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Open sky: bracing for a healthy flow of travelers, Colombia is ready to give up control of its largest airport.

Colombia has long sought to shed its image as a country plagued by war and drugs. It may be doing just that. While conflict is still a problem, the numbers are encouraging: Colombia's air traffic has surged. International passengers rose 159% from 1990 to 2003, to 2.9 million. Cargo traffic--mainly flowers for export-is on the rise too.

The government must cope with the increase, but it is short on cash. To solve the problem, it plans to sell a concession to operate the country's largest airport, Bogota's El Dorado International Airport. A study carried out by one potential bidder, the Paris Airport Agency, shows that El Dorado needs about US$1 billion in renovation and expansion to double cargo capacity. It also needs a new control tower and a new international terminal.

The expansion project would allow the airport to double its capacity to 16 million passengers a year. A private concessionaire would run El Dorado, which accounts for a third of all domestic passengers and over two-thirds of international passengers. The expansion is needed as Colombia attempts to position itself as the international hub for the Andes. If approved by the government, as appears likely, bids for the concession could open as early as the first quarter of 2005.

"Tourism is increasing as both Colombians and foreigners now are more confident to travel to and around Colombia," says Juan Carlos Velez, director of the country's Civil Aeronautics Agency. Velez says tough new security policies put in place by President Alvaro Uribe has increased tourists' confidence in Colombia. A recent increase in the value of the peso has made traveling abroad cheaper for Colombians, which accounts for some of the hefty air traffic over Bogota. A robust airline industry and the viability of the project have drawn interest from potential bidders across the globe. "We have the airport operators of Milan, Frankfurt and Paris all showing interest in the concession," Velez says. "They see that there is a huge potential here."

According to Velez, the concessionaire would tuna profits by increasing the number of duty-free stores and restaurants, which it would rent out. Currently, 80% of El Dorado's revenue comes from taxes on passengers and fees paid by the airlines and just 20% comes from rents paid by shops and other businesses in the airport. On average, international airports report the reverse: 30% of revenue from passengers and airline fees and 70% from rent.

By increasing the number of shops and restaurants in the airport, El Dorado's operator could easily boost the current $60 million in annual profits, Velez says, without giving an exact estimate. Profits will also come by turning El Dorado into an Andean hub. While the tendency in the aviation industry is more city-to-city flights, typical of a low-cost model that bypasses a hub, Colombia's aviation agency is confident that regional hubs will still play a crucial role in Latin America.

Such hubs will send people to less-traveled routes that otherwise may not be financially viable for airlines. Bogota, says Velez, is well positioned to play that part. Not only does the city sit in the northern reaches of South America and on the border with Central America, but it is also the only South American nation with beaches on both the Pacific Ocean and the Caribbean Sea. The only competition comes from Panama and Caracas. "It's difficult to see those airports expanding much more than they are right now," he says.

The remodeling of the airport comes at a time when the government and the private sector are trying to attract more tourists from abroad. The Colombian hotel association has pledged to invest more than $100 million in expanding and constructing new hotels in an effort to boost the number of visitors to Colombia. Colombia's airlines, meanwhile, have expressed support for the airport extension. Backers of a new Colombian airline, Fenix, say that they opened for business in 2004 because they saw that with the expansion of the airport, an increase in Colombia's air-traffic would follow. "The market is set to grow further, and this expansion is needed to help cope with the new passengers," says Luis Gomez, one of the founders of the new low-cost airline.

Checkered past. If the government gives the concession the green light, Bogota would join the Colombian cities of Cartagena, Cali and Barranquilla on the list of the country's airports already operated by private companies. In the future, the aviation agency is planning to sell concessions to the airport on the tourist island of San Andres and in Colombia's second-largest city, Medellin. Yet not all such sales have gone without incident: Companies running the airports in Cartagena and Barranquilla were asked to make additional investments into their projects that were not outlined in the contracts.

"The Colombian government has a mixed history of concessions," says Eduardo Maya-Restrepo, an aviation analyst. "The government must not repeat past mistakes. It must be very clear about exactly what is expected of the private operator."
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Title Annotation:Aviation; El Dorado International Airport
Comment:Open sky: bracing for a healthy flow of travelers, Colombia is ready to give up control of its largest airport.(Aviation)(El Dorado International Airport)
Author:Muse, Toby
Publication:Latin Trade
Geographic Code:3COLO
Date:Dec 1, 2004
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