Brazil looks to improve airport privatisation model

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Several Brazilian politicians have suggested that Brazil will rework its airport privatisation model for the international airports of Rio de Janeiro and Belo Horizonte, after the concession scheme applied to Sao Paulo Guarulhos, Campinas and Brasilia received heavy criticism from airlines, unions and within the government.

A senior source at Infraero, the state-owned airport operator, says that "[president] Dilma Rousseff is deeply dissatisfied with the outcome of the first privatisation round".

"The tender process resulted in generating higher than expected fiscal income through concession fees that vastly exceeded the established minimum, but Dilma [Rousseff] had expected higher profile operators, with more experience in large terminal operations, to win the concessions," they say.

The first round of concessions for Brasilia, Sao Paulo Guarulhos and Viracopos-Campinas airports were won by consortiums lead by the large Brazilian pension funds, including Invepar and Triunfo Participacoes e Investimentos, with small participation from overseas operators, including Airports Company of South Africa and Frence-based Egis.

The Brazilian government is discussing a new private-public partnership (PPP) scheme where yet-to-be-created investment arm of Infraero would acquire 51% of the equity with control over strategic decisions, while a private operator would hold the remaining 49% and run the airport under a management contract, the source says. This reverses the ownership stakes of the first round, where private investors held 51% with full management control and Inraero 49%.

"While the original concession scheme required participants to have experience in running terminals of more than five million passengers, the new conditions will probably raise that level to a minimum of 30 million passengers," they explain. Adding that this should "ensure best practice management of some of Brazil's largest and and most strategic airports". They say that they believe that the new tender conditions will be made public in September.

Rio de Janeiro Galeao and Belo Horizonte Confins airports are to that are expected to be tendered in the second round of concessions.

"President Dilma Rousseff has proposed a shared management scheme [under which] a major international airport operator will manage [Galeao] jointly with Infraero," said Sergio Cabral, governor of the state of Rio de Janeiro, according to reports last week.

Galeao is considered very attractive to private investors. Infraero is currently executing some major government-funded expansion work that would likely significantly reduce the required private investment in a concession. The airport serves 15 million passengers per year and has a capacity of 17 million. It is being expanded to handle 44 million passengers per year by 2014.