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MAp CEO, Kerrie Mather, discusses the company’s global airport investment holdings.
Why are airports a good asset to invest in?
Airports have unique qualities that make them a good investment, including their potential for high growth and resilience. While they’re capital intensive, they remain a very attractive asset for long-term investors as they combine a high degree of predictability of cash flow with above average growth. Historically, airports recover quickly from external shocks and return to long-term growth trends. They will remain a good asset to invest
in because they are exposed to aviation traffic growth that is generally both consistent and above economic growth, driven by cheaper airfares. Airports will continue to benefit from structural changes within the industry, including new aircraft technology delivering larger and more efficient planes, the opening up of routes through bilateral agreements, low-cost carrier development, airline integration and alliance expansion.
Has the aviation market improved over the last 12 months? While there was clear evidence of recovery in the sector, the backdrop remained a challenging one.
42 Issue 1, Volume 5
Our airports – Sydney, Copenhagen and Brussels – continued to grow traffic, revenue and earnings in the face of the depreciation of the Euro, adverse weather conditions, including record snowfall across Europe, and the eruption of the Icelandic Eyjafjallajökull volcano, which shut down European airspace for several days and had an unprecedented impact on airlines and airports around the world.
Despite these challenges, Sydney Airport has largely recovered from the impacts of the global financial crisis and achieved record growth levels at the end of last year. Copenhagen Airport is now performing above the pre-financial crisis levels and is rapidly returning to a growth trend. And Brussels Airport’s performance in the final quarter of last year indicates an acceleration of recovery. By December, all three airports were generating significant growth.
Has access to finance improved over the last 12 months? Over the last 12 months, we’ve successfully refinanced debt facilities at both Sydney and Copenhagen.
Sydney successfully refinanced A$1.9 billion of 2011 and 2012 debt maturities. We
tapped three different markets – bank debt including some seven year debt; Sydney’s first unwrapped local bond issue, a five year note; and the first US144A issue by a privately-owned airport. This has allowed us to diversify our sources of capital. Copenhagen successfully completed the issuance of €228 million equivalent in US private placements. The proceeds were used to repay existing bank debt and cancel existing bank commitments maturing in March 2012. This has substantially reduced Copenhagen’s refinancing risk and dependency on the bank loan market.
What criteria/investment potential does an airport need to demonstrate to interest MAp? We have very specific investment criteria to ensure we buy quality airports that have strong growth potential and generate high returns for our investors. We’re looking for airports: • in a good location that are attractive for business and tourism and in a large catchment area;
• with a strong traffic profile dominated by origin/destination traffic, ensuring the airport is resilient through business cycles;
GLOBAL AIRPORT CITIES
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