Airport News. Quarterly Newsletter

Transcription

1 AIRSIDE COMMERCIAL LANDSIDE Airport News Quarterly Newsletter Issue #6, December 2012 Corporate Governance Models The Airport Group ( TAG ) has been working closely with many Local Councils to address emerging challenges associated with increasing aircraft movements, passenger numbers, aircraft sizes and regulatory complexity. One major solution to these challenges lies in the effectiveness of the airport s governance and management systems. Increasingly airport operators are facing the dilemma regarding the best governance and management structures for their airport assets. In our previous issue we discussed the various airport management models. In this edition we will focus on airport governance and how this relates to the overall operation of the airport asset.there are three main models of airport governance within Australia. These are: Local Council owned, corporatized, and privatised. Each model assumes a different level of control and methods of operation. TAG Perth Office Opens We are excited to announce the opening of our Western Australian operations, led by Wayne Ticehurst. Wayne joins us from a lengthy background as CFO of Perth Airport. Wayne has been very active recently in advising metropolitan and regional airports in WA, NT and QLD on all matters to do with finance and governance. You can contact Wayne on waynet@theairportgroup.com.au or Owned: Local Council owned airport assets are those which follow the original ownership model whereby the airport is the responsibility of the local Council to maintain and operate as a community asset. This ownership structure is most common among regional and rural airports and aerodromes, and often presents an issue for local councils as a cost burden. There is quite commonly a lack of specialised airport personnel (an industry-wide problem). Corporatised: Under the National Competition Policy (NCP) provisions of the Local Government Act and Regulation there are three main business models centered on the corporatization of airport assets. These include: 1. Full Cost Pricing where the business remains a Council service and adopts Full Cost Pricing (FCP) reforms; 2. Commercialised Business Unit (CBU) where the business is created by Council to manage the airport, with a dedicated business unit manager employed; or 3. Corporate Entity where the business becomes a Council-Owned Corporate Entity. Privatised: We expect that the industry will see an increasing appetite for privatisation of regional airports in the near future in response to escalating capex requirements for Councils and confidence in the reliability of recent pax growth trends. The preferred business model is yet to emerge, however the sale of Cairns and Mackay Airports in 2010 is a recent example. Office closing dates over Christmas: The Airport Group will remain open over the Christmas and New Year period, closing only on public holidays. Contents: Public and Private Funding of Airport Infrastructure Part Protection of All Weather Solutions...3 Training Review PANS-OPS, OLS...4 Recent Staff Appointments...5 Upcoming Events...6 Reference Material & Media...6

2 Public and Private Funding of Airport Infrastructure Part 1 By Wayne Ticehurst (CPA), Consulting Director Airport Finance & Governance The resources economic boom and its associated fly-in-fly-out activity, as well as the focus of various levels of Government on the stimulation of regional activity, are driving a quantum shift in the importance of regional airports, small and large. The challenge for regional airports in the context of economic growth and changing cultural influences is how best to manage the operational demands, and how to source the financial investment required to meet and plan for future growth. Invariably, there are two financial alternatives for airport infrastructure funding: public or private. Public funding alternatives, while limited, are available under a number of Regional Funding schemes including: Regional Development Australia Fund, Royalties for Regions and the Royal Infrastructure Fund to name a few. As public funding is government provided, the concerns and objectives of the schemes extend beyond the specific project and community, and aim to provide an overall benefit to the broader region and community. As such, greatest emphasis within the criterion is placed on the contributions that the project will make to community amenities and social capital, and the level of local support. The privatisation of Australia s major airports from 1997 heralded a new approach to the funding of airport infrastructure in Australia, with a move away from the traditional model of public funding to private funding. Successful bidders for the airport leases were required to fund the up-front capital and to have a reliable means of funding ongoing airport developments. Today, 15 years after the first round of privatisation, Australian airports have demonstrated a sound track record of prudent financial management and resilience to external shocks, which has improved the credit profile of airports to lenders and equity investors, the two primary sources of funding. This augers well for regional airports, which may in the future seek debt and equity funding, providing that the airports present a strong funding case. Debt funding Typically, debt funding is sourced from banks and/or capital markets and is secured against the assets of the airport. Capital markets consist of sophisticated institutional investors, who subscribe for bonds issued by the airport. This source of debt is for longer terms, which are better suited to the longevity of the airport assets, however will generally require at least one investment grade credit rating to meet investor requirements. A number of Australian airports have sourced funds from the US capital market due to the depth of this market. Issues may be wrapped by credit insurers, who can bring a higher credit rating to the issue than the underlying rating of the issuer, thereby attracting more favourable pricing. The credit insurer will charge a premium for this, which needs to be assessed against the lower margin. Since the GFC however, the credit position of the insurers has diminished and a number of these parties are no longer offering this product. Not all major privatised Australian airports have accessed capital markets, but all have bank debt. Bank debt is typically provided as non-amortising, bullet facilities and for terms ranging from 1 to 5 years. Longer tenor bank debt is available but the margins are generally not competitive with alternative capital market debt. Bank debt facilities can be bi-lateral, between the borrower and a single lender or syndicated, where there are a number of lending banks. In a syndicated facility, it is typical for one (or sometimes joint) banks to act as arrangers. A syndicated facility is generally used when the borrowers requirements exceed the lending limits of an individual bank. Airports usually utilise bank debt facilities to fund a portion of their capital expenditure. The benefits of such facilities are that they are only drawn as required, ensuring the borrower does not unnecessarily incur interest, however commitment fees will be charged for the facility limit. Such capital expenditure facilities are usually rolled into a term loan facility on maturity. Other bank lending facilities utilised by airports include overdraft and liquidity facilities.

