Milan moves in to manage

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A consortium headed by the Milan airport operator SEA has won a 30 year concession to manage Argentina's 33 state-owned airports.

The winning consortium is called Argentina 2000. SEA holds a 30 per cent stake, US ground handling company Ogden 28 per cent, and local partner Corporacion America Sudamericana 35 per cent. The consortium offered capital investment of US$2 billion and an annual fee of $171 million, over four times the minimum annual $40 million concession fee set by the government. The rival bidders, consortia including Aeroports de Paris and Frankfurt airport, offered annual fees of $162 million and $153 million.

Argentina's three main airports, international airport Ezeiza, Aeroparque de Buenos Aires and Pajas Blancas in Cordoba, will be handed over to the new owners in 90 days, while the remaining 30 will be transferred within a year.

Local industry sources are sceptical that the concessionaires will be able to recoup their outgoings and predict that the consortium will have to reduce the licence fee. SEA chairman Guiseppe Bonomi describes the rumours as 'absurd', as 'the licence fee is proportional to the sum of all the business that the concession will generate.'

He does concede that there are plans to increase departure taxes, but this will be proportional to the improvement in service; 'today you pay nothing, because there is no service'.

Bonomi predicts that the concession will be in the red in its first year, break even in the second and move into the black in year three. Only in year six will investors receive an 18 per cent return on capital. Profits will average 7 per cent of revenue.

These projections assume an increase in traffic of at least 15 per cent, which the consortium believes will take place once modernisation of the airports has been completed.

The consortium aims to expand Ezeiza airport within five years, integrating traffic currently served by national airport Aeroparque/Jorge Newery.

Iata, which claims that airport fees will rise because the Argentinian government has converted a public monopoly into a private one, may be pleased to hear about a less monopolistic Mexican approach.

The Mexican government recently announced it would group 35 state-owned airports into four regional entities - Mexico City, Pacific, Southeast and North-Central - and sell them off separately. Operating consortia, which must comprise one internationally active airport operator and one local investor, will initially be allowed to buy just 15 per cent of the shares in only one of the airport groups, with an optional extra 5 per cent at a future public offering if performance targets are met. The remaining shares will then be floated on both domestic and international stock exchanges.

The first tender, for the Southeast group which includes Cancun, is set to open at the end of March and will close four months later, says Jorge Silberstein of the Mexican Ministry of Communications and Transport. Silberstein will not be drawn on analysts' estimates that the government might earn $400 million from the privatisation, but says that Mexico has 'more attractive airports' than Argentina.

Silberstein says the government 'tries to regulate with standards and not investment' and is currently drawing up a regulatory framework to which the newly privatised airports will have to adhere.

Tom Gill