October 09, 2006

Airport Privatization

Kind of a long story, but worth the read.. For two years, we have urged the City of Worcester to put out an RFP to see if anyone would be interested in taking the airport private, most likely through a 99 year lease. Stewart Airport in Newburgh, NY did this exact thing. The $100,000 IMG, however, dismissed this last year as not being an option, since they felt nobody would be interested. Always felt how would you know nobody would be interested, unless you put out an RFP??

Stewart lease to be sold

When a new operator takes over Stewart International Airport, it will bode well for its future, say people close to Stewart and the airport business. That's because the newcomer, a player yet to be named, will likely be more qualified than National Express Group PLC, which long ago exited the aviation business except for Stewart.

National Express said Thursday that over the past two months, it has received expressions of interest from other airport operators and has "commenced negotiations regarding a potential disposal." Airport spokeswoman Tanya Vanasse said Thursday National Express expects to make a selection in the near term and complete the transaction by the end of the year. No companies were named, but Vanasse said she understood the parties are performing fact-finding and that some "have had people come through" Stewart.

Chuck Seliga, president of Stewart, said in a news release, "It is rewarding to see that aviation entities are interested and ready to invest. I only see good things ahead for our stakeholders, for the airport and for the Hudson Valley." Clearance is required by the state Department of Transportation, which owns Stewart and leased it to National Express for 99 years in April 2000, and the Federal Aviation Administration, which created the pilot program in privatization that made the deal possible.

James Wright, chairman of the advisory Stewart Airport Commission, said he wasn't surprised at the stance taken by National Express, "and those that I've talked to are pleased." "National Express, while they've tried, hasn't really been successful," Wright said. Chances would look better with an operator with good experience willing to really push Stewart, he said.
"The new guys are going to have to have contacts; have a pretty healthy budget and beef up the whole marketing effort," Wright said.

So who might the new guys be? There are a handful of major players on the international scene:
Grupo Ferrovial, Spain, is a major construction company that has investments in the Bristol airport in United Kingdom and a 21 percent share of the Sydney airport in Australia. It recently bought BAA PLC.

BAA PLC is itself a major airport operator in the United Kingdom, where it privatized seven airports including Heathrow. It has interests in Italy, Australia and Hungary. It has a long-term management contract to run the Indianapolis International Airport.

Macquarie Airports, part of Macquarie Bank in Australia, also owns interests in Bristol, England; Sydney, Australia, and Birmingham, England. It's also in Rome, Brussels and Copenhagen.
Fraport AG, based in Frankfurt, Germany, is active in some way at 50 sites globally. Other major interest include airports in Antalya, Turkey; Cairo, Egypt; Lima, Peru; and Hannover, Germany.

TBI PLC, originally British, is owned mostly by a Spanish company, Abertis Infraestructuras, SA. TBI has ownership interests and management roles at London Luton Airport, Belfast and Cardiff in the United Kingdom; the main airports in Bolivia; one in Colombia; and one in Stockholm; and manages several in the U.S., Atlanta and Burbank, plus Orlando-Sanford International Airport in Florida. Stewart has flights to Orlando-Sanford via Allegiant Air.
Schiphol Group, an enterprise owned by the Netherlands' government, owns or runs four airports in that country and has interests in Brisbane Airport, Australia, and owns part of Terminal 4 at JFK Airport in New York.

What Stewart would go for is hard to tell, but National Express is likely to want to recoup its $35 million purchase as well as the capital investment in infrastructure. Vanasse said the airport has put in $78 million, with federal funds covering most of that and National Express picking up either 5 percent or 30 percent, depending on type of project and funding. That suggests the company has more than $50 million sunk into Stewart. Operations have generally been profitable, Seliga has said, though no numbers have been given.

Wright speculated National Express could also be approached by an airline or a cargo operator.
Vanasse said the state's lease agreement lets National Express transfer its holdings to an operator that has key managers with significant experience in running commercial airports like Stewart and whose financial strength is sufficient to handle Stewart. In the meantime, "It's business as usual here."

Kevin Schorr, research director for Campbell-Hill Aviation Group in Alexandria, Va., said National Express' decision made sense and that any newcomer would build upon its work so far.
"Any firm that takes over the lease will want to proceed with any facility or infrastructure investments that are going on or planned," Schorr said, as these would make the place more attractive to buyers.= "I don't think there will be any big changes," he said. "But then again, you never know." Doing better at getting airlines isn't easy, Schorr said. But what might help is if the new owner lowers the operating costs or offers better financial incentives. "It's almost expected nowadays that to attract new service, you have to offer some kind of incentive."

Robert Poole, head of transportation studies for the Reason Foundation, a backer of the privatization movement, said National Express made the right move. "They seem to have made a corporate decision sometime several years ago to not go further into the airport business," Poole said. "This made Stewart kind of an orphan project for them." He expects good interest. "The global airport privatization market remains a very active one," he said. "It's probably the only place that really has the feasibility to become the fourth major jetport for the greater New York metropolitan area."

Sen. Charles Schumer, who has worked to increase air service upstate, provided a statement through a spokeswoman: "I've always said that Stewart has great potential to help attract new economic development and jobs to the region. I see this impending sale as an opportunity to more fully realize that vision."

1 comment:

Anonymous said...

Article in the opinion section of October 10th T&G "Air Advice".