3 Equity funding All privatised airports have a component of their capital structure in the form of equity from their shareholders. Most of the shareholders of Australian privatised airports are large institutional bodies, such as superannuation funds, providing a deep pool of capital. Equity is typically provided in the form of ordinary shares, which are sub-ordinated to the interests of secured creditors. Some privatised airports have preference shares in their equity funding, but these are still sub-ordinated to senior lenders. Airport shareholders may look to reinvest dividends back into the airport as a means of supporting the airport s growth. Over the years, various forms of hybrid products have emerged in privatised airport capital structures. These products have some debt and some equity characteristics and are often referred to as mezzanine finance. Hybrids rank behind senior secured creditors but usually ahead of straight equity. Generally there is a higher yield paid by the airport on these instruments and the distributions can be deferrable (unlike interest on debt). Some hybrids are listed, providing an active and liquid market for trading. In the next issues, we look at the key considerations that an airport will need to take into account when planning its capital structure and how best to prepare for a debt or equity issue. protection of All Weather Operations By Ray Romano, Airspace Specialist Aerodrome operations are greatly enhanced when all weather operations are facilitated. For the pilot, this means the ability to use Instrument Flight Rules ( IFR ) techniques to fly in cloud, rain, smoke or fog, yet still achieve safe take-off and landing. The techniques, called Instrument Flight Procedures ( IFPs ), are developed in accordance with ICAO document 8168 PANS-OPS. IFR is required for all Regular Passenger Transport ( RPT ), airline operations and many other activities. To implement IFPs, CASA mandates that aerodromes have certification or registration. This requires that a minimum standard of infrastructure for low visibility movements is available, and that certain activities take place, such as aerodrome reporting/ inspection, annual Obstacle Limitation Survey and provision of NOTAMs. Where IFPs are promulgated, CASA regulations state that aerodrome operators are responsible for protection of IFP airspace, ensuring that aircraft in low visibility operate safely and avoid obstacles or dangerous manoeuvres. Additionally, 22 aerodromes named in the Airports Act 1996, must submit Prescribed Airspace plans to the Department of Infrastructure & Transport and seek development approvals. IFP designers must provide aerodrome operators with a letter, including diagrams, which identifies areas of interest (nominally called PANS-OPS surfaces) controlling the first and final phases of flight. Diagrammatic outlines are normally provided in conjunction with textual location description of critical obstacles and maximum design height considered. Aerodrome operators are then advised to contact the designer should any new obstacle be observed. With that advice, the designer is able to reassess whether the IFP needs amending, but does not allow an operator to plan or assess development applications which protect operations for safety, efficiency and regularity. In accordance with the Aerodrome Regulations, the designer s letter should be incorporated in the aerodrome manual and is subject to CASA audit. TAG173 (Airspace & Procedure Design) The TAG173 Group is headed by Ray Romano, former Chief Designer of IFPs at Airservices. TAG now offers a service providing definitive airspace protected for IFPs. In turn, this capability allows an aerodrome operator to reliably assess development applications and monitor activity around the airport. The result may then also be included in local government development plans. Clients may also access an amendment service, whereby TAG will review changes made quarterly in the Australian AIP and update the airspace. TAG is seeking 173 Certification which will enable us to design new IFPs, including RNAV and RNP-AR procedures. It is anticipated that this will be available in early 2013.

