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June 12, 2020
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P3 ‘needs to be considered’ for airports

New York has once again provided a beacon of light as airport owners deal with the turbulence of Covid-19; but what are the signals coming from Washington? By P3 Bulletin's David Keniry.
P3 ‘needs to be considered’ for airports

Throughout his term New York Governor Andrew M. Cuomo has been championing the transformation of LaGuardia Airport (LGA), and the Port Authority’s public-private partnership (P3) with LaGuardia Gateway Partners that is delivering the USD8bn megaproject. 

This week Cuomo once again marked another milestone with the opening of the Terminal B Arrivals and Departures Hall at LaGuardia Airport by holding his now post-Covid internationally renowned daily press conferences.

Speaking at the Queens-based terminal he said: "LaGuardia Airport is going to be the first new airport in the United States of America in 25 years. Just think about that. 25 years. The last airport was Denver: 1995. This nation hasn't figured out how to build an airport. Why? It was too big, too complicated, too confusing. So we just didn't do it.

Meanwhile, countries all around the world did it and you could fly into airports all around the world and they were brand new, and there were entertainment centers, and business centers, and they were magnificent. And then you'd fly into our airports here in the United States which were built in the '50s or the '60s or the '40s. And it was just so apparent how other nations were outpacing us. Who is going to change that? Who is going to lead? New York. And that's what LaGuardia Airport is all about."

Throughout the news conference which was to provide updates on the crises New York and the US is dealing with currently, both the sustainable and Covid-19 related measures of the new terminal were underlined.

Cuomo commented: "You know what, we needed this. We needed this today. We needed to see the light at the end of the tunnel, we needed to see possibility, we needed to see New York stand up and shine, we needed to remember how great a place this is, and how a great a people we are."

Cuomo’s support for the project was noted at the press conference by Jane Garvey, chair of LaGuardia Gateway Partners. Garvey, chair of Meridiam North America said: "Meridiam is proud to be a part of LaGuardia Gateway Partners and work together with Governor Cuomo as we take the next step in building a state-of- the- art Terminal B. His leadership has been vital to this project.”

Thierry Déau, Meridiam's Founder/CEO, stated: "The LaGuardia Airport Central Terminal B Project is a perfect example of how we can expedite delivery of vital solutions to meet US infrastructure needs through public private partnerships at critical, challenging junctures. This mirrors Meridiam’s mission as an impact investor focused on growth through sustainability, innovation, and partnership.

Since Cuomo revealed his plan for LGA in 2015 the global P3 and aviation sectors have been watching closely. The project was widely seen as a turning point for the fortunes of US airports, and their weary passengers, as well as the P3 market itself.

However despite the best intentions by stakeholders across the US, the airport revolution has not taken off, and Covid-19 is likely to keep projects grounded for a little longer. 

So what can P3 do to help public airport owners?

Following the addition of Sofia Airport in Bulgaria this week to Meridiam’s portfolio, which includes airports in Madagascar and Jordan, Déau told P3 Bulletin: "Public airport owners need to consider P3 to achieve better alignment on sustainability issues which are now critical for airports with long term support from private sector".

LaGuardia Gateway Partners is composed of Meridiam, Vantage Airport Group, Skanska and JLC Infrastructure for development and equity investment, Skanska Walsh as the design build joint venture, HOK and WSP for design, and Vantage Airport Group for management of the terminal operations.

Aaron Toppston, Managing Director – Infrastructure Investments & Strategic Planning for Walsh said: “P3s are one of many financing and delivery tools available to airports across North America. However, P3s, like any other major capital project, require thoughtful long-term planning with wide stakeholder input. Many airports are taking stock of available funding and re-assessing future demands, with an eye how to modernize facilities for a mix of passenger, cargo and other traffic. P3s require long-term planning that can start today in order to help implement against these long-term strategies.”

The US Department of Transportation’s (USDOT) Federal Aviation Authority (FAA) told P3 Bulletin the Airport Investment Partnership Program (AIPP) is for any participant who wants to apply and meet the criteria, however the FAA is not actively seeking participants. The agency released a fact sheet last week following the official withdrawal of St. Louis from the AIPP.

The criteria has not been amended post-covid.

The 2018 Reauthorization Act removed the limitation on the number of airports, effectively ending the pilot program, and renamed it the Airport Investment Partnership Program (AIPP). Through this initiative, commercial service airports can only be leased and general aviation airports can be sold or leased. The AIPP continues to permit airports to explore privatization as a means to generate access to sources of private capital for airport improvement and development. Local or state governments own and operate most commercial service airports in the United States. Public-use general aviation airports are both publicly and privately owned.

Following the withdrawal of St. Louis Lambert International Airport by the City of St. Louis, the two remaining airports in the program are Hendry County Airglades Airport in Florida and Luís Muñoz Marín International Airport in Puerto Rico.

As previously reported US Transportation Secretary Elaine L. Chao announced in April the award of USD10bn to airports from the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

Kerrigan Partners Principal Richard Kerrigan commented: “Obviously, many airport owners are currently dealing with a significant decline in airport revenues due to the Covid-19 halt to most passenger movements, like any entity that relies heavily on demand-based revenue sources, many are focused on immediate operational and liquidity concerns and airports are taking immediate steps to ensure appropriate public safety measures are undertaken to allow, and now in some ways encourage, passengers to travel within the new constraints. Given the significant decline of airport revenues, it's possible that many airports will rethink the timing and affordability of new major capital investments given the uncertainty of the timing of the ramp-up period back to pre-Covid-19 demand and revenue levels.

San Francisco-based advisor Kerrigan added: “Some of the past challenging airport P3's proposed have been privatizations, this is where it is a sale of the asset, an ownership transfer, to the private sector. These proposals have been challenging due to the political, employee/labor, and community push back to such asset sales. Long term concession-based P3's are a project delivery and asset management method that does not involve a change of ownership control, which has seen a lot more success in the US market in a wide range of asset types and sectors. 

“In a webinar update this week, the USDOT Build America Bureau mentioned that TIFIA financing is considered an eligible use for airport terminal projects if it includes a transit access connection. The Bureau has not completed an airport terminal project financing to date and the Bureau said it has significant funding capacity under its current program. This long term, low cost, and highly customizable financing product offers airport owners significant value as they consider their future financing plans,” he concludes.

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P3 ‘needs to be considered’ for airports

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New York has once again provided a beacon of light as airport owners deal with the turbulence of Covid-19; but what are the signals coming from Washington? By P3 Bulletin's David Keniry.

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