Japanese government is planning to sell rights of airport management and operation of 27 government owned airports including Haneda (Tokyo) and New Chitose (Sapporo). Government thinks there are large rooms to improve profitability of these airports after examining best practices of international airport business, but such an improvement is enabled only by private sector. Legislation for the government to sell these rights is underway.

Within 2012, “market sounding” which means request for proposals on business model or on type of concession for each airport is scheduled to start. These proposals are treated as “non-binding” ones used only for collecting ideas, while the proposing entity will not be bound with the proposal in bidding process afterwards. Whether foreign players can participate in or not is uncertain so far, but a policy will be clear very shortly.

Privatization was successfully conducted in Japanese railway sector and telecommunication sector, but for the airport, there is no preceding case realistically. Largest international airports, namely Narita and Kansai, were privatized in terms of corporate personality, but Japanese government holds the majority of the share. As Kansai airport is suffering huge debt, about USD 15 billion, it will be merged with Itami airport which earns a sound profit, and finally, the merged company is planned to be “re-privatized” in a certain PPP format. Privatization of airports is a sort of never-ending theme for Ministry of Land, Infrastructure, Transport and Tourism.

Of 27 above, there are 12 airports which have more than 2 million passengers annually. All of 12 airports, except for Naha airport of Okinawa, are enjoying black ink figures in terms of EBITA. However, most airports except for Haneda and Chitose have less than JPY 2 billion (about USD 18 million) as black figures. So that, management knowhow of private sector to improve profitability is keenly requested.

Who can provide such a knowhow? Since Narita International Airport Corporation is government owned entity and Kansai International Airport has above-mentioned situation, there is no private airport operation company in Japan. I am not sure that Japanese government may think possibility of inviting international airport players such as BAA and Fraport, but it is very likely. From 2014 to 2020, Japanese government will conduct all the bidding process for 27 airports.

Details of the plan are revealed in the report of “Discussion group on airport management and operation” initiated by Ministry of Land, Infrastructure, Transport and Tourism.

Originally posted on Infrastructure Investment Journal authored by Daisuke Imaizumi, CEO of InfraCommons.