With Brazil’s second busiest airport sold for $8.3 billion and London Stansted swapping hands for €1.75 billion, the €3 billion VINCI Airports paid for ANA’s Portuguese airport system last year is beginning to look like a bargain.
For the investment, VINCI acquired the concession to manage, operate and develop 10 airports across mainland Portugal and the islands of the Azores and Madeira for the next 50 years.
The group includes Lisbon – the main hub of TAP Portugal and jewel in the crown of the nation’s airport system – as well as the highly successful and former Airport Service Quality (ASQ) award-winning gateway of Porto, and the popular Algarve gateway of Faro.
But it also includes the less profitable airports of Beja (located in Portugal’s Alentejo region) and the island gateways of Funchal and Porto Santo (Madeira) and Ponta Delgada, Horta, Flores and Santa Maria (the Azores), which handle the bulk of their traffic during the summer months.
By his own admission, VINCI Airport’s CEO, Nicolas Notebaert, admits that it is quite a mixed bag, but he is absolutely certain that the company made the right choice in buying a 100% stake in ANA.
And he tells Airport World that just a year into the concession, ANA is already reaping the rewards, with traffic growth up 5% in 2013 to 32 million, while VINCI Airport’s annual revenues have risen from €429 million to €650 million.
“We did not get any surprises when we acquired ANA because we did due diligence and knew exactly what we were getting – a well run airport business that we could take to the next level,” says Notebaert.
“Our business model is very much based on the smooth integration of our people, ideas and philosophies. From the outset we worked together with the ANA team to develop a new strategic plan for the company, which has common goals for ANA and VINCI Airports.”
Notebaert describes ANA’s new strategic plan as a mix of “continuity of ANA’s plans with some slight changes”, something that is perhaps best demonstrated by VINCI’s opting to keep the existing ANA chairman and board of directors, with the addition of two VINCI appointed executives.
In the not too distant past, both ANA and TAP Portugal had reputations for being quite slow moving, staff heavy organisations, but Notebaert insists that this is no longer the case for ANA due to more than a decade of streamlining and cost control.
Including 100% owned ground handling subsidiary, Portway, ANA currently employs around 2,828 staff across its airports, a figure that Notebaert doesn’t feel is excessive for 10 airports handling over 30 million passengers per annum.
So, re-winding the clock back 18 months, what was the attraction of Portugal’s airport system to VINCI Airports?
“It was the right deal at the right price and a strategic move for VINCI in terms of airport concessions,” says Notebaert. “First, it was a 100% acquisition, which gives us the control we need as an investor and operator of transportation infrastructure across the globe.
“Secondly, the concession was for 50 years, which as a long-term investor/partner, fits our business model as it gives us time to make a difference.
“Last, but by no means least, we found that the regulation in place in Portugal was very favourable and did not require significant investment from us at the outset.”
The fact that that non-aeronautical activities are not regulated and ANA is free to set the structure and amount of aeronautical fees at its airports – as long as different inflation-linked price caps across the network are observed – are two of the regulations that particularly appealed to VINCI Airports.
In essence, according to Notebaert, they ensure that ANA will benefit from all upsides on traffic, non-aeronautical activities, cost base and capital expenditure (CAPEX).
And, he adds that rising traffic figures across Portugal’s airport system of around 4% per annum for the last decade, was the icing on the cake.
Indeed, Notebart points out that the level of traffic growth in Portugal is one of the highest in the world, easily outstripping the more established European markets such as the UK and Germany.
He also notes that although some of ANA’s airports are less profitable, its Madeira gateways – operated under the umbrella of 100% owned subsidiary, Aeropuertos da Madeira – made €40 million in revenue in 2012.
“ANA is a growing company, 5% in traffic and more in revenues, and I can only see this continuing for the foreseeable future if we make the best use of our facilities and manpower,” he says.
Although Notebaert won’t commit to any predictions for 2014, he expects another “very good year” for ANA, partly based on an 8% rise in passenger numbers in the first few months of the year and the upcoming football World Cup in Brazil.
Don’t understand what the latter has got to do with Portugal? Well, things might become a bit clearer upon learning that in an average year, Lisbon Airport on its own accounts for 25% of the annual traffic between Europe and Brazil.
Not surprisingly then, Lisbon Airport (Portela) is the biggest airport in Portugal, handling 16 million passengers in 2013 – exactly 50% of the total handled across the entire country.
Next biggest is Porto’s Francisco de Sá Carneiro Airport and Faro, which handled 6.3 million and 5.9 million passengers respectively in 2013 as they accounted for 19% and 18.4% of Portugal’s traffic.
In terms of airport development, Notebaert reveals that the initial priority for ANA is to build up its route network, boost passenger numbers and increase non-aeronautical revenues before undertaking any infrastructure development projects.
