Global Airport Development conference report: Trump,

Brexit, pipelines and PPPs

Rapporteur: David J Bentley, Chief Airports Analyst, CAPA – Centre for

Aviation

The Global Airport Development (GAD World) conference was held in what turned out to be a

mild but occasionally very rainy Lisbon, between 29-Nov and 01-Dec-2016. This report chronicles

the presentations and debates that took place on the first two days, including selected ‘stream’

sessions on both days. There was, inevitably, a political theme to the event, with the (Jun-2016)

UK referendum on continuing membership of the European Union (‘Brexit’), the (Nov-2016)

election of President Trump in the US and associated ‘uncertainty’ dominating events, sometimes

to the point of tedium.

Otherwise the concern was, as always, the ‘pipeline’ of airport privatisation details, or rather the

lack of them, while the hope was for the continuation of the trend towards PPP deals.

Day 1 – morning

The event was hosted by the French conglomerate Vinci, whose concessions division was the

successful concessionaire for ANA, Portuguese airports, in Sep- 2013, and whose subsequent

presence at Lisbon’s Humberto Delgado airport was noticeable to all the delegates that used it to

access the event. In his opening speech, Vinci CEO Nicholas Notebaert mentioned that Vinci had

joined the top five global ‘players’ in the area of airport privatisation, mainly because of the ANA

deal, and had achieved an Ebitda margin of 50% in 2015.

The Portuguese Minister of Planning & Infrastructure, who arrived late, thus setting back the event

timing throughout the day, spoke of the strong passenger growth in Lisbon throughout the last three

years, including gains of up to 30-40% recorded in Lisbon, Oporto and the Azores with an overall

average of 20%. He joked that “concessions last longer than marriages.” They certainly last longer

than governments, except perhaps in Cuba.

Simon Morris of ICF was Chairman for the day and in his introductory speech referred for the first of

many, many occasions to the US Presidential Election and its impact on aviation and to ‘Brexit.’

Strangely, he said, “if Brexit happens…” which is perhaps a good indicator of the degree of denial

that persists in industry and commerce generally, not just in the airport sector.

Hulsman: Trump’s supporters expect, and he will deliver

To redress the balance, the conference proper opened with a dynamic unscripted presentation by

John Hulsman, a Life Member of the US Council on Foreign Relations, a Washington ‘insider’ and

now a London-based journalist and commentator. In a 30-minute presentation that embraced

Trump/Brexit, the oil price, COP21/CMP11 (the Paris Agreement on Climate Change), NAFTA and the

slowdown in China he described 2016 as the year the political ‘tectonic plates’ were broken and

warned of more to come, though he stopped short of predicting a victory for Marine le Pen’s Front

National in the 2017 French Presidential election.

He lambasted much of the popular press for not seeing Trump/Brexit coming and insisted that their

analysis was wholly inadequate. Trump is a Jacksonian Nationalist (referring to seventh US President

Andrew Jackson), a creed which takes a very narrow view of US economic interests, i.e. America first,

second and last while recognising it is no longer the only show in town. 70 years of writing cheques

to prop up NATO is coming to an end, as is the US’ support of the Paris Agreement.

Intriguingly, he added that the self-financed Donald Trump “owes nothing to anyone” unlike all his

predecessors. There are no favours to be called in, except by those who won the election for him,

the white high school educated voters in the Midwest ‘rustbelt,’ to whom he referred as the

‘Springsteen Democrats.’ It is they who expect the revocation of COP21 and the renegotiation of the

NAFTA agreement and that will be delivered.

On oil, the US continues to benefit from shale gas and oil production, which is cheaper, and will

continue to influence the commodity’s price. The Chinese government is brittle and has to deliver in

a way that a democratic government like India’s does not. Tensions will continue to rise in US-China

relations. Using the analogy of World War II we are in the 1920s right now.

While Mr Hulsman did not specifically mention the impact on the aviation industry of these events it

is clear for all to see that the bigger picture of global politics is about to influence it in a way that

traffic forecasters have not anticipated.

No sign of LCC encroachment on European prime routes diminishing

Mark Manduca, Head of Transport Equity Research at Bank of America Merrill Lynch, spoke of

aviation’s winners and losers. He focused on continuing LCC encroachment in Europe and described

the situation there as being unique, with low cost carriers competing directly with high cost ones;

old fleets with new fleets; and unionised pilots with non-unionised ones. He described Germany as

being an easy target for LCCs where the greatest growth has been on the spokes that connect

through Frankfurt. Ryanair in particular has the opportunity to “cut them off” with direct services

with the advantage of average fares of EUR61 against EUR140 for Lufthansa. Maintaining that no

region is safe from price deflation he suggested that ULCCs will continue to attack indebted carriers

and those with industrial issues (e.g. pilot strikes). Multiple price wars will impact on airports and

hub airports in particular must resign themselves to the changing paradigm.

A CEO panel including representatives from Groupe ADP, Vantage Airports Group, Corporación

América and Vinci Airports debated how airport leaders are responding to this maelstrom of

economic, geopolitical, security and environmental ‘uncertainty.’

Vantage Group’s CEO George Casey mentioned PPPs (or P3s as they are known in the US) for the

first time, when he spoke of the New York LaGaurdia Airport P3. It has set a benchmark for the

implementation of this model, with many airlines involved in the negotiations.

Corporación América’s Martin Eurnekian, describing his organisation as “a new kid on the block that

has been around for a while,” said that Corporación América has gained experience in crisis

environments (i.e. Argentina) and while he is content to continue working in those areas that

experience has prepared it for expansion elsewhere in the world.

Vinci’s Nicolas Notebaert bemoaned narrowing timeframes in which to make decisions and the

growing lack of stability in the industry while both George Casey and Groupe ADP’s Antonin Beurier

referred to the need to invest in people, especially those of an entrepreneurial nature. Casey warned

that the ‘trickle down’ of PPP transactions to secondary level airports is likely (e.g. in the US, see

later) but that it is limited. Airlines are frequently seeing airports as being part of the ‘customer

experience’ and municipalities often cannot deliver.

Liquids and gels are here to stay: MI5

A second external speaker followed, the Right Hon Baroness Manningham-Buller, who was head of

MI5, the UK internal secret service, from 2002 (i.e. immediately post ‘9/11’) to 2007. Her

presentation was not airport specific and was delivered in the manner of an after dinner speech;

nevertheless it was at least entertaining.

Her main message is “don’t try to change too much in a time of crisis”. Contradicting Donald Trump,

she insisted that retaining Muslim staff is essential as they have “an ear to the ground.” Competent

individuals are needed equally in government and in commerce but also those with humility, who

are open about what they don’t know as much as what they do.

