More global airports up for sale

MUMBAI: Airport privatisation programmes in several countries, particularly in eastern Europe and central Asia, are throwing up opportunities for Indian airport companies that are widening their areas of operation. The GMR group’s award to operate and build the Sabiha Goksen airport in Turkey may soon be followed by other similar cross-border deals.

“Opportunities are coming up globally, in places like the Czech republic, Portugal and Peru even as major airports in busy cities get saturated and focus shifts to second and third airports,” says ABN Amro executive director S Manikkan. The Dutch bank was GMR’s advisor in the Turkey deal.

According to the Centre for Asia Pacific Aviation, an aviation industry think-tank, about $60 billion investment funds is currently chasing airport assets as they become available. The value of an airport is traditionally measured by its Ebitda (Earnings before interest, taxes, depreciation and amortisation) and its sale price is measured as a multiple of the Ebitda.

Recently, airports have been changing hands on Ebitda multiples of up to 30 times, as was the case at Leeds Bradford, which was sold for 145.5 million pounds. Some airports like Hungary’s Budapest Airport have changed hands twice in the last two years, going for 1.5 billion pounds on the first occasion. Apart from traditional airport operators and construction companies, private equity players too have played a significant role in the M&A action at airports.

In India, the two private companies involved in airport modernisation, the GMR group and GVK, are looking to expand their business. Responding to an e-mail, the vice-chairman of the GVK group, Sanjay Reddy, said, “We do see international opportunities for GVK in the airport space. We have a large team of expatriates who have come from some of the best airport operations around the world and they are exploring opportunities, leveraging their knowledge and contacts.’’ The company has India’s largest airport, the 25 million passenger Mumbai airport, under its management, and is well positioned to respond to such opportunities, he added.

The Bangalore-based GMR has formed a new business development cell focused on opportunities in the airport space. There is little point in running one or two small projects in isolation, says Madhu Terdal, CFO of the GMR group.

The group is not interested in being a passive financial investor. The idea is to pick up more such assets and gain experience in managing them, he said. The Airport Authority of India (AAI), India’s government-owned airport operator, has in the past been active in the construction of airport projects in Africa and the Middle East. With this experience, it is an equally strong contender for many of the projects globally, says an AAI source.

Till 1987, airport privatisation existed only as theory. The British prime minister Margaret Thatcher made history by selling off BAA through an initial public offering for $1.9 billion. There has been a wave of airport sales of late, including the 50-year concession for Brisbane, Melbourne, and Perth in Australia for $2.6 billion. The BAA (British Airports Authority), which runs the Heathrow airport, is now under the control of a consortium led by Ferrovial, a Spanish construction company.