ANALYSIS: Brazil’s private airports hurry infrastructure investments

Washington DC
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Brazil’s foray into airport privatisation looks to be progressing nicely. New terminals are under construction in Campinas-Viracopos and Sao Paulo while investors are lining up for the next round of concessions in Belo Horizonte and Rio de Janeiro.

Since the country’s National Civil Aviation Agency (ANAC) closed long-term concessions of the Brasilia International, Campinas-Viracopos International and Sao Paulo Guarulhos International airports in November 2012, concessionaires have rapidly progressed with construction of much needed capacity improvements with targets of opening before the World Cup begins in June 2014.

"The main thing we are now working on is to increase capacity," said Luiz Ritzmann told Airline Business earlier this year, chief information officer of Concessionária Aeroporto Internacional de Guarulhos, which operates the airport in São Paulo. Invepar and Airports Company South Africa (ACSA) own 51% in the concession with Brazilian airport operator Infraero owning the remaining 49%.

The Brazilian reais (R) 3 billion ($1.38 billion) phase one expansion at Guarulhos includes a new 170,000m² (1.8 million ft²) terminal 3 that will increase annual capacity by 12 million passengers to more than 40 million with 22 new jet bridges and 36 additional remote aircraft parking spots.

A 6,000m² expansion of terminal 2 at Guarulhos opened in August. This includes new concession space in the departures area and an expanded baggage claim space.

“We will deliver our brand new, greenfield terminal by May next year,” says Luiz Kuster, chief executive of Aeroportos Brasil Viracopos. “With 28 fingers [jet bridges], 145,000 square metres, we will start operations to Viracopos airport.”

The $1 billion terminal will increase passenger capacity to 14 million per year from nine million when it opens on 11 May 2014, he says. The concessionaire, which is owned by Egis, Triunfo and UTC, plans to begin construction of a second runway after the new terminal opens in 2014.

Corporacion America and Engevix Engenharia-owned Consorcio Inframerica Aeroportos are investing $750 million to expand capacity in Brasilia by 4 million passengers to 20.7 million annually, says the private operator. It expects to add 50 new retail outlets and 15 new jet bridges for a total of 28 by 2014.

Tight construction timelines are pressuring some of the concessionaires.

Valor Antonio Miguel Marques, president of the Guarulhos project company, told local media in early October that about 42% of work on terminal 3 was done but that the impending rainy season threatened the construction schedule with only eight months left before opening day.

“I've never been in something with this magnitude with such a tight deadline,” he told local media outlets. “Undoubtedly, the biggest concern is the term.”

As Brazil’s busiest international gateway, the Sao Paulo airport is in the most need of expansion ahead of the World Cup. Without the terminal 3, some local experts say that arriving passengers could be forced to use temporary structures during the games.

Guarulhos handled 32.8 million passengers in 2012 compared to its design capacity of 29 million, according to Infraero data.

Kuster from Viracopos and Daniel Ketchibachian, commercial director at the Brasilia airport, both said that they are confident that they can meet the construction deadlines at their respective airports at the World Routes forum in October.

As the Brasilia, Sao Paulo and Viracopos concessionaires sprint for their mid-2014 deadlines, international investors are already lining up for the next two airports: Belo Horizonte Confins International and Rio de Janeiro Galeao International.

ADC & HAS, ADP/Schiphol, BAA/Ferrovial, Changi, Flughafen Munich/Flughafen Zurich and Fraport are competing for the two airports, according to local reports. Financial bids are due 18 November with the tentative winners announced on 22 November.

ANAC has set a minimum bid of R990 million for the 30-year Confins concession with a required R3.6 billion in capital investment and is asking for at least R4.73 billion for the 25-year Galeao concession with R5.8 billion in capital investment.

“They’ve structured the process to be a transparent process and with Infraero remaining as a significant shareholder,” says Amit Rikhy, vice-president and head of acquisitions for ADC & HAS Airports Worldwide. “It’s a very interesting structure [but] one that attracts significant investors.”

He declines to comment on which airport ADC plans to bid on – investors are only allowed to win one concession – but says that overall the firm is happy with the process.

Kuster says that the Viracopos concessionaire would be interested in bidding on one of the upcoming deals but will not due to a restriction limiting existing concessionaires to no more than 15% of the equity in Confins and Galeao. Other restrictions require that airport operators hold at least a 25% equity stake in the airports and own a portfolio of airports that handle at least 35 million passengers annually.

Despite the complaints, the restrictions appear to be doing exactly what they were designed to do – attract the big names in global airport operations while limiting the involvement of local pension funds and other institutional investors.