She spoke of the Aug-2006 plot to bring down many airliners either over the North Atlantic or over

cities in the US; what has subsequently led to the ‘liquids and gels’ (LAGs) regulations, which

affected most of the participants at the event, and which might have remained a mystery had no

detailed forensic examination been possible.

True to her own philosophy she admitted candidly in response to a question from the floor that she

was ‘out of date’ and could not answer competently. In response to another one, which reminded

her that LAGs regulations have been eased in some countries, she stated she was against the

profiling of terrorist suspects as an alternative to the present regime as one could always ‘slip

through the net.’ Surprisingly, in the light of landside terrorist attacks at Brussels and Istanbul

airports in 2016 no questions were tabled on her attitude to heightened landside security and its

effects on customer service (which was a subject dealt with on Day 2) and she did not raise the

matter herself.

State of the Union – Asia lacks the concession maturity of Europe and

LatinAm

Returning to more mundane matters, the ‘Investing in Airports State of the Union’ session, which

included Nicolas Notebaert again, also representatives from Macquarie infrastructure, Ardian and

GIP, M. Notebaert commented on the Japanese (Osaka) concession in which his firm is involved but

focused more on the diversification that Vinci seeks, the need for a wide geographic outlook and to

“move quickly” when an opportunity like Osaka presents itself.

GIP’s Michael McGhee reiterated that GIP’s model is to improve existing ‘not so good’ airports and

opined that while talk of the ‘pipeline’ is frequent, genuine opportunities are rare. He foresees a

similar pattern of activity in 2017 with a continuing focus on “quality assets” rather than those that

are still short on delivery. He would not be drawn on the future of London Gatwick and Edinburgh

airports other than to say that the choice of timing for the monetisation of GIP’s airports will be

crucial.

For Ardian’s Laurent Fayollas opportunities will continue to arise but it is necessary to know what

you want to do with the assets first. They continue to focus on Italy, which is shaping up to a

constitutional referendum on 04-Dec-2016.

Nicolas Notebaert noted that transactions in troubled economies such as Greece and Italy have

progressed surprisingly well but that the ‘rule of law’ and political stability as at least as important as

any traffic forecasts.

Asia was identified as lacking the maturity of Europe and Asia for concession deals and that there are

political constraints, as in the Philippines. Poor cash returns in China have led investors there to turn

their attention to Europe.

Surprisingly, no comments were made on either the Middle East or Africa; nor were questions

tabled, though both were examined in streams on Day 2.

ICF – do not forecast traffic by reference only to aviation

ICF’s Kata Cserep made an interesting presentation which questioned traditional econometric-based

air traffic forecasting techniques, hinting that they may have become dated, and suggested that geo-

political situations and decisions should be given much more credibility in the forecasting

environment. Examples that she mentioned varied from the High Speed Rail line between Madrid

and Barcelona which is known adversely to have impacted on air traffic between the two cities and

Croatia’s entry into the EU which helped increase traffic there by 20%.

Ms Cserep ran through a range of scenarios for ‘Brexit’ (GDP, foreign exchange rates, Common

Aviation Area or return to bilateral arrangements, hard/soft exit and airline responses) and

mentioned the impact of national planning decisions, not only on runways but equally on high speed

rail and roads. Her message was not to forecast an airport’s prospects in “isolation”.

On the specific subject of attracting airlines there is the evident need to determine the prospects for

both O&D and transit passengers and to be aware of which airlines might fill the gap in the event of

a failure, referring to case studies of Malev at Budapest and Cyprus Airways at Larnaca and Paphos.

She concluded by repeating the now common mantra that the only forecasts for traffic growth to

carry any authority these days are for two years or less and that achieving a credible for one 10 years

is almost impossible.

Deal of the Year – Vinci/Orix unfazed by a sinking airport

The ‘Deal of the Year’ showcase gave the opportunity to three participants to present their

shortlisted case for their airport together with two others on the long list.

Stewart Steeves of LaGuardia Gateway Partners made the case for the USD4 billion central area P3

redevelopment there, which is a complex procedure on a small site, the largest P3 in the US to date,

and which attracted partners from across North America and 170 institutional investors. It was

notable for its success in gaining airline approval but possibly lost out when judged by a panel for

allowing parking revenues to remain with the Port Authority of New York and New Jersey.

Aeroporti di Roma presented on behalf of its 96% owner Atlantia for the deal that saw the

acquisition of 60% of Nice, Cannes and St Tropez airports from the French government. The

presentation largely outlined the benefits offered by the asset (4.6% CAGR over five years; long haul

growth; no single carrier with >30% market share; ongoing refurbishment; investment grade rating;

first airport to be carbon neutral and so on, without detailing a positive aspect of the negotiation,

which may have counted against it.

There was always a feeling that the Osaka airports deal presented by Vinci would win, and not

because Vinci was the conference host airport operator, as is sometimes the case. What set the 44-

year concession deal for Kansai and Itami airports apart, in conjunction with Orix, was probably the

fact that Vinci was chosen by Orix not vice versa, as is the Japanese tradition, rejecting German and

US suitors along the way; that it is a relatively new company by Japanese standards and with no

experience of airports (it is better known as an aircraft lessor) thus shifting a great deal of

responsibility on to Vinci; the transfer of the existing (and very heavy) debt to the government in

return for payment of the concession fee; and the sheer nerve in taking on an airport that is known

to be sinking. To counter the outcome of it sinking faster than expected (within the period of the

concession) Vinci/Orix acquired the agreement of the state to take on that risk.

So it was no great surprise when Vinci Airports was announced as the winner at the Taste of Portugal

Cocktail Reception that evening.

Day 1 – afternoon

The afternoon session was held in two complementary streams, the first one (A) dealing with the

‘pipeline’ of airport privatisations globally and Stream B dealing with the subject of ‘investing in

today’s market.’ Stream A was followed by the rapporteur.

French concessions under the microscope

In the first session the French regional airports concessions were studied in more detail, from the

government reforms of 2005 that enabled what transactions have taken place so far to begin, via the

Toulouse airport concession of Dec-2015 through to the recently concluded deals that saw the

central government relinquish its 60% stakes in the Nice and Lyon airports, with a local authority

also relinquishing 4% of its 5% holding at Nice.

