Airports are taken under wing

Regional air gates became, following seaports, the attractive assets for investors. In the aviation sector are interested Russia's largest companies, which, in a short time, have formed the entire holdings, combining several airfield complexes. On the eve of bidding for the sale of shares of Murmansk Airport, which the Auction House of the Russian Federation organizes on the instructions of the Federal Property Management Agency, “AHRF-Consulting” has decided to investigate the situation in the air market.


RUSSIAN MARKET of air traffic according to the results of the last year increased by 10.2%, including internal ones – by 17.9%. This is due to the increase in the volume of domestic tourism and the growth of business communications in the country. Positive dynamics can provide a new impulse for investments in airports and the modernization of infrastructure, experts say.
To date about 45% of all international airports in Russia belong to the state or close structures. Of them 70% of objects are in the regional ownership. A substantial part of the air terminals (42%) have in the structure of the authorized capital stock a large share of private capital or wholly owned by private companies. The remaining 13% belong to the mixed ownership structure.

The oligarchs are buying up the air
The formation of large holdings in this market has begun in 2007. Then investors began to consider the airports not only as the part of the airfield, but as a separate business that can generate income. By analogy with the foreign airline hubs in major Russian hubs restaurants, cafes and shops began to develop. One of the main objectives of the owners of the air terminals is not just the growth of passenger flow, but also increase of the time that potential customers spend in the area of services. The most profitable are thought to be the objects with passenger flow of at least 500,000 people a year. Complexes with index of 700,000 passengers are guaranteed to attract the investor’s attention.
The attraction of investments in the transport sector is promoted by the international sports and cultural events such as the Olympic Games in Sochi in 2014, the FIFA World Cup 2018 in different cities, the World Exhibition Expo 2020 in Yekaterinburg and so on. For example, the “Renova” Group keeps a check on the four airports of 11 cities, where the FIFA World Cup matches will take place in 2018.
For the present Russia has three holding that are owned by well-known oligarchs and have large shares in important regional airfield complexes.

“Airports of Regions” – the largest of these companies. Its strategic investor – GC “Renova”, owned by Viktor Vekselberg. The holding includes OJSC “Airport Kol’tsovo” (Yekaterinburg) , OJSC “International airport Kurumoch” (Samara) , OJSC “Nizhny Novgorod International Airport” (Strigino) and OJSC “Airport Rostov-on-Don”. Their total passenger flow in the first quarter of 2015 was 1,718,659 persons.
The company “Basel Aero” manages the air assets of one of Russia largest industrial groups “Basic Element”, owned by Oleg Deripaska. Since June 2012 “Basel Aero” is a joint venture of “Basic Element”, Sberbank of Russia and Changi Airports International (a 100% subsidiary of Changi Airport Group). The company consolidates the airports in the south of the country (in Krasnodar, Sochi, Gelendzhik and Anapa). They serve more than 8% of Russia total passenger flow and 2% of the total cargo traffic. Last year the company shipped 7.8 million passengers, carried out 41.7 million flights (“Basel Aero” information).

The company “Novaport” belongs to the GC AEON Corporation, owned by Roman Trotsenko and Investment Holding Meridian Capital from Kazakhstan. The network includes air hubs in Novosibirsk, Barnaul, Tomsk, Chita, Astrakhan’, Chelyabinsk and Volgograd. Passenger flow according the results of the last year – more than 7.8 million people.
Participation of investors in the development of airports mainly has an effect on increasing of passenger flow. For example, in 2012 the total number of passengers of the airports, belonging to three key players, has grown by 30-40%. At the same time the reconstruction of terminals, increasing of their capacity, establishing contacts with airlines promote the increasing of income in all activities of the airports.
In the market new players are appeared: LLC “Aerofuels Group”, OJSC “Ramport Aero”, LLC “AEROINVEST” and OJSC “Aviation Oil Company”. In their ownership are the airports of Kurgan, Nal’chik, Mineral’nye Vody, Kaliningrad and so on. The activity also show the foreign investors from China, Turkey and Singapore.

