Pakistan Civil Aviation Authority (CAA) set to receive an
upfront fee of $1.36 billion
The Pakistan Civil Aviation Authority (CAA) is set to receive
an upfront fee of $1.36 billion following the outsourcing of key airports over
a 15-year period.
As per a presentation delivered to the cabinet in the
previous month, 48% of the total airport revenues, including income from
navigation, taxiway, and baggage services, will remain outside the scope of the
project and continue to accumulate for CAA. The approved transaction structure
combines an upfront fee of $100 million with variable fees.
Three
Pakistani airports generate impressive Rs. 130 billion revenue in three years
More than half of the revenues falling within the project
scope will be allocated to CAA, and over the 15-year duration, the variable fee
estimated for CAA amounts to $1.36 billion in nominal terms and $598 million in
net present value (NPV) terms, with the actual value depending on the bidding
process.
According to the key points of the concession agreement,
land tariffs will remain unregulated, while air tariffs will be periodically
adjusted by CAA every three years. These adjustments will include a 50% correction
for cumulative inflation, with the remaining 50% passed on to the concession
holder, assuming operational efficiencies are met.
The government will provide support to the concession holder
in opening and maintaining foreign currency accounts, making foreign exchange
available, and ensuring convertibility and transferability to meet foreign
payment obligations.
Pakistan
approves outsourcing of three major airports
The presentation also covered the outsourcing of Islamabad
International Airport. The Aviation Division emphasized that private sector
involvement in airport operations is a well-established international practice
that enhances service quality, maximizes revenue potential, and attracts
investment.
The cabinet was informed that globally, privately operated
airports account for 40% of air traffic, with 40 of the highest revenue-earning
airports using a public-private partnership model. In India, eight major
airports, including Delhi, Mumbai, Bengaluru, and Hyderabad, operate as
public-private partnership projects.
The Aviation Division explained that various options had
been explored over the past few years, but outsourcing the airports in
Islamabad, Lahore, and Karachi had not been accomplished. Fresh efforts were
initiated in December 2022, and it was decided to proceed within the framework
of the Public-Private Partnership Authority Act 2017, utilizing an
international competitive process to select a private partner for the design,
construction, rehabilitation, financing, operation, maintenance, and eventual
transfer of the airport back to CAA upon the concession's termination.
This initiative is expected to be the first public-private
partnership project in Pakistan's aviation sector. After Islamabad, the same
model may be applied to the airports in Karachi and Lahore.
The cabinet was also informed that the International Finance
Corporation (IFC), a member of the World Bank Group, was appointed as the
transaction advisor on April 11, 2023, under the Public-Private Partnership Act
2017, following approval by the federal cabinet. The IFC has extensive
experience in advising and supporting public-private partnership projects, with
a track record of 360 projects in 120 countries since 1989, including 40
airport-related projects since 2005.
Source: Express Tribune