Vinci was a finalist in both cases but came second at Nice. However it was successful at Lyon, which

is located in the premier industrial region of France and centrally so, on high-speed rail lines and

motorways. Nice was a more difficult transaction as a result of the terrorist atrocity there just one

week prior to the transaction date and which prompted a postponement, but its attractions are

possibly even greater with its tri-national location, strong UK market (which may or may not be

influenced by ‘Brexit’) and usage by ‘high net worth individuals.’

In the case of Lyon the airport CEO stated that Vinci’s experience would help it gain long haul market

share, which is an imperative (there are just three long haul routes, one of them seasonal) but in the

case of Nice that airport will not be chasing volume for the sake of it, preferring to concentrate on

resilience.

In the second part of the session the President of Toulouse Airport and the MD of the Hong Kong

based investor there, Friedmann Pacific, joined the panel to discuss the Toulouse concession, one

that perplexed some people at the time. The airport has progressed under private management but

still requires more long haul services. It has a similar problem to that of Lyon Airport in this respect,

and is attempting to reposition itself as the gateway to the South of France from Asia - China

specifically – and the Middle East. Other initiatives include reconfiguring the retail space and

directing airside passengers through it (which is not always welcomed though many airports now do

it) and finding ways to re-incentivise employees.

Regulation was briefly discussed. Formal regulation on charges is still quite new in France and

airports are moving towards an unadjusted single till.

Unfortunately there was no time to ask the panel about the next step in the concession procedure,

which is assumed to involve another raft of primary cities in France, possibly one or two in the

dependencies such as Guadeloupe and Réunion, and a further transaction concerning the Paris

airports.

Japanese concession schedule heats up

The next stage in the Japanese concessions programme was lucidly conveyed by the Director of the

Ministry of Land, Infrastructure, Transport and Tourism (MLITT).

Japan has over 100 airports, mostly on the islands, and divided into:

1. National (e.g. Tokyo Haneda, Fukuoka and Shin Chitose), owned by MLITT and the main

privatisation target of the government;

2. Local (e.g. Kobe, Shizuoka, Memanbetsu);

3. Corporate (e.g. Tokyo Narita, Osaka Kansai and Nagoya Chubu);

4. Defence.

3 and 4 are not currently targeted for privatisation;

Growth has been driven by greater tourism, deregulation, and a belated increase in LCC passengers,

of whom there were 24 million to date in 2016.

MLITT’s privatisation aims are driven by the need for more flexible landing fees to attract more

airlines; more efficient management; revitalisation of the airports; and for non-aeronautical

revenues to grow to offset the reduction in landing charges. In the background is Japan’s fiscal

condition.

Forthcoming deals involve the National airports of Fukuoka and Hokkaido and the small Takamatsu

Airport where the first screening process will take place in Dec-2016 for a 15-year concession

extendable to 35 years. Applicants need only offer operational experience since 2006.

At Fukuoka, where operations are restricted at the request of local residents but which is still

designated as ‘congested,’ 100 companies have already shown interest in the airport with the fourth

largest passenger volume. Terms will be published in Mar-2017 for a 30-year concession from 2019.

A new runway is already under construction. One third of the land is owned by local investors but

that situation has been ‘assuaged.’

The concession on the Hokkaido airports is a seven facility project which is being sold as ‘one

Hokkaido.’ Shin Chitose is the largest and each of the airports will be marketed on the basis of their

ability to attract individual tourist-based route operators. As with Fukuoka, market sounding is

continuing at this time.

Other airports to be privatised where the schedule is not yet as advanced include Kobe (2018),

Shizuoka (Mar-2019) and Hiroshima (2021).

US P3s – a raft of smaller airports could be brought in

A panel representing Denver and Dallas-Fort Worth airports, Manchester Airports Group (which has

a US management division), CCR USA, the investor Oaktree Capital and Ferrovial Aeropuertos, which

is already active in a P3 contract at Denver Airport, discussed the P3 scenario in the US in greater

detail.

CCR’s Amit Rikhy outlined the by now well known reasons why privatisation in general and the 1996

Pilot Programme in particular has failed to make an impact in the US, such as (inter alia) the

traditional bond financing activities, airline control of terminals, and the lack of political will.

The big white hope is that P3s, now established, will continue to prosper but there is still a degree of

misconception about them, which is prompted by there being different laws in different states and

even amongst municipalities within states.

But ageing and inadequate facilities, and the realisation by most US international travellers that they

arrive at a much better facility than the one they left, are pushing those municipalities into a

structural sea-change.

Apart from the deals already under way bids to provide infrastructure on a P3 basis in the way of

terminals, cargo facilities, people movers and car parking or rental car facilities amongst others are

under way or expected at airports that include Kansas City, Milwaukee, Albuquerque, San Diego,

Burbank, Oakland, and Los Angeles LAX, while future projects could take place at GA airports such as

Teterboro in New Jersey and in Terminal 8 at New York JFK airport.

However, Mr Rikhy warned that some of these airports are heavily unionised, mentioning Oakland

as an example, and that there could, accordingly, be considerable resistance.

The representative of Dallas-Fort Worth Airport, Chris Poinsatte, who has previously been noted as

an opponent of privatisation, said that a P3 was considered for a new terminal in order to take the

debt off the balance sheet but that as American Airlines has 85% of capacity there a sixth terminal

for AA – as it would be – with third party involvement would create too many issues. He did add

though that the airport did negotiate a BOT model for a people mover.

East European airports seek concession interest

For the final session of the day in Stream A the rapporteur moved to Stream B on the basis that the

Stream A subject, Saudi Arabia, might be covered under ‘Middle East’ the following day.

Stream B gave an outlet for three East European/West Asian airport operators effectively to

advertise the concession of their airports, namely Lithuanian Airports, Kiev International Airport and

Belgrade Airport Nikola Tesla. Collectively they represent most, but not all, concession activity in

that region at this time.

Lithuania Airports seeks concessions on three quite different airports – at the capital, Vilnius, the

second city, Kaunas, and Palanga, a smaller city in Lithuania’s main coastal tourist region, all for 25

years.

The presentation was candid in that both the attractions and downsides were presented. Attractions

include a special concession law with a full demand risk transfer, long term forecast GDP growth of

up to 3.5%, a modern terminal with capacity increasing by 1.5 million ppa in 2016/17 and an

increase in low cost penetration (Ryanair/Wizz Air).

The downsides include the lack of a national carrier (Latvia’s airbaltic assumes the role to a limited

degree while SAS is the leading full service carrier), lack of clout in the cargo segment, a declining

population and inadequate tourism promotion, though it has improved recently.

