NMIA reports profit near $1 billion
Kingston's Norman Manley airport (NMIA) whose divestment did not elicit a formal offer in December, increased its 2015 revenue by more than a third while its profit jumped from break-even to over US$7.7 million ($937) million figures that apparently help to fuel the insistence of the authorities that they are under no great pressure to offload the asset and that it will not be dumped cheaply.
In fact, government sources expect a better outcome when the airport is again put up for sale, and hint at interest from potential new players, including Grupo Aeroportuario del Pacifico (GAP), the majority partner in MBJ Airports, which operates the Sangster airport in Montego Bay, which didn't enter the fray at the last go.
China Harbour Engineering Company (CHEC), which was part a consortium with Ireland's Dublin Airport, but in the end didn't bid on Norman Manley, is likely to revive its interest with a new partner, other sources say.
"Let me reiterate that there will be no fire sale," Omar Davies, the transport minister, who has portfolio responsibility for Jamaica's airports, told Parliament last week in the face of what was being described as a failed divestment, after none of the five shortlisted consortia made.
Sale not urgent
"There is no urgent imperative to propel us to privatise the asset at this time," Davies said.
Davies did not support his assertion with the airport's financials and neither did Airports Authority of Jamaica (AAJ) Chairman Dennis Morrison provide specific numbers when he recently told stakeholders of "30 per cent increase in revenue" and indicated his optimism for the airport, despite the divestment snag. The AAJ is the entity that owns the assets.
However, Norman Manley's unaudited accounts obtained by the Financial Gleaner showed that the airport had revenue last year of US$29.1 million ($3.5 billion), or a jump of approximately 35 per cent over the previous year. The near US$8 million the airport netted in 2015 was against the US$30,000 made the year before. The bottom line numbers came after debt servicing costs.
"This improvement in Norman Manley's financial performance was underpinned by two things," said a source conversant with the airport's operations. "First, there was an approval of new operating fees by the airports regulator, the Jamaica Civil Aviation Authority (JCAA) for a five year period; and second, there was a five per cent improvement in passenger traffic at the airport in 2015."
Approximately 1.43 million passengers, excluding transiting travellers, used the airport in 2014, which would suggest that an additional 71,000 did so last year.
Davies has asked the NMIA divestment team, headed by Michael McMorris, for a formal assessment of what might have been their reasons and how the new effort at divestment should be approached.
However, some sources speculate that among their concerns was a requirement for an early investment of an estimated US$50 million for a 500-metre extension of the airport's runway 300 metres of this is necessary in the short term to satisfy emerging regulatory requirements. This would be the largest chunk of a projected US$130 million in airport upgrades over the next decade. In addition to an annual concession fee, the government had asked for lump sum payment of US$20 million, half of which it would have received at the signing of the deal.
"There is a clear belief that over the life of the concession that deal would be profitable for the concessionaire," said a source who was close to the divestment process. "The new fees approved by the regulators, and the ability of the operators to drive passenger movement, should allow for the required investment and return a profit" over the 25-year life of the concession.
These sources argue that expanded infrastructure, including CHEC's new north-south highway, to be completed by March, should increase opportunities and competi-tiveness of the airport. The north-south highway will reduce the travel time from Kingston to Ocho Rios to 45 minutes, against more than two hours on the old route.
"What this means," said a source familiar with the Government's analysis, "is that Norman Manley, in relation to the time it will take to get someone from the airport to a hotel in the Ocho Rios and that eastern end of the north coast where more than 2,000 hotel rooms are to be completed in the near term, will be competitive with Sangster airport."
The cited new rooms do not include another 2,000 planned by CHEC as part of its utilisation of 2,000 acres of land it received from the Government for development to help prime its US$650-million investment in the north-south highway.
Additionally, government analysts point to plans for a highway on the south-east coast, starting near the Norman Manley and heading east through the parish of St Thomas for which Jamaica is getting nearly US$400 million from China as another potential strength for the airport.
"That highway, which will start soon, will open St Thomas to tourism development, similar to what the north coast highway, running east-west on that side of the island, did for hotel development in the 2000s," one official said.