has been a considerable amount of airport privatisation activity in 2014, most of it involving small secondary and tertiary level airports. They include: Ballina Byron Airport; Lismore Airport; Port Macquarie Airport; Albury Airport; Merimbula Airport; and Brisbane West Wellcamp Airport.

10. Fiji

  • Fiji’s Government outlined in Dec-2014 its plans to sell its stake in Airports Fiji Ltd in 2015 under a “partial divestment” programme outlined in the 2015 State Budget.

West Asia and Russian Federation

1. Russia: Up to 30 airports are suitable for privatisation. Moscow airports are to be merged

Despite the current economic adversities up to 30 airports are considered to be potential privatisation targets.

  • In Jul-2014 the Russian Direct Investment Fund (RDIF) said the BRIC countries, acting in combination, would launch an infrastructure fund that will help foster development of roads, airports, ports and other infrastructure projects in those nations. Even so, and as existing foreign operators can and do testify, ownership is an ambiguous area in Russia as it is in China.

Current examples of privatisation activity include:


  • The Economic Development Ministry developed a 49-year concession agreement for airports within the Moscow Aviation Hub. Concessions will replace the current system of governance among Moscow’s airports, with operators managing the operation of airfields and the government retaining ownership. Concessions will be offered on Moscow’s Domodedovo, Sheremetyevo and Vnukovo airports.
  • The merger of Sheremetyevo and Vnukovo airports draws nearer and should be completed in 2015. The combined entity is expected to be in the majority ownership (70-75%) of three private investors on a 49-year lease with the government expected to hold the remaining 25% to 30%.
  • Separately, Sheremetyevo Airport has been trying to offload its holding in Vladivostok International Airport and Terminal Vladivostok.

Outside Moscow:

2. Kazakhstan

Investors from China and Turkey were reported in Oct-2014 to be interested in constructing an airport to cater to the needs of the Kinderly resort on the Caspian Sea, with negotiations with the investors to be completed by the end of 2014.

Latin America

While all eyes have been on Brazil during the last two or three years privatisation activity has dried up there for the moment at least but there is plenty happening elsewhere on the continent.

1. Brazil: Concessions being prepared for three more airports. Private sector to play a bigger role in green field airports

  • It now seems that privatisations of key airports will continue once Infraero is restructured and the government is preparing concessions for three more airports in Manaus, Porto Alegre and Salvador. However, contradictory statements are frequently made by different government offices.
    In Dec-2014, Brazil’s Government found it necessary to approve a credit line for Infraero as the state airport operator has been so financially hampered following the privatisations of the country's five busiest airports and the closure of Natal Augusto Severo Airport in favour of the private Natal Aluízio Alves International Airport.
  • As the year progressed the second series of airport concessions were finalised, involving Rio de Janeiro’s Galeao International Airport and Belo Horizonte Trancredo Neves Airport. In each case bids were hundreds of per cent above the required minimum and in each case Infraero retained 49% of the equity.
    The concessionaires could now face unanticipated competition due to a proposed rule change. The government intends to overturn regulations that prevent most airports operated by the private sector from receiving commercial passenger flights. The change would allow companies to build new commercial airports from scratch. The private sector newcomers (separate from the existing concessionaires) will be involved in projects such as the forthcoming third airport for São Paulo, which will be 100% privately built and operated

2. Chile

  • Chile is working through a concessions portfolio that includes the Santiago Arturo Merino Benitez airport.
    Over 30 companies pre-qualified to participate in the tender for the expansion and operation of Chile's capital airport (which includes construction of a new 200,000sqm terminal), subsequently shortlisted to 12.
    The tender process was extended from Sep-2014 to Feb-2015 to allow more time for interested parties to prepare their bids.
    The Public Works Ministry believes that six firms will submit formal bids. Following the award, a transition process is expected before the new operator takes over the concession from Oct-2015.

3. Colombia

  • In Feb-2014 Colombia’s National Infrastructure Agency (ANI) opened a bidding process for concessions to operate and upgrade four regional airports: Barranquilla, Neiva, Armenia and Popoayan. The upgrade mainly requires the rehabilitation and expansion of runways, expansion and improvement of terminal buildings. However, interest has been low.

4. Peru

  • Peru’s Chinchero Cusco International Airport construction and operation tender attracted interest from seven parties. The 40,000sqm facility will replace Cusco Velazco Astete Airport upon its completion by 2018 or 2019 and will have capacity for five million passengers per annum.
    The award of a 40-year construction and operation concession was eventually signed by the concessionaire Kuntur Wasi in Jul-2014.
  • Elsewhere in Peru the Jauja, Huanuco and Jaen airport concessions will be granted in early 2016.

5. Paraguay

The privatisation of Asuncion Silvio Pettirossi Airport is among the new Government's priorities to introduce more public-private partnerships in the country. The concession would be for 30 years.

Mexico and Caribbean

1. Mexico: New Mexico City airport is unlikely to be private sector funded

  • Following many years of deliberations the construction of a new airport for Mexico City was finally agreed in 2014. The new airport is expected to be complete by late 2018 or early 2019. The government insists it will remain in state hands upon completion, while the project will be financed through a combination of current cash flow and bonds.

2. Jamaica

  • In Dec-2014 it was announced that the Development Bank of Jamaica is seeking foreign investors to bid on the operating, finance, development and maintenance contract for Kingston’s Norman Manley International Airport under a 25-year public-private partnership agreement. Abertis is attempting to sell its 75% stake in Montego Bay airport, Jamaica.

3. St Lucia

  • The International Finance Corporation was called in by the government of St Lucia, and its Air and Sea Ports Authority (SLASPA) as lead advisers overseeing the public-private partnership (PPP) tender of Hewannorra Airport. The government and SLASPA plan to issue a 30-year concession tender.

North America

1. United States: the lease pipeline has dried up but there are growing opportunities for PPPs and especially in terminal construction and renovation

US airport privatisation activities stalled after the second failure of the lease transaction on Chicago Midway airport a couple of years ago, leaving only the single successful lease at San Juan, Puerto Rico, a pipeline of merely small transactions and some shifting of responsibility for airport operation between State, County and City authorities.

There is continuing disappointment in the relatively small interest in the Federal Airport Privatisation Pilot Programme, which has been in existence since 1996 and which has recently been extended to permit 10 privatisation ‘slots,’ of which only one is occupied, another having been filled in 2014.

Most of the precious little activity seems to be focused in and around the mid-West.

  • Despite the failure of the lease transaction on Chicago Midway airport the city authorities are keen to progress the long discussed and anticipated third Chicago ‘South Suburban’ airport at Peotone, Illinois. The Illinois Dept of Transport held an "industry day" to explain the project and assess private-sector interest on the possible development of the airport as a public-private partnership. In Jun-2014 it purchased 288-acre Bult Field, an adjacent general aviation airport. The project has been discussed for nearly 40 years, and local sentiment has it that it is time either to build the airport or scrap the project.
  • In nearby Gary, Indiana, the airport closed the 40-year deal in Jan-2014 with Aviation Facilities Company (AVCO. Its subsidiary, AvPorts, has a 10-year contract to manage the airport, with up to six possible five-year renewals.
  • An attempt was made early in 2014 to privatise Toledo Express Airport (Ohio) but it fell foul of concerns about the implications on FAA funding.
  • In California, the potential shift of ownership of Ontario International Airport in the ‘Inland Empire’ to the east of Los Angeles from Los Angeles World Airports (LAWA) to Riverside and San Bernardino counties, and which has been ongoing for four years now, edged a little closer. There is no immediate prospect of privatisation, but that could yet emerge out of this complex transaction.
    Elsewhere in the US the company seeking to privatise the Hendry County Airport in south-central Florida received FAA approval on 05-Aug-2014 to take over managing the airport, effective 12-Sep- 2014.
  • A New York-based private equity firm, Propeller Investments, is attempting to privatise two small general aviation airports in significant locations, namely Atlanta and Seattle, two cities that each has only one commercial airport.
  • The airstrip in Georgia is at Paulding County in the Atlanta suburbs, where Propeller Investments seeks to attract airline service to its Silver Comet Airport. Small as it is, the project is strongly opposed by a cabal of Delta Air Lines, its pilots' union, Atlanta's mayor and some local residents, which say the county's real goal is to build a commercial hub, a project that is unnecessary, wasteful and doomed to become a costly failure.
  • Propeller Investments has similar plans for Paine Field airport in Everett, a northern suburb of Seattle, which serves both general aviation and Boeing's huge Everett assembly plant.

That is the extent of airport privatisation activity in the US momentarily. However, there will probably be opportunities in construction and operation of new terminals at major airports such as the Central Terminal Building at New York’s La Guardia airport and the development of T4 at JFK airport if the emphasis shifts away from airlines owning and/or operating terminals at primary airports.

There is the noticeable budding of a desire across the US infrastructure community, both public and private sector, for PPP projects to help solve the country’s continuing failure to find the necessary funding to offer its air travellers modern facilities.

