PPP PROJECTS AND AIRPORTS:

EXPERIENCE AND STATE IN WORLD REGIONS

Anna Tomová Department of Air Transport

University of Žilina The Slovak Republic

anna.tomova@uniza.sk

This paper has been originated as a part of the National Grant Scheme of the Ministry of Education of the Slovak Republic - VEGA 1/0341/09 as well as within GAB research project works framework.

Motives for private participation in airports are different. Similar diversity can be found in ways through which private sector participates in airport business. This paper is aimed at public-private partnerships in the world regions, providing regional quantitative data as well as the most interesting examples of airport public private partnership schemes.

Private Sector in Airport Business

Thirty years ago all major airports were public entities. They were considered to be a strategic part of infrastructure without any reason for transfer of ownership or management to private sector. Nowadays, airports became commercialized and devoluted from public sphere using different modes of airport ownerships and management with private sector participation. Neufville and Odoni (2002) describe eight combinations including those without private presence that still exists in some countries. Different types of public-private partnerships (PPP) according to the site´ s responsibility can be found in European Commission Guidelines for successful PPP (2003). Another public private partnership typology is used in Hammani (2006) showing four main types of PPP: contracts (lease contract etc.), concessions (ROT etc.), greenfields (BOT etc.) and divestures (partial or complete assets sale). This typology is followed also in the World Bank Private Participation Infrastructure database. Generally, PPP typology is rather vague all over the world as any concrete PPP scheme is unique relationship between public and private.

Air transport business belongs to infrastructure business having its own particularities. Current airports are complex entities providing a wide range of business activities, core (aeronautical) as well as non-core (commercial) ones. When comparing within air transport industry, airports have significantly better results in the operating margin ratio than airlines (Graham, 2008). Long-term perspectives of growth in air transport industry (STATFOR 2008) create another reason for private sector interest to be present in airport business. There are also other - country specific - needs that attract private investors (non sufficient public funds for airports modernization or new airports construction, public dissatisfaction with ineffective airport management, governmental economic policy following privatization wave etc.). Moreover, PPP schemes can be considered to be specific channels through which transnationalisation of airport business is being realized by global airport players.

Summarizing, airports assets are alluring for private sector from various reasons and – on the other hand – public sector inclines to airport PPP also from variety of reasons. In the following text, we provide description of the current state in airport public-private partnerships in the world regions. Some data difficulties have appeared during this work as the WB PPI database contains only developing countries (and the list is changing due to economic and social growth in some countries (i.e. the Czech Republic listed as developing country last years is now excluded from the database). The data for developed countries have been obtained mainly through national PPP databases.

Public Private Partnership and Airports in North America

Canada has developed considerable expertise in the PPP field especially in cultural facilities and sports. Each state in Canada has its own authority to promote effective use of partnership. In 1994, National Airports Policy was published. It started divestiture process of main airports in the country. Some airports were completely sold but the airports of the highest importance were leased for operations, management and maintenance purposes. Another act that is very unique in the world separated in 1996 ANS duties from Transport Canada to newly created company NAV CANADA. This is fully private non-share and non-profit company that has purchased the system from $1.5 billion. As far as it has the monopoly on provided services it is subject to regulations and charges has even dropped for 30%. According to National Airport Policy, Transport Canada1 owns, operates or subsidizes 150 from 726 certified airports. About 94% of all passengers and cargo are handled by 26 airports that create the core of National Airports System. Federal government retains their ownership but operations, management and maintenance duties are transferred to currently twenty-one Canadian airport authorities. Those authorities are created by local municipalities, cities, local chambers of commerce, etc2. They are non-share, non-profit corporations. Smaller airports were offered to municipalities and cities as well as to private sector in the named order. Even before long-term leasing where private sector has only a minority (or even none) shares, private investments were used for building new terminal at the Toronto Pearson International Airport in 1991. Lokheed Air Terminal, Inc. – private operator and equity partner was in that time biggest airport operator in the USA3. Despite that private sector has been involved in social-service agencies since ‘60s in the USA, usage of PPP schemes is relatively small here. In 2006 it covered only 14% of all closed projects for that year. They were non-profit private companies that were met with higher popularity as country has been ‘historically loathe to rely solely on centralized government structures for the provision of public goods’ (Osborne, 2000). Nowadays, National Council for Public Private Partnership collects information about projects, describes PPP projects as such and provides helpful information for further investors. Projects are involved in various segments of PPP market – public safety, public works, infrastructure, water/waste, military sector, e-government etc. (there are for example 150 privately run prisons in the US – largest number in the world4). Up to 2008 over thirty states have passed the laws to implement PPP