The operator seeks experience of airports with up to 10 million ppa (the target amount for the end

of the concession), operating at least two regional airports in Europe, and financial strength. It will

be able to develop connecting traffic (difficult – Vilnius does not lie on the road to anywhere in

particular though it does attract many passengers from neighbouring Belarus), encourage self-

connectivity, drive new point to point routes and instigate a private route development fund out of

the concession fees.

Kiev Zhuliany (or City) Airport is the smaller of the two facilities serving the capital city of Ukraine

and its traffic halved to less than one million between 2013 and 2015 owing mainly to disruptions

caused by the war in the east of the country. In that sense it has been more badly affected than the

rival Boryspil Airport which did manage to recover some 2014 passenger losses in 2015. It is

currently operated under concession by Master Avia, under a long term lease to 2059.

The airport has three new terminals with under-utilised space to grow both aeronautical and non-

aeronautical activities and with the cessation of hostilities the owners hope to achieve 2.2 million

ppa by 2020, which will be boosted by the anticipated access to the European Common Aviation

Area (ECAA). Ryanair is but one LCC that has previously declared an interest in operating there under

the appropriate circumstances but the changed relationship between Russia and Ukraine could

count against it.

Additional investors in the airport are sought accordingly.

The Nikola Tesla International Airport in Belgrade lies in a country which is already in the ECAA,

with GDP growth of 3% per annum and Serbia is a candidate for membership of the EU. The

privatisation of Air Serbia having been completed the airport is seeking a long term strategic partner

and parties are soon to be invited to discussions.

Traffic increases have prompted Ebitda growth and an Ebitda Margin of 56%. There is a dedicated

low cost terminal already in place and the management is encouraged by the growth in traffic in

Croatia of 20% since that country joined the EU.

Day 2 – morning

A popular early morning call for the second attempt to concession Jamaica’s

capital city airport

The second day began with a breakfast briefing by the Airports Authority of Jamaica and various

advisors on the resurrected concession of the Norman Manley International Airport in the capital,

Kingston. Despite the disconcertingly early hour it attracted several dozen attendees.

The Sangster International Airport at Montego Bay has already been successfully concessioned and

with a subsequent on-sale but the procedure at Kingston was curtailed a year ago as potential

investors recoiled from the expectation of an excessive up-front payment and a high fee for

extending the runway by 300m. That upfront fee has now been reduced to USD5 million and the

mandatory capex requirement to USD110 million, of which USD50 million must be spent in the first

three years.

The airport is operated 24/7 with no curfew (which is not the case at Sangster), under a single till

charging regime, with no peak charges and with a 55% overall increase in rates authorised for the

next charging period. (The single till regime is not mandatory and the concessionaire can ask for it to

be changed). It is located close to the country’s main sea port and handles mainly VFR traffic as the

majority of tourists use Sangster.

The objective is to claw back some of that traffic from the western island located Sangster and

perhaps to increase LCC penetration, although that already stands at 26% (seat capacity) and does

not square with the hefty rate increase.

The Airport Authority’s CEO candidly admitted that growth had been ‘anaemic’ in recent years (it

was stable from 2011-2014, the most recent figures available to CAPA) but Sangster has not fared

much better. The authority is confident passenger traffic can be raised from 1.5 million ppa to 3

million by 2018.

The principle attraction to investors will be the fact that tourism structure is being increased

considerably, with the hotel stock rising to 33,000 rooms while new highways now link the eastern

side of the island with the western side where the tourism product is concentrated (and which is the

location of Sangster). Additionally, the terminal infrastructure is already in place with a new one

having opened in 2008 and there is also an opportunity to improve the ratio of non-aeronautical

revenues, which currently stand at 33%.

Asked about the poor reputation that parts of Kingston have for crime (for example Trench Town) he

replied that the suburb, the birthplace of Bob Marley, is now a tourist hotspot!

The RFQ procedure will begin in Jan-2017, will complete in Mar-2017, with a decision expected in

1Q2018.

IATA remains confident about growth prospects but the oil price and external

shocks are always lurking in the background

In the first formal session of the day an overview of the global air traffic forecast was given by David

Oxley, a Senior Economist with IATA.

The presentation followed familiar lines, mentioning that developing markets continue to take an

increasing share, with higher growth rates and that the swing eastwards as the centre of gravity of

the air transport business continues. The growth of traffic between developing markets was

emphasised.

China is now expected to be the largest domestic market by 2025, with India rising to #3, Indonesia

from 10 to 5 and Turkey pushing in to the top 10 for the first time in the same time period, while

Italy will drop out. It was not explained whether or not the current political issues in Turkey have

been taken into account in the forecast.

Passenger traffic has been growing at 1.75 times that of global GDP historically but that relationship

is becoming increasingly variable.

Generally speaking, from IATA’s viewpoint the future still looks bright but many things can wrong of

course. There is no forecast of imminent recession in the dominant world markets but it can come

quickly. The oil price, having been stable and high from 2010 to 2014, collapsed to USD35/barrel to

the great advantage of airlines though the price has since recovered by 50%. IATA estimates that the

oil price fall accounts for 50% of traffic growth in 2015/16 (the implication being that a return to

2014 prices would occasion a similar reduction in traffic). Some airlines have fared better than

others depending on the relationship of their main earnings currency to the settlement of fuel bills,

which is typically in US dollars.

The largest passenger growth in IATA’s latest timeframe (to 2030) is anticipated in Africa (+5.1%) but

that is from a small base. Otherwise Asia Pacific will have the largest growth from an established

base. The slowest growth will be in the mature markets of North America and Europe, but they will

remain substantial ones nevertheless. Overall, passenger numbers are set to double but the industry

remains subject to the sudden and often unanticipated exogenous shocks that have plagued it for

decades.

Customer service – staff outside the airport’s control are the worst offenders

David Feldman, a consultant with a particular interest in airport customer service, chaired a session

on how airports are managing that service, operational efficiency and commercial revenues while

operating under capacity constraints. The panel consisted of executives from small and medium

sized airlines and one from NATS, the UK ATM provider.

The chairman said that he had heard the words ‘customer experience’ 17 times already at the

conference but that it was usually low on the list of priorities at most airports. His point was proved

by his own panel. While several valuable comments were made the discussion drifted away from

customer service and on to the environment following a contribution from Andre Schneider, CEO of

Geneva Airport but new to the business and who rather mysteriously identified the environment as

the key determinant of customer service, rather than of capacity limitations.

As is often the case at GAD events a notably incisive observation was delivered from the floor by

Professor Rigas Doganis, who said that the panellists had rather missed the point, which is that (1) it

is non-airport employed staff who are the biggest issue at most airports where service standards are

concerned (for example in outsourced security and ground handling functions, not to mention

immigration control) and (2) that the worst offenders of all are air traffic controllers who are

continually going on strike.

