IATA Industry guidance issued for airport PPPs
The International Air Transport Association (IATA) and Deloitte recently published a guidance booklet aimed at governments and authorities entitled "Airport Ownership and Regulation" which considers public-private partnerships (PPP) and other forms of privatisation for airport infrastructure.
The guidance booklet details the different operating and ownership models available to governments looking to privatise airport infrastructure across the full public-private spectrum, including consideration of the following models: corporatisation, management/services contracts, PPP concessions and both partial and majority equity sales.
The publication of the guidance booklet is particularly timely for the Middle East as a number of governments across the region are currently considering or are in the process of procuring new greenfield airport projects, rehabilitating and expanding existing airports and/or privatising the operation and ownership of airport infrastructure. In particular, the General Authority for Civil Aviation (GACA) in Saudi Arabia announced its intention in 2016 to fully privatise all of the Kingdom's airports in line with the central government policies set out in Vision 2030 and the National Transformation Programme. GACA has employed a combination of different models to attract private sector investment, including an operation and maintenance contract for the King Abdul Aziz International Airport in Jeddah (since terminated by GACA), adopting the PPP-model for airports which require significant expansion works (Taif, Al Qassim, Hail and Yanbu) and corporatising the existing operating companies in Riyadh and Dammam, particularly with a view to a full or partial sale to the private sector.
Although Kuwait has recently entered into a management agreement for the new Terminal 4 at the Kuwait International Airport, it remains to be seen whether the UAE, Oman, Kuwait and Qatar will follow Saudi Arabia's lead in opening up the aviation sector to further private sector participation. Outside of the GCC, government authorities in Egypt, Lebanon and Jordan are focusing on PPP structures to develop and expand critical airport facilities with the assistance and support of multilateral agencies.
The intervention of IATA in this way is broadly to be welcomed. If the region's airports are to be successfully created and upgraded using private sector expertise and capital then it is essential that the right project structure and risk allocation is brought to bear for each individual project.
All too often a lack of proper analysis of the underlying economics of a particular airport, combined with a less than clear-eyed view of the partial and economic drivers behind the desire to involve the private sector can lead to the adoption of a structure or risk allocation that is ill-suited to the project – most often around expectations over passenger forecasts, the ability of concessionaires to influence passenger numbers over time and the likely willingness of the private sector to take material risks in these respects – especially for smaller regional airports. This leads, in turn, to the subsequent failure of the procurement or the concession.
This new guidance booklet will not, of course, solve these problems at a stroke. However, anything that – like this – helps educate the public sector as to the available options for engaging the private sector for the region's airports, should, over time, lead to better structured deals that are more likely to succeed when put into the market.
The table below sets out a number of existing airport PPP projects in the Middle East, as well as future opportunities for private sector investment.
COUNTRY | AIRPORT | DESCRIPTION | MODEL | SPONSORS | STATUS |
---|---|---|---|---|---|
Saudi Arabia | Prince Mohammad bin Abdulaziz International Airport (Madinah) | A 25-year concession to rehabilitate, expand, operate, develop and maintain the existing Madinah airport awarded by GACA | PPP – Build, Transfer and Operate | TAV Airports Holding, Saudi Oger and Al Rahji Holding Group | Operating Financial Close – June 2012 |
Saudi Arabia | King Abdulaziz International Airport (Jeddah) | A 20-year concession for the operation and management of the existing KAIA airport awarded by GACA to Changi Airports Saudi Arabia in April 2017 | Operation and maintenance | Changi Airports International | Awarded in April 2017. Concession cancelled by GACA in February 2018 |
Saudi Arabia | Taif International Airport | A 30-year concession to develop and operate the Taif International Airport awarded by Gaca | PPP – Build, Transfer and Operate | Asyad Holding, Munich Airports and Consolidated Contractors Co | Awarded in April 2017 Financial Close has not yet occurred |
Saudi Arabia | Prince Naif bin Abdul Aziz Airport (Al-Qassim) and Hail International Airport | A 30-year concession to rehabilitate, expand and operate the Al Qassim and Hail airports | PPP – Build, Transfer and Operate | TAV Airports Holding and Al Rajhi Holding Group | Awarded in April 2017 Financial Close has not yet occurred |
Saudi Arabia | Prince Abdul Mohsin bin Abdulaziz Airport (Yanbu) | A 30-year concession to build and operate a new terminal at Yanbu | PPP – Build, Transfer and Operate | TAV Airports Holding and Al Rajhi Holding Group | Concession signed in March 2017 Financial Close has not yet occurred |
Saudi Arabia | King Khalid International Airport (Riyadh) | Conversion of existing government operator to private operating entity | Corporatisation and privatisation | Managed by Riyadh Airports Company (RAC) - 100% owned by the government of Saudi Arabian | It remains unclear whether an equity stake will be sold in RAC (as was originally intended by GACA) or whether this will be retendered as a PPP concession |
A five-year concession to operate and maintain Terminal 5 at KKIA | Operation and maintenance | Dublin Airport Authority | Contract awarded in January 2016 | ||
Saudi Arabia | King Fahd International Airport (Dammam) | Conversion of existing government operator to private operating entity in July 2017 Some limited maintenance works sub-contracted to private companies (e.g. fire and rescue services) | Corporatisation and privatisation | Managed by Dammam Airports Company (DAC) - 100% owned by the government of Saudi Arabian | It remains unclear whether an equity stake will be sold in DAC, although we note that in May 2018 DAC's CEO announced that DAC would assume operations for a second airport in Saudi Arabia |
Saudi Arabia | Jubail Airport | Development of a new passenger terminal at existing Jubail airport | PPP - Exact model not yet known | N/A | Feasibility stage. Public procurement process expected to commence in 2018 |
Saudi Arabia | Al Faisalyah Airport | Potential new airport in Al Faisalyah located in the western part of Mekkah | Exact model not yet known | N/A | Pre-feasibility stage |
Kuwait | Kuwait International Airport | A five-year concession to operate and maintain Terminal 4 at Kuwait International Airport | Operation and maintenance | Incheon International Airport Corporation | Contract awarded in April 2018 |
UAE | Ras Al Khaimah International Airport | Potential privatisation of Ras Al Khaimah International Airport | Privatisation | N/A | Feasibility stage. Government of RAK appointed KPMG to advise on potential privatisation in October 2017 |
Jordan | Queen Alia International Airport (QAIA) | 25-year concession to rehabilitate, expand and operate the existing QAIA airport awarded by the Ministry of Transport | PPP – Build, Transfer and Operate | ADP Group, Meridiam, ASMA Capital and Edgo | Operating Financial Close– November 2007 |
Jordan | North Shouneh Airport; Amman Civil Airport and King Hussein Airport | Ministry of Transport is examining the feasibility of three new airport PPP projects | PPP - Exact model not yet known | N/A | Feasibility stage |
Egypt | Ras Sudr Airport | Concession for the development of a new airport in the Ras Sudr area of South Sinari | PPP – Build, Operate and Transfer | N/A – Under procurement | RFP stage – bids to be received by 2 July 2018 |
Lebanon | Rafic Hariri International Airport | Concession for the rehabilitation, expansion and operation of the Rafic Hariri International Airport to be awarded by the High Council for Privatisation and PPP (HCP) | PPP - Exact model not yet known | N/A | Feasibility stage. IFC appointed to advise HCP as lead transaction adviser |
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