© Briana Tozour/Unsplash
In the first part of this report, last week, we looked at the big regional variations in the scale of private investment in airports. But, post-COVID, there are opportunities for public-private partnerships (PPPs) to become a growing trend to support emptied state coffers.
One region that, historically, has been favorable to the development of airport PPP projects is Asia. Several projects are in play in the region—particularly in India, the Philippines, Japan, Cambodia, and Indonesia—confirming that appetite still remains.
India remains one of the strongest airport PPP markets in the region, with several existing PPP deals and more Airports Authority of India airports yet to come under the hammer. Adani Group is among the biggest private players in the Indian airport market and has expressed its intention to grow through further acquisitions should opportunities arise. Expansions at existing privatized airports are also taking place, for example at Bengaluru Kempegowda, plus add-on projects in Malaysia and the Philippines.
It is notable that the private sector in Asia tends to have weight at high-volume airports in the market as this is where profits generally lie. The World Association of PPP Units & Professionals, said: “Asia stands out from the other continents with more than 45% of passengers in the region having traveled using airports benefiting from private sector involvement, even though these airports represent only about 15% of the airports in Asia.”
Mopa Airport is a new, privately-funded airport in Goa, India featuring a striking control tower.
In the Middle East—where the state has traditionally owned all aviation assets from the airports to the airlines—there are changes afoot. Saudi Arabia’s huge push to develop inbound international tourism as part of its very ambitious Vision 2030 strategy, also brings with it a healthy dose of PPP involvement, from hotels to airport infrastructure.
The Kingdom has stated: “Private investment plays an essential role in realizing Vision 2030. Saudi Arabia aims to achieve an increase from 40% to 65% in private sector contribution to GDP.” A Privatization Law has already been enacted there to attract foreign direct investment and the latest announcement on the aviation front is a new master plan for a six-runway hub for Riyadh.
The country’s Public Investment Fund (PIF)—one of the largest sovereign wealth funds in the world—said that the airport would include 12 square kilometers of airport support facilities, space for residences and recreation, retail outlets, and other logistics real estate. The aim is to accommodate up to 120 million travelers by 2030.
As we enter the new post-COVID world, there is consensus that travel and tourism will grow again, and quickly. UNWTO data show that international tourism reached 63% of pre-pandemic levels by the end of 2022, but that international tourist arrivals could reach 80% to 95% of pre-pandemic levels this year.
In some regions and markets such as Europe and the United States, demand has exploded. By sub-region, several reached 80% to 90% of their pre-pandemic arrivals in the first nine months of 2022. Western Europe hit 88% and Southern Mediterranean Europe was at 86%. The Caribbean and Central America were both at 82%, with Northern Europe just behind at 81%.
Moreover, there were some destinations reporting arrivals above pre-pandemic levels in those nine months including Albania, Ethiopia, Honduras, Andorra, Puerto Rico, Dominican Republic, Colombia, El Salvador, and Iceland.
Naturally, private investors in the airport sector are looking closely at all the recovery and forecast traffic data—as well as longer-term demographic and economic development trends—when making their investment decisions.
The Modalis view is that while obstacles remain, not least those of geopolitical conflict and the risk of an economic downturn, demand for travel will continue to outweigh the negatives as has been shown very strongly in the second half of 2022. Coupled with an ever-sharpening focus on green finance, this puts the airport PPP market—from both the landlord and investor side—on a strong footing for the future.