IMAGINE owning a shopping centre
that your customers are forced to stay in for several hours. Better yet,
everyone who visits is relatively rich, and many are in a holiday mood.
Now imagine that the number of these special shopping centres is strictly
regulated, giving you a near-monopoly. On top of this you get paid a fee per
visitor. No wonder buying airports has become something of an investment fad.
Though potentially lucrative,
airports tie up a lot of capital, which is why governments around the world are
selling them. Some are being listed on stockmarkets, others sold to private
investors. The Japanese government is selling 30-40-year concessions to run
some of its airports. France sold a 49.9%
stake in Toulouse airport to a Chinese-led consortium in December. Investors
include pension funds, sovereign-wealth funds, infrastructure specialists and
private-equity houses.
What sets airports apart from most
investments in infrastructure is their dual income stream: they bring in money
both on the aeronautical side (landing fees, contracts with carriers) and from
passengers (parking, shopping, hotels). If you own a toll road and traffic
dwindles, there’s not much you can do. But with an airport there are lots of
levers to pull, such as cutting capital costs, firing staff and upping the
price of parking.
“We love them because they pay a steady income for our
retirees, protect against inflation and are a diversifier,” says Andrew
Claerhout of the Ontario Teachers’ Pension Plan (OTPP), which is an investor in
four European airports including Birmingham and Copenhagen. Best of all is the
bonus that comes from being a monopoly. Returns from well-run airports tend to
be in the double digits, markedly higher than more boring assets like bridges.
One way to boost profits is to
increase the number of passengers who can be herded through the buildings.
Ardian,
an investment firm that owns a stake in Luton airport, near London, helped to
convince the local train company to increase London-bound services during
rush-hour. It also removed a bottleneck at security by opening more lanes and
hiring “smiling people” in yellow T-shirts to point passengers to the shortest
queue. An upgrade of the terminal, aimed at increasing the number of passengers
from 12m to 18m a year, is next.
When an airport has been in public
hands, the non-aeronautical parts of the business have often been especially
neglected. Buyers often invest in good parking (ie, under a roof and close by),
which can become one of the biggest single sources of income. But not all
airports are created equal.
Those serving capital cities tend to be safer bets,
with a steady supply of visitors, come rain or shine (unlike holiday
destinations). Ensuring the airport is not dominated by a single carrier is
another golden rule, as this makes it vulnerable to strikes or bankruptcy.
Buying a stake in an airport of which the government owns a controlling share
is risky, as public and private interests are not always aligned.
Europe is currently the hub for
airport investing, accounting for more than half of all deals since 2011,
according to Preqin, a data firm. That compares to 15% in Asia, 14% in
Australasia and 9% in America. But European valuations are reaching dizzying
altitudes: Ljubljana airport was sold last year to Fraport, a German airport
specialist, reportedly for a lofty 20 times annual earnings.
Michael Burns of
PwC, a consultancy, points out that the number of passengers is growing twice
as fast at many Asian and African airports. By 2020 Indonesian airports will
have more traffic than British ones, predicts PwC. More adventurous investors
may end up flying long-haul.
