Thursday, February 2, 2012

Who wants to run a Brazilian airport?

With the World Cup just around the corner, one of Brazil’s chief concerns – leaving aside debate about allowing alcohol in the stadiums – is the expansion of its airports, which have long been operating at chronic over-capacity.

On Monday (Feb 6), Brazil’s stock exchange, BMF&Bovespa, will hold an auction for the concessions of three of the country’s principle airports – two in the megapolis comprising of the neighbouring cities of São Paulo and Campinas and the other in the country’s capital, Brasília. According to Brazilian media, 11 proposals were filed, not only from Brazilian companies but also including British, Singaporean, American, French and South African corporates, among others.

The international interest is no surprise – data from the Air Transport Association shows that between 2010 and 2011, domestic travel grew 13.7 per cent in Brazil, the second-biggest growth rate of any large economy after India and surpassing even China.

Data from the Brazilian state-run company that runs Brazil’s airports, Infraero, offers an even more optimistic outlook, with domestic landings up 15.8 per cent between 2010 and 2011 and international landings 13.9. Brazil’s airports handled 88m passengers in 2011.

The government expects to raise around $3.18bn with the sale of the three airports. The main feature of the event will be the privatisation of the country’s main airport, Guarulhos in São Paulo, dubbed by the Brazilian press as “the jewel in the crown” of the auction. The biggest airport in Latin America (in terms of passengers), Guarulhos is expected to have a starting price of $2.5bn.

It remains to be seen how successful the auction will be. The government has tried on numerous occasions to auction the concession for a bullet train between São Paulo and Rio de Janeiro but without success. The bidding conditions have not been attractive enough to entice contractors.

The airports could be a different story. It is not unusual for passenger to pay $580 for a 45-minute flight from São Paulo to Rio. The attraction of lucrative landing fees and commercial rights to set up shops in terminals in a country where people like to consume should be enough to whet the appetite of bidders.

But one thing is for sure. With airports such as Garulhos already at over-capacity two years away from the World Cup, something needs to be done and soon.

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