Flughafen Zürich’s Southeast Asia airport investment office goes where others fear to tread

Flughafen Zürich AG has established a ‘Zürich Airport Asia Consultancy’ office in Kuala Lumpur, aimed at seeking further airport investment and management potential in Southeast Asia. Among other tender opportunities in the region, Flughafen Zürich CFO Lukas Brosi said the company is examining a management application for Clark International Airport in The Philippines. A recent The Blue Swan Daily report highlighted Indonesia’s Angkasa Pura II’s interest in that airport and since then AirAsia Group lodged its own interest in the O&M contract there.


Summary:

  • Flughafen Zürich has established a consultancy office in Malaysia to seek out airport investment and management opportunities in Southeast Asia;
  • It has confirmed an interest in Clark International Airport in The Philippines, a facility that Indonesia’s Angkasa Pura II and AirAsia Group have lodged interest;
  • Flughafen Zürich has always been a very active investor beyond its homeland and was defined in one CAPA – Centre for Aviation Airport Finance & Privatisation as “probably the most ambitious operator/investor in the business”.
  • Southeast Asia is not on the radar for many of its peers for various reasons, but Flughafen Zürich has already held discussions on projects in Indonesia and Vietnam.

This is a fairly rare example though of a western company actively seeking new investment and management opportunities in Southeast Asia. They have done in the past – Groupe ADP for example has been active there, Vinci still has interests in Cambodia and Fraport is in India.  But in Asia overall, just as emphasis has previously fallen on China, then India, now it has switched uncompromisingly to Japan, where there is a wealth of opportunities in a country that belongs very much in the First World economically and culturally and where western investors can feel comfortable. Elsewhere interest has zeroed in on hotspots like Brazil and the United States might come into the frame if more P3 activity emerges there.

That is not always the case in Southeast Asia where the approach to privatisation in countries such as Indonesia, The Philippines and Vietnam can seem to be piecemeal and uncoordinated, where the business culture is quite different and messages about the prospects and the procedures to handle the sale or concession of airports tend to be mixed. Western investors can be unnerved.

Indeed Flughafen Zürich sold its minority holding in India’s Bangalore Kempegowda International Airport, the first green field airport there to be built by the private sector under a public-private partnership, though it said it remained committed to the Indian aviation market and would actively consider new investment opportunities where local experience and airport operator expertise could generate a significant impact.

Some western investors got their fingers burned in previous decades by rushing into apparent opportunities in Latin America and Russia that turned out to be anything but and the message seems to have stuck.

Flughafen Zürich though has always had a bullish attitude to foreign investment and in one Airport Finance & Privatisation report published by CAPA – Centre for Aviation was referred to as “probably the most ambitious operator/investor in the business.”

Presently, Flughafen Zürich is involved with 13 airports through concession or management details though none are in Asia and the emphasis is on Latin America where the company holds the concession on the Belo Horizonte Tancredo Neves (with CCR as BH Airport) and Florianópolis Hercilio Luz (alone as Floripa) airports.

CHART – Flughafen Zürich is involved with 13 airports through concession or management details though none are in AsiaSource: CAPA – Centre for Aviation

While some of the other Brazilian concessions have proved to be problematic that has not been the case with Belo Horizonte and Florianópolis. Traffic growth at the former averaged +6.3% in 2017 and 2018 y-t-d, while at Florianopolis it was +8.9% in 2017 (2018 figures not available).

In the last year or so Flughafen Zürich has also pitched for some major tenders, for example the Belgrade Nikola Tesla Airport concession, with Meridiam Eastern Europe Investments and Eiffage, but was not successful. Moreover, it is studying opportunities for participating in the next round of airport concessions in Brazil and is negotiating to acquire participation at Aeroportos Brasil Viracopos for the concession for Campinas Viracopos Airport, one that has been notably troublesome.

Nevertheless, the company has already notified interest – before setting up its new office – in the management and development tender for Batam Hang Nadim Airport in Indonesia, which offers 1762 ha for infrastructure development. It also met with a Vietnamese delegation in 2017 to discuss the construction of the Long Thanh International Airport which is planned to alleviate traffic congestion at Ho Chi Minh City Tan Son Nhat Airport. The management there expressed interest in Flughafen Zürich cooperating with Vietnam on airport training, management, technology and in other areas.

So a company that has always been a force in airport investment and management seems to be signifying a shift of interest in favour of Southeast Asia, where some peers are fearful to tread; one which might prompt others to do the same.