1 Transport Canada – Ministry of transportation in Canada 2 Vancouver International Airport Authority is an example where members of Board of Directors are nominated by Institute of Chartered Accountants of Ontario, Regional Municipality of Peel, Government of Canada, Regional Municipality of York, Chambers of Commerce, Province of Ontario, Regional Municipality of Halton, City of Toronto, Regional Municipality of Durham 3 In 1993 Lockheed Air Terminal, Inc. operated 6 airports and provided services at 22 airfields worldwide. Company doesn’t exist any more. 4 KARPOVA, K.: Public-Private Partnerships (PPP) in the United States: A Snapshot of Recent Developments and New Directions; 2002; IP3.org [http://www.ip3.org/pub/publication2002_010.htm]

projects. Study of McKenna Long & Aldridge LLP (law company) describes several mistakes that emerged during processing of different projects. Besides all this mistakes that were taken into consideration for further projects, most of them are very successful that is proved by ascending interest of public sector for this type of projects. Although airport’s ownership is mostly public in the USA, several terminals at some airports were built by private airline companies that were also responsible for their management and operations. TWA Flight Center or Worldport at the New York JFK Airport or United Terminal at the Chicago O’Hare Airport are some of the well known examples. Anyway most of the services like ticketing, clearing, baggage handling are now provided by private companies. According to some estimates ‘as many as 90 percent of the people working on the nation’s largest airports are employed by private firms’ (Wells, 2003). Airports Council International (ACI) defines six entities that are responsible for airport operations in USA. They are shown on Figure 1.

33%

30%

15%

9%

7%6%

City

Airport Authority

County

Port Authority

State

Other

Figure 1: Providers of airport operations and management in USA

In 1997 started pilot program initiated by FAA for airport privatization called Airport Privatization Pilot Program. Applications were posted by six airports of which only one, Stewart International Airport, was finally accomplished. In 2000 it was leased for period o 99 years to British-owned company, National Express Group, but in 2007 remaining 93 years of lease were acquired by public Port Authority of New York and New Jersey. Last privatization attempt started in 2006 for Chicago Midway Airport. As in case of Canadian privatization airport was in October 2008 leased for 99 wears to Midway Investment and Development Corporation consortium consisting inter alia of Vancouver Airport Services. One of the most popular PPP projects presented usually as an example of the USA public-private tandem in airport business is reconstruction of Terminal 4 at New York JFK Airport. In 1997 Port Authority of New York and New Jersey, an operator of JFK Airport, entered into 20-years partnership with a private consortium, consisting inter alia of Amsterdam Airport Schiphol, to rebuild and operate Terminal 4 for $1.4 billion making it biggest airport PPP project at that time.

Public Private Partnership and Airports in Developed Europe 5

United Kingdom is the pioneer in partnerships with private sector In Europe, introducing a PFI (Private Finance Initiative) concept in 1992. Nowadays it is still the leader in setting up successful projects, but most of the projects are from health and education sphere and only one project has been assigned to the airport development yet.

Sector distribution of PPP in UK

7363

57

240156

202

Local Government

Transport

Defence

Health

Others

Education

Figure 2: Sector distribution of PPP in UK

Inverness Airport6 is operated by government owned company Highlands and Islands Airports Ltd (HIAL). In 1998 PFI contract was granted to Inverness Airport Terminal Ltd (IATL) to build and operate new terminal. But in 2006 HIAL made a deal for buy-out of terminal back to the Airport for a price £27.5 million. Other airports in the UK are mainly privately owned. Many other developed EU countries have their own institutes, public or private, running web portals and offering consultancy services in the field of PPP. In Spain, it is Foro PPP, in France it is covered by Ministry of Finance, in Germany almost each Bundes state has its own portal for PPP projects (for example Brandenburg portal for PPP). International Financial Service London has made a research for PPP projects in EU and UK. According to data form their report collected from Public Private Finance and DLA Piper, Germany has the largest number of partnership with forty projects, Spain is the second one and France is following with thirty-eight and thirty-four projects. From financial point of view, Spain is the leading country followed by France and Italy. Highest number of projects is connected with transport infrastructure with domination of road sub-sector, while rail and other infrastructure (bridges and tunnels) are also in large numbers.

PPP projects in EU

40

38

342019

97Germany

Spain

France

Italy

Ireland

Others

Figure 3: Distribution of PPP projects (number based) in European Union

5 In this part of the text new member countries are not included. They are analysed separately as in the WB PPI database they are considered to be developing countries. 6 Refer to PartershipUK database from March 2009. [http://www.partnershipsuk.org.uk/PUK-Projects-Database.aspx]. The only airport is the Inverness Airport in Highlands’s area, with private participation in terminal reconstruction.

