Private investments are among the arrivals at Brazilian airports

First airport concessions in Brazil open prospects for the admission of new financial resources for modernization of the sector

Concessions to private initiative of the airports in São Gonçalo do Amarante (RN), Guarulhos and Viracopos (SP), and Brasília have opened new perspectives for the federal government. Pressured to carry out construction and expansion of airport terminals across the country, but without having enough resources and time to do so, the government sees the granting of concessions as a way to ensure the inflow of funds, in the short and medium term, for the modernization the nation’s system of airports. The government's expectation is that the arrival of private investments will accelerate the preparation of the structure for the 2014 FIFA World Cup and the 2016 Olympic Games in Brazil.

In the case of the airport of São Gonçalo do Amarante, the Inframérica Consortium - formed by the association of the Engevix group and the Argentine group Corporación America - was the winner of the auction held on August 22, 2011 upon submitting a bid of R$ 170 million (US$ 94.44 million) for the concession. In exchange, the consortium secured the right to build, maintain and operate the airport in the metropolitan area of Natal, capital of Rio Grande do Norte state. Investments in the venture are expected to total some R$ 650 million (US$ 361 million).

The other three airports were granted to private initiative at an auction held in February 2012. Together, the three airports account for 30% of the movement of passengers, 57% of cargo and 19% of all the aircraft in the entire Brazilian system of airports and the concessions were sold at auction for a total of R$ 24.5 billion (US$ 13.61 billion), almost five times the minimum asking price of R$ 5.477 billion (US$ 3.04 billion) set by the government.

The highest premium was recorded at the auction of the Airport of Brasília, which had an offer of R$ 4.51 billion (US$ 2.51 billion) made by the InfrAmérica Consortium, established by the Infravix Participações S/A and Corporación América S/A companies. The premium was 673.39% above the minimum asking price.

Second place went to the Airport of Guarulhos, where the concession was won at auction by the Invepar ACSA Consortium - an association between the Investimentos e Participações em Infraestrutura S/A company and Airports Company South Africa. The amount offered (R$ 16.213 billion or US$ 9.011 billion) represented a premium of 373.51% over the minimum price.

The Aeroportos Brasil Consortium, comprised of TPI Triunfo Participações e Investimentos S/A, UTC Holdings S/A and France's EGIS Airport Operation, won the competition for the Campinas Airport by bidding R$ 3.821 billion (US$ 2.123 billion), 159.75% over the minimum asking price. The funds raised with the premiums will be invested in the improvement of existing airports and will be paid in annual installments monetarily adjusted for inflation by the government’s IPCA index according to period of concession of each airport.

These periods will vary from case to case. For Viracopos airport, the period of concession will be 30 years. For Brasilia, it will be 25 years and for Guarulhos, 20 years. Contracts may be extended just once, for a five-year period, as a way of reestablishing the economic and financial balance of the operation, in the case of an extraordinary review.

Investment program
Until the time the concession of each airport ends, a set of investments totaling some R$ 4.6 billion (US$ 2.56 billion) are planned for Guarulhos, R$ 8.7 billion (US$ 4.83 billion) for Viracopos and R$ 2.8 billion (US$ 1.56 billion) for Brasilia. The goal is to establish international standards for quality of service. Part of this set of investments should be performed in time to support demand during the 2014 FIFA World Cup 2014.

Failure to comply with this schedule implies paying penalties of R$ 150 million (US$ 88.33 million), plus an additional R$ 1.5 million per day of delay. For the airport in Brasilia R$ 626.53 million in investments are scheduled through 2014, including a new terminal for at least two million passengers/year.

For Viracopos, investments until the opening of the 2014 FIFA World Cup will total R$ 873.05 million (US$ 485.03 million), with a new terminal for at least 5.5 million passengers/year. In the case of Guarulhos, amounts invested until the World Cup will be around R$ 1.38 billion (US$ 766.7 million), including the new terminal with a capacity to handle seven million passengers/year. Besides the terminals, construction work is planned for the expansion of runways, patios, parking lots, access roads, etc.

Construction work that has been initiated, even at those airports for which concessions have been granted, will continue to be performed by Infraero. New interventions are the ones that will become the responsibility of the concessionaire for each airport.

