San Juan airport lease could benefit airlines

Washington DC
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The Puerto Rico Port Authority's planned lease of the San Juan Luis Munoz Marin International Airport to a private operator could benefit airlines in an effort to boost traffic at the Caribbean airfield.

The deal involves a 40- to 50-year lease of the airport to a private consortium. It would be the only private lease of a commercial airport in the US under the Federal Aviation Administration's airport privatisation pilot programme, which allows for 10 airports to be privatised, if it closes.

A private operator would be expected to boost traffic during the term of the lease, which could easily be accomplished by lowering the fees and rents airlines pay for using the facility. These charges are likely to be fixed for the first five years of the contract before beginning to increase at an annual rate comparable to the US consumer price index.

The port authority is understood to be contemplating an increase in landing fees to pay for required upgrades if the deal does not reach financial close, according to a source close to the transaction.

An American Airlines spokeswoman says the airline is working closely with the port authority on the deal but declined to comment further.

A JetBlue spokesman says the airline supports a private lease of the airport that improves the facilities and customer experience.

American carried 26.2% of the passenger traffic at Munoz airport and JetBlue 24.9% during the year ending in January, according to the US Department of Transportation. They are the two largest passenger airlines at the airport.

The port authority has selected ASUR and Highstar Capital-owned Aerostar Airport Holdings and Ferrovial Aeropuertos and Macquarie-owned Grupo Aeropuertos Avance as final bidders for the Marin airport lease. It hopes to receive an upfront payment of about $1 billion from the winning consortium and an annual share of the airport's revenues, according to the source. It would also require that they invest between $40 million and $60 million during the first five years of the concession.

A preferred bidder could be selected as early as June.

David Alvarez, executive director of the Puerto Rico Public Private Partnership Authority, which is handling the transaction, says the private consortium will be required to make certain capital investments during the first five years but would not confirm any specific numbers.

Aerostar Airport Holdings and Grupo Aeropuertos Avance were selected from six teams that were shortlisted in September 2011. The other interested bidders included Goldman Sachs Infrastructure, Flughafen Zurich, Fraport, GE Capital Aviation and TIAA-CREF. The PRPPPA released a request for qualifications for the lease in June 2011.

Credit Suisse is the financial adviser to the PRPPPA, Mayer Brown is their US legal counsel, Pietrantoni, Mendez & Alvarez is local counsel and LeighFisher is technical adviser.