Several airports in continental developed Europe have already experienced partnership between private and public sector on management and operations basis as well as with primary developing types of PPP like BOT in Europe as well as out of the region. Generally, continental Europe follows various mixes in airport assets ownership, realizing PPP schemes abroad. Fraport AG that is involved in many projects over the world is a company where about 52% of shares owned by public sector represented by City of Frankfurt and Sate of Hesse while rest is in the private hands of several companies. Amsterdam’s Schiphol Group has been until 2007 fully in public hands. State of the Netherlands, City of Amsterdam and City of Rotterdam owned together 100%, but on December 1, 2008 agreement was signed with Aeroports de Paris and 8% of shares were transferred to new owner. Schiphol acquired 8% of Aeroports de Paris in turn. Federal Government in Germany announced privatization program for airports in 1982. Since then five of 18 international airports in the country have been partially privatized. First privatization attempt started in 1996 namely for Berlin airports but was canceled in 2003 due to private investor withdrawal. Therefore Düsseldorf Airport became the first one to be partial privatized in the country. Hochtief AirPort GmbH is a shareholder in Düsseldorf and Hamburg Airport, which has benefited by getting a new terminal partially built from private investments as well. In 2002 was signed leasing contract for 99 years period with consortium named Berlin-Brandenburg International Partner led by IVG Holding and Hochtief AirPort. Agreement contains clause about investments of €1.7bn, while the government agreed to invest for a rail and road infrastructure. Latest PPP airport project listed in the developed EU but realized abroad is BOT agreement for Riga Airport, Latvia. Three consortiums participated in bidding process among them Hochtief AirPort, but finally on March 3, 2009 winner was announced. Consortium of Latvian construction company and Turkish TAV were awarded a concession for building a new terminal and operation of entire airport. Main purpose is ‘Development of RIGA International airport infrastructure to provide attendance of 20 million people per year.’7 TAV has informed that is planning to invest about €250 million - €300 million. Another example of Hochtief AirPort involvement is well known greenfield project of Athens International Airport, Greece. Consortium entered into the agreement for 30-years with Hellenic government in 1995. Greek State holds 55% and private investor, with majority of shares held by Hochtief, owns the rest. Project is often presented as the success of using the institute of public-private partnership due to three months advance of the project development.

Public Private Partnership and Airports of Australia and New Zealand

Australia followed the UK PPP example in improving infrastructure, school and health system and other public services. In database administered by National PPP Forum thirty-nine PPP projects are listed. Majority (one fourth) of the projects are from transportation sphere, mostly covering road transport. Australia has also many projects covering housing, state services like court houses or prisons as well as one project from defense area (Defense Headquarters Joint Operation Command Facility).

7 Portal for PPP projects in Latvia: Development project of RIGA International airport; [http://www.ppp.gov.lv/en/view_1843.html]

25%

20%

21%

13%

8%

5%5% 3%

Transport

Water&Waste

Other

Health

Education

Housing

Prisons

Energy

Figure 4: Sector distribution of PPP in Australia

According to Airport Act from 1996 preparation phase of privatization of main airports of Australia was launched. The first phase covered the sale of leases on three major international gateway airports, at Brisbane, Melbourne and Perth, and the second phase the sale of leases on a further fifteen airports. Privatization was in the form of long-term leasing for 50 years with an option to extent for another 49 years. Westralia Airports Corporation (WAC) is an example that operates Perth Airport, third largest airport in Australia. Most of the shareholders are created by different kind of funds like Officers Superannuation Fund. After private partner entered the company the process of airport improvement started. An announcement of A$ 1 billion vision was made to deliver a new airport in three phases. New terminal, hotel, parking facilities and other facilities are in this master plan. In New Zealand different ownership structure is observed for three major airports. Christchurch airport is owned by government, Auckland is a listed public company and Wellington was privatized in 1998 with 66% of private capital.

Public Private Partnerships and Airports of Latin America

According to World Bank statistics, Latin America is the most progressive region from developing countries in PPP projects application. In more than twenty years since 1987 it accommodated 1,252 projects. Most of the countries of this region have experienced dictatorship government that slowed down development of almost all infrastructure areas as well as in sphere of health or education. With often low and unstable state budgets countries searched for another source of financing of new projects as well as for experienced partners for better effectiveness of operations and management. Public private partnership in different ways was therefore accommodated in policy of most of them. The highest number of projects (about one fourth) is held in Brasilia, the largest country of region. 326 projects had been agreed until 2007. It is followed by Argentina (193), Mexico (176) and Columbia (132). Chile with 107 projects was the spearhead with development six of its first partnership in 1987.

PPP in South America

Brazil; 326

Argentina; 193

Mexico; 176Colombia; 132

Chile; 107

Peru; 56

Others; 262

Figure 5: Distribution of PPP projects in South America

When discussing airport sector with regard to PPP, paradoxical situation can be observed in this region. Country with highest number of PPP projects does not have any one concerning airport infrastructure. But in 2008 has Brazilian government started consideration for using private public partnership for several airports in the form of concession or BOT type. Chile experienced the highest interest from public and private sector for co-operation in airport sector in the region.

