|Author (Person)||Barnard, Bruce|
|Series Title||European Voice|
|Series Details||Vol 7, No.14, 5.4.01, p21|
EUROPE'S airports are leaving their US and Asian rivals standing in the race to escape from state ownership as privatisation reshapes the industry.
Frankfurt, continental Europe's leading hub, plans an initial public offering of around 30% in June and Amsterdam Schiphol, its third-largest airport, is shooting for a stock market listing later in the year expected to value it at over €2 billion.
They will join a growing group of quoted airports headed by BAA, which owns seven UK hubs including London Heathrow and Gatwick, and runs nine others around the world; Aeroporti di Roma, which operates Rome's Fiumicino and Ciampino airports; Copenhagen and Vienna.
Europe's airports also are moving much faster than their US counterparts in adding value to their traditional business of building runways and terminals. Non-aviation sales, mainly from retail activities, reached 40% of BAA's revenues last year and around half of the turnover at Amsterdam and Copenhagen.
This is a remarkable change from a few years ago when continental airports were fighting tooth-and-nail against the European Commission's bid to break up their ground-handling monopolies.
Airport privatisations are drawing a wide array of investors from outside the industry, such as Benetton, the private clothing empire, and Pirelli, the tyre maker, which lost out in the bidding for Aeroporti di Roma last year to a consortium headed by Cesare Romiti, the former chief executive of carmaker Fiat.
The attraction is simple: airports are low-risk, high-return businesses. After runways and terminals are built fixed costs are relatively stable while passenger traffic is rising at around 5%-6% annually.
The meltdown of high-tech, new economy stocks has further enhanced the attractions of airports: BAA shares have soared by over 80% in the past year.
Europe's airports are capitalising on their skills to win lucrative management contracts around the world. Schiphol scooped the most prestigious contract, to refurbish and operate Terminal Four at New York's JFK airport, while BAA operates catering and shops at Newark and Pittsburgh, and Frankfurt runs baggage operations at Stockholm Arlanda.
Privatisation is spreading for a various reasons. Schiphol says its international development is being hindered by the fact that other countries view it as a state enterprise. Frankfurt opted for an IPO after its current owners - the state of Hesse, the city of Frankfurt and the federal government - said they are no longer willing to finance the airport's ambitious growth programme on their own.
Airports also are taking stakes in foreign facilities in a bid to create global networks. BAA has led the way with interests in airports from Italy to Australia while Schiphol and Frankfurt, which were partners in a consortium that made an unsuccessful bid for Aeroporti di Roma, are eyeing moves abroad after their privatisations.
The two are likely to make a bid for Sydney's Kingsford Smith airport, which the Australian government put on the block last week. BAA and Singapore's Changi airport also are seen as potential bidders in a sale that is expected to raise around €3 billion.
There is a thriving trade in second-tier regional airports, particularly in Britain, but bigger hubs haven't come into play yet because most remain under state ownership. The airports finally are following their airline customers and forming cross-border alliances. Again, Schiphol and Frankfurt are leading the way, forging an alliance, called Patares, that has already won a contract to run a cargo terminal at Hong Kong.
The US, by contrast, remains a backwater. Most airports are run by local authoritieswhich are in collusion with established airlines who use their status as major investors to block expansion that would allow in competitors.
Major carriers often have exclusive leases on gates of up to 30 years which they are not obliged to rent to their rivals.
The Airport Privatisation Pilot Program of 1996 was intended to privatise five airports to see if the new owners could manage them better and turn a profit. But five years on only one has been fully privatised, Stewart International in New Windsor, New York, and only after National Express, a British bus and rail company, stuck through the complex three-year bid process.
Europe will pull further ahead of the US in the coming months as its top airports enter the private sector and buy abroad.
But some things don't change: the French government has no plans to privatise Paris Charles de Gaulle, Europe's fastest-growing hub.
Major feature on Europe's airports.
|Subject Categories||Mobility and Transport|