This document summarizes a presentation given by Thomas Frankl on airport investment. The presentation discusses trends in airport privatization, including an increasing number of public-private partnerships and trade sales of airports in 2011. It also analyzes the advantages and disadvantages of different models of private investment in airports, such as concessions, management contracts, and minority stakes. Overall, the presentation argues that airports should focus on developing new revenue streams before considering privatization, in order to maximize their long-term economic value.

1. Airport Investment
Thomas Frankl
Managing Partner & CEO
Airport Development Partners SA
Geneva, Switzerland
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2. Idyllic Lake Geneva
© ed. Plonk&Replonk
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3. Idyllic Lake Geneva
© ed. Plonk&Replonk
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4. Idyllic Lake Geneva
© ed. Plonk&Replonk
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5. Agenda
• Introducing Airport Development Partners
• 2011 airport transactions
• Airport privatisation from an investor perspective
• A tale of two airports
• PPP – ‘Public-Private Panacea’ ?
• Engaging with private investors
• Alternatives to privatisation
• Conclusions
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6. Airport Development Partners SA
• Headquartered in Geneva
• Chairman: Marc Brutten
• Managing Partner & CEO: Thomas Frankl
• Members of the Board:
– Bob Aaronson, former Director General ACI
– Joseph In-Albon, former CEO Swissport
– Hans-Peter Kohlhammer, former CEO SITA
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7. Airport Development Partners SA
• Supporting public and private airport owners
in three areas:
– Assisting public and private airport owners in
preparing for sale / PPP concession / management
contracts
– Increasing efficiency of operations
– Developing new commercial income streams /
alternative use scenarios
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8. Airports for Africa Foundation
• Geneva-based foundation providing free
consultancy services to LDC in sub-Sahara
Africa
• NGO accreditation concluded before close of
the year
• Designated Chairman: Bob Aaronson; Board
appointments to follow
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9. 2011 - Transactions picking up
• PPP:
– Rwanda: Bugesera
– Nigeria: Likki-Epe
– Nairobi Jomo Kenyatta
– Medina
– Zagreb
– Puerto Rico
• Trade sale¹:
– BAA: Stanstead, then Edinburgh or Glasgow
– AENA stake
– MAD, BCN
– HochTief Airport portfolio: ATH (plus gvt. stake), DUS, HAM, TIA, SYD
– US: Chicago Midway, Gwinett, Hendry County
– Genoa and a number of smaller Italian airports
– Hannover
– 2009/10 ‘left-overs’: Parma, Lübeck, Bydgoszcz, Balaton, Györ, etc.
¹ only majority participations
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10. Airport Privatisation – the investor
perspective
1. Hub Airports
2. Regional hubs with large catchment areas
3. Economically viable, non-hub airports (incl.
niche airports)
4. Financially non self-sufficient, underutilized
airports
5. Economically and financially non viable
airports 10

11. A tale of two airports
Regional Airport A Regional Airport B
(Revenues: USD 60m, 300 staff) (Revenues: USD 60m, 300 staff)
• EBIT (2010): USD 3.6m • EBIT (2010): USD 3.6m
• Three-year action plan:
• Sold to an investor in 2011 – Route development: USD 200k (3
new routes)
at a 10 x EBIT multiple for – Mobile terminal to accommodate
USD 36m new routes: USD 400k
– Voluntary staff reductions by 20% :
USD 800k
– Increase of retail space: USD 500k
– Increased operational efficiencies
(IT, multi-tasking, energy savings,
etc.): USD 100k
– Total capex: USD 2m
– Additional EBIT of 17% generated
in year 3: USD 0.6m
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12. A tale of two airports
Regional Airport A Regional Airport B
(Revenues: USD 60m, 300 staff) (Revenues: USD 60m, 300 staff)
• EBIT (2010): USD 3.6m
• EBIT (2014): USD 4.2m
• ROI of action plan: USD
2.6m on a USD 2m
investment, i.e. 30%
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13. A tale of two airports
Regional Airport A Regional Airport B
(Revenues: USD 60m, 300 staff) (Revenues: USD 60m, 300 staff)
• EBIT (2010): USD 3.6m
• EBIT (2014): USD 4.2m
• Sold to a private investor in
2015 at a 10 x EBIT multiple
for USD 42m
• ROI of action plan at the time
of a sale: USD 6m vs. USD 2m
investment = 300 % !
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14. PPP – ‘Public-Private Panacea’ ?
• The Pro’s:
– Politically acceptable / ‘sellable’
– Investors willing to take a long-term development view
– Keeps investor and government objectives aligned
– Transparent process
– Distribution of risks between partners
– Predictable airport development via mandatory phased investment programme
– Last-resort option to revoke concession exists in case of contract breach
• The Con’s:
– Legislation needs to be ‘PPP compatible’
– Long time lag between initial decision and award of the tender – often derailed by change in
governments
– PPP favors global, integrated operators over single operators
– Requires responsive and business-minded project team involving government and airport
authorities
– Cumbersome and slow process
– Quality of tender all-important (rules and conditions, definitions, realistic time lines
– Calling-off of tender (e.g. too few interested parties, change in government, etc.) damaging
– Risk of renegotiation once deal signed
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15. Engaging with Private Investors:
Five Best Practices for PPP
1. PPP legislation
2. Generate a general ‘investment climate’
conducive to attracting investors
3. Plan with the political cycle (elections) in
mind
4. Build in contingencies (time, budget, people)
5. Maintain a regular and intensive dialogue
between the partners and stakeholders on all
operational, financial and community aspects15

16. Engaging with Private Investors:
Five Best Practices for a Trade Sale
1. Start with the end in mind: what does the public owner-operator
wish to achieve by involving private partners, and by when ?
2. Document the sales arguments (airport and economically relevant
region) within a concise Information Memorandum: assumptions
about catchment area, growth assumptions, long-term develop-
ment potential should be conservative
3. Test market interest: start with investors having previous (e.g.
Africa) experience
4. Build in contingencies (time, budget, people)
5. Maintain a regular and intensive ‘institutionalized’ dialogue
between the partners and stakeholders on all operational,
financial and community aspects
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17. Engaging with Private Investors: Five Best
Practices for Management Contracts
• ‘Off-market’: research and approach operators directly
• Future manager should already operate similarly-sized
airport(s)
• Be mindful of cultural differences / language barriers
• Agree early a healthy balance between base fee and
success fee
• Ensure sufficient and continuous staffing and physical
presence by manager (resident team)
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18. Alternatives to Privatisation
• Transfer of ownership to local municipality
• Management contract covering all or part of
operations (e.g. terminal)
• Sale of minority interest, or airport real estate
(e.g. long term lease) to finance the development
of infrastructure / new revenue streams
• Issue individual concessions (fuel, FBO, retail,
etc.) to reduce operational costs, drive revenues
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19. Conclusions
• Airports are catalysts of growth: they should
be considered a strategic asset; any form of
privatisation should account for that
• Profits are the yard stick for financial
valuations – but not necessarily for economic
value
• Airports should develop their revenue
potential first and privatise later - if at all
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20. Shoukran – Asante Sana
Thank You – Merci
tfrankl@adp.aero
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