Sky battles
In 2006 the Government adopted a Concept for Management of Federal Property of Airports (Airfields) of Civil Aviation. It says that attracting investment will be carried out also through privatization. The main task – to eliminate the budget expenditures for the maintenance and development of aero complexes.
Increasing the investment attractiveness of Russian regions for business guaranteed demand for these assets. At auctions and competitive tenders at different times were sold the shares of airports Kol’tsovo (Yekaterinburg), Tolmachyevo (Novosibirsk), airports in Astrakhan’, Perm’, and so on. For today decisions on privatization are taken for the air gates of Murmansk, Arkhangel’sk and Magadan. Bidding on them must hold the Auction House of the Russian Federation, which is entrusted to sell blocks of shares in several hundred companies of different industries. For the time being private entrepreneurs are allowed to work mainly with the regional objects , although the possibility of transmission to investors of Moscow “Sheremetyevo” and “Vnukovo” is being discussed for a long time.
Due to intense competition in this sector (mainly among the top three companies) privatization of the federal budget brings good income. Auctions are often carried out with significant excess of the starting value. So, in 2011, 51% of shares of Novosibirsk “Tolmachyevo Airport” were sold for 2.8 billion rubles – 2.5 times more expensive than the starting price. 25.5% shares in the airport of Anapa in February of 2014 were sold at OJSC AHRF auction with double excess of the starting price.

Airports to be privatized at the auctions of AHRF

Object

Date of sale

Description

30.88% in OJSC “Airport Murmansk”

28 May 2015

The single airport in the region, opened for carrying out international flights. The airfield of the first class according to the classification of International Civil Aviation Organization (ICAO), category B (according the length and width of the runway). Maximum accepted type of aircraft – Tu-157M and Il-76, capacity – 5 takeoff and landing operations per hour, aircraft parking spaces – 12. Passenger flow according to results of 2014 – about 650,000 people, freight turnover – 2,200 tons.

Starting price – 65,402,000 rubles

50.99% in OJSC “Airport Arkhangelsk”

IV quarter of 2015

Arkhangelsk Airport (Talaghy) – the third largest airport in North-West after Pulkovo and Kaliningrad Airport. According to the classification of ICAO the airport belongs to the first category. Passenger flow according to results of 2014 – 801,000 people, that is 5.1% higher than the rate of 2013.

100% in OJSC “Airport Magadan”

IV quarter of 2015

The airport provides air communication of Magadan Region with Far East, Siberia and Moscow. The airport has a runway of A class, accepts aircrafts of 1–4 classes and helicopters of all types.


According data of the Auction House of the Russian Federation

Private flights
Investments of holdings in airport infrastructure without upgrading of airfields ineffective themselves. Taking into account the fact that 100% of the country's airports are state-owned, the private investors have to establish strong partnership with the government.
Abroad the relations between the state and private companies in this industry have for a long time been partnership. Over the past 15 years a growth rate of airports privatization accelerates worldwide. The first European country, carried out in the late 80’s – early 90’s a large-scale and systematic transfer of air terminals in private hands, was Great Britain. Then, it was followed by the government of Germany, Italy, Denmark, Austria. The authorities also are still keeping the administrative, control and supervisory function: maintenance of equal conditions of competition, regulation of natural monopolies, provision of a proper level of security and so forth.
Many countries are also actively used and other ways to attract private capital into air objects: under long-term lease contracts, under terms of concession or under contracts. In Russia this type of cooperation has been used only once – while reconstructing the St. Petersburg Pulkovo Airport. The airport was transferred to the concessionaire for the period of 30 years in exchange for the investment of 1.4 billion Euros.

Elena Prozorova
Weekly newspaper “Real Estate and Construction of Petersburg”, № 19 (858) 11.05.2015, p. 10