It has been a year since Grupo Aeroportuario del Sureste (ASUR) and Highstar Capital-owned Aerostar closed the San Juan Luis Munoz Marin International airport concession, the first such deal for a major airport in the USA.
The lights are working, bathrooms are being cleaned regularly and jet bridges that were prone to breakdown are being repaired, says Rhett Workman, managing director of government and airport affairs at American Airlines.
“It’s been a much more open and transparent process, in terms of how we bring forward airport capital programmes,” he says on Aerostar’s engagement with airlines during the first year.
Kevin Costello, a member of the San Juan airport airline affairs committee and director of properties and airport affairs for JetBlue Airways, also talks positively about “collaborative” effort between airlines and the operator to “remake the airport”.
“Overall, we’re happy,” he says.
Aerostar closed the $2.6 billion, 40-year concession for the San Juan airport in February 2013. Under the terms of the agreement, it must make $1.4 billion in capital improvements, including $240 million by 2016, in the airport during the next four decades.
The aim of the concession is to improve the facilities and to also boost air traffic to the airport, which has seen passenger numbers fall more than 15% to 7.25 million in 2013 since 2006, US Department of Transportation (DOT) data shows.
Routine maintenance is only part of Aerostar’s capital plans for San Juan. It is renovating and consolidating concourses B and C, designing a new sterile connector between concourse A and the existing US federal inspections services (FIS) facility for international arrivals and working on upgrades to the retail, food and beverage concessions for travellers.
“We are very happy with what we have seen over the last 12 months,” says Adolfo Castro, chief executive of ASUR. “The airport is in a lot better shape now.”
The biggest challenge facing the operator is to complete the projects on time, with the opening of the new concourse B and C facility in November being its next major deadline, he says.
Once that happens, airlines will be relocated from temporary locations in concourse D, except JetBlue who remains in concourse A, to their permanent positions in the renovated facility. This will allow the operator to reduce the footprint of the terminal.
“Today this airport has 2.7 times the square metres of my nine concessions in Mexico [but] with 50% traffic,” says Castro. “It has too much square metres.”
This echoes comments by Workman, then managing director of corporate real estate and government affairs at US Airways, in November 2012.
“The airport is saddled with excess capacity and terminal space," he said. "Its very expensive to provide the upkeep on the terminal space.”
Aerostar plans to consolidate airlines in concourses A, B and C when it completes its renovations. Concourses E and D will be closed for the foreseeable future.
Most airlines are positive about the new fee schedule implemented by the operator, as well. Under the concession agreement, fees are fixed for the first five years and rise at a rate pegged to annual US consumer price inflation for 10 years after that.
Costello says that growth in passenger traffic at San Juan has resulted in lower per passenger costs for JetBlue. However, he adds that they would “of course” always like better rates at an airport.
“Growth in San Juan drives overall airline unit costs down across the board,” he says. “We’re seeing that here in the first full term here, [in] 2014.”
In November 2012, Costello said that “fair” airport rates and charges at San Juan would allow airlines to pass savings on to customers and boost traffic.
JetBlue’s passenger traffic at the airport rose more than 11% to 2.6 million during 2013, according to the DOT. The New York-based carrier was the largest airline at the airport with a 36.2% market share during the year.
Workman, who spoke about the need for certainty of costs in 2012, is optimistic about the new rate scheme.
“It’s hard to put a stake in the ground at an airport because there is so much evolution going on,” he says. “But I think we got it right.”
American was the second largest carrier in San Juan with a 19.7% market share in 2013, the DOT data shows. This share increases to 29.2% when combined with US Airways, which it merged with in December 2013.
“It’s not something you do from day to night,” says Castro on overall traffic growth. “We believe we're on the right track.”
Nonstop routes from San Juan, April 2014
Innovata FlightMaps Analytics
San Juan remains a test case for airport privatisation in the USA. While not the first privatised commercial airport in the country - that distinction belongs to Stewart International near New York City - it is the first medium- to large-sized facility to complete a deal.
Chicago Midway airport looked as if it would follow in San Juan's path with a similarly structured deal but the concession was pulled from the market due to a lack of competition in September 2013.
The only deal still pending is a long-term concession for the central terminal at New York LaGuardia. The $3.6 billion project involves replacing the existing facility with a new 120,774m² (1.3 million ft²) terminal with 35 contact gates that would open in phases from 2016 to 2021.
However, the Port Authority of New York and New Jersey (PANYNJ) has disqualified ASUR, despite its experience with concessions in both San Juan and Mexico, from bidding on the LaGuardia project due to unknown reasons, according to a stock exchange filing on 13 March.
The opaque departure of ASUR from the procurement appears to be standard practice for the New York deal.
“We have a lot of concerns right now as we’re not at the table yet and don’t have a view on the process,” says Costello on LaGuardia.
His advice to the PANYNJ, or any authority considering privatising an airport, is to engage airlines early and often.
Something that the PANYNJ does not appear to be doing much of at LaGuardia, yet.