As of the signing of the contract agreement, there will be a transition period of six months (extendable for another six months) in which the concessionaire will manage the airport jointly with Infraero, which owns a 49% stake in each airport granted. After this period, the new controller will assume the operations of the airport. Airspace management, however, will not change and will continue under government control.

Infraero, a federal public company, is presently responsible for the operation of 63 airports in the country, which are responsible for handling 67% of the total number of airline passengers. According to the federal government, dividends from Infraero’s equity stake in concessions will be used for investment in the remaining airports in the system.

Record investment in 2011
Infraero closed 2011 with the largest budget for investment in its history, reaching R$ 1.145 billion (US$ 636.1 million). The source of this Information is government-owned Infraero itself, which says it has reached 76% of the revised budget for the past year which was R$ 1.513 billion (US$ 840.6 million). This represents the largest percentage of completion in the last five years, which averaged only 48%. The increase over 2010 was 77.5% when R$ 645 million were applied.

According to the president of Infraero, Gustavo Valley, these numbers reflect the company's commitment to proceed with works and improvements at the airports that make up the network. “In 2012, we will double our efforts in order to continue to adequately meet the demands of Brazilian society for airport services,” he said.

Regarding sources of funding, of the total invested in 2011, R$ 457.1 million (US$ 253.94 million) were executed with their own funds, R$ 687.5 million (US$ 381.94 million) with funds provided by ATAERO, and R$ 500 thousand (US$ 277.8 thousand) with funding from agreements. ATAERO (Adicional de Tarifas Aeronáuticas) is a percentage based value-added fee levied upon domestic and international departures and upon charges for the use of air navigation and telecommunications aids. In theory, the proceeds should be applied in the improvement of airport infrastructure throughout the country.

As regards the nature of investments, R$ 845.4 million (US$ 468.67 million) referred to construction and engineering services and R$ 299.6 million (US$ 166.44 million) to the purchase of equipment, furniture, utensils and land. The investment made also included construction works at Guarulhos (SP), Galeão (RJ), Manaus (AM), Confins (MG), Curitiba (PR), Porto Alegre (RS), Natal (RN), São Luís (MA) , Brasília (DF) and Recife (PE), in addition to the expropriation of areas for the expansion of the airports of Porto Alegre and Campinas.

At the International Airport of São Paulo/Guarulhos - aka Governor André Franco Montoro Airport (SP), an important investment was made in the revitalization of a section of the airport’s longest runway (3,700 meters in length) providing greater safety in landing and takeoff operations.

The runways of the airports in Fortaleza (CE), São Luís (MA), Uberlândia (MG) and Santarém (PA) also underwent revitalization works.

Infraero also underscores the completion of the first stage of the works of the Runway and Airport Patio System of the São Gonçalo do Amarante Airport in Natal (RN), and the last stage of construction of the Connector of International Airport of Recife/Guararapes - aka Gilberto Freyre Airport (PE).

Now, the International Airport of Rio de Janeiro/Galeão - Antonio Carlos Jobim has received major equipment to ensure its operability, such as the installation of ALS (Approach Lighting System) at the head of one of the take-off and landing runways. The system allows landing operations to be performed safely, even at night or in adverse weather conditions. The Galeão Airport now also has four baggage claim conveyors and ten new aircraft hold x-ray units for the inspection of checked baggage.

Infraero also invested in the purchase of furniture for the new arrival and departure halls, security and surveillance systems, operational vehicles, air navigation equipment and land for expansion of airports, among other items.

In January 2012, work was completed on Passenger Terminal 4 of the International Airport of São Paulo/Guarulhos - Governor André Franco Montoro (SP) and on the implementation of the Operational Module of the Salgado Filho International Airport - Porto Alegre (RS). And, by the end of this year, it is expected that the renovation and expansion works at the airports of Guarulhos, Confins, Manaus, Galeão and Curitiba will enter a more advanced stage of execution.

In addition, tender bidding processes are underway for the airports of Fortaleza, Florianópolis, Cuiabá, Salvador, Porto Alegre, Foz do Iguacu, Macaé, Goiânia and Aracaju to start relevant works before this year is over.