PPP airports in South America

Chile; 8

Colombia; 6

Mexico; 6Argentina; 4Dominican

Republic; 3

Ecuador; 3

Peru; 3

Others; 10

Figure 6: Distribution of airport PPP projects in South America

All airport projects in Chile are of concession type. Concession for the main airport of the country, Santiago International Airport, in Santiago de Chile was in 1997 granted to consortium SCL Terminal Aéreo Santiago S.A.8 for 15 years. Under this concession, that has some features of BOT type, more than $300 million has been invested and new terminal was inaugurated in 2001. After this several other developments like control tower, cargo terminals or sewage treatment plants have been developed and nowadays is Santiago International

8 One of the shareholders is already mentioned Vancouver International Airport Authority.

Airport considered the safest airport and the airport with the best service in the Latin America9. Third busiest airport in Latin America is El Dorado International Airport, Bogotá, Colombia, that has experienced advantages of public private partnership as well. In 1995 concession for building second runway was granted to a special-purpose corporation. As in USA one airport terminal was built in 1998 and operated privately by Colombia’s national carrier Avianica. Since 2006 is airport operated under the concession by Colombian’s company Opain with participation of Swiss Flughafen Zürich AG. Concession is granted for 20 years with condition of investment of at least $650 million that should include construction of new terminal. Mexico followed privatization path sketched by Australian and Canadian cases. In 1998 three regional corporations were created with an aim to operate a group of airports in specific geographical region. They are government-owned corporations with its own capital and legal identity listing 85% of shares on national stock exchange as well as on NYSE. Table 1: PPP airports statistics in Latin America Total number of projects 43Country with highest no. ChileTotal investments $9,285 million

Country with highest investments MexicoMost expensive project Concession for 33 airports for

Aeropuertos Argentinos 2000; Argentina

Concession (BOT, RBOT, etc.) 32

Divestiture 1

Greenfield project 6

Management and lease contract 4Source: WB PPI database. PPP schemes in the region cover all PPP varieties, divesture including. However, the share of divesture projects is only 2,3 % on overall projects number.

Public Private Partnership and Airports in East Asia and Pacific Region

East Asia and Pacific belong to the regions with the remarkable economic growth over the world. The region is also very advanced in developing PPP projects for different spheres of public interest. In the beginning of 2009, 1,228 partnership projects are listed in the World Bank database with more than 60 % of them developed in China. China has experienced public private partnership since 1980s with highest interest in energy sector, following by water and sewage and transport sector. Total investments of $99,626 have been brought by private sector for within these partnerships. Largest number of projects and also share investments are of greenfield type. Only 36 projects that carried 5% of investments have been canceled or distressed. In other countries energy sector is also prevailing, followed by transportation sector mostly. As well as in China, most of the investments have been used for brand new, greenfield projects.

9 Foreign investment committee: Invest in Chile, an Opportunity; 2007 (propagation material of Geverment of Chile)

PPP in East Asia and Pacific

China; 782Malaysia; 96

Thailand; 94

Philippines; 88

Indonesia; 87Others; 81

Figure 7: Distribution of PPP projects in East Asia and Pacific Majority of projects in airport segment is holding China. With its seventeen airport projects is covering the majority (62%) of the projects in region also when talking about the financial investments (more than 50%). Partial divestiture of the airport is the most common type of private participation with the highest number of projects from the developing regions. Greenfield projects are also in the highest number within this region.

PPP airports in East Asia and Pacific

China; 17Cambodia; 3

Malaysia; 2

Thailand; 2

Lao PDR; 1

Philippines; 1

Vietnam; 1

Figure 8: Distribution of airport PPP projects in East Asia and Pacific As it was mentioned, most of the airport projects are divestiture one in China. In 1998 Civil Aviation Administration of China released the investment guidelines for foreign companies to take up to a 49% in the airports. Wuhan Airport was the first one where private company from Honk Kong obtained its 30% share. Before that four large airports were transformed into the join-stock companies with shares publicly listed on the stock exchange. Xiamen Gaoqui International Airport under the governance of Xiamen Airport Development Co. Ltd. since 1996 has 25% of shares listed on the Shanghai Stock Exchange. In shares of 1998 Shenzhen International Airport, currently 5th busiest airport in country, were put in the stock exchange. Airport operates the area of Honk Kong and is the favorite alternative especially for the low-