4 Training Review PANS-OPS & OLS PANS-OPS Introduction Course Pans-ops testimonials By far one of the most enjoyable PANS-OPS courses I have completed. Ray has a way of explaining the complex concepts of PANS-OPS in a simple and easy to understand way. I liked how each new topic built upon previous topics in a systematic way making the subject easier to grasp. The depth of the course was enough to give a good understanding of PANS-OPS and how this is applied to an aerodrome but without all the mathematics and calculations, which can be overly confusing. I highly recommend this course to those who may have completed a previous course or are new to PANS-OPS and want the concepts explained in a easy to understand way. Brett Eaton, Airside Safety Manager, Adelaide Airport Limited The OLS course provided me with a better understanding as to what and why we do OLS assessment overlaying proposed plans with OLS CAD database. I certainly enjoyed seeing some of the approach/ take-off video s from around world. Robert Millwood, Draftsperson - Airport Operations, Adelaide Airport Limited TAG has re-introduced a previously popular training course called Introduction to PANS-OPS. You may not be aware that it is a requirement that Operators of Aerodromes with Instrument Flight Procedures to monitor and report any circumstances which affect operations of aircraft using those procedures. This is documented in CASR MOS Part 139, in Chapters 2, 7, 10 and 12; which also refers to CASR Part 173 chapter 6. The construction of Instrument Flight Procedure Protection Areas ( PANS-OPS ) defines the limits of obligation for this purpose. We have tailored this course for aerodrome operators, reporting officers and developers. It aims to give an appreciation of CASA regulatory requirements (under CASR Part 139) and the interaction with Instrument Flight Procedures (CASR 173). An Introduction to PANS-OPS Course (4 days) was held on 30th October to 2 November 2012 in Canberra. Our aim was to assist Regional Councils with this compliance. Any aerodrome operator needing to understand the inclusion of Instrument Flight Procedure diagrams in their Aerodrome TAG also runs Obstacle Limitation Surfaces (OLS) Familiarisation Courses (1 day) which are essential for Councils to understand the surfaces around their airport and the ability to identify obstacles, particularly in light of all the development applications in close proximity to airports. Mike Thompson delivered the OLS course held on the 29th of October 2012 in Canberra, with 12 participants attending from National Regulatory Bodies, Councils and Airport Operators from around Australia. The aim of the course is to provide you with an understanding of what makes up the Obstacle Limitation Surfaces and why they are so important to the safe operations of an airport. Most importantly the course outlines the importance of having an understanding of how the different surfaces relate to aircraft operations at your airport or associated with your employment. The OLS Familiarisation Course is all about giving you an understanding of the: Terms used to describe obstacles; Manual or the requirement for Reporting of Obstacles should attend one of our future courses in The training course is aimed at aerodrome managers, reporting officers and developers. It aims to give an appreciation of CASA regulatory requirements (under CASR Part 139) and the interaction with Instrument Flight Procedures (CASR Part 173). The course focuses on the development of Instrument Flight Procedures, their protection volumes characteristic shapes and sizes, and then relates them to the regulations for protection of airspace. The course does not deal with complex mathematics and involves few numbers, but rather concentrates on how to protect the Instrument Flight Procedures and interpretation of diagrams provided by the designer. We are proud to announce the course is presented by Ray Romano, Airspace Specialist (ex Chief Designer for Airservices Australia). Details of this course are available on the TAG website or by contacting Catherine on catk@theairportgroup.com.au OLS Familiarisation Course Types and functions of the different Obstacle Limitation Surfaces; Process for visually inspecting the Obstacle Limitation Surfaces; Reporting arrangements if the Obstacle Limitation Surfaces are infringed; and The process for removing a temporary obstacle. Some of the items covered in the course in order to achieve this understanding are: In detail what the Obstacle Limitation Surfaces are; How they can impact on day to day operations at your airport; How they can impact on the long term operations at your airport; Explain how to go about making sure that these critical surfaces remain free of obstacles; and The CASA standards that apply to inspections of the Obstacle Limitation Surfaces.

