Assessing Public-Private Partnerships in Regional Airports Development (Part 2 of 2)

By John Eskaros (Frankfurt, Germany)

This is Part 2 of 2. Part 1 was published on June 24th, 2020 and can be found here.

Note to reader: The following article is based on a research project conducted by the author as part of his master’s thesis for Business Administration (MBA) in Aviation and Tourism Management at the Frankfurt University of Applied Sciences. The research was conducted from September 2019 to March 2020 and therefore prior to the COVID-19 crisis.

As mentioned in Part 1 of this article, experts were if they believe a PPP structure can improve the poor financial performance of small and regional airports.

The same experts were aslo asked to rank the different areas were PPPs can be most challenging and the phases within a PPP where most challenges are usually faced. The six different areas were “Economics and Financials”, “Governance and Regulations”, “Project Structuring and Modelling”, “Risk Management”, “Contract Management” and “Performance and Evaluation”. As for the project phases, they were divided into seven items; “Project Identification and Vision ”, “Technical Feasibility & Due diligence”, “Financial Feasibility and Raising Capital”, “Transaction, Bidding, Contracting”, “Short Term Execution: Building (CAPEX Investment)”, “Long Term Execution: Maintenance & Operations (OPEX Investment)” and “Handover and Project Closure”.

Finally, experts were asked to mention the most pressing challenges faced and give their professional opinion if PPPs face different challenges in regional and small airports compared to the bigger and well-established hubs.

Figure 1 – Radar diagram of the weighted index for each topic according to the surveyed experts (The lower the number the higher the ranking in terms of being a problematic topic)

  

Figure 2 – Radar diagram of the weighted index for each phase according to the surveyed experts (The lower the number the higher the ranking in terms of being a problematic phase)

Our Findings

Upon the analysis of the different answers, rankings, and comments and by comparing the answers provided by the public sector versus the ones provided from the private sector, the below conclusions were reached:

  • Most interviewed experts consented that public-private partnerships can improve the current poor financial performance of struggling small and regional airports.
  • Experts see stability in terms of investors’ appetite towards investing in small and regional airports with self-negating votes on having a slight increase or a slight decrease.
  • Economic prosperity is proven to be mandatory to attract investors however, pioneering investors are usually the ones that initiate the development in a certain region.
  • Airport clustering is hype and experts disagree that individual airports perform better. However, due to neutral & agreeing votes, further quantitative research is needed to prove such a claim.
  • A consensus was reached on whether PPP projects face different challenges in small airports compared to the well-established hubs with the majority agreeing that the challenges faced are different.
  • “Economics & Financials” topics are a major concern for all stakeholders. However, “Project Structuring and Modelling” seems to be of higher concern to the public sector.
  • Experts collectively ranked the “Financial Feasibility and Raising Capital” phase as the most vulnerable phase in a PPP project.
  • The lack of economic viability of small and regional airports due to the limited demand & the clear dependability on highly mobile airlines is the challenge mostly mentioned.
  • The public sector seems to lack the experience for handling complex PPPs where adequate governance is usually needed. The short financially driven vision of some investors can amplify the effects of this problem.
  • Academically approaching PPP topics in a generalized way is a very intricate process. Yet, there is a lack of literature for these types of studies where future research is still required.

In conclusion, our research confirms that the market still identifies -from the overall opinions of the experts that were interviewed and surveyed- a public-private partnership as a highly valuable tool to develop public infrastructures such as airports and, in some cases, can be even considered inevitable. However, if this research and questionnaire were conducted again today, we would -definitely- expect to see major differences to the achieved results due to the COVID-19 crisis and the financial implications it brings to the whole of the aviation industry.

Finally, The author would like to thank the GAD World Conference for their sponsorship of this research, the support provided during the data collection phase of the research, and for allowing us to present the detailed results of this research in the upcoming GAD World Conference in Zurich. The author would also like to thank Prof. Dr. Andreas Papatheodorou and Dr. Vincenzo Uli for their time and insightful guidance during this research.

About the Research

As outlined in the lead paragraph, this research project was conducted as a master’s thesis presented by the author in partial fulfillment of requirements to obtain a master’s degree in business administration (MBA) in aviation and tourism management. The research was conducted before the current COVID-19 crisis from September 2019 to March 2020. The degree was successfully awarded in April 2020 by the Frankfurt university of applied sciences in Frankfurt, Germany. The MBA program is conducted in Frankfurt; one of the world’s largest aviation hubs, designed together with well-known industry leaders like DFS, Fraport, and MUC Airport, and in partnership with Embry-Riddle aeronautical college, Huddersfield University and Aegean University.

The research project was sponsored by the GAD World conference; one of the world’s leading airport development and finance events. It is considered the only event dedicated to investing in airports, bringing annually airports, investors, financiers, regulators, governments and airlines together at a world’s leading forum for global airport development and investment. The research process was supervised by Prof. Dr. Andreas Papatheodorou; Professor in Industrial and Spatial Economics with Emphasis in Tourism at the University of the Aegean, Greece; an Adjunct Professor at the School of Aviation, University of New South Wales; and an Adjunct Professor at Frankfurt University of Applied Sciences. The research was also co-supervised by Dr. Vincenzo Uli; Research Fellow in Management at the Frankfurt University of applied sciences.

Correspondence:

Author: John Eskaros – Email: Eng.john.m.r@gmail.com

Supervisors: Prof. Dr. Andreas Papatheodorou – Email: a.papatheodorou@aegean.gr
Dr. Vincenzo Uli – Email: v.uli@fb3.fra-uas.de

Bibliography

International Air Transport Association IATA (2019): Annual Review 2019. International Air Transport Association. 75th Annual General Meeting, Seoul, June 2019

Oxford Economics (2018): Aviation: Benefits Beyond Borders. 1st ed. Air Transport Action Group (ATAG). Geneva

ACI World (2018): ACI Policy Brief. Creating fertile grounds for private investment in airports. 01st ed. With the assistance of ACI Asia, ACI Latin America-Caribbean, InterVISTAS Consulting. Airports Council International. Montreal, Canada.

ACI Europe (2017a): European Regional Airports. Connecting people, places, and products. Brussels.

ACI Europe (2016): The Ownership of Europe’s Airports. Brussels.

World Bank and PPIAF (2012): Public-Private Partnerships – Reference Guide.

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