cost carriers. Construction of Terminal 3 that is considered to be the architectural masterpiece is taking a place since the beginning 2008. Financing is provided by the company’s own resources as well as by the public investments from government or the city. Stock listed shares have also two airports in Shanghai that are the 3rd and 4th busiest airports in China. In 1999 new cargo terminal was built at the Shanghai-Pudong Airport by the newly established company Shanghai Pudong Airport Cargo Terminal Co., Ltd. This company is a joint venture company with 51% of airport’s shares and 49% of private shares. One of the investor is the Lufthansa Cargo AG that owns 29% of shares. Together $57.9 million were invested. Later on more airports followed this trend and were transferred to the joint-stock companies with limited number of public shares. Private investments were then used for development of these rapid-growth airports. In 1991 Malaysian Parliament passed a bill to separate the Department of Civil Aviation (DCA). DCA remained the regulatory body and Malaysia Airports Berhad, newly created entity became responsible for airport operations. In 1999 this entity became the first airport company to be listed in Asia. It covers the operations of 39 airports including Kuala Lumpur International Airport, 7th busiest airport in Asia. Cambodia has chosen different way and did not offered airports for privatization or just for stock listing. Ownership of the airports included in the PPP projects remains in the public hands and concession for 35 – 40 years was granted for one private company. Societe Concessionaire de L'Aeroport (SCA) operates three international airports there. Concession for first, Pochentong International Airport, was granted in 1995 for 45 years and other two were granted in 2001 and 2006. Company has only foreign shareholders, Muhibbah Engineering from Malaysia and Vinci from France. Total investments amounts $432 million. Another example of using private experience and investments is Lao-Japan Airport Terminal Services Co., Ltd that has built and operated a new terminal in Vientiane International Airport, Laos. European capital can be found in new terminal at Ninoy Aquino International Airport, Philippines, where BOT contract was signed with German Fraport AG. Table 2: PPP airports statistics in East Asia and Pacific Total number of projects 27Country with highest no. ChinaTotal investments $8,099 millionCountry with highest investments ChinaMost expensive project Partial divestiture of

Hangzhou Xiaoshan International Airport; China

Concession (BOT, RBOT, etc.) 5Divestiture 11Greenfield project 9

Management and lease contract 2Source: WB PPI database.

Public private Partnerships and Airports in Sub-Saharan Africa Sub-Saharan Africa is the sharpest example of developing countries. Reason for fragile social and economic position of the region can be found going deeply in history as well as the high number of civil or other wars that destroy these countries and avert them from further development nowadays. Governments are very unstable and financial situation is very poor with high rates of inflation and low incomes. In Sub-Saharan region World Bank is listing about 380 projects. Nigeria is a leading country with only 13% of all projects. There are 45

other countries in this region using Private-Public Partnership that makes it a region with largest spread. Most of them list in average six to eight projects. Other active countries in regions are South Africa, Tanzania, Ghana or Kenya that together with leading Nigeria covers 36% of all partnerships. Most of the projects are new greenfield structures from telecommunication sector that is still in shortage within this region. According to the 12th meeting of the Conference of the African Ministers of Transport and Communications Africa needs: “The Transport in Africa Platform of Action recognizes that there is a need to develop integrated transport systems to provide the continent with safe, reliable, efficient and affordable infrastructure and services so as to promote regional integration, address the needs of the poor, reduce the impact of HIV/AIDS, empower women, underpin economic growth and enhance Africa’s position in global markets.” (UNECA, 2002) NEPAD (The New Partnership For Africa’s Development) in its document Communique of the African Ministerial Forum on Integrated Transport supports the idea of exploiting the PPP institute when stating that ‘Given the capital-intensive nature of transport infrastructure, a public private sector partnership (PPP) should be adopted, which should focus on concessioning to allow the transport system to fund itself for sustainability’. (NEPAD, 2003)

PPP in Sub-Saharan Africa

Nigeria; 50

South Africa; 33

Ghana; 16

Kenya; 16Others; 238

Tanzania; 21

Figure 9: Distribution of PPP projects in Sub-Saharan Africa

Aviation in Africa is generally on the same low level as other industries. Most developed country is South Africa. Rest of the region still needs further development to achieve high standards of developed world. Most of the airlines on the European black list10 are from this area. Although only one airline is a member of international airline alliance there is one more with a status of associate member airline and one more is being considered for a membership.11

10 European black list – list of airlines that are not allowed to fly to EU because of safety reasons. 11 South African Airways is a member of Star Alliance, Kenya Airways is an associated member of Sky Team and Ethiopian Airlines is being considered for a membership in Star Alliance.

