AIRPORT BUSINESS MANAGEMENT

Airport Business Management

Airport Business Management

Introduction

In July 1987, the privatisation of BAA offered investors a unique opportunity to invest in a new type of asset: airports. In the 20 years that have elapsed since then, investors have come to appreciate the investment merits of airports. As one analyst puts it, investors have the excitement of the aviation sector from the comfort of an armchair. (Janic, 2008, p113-134)

The aviation sector has certainly been exciting in the last 20 years. The industry has experienced significant change as low-cost airlines have come to dominate the short-haul market, particularly within Europe, bringing both affordability and availability to the travelling public. (Janic, 2008, p113-134) Meanwhile, at the other end of the market, the network carriers have continued to develop their products, particularly in the long-haul sector with greater comfort (flat beds) and entertainment on offer.

The challenge for the airport sector during this period has been fourfold: ? First, to ensure adequate capacity to meet the continuing strong growth in traffic, both passengers and freight. ? Secondly, to cope with increasing diversity as demands from low-cost carriers, other short-haul airlines and long-haul airlines have diverged.

? Thirdly, to manage the increasing complexity due to the requirements for greater scrutiny by national security, immigration and quarantine authorities. ? And last but not least, to improve business performance as privatisation and increased competition have transformed the approach to airport management. (Janic, 2008, p113-134)

(Janic, 2008, p124)

Macquarie's Investment Strategy

Macquarie's interest in infrastructure dates from 1996, coincidentally the year in which Macquarie Bank was first listed on the Australian Stock Exchange. The interest in infrastructure grew out of the advisory business, when the bank realised that extending its role from financial adviser to fund manager and asset manager increased its ability to deliver deals and also provide a package that appealed to growing investor demand. (Janic, 2008, p113-134)

In less than a decade, Macquarie has become a leading player in global infrastructure, with almost £25bn of equity under management. (Benham, 2008, p8-13)

In terms of assets, Macquarie is managing over 100 assets in 25 countries. These range from toll roads to airports to gas and electricity networks. In the UK, Macquarie's businesses include Thames Water, Moto Service Stations, National Car Parks and the Isle of Wight Ferry. T(Benham, 2008, p8-13)hese assets are 'packaged' into funds, some of which, like Macquarie Airports (MAp) are listed, but most are unlisted. (Benham, 2008, p8-13) Macquarie Airports and Macquarie Infrastructure Group (which operates toll roads worldwide) are both in the top 50 companies on the Australian Stock Exchange and each has market capitalisation in excess of £3bn.

Macquarie's Investment In Airports

Macquarie's investment in airports dates back to 2000, when the group acquired the Portland Group, an airport management consultancy group which the present author had founded with Mark Call in 1994. Many members of the Portland Group had long and strong experience in the airports industry, mainly with BAA. The combination of Macquarie's world-leading experience in corporate finance and fund management combined with Portland's airport experience provided ...