Airports Authority weighing economic reset for Sangster, NMIA

Pacific Airport Group, GAP, the Mexican owner of Jamaica’s largest international airports, wants a recalibration of deliverables under the concession agreements it has with the Government, following the halving of passenger numbers since the pandemic.

Jamaica, too, wants to reassess the feasibility of these concessions, and is willing to negotiate.

“The main objective of this assessment is to determine if the Government can afford the potential compensation to be made to the concessionaires, should any of the proposals be accepted and recommended for inclusion in the review and possible negotiation process,” said the Airports Authority of Jamaica, AAJ, in bid documents seeking to procure the services of a consultant to advise the negotiating team.

GAP was planning to pump US$213 million, or $32 billion, into projects at Norman Manley International Airport, NMIA, in Kingston and Sangster International Airport, SIA, in Montego Bay over five years. That spend, or elements of it, may now be on hold pending negotiations.

Halt of capital projects

In 2020, GAP said it would scrap or delay non-essential capital projects following the onset of the pandemic. It formed part of a wider halt of capital projects by the Grupo Aeroportuario del Pacífico – which translates to Pacific Airport Group – across its chain of 14 airports that are mainly based in Mexico. These measures will keep cash in the company as it deals with the ­fallout from the pandemic.

GAP was granted contractual relief, in accordance with the concession contracts, as remedies to ameliorate the adverse effects of the pandemic, which was labelled a force majeure event, according to the AAJ documents seeking to hire the consultant to conduct an economic reset.

The concessions run for 25 years for NMIA, dating from 2018; and 30 years in the case of SIA, dating from 2003. The airports are managed, respectively, through PAC Kingston, or PACKAL, and MBJ Airport Limited.

“Both concessionaires, that being PCKAL and MBJ, have submitted proposals that are seeking to modify and/or rebalance certain deliverables under their respective concession agreements in order to procure the economic recovery and long-term sustainability of the airport concessions,” AAJ said.

The Cabinet has approved the setting up of a negotiation team that will oversee the review. The team, however, wants an adviser to consult on technical, financial and legal matters in support of its work, including “assessing the long-term recovery and sustainability proposals submitted by the concessionaires, with a view to deriving plausible recommendations for consideration by the Government of Jamaica”. Applicants have until February 1 to submit proposals.

The negotiation team includes experts from the AAJ, Ministry of Transport and Mining, Ministry of Finance and Public Service, Attorney General’s Chambers, and the Development Bank of Jamaica.

GAP recorded three million passenger movements through both airports in the 2021 calendar year. That was 2.5 million fewer than the volumes recorded prior to the pandemic, which hit 5.5 million in 2019. The AAJ wants the consultant to assess the revenue forecasts for the airports based on demand prior to the pandemic and during the pandemic.

Airport representatives for GAP in Jamaica were not reached for comment.

“The advent of the global pandemic, COVID-19, has resulted in economic fallout across many industries, with air travel industry not exempted. In each respective concession agreement, the concessionaires are entitled to trigger the force majeure event provisions upon the occurrence of an epidemic which, inter alia, materially and adversely affects the performance by the concessionaires of their obligations and the enjoyment of their contractual rights,” the Airports Authority said.

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