5 Recent Appointments Q4, 2012 North Burnett Regional Council TAG has recently completed a strategic review of Council s 6 aerodromes which are located inland from Bundaberg in Southern Queensland. As for many Councils, the aerodromes represent a financial burden but are also a key emergency and essential services asset for the community. For North Burnett we identified a single aerodrome for future development based on a multi-purpose approach and its geographic location. We also identified technology improvements at the smaller aerodromes to enhance all weather emergency services access. Banana Shire Council RAD Funding We have been retained by Banana Shire Council to prepare a Regional Australia Development Fund EOI submission for the Thangool Airport Expansion Project. This follows on from our recent Business Plan and engagement for the detailed design of the entire airside upgrade works to construction-ready status. Brisbane Airport Village Golf Central Development Aeronautical Assessment TAG has been engaged to perform an aeronautical assessment of floodlighting for the Golf Central Development at Brisbane Airport Village. TAG will liaise with all stakeholders as required. Adelaide Airport PANS-OPS Model and Report Update TAG conducts regular quarterly reviews of the Adelaide Airport DAP charts and informs the client if there are any changes which affect their PANS-OPS model. A quote is provided for the client to approve and then the model is amended and the report updated. This ensures the client has an up to date airspace model at all times. Darwin International Airport RPT Expansion TAG has recently been appointed for the detailed design of the RPT Expansion at Darwin International Airport. Work is commencing immediately with delivery as early as February WA State Aviation Strategy The WA State Government is actively addressing the absence of a State strategic aviation policy. The State Department of Transport released an Issues Paper earlier in 2012 designed as a tool to initiate debate and discussion amongst stakeholders, and to inform the adopted Strategy. Many of the key challenges identified in the Issues Paper are applicable to other States where there is no State Aviation Policy. These include: identifying and classifying a network of airports across the State, prioritising key airports, limited infrastructure capacity to meet demand, skills shortages (an issue across the aviation sector), Council funding challenges, establishing effective commercial operating agreements. The Strategy will be applicable to safety initiatives, business and corporate, tourism, essential services, trade and exports, and investors / operators. We look forward to further progress on this issue in WA and in other States. Beyond WA, the profile of aviation infrastructure as an issue is escalating through various public policy / industry channels. Groups such as the AAA and The Australian Aviation Associations Forum are promoting various policy positions and this is to welcomed. We continue to find a lack of awareness or co-ordinated effort within local government representative groups and at a State level, and we look forward to contributing to a further escalation of the issue as we move into a Federal election year. STAFF Appointments TAG welcomes Wayne Ticehurst, Consulting Director Airport Finance & Governance. Wayne was until recently the Chief Financial Officer and Company Secretary for Westralia Airports Corporation Pty Ltd (WAC). Wayne brings extensive experience in the financial industry, and will drive our financial forecasting, investment and governance services across both commercial and operational areas. You can contact Wayne at waynet@theairportgroup.com.au or TAG welcomes Bruce Potter, Senior Airport Civil Designer. Bruce joins us from a varied background with large engineering groups, working across all aspects of civil engineering and utilities. Bruce is a Committee Member of Engineers Australia and a chartered committee member representing Engineers Australia in the development of an Australian standard in subsurface utility engineering. You can contact Bruce at brucep@theairportgroup.com.au or

6 UPCOMING EVENTS About Us AAREC days TAG is again the Organiser and Major Sponsor for AAREC (Australasian Airport Real Estate Conference), and this year we are taking the conference international! We are working closely with Auckland Airport as the Host Partner to put together an exciting program. The conference is to be held in Auckland in early June 2013, with the dates to be confirmed in the near future. Please register your interest for the conference by contacting Taylor Gailey on or taylorg@ airportproperty.com.au. Further details of the event will be published in early January OLS Familiarisation Course - 1 day February Brisbane June Canberra October Brisbane PANS-OPS Introduction Course - 4 days This course will be held when we have a minimum of 6 participants interested in attending the course. The dates and place for this course will be confirmed with the interested participants once the minimum number of attendees has been achieved. Please register your interest for the OLS Familiarisation Courses or PANS OPS Introduction Courses by contacting Catherine Kennedy at catk@ theairportgroup.com.au. The Airport Group offers a comprehensive whole of airport solution for regional and metropolitan airports in Australia, New Zealand and the Pacific Region. We are the only firm that brings together 60 years of airport operational, planning and design experience coupled with Australasia s leading airport commercial experience. Increasingly, airport stakeholders require a complete solution that is cognisant of the balancing priorities of airside and landside assets, and the benefits that the effective integration and commercialization of these assets can deliver. Airside civil design Airport master plans and approvals Airspace and procedure design Reference Material & Media Land use planning and feasibilities Airport management The AAA has recently released a very comprehensive report Australia s Regional Airports: Facts, Myths and Challenges. This is a follow up to the June 2012 release of Connecting Australia: The Economic and Social Impact of Australia s Airports. We know from our own work that the issues covered in these reports are accurate and we recommend them as reading for regional and remote airport stakeholders. Visit TAG recently appeared in the Aviation Business magazine covering latest trends and case studies on airport landside / property assets. Visit au/issue/november/december-2012 Airport finance and governance Training Strategy and business planning Commercial transactions Development and construction management Follow us on The Airport Group would like to thank all of our clients and collegues for their support in We wish you and your families a safe and happy holiday season and look forward to seeing you again in 2013! Like us on Facebook The Airport Group The Airport Group knows airports. Visit us at Please contact: Hans Pearson Director m: e: hansp@theairportgroup.com.au Rob Mactaggart Director m: e: robm@theairportgroup.com.au Mike Thompson Director Aeronautical m: e: miket@theairportgroup.com.au Unit 1, 425 Nudgee Road, Hendra Qld 4011 Australia GPO Box 206, Brisbane Qld 4001 Australia 4/10 Kent Street, Kambah ACT 2902 Australia 49A Bouton Street Dianella WA 6059 t: