Airport Privatisation

The majority of the world’s airports remain government owned and operated, though a trend towards full or partial privatisation began in the 1990s (the very earliest examples dating back to the 1970s and even earlier in some cases in the US) and continued, with occasional periods of inactivity, until 2009.

Airport privatisation can at one end of the scale mean merely ‘corporatisation’, where a government department is run along commercial, private sector lines, perhaps being turned into a limited company with government shareholders, and at the other an Initial Public Offering (IPO); a stock market flotation of equity. In between it can take the form of a lease (the only way an airport can be privatised in the US momentarily), a trade sale, a perpetual franchise, a build-operate-transfer scheme or one of its many derivatives, a public-private-partnership, a private finance initiative, a management contract or a management buy-out. The main element in a government’s decision making on the method of privatisation is often the degree of control it wishes to continue to operate, which can vary from zero to almost total. As with privatisation in other sectors, new and innovative methods are being introduced all the time and an airport may change hands by different methods.

Britain’s BAA for example was privatised directly by way of an IPO (along with several others in Europe where the IPO has been popular in better economic times), then was bought out by a foreign private consortium and is now being split up, in the first instance by way of a trade sale of one of its airports to a private equity fund.

The main goals of privatisation, inter alia, are: (in emerging markets) to tap domestic and foreign capital markets; to provide independent financing of large scale projects; to reduce the financing requirement of central government; (in existing markets) the avoidance of additional debt; transfer of responsibility or risk; introduction of efficiencies and consequential improvement of financial performance.

The period 2009-10 has been one of the quietest for airport deals in the last two decades, largely due to the credit crunch. Nevertheless there have been some critical ones: London Gatwick, St Petersburg and Pristina being examples of large, medium and small airports where transactions have taken place recently; the Chicago Midway lease may yet re-emerge in 2010 (and 15 US airports have now expressed an interest in privatisation); and at least one sizeable deal is pending in the UK.

Governments are expected to unlock a wave of privatisation activity in coming years as they seek to restore health to publish sector finances in the wake of the global financial crisis.

See CAPA's new Global Airport Investors Database. CAPA also covers Airport Privatisation and Ownership issues in our exclusive report, Airport Investor Monthly and publishes the management report, Global Airport Privatisation.

News Headlines

CAPA Analysis

Share Market Performance