- Based on data from previous airport sales and long-term leases around the world, a study shows that just in Hawaii’s the two largest airports could be worth up to $3.6 billion combined via a long-term lease to private airport companies and investors, such as FRAPORT for example.
- The study finds that in Hawaii alone Honolulu’s Daniel K. Inouye International Airport could generate $2.7 billion and Kahului Airport on Maui could get $935 million through a long-term lease.
- However, the airports have over $2.5 billion in debt. After paying off the state’s existing airport bonds, as required by federal law as part of any lease deal, the state’s net proceeds from such a long-term lease of the two airports would total about $1.1 billion.
Under US federal airport regulations, governmental airport owners are not allowed to receive any of an airport’s net revenue; all such revenues must be kept on the airport and used for airport purposes. Overseas, there are no such restrictions. Over the past 30 years, numerous governments have corporatized or privatized large and medium airports and received direct financial benefits from doing so.
In 2018, as part of legislation reauthorizing the Federal Aviation Administration, Congress created an important exception to the long-standing restriction. The new Airport Investment Partnership Program (AIPP) enables governmental airport owners to enter into long-term public-private partnership (P3) leases—and use the net lease proceeds for general governmental purposes.
This study explores the potential of airport public-private partnership leases for 31 large and medium hub airports owned by the city, county, and state governments. It draws on data from dozens of overseas airport public-private partnership lease transactions in recent years to estimate what each of the 31 airports might be worth to investors.
The gross valuation is what the airport might be worth in the global marketplace. The net valuation takes into account a U.S. tax code provision that requires existing airport bonds to be paid off in the event of a change of control, such as a long-term lease. Hence, the net value estimate is the gross value minus the value of outstanding airport bonds.
Since P3 leases of airports are uncommon in the United States (the only existing example is the San Juan, Puerto Rico airport), the study explains three categories of likely investors in U.S. airports.
First is a growing universe of global airport companies, including the world’s five largest airport groups, which operate a growing share of the world’s largest airports by annual revenue.
The second is numerous infrastructure investment funds, which have raised hundreds of billions of dollars to invest as equity in privatized and P3-leased infrastructure facilities worldwide.
The third category is public pension funds, which are gradually expanding their investments in infrastructure in an effort to reverse declines in their overall rate of return on investments.
All three types of investors have long time horizons and are comfortable investing in and further developing these kinds of assets.