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Airport deal ‘creative and resourceful’

Bermuda's airport redevelopment deal is “unusual”, according to the global body Airports Council International — but the proposal was also described as “creative” and seemingly well vetted.

“Our message is not to say that they should or should not do this,” added Angela Gittens, director general of ACI.

“Due diligence appears to have been done, and the provisions of the agreement, from what we can see, are the kinds of provisions that we promote.”

ACI, a worldwide trade representative for airports, spoke with The Royal Gazette after assessing the business case and value-for-money reports on the project. Based in Montreal, Canada, the non-profit ACI serves 592 members operating 1,853 airports.

The reports, issued by the Government a week ago, have been fiercely disputed, with MPs heading into Parliament today to debate two key pieces of airport legislation.

The Progressive Labour Party is to call for the Auditor-General to assess the Government's public-private partnership with Canadian Commercial Corporation before MPs debate the Airport Redevelopment Concession Act and the Bermuda Airport Authority Act.

In a measure of the political rancour that has dogged the project for two years, Bob Richards, the Minister of Finance, has spent the week at loggerheads with David Burt, the Leader of the Opposition, over whether the reports demonstrate value for money.

Public-private partnerships like Bermuda's are a growing global trend, Ms Gittens said, and airports are “one of the places where governments recognise that they can get outside sources of capital”.

The group took special note of the island's partnership with Canada to develop a lone, comparatively small facility.

“This one was very interesting to read,” Ms Gittens said. “I don't know if we have had this government-to-government structure. It's creative and resourceful. Having a PPP isn't unusual, but the structure is.

“It's also included provisions that we encourage. The Government sets out its objectives clearly and its criteria for success. Something we see is either buyer's or seller's remorse, when various parties draw different conclusions of what success looks like.

“In this case, that looks like it has been made manifest. Everyone will know what the deal is. It's almost textbook in terms of what we would advocate.” Ms Gittens also ranked the assessments as realistic in terms of potential pitfalls.

“In any transaction there is a risk of things not working out,” she said.

“It's important that everyone understands things can go wrong in 30 years. The fact that it is countenanced is very important.”

Mr Richards has given job creation as one of the project's top priorities, which Ms Gittens said was a typical rationale for any government.

Governments also find airports attractive for their capacity to be run more in the style of a commercial business than other infrastructural investments, she noted. Stefano Baronci, director of economics for ACI, has examined a value-for-money report commissioned from the transport consultancy Steer Davies Gleave, and said he was satisfied with its analysis.

“The report very much provided evidence that the objective that Bermuda has set in advance could be met by selecting this scenario,” he said. “There are two important points that the report highlights which make you understand the level of risk that the investor takes.”

Passenger numbers could flag in the future, he said, while the modernisation of infrastructure by itself “can't be a game changer for increasing demand”. Both officials found it unusual that investors would take interest in a small airport that did not belong to a larger network of facilities.

“This particular investor is taking great risk,” Ms Gittens said.

“Typically, they wouldn't look at an airport of this size. I think it's because of this government-to-government feature.”

The backing of the Canadian Government, Mr Baronci said, made the proposal “solid — more so than with a purely private investor”.

Ms Gittens, who recalled the island from an ACI conference held here in 2010, gave high marks to the argument that L.F. Wade International's current terminal was susceptible to damage from hurricanes.

“What a lot of the documents talk about is what happens if you don't do anything,” she said.

“It looks like you don't have that option just from a maintenance point of view with the terminal's vulnerability to storms. That puts you out of business altogether.

“This is something that's expensive to maintain which will be an albatross around your necks until you do something else.

“That's an important element. It's not just a pretty new building to replace something that isn't pretty.”

‘Deal well-vetted': Angela Gittens, director of Airports Council International (Photograph supplied)

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Published November 25, 2016 at 8:00 am (Updated November 25, 2016 at 6:15 am)

Airport deal ‘creative and resourceful’

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