Editorial: Why not an IPO for Manley airport?
It is the nature of the game that the Government has been mocked, and branded as incompetent, by the political Opposition for the failed effort to divest Kingston's Norman Manley International Airport (NMIA). And on the face of it, that is what happened: a failure. For, of the five consortia that showed interest in the airport, none made a bid by the time the offer period closed at the end of December.
What transpired, though, may not necessarily have been a bad thing. It is an opportunity to review its divestment strategy for the airport, including the use of what the finance minister, Peter Phillips, speaking in a separate, but related context last week, referred to as other "modalities".
It was days after Omar Davies, the transport minister - whose portfolio includes ports - acknowledged in Parliament what had transpired with Norman Manley that Dr Phillips addressed the annual conference on capital markets hosted by the Jamaica Stock Exchange (JSE), and reiterated the administration's intention to push ahead with the divestment of "a number of Government of Jamaica assets", some of which will be done via the JSE, including its Junior Market. He identified among these the electricity generator, Wigton Windfarm; the real estate entity, Factories Corporation of Jamaica; the heritage site operator, Things Jamaican; Ethanol Jamaica; as well as the Government's 51 per cent stake in the Petrojam oil refinery; its 19 per cent in the light and power, Jamaica Public Service Company; and its 32 per cent of the food and commodities manufacturer, Seprod Ltd.
While it was clear that the list was not exhaustive, and he did not say which of the firms was destined for IPOs, Dr Phillips, notably, did not name the Manley airport. Yet, this newspaper believes that this entity may be ripe for the stock exchange and that, appropriately priced, it would be an extremely successful offer. Appropriate pricing doesn't mean a fire sale, which Dr Davies said the Government will not do.
On the back of a hike in operating fees approved by the regulators, plus a five per cent increase in passenger movement, the NMIA's revenue last year jumped by 34 per cent to US$29.1 million (J$3.5 billion), more than a quarter of which it took to the bottom line, for a profit of US$7.7 million. Notably, the fee hikes that helped the drive in income came into effect after the first quarter, so did not impact the full financial year.
Put another way, the NMIA is a profitable business. As it now stands, it seems capable, if judiciously managed, of generating revenue to fund its infrastructure development and, if not pay substantial dividends in the short term, and provide healthy capital gains. Further, its competitiveness is likely to be enhanced with the opening of the nearly completed North-South Highway, and the plans for a new highway on the south coast, beginning near the Manley airport and heading east to the parish of St Thomas.
The Government, understandably, may want to have a majority partner with a background in airport management and experience, but this need not prevent it going the stock market route, with an enterprise that would not only provide more Jamaicans with symbolic value of owning shares but from which they can actually earn money.