Gatwick Airport commits to continuing capacity expansion irrespective of the

government’s selection of Heathrow for an additional runway

The first of two presentations by the respective winners and losers in the UK airport expansion race

was made by Stewart Wingate, the CEO of London Gatwick airport. While not exactly conceding

defeat, Mr Wingate chose to major on the ongoing investment at Gatwick. He is still keen to add

capacity there, if only for corporate reasons now, rather than the ‘national interest’.

Putting the airport – the world’s busiest single runway facility – into context, it recently handled 949

movements in a single day; a world record for a commercial airport and now serves 50 long haul

routes.

GBP1.3 billion has been spent on infrastructure in both terminals since the airport was privatised in

2009 with a further GBP1.2 billion to come by 2021. 40% of passengers use the airport’s rail terminal

for access and egress, one that has been transformed with a GBP30 million investment and there is a

growing network of rail stations to the north of London (Gatwick is 25 miles to the south) which are

now connected to it.

Within the terminals, airlines are being relocated according to type, but the airport’s already

established self-connection facilities, which are in both terminals, will not be affected in any way.

Self-connection, point-to-point traffic and the rise of long haul low cost were critical planks in the

airport’s submission to the Airports Commission for a second runway.

His main message is that Gatwick Airport works with local communities “to be a trusted and valued

neighbour.”

There was no word on the potential for Gatwick to build a second runway irrespective of the

government’s stated preference for Heathrow. That is a shareholder decision.

Heathrow presentation based around route development and job creation

In the second presentation, which followed later in the morning, Andrew McMillan, Strategy and

Economics Director at Heathrow Airport, set matters off on the wrong foot by including the phrase

‘the UK’s only hub airport’ in his opening sentence; one that has become a mantra too far for many

people. Thereafter, he became more modest, saying the Heathrow management had been surprised

at the unequivalence of the decision in its favour.

He concentrated more on route development activities. The anticipated capacity after the third

runway is constructed (by 2025 allowing for faster processing of the planning process by way of

consent orders) will be 130 million ppa though this may mean some additional terminal space as

well. The aim is to connect 95% of global GDP through the airport. New routes can be delivered

despite PSO and rail constraints and ‘Brexit’ may increase the opportunities for PSOs, which are

currently regulated by the EU.

Compulsory purchase orders will be used to demolish a waste energy plant and some homes. He did

not mention the demolition of the British Airways headquarters building at Harmondsworth (at that

firm’s expense), which has angered the CEO of IAG but there was no opportunity to question him on

whether IAG airlines might start to relocate to other airports either in the UK or abroad.

The opportunity to improve local job prospects is, he admitted, a pay-off for support for the runway.

At the end of the session there was a symbolic presentation of a cake, part of a procedure that has

existed between Heathrow and Amsterdam airports for some years as the fortunes of Heathrow in

its quest to secure an additional runway have ebbed and flowed.

Investors call for more active promotion of the concept of airport privatisation

by trade bodies

Earlier, another session addressed the deal ‘pipeline’ and how the investment community can better

justify its role in infrastructure provision. Three of the panellists were members of an international

global investment organisation. With only four or five deals a year, and that rate likely to continue in

2017, it was suggested that the airport sector could learn from others, for example in the way their

trade bodies are more keen to intervene to promote private ownership. There seemed to be a

collective shout out to Airports Council International (ACI) to play its part in such a way rather than

merely making passive supporting statements.

Perhaps the most remarkable event took place towards the end when a question from the floor

asked about the ‘high profile failures’ of airport privatisation. The panellists were unable to name

one, somewhat surprisingly since the renationalisation of the Abertis concessioned airports in

Bolivia, of the Glasgow Prestwick and Cardiff airports in the UK, the almost total collapse of Coventry

Airport (UK) and the passing of New York Stewart International Airport back into the public sector

after only seven years of a 99-year lease stand out like sore thumbs, just to name a few.

AENA’s CEO Vargas declares himself a fan of privatisation

The partial privatisation of AENA almost two years ago has gone down in the annals of airport

privatisation as a roaring success and José Manuel Vargas Gómez, the Chairman & CEO, was invited

to tell its story. Presently AENA’s share price is around EUR130 (from a float price of EUR58) and an

Ebitda margin of 60% is being achieved.

The key to the success of the transaction had been the reorganisation of its tariffs, according to Mr

Vargas.

He added that AENA is ‘different’ for two reasons. Firstly because it is a ‘gateway to tourism’

meaning the Spanish resorts, islands and historic cities, and secondly because it is the gateway to

Latin America.

Traffic growth is being driven now by tourism (he admitted this is as much to do with other

countries’ problems as with any improvement in the Spanish tourist product) and by a rallying of the

Spanish economy after five years in the doldrums. But he warned that the alignment of these

conditions cannot continue forever and, hence, growth cannot continue at its current rate.

A regulatory review is due. AENA wants to freeze tariffs at their present rate while airlines continue

to press for a reduction. The general regulation continues to be enshrined in the law that brought

about AENA’s privatisation: i.e. that there will be no increase for 10 years. This has not had the

adverse effect on profitability that some feared, partly because of advances in non-aeronautical

revenue generation streams.

AENA still benefits from its ‘network’ (which again is enshrined in law) and has no intention of

shrinking it. Pressed on the prospect of further privatisation he said this might be better for the

existing investors as the entity would then be majority privately owned and better placed to attract

high quality executives.

In general he is a ‘fan’ of privatisation, which has secured AENA’s position as a global leader with a

“fantastic financial situation.”

Airport expansion limited by environmental and economic impact factors

A panel discussing ‘Permission to Grow – Tipping the scales in favour of airport expansion’ –

returned to the theme of the environment, and also to economic impact. Vincent Harrison of daa

bemoaned the lack of advance planning in Ireland and especially so around Dublin, where 20% of

GDP is created in the immediate environs of the airport. He said, not unreasonably, that it is the

(many) airports in Ireland that drive the economic growth there.

Swedavia’s Karl Wistrand, the Group CEO, spoke of seeking zero emissions around Stockholm

Arlanda airport while at the same time propelling a ‘Connect Sweden’ hub policy that would utilise

its position with regard to other Scandinavian, and Baltic, countries. He said that it took 26 years to

implement the agreement for a new runway there.

Patrick Burrows, the London City Airport representative on the panel, lamented the imposition of

draconian noise regulations there, while Munich Airport’s Ralf Gaffal was adamant that Bavaria is

not a state that is interested in the economic impact argument. Being probably the wealthiest in

Europe it does not need such impact and the argument for a third runway there sold itself simply

because people have the need to “get to places.”

