ROUTES AMERICAS: Brazil Airport Privatisation Winners Could be Real 'Losers'

The winners of bids to operate three of Brazil’s main airports may actually turn out to be the real ‘losers’ as hidden costs begin to bite, the head of a leading Latin American airport investor has warned. Jaime Daly, CEO of Latin American Airports Holding, said the three consortia which won bids to operate Brazil’s privatised São Paulo–Guarulhos, Campinas–Viracopos and Brasilia airports are likely to be stung by a range of unexpected costs as they face the task of upgrading the gateways in time for the 2014 World Cup, which is being hosted by Brazil.

“They have a huge challenge, they have two years in which they have to build temporary infrastructure that will add to the costs to construction as they are expecting a 35% increase in traffic during the games,” he said.

As well as the costs of temporary terminals need to handle extra traffic, the operating consortia, which include Brazilian companies Invepar, Engevix and OAS, South Africa’s ACSA and France's Egis Airport Operation, will also have to decide what to do with the thousands of Infraero staff who currently work at the gateways.

“The winners, or maybe the losers, of the bid have 90 days to decide if they want to keep the employees they have inherited or fire them” Daly explained, adding that “nobody knows” how many ex-state employees actually work at each gateway.

Speaking during the Routes Americas Strategy Forum in The Bahamas, Daly said the three successful consortia groups faced a “huge challenge” to make their investments profitable, including demand for air travel from Brazil’s burgeoning middle class outstripping capacity and the complexity of local, state and federal bureaucracy, which was likely to create bottlenecks in forming a new masterplan or initiating construction projects.

The three airports were privatised earlier this month for the combined sum of $14.2 billion, a figure far higher than the Brazilian government had been looking for, a fact that has had a negative impact on the winning companies' market profiles, Daly said.

“There were 11 bidders in this process, including the most important airport operators in the world, when those contracts were awarded the figures were stunning, to such an extent that the next day when the news was announced the losers of the bid saw that their stock market price went up,” he pointed out.

Daly’s comments were echoed by Philippe Baril, chairman of ACI LAC and President and CEO of Quiport SA, who said: “there is going to be a burden to pay for this infrastructure, profits have got to come from that investment, I think it will be a burden on those using the airports as the infrastructure has to be changed.”

by Oliver Clark, Editor – Routes News