Non-aviation related revenues currently account for around 30% of ANA’s income and Notebaert would ultimately like to see the figure rise to at least 50% to make the company less dependent on aeronautical activity.
“Our customer base says that we can do better regarding non-aeronautical revenues, and this is something we are actively working on and will improve over time,” he says.
He reiterates that there is no need for huge investment in Portugal’s airports as VINCI has inherited a “sound investment plan” from ANA, based on the commitment to make small and regular upgrades to its gateways.
“We are committed to improving and expanding terminals over the next decade and this should be enough to cope with demand,” says Notebaert.
The opening of a new shopping plaza at Lisbon Airport just prior to ANA’s acquisition by VINCI was the last big development project at a Portuguese airport. Next on the agenda are terminal improvement and expansion projects in Faro and Madeira.
Madeira’s Funchal airport actually celebrates its 50th anniversary this year, and ANA intends to mark the milestone during ACI Europe’s upcoming Regional Airports Conference and Exhibition in Madeira.
Funchal was actually Portugal’s fastest growing airport last year, experiencing a 7% upturn in traffic as 2.5 million passengers passed through its facilities.
TAP Portugal and its subsidiary Portugália are the dominant carriers in the Portuguese market, accounting for the lion’s share of the traffic at their Lisbon hub.
Other big players in Lisbon and the Portuguese market include easyJet, Ryanair, and SATA International. Portela is also the base for charter airlines such as euroAtlantic Airways, Hi Fly and White Airways.
“It is the role of the concessionaire/airport operator to be creative and develop the route network and we are absolutely committed to doing this in Portugal, as we do elsewhere,” states Notebaert.
Rising international traffic, which in 2013 accounted for 83% of all passengers handled at Portugal’s airports, is driving the upward trend, according to Notebaert.
System wide, the UK and France provided the bulk of foreign passengers, followed by Germany, Holland, Sweden and Belgium and then the old Portuguese colonies of Angola, Mozambique and Cape Verde in Africa and Brazil in Latin America.
New Lisbon Airport
It feels like the project has been on the agenda for 20 years, and just when it seems likely to get go ahead, it is placed on the back burner again by the government. So what is the latest news on its development?
Notebaert is quite clear on the matter, insisting that it will happen and that it will be built, co-funded [with private investors] and operated by ANA. He even goes as far as to suggest that the most likely opening date will be some time after 2024.
“There is a clear ruling in our contract that when the annual passenger traffic at Lisbon reaches 22 million, the Portuguese government will choose the site of a new airport within four years,” says Notebaert.
“It could serve the capital in addition to Portela, so the opening will not necessarily mean its closure.
“What is clear is that as Lisbon only currently serves 16 million passengers per annum, the new airport is not imminent, and our first objective remains the same as the Portuguese government, and that is to optimise the capacity of Portela to allow it to reach its potential.”
He cites London Gatwick, the busiest single runway airport in the world, as an example of what can be achieved in terms of making the most of limited resources, adding that its success makes him believe that Portela could easily accommodate up to 25mppa.
“We are contractually bound to operate the new airport. It will be up to the government of the time to decide when and where,” enthuses Notebaert.
Global airport portfolio
The acquisition of ANA ensures that VINCI Airports is now one of the world’s biggest airport operators in the world, managing 23 airports in Portugal, France and Cambodia, which between them, handle nearly 45mppa and earn in excess of €600 million in revenue.
He notes that traffic at VINCI’s Cambodian airports (Phnom Penh and Siem Reap) grew by 18% in 2013 and has soared between 12% and 20% annually for the past four years.
Its 10 French airports also recorded a 7% upturn in passenger throughput last year, so the VINCI business model is clearly working.
So what next for VINCI in terms of adding to its airport portfolio? Notebaert was understandably cagey about revealing too much, but was honest enough to admit that it is actively looking for investment opportunities as well as management contracts.
“Our Cambodian experience makes us think that we can replicate the experience in other emerging countries as we are interested in growth markets,” says Notebaert.
“We could do it again in Latin America or elsewhere in South East Asia, for example, if the situation is right.”
Although VINCI Airports has yet to make any big investment in upgrading Portugal’s airport system, it is certainly not shy of getting its chequebook out when required, as it demonstrated in Cambodia when building new terminals in Phnom Phen and Siem Reap.
“We built everything in Cambodia, where we started out with 100,000 passengers and now handle five million per annum,” Notebaert remarks.
“I think we will also be one of the last big builders of airports in western Europe as we are committed to building the new airport in Nantes and will build the new Lisbon Airport.
“We are a long-term investor in airports. We have no exit policy and are not afraid of investing money on upgrading our airports when the time is right.”
Portugal’s airport system clearly has found the right investor.