PPP airports in Sub-Saharan Africa

South Africa; 4

Cameroon; 1

Côte d'Ivoire; 1Gabon; 1Kenya; 1

Madagascar; 1

Mauritius; 1

Nigeria; 1

Tanzania; 1Togo; 1

Figure 10: Distribution of airport PPP projects in Sub-Saharan Africa Despite all those negative facts investment process is raising especially in transport and telecommunication infrastructure. Private interest in airports is growing as well and governments are seeking for opportunities to use its experience and financial investments as well. South Africa is the country with the highest number of projects - three partial divestiture and one greenfield project. In 1993, the Airports Company South Africa Ltd. was created.In 1998 it was partially sold to private sector. 20% share was sold to European Aeroporto di Roma for $165.7 million and 4.2% acquired five South African companies. But in 2005 Aeroporto di Roma sent its share back to public sector strictly speaking to The Public Investment Corporation Ltd. Aeroports de Paris is another European airport company that has interests in African region. With another French company, SUEZ, participates in concession contracts for two airport projects. Since 1991 in Aeroports de Madagascar and since 1993 with Ascena from Madagascar in Aeroports de Cameroon that hold the concessions for airport system in Madagascar and Cameroon. Another French interest in the region can be observed in Liberville International Airport, Gabon where lease contract was granted to Marseille’s Chambre of Commerce and private company Sofreavia that is currently part of Egis Avia. Egis Avia is also involved in the latest contract for refurbishment of Brazzaville Maya-Maya Airport in the Republic of Congo. Same companies (Marseille’s Chambre of Commerce and Sofreavia) create AERIA that owns ROT concession for Felix Houphouet-Boigny Airport in Côte d’Ivoire. British BAA was in 1999 awarded management contract for five years for Sir Seewoosagur Ramgoolam International Airport, Port Louis, Mauritius. ‘The project aimed to upgrade all facilities including: new departure and arrival lounges; new conveyor belts to improve efficiency of baggage delivery; new restaurants; improved immigration, customs and police facilities and new duty free shops at departures and arrivals.’12 In 2007 started construction of greenfield project, Aéroport International de Blaise Diagne, Dakar, Senegal. It is PPP project of BOOT type, for period of 25 years, with private investors from France (BNP Paribas Bank) and Morocco and management partner, Fraport, from Germany.

12 Airport-technology.com: Sir Seewoosagur Ramgoolam International Airport (MRU/FIMP), Port Louis, Mauritius ; [http://www.airport-technology.com/projects/mauritius/]

Table 3: PPP airports statistics in Sub-Saharan Africa Total number of projects 13Country with highest no. South AfricaTotal investments $505 millionCountry with highest investments South AfricaMost expensive project BOT greenfield project for

Murtala Muhammed Terminal One;

NigeriaConcession (BOT, RBOT, etc.) 5Divestiture 3Greenfield project 3

Management and lease contract 2Source: WB PPI database.

Public Private Partnership and Airports of Middle East and North Africa

North Africa and Middle East region has the lowest experience with PPP projects, with only 127 projects since 1987. It is also one of the smallest explored regions together with South Asia. Leading country is Egypt with twenty-two projects mostly of greenfield type (68%). Egypt has majority of its partnership within transport sector although generally in region is telecom sector prevailing. It has made good steps towards implementation of PPP projects in law sphere and practice with involvement of World Bank that in 2007 granted Cairo a technical reward of $600,000. Following three countries has attracted private participants mostly for energy sector. When talking about financial investments, Morocco has the leading position with $18,513 million. Telecom is the highest invested sector here with twice so much investments as second energy sector and almost eight-times more that third transport sector.

PPP in Middle East and North Africa

Egypt, Arab Rep.; 22

Algeria; 19

Oman; 14Morocco; 13Jordan; 12

Others; 47

Figure 11: Distribution of PPP projects in North Africa and Middle East As the most frequent tourist place in the region Egypt has also the highest number of PPP projects in airport sector, but in financial expression Tunisia with only one concession project has the biggest value share in the region.

PPP airports in Middle East and North Africa

Egypt, Arab Rep.; 7

Algeria; 1

Djibouti; 1

Jordan; 1

Oman; 1Tunisia; 1

Figure 12: Distribution of airport PPP projects in Middle East and North Africa Egypt has decided to involve private sector to finance and also manage the new or existing airports. The first airport PPP project in the country was brand new greenfield BOT project of building the Marsa Alam International Airport in 1998. Private Egyptian corporation owns and operates the airport while Aeroports de Paris, that used to have an involvement also in southern parts of Africa, manages it. In 2000 a BOT contract for building a new terminal with big Egyptian company Artoc Suez. was signed There are two other greenfield airports where BOT concession was granted for 50 years to American company Kato. Aeroports de Paris was in 2005 awarded the concession to operate another five Egyptians airports - Sharm El Sheikh, Hurghada, Luxor, Aswan and Abu Simbel. Main airport and also the second busiest airport in whole Africa, Cairo International Airport is under eight years management contract with German Fraport AG. No other greenfield airport project can be observed in this region. BROT concession contract can be found in Jordan, Oman and Tunisia while management contracts are in Algeria and Djibouti. Again Aeroports de Paris is involved in francophone Algeria where it provides management services for public company Aeroport d'Alger for four years until 2010. According to official portal of company, ‘Aéroports de Paris Management has focused on developing non-aviation revenues, upgrading operating procedures to international standards through the transfer of know-how and the training of airport employees’.13 British BAA was part of the consortium that in 2001 obtained the BROT concession contract for Seeb and Salalah Airports. Condition for building new terminal, runway and control tower was not met reasoned by terrorist attack in 09/2001 and the lowered demand for air transport especially in Arabic countries. Therefore in 2004, government of Oman decided to take over the shares of foreign partners and management and operations were taken back by government’s Oman Airports Management Company S.A.O.C. Turkish TAV company that operates all major Turkish airports, Macedonian airport and Riga International Airport, Latvia, operates by its subsidiary TAV Tunisie two international airports in Tunisia under the BROT concession. Concession was granted for building a new airport in Enfidha and for upgrade of Monastir airport with following operations.

