Fifth Brazilian airports concession tranche completed – Flughafen Zurich, AENA internacional and Aeroeste successful, but at quite a price

27 March, 2019

Brazil's Ministry of Infrastructure (MoI) announced earlier this month that it has successfully tendered 12 regional airports in blocks for a total of BRL4.2 billion (USD1.1 billion) over a 30-year concession period. Out of the total, BRL2.4 billion (USD629.4 million) will be paid during the contract signing. The blocks had a combined traffic of over 13.7 million passengers in 2018, representing 6.5% of the total Brazilian traffic.


  • Fifth Brazilian airport concessions tranche completed, at a huge premium;
  • Block system proved to be attractive to domestic and foreign companies alike;
  • The government is the winner, especially new President Bolsanaro.

The minimum bid was set at BRL218.7 million (USD57.3 million) - less than 6% of the amount actually paid - so when the Minister of Infrastructure Tarcisio de Freitas says, "It is very clear that this auction, this margin above minimum, demonstrates the level of confidence in the country… shows the great potential of Brazil", he is not kidding, though whether such confidence is justified is another matter.

That margin even supersedes those paid in the earlier tranches, which were considered excessive in many cases and where there were earnings multiples as much as eight times the norm. The contracts are scheduled to be signed in Jul-2019 and management transition will commence in Aug-2019. Full 100% management of the facilities will commence in Nov-2019.

There was a significant change in the machinery this time. The regulation for this fifth round of concessions does not include a fixed annual fee for the winning concessionaires. The annual fee was converted into a percentage of annual revenue generated by the block of airports, where Northeast Block has an