2. Canada

In Toronto, Porter Airlines commenced a bidding process for the sale of a passenger terminal at Billy Bishop City Airport in Dec-2014.

Middle East

There is lots of actual, potential and recently completed construction activity in the Gulf region especially, but there remain very few privatisation deals. The main exception is Saudi Arabia.

1. Saudi Arabia

Efforts have been intensified to privatise King Fahd International Airport, following a profitable year in 2013, after years of financial deficit. The airport’s expansion project is expected to be finished by 2018.

In May-2014 the General Authority for Civil Aviation (GACA) revealed the country's Riyadh King Khaled International Airport will be operated under a public-private partnership. Other airports within the region will progressively be placed under a similar ownership programme.

2. Oman

The Ministry of Transport and Communications and other public and private bodies plan to develop short and long-term national strategies for the country's transport sector, including airports. The strategies are expected to establish a public transport model for the country and identify areas for public and private sector involvement in transport development, including aviation.

3. Iran

Qom International Airport confirmed in Oct-2014 that Chinese investors had visited the airport to discuss investment prospects. Chinese state and private investors are looking at financing a number of projects in Iran, in the airport and rail sectors.

But they have many problems to deal with. Years of sanctions have ensured that only three of the Iranian Airports Organisation’s 51 airports are profitable.


Narrowing the airport construction gap with the rest of the world

Some economists believe Africa will be the world’s next major destination for both business and tourism. But safety, security, and transportation costs still remain high on the agenda for aviation professionals in Africa, as do health issues such as the recent Ebola haemorrhagic fever outbreak in West Africa, over which they have little control. The African continent only accounts for 2.85% of the global total of passengers transported and only 2% of global airport income in spite of being the second largest and second most populous continent.

Africa is not at the top of the list for infrastructure investment in general. On the other hand there is no longer a massive difference between Africa and other world regions in terms of airport construction projects and investment. New infrastructure has to be paid for somehow and, as in the case of the US, the ability of many African states to do that is limited.

Many of these projects are supported directly or indirectly by the World Bank and regional development banks.

1. Nigeria

  • Lagos International Airport’s T2 has been operated under a PPP for several years now and the private sector party, Bi-Courtney Aviation Services Limited, has been urging the Nigerian government to attract more private investment in the sector. A government agency wants to do that but security issues are likely to prevent further privatisation in the near future.

2. Kenya

  • There are two projects at Nairobi International Airport for which the private sector may play a part, namely a second runway, and a new terminal with capacity for 20 million passengers per annum.

3. South Africa

Despite heavy investment by ACSA prior to the 2010 soccer World Cup and subsequent airport investment, there is still suspicion in some quarters that ACSA will be heavily pressed by increasing passenger traffic and that there is, consequently, room for more privately operated airports.

  • There are a small number of privately run airports in the country, such as Lanseria, between Johannesburg and Pretoria, and KMIA (Kruger Mpumalanga International) in the Kruger National Park.
  • The latest proposal is for a new private airport, Mpumalanga, which would be situated near Delmas, about 40 km from Johannesburg’s O R Tambo airport. Department of Transport approval for international status is needed prior to operations commencing.
  • Meanwhile, the City of Tshwane plans to sell Wonderboom National Airport in response to a study which concluded the private sector would be better able to raise funds for the facility's development.

As for ACSA, as it comes under more pressure at home it is aiming to secure new consulting and management contracts in Africa and other regions in the coming year.

The African continent is spawning investors of its own such as Investec, which is jointly listed in South Africa and the UK; and Harith, which took control of Lanseria Airport in Nov-2011 in what is a groundbreaking PPP.

  • There is one recent development that may have an important bearing. The 1999 Yamoussoukro Decision/Agreement, which pledged to open up air transport markets within Africa to transnational competition, has still not been implemented in enough countries. In Nov-2014 Ethiopian Airlines said it hoped a decision to open up intra-African aviation routes will be fully implemented in 2015 following a meeting between heads of state that is expected to deliver some progress.

International funds dictate the fortunes of primary airports

As pointed out in earlier reports, the financing of airports is increasingly dominated by huge international funds. There is still great diversity amongst investors and operators but there is a constant shift towards funds – infrastructure; pension; sovereign wealth; and hedge funds and private equity, globally.

Another trend that has been observed is the propensity for strategic investors increasingly to invest in infrastructure assets in emerging markets where growth forecasts are significantly above the mature markets in Western Europe and North America.

Last year CAPA reported that airport valuations had crept back up towards 15/16 times EV/EBITDA. With only a few transactions on which to gauge an observation it does at least appear those levels are being maintained.

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