13 From official portal of Aeroports de Paris Management; [http://adp-m.com/pg_portfolio.html#r4]

Table 4: PPP airports statistics in North Africa and Middle East Total number of projects 12Country with highest no. Egypt, Arab Rep.Total investments $2,103 millionCountry with highest investments TunisiaMost expensive project BROT Concession for Enfidha

and Monastir International Airports; Tunisia

Concession (BOT, RBOT, etc.) 4Divestiture 0Greenfield project 4

Management and lease contract 4Source: WB PPI database.

Public Private Partnership and Airports in South Asia

South Asia region is mixed region with countries with remarkable economic growth but also with economic problems. India is the most developed country in the region, being the second most populated country in the world. With an average GDP growth of 7.5%14 for last two decades it is one of the fastest growing economies in the world, but with population below poverty line rate of 27.5% it is also one of the poorest countries. Nevertheless its economical growth is mainly a reason of cheap labor force used by foreign private investors. Cities like Mumbai, Chennai, Delhi or Bangalore has been changing their face for last fifteen years to new look of IT, science or hi-tech centers. With this fast growth a need for a better infrastructure, energy sources or water sources rose up. India is therefore the largest country in this region using PPP projects covering 73%. Most of the projects are greenfield (BOT or BOOT) projects from energy sector and concession agreements for transport sector, mostly for road systems. Even though, telecom it the sector with highest investments (in India and the rest of the region), followed by energy sector. Pakistan as the second most initiative country in public private partnership with forty-seven projects follows the same pattern of investments mostly in telecom followed by energy and transport sector.

14 OECD: Economic Survey of India published in Policy Brief, October 2007 available at [http://www.oecd.org/dataoecd/17/52/39452196.pdf]

PPP in South Asia

India; 307

Pakistan; 47

Bangladesh; 23

Sri Lanka; 23 Others; 17

Figure 13: Distribution of PPP projects in South Asia World Bank lists only eight airport projects within this region. Again majority of them (6) is on the Indian land and Bangladesh and Pakistan are listing for one airport. Half of the projects are new greenfield airports and two airports are on concession and two on management contracts. Bangladesh is another example of an unsuccessful airport project. In 2005 Thai Airways signed Management contract for second largest airport in the country Shah Amanat International Airport for ten years. After two years project was canceled due to delays in transferring the airport management15. In Pakistan new airport was built under the BOO agreement between Pakistan Civil Aviation Authority and Sialkot Chamber of Commerce & Industry.

PPP airports in South Asia

India; 6

Bangladesh; 1

Pakistan; 1

Figure 14: Distribution of airport PPP projects in South Asia

15 THE WORLD BANK GROUP: PPI data update note 10, July 2008

India is counting six PPP projects concerning airports. Three of them are greenfield, two concession and one management projects. First airport PPP project in country was new international airport in Cochin signed in 1996. Airport was built using investments from more than 10,000 Non Resident Indians in total investments of $125 million. In 2005 followed two projects of new airports in very similar cities of Bangalore and Hyderabad. Both cities experienced rapid growth and current airports were not sufficient to deal with the increasing number of passengers. Bangalore International Airport has two European shareholders namely Siemens AG and Unique Flughafen Zurich AG, that is also responsible for airport management and third partner is Indian company. Indian government set the requirements for airport PPP projects that one of the shareholders of private consortiums must be an airport operator. In Hyderabad International Airport Ltd it is Malaysia Airport Group. Hyderabad airport has been built for $400 million and has the longest runway and tallest control tower in the country. Fraport AG is involved in the Indira Gandhi International Airport in Delhi where it is part of Delhi International Airport Limited, consortium that was awarded BROT concession in the value of $2,150 million. Concession has been granted for 30 years with requirements for renovation of Terminals 1A, 1B, 1C and Terminal 2, construction of 4.43km CAT IIIB and Code F compliant runway, construction of new domestic terminal and construction of an integrated passenger terminal (Terminal 3)16. Table 5: PPP airports statistics in South Asia Total number of projects 8Country with highest no. IndiaTotal investments $4,554 millionCountry with highest investments IndiaMost expensive project BROT Concession for Indira

Gandhi International Airport; India

Concession (BOT, RBOT, etc.) 2Divestiture 0Greenfield project 4

Management and lease contract 2Source: WB PPI database.

