Brazil and Argentina are both looking to private investors to help finance airport expansion, as traffic in the region increases following the creation of the Mercosur free trade zone incorporating Brazil, Argentina, Paraguay and Uruguay.
Brazil has included airports on its list of assets to be privatised by the end of President Fernando Henrique Cardoso's mandate in 1999. The Argentine government, which has become involved in a constitutional battle over privatisation of its airports, now hopes to sell 33 of its biggest airports early next year.
The Brazilian government's airports authority, Infraero, has already begun an ambitious expansion of its airports to cope with extra demand. Main projects include the construction of new airports for the northeastern cities of Sao Luís and Fortaleza, a second terminal at Rio de Janeiro/Galeao, a new cargo terminal at Sïo Paulo/Guarulhos, and modernisation of Salgado Filho airport at Porto Alegre and the international airport in the capital, Brasilia.
Infraero is already working in partnership with private companies, which it contracts on a project-by-project basis, but no firm date or plans have been set for full-scale privatisation.
Aviation analysts say that Brazil's airports would be highly attractive investments as they do not require as much development work as others in the region. 'There are at least 40 airports in this country which could be transformed into international-class airports with minimum investment,' says José Carlos Martinelli, airline transport consultant at Eurolatin. 'In the next decade, there will be enormous growth and this will make the investment very attractive.'
Although concerns about national security could slow down the privatisation, Martinelli says that pressure from Brazil's rapidly expanding airlines may encourage the government to bring the process forward.
Infraero predicts that passenger numbers through its airports will rise from 53.48 million this year to 68.81 million by 2001, while cargo traffic will rise from 1.47 million to 2.57 million tonnes.
Although Argentina is further along the road to full-scale privatisation, President Carlos Menem has seen his programme run into delays in Congress and has attempted to use a presidential decree, claiming that deteriorating service at Argentine airports has made the issue urgent. Menem has used the safety issue to try and speed up the sale, following an incident in August when three aircraft almost ran out of fuel after bad weather closed Buenos Aires /Ezeiza, and the crash of an Austral DC-9 in October.
However, legal challenges have constantly forced the timetable to be altered. Six groups are involved in the bidding and the winners will have to invest around $2.1 billion and pay a $40 million annual royalty to the government for the 30-year concession.
At the start of November the sale was postponed once again, this time at the request of four of the groups. It is now due to take place on 15 January. 'Potential investors do not feel so confident with this legal framework,' says Fred Thomsen, senior economist at ING Barings in Buenos Aires. 'Dates are constantly being postponed; they seem to change almost once a week.' But he does not expect the sale to fall through. 'The bottom line is that it will get done, eventually. Everything else that has been privatised here, such as gas, electricity and telephones, has improved.'
Brian Homewood
Source: Airline Business
