After having successfully managed airports in Malaysia, India and Turkey, Malaysia Airports Holdings Bhd (MAHB) has decided to bid for airports in Europe where the stakes are high and the players established.
It is one of the several parties involved in the bidding for Stansted Airport in England. There are several stages involved and winner will not be known until mid-2013.
The biggest challenge any winner will face is the airport’s biggest client, Ryanair. The budget carrier’s chief executive Michael O’Leary has consistently criticised Stansted’s owner, Heathrow Airport Holdings Ltd (formerly known as BAA), blaming it for the dramatic drop in passenger traffic from a high of 24 million passengers in 2007.
Stansted is the third busiest airport after London’s Heathrow and Gatwick. It is located 48 kilometres northeast of central London at Stansted Mountfitchet in Uttlesford in Essex.
It is predominantly a leisure and holiday airport and flew 17.4 million passengers last year.
Heathrow, which is partly owned by Spain’s Ferrovial SA, is selling the airport to satisfy competition concerns after it lost a four-year battle with UK regulators. It has already sold Gatwick, London’s second-busiest airport, and Edinburgh airport to comply with the UK Competition Commission’s concerns over its dominance of the UK airport sector.
MAHB has entered the competition for Stansted after Heathrow Airport Holdings sought new bidders, ostensibly in a bid to improve the price it could get. It already had shortlisted bidders: Manchester Airports Group; the New Zealand investment management company H.R.L Morrison & Co Ltd; the US buyout giant TPG; and Australia’s Macquarie Group Ltd.
Deutsche Bank and ING Bank are running the auction for Stansted, which has been valued at 1 billion pounds. A report said detailed sales information would be sent out imminently and the bidders given access to due diligence. It is unclear when the next bids are due, but the sale is expected to be completed in the first half of 2013.
MAHB’s track record is one of prudence. When it won the bid to own and manage Indira Gandhi International Airport some years ago it was cautious about how much it had to spend for the stake. In terms of expertise, it is comparable to global players such as Ferrovial/BAA, TAV Airports, Fraport AG, and Schipol.
While Stansted would be a good acquisition, MAHB earlier this month lost a major contract with Maldives airport. In fact, both MAHB and its Indian partner GMR were given their marching orders to leave the Maldives in five days.
It was no fault of either company and there was no wrongdoing, but simply politics. The new government is refusing to honour contracts given out by the previous government and wants to be seen as helping local contractors. But managing airports requires skills, expertise and deep pockets, and the Maldives government may have some other foreign player in mind.
The ouster from the Maldives calls to mind how MAHB lost its contract for managing the Almaty airport in Kazakhstan some years ago.
But MAHB is not short of contracts. It now manages 39 airports in Malaysia, and will manage the new KLIA2 — the largest low-cost air terminal when it opens its doors on May 1.
It is also the owner and manager along with GMR of Indira Gandhi airport in Delhi, and also Hyderabad airport, and the low-cost air terminal in Turkey.
It is in various bid stages of bidding for more airport contracts in China and Indonesia. There are also a lot of opportunities elsewhere but Asia is its playground and Europe will give it a boost into the western world.
But Brazil is opening up and so is Iran. Brazil may be good but the company would need compelling reasons to wander too far from home, and as far as Iran is concerned, it is wary of the sanctions on the country by the US.
MAHB’s rival across in Singapore, SATS, may not be too worried about distance. It may even be keen on Brazil, and it had deep pockets and the backing from the government to venture out to exotic places.
Another potential rival is Airports of Thailand, which concentrates basically on the six major airports in the Thai market. Perhaps, when more airports in Asia are privatised, or existing ones are open to foreign competition, the fight will get tougher for all players.