Airports come back down to earth

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08 May 2009

After spiralling in recent years on the back of a wave of privatisations, airport values have receded rapidly in the downturn as investors shrink from the debt burden involved. Governments will likely remain reluctant to put their assets up for sale for some time.

When a consortium led by Spanish construction firm Grupo Ferrovial bought the already privatised British Airports Authority in 2006, owner of London’s Gatwick and Heathrow Airports among others, the £10 billion price tag ($20 billion at the time) expressed vividly investors’ confidence in the solidity of airports as assets. This was probably the high water mark for airport transactions in Europe.

Two years later Chicago’s Midway Airport was to be the first major American airport privatisation. The launch project in a Federal Aviation Authority pilot programme, Midway was going to introduce the model to a country unaccustomed to privately operated airports. The Midway Investment Development Company (MIDCo) won the tender with an impressive $2.5 billion bid.

But by March 2009 the deal had fallen apart. The $700 million to $800 million bank financing required by MIDCo was met with stony silence in the markets. With the consortium...

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