Panel chairman Clive Condie of Luton Airport concluded, not for the first time, that there was a need

to share information with the public on airport expansion plans in a more focused and meaningful

way.

Schiphol group is virtually printing its own money

A session on how airports are financing growth brought together representatives from Gatwick

Airport, Schiphol Group, daa and Manchester Airports Group (MAG). All the members have been

active in major financing exercises in 2016.

A second runway is crucial to Dublin Airport, being situated as it is on the edge of Europe and with

no land link to the mainland. Half of all investment at the moment is directed towards that runway,

which has regulatory approval. A 12-year finance deal has been concluded at an interest rate of

1.55% which the CFO referred to as “acceptable” to laughs from the audience. He also said the credit

rated airport “plays to the bond market” and if it equity listed “things would be different.” He noted

the diminishing demand for bond market financing in 2016 (USD25 billion) compared to 2015

(USD42 billion) but could not offer a reason for it.

Gatwick’s CFO stated that the lighter regulatory regime applicable there now has led to increased

infrastructure spending, post RAB.

Robert Lenterman, the Director of Finance for the Schiphol Group, was openly bullish about that

organisation’s financial credentials, revealing that Schiphol Group “could have raised USD1 billion in

a day” this year had it wanted to, such is the appetite for a range of financing instruments such as

bonds and private placements. Inadvertently perhaps he was also questioning the need for

privatisation, which has been rejected in Amsterdam, though no-one picked up on it.

MAG’s Finance Director Iain Ashworth made reference to the renegotiation of a revolving credit

agreement with a consortium of banks similar to that at other airports except that the number of

participants has shrunk from 12 to eight since the first agreement. More pertinently he pointed out

the modular nature of the GBP1 billion expansion at Manchester Airport which will see Terminal 2

expanded and linked to Terminal 3 by a new connecting skywalk, while Terminal 1 will be made

redundant. The modular nature of the expansion means that any of the 30 separate projects can be

brought forward or put back as demanded by economic circumstances.

Millennials dictate the future for airport apps

The final session of the morning was presented by Brian McBride, a Chairman of several online retail

companies and once CEO of Amazon UK. His theme was ‘What can airports learn from GAFA

(Google, Apple, Facebook and Amazon) - digitalisation and innovation in retail, business and life?’

While disruption didn’t figure in the title it was there in spirit.

As in the case of the ex-Head of MI5 on the first day the presentation was entertaining and ranged

over a wide area: Moore’s Law (the doubling of computer processing power every 18 months);

miniaturisation; and how big IT companies come and go (for example Nokia, which “missed the

smartphone.”) There were three main messages:

1. E-Commerce is disrupting traditional retail activities;

2. It is ‘all about mobile’ – 50% of internet traffic is now on mobile devices;

3. Digital is changing the world of advertising.

In support of (1) Mr McBride said that Google is seeing its own core business under attack as the

need to ‘search’ for products and services has diminished. Many people have up to five ‘apps’ on

their ‘phones and companies have to fight to be seen there. Entire industries have grown up around

the mobile and the app, Uber being the best known example.

But there can be too many apps. For the ‘millennials’ personalisation and discovery are the

watchwords.

Unfortunately, for all the interesting insight into the world of CIT (for example how fashion is being

sold to adolescents via Snapchat) there was little that was directly relevant to the airport sector,

other than the observation that airport retail operates “in a bubble” and is often the vehicle for

stress purchases or time-killing entertainment rather than serious purchase consideration. Also that

airport operators should “make it easy” for teenagers to use their apps, because they are most likely

to use the ‘back’ button.

Day 2 – afternoon

Heavyweight panel makes the case for the next round of Brazilian concessions

The afternoon session of the second day was again streamed and the selected one was Stream B,

which consisted of a series of country and regional presentations similar to Day 1 except that deals

are not necessarily imminent. It was chaired by Curtis Grad of Modalis Infrastructure Partners.

In the light of the proximity of the third tranche of concessions in Brazil, that country opened the

proceedings with presentations and a panel discussion involving representatives from regulators and

operators in Brazil and Argentina and also from Flughafen Zurich, which is already active in Brazil.

The panel session coincidentally took place on the day the concession terms for the third tranche

were to be advised in Brazil.

Brazil’s credentials for investors include the fact it has by far the largest population on the continent,

is the third biggest domestic air travel market in the world and has had the largest traffic growth

there in over a decade. But the recent economic crisis has led to significant capacity reductions.

The combined bids in the first two tranches amounted to USD15.2 billion and USD8.67 billion has

been invested in the relevant airports to date. There has been more investment in the last five years

than in the previous 16.

There are numerous changes in the concession terms for this round including the opportunity for

concessionaires to vary aeronautical charges during the day, to an average set by ANAC, the

regulator.

Concession fees on this occasion will be paid at a rate of 25% upfront, then 75% thereafter with a

five-year period of grace. The terms for the four airports (Porto Alegre, Salvador, Florianopolis and

Fortaleza) vary from 25 to 30 years as they have done in the past. The Executive Secretary of the Civil

Aviation Secretariat was asked on the sidelines why that is the case and could only reply “it varies by

airport” which is not really an answer.

Bids will be classified in descending order on their size and initial fee payment proposal. Data room

documents will be available from 16-Dec-2016 in English, with Spanish to follow later (date

unspecified). The auction will take place at the São Paulo stock exchange on 16-Mar-2017. Previous

concessionaires can participate for all four airports but would be limited to two of them, one in each

in the north and south.

Several observations were made about previous rounds, including that emergency CapEx was

required in some cases (for example Belo Horizonte) when state operator Infraero had been found

not to have done its job properly. Infraero’s holding is down to 47% and it will be phased out as a

shareholding entity in the future.

Dario Rais Lopes, the CAA Secretary, concluded the session by insisting that “this is the right time”

for investors but in the light of questions about previous over-valuations and overpayments, the

economy, the political background and blunt comments about the “catastrophic financial situation”

at Rio de Janeiro’s Galeão airport there remains a degree of the dreaded ‘uncertainty’ as to whether

the government’s more concessionaire-friendly approach will be enough to secure the returns it

seeks this time around.

Russia – easier to do business there, now

Russia, a country not well known to most delegates, attracted a large audience nonetheless to a

sweeping overview by VTB Capital’s Peter Stonor. He referred to the series of financial crises that

seized Russia from 1997 to 2010 but insisted that despite current concerns (depressed oil prices and

politically generated economic sanctions) the economy is more resilient now and is focused on

market-led solutions, such as a floating exchange rate that has been in place since Oct-2014 that has

led to a 34% gain by the ruble against the euro in 2016.

