Covid-19 grounds Hiroshima Airport privatisation till July 2021

The final contract is set to be signed around November, with the new private sector owners due to start operating the airport on 1 July 2021.

Hiroshima Airport, the largest airport in Japan’s westernmost Chugoku region, is now expected to start operations under its new private sector owners on 1 July 2021, three months later than originally scheduled, because of covid-19.

Two applicant groups, whose identity has not been disclosed, passed a first screening last October by Japan’s Ministry of Land, Infrastructure, Transport and Tourism. A second screening has now been delayed from April to July. Further steps, such as selection of a preferred group to operate the terminal buildings and parking space, are also running about three months behind. The final contract for the privatisation is planned to be signed around November, according to MLIT.

“People are more or less working from home” due to covid-19, an MLIT spokesman told Infrastructure Investor. “Under these circumstances, we have heard from the [bidding] participants that it is not easy to discuss and compile a proposal. Taking [this] into account, we have decided to delay the schedule.”

Last year, MLIT stated the private sector operator is to integrate the operations of the runway and terminal buildings, with the aim of improving user service, and use its expertise to revitalise them.

The operating term of the privatisation is basically 30 years. Five years can be added in case there is a force majeure event and the operator needs more time to make up for any losses incurred, the spokesman said.

Although the government of Japan currently manages the airport’s runway, a company called Hiroshima Airport Building operates the airport terminal business. According to Hiroshima Airport Building’s latest financial statement, Hiroshima prefecture owns 39.2 percent of the company, with All Nippon Airways Holdings and Japan Airlines owning 10.7 percent and 10.6 percent, respectively.

“The new operator group will set up a special purpose company, and the SPC will obtain the shares of Hiroshima Airport Building so that it will be a subsidiary of the SPC,” the spokesman said. “As for the parking lots, the SPC will obtain the business from a general incorporated foundation – the entity currently operating the airport’s parking lots.”

Asked if Hiroshima prefecture will remain involved with the airport operation, he replied: “As the SPC will acquire Hiroshima Airport Building’s shares, the prefecture will no longer be a shareholder of Hiroshima Airport Building. Prefectural investment into the SPC is basically not allowed unless highly necessary, under the current guidelines.”

Hiroshima Airport had ¥449 million (€3.9 million; $4.2 million) of operating losses and ¥944 million (€8.2 million; $8.8 million) of positive EBITDA last year, according to an MLIT report. Nine of the 25 airports being operated by the Japanese government had negative EBITDA last year.

Japan has sped up privatisation of its airports. Fukuoka Airport was privatised in April last year and is now owned by Fukuoka Airport Holdings alongside Kyushu Electric Power, Nishi Nippon Railroad, Changyi Airports and Mitsubishi Corporation.

In April 2018, a consortium led by French airport operator Vinci Airports and Japanese financial services provider Orix Corporation began operating Kobe Airport for a term of 42 years. The consortium had previously taken control of Kansai Airport and Osaka Airport in April 2016 for 44 years. In addition, Sendai Airport was privatised in July 2016 and is now owned by a consortium led by railways company Tokyu Corporation.