They say good things come to those that wait, and after just over a decade with the company, Jorge Gil was appointed CEO of Ferrovial Aeropuertos in December 2012.
It actually took him 11 years, and many different positions, to rise to the top, and he believes that this “apprenticeship” means that he is perfectly placed to take Ferrovial’s airport business to new heights.
“I have two main aspirations: to grow professionally and to learn. And those are things that I have constantly experienced during my time with Ferrovial,” says Gil.
“In the last thirteen years I have seen the company from many different positions and in different states of health, and I am pleased to say that we are much leaner and fitter today than ever before.”
Founded in 1952, Ferrovial is one of the world’s leading developers of transport infrastructure, with activities in construction, toll roads management, maintenance and services.
Its business interests equate to operations in more than 25 countries and a global workforce of 65,000 employees.
Gil claims that the Spanish company is the world’s leading private investor in transportation infrastructure having invested €53 billion on its assets.
This includes a major stake in key assets such as Canada’s 407 ETR highway and, of course, London’s Heathrow Airport, which in 2013 maintained its long-held status as the world’s busiest international airport for passenger traffic.
He believes that its portfolio of successful businesses ensures that Ferrovial enjoys a worldwide reputation as an “efficient, exemplary organisation in the sectors in which it operates”.
Gil jokes that Ferrovial “landed into the aviation industry” in 1998 when it was part of a consortium that bought a 24.5% stake in Aeropuertos del Sureste (ASUR), and since then, the company has invested and managed a wide range of airports in the UK, Italy, Australia, Chile and Mexico.
It acquired its prize asset, Heathrow, in July 2006 when it led a consortium that paid €23.6 billion (£16.3 billion) – including debts – for BAA Airports Limited, now known as Heathrow Airport Holdings (HAH) .
As part of the deal, it also acquired Gatwick, Stansted, Edinburgh, Glasgow, Aberdeen, Southamption and Budapest airports, as well as a controlling 65% interest in Naples International Airport operator, GESAC, the retail management contracts at a handful of US airports, and minority stakes in six Australian gateways.
Ferrovial’s equity contribution to the deal was €3.7 billion (£2.6bn), giving it a 62% stake in the consortium, which also included CDPQ (28%) and GIC (10%).
“This was a crucial step, which consolidated Ferrovial’s position as one of the world’s leading private airport operators and management companies,” reflects Gil.
According to Gil, under investment at Heathrow meant that Ferrovial inherited an airport with outdated facilities and a poor reputation for customer service.
It was something the company knew it had to address quickly, and Gil believes that investing €9.4 billion (£7.8bn) on upgrading the airport’s infrastructure since 2006, a strategy it continues today with the soon-to-open Terminal 2, demonstrates its commitment to the cause.
He is also quick to point out that Heathrow has strived hard to improve its customer service standards, and subsequently its public image, under Ferrovial’s ownership.
Indeed, Gil states that customer satisfaction levels are at an all-time high, with ACI’s Airport Service Quality (ASQ) Survey revealing that 75% of passengers rated Heathrow ‘Excellent’ or ‘Very Good’ in 2013, as opposed to just 48% in 2007.
Heathrow actually achieved its highest ever overall passenger satisfaction score of 3.99 for the first two quarters of 2013 and 3.97 in the final quarter to ensure a calendar year high of 3.97 – marginally up on 2012’s 3.94.
And, as customer satisfaction levels have increased, so has passenger spending in Heathrow’s shops and F&B outlets, with retail income (including car parking) rising by 6% to €590 million (£487 million) in 2013.
Duty free outlets accounted for €153 million (+3.3%) of the total, airside specialist shops for €116 million (4.3%) and Bureaux de Change €54.5 million (2.3%) in 2013, as Heathrow’s net retail income per passenger rose 2.6% to €7.7.
The figures prompt Gil to comment that Heathrow now delivers “excellent operating results”.
“Our business model prioritises efficiency, safety and customer satisfaction with a focus on sustainability, along with value creation for stakeholders, employees and local communities,” enthuses Gil.
Catalyst for success
Before becoming head of Ferrovial Aeropuertos, Gil was head of project financing and director of corporate development at Cintra, Ferrovial’s highway division, and then director of financing and capital markets for the whole corporation.
He says that the refinancing of BAA in 2008 is one of the highlights of his career to date, because of the size and difficulty of the project and the fact that it took place during the 2007-2008 global financial crisis.
Gil admits: “Had the size of the deal been ten times smaller, I would be equally satisfied, owing to the complexity of closing several transactions at the same time.”
He certainly has no hesitation in stating that as a result of the move, HAH possesses a robust financial position, with a solid asset valuation, and a debt restructured through bond emissions.
Today, Ferrovial holds a 25% stake in HAH and continues to be Heathrow’s main shareholder and long-term industrial partner.
However, HAH’s airport portfolio is much changed from the one Ferrovial bought in 2006 as pressure from the UK’s Competition Commission has forced it to sell Gatwick for €1.8 billion (£1.5bn) in 2009, Edinburgh for €980 million (£807 million) in 2012 and Stansted for €1.8 billion last year.
It also voluntarily sold its majority stake in Naples International Airport, Budapest Airport, World Duty Free and its real estate business.
The sales mean that HAH’s airport portfolio now comprises just Heathrow, Glasgow, Aberdeen and Southampton in the UK, which between them, handled nearly 85 million passengers last year.
