Friday, February 13, 2015

AENA Privatisation: Uncertainties and unknowns

Finally, and after glitches concerning the auditor, AENA's initial public offer of shares has gone ahead. The 58 euro per share price rose on the first day of trading to over 69 euros, leaving the minister for development, Ana Pastor, a happy lady. Analysts consider it to be a strong stock, and though the price is likely to fall a little, the entry onto the Madrid stock market has been positive.

Despite the muted euphoria, there are several unknowns which cloud the AENA privatisation. One, that of union relations, has, for the time being, been placed on the back burner, the two main airport unions CCOO and USO having called off strikes that were planned from this month and through the spring and summer. Assurances have been given regarding contracts and minimum staffing levels. If the unions are now adopting a temporarily contented watching brief, not all has been rosy with the chief institutional shareholders. The belief that the privatisation might herald a phase of optimism for the Balearics has been shaken by the fact that the Banca March's investment foundation felt that the share price was too high and so has, along with Ferrovial, opted to stay out of that original core of investors and will not, therefore, be represented on the new board. Still, there has been plenty of interest from major investors such as George Soros and through sovereign funds in the Middle East, Singapore and Norway.

One of the greatest unknowns has to do with the further liberalisation of the skies and so of international airline presence at major airports, by which one means Madrid and Barcelona. Emirates, Air India, Latam Airlines are among overseas operators jostling to develop new routes and which are eyeing up Madrid in particular as a hub. There is, as a consequence, disquiet among an already emasculated Spanish airline industry that existing hub activities might be threatened; Air Europa appears especially minded to get the ear of the ministry on this matter.

And it is the relationship between the government and the 49% shareholders that provides the biggest unknown of the lot. Who ultimately will wield the power? The government may have retained a majority of shares, but how determined might it be to exercise its majority against the ambitions of others?

Coming to Mallorca and the Balearics, further development of international air routes might be thought a good thing, but only if good interconnecting schedules can be piggybacked onto routes that the likes of Emirates or Air India might desire. Otherwise, Palma looks unlikely to be a beneficiary of privatisation. This said, Ana Pastor, following the previous announcement by regional tourism minister Jaime Martínez that airport taxes will be frozen for ten years, has intimated that there may, after all, be room to manouevre in terms of lowering taxes (especially for the off-season) at Balearics airports. Airlines have naturally welcomed the suggestion, though they see in it an element of pre-election campaigning. As I have noted before, the profitability of Palma will be something that shareholders will be keen to maintain and so tax reductions would only be of interest were there a guarantee of greater profits from resultant flights.

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