Ownership Models and Organizational Structures. Rafael Echevarne of ACI World Played by Cindy Nichol

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1 Ownership Models and Organizational Structures Rafael Echevarne of ACI World Played by Cindy Nichol 1

2 Historical Background Until the late 80s: Airports seen worldwide as natural public sector departments, managed just like other public transport infrastructure UK started Airport Privatization in the 1980s Airports Act BAA became a PLC; Airports with turnover exceeding GBP1 million have to be set up as PLCs run at arms length from local government - By 2007, the majority of UK airports in private hands only Manchester 100% public sector 1992: Vienna floated 27% in Stock Exchange 1996: Copenhagen floated 25% And so on Today, approximately 400 airports worldwide have private participation (full or partial ownership) and/or managed by private companies through concessions contracts

local government - By 2007, the majority of UK airports in private hands only Manchester 100% public sector 1992: Vienna floated 27% in Stock Exchange 1996: Copenhagen

3 World Airport Privatization Map

4 Role of government Philosophical change

5 Why Governments Privatize Airports Governments inability to meet capital requirements Generate revenue for governments from: Sale proceeds Tax paid by corporatized/privatized entity Benefit seen from more commercial / less bureaucratic culture - Realise full commercial potential - Service standards Inject know-how in the industry Not seen as key strategic assets that need to be controlled by government on a daily basis. Overall, successful international experience

bureaucratic culture - Realise full commercial potential - Service standards Inject know-how in the industry Not

6 Is Government Regulation Needed? Regulation - Economic - Technical/safety - Service Need to protect consumers What s the cost of regulation? Does regulation achieve its objectives? Increased competition among airports

7 Privatization Methods Initial Public Offering (IPO) Public offer of shares in privatised entity and listing on the stock market (national and/or international) Trade Sale Private sale of part or all the capital of the privatised entity to a single investor, often after a competitive tender process Lease / Concession Public retains the title of the asset. Management is transferred to a third party, which receives the operating revenues Other methods BOT Build-Operate-Transfer BTO Build-Transfer-Operate Management contracts

often after a competitive tender process Lease / Concession Public retains the title of the asset.

8 Objectives drive the method Increase efficiency and develop commercial culture Full privatisation by IPO or trade sale Achieve international standards and access management know-how Management contract, trade sale with TSA Maximise sale proceeds Full privatisation by trade sale Finance new facilities but avoid public expenditure BOT Speed of transaction Trade sale Wider share ownership among public Flotation

trade sale with TSA Maximise sale proceeds Full privatisation by trade sale Finance new facilities but

9 Ownership models in Europe Public networks Chambers of Commerce Public & private Private

10 Ownership models in Europe PUBLIC PRIVATE Country Region Town Other Listed Private French Regionals X X AdP (Paris) X X Amsterdam 76% 24% Manchester 100% Munich 26% 51% 23% Milan 14.6% 84.6% 0.8% Vienna 20% 20% 10% 50% Turin 13% 38% 4.7% 44.3% Newcastle 51% 49% BAA 100% Bristol 100%

Manchester 100% Munich 26% 51% 23% Milan 14.6% 84.6% 0.

11 Malaysia AIA VIE BCIA CFH BAA ADR Malaysia AIA Vienna BCIA CPH BAA ADR Birmingham East Midlands Hannover Belfast Dusseldorf Prestwick Luton Bejjing (ADP) ACSA Bristol Hamburgo Wellington Canberra Argentina Melbourne Cardiff Coolangatta SAVE Brisbane Darwin AP Perth Adelaide Airport Valuation as EV/EBITDA multiple Long-term concessions and Trade Sales produce higher valuations than IPOs 25 Multiple EV/EBITDA 20 Concessions & Trade Sale 15 Listed airports (IPO) Average actual share price Av. 13,6x 10 Av. 8,2x Av. 8,5x 5 0

Darwin AP Perth Adelaide Airport Valuation as EV/EBITDA multiple Long-term concessions and Trade Sales produce higher valuations

12 Airports listed on Stock Exchange Airport Company Hongqiao International Airport Xiamen-Gaoji International Airport Beijing Capital Airport Shanghai-Hongqiao Int. Airport Haikou Meilan Int. Airport Guangzhou-Baiyun International Apt. Aeroporti di Roma S.p.A. Aeroporto di Firenze S.p.A. Flughafen Wien Copenhagen Airports Ljubljana Airport Auckland International Airport Malaysia Airports Holdings Bhd Zürich (FDZ + FIG) Flughafen Frankfurt AG Malta International Airport Macquarie Airports Airports Authority of Thailand Brussels BIAC Budapest Airport Aeroports de Paris Country China China China China China China Italy Italy Austria Denmark Slovenia New Zealand Malaysia Switzerland Germany Malta Australian Fund Thailand Belgium Hungary France

International Airport Malaysia Airports Holdings Bhd Zürich (FDZ + FIG) Flughafen Frankfurt AG Malta International Airport Macquarie Airports Airports Authority of Thailand Brussels BIAC

13 Who invests in airports Airport operators Infrastructure development firms Construction firms Pension funds / Sovereign funds / Financial investors / Infrastructure funds

14 Key Players

Airport Alliances (part one) Created in 2000 by Fraport and Schiphol in order to cooperate in international airport projects Was world s first airport alliance In 2000 won tender for development and

15 Airport Alliances (part one) Created in 2000 by Fraport and Schiphol in order to cooperate in international airport projects Was world s first airport alliance In 2000 won tender for development and management of logistics centre at HK airport No further cooperation Created in 2000 by Bechtel In 2001 Changi took 50% stake Aims to integrate every phase of airport development Won 3 concessions but is not considered to be a major player

logistics centre at HK airport No further cooperation Created in 2000 by Bechtel In 2001 Changi took 50%

16 Airport Alliances (part two) Follows AF-KLM merger Cross investment of 8% Expected synergies of EUR71 p.a. Until 2013 and then yearly reductions of EUR18 p.a. Priority investments in airports where Skyteam operates

a. Until 2013 and then yearly reductions of EUR18

Fundamentals for Airport Privatization and Concession Policies. Dr Anne Graham University of Westminster London

Fundamentals for Airport Privatization and Concession Policies Dr Anne Graham University of Westminster London Outline Why airport privatization? The privatization timetable Types of privatization Risks