Puerto Rico airport lease approved in crucial FAA verdict

A P3 for the Luis Munoz Marin International Airport has reached fianncial close just as Federal Aviation Administration approved a $2.5bn for a 40-year lease.

A $2.5 billion deal to privatise Luis Munoz Marin International Airport (LMM) reached financial close after the Federal Aviation Administration (FAA) approved leasing the air field to consortium Aerostar Airport Holdings. 

The transaction, a 40-year lease handing over operation and upkeep to Aerostar, is the first-ever privatisation of an air field in America. LMM, opened in 1955, is located in Puerto Rico, a US territory.

“The selected private operator is qualified to operate the airport,” the FAA stated in its choice. The Authority is part of the US Department of Transportation (USDOT).

The FAA announcement was paired with a press release revealing that Aerostar and the Puerto Rico Public-Private Partnerships Authority (PPPA) have reached financial close on the LMM transaction. 

David Alvarez, executive director of the PPPA indicated called the lease “trend-setting….for Puerto Rico and the US”.

Aerostar is a consortium teaming Highstar Capital and Grupo Aeroportuario del Sureste (ASUR). Highstar and ASUR were named preferred bidder last July.

Aerostar, under the terms of the deal, offered $615 million upfront and $550 million over the course of its lease in addition to pledging to invest $1.4 billion to renovate and revamp LMM.

The consortium outbid Grupo Aeroportuarios Avance, which matched Macquarie Group and Ferrovial Aeroportuarios.

Christopher Lee, founder of Highstar, a core infrastructure fund managing $5.5 billion, called the decision “historic,” opining that America has “at last” privatised a major air field.

LMM is the busiest airport in the Caribbean region, servicing 9 million people annually. More broadly, the lease of Luis Munoz Marin International Airport could bolster airport privatisation in the US: Chicago last month opened bidding for its Midway International Airport.

ASUR is a premier private airport operator in Latin America, and is especially active in Mexico.

The FAA verdict quelled industry concern that the lease might not go through. In Puerto Rico, the decision to privatize LMM was politically unpopular.

The island undertook a robust privatization program under erstwhile Governor Luis Fortuno, implementing in 2009 enabling public-private partnership (PPP; P3) legislation, and creating the PPPA.