New Lisbon airport could take off this year

The Portuguese government has approved the concession base for the forthcoming tender of Lisbon’s new €5bn airport. The 40-year concession intends to privatise airports operator ANA and require the private sector to design, build, finance and maintain the new airport.

After years of false starts and preparation, a tender for the design, build, finance and maintenance of Lisbon’s new €5 billion airport could be launched this year.

Artist's rendition of new

The new airport will be part of a tender for the privatisation of national airports operator ANA. ANA runs three airports on the mainland  – in Lisbon, Porto, Portugal’s second largest city, and Faro, a major European tourist hub in the south; and three in the Azores islands – in Ponta Delgada, Santa Maria and Horta e Flores.

The recently approved concession model opens the door for the private sector to operate and maintain the airports in addition to building and operating Lisbon’s new airport for a period of 40 years, with a 10-year extension negotiable.  The new airport will be located in Alcochete, on the south bank of the Tagus River.

The future concessionaire will have access to two revenue streams – regulated revenues from traditional aeronautical activities and further revenues deriving from non-aeronautical sources, such as the exploitation of commercial businesses in the airports. ANA's airports derived 59 percent of their income in 2008 from regulated revenues and 41 percent from non-aeronautical activities.

In this sense, they contradict the majority of airports, which generate the most of their revenues, or about 60 percent, from non-aeronautical activities.The latter also offer the most opportunity for upside.

“In the years ahead, this aspect of the business is likely to attract considerably more attention and will be the focus of creative retail plays,” said Chow Kok Fong, a former chief executive of Singapore’s Changi Airport, in a 2008 case study on the airport’s development.

Importantly, the concession model also outlines provisions for the economic stabilisation of the concession, should it be necessary. These measures could include adjustments to the regulated revenues, subsidies or direct government funding, an extension of the concession contract, or other negotiated solutions.

The privatisation of ANA and the construction of Lisbon’s new airport have been recurrent themes in the European project finance market, so far without any practical expression. But the fact that Portugal’s finance minister made the new airport one of the centrepieces of the 2010 budget, in addition to the approval of its concession model, add new urgency to the project and indicate that 2010 could be the year when it finally takes-off.