DELIVERING GROWTH BY PARTNERSHIP

Developing Sustainable PPP Opportunities for Jamaica - Airports

Mr. Earl Richards, President

Airports Authority of Jamaica

February 2014

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Presentation Overview

1. International Civil Aviation Structure

2. Jamaica’s Airport Governance Structure

3. Airport Ownership Models

4. Jamaica’s Airports PPP – – Sangster International Airport – PPP– Norman Manley International Airport – Shadow PPP

5. Airports Revenue Streams

6. NMIA Opportunities

International Civil Aviation Structure

UN Convention of the Parties

ICAO

JCAA

Flight SafetyAir Navigation Services

Airports Regulation

SIANMIA

Economic Regulation

Airports Governance

CABINET

Ministry of Transport, Works and Housing (MTWH)

Jamaica Civil Aviation Authority

(JCAA)

AIRPORTS AUTHORITY OF JAMAICA

(AAJ)

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AAJ organizational chart

AIRPORTS AUTHORITY OF

JAMAICA(AAJ)

NMIA AIRPORTS LIMITED(NMIAL)

 Aerodromes

 * Ken Jones* Negril* Tinson Pen

 

Ian Fleming International Airport

(Boscobel)

MBJ AIRPORTS LIMITED

(MBJ)

Norman Manley International Airport

(NMIA)

Sangster International Airport

(SIA)

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Jamaica Civil Aviation Authority (JCAA) - Established under JCAA Act and responsible

for both technical regulation of aviation sector and economic regulation of airports.

Both JCAA and AAJ operate under Ministry of Transport, Works and Housing but under separate Legislation and with separate Boards.

Airports (Economic Regulations) Act of 2002 mandated the JCAA to provide for the economic regulation of air transport.

The Act establishes the legal framework, criteria and methodology for the economic regulation of Scheduled Airports (currently SIA and NMIA)

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Airports Authority of Jamaica (AAJ)

Established under Airports Authority Act of 1974

Independent statutory body to own, manage, and operate both Norman Manley International Airport (NMIA) in Kingston and Sangster International Airport (SIA) in Montego Bay

AAJ given additional responsibility for four domestic airports in 1990– Tinson Pen (Kingston)– Ken Jones (Portland)– Boscobel (St. Mary)– Negril (Westmorland)

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Airport Ownership Models

Government Ownership– Owned and Operated– Owned and Management outsourced to private sector

Private Ownership – Sale of government assets to private operator (Note UK)

PPP – Master Concession & Lease– Long Term Agreement; ownership resides with the government

Jamaica has opted for the PPP model

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Airport Privatization

“ Since 1987, when Margaret Thatcher’s government privatized (via a 100% public share offering) the former British Airports Authority (now BAA), airport privatization has become a global phenomenon. Governments in Europe, Asia, Australia and New Zealand, Latin America and the Caribbean have privatized major airports. Some of these privatized entities have subsequently acquired full or partial ownership interests in other airports (in their own country and elsewhere), as have some government-owned airports. Today’s global airport industry is often characterized by airport groups, rather than just individual airports.” Extract from Annual Privatization Report (April 2012)

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Jamaican Airports Public Private Partnerships (PPP)

Sangster/SIA (Montego Bay) and Norman Manley/NMIA (Kingston) Airports

SIA

NMIA

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Jamaica Airports PPP: Government Action

Government declared its policy on airports PPP (1990s)

Established Legal Framework– Airports Authority (Amendment) Act of 1996 permitted administration,

control, and management of designated airports to be undertaken by companies or entities other than the AAJ (enables airports PPP)

– Airports Economic Regulations Act (2002)

Approved and published PPP Policy (November 2012)

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Sangster International Airport (SIA)

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Sangster International Airport Layout

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SIA is Jamaica’s principal tourism gateway

SIA made priority airport for first PPP as it had the better prospects for a successful outcome

PPP model: Master Concession and Lease

Concession Agreement became effective in April 2003

Then had twice the passenger throughput of Kingston’s airport

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SIA PPP Implementation

Government established Enterprise Team to manage process

International bidding process followed two stages:

Stage 1: – Prepare Information Memorandum – Invite expressions of interest – Prequalify and short-list prospective bidders

Stage 2:– RFP issued to short-listed prospective bidders – Following the bid evaluation and approval, the preferred bidder

and a stand-by bidder were selected and notified.