Air traffic has grown throughout the present crisis despite the emergence of the ‘staycation’ concept

in Russia, but international travel remains low at an average of one trip per person per annum.

The airport system is still oriented heavily towards the Moscow system (Sheremetyevo,

Domodedovo, Vnukovo, and now the fringe Ramenskoye/Zhukovsky), with passenger traffic at St

Petersburg, the second city less than one fifth than that of Moscow and it is at those airports where

the largest growth has been achieved (5%) in recent years.

Mr Stonor referred to the 2010 concession of St Petersburg’s Pulkovo Airport (Northern Gateway

Partners), where a USD1.2 billion investment has been made and to the recent on-sale of equity to

Qatar Investment Authority for USD240 million (comparable with international benchmarks), the

diminishing involvement of Fraport (now 25%) and the exit of Fraport’s partner (as it is in Greece),

Copelouzos.

St Petersburg represents the largest foreign investment to date in the Russian transport sector.

In response to a question from the floor about difficult negotiating circumstances in Russia that were

highlighted at a previous GAD by a senior representative of Northern Gateway Partners he

responded by saying that it was no worse than at any other bilingual negotiation, that the provision

of dual language documentation has since improved and that “there are no difficulties in

transactions in Russia these days”.

Turning back to Moscow, millions of dollars have been spent by both the public and private sectors

to improve the airports there and agreements have been signed to continue both the privatisation

efforts and consolidation of management and operations. Vnukovo Airport is now 74.9% in private

hands and Sheremetyevo 70%, leaving 25.1% and 30% respectively with the Russian Federation.

Moving on to the regional airports (which are freehold concessions) the three main investors were

identified as the Basel Aero consortium (Basic Element, Sberbank and Changi Airports International),

which is mainly active in the south of the country, the Airports of Regions consortium for which

Ekaterinburg is the main asset, and Novaport, which has interests across the country.

There are few active or potential direct Russian investors in foreign airport assets (VTB Capital is

one), or foreign investors into Russian assets, but there was insufficient time to pursue the reasons

for that state of affairs.

Iran – lots of potential for investors but that elephant is back in the room

A presentation on Iran (‘Coming in from the cold – what airport infrastructure does it need and

opportunities for international investors’) was made by the Business Development Manager of Vinci

Airports, which has established itself as first mover in this potential, developing yet still uncertain

market.

M. Rémi Maumon de Longvialle identified Iran as having the second largest economy in the Middle

East, with highly developed industry and GDP growth rate of 5% anticipated since the curtailment of

most economic sanctions and vast potential for tourism.

However, right now there is very low market participation by airlines with only 0.3 trips per annum

per capita.

The presentation focused on two airports where Vinci is already involved – the one servicing the

holy city of Mashhad, also heavily industrialised, 900 km from Tehran and difficult to access by

surface transport, but which M. de Longvialle candidly admitted would be unlikely to be on any

westerner’s visit list for now; and Isfahan, the third city by population, the former capital, only three

hours by car from Tehran but which would be popular with foreign tourists.

Both airports fit Vinci’s requirements of having good growth prospects, but which also need a high

quality partner to deliver a development strategy.

An MoU has been signed for a BOT agreement to be concluded by the end of 2016, to close in Apr-

2017 (a year in which there is a Presidential election) and for Vinci operations to begin in both cases

in 2Q2017.

Of course the ‘elephant in the room’ (a phrase used almost as often as ‘uncertainty’ throughout the

event), is the ‘Trump effect,’ meaning the potential for the return of sanctions, which would hit

Boeing, Airbus and just about everyone else. M. de Longvialle summarised Vinci’s position as being

“we will take risks, but not do crazy things”.

Middle East – more PPPs expected and a surprise announcement from Oman

New infrastructure was the main hook for a session on the Middle East countries which looked at

the drivers behind their aviation aspirations, and which involved representatives from Bahrain,

Oman, IATA and the companies Airport International Group (AIG) and Egis.

Bahrain Airport, whose large expansion project has made little news lying as it does in the shadow of

the regional giants, is driven by capacity constraints but is determined to be the most efficient in the

region in order to differentiate itself.

Jordan’s Queen Alia International Airport was described as a ‘test case’ for PPPs in the region and it

is anticipated there will be more of them (starting with Saud Arabia in 2017), while the Jordanian

capital’s airport itself was expanded under a Phase 2 procedure that completed in Sep-2016.

Possibly the most dramatic announcement at a conference where the lack of (pipeline)

announcements was a constant theme came from Sheikh Ahmed Sultan Al-Hosni, the CEO of Oman

Airports Management Company (OAMC). Referring initially to the five-year project that is under way

there to improve the Muscat and Salalah airports with new terminals and that five new runways had

been opened since the beginning of 2015, he said OAMC’s vision is for both to be in the top 20

airports globally by 2020 in terms of quality standards (e.g. Skytrax).

The existing terminal building at Muscat International airport will be retained as a low cost facility

with no variation in charges between it and the new terminal.

But the biggest announcement was still to come, namely that Oman would start looking again

beyond its borders for foreign investors (there was a failed 25-year concession deal that lasted from

2002 to 2004 on the then Muscat Seeb and Salalah airports) and a 30% equity share would be made

available to suitable parties at the end of the five-year project. Moreover, OAMC will seek to

become a foreign investor, itself.

Canada – to privatise or not?

Session chairman Curtis Grad was in his element as the next panel discussed the potential for

privatisation of Canada’s main airports, having himself been directly involved in the management of

three airports there.

The panel comprised airport executives from both sides of the privatisation argument including the

retiring CEO of Aéroports de Montréal (nominally for it) and the CEO of Edmonton Airport (nominally

against it) as well as an investor (OTPP) and a lawyer (McCarthy Tétrault).

The post-1992 Canadian airport paradigm is a complex one with airports able to charge what they

like, which gives them a high credit rating despite having to pay 8-11% of revenues as taxes and

which would be marginally attractive to investors. On the other hand those high charges have been

driving potential passengers into the arms of US airlines operating from lower cost airports over the

border, the length of the country.

The argument was made is that ground rent payments are egregious and that ‘pay-back’ (to the

government) has already been made. Many airports are experiencing difficulties attracting external

entities to invest, for example in hangars.

