Private airport investment has come a long way in a short space of time. Over the last 25 years a handful of intrepid investors from a limited range of sectors has blossomed into a diverse army of private equity players, lured by low interest rates and the sector's apparent resilience to economic aftershocks.
Time will tell whether this continues to be the case as the aviation industry faces a growing list of macroeconomic challenges. But, for now, the consensus among airport operators and investors gathering in Hamburg for GAD World 2018 is that concession models work, provided the right circumstances are in place, and privatisation frees governments to spend public money elsewhere.
Anke Heinze, Director of Investments and Financing at AviAlliance, told delegates on day one of the conference that the global financial crisis was "a watershed moment" in the history of airport privatisation – a market that was previously the reserve of construction and real estate companies.
"Airports proved to be quite resilient and investor interest has grown tremendously since then," said Heinze, adding that low interest rates have also played a part in this "increased appetite" from the investment community.
Other panel members broadly agreed with Heinze's summation and sang the praises of the global airport privatisation trend – a trend which Nicolas Notebaert, Chief Executive of VINCI Concessions and President of VINCI Airports, went as far as to say "has never proved negative".
"More money is chasing airports nowadays and most of it is coming from financial investors," said Ferrovial Aeropuertos Chief Executive Jorge Gil, adding that airports "as an asset class have behaved quite positively". However, Gil also offered a word of caution to those who "underestimate the complexity and risk of managing airports".
Pointing out that events beyond airports' control, such as airlines going bankrupt, Brexit and terrorist attacks, will have a greater impact on airports than on other infrastructure projects, Gil warned that "only time will tell" whether airports will continue to be seen as a low-risk asset.
As HSBC's European Equity Research Sector Head for Transport, Andrew Lobbenberg, noted in a later session, these are "very unusual times" and the macroeconomic challenges facing the industry are "larger than they have been for some time".
Offering a slightly different perspective to representatives of the private airport operating consortia, Vaclav Rehor, Chairman of the Board of Directors at Prague Airport – which was set to be privatised a decade ago but ended up remaining under state control – was keen to stress that passenger numbers have grown by more than a third over the last five years without the use of private funds.
However, Rehor revealed that Prague Airport is now considering whether to "look around and partner with someone else” and is "undecided" on whether to self-fund its new terminal or seek private equity funding.
Rehor outlined the advantages of working alongside a group of other airports on issues such as the deployment of future technologies, admitting that: "In terms of knowhow and technology we might lose out to other airports because we're alone. This is where privatisation could help us because we'd be part of a larger group."
One state-owned airport operator that does seem confident it has chosen the right model is Finavia. Kimmo Maki, chief executive of Finavia Corporation, describes the Finnish Government as being a "great owner" that understands corporate governance and is investing heavily in improving the customer experience in the country's airports.
"In that perspective, in Finland [state ownership] works quite well. In many cases the concession model is good but there have to be some reasons to go for that," said Maki.
One key issue facing private investors with airport concessions is what to do when those concessions expire. For instance, Athens International Airport (AIA) – the first major greenfield airport to have been constructed under a public-private partnership (PPP) – hopes to extend its soon-to-expire private concession.
AIA chief executive Yiannis Paraschis said that it has "an unfortunate arrangement that says the whole thing has to be delivered after 25 years to the Greek state". The airport is "going through a stage of very strong growth" and needs to make a decision on how it will expand. Therefore, it is "working to extend the concession".
Fraport Greece, which last year began a 40-year concession to manage and develop 14 regional airports on the Greek mainland and surrounding islands, will demonstrate that private investors "can turn things around in a short space of time", according to its chief executive, Alexander Zinell.
These 14 airports, which he said were "some of the worst in the world, according to some websites", will go through a "dramatic change in four years", proving that private sector investment can deliver "good infrastructure, good management and good returns to shareholders".
"The statistics and evidence speaks for itself that it works," said Zinell.
Lessons learned over the last 25 years of private airport investment are that investors need to be in it for the long haul because there will undoubtedly be bumps along the way.
Ferrovial's Gil did not mince his words when he said his key take-home from the last quarter century is that "shit happens". While air transport "will continue growing above expectations" investors could "face a bumpy road" in the short term and must be equipped to deal with that, according to Gil.
In other words, as HSBC's Lobbenberg puts it: "There are long-term grounds for optimism but the near-term is unpredictable."