By NEIL HARTNELL
Tribune Business Editor
Nassau airport’s managers are moving to secure “hundreds of acres” for potential future expansion of its runway and terminal “footprint”, a Cabinet Minister revealed yesterday.
Dionisio D’Aguilar, minister of tourism and aviation, told Tribune Business that ensuring “the necessary land” is available to meet Lynden Pindling International Airport’s (LPIA) future needs was an issue already “in play”.
He added that LPIA’s operator, the Nassau Airport Development Company (NAD), needed to “consider everything to accommodate” the steadily increasing passenger traffic that has resulted from Baha Mar’s opening and 16 percent year-over-year stopover visitor growth for much of the 2019 first quarter.
Mr D’Aguilar’s insight into NAD’s planning challenges came as he revealed that the government has agreed on a ten-year extension to the existing deal with Vantage Airport Group, the Canadian headquartered firm, to provide management services to LPIA’s operator.
The minister said this, combined with the 20-year extension to NAD’s lease to operate LPIA, would strengthen the airport manager’s relationship with current and future business partners. He explained that both extensions would boost confidence among investors that long-term deals with NAD will not be impacted by expiring leases and subsequent political interference.
With NAD looking to the future following its recent $139m debt refinancing, Mr D’Aguilar told Tribune Business: “We’re considering increasing the footprint of LPIA, and to secure the necessary land from the Crown to allow for future expansion of the runways and terminals.
“It’s very important that we start to secure that real estate so no development takes place that impacts the natural expansion of the footprint. It’s important that people don’t build buildings in the way of future runways. They’re [NAD] thinking about all that now and getting it started.’
“All that is in play. An additional runway is quite big and wide, and needs additional real estate, so one can assume that this would be in the hundreds of acres. It’s just to secure land for future expansion.”
Mr D’Aguilar said such longer-term planning was in addition to “the infrastructure works NAD is contemplating on the airside sector”, which include runway upgrades, new aircraft taxiways and parking spaces, and further enhancements to LPIA’s terminals.
“Obviously the traffic going through that airport is growing quite considerably,” he added, “and we now need to consider everything to accommodate the increase in traffic. There are a lot of things we need to rectify, and Vantage brings that expertise to the table. We want to keep that relationship.”
LPIA remains arguably The Bahamas’ most important infrastructure asset, as it is the main gateway through which around 1.5m higher-spending stopover visitors access this nation’s tourism product and fuel the country’s largest industry and wider economy. This role means it is absolutely critical that the airport keep pace with economic and tourism growth.
NAD’s 2018 financial statements, which were disclosed to potential investors as part of its recent $139m refinancing, also include a provision for resurfacing the existing LPIA runways that is currently valued at $32m with a 13 percent discount rate.
Mr D’Aguilar, meanwhile, said the extensions of the existing arrangements with NAD and Vantage to March 31, 2057, and March 31, 2029, respectively, simply made good business sense as it gave the airport operator’s current and potential commercial partners certainty and predictability in knowing their investments were secure for the long-term.
NAD’s initial 30-year lease was due to expire in less than 20 years from now, at end-March 2037, and the minister said the Government had been informed that the relatively short remaining duration was unnerving parties talking to the LPIA operator.
“The Government has agreed to extend the lease,” Mr D’Aguilar confirmed in response to Tribune Business’s revelation of the 2057 extension. “Here we are in 2019 with less than 20 years to go.
“It’s difficult for NAD to negotiate relationships with less than 20 years left on its lease. The Government saw fit to extend it by another 20 years, the lease from the Airport Authority to NAD, because anyone wanting to enter into a relationship with NAD knows that agreement is in place for the long-term.
“People were saying: ‘What happens after 2037? It’s not even 20 years’. If potential investors at NAD are mentioning this as a stumbling block, it’s quick and easy to fix, so we’ve fixed that. The risk is very low from the Government’s perspective because the Airport Authority is owned by the Government, and NAD is owned by the Government.”
Mr D’Aguilar then revealed that the Minnis administration has extended Vantage’s NAD management contract, which was due to expire at end-March 2019, by a further 10 years to 2029.
“We were minded to do so because we were pleased with the performance of NAD/Vantage, and Vernice Walkine and the team of Bahamians she heads up that represent Vantage there,” he added.
“They’ve successfully had the ratings on NAD’s debt upgraded twice, albeit the second time was a minor modification from a ‘BB+’ to a ‘BBB-’, but it restored the investment grade rating and dropped the negative outlook.”
Arguing that the combined effect of the two extensions would give LPIA investors major reassurance, Mr D’Aguilar told Tribune Business: “It makes persons considering entering into any relationship at the airport comfortable with the fact that the status quo is going to remain, and that NAD is going to be managing the airport and NAD will be managed by Vantage.
“There are Bahamians in place managing NAD with the ability to draw on the expertise of Vantage. This is a good set-up and we want to continue that. Vernice Walkine and her team have done an excellent job to improve operations and the debt.
“The recent refinancing of $139m of high interest debt took it to a more reasonable 7.5 percent, and we’re projecting that NAD - which has always been cash flow positive but suffered net losses - will still be cash flow positive but move into a net profit from 2019.”
NAD is projecting that it will turn a comprehensive profit of $2.56m for its current financial year to end-June 2019, driven by further increases in passenger facility fees and other forms of revenue.
Its financial statements for the year to end-June 2018 revealed that its net comprehensive loss fell by almost $10m year-over-year - dropping from $14.153m to $4.371m - as it slashed losses by some 70 percent.
The improved financial performance was driven by increased passenger traffic stemming from Baha Mar’s full opening, plus fee increases, both of which contributed to significant hikes in passenger processing and facilities fees.
Passenger facility charge revenue grew by 15.5 percent or over $7m, rising from $45.464m to $52.508m, while processing fees were up by 51.4 percent from $7.525m to $11.396m. As a result, total operating revenue jumped from $77.028m to $89.396m, a 16 percent rise that put NAD closer than ever before to covering both operating expenses and $68.473m in financing costs