Following extensive negotiations, a 30-year concession and lease agreement was signed with MBJ Airports Limited

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Airport Improvement Fee

Airport improvement fee (AIF) approved by Government under Airports Economic Regulation Act

AIF for use exclusively by the concessionaire for approved capital projects – construction and debt service

Fee is levied on departing passengers and was the result of negotiations between the Government and MBJ as part of the Concession deal

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Economic Regulation of SIA airport charges follows Price Cap Incentive Model (CPI-X)

The regulated airport charges were set prior to the commencement of the MBJ concession and were ‘grand-fathered’ as the year-one rate

Regulated airport charges are adjusted annually using a USA Consumer Price Index formula. Note that all regulated charges are denominated in USD.

Preparations for full rate review in progress; a new rate regime will become effective on January 01, 2015

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April 2013 marked 10 years of the 30-year Concession Agreement between

AAJ and MBJ..

SIA PPP deemed to be a successful model.

NMIA Terminal

Norman Manley International Airport

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Shadow PPP at Norman Manley Airport

AAJ incorporated NMIA Airports Limited as wholly owned subsidiary to manage and operate NMIA as authorized airport operator

AAJ and NMIAL signed Concession and Agreement and Lease, modelled on the MBJ format

Airport Improvement Fee (AIF) made available to NMIAL to fund capex and debt service.

Commercial, “private sector” business model adopted

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NMIA terminal needed significant improvements

Much of the terminal infrastructure had served its economic life and could not be sustained by routine maintenance

Passenger growth led to overcrowding with unsatisfactory service levels

New equipment / technology needed to be implemented for efficiency and cost effective operations management– CUTE/CUPPS, CUSS, and Access Control– X-Ray screening equipment, CCTV, FIDS, and BIDS

Undertook Master Plan study

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Norman Manley International Airport PPP

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NMIA currently in PPP Preparation phase

Enterprise Team appointed and at work

Development Bank of Jamaica, PPP Secretariat managing process

International Finance Corporation appointed as Lead Advisor

Initial Due Diligence completed

Transaction Structure Report completed

Report and recommendations to be submitted presently to Government for Cabinet decision

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Aeronautical & Non-aeronautical Revenue Opportunities

NMIA Revenue Structure/Streams

Landside Revenue Streams

Airside Revenue Stream

Regulated Non-regulated

Vehicle Parking Facilities Landing Fees Common Use Passenger

Processing Systems Ground Transportation

Aircraft Parking Airport Improvement

Fees

Premium Reception Lounges

Passenger Terminal Services

Aircraft Fuelling Services

Retail Concessions Passenger Security Services

Cargo services

Space Rental/lease Passenger Loading Bridge

Hangarage

Inbond Services AVOP

Advertising   Space/land Rental/lease Kiosks   Inbond Services Petrol Station   Ambulance Services Banking Services  

Aeronautical Revenue Streams

Landing Fees

Passenger processing Fees

Aviation Security Fees

Common Use passenger Processing System Fees

Aircraft Parking Fees

Runway Lighting Fees (not presently in place)

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Non-aeronautical Revenue Streams

Space Rental Revenues Concession Revenues

– Duty Free (Liquor, Perfumes & Tobacco)– Food & Beverage– Retail– Specialty Items

Aviation Fuel sales Car park

Good potential for private sector initiatives

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Non-aeronautical Revenue Streams - Trends

The following services are offered at different airports globally:

Airport Hotel Auto Detailing Museum Saunna & Spa Baggage Storage Kid zones Dog Hotel Venue for events (Concerts, music shows, etc.)

Potential Future Revenue Sources for NMIA

Port Royal Development

Home Port for Cruise Shipping

Airport Hotel

Palisadoes Commercial Centre

Increased passenger traffic from new markets after runway extension

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Thank You!