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US airports playing catch up with Canada

The downsides of how the US operates its airports compared to its Northern neighbour were up for debate at an infrastructure conference in Montreal.

A lack of privatisation and fierce competition among airports has created a backlog of projects in the US, according to infrastructure experts.

Susan Gray, head of infrastructure at Standard & Poor’s, said at CG/LA Infrastructure’s Global Infrastructure Leadership Forum on Friday that differences in the way Canada and its southern neighbour fund and operate their airports is the reason why so many US hubs have fallen in disrepair.

She said the US market stood out in two respects: the high level of competition among its airports and their ability to tap private markets.

“You have a lot more competition between airports in the US,” Gray said. “That impacts on the quality of the airports, that is actually quite an important distinction from an investor’s and a lender’s perspective.”

The US’s numerous regional airports, along with the fact that the country’s hubs are more often connection points rather than destinations, unlike their Canadian counterparts, means that American airport operators are often fighting for federal and municipal funding, Gray said.

The other major difference lies in how airport operators raise capital expenditure funding.

“In Canada, airports are in a position where they can go and raise capital from the debt markets in order to raise capex. In the US, there is still this locked-box concept,” Gray said. “The large airports in the US are really straining against the inability to raise additional capital through additional charges.”

The $4 billion LaGuardia modernisation PPP is a model other US airport operators should look to in the future, according to Gray.

Roderick Devlin, a principal at Squire Patton Boggs, the law firm that advised on raising private bonds for project, agreed that PPPs will be play a significant role in reshaping the US airport market.

LaGuardia, the US’s largest-ever PPP, has been celebrated in the infrastructure community as a way the private sector can help complete badly needed and underfunded projects.

“It shows many of the advantages of PPPs,” Devlin said. “When the private developer came in, they managed to really contract stages of construction.”

The consortium developing the first phase of the LaGuardia modernisation project, which includes Meridiam, Skanska Infrastructure Development and Vantage Airport Group, reached financial close on the scheme last June.