One proposal that has been considered by Credit Suisse, which is advising the government on the

next step is the ‘bundling’ of a privatisation process but that was rejected by OTPP’s SVP

Infrastructure, Andrew Claerhout, who supports the notion of starting off with one or two or the

smaller airports that are clear of debt to test market appetite. (Rapporteur’s note: he might also

have mentioned the failure of such a bundling procedure in the case of BAA in the UK, where it took

decades to unravel a privatised monopoly).

M. Claerhout referred to OTPP’s freehold airport investments in Europe and lamented the fact that

no regulatory scheme exists in Canada under which airports have moved from public to private

control, hinting that a light-handed regulatory scheme would be required. As a deal-maker OTPP

needs control over its operations “to make things happen,” he said, echoing many such previous

observations. He also mentioned government minority ownership in Europe, in airports invested in

by OTPP, suggesting he would be content with a similar scenario in Canada.

Edmonton Airport’s Tom Ruth expressed his surprise at how quickly events were moving in Canada

and then went on to present Credit Suisse’s initial proposals, which are:

Retain the status quo;

Monetise current leases, with an extension where appropriate;

Lease to a for-profit organisation (instead of the current non-profit ones);

Sell to the current airport authority;

Sell to a full profit entity, outright.

There are legal issues imposing on any procedure because current leases run through to 2072. The

word ‘expropriation’ has been mentioned and the government has the right to do that. At Toronto

Pearson International Airport the government holds right of first refusal on any future transaction.

The consent of bondholders would be needed in many cases. In British Colombia aboriginal land

claims (which recently have become an embarrassment to the government) further compliance

matters.

Moreover, a workable privatisation model must take into account the competitiveness of the

airports. Referring back to an earlier session on the morning of Day 2, it was revealed that most

customer complaints are about government services at airports rather than about those under the

control of the management.

As for the future timing of this potential sea-change in how Canadian airports are managed, financed

and invested in, the expectation is that a formal proposal will be made in advance of the next

Budget, i.e. by Feb or Mar-2017.

Latin America – Mexico creates an innovative trust to handle the transfer from

old to new airports in the capital

The penultimate session of the second day returned to Latin America, to a discussion on airport

projects and ownership there and immediately to a further conversation on the fate of Infraero in

Brazil, an entity that was described as being ‘redesigned’ by Dario Rais Lopes, who returned to this

panel. By that he meant that it is exiting both air traffic services and existing concessions and will

reduce from 12,000 to 5,000 employees. Its future lies in a joint airport services venture with

Fraport.

Mr Lopes also mentioned the separate federal state airport privatisations that are taking place

outside of the national level ones and that there might be a role for Infraero in those. He did not

allude to the suggestion made three years ago when the diminution of Infraero was first mooted

that it might become involved in foreign transactions.

A rather laid back presentation was made by the President of the Airports Regulatory Authority of

Argentina which detailed the original privatisation of 33 airports (to AA2000/Corporación América)

in the midst of a recession in 2001, the subsequent renegotiation in 2007 and that more airports

might be built in Argentina “but it is open to debate” and not much more.

AA2000’s Matias Patanian said that dealing with the state was very hard in the early 2000s but his

company is now handling 100 million ppa. His biggest problem still is the competition from long

distance buses.

An update was give on the new Mexico City airport, where the private sector is heavily involved in 52

construction packages at an airport that will end up with six runways eventually, but not in the

actual financing; at least not yet.

One innovation has been the creation of a trust to handle the transition between the old and new

airports so that the original one financially supports the new one. 40% of the financing of the new

airport will be from this trust with 60% from bond issues, which have been oversubscribed. A

revolving credit facility has been concluded with a consortium of 13 banks.

OPAIN’s representative Andres Ortega Rezk spoke about expansion works at Bogota’s El Dorado

International Airport raising capacity to 65 million ppa and that the new ‘El Dorado II’ airport that is

scheduled to open in 2022 “will have to compete with us.”

Andrew O’Brian, the CEO of Quiport, which he insisted is the first fully privatised airport to be built,

made reference to shareholders Aecon (Canada) and CCR (Brazil), the latter of which is growing in

significance in the region.

Africa – Bridesmaid Revisited

Africa is often the bridesmaid at investment conferences and was the last region to present here but

a hard core of interested persons stayed on to hear two competent presentations from the Rwanda

Civil Aviation Authority and the Tanzania Airports Authority respectively.

Both covered similar ground, namely the difficulties that Africa still has in attracting transport sector

investors.

Prudence Tuyishimire of the Rwandan CAA spoke of there being no air transport ‘culture’ in Africa

and joked about a 1:20 ratio between passengers and meters & greeters. A 1% growth in passenger

traffic continent-wide in 2015 was offset by a similar fall in movements, which at least shows that

load factors are increasing, and cargo grew at 3.5%. However, in Rwanda, passenger growth was

+13%, in line with a spurt in GDP growth.

A boom in tourism is both happening and anticipated, led by government activity in the M.I.C.E.

segment. Air Transport is thus a priority for the government and the national airline is protected as

far as possible.

Returning to the wider African scene he said that many international airports are full to capacity,

which has prompted an African proverb along the lines of “if you don’t see a crane beware the lack

of capacity.”

Others have capacity “but not when required,” which left some delegates scratching their heads.

On a positive note there is a much greater level of investment and of construction projects across

Africa (which is confirmed by the CAPA Global Airport Construction Database). He referred

specifically to Rwanda’s own Kigali Bugesera Airport, which is scheduled to open in 2019, a USD800

million PPP with a secured infrastructure investor, Portugal’s Mota Engil Engenharia e Construcao

Africa, a Chinese company having withdrawn from the project in 2013.

However, he was honest enough to admit that key challenges remain such as the securing of further

private sector finance, the high cost of the infrastructure, connection challenges and the all

pervading failure of liberalisation measures across the continent as embodied in the Yamoussoukro

Agreement.

Salim Msangi, Acting Director General of the Tanzania Airports Authority followed a similar line.

Linkages are still weak and, surprisingly, to this day it is still often necessary to travel from Africa to

Europe (or the Middle East) and back again simply to move within African countries.

The scarcity of government financing is paramount; the small scale economies of many African

countries permit no other outcome.

The low cost segment has been a disappointment there. Clearly referring to Fastjet without actually

naming it he said they have not done what was expected.

Leadership, land, people and unambiguous political strategy is still required.

This presentation brought the main airports section to a close - the third day was more airline-

oriented - and it finished with a similar theme to the first presentation on the first day, one of the

more successful concession or PPP deals, which must have given some comfort to the delegates as

they made their way home, and perhaps a little more certainty.

End.