After a relatively quiet year for major airport transactions, during which the long-awaited privatisation of Chicago Midway finally progressed, Prague and London Gatwick are among two of the high profile airport sales on the agenda.
The Czech government is finalising privatisation plans for Prague, while Spain’s Ferrovial, amid a preliminary negative decision by UK competition authorities, has announced it is to sell Gatwick.
But the impact of the economic downturn and financial crisis on the desire, need or ability to sell airports within this environment could vary with each case.
“Those states or vendors who can afford to will postpone planned privatisations or airport sales to a later point in time in order to obtain the maximum conceivable prices,” suggests chief executive at Germany’s Hochtief AirPort Reinhard Kalenda. “In a few cases, though – precisely because of the financial crisis – some states will be in need of private investment to enable them to expand and develop their airports.”
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This view is echoed by Spanish airports group Abertis, which has involvement in more than 30 airports in nine countries. "It is difficult to predict the desire of states in the current market situation. While some states may view the current conditions as a factor influencing project schedules, other states may see private public partnerships as a new opportunity within their jurisdiction to monetise an infrastructure asset under appropriate conditions. So we will have to wait to see which the positions in the coming months are."
But it adds: "Apart from that, and from the state's point of view, in the short-term it is hard to imagine that governments could continue generating significant additional resources, or release them from other segments, to meet the needs of society and to contemplate new demands on infrastructure. That’s why we still foresee – leaving aside the current situation of the financial market - an increasing growth of public-private partnership projects in the airports sector in the future."
For its part the Czech finance ministry has already indicated it will only go ahead with the sale of Prague airport, for which it is currently finalising a privatisation advisor, if the price meets is expectations. "If we are not satisified with the price, we will not sell," the ministry says.
The other possible impact of the financial crisis on airport infrastructure projects is whether private firms' ability to secure the necessary funding at an acceptable cost is impacted.
Abertis says that while financial markets are still quite complex at the moment, public infrastructure projects like airports tend to "warrant confidence" as examples of projects which guarantee stability and predictability in the cash flows generated. "Currently, the stage that is facing the international financial markets is resulting in greater complexity in attracting the necessary resources not only for this type of projects, but in general for the financing of the whole economic system," it notes.
Kalenda says: "We can expect to see loans for investments in airport projects becoming more expensive for a while. At the same time, banks and project sponsors are looking for higher equity ratios. That really forces potential airport investors to review possible projects even more thoroughly than before and to make very deliberate choices regarding which assets are worthwhile, which projects are worth pursuing.
"One thing I am hoping for from the crisis is that it may restore a certain degree of normality to the market after years of rising prices for airports. Our business is based on a long-term perspective, so a bit more rationality and realism in this respect would be very helpful. Kalenda notes the stated aims of the group, which acquired Budapest's Ferihegy Airport in 2007, remain to gradually enlarge its portfolio of airport holdings. "In this, we will stick to the stringent investment criteria we have applied in the past," he says. "But, we will also subject projects to an even stricter analysis as to just how well they fit into our portfolio under the given circumstances."
Source: Airline Business