Without doubt, Heathrow is the prize asset of both Ferrovial Aeropuertos and HAH, the latter even stating in its 2013 year end accounts that it had become “the full focus of the business” since the sale of Stansted.
And, it is easy to see why, as the UK’s only hub handled a record 72.3 million passengers (+3.4%) in 2013 and was the recipient of a number of awards in the process.
These included being named the ‘Best Airport in Europe handling over 25mppa’ by ACI Europe (won jointly with Amsterdam Schiphol) and Executive Travel magazine’s 2013 Leading Edge Award for ‘Best International Airport’, while Terminal 5 won SkyTrax’s ‘Best Airport Terminal’ award.
And Gil, who describes 2013 as a “great year for Heathrow”, is confident that more accolades will soon be coming its way following the much anticipated June 4 opening of its new €3 billion (£2.5bn) Terminal 2.
Also known as The Queen’s Terminal, Terminal 2 will become the new home of the 23 Star Alliance carriers serving Heathrow as well as Aer Lingus, Virgin Little Red and Germanwings, ensuring that it handles around 20mppa.
Gil insists that T2 – one of the largest privately funded infrastructure projects in the UK in recent years – has been designed from the outset with the needs of the individual passenger at its heart, and with sustainability as a guiding principle.
He supports the claim by revealing that T2 will produce 40% less CO2 emissions than the buildings that it has effectively replaced. It will also be the UK’s first airport terminal to be awarded a BREEAM rating for its sustainable building design.
“It is an easy thing to say, but continuous improvement truly is at the core of Heathrow’s heart,” adds Gil. “Every member of the team is committed to making every journey better, every day, and all the time.”
According to Gil, one of the biggest challenges faced by Heathrow in 2014 will be coming to terms with the impact new economic regulation will have on the gateway.
He is, of course, talking about the Civil Aviation Authority’s decision that Heathrow can only increase its charges by less than the rate of inflation for the next five years.
It doesn’t sound that bad, but effectively the new ruling means that Heathrow’s per passenger airline charges will fall in real terms from €25 in 2013/14 to €23 in 2018/19.
Heathrow chief executive, Colin Matthews, has already blasted the regulation as “draconian”. And Gil agrees, claiming that the findings of the toughest price review the airport has ever faced were based on aggressive operational, commercial and passenger forecasts, requiring Heathrow to reduce its operational expenditure by more than €726 million (£600 million), and stretch commercial revenue targets by in excess of €121 million.
He notes that this makes it very difficult to achieve the already “very low return” approved by the CAA.
“We will review our investment plan to see whether it is still financeable in light of the CAA’s settlement,” he warns.
“It means that we will need to achieve a better level of efficiency, increase productivity and reduce costs while competing with other airports in Europe, which like us, are offering better passenger service every day.”
UK capacity crunch
Talking about competition from major hubs around the world, Gil is pleased with the Airports Commission’s recent conclusion that Heathrow has been shortlisted as a viable option for expansion.
So too has Gatwick, although he refuses to accept that it is the main competitor to Heathrow for extra capacity.
Indeed, Gil argues that there is room for growth at both airports, but claims that what the UK needs is extra hub capacity.
“Heathrow and Gatwick are different,” he says. “Heathrow provides regular, direct flights to long-haul business destinations by connecting passengers from all over Europe. Gatwick serves mainly short-haul and holiday destinations.
“The choice is between one hub and none, not two or a split hub. We are working with all stakeholders to support the proposal to build a new runway at Heathrow.
“It is of utmost importance if the UK wants to be part of the race to emerging markets. Long-haul connections from Heathrow have given the UK a competitive advantage for the last 50 years, and we want to ensure that we will be able to provide this critical access in the future.”
Gil believes that building a third runway at Heathrow would also support more inward investment that would consequently deliver more jobs, more trade and more economic benefits.
“Continuing to have one of the world’s best-connected hub airports in the UK is vital to supporting the economic growth of the nation,” he adds.
“The Airports Commission’s final report, due out in 2015, will indeed be a significant milestone in Heathrow’s history. We hope the right decision is made and we are given the opportunity to expand Heathrow.”
Global airport operator
Although only operating airports in the UK today, Ferrovial Aeropuertos hasn’t given up hope of rebuilding a global airport portfolio, as its recent participation in tenders for gateways in Brazil testify.
Indeed, Gil confirms that Ferrovial is actively looking for new investment opportunities. “We are committed to increasing our airport portfolio and our goal is to invest in airports where we are able to bring added value,” he tells Airport World.
“Our wide range of expertise allows us to add value in the areas of construction, financing or operations, boosting revenues and improving efficiency. This enables us to analyse both existing mature airports as well as new or CAPEX intensive airports.”
When it comes to investment opportunities, Gil says that Ferrovial is truly global in its ambitions.
“Whilst we have a preference for Organisation for Economic Co-operation and Development (OECD) countries, we are also open to other markets,” he reveals.
“As investors, we have a preference for being majority shareholders. Having said that, we are open to considering other alternatives, such as management contracts, if appropriately linked to our core business. That is a decision we take on a project-by-project basis.”
In response to the question what does Ferrovial bring to the table, Gil smiles, and says “everything”.
He says: “Thanks to our operational experience, proven financial capabilities and synergies with other divisions in our group, we can deliver a world-class service, implement operational innovation and attract airlines and new routes, driving growth and improving the passenger experience.”
When you put it like that, I don’t think it will be long before Ferrovial Aeropuertos adds to its list of gateways.