Public Private Partnerships and Airports in Developing Europe and Central Asia

In this region the Russian Federation is a country with the highest number in the PPP database. Although more than half (183) of all (310) listed partnerships are divestiture projects, other PPP types are used as well. Hungary, Poland or Turkey are next on the list counting from 39 to 59 projects. Most of the projects in this region are divestiture projects that are not always considered a PPP projects while the second are greenfield projects that has almost the same value of investments as divestiture projects. The most valued sector in terms of financial investments as well as in term of number of projects is telecom closely followed by energy sector.

16 From PPP India Database available at [http://www.pppindiadatabase.com/Screens/frmView.aspx?PROJECTID=MPfNkEUZr4g=&AUTHORISEDUSER=N]

PPP in Europe and Central Asia

Hungary; 59Poland; 49

Turkey; 39

Kazakhstan; 33

Others; 225Russian Federation;

310

Figure 15: Distribution of PPP projects in Europe and Central Asia

Highest number of PPP projects in this region is within Turkey. TAV Airports holding that was established in 1997 as a joint venture of two Turkish companies. One of the first BOT airport contracts in Europe was awarded to this group in the same year for building and operating a new terminal at the Istanbul Ataturk Airport. TAV has later won a concession for management of another two main airports in Turkey - İzmir Adnan Menderes Airport and Ankara Esenboğa Airport. It has also interests in Tunisia in already mentioned Monastir Airport as well as in Georgia in Tbilisi Airport and Batumi Airport. Latest success (spring 2009) was awarded BROT concession for Riga Airport, Latvia. Second busiest airport in Turkey, Antalya International Airport, is leased to the joint venture company with majority share of German Fraport AG. Private investments were used for building a new international terminal and further operations.

PPP airport in Europe and Central Asia

Turkey; 7

Russian Federation; 6Hungary; 3

Armenia; 2

Georgia; 2

Poland; 2

Others; 5

Figure 16: Distribution of airport PPP projects in Europe and Central Asia In Russia, most of the PPP projects that are listed in database are of divestiture form. But there are also some of more traditional BOT, concession or management types. Sheremetyevo International Airport, Moscow that is split into the two separated terminals is operated by joint venture with participation of Singapore’s Changi Airport. Russian operator has decided

for this choice because of outstanding results of the management and operations of the selected airport. Another Moscow’s airport, Domodedovo, is leased to Russian group East Line under the 75 years lease contract. The airport has experienced rapid growth of handled passengers after many significant airlines have switched their base from Sheremetyevo airport. East Line has been heavily investing into the airport and has matched the demanded capacity as well as emerged new control tower or reconstructed original terminal. Plans are to build extension called as Terminal 2 and by 2012 another Terminal 3. Experience from PPP airport projects from South America has encouraged Argentinean company Corporacion America (CASA) to take a part in the biding process for the concession for main airport in Armenia, Zvartnots International Airport, Yerevan in 2001 and later in 2007 also in Shirak Airport, Shirak. In both cases CASA is not only responsible for management but is also the investing company for current or further development of both airports. Budapest Airport in Hungary is very good example of using private participant for public airport. In 1997 started BOT Greenfield project for expansion of Terminal 2 with price of $120 million from Canadian consortium. One year later British consortium built another greenfield project for $15 million – Malev Air Cargo Terminal. After a good experience with private operations and investments Hungarian government decided in 2005 to award a ROT concession for 75 years to consortium of Canadian, Singaporean and German companies. Same German company, Hochtief AG, is also involved in consortium that was awarded a BROT concession for Tirana International Airport, Albania for twenty years with investments of $308 million. ROT concession for Varna and Bourgas Airports are hold by German Fraport AG and also already mentioned Malaysia Airports Holding Berhad has management contract for ten years for operations of Astana International Airport, Kazakhstan. Romania has also decided to solve the need for a new international airport by using a Public-Private Partnership. Brasov Airport is to be built and operated by Canadian company for forty years. Total costs of the project are supposed to be about $116.8 million. Table 6: PPP airports statistics in (developing) Europe and Central Asia Total number of projects 27Country with highest no. TurkeyTotal investments $9,543 millionCountry with highest investments TurkeyMost expensive project ROT concession for Budapest

International Airport, HungaryConcession (BOT, RBOT, etc.) 8Divestiture 6Greenfield project 7

Management and lease contract 6Source: WB PPI database.

Further Research Questions

Public private partnerships in airport business generate various perspective research questions: How can global strategy of key airport business players be defined with regard to foreign market penetration? Are there any inter-regional differences within this strategy? What part of world airport business is kept by key airport business players through assets ownership and/or public private partnerships? What is performance index and competitiveness index of key world airport business players taking into account their presence in airport divestures and/or airport public private schemes? Which of the key airport business players is the most transnationalized one? What will evolution of airport

transationalisation be within the world regions and among them? We assume to contribute in answering these questions in future.

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