Source: The Australian Author: Derek Sadubin 10/26/2007
Subject Concerned: Government Opinion Airport
The flow of airport ownership transactions may have slowed this year, but the prospects for airport privatisation activity are looking very strong, according to Macquarie Airports chief executive Kerrie Mather.
In an exclusive interview, the head of MAp, owner of stakes in Sydney, Copenhagen, Brussels and Bristol airports said: "If you look at the global airport privatisation pipeline, it's the strongest I've seen it, particularly over the next two years. There is a very big opportunity in Europe, when you consider less than 15 per cent of airports there are privatised."
Airports slated for privatisation in Europe include Prague, French regional airports such as Nice, Toulouse, Bordeaux and Lyon, and airports in Poland and Portugal.
Last year was the second-busiest year for airport privatisation worldwide, according to the Centre for Asia Pacific Aviation's Global Airport Privatisation report, with 15 major airports or airport groups privatised (compared with 21 in 1998).
Secondary sales activity last year was very strong and looks set to continue, as UK and Australian airports could come to market following BAA's takeover by Ferrovial.
Even in the US, where airports are predominantly owned by local governments, with airlines controlling terminal infrastructure, the mood may be changing.
"We understand that Chicago Midway is also a step closer to a long-term lease agreement, which would create an important precedent in large airport privatisation in the US market," Ms Mather said.
According to the MAp CEO, this activity is coming at a time when the aviation industry is very buoyant, with new aircraft technologies entering the market and large capacity increases coming on. "The LCC order books are significant. We are seeing very strong LCC traffic through Brussels Airport and we are targeting stronger growth in this segment at Copenhagen," she said.
Overall, Macquarie Airports sees the recent credit crunch in global markets having some downward pressure on some airport valuations. "The availability of debt financing for some investors may not be there as a result of tightening lending practices," Ms Mather said.
"The higher airport multiples we have seen lately reflect the profile of airports sold recently - they have tended to be regional airports that have higher traffic growth rates and secondary transactions involving passive investors.
"The upcoming privatisations will involve a different profile of investors. Government vendors will be looking very closely at the credentials of the operator, to ensure a seamless transition to the private sector, as well as investors who will be there for the long term."
Ms Mather believes Macquarie Airports is well positioned to participate. "We have strong cash reserves available for opportunities should they arise and an excellent track record in the sector."
One of its best performing MAp assets is Sydney Airport, which last week unveiled a major AU$500 million expansion of the international terminal.
The project involves adding 7300sqm to the departures level to provide centralised passenger processing, new retail, food and beverage outlets and passenger waiting areas. The centralised concept has worked very well at Copenhagen Airport, strengthening non-aeronautical revenues at the facility, according to Ms Mather.
Additional and upgraded aeronautical facilities, including aerobridges and taxiway improvements to accommodate a wider range of aircraft will also be completed at Sydney. The arrivals baggage system will also be upgraded to meet the extra peak passenger flows associated with the introduction of the A380 into airline fleets.
By 2023-24, Sydney Airport is expected to be handling more than 20 million international passengers, double the number today. MAp has been steadily building its stakes in Sydney, Brussels and Copenhagen airports, as it streamlines its portfolio. This upbeat view of the market suggests that there will be more to come from MAp in 2008.