Saudi Arabia seals landmark deals for five airport PPPs

The Saudi Arabian government has finalised agreements that will see five of its airports operated under PPP concession agreements.

Three of the five airports will be run by Turkish group TAV, which has been operating Madinah Airport in Saudi Arabia since 2012, previously the country’s sole airport in private hands.

TAV will team up with Saudi conglomerate Al Rajhi Holding Group to invest $400 million in the construction of new terminal buildings as part of the 30-year concession contracts. The consortium will also be charged with boosting passenger numbers from a combined 3.6 million passengers in 2016 to about 11.5 million per annum.

TAV, which operates 17 airports around the world, will be boosted in its Saudi mission after France’s Aéroports de Paris increased its stake in the company to 46.1 percent last week, having been a 38 percent shareholder since 2012. It bought a further 8.12 percent for $160 million, valuing the company at $2 billion.

Meanwhile, Singapore’s Changi Airports has been chosen to operate the King Abdulaziz International Airport in Jeddah on a 20-year contract. While the site saw a 3 percent increase in passenger numbers last year to 31 million and is popular due to its proximity to Mecca, the Singaporean firm will have its work cut out after the airport was named by an annual survey as the worst in the world, stating “virtually all aspects of the terminals need serious improvement”.

In a greenfield development, Munich Airport has been selected to build and operate the new Taif International Airport, joining hands with Lebanon’s Consolidated Contractors Company and Saudi firm Asyad Holding. The airport is expected to have an initial 5.8 million passengers when it opens in 2020.

The concession awards are the beginning of the Saudi Arabian government’s plan to offload all 27 of its domestic and international airports by 2020. Legal adviser Clifford Chance said the deals are the first major non-utility PPP projects to close in the country.

The strategy is part of a wider privatisation process happening in the kingdom in which officials hope to raise about $200 billion – excluding the IPO of Aramco – through the privatisation of power and water assets, airports, hospitals and schools. The government approved in recent months the establishment of the National Centre for Privatisation to help with the process.