Rio Opens R$6 Billion Airport Concession

By Doug Gray, Senior Contributing Reporter

RIO DE JANEIRO, BRAZIL – The postponed tender for the expansion and management of Rio’s Galeão international airport is set to go ahead later this week despite the threat of further delays. An estimated R$6 billion of investments will be required across the 25-year concession period as the winning consortium increases capacity with new runways, terminals and passenger facilities.

Monday’s bids, set at a minimum of R$4.8 billion, are expected to be opened at São Paulo’s BOVESPA stock exchange on Friday despite a call by Rio’s Public Federal Ministry (MPF-RJ) to postpone the auction. The ministry’s official Twitter page demanded a suspension of the auction because “the outline of the Galeão concession doesn’t include any methods to improve the security weaknesses at the airport.”

The contract calls for a three-phase development, with the handing over of control from INFRAERO to the winning consortium within six months, to be followed by the expansion of the facility in phase two and an “improvement in the level of services provided.”

Within thirty days of INFRAERO’s approval of the project outlined by the winning bid, work is due to begin, and the deadline for the first new passenger terminal is set at April 30th, 2016, just three months before the start of the Rio Olympics. That has to include parking for 1,850 cars and facilities capable of processing 1,700 arriving passengers per hour.

The winning consortium will have its work cut out to perform the necessary expansion, predicted to jump from its current 17 million to as many as 60 million passengers a year by the end of the contract. That will also mean a new, 2.5 kilometer runway, which has to be installed and operational before the number of flights per year passes 198,000, or at the latest, December 31st, 2020.

Following a lack of interest in major infrastructure concessions including road and rail, the MPF-RJ’s call to postpone the auction will have done little to convince the world’s operators to take part. The pre-salt oil field Libra attracted just one bid last month, and it looks unlikely that the R$4.8 billion required will be surpassed significantly.

Should that lack of interest be repeated in what may become the world’s most important airport ahead of the 2016 Olympic Games, it would further damage the government’s reputation for creating a fertile ground for investment in Brazil, in what should be a highly profitable and as yet underdeveloped sector.

None of the names will officially be made public until 24 hours before the bids are opened, but among the companies likely to be interested are Brazilian construction giants OAS, Queiroz Galvão and Odebrecht, while international operators Schipol and Heathrow are thought to be considering bids.

The auction follows the privatization of São Paulo’s Viracopos and Guarulhos and Brasília’s airports last year, and will take place along with that of Belo Horizonte’s important hub Confins. Both contracts will have a one-off, five-year extension clause and could both be sold to the same operator if they are the only bidder in one or other of the auctions.