Dealmaking and public-private contract awards in the airport business have ebbed a little in the past 12 months, but remain relatively buoyant.

Modalis Infrastructure Partners has been tracking the market closely through its Deal Pipeline on the airportIR business intelligence website and the flow has remained robust, although the market was not as strong as in 2023. Currently, the site is tracking more than 100 active deals.

The relative dip reflects a tougher funding environment due to higher interest rates, with investors taking a harder look at the speed of returns before taking aim at specific airport projects and management contracts.

Justin Lee, airportIR’s Singapore-based writer/researcher, commented: “There are fewer multiple airport public-private partnership (PPP) deals that have been concluded this year. That’s not to say there aren’t many multi-airport opportunities in the market; there are some in the Bahamas, Greece, India, and Peru, for example. However, the PPP process is very slow due to various factors.”

Caution is warranted given the current geopolitical concerns in Eastern Europe and the Middle East. Also, over the years, many multi-airport systems around the world have already been privatized, including some larger capital-city airports that are most attractive to investors.

In the recent past, these have been used—perhaps most noticeably in Brazil—as a profit driver batched up with smaller gateways to make the entire group financially viable. Despite fewer lucrative hub-airport deals, air transport infrastructure remains a good bet, particularly airports, given the strength of the post-COVID passenger rebound.

The latest United Nations World Tourism Organization (UNWTO) data shows that international tourism bounced back to 96% of pre-pandemic levels in the seven months through to July 2024. That amounted to around 790 million tourists traveling internationally during the period—about 11% more than in 2023, and only 4% less than in 2019.

BlackRock Enters the Fray

A key move this year came from the world’s biggest asset manager, BlackRock, which has thrown its hat into the infrastructure ring. The global company has swallowed up fund manager Global Infrastructure Partners (GIP) in a deal valued at $12.5 billion, and completed on October 1.

GIP is a lead shareholder in several key airport assets, among them London Gatwick (LGW) and Edinburgh (EDI) in the UK, and Sydney Airport (SYD), Australia’s primary international gateway serving 38.7 million passengers in 2023. The group also owned a 75% stake in London City Airport (LCY) before selling it in 2016.

In a statement, BlackRock said: “Large government deficits mean that the mobilization of capital through PPPs will be critical for funding important infrastructure. As capital has become more scarce in a higher interest rate environment, companies are exploring partnership opportunities to improve their returns on invested capital (ROIC), or to raise capital to reinvest in their core businesses.”

The prevailing financial environment has placed extra burdens on government owners of airports, as well as operators wanting to upgrade facilities. BlackRock’s move only confirms that this asset class, among several in the wider infrastructure pool, has longevity.

Larry Fink, chairman and CEO of BlackRock, said: “Infrastructure is one of the most exciting long-term investment opportunities as a number of structural shifts reshape the global economy.

“We believe the expansion of both physical and digital infrastructure will continue to accelerate as governments prioritize self-sufficiency and security. Policymakers are only just beginning to implement once-in-a-generation financial incentives for new infrastructure technologies and projects.”

Thrills & spills

Though 2024 has not been the best year for the airport PPP market, there were some important transactions that came to light; some concluded, while others are in limbo.

In Europe, in the latter camp, there had been much speculation at the start of the year about a change of ownership at the continent’s busiest hub, London Heathrow (LHR) after its main shareholder, Ferrovial, expressed an interest in divesting at the end of 2023.

Two buyers—private equity firm Ardian and Saudi Arabia’s Public Investment Fund (PIF) —were in the frame, and the deals have now concluded with Ardian becoming the biggest shareholder in LHR with 22.6% and PIF taking 15%. This leaves Ferrovial with a 5.25% stake, according to Heathrow Airport Holdings Limited.

Other investors include Qatar Investment Authority (20.00%), GIC (11.20%), Australian Retirement Trust (11.18%), China Investment Corporation (10.00%), Caisse de dépôt et placement du Québec (2.65%), and Universities Superannuation Scheme (2.10%). 

Ardian’s Co-Head of Infrastructure Europe and Senior Managing Director Juan Angoitia Grijalba said: “The U.K. is a priority market. Our investment in Europe’s leading airport will draw on Ardian’s expertise in aviation, including previous investments in London Luton Airport and stakes in six airports in Italy. It is another example of how we are investing in significant infrastructure in our core markets.”

Meanwhile, in Hungary, AviAlliance sold off its stake in Budapest Airport (BUD) to a consortium consisting of the Hungarian state-owned Corvinus Zrt and VINCI Airports, while increasing its control over Athens Airport in Greece. The move means that VINCI—with operations in Portugal, the U.K., France, and Serbia—now handles more than 150 million passengers in Europe across 26 gateways.

- In Part 2, to be published on January 1, we will look beyond Europe at some significant developments in Asia and South America.

- This article is modified from the original in Airport World, the magazine of Airports Council International.