Crunch time for TAV: On the hunt for new airports as Istanbul deal expires
ISTANBUL - Reuters
Turkish Airlines aircrafts taxi at Ataturk International Airport in Istanbul, Turkey, February 13, 2016. Turkish airport operator TAV Havalimanlari Holding AS posted a net profit of 210 million euros ($236 million) in 2015, down 4 percent from a year earlier, it said in a statement to the Istanbul stock exchange. REUTERS photoTurkish airport operator TAV aims to add one or two airports to its portfolio and boost revenue from its service businesses to compensate for the looming expiry of its contract to run Istanbul’s Atatürk Airport, Chief Executive Sani Şener said on Feb. 14.
Turkey’s new airport in Istanbul is due to start operations in 2018 and Atatürk, the ageing hub for flagship carrier Turkish Airlines, is due to close in 2021.
TAV, which lost the tender to operate the new airport to a consortium led by Turkish group Limak, is now faced with the loss of its main earnings generator.
TAV operates 14 airports in Turkey and countries including Georgia, Tunisia and Macedonia. Still, Ataturk accounted for 60 percent of 2015 EBITDA earnings before interest, tax, depreciation and amortization.
Şener said it is now looking to expand into Southeast Asia, Africa, India and the United States.
“We are interested in Manila Airport. A consortium including TAV has already received preliminary qualification to bid in a tender for a group of five airports in Philippines. Actually that will be a preparation for us for Manila Airport,” he told a group of reporters in a roundtable interview.
Typically, companies like TAV bid for the right to operate airports for a certain number of years. They do not acquire the property itself.
TAV is also looking to source more of its revenue from its non-airports businesses. Its services division includes duty-free shops, catering, and IT companies, a business model similar to that of South Africa’s Bidvest Group.
Şener said the company aims to have the division account for 70 percent of its revenue eventually, from 54 percent in 2015. Group revenue totaled 1.08 billion euros last year.
“Our services companies have started to expand. We operate 14 airports but with our services companies TAV has a footprint in 70 airports,” he added.
TAV has started to negotiate its concession agreement terms in Tunisia as passenger traffic fell 58 percent to 1.4 million after the country suffered from deadly militant attacks last year.
“The negotiations are in advanced stage and a three-year standstill agreement may be signed within next one to two months. With that agreement we would stop paying loan installments and rent,” he said.
TAV had won Tunisia airport operation tender in 2008 for 20 years. The company had borrowed 360 million euros from around 20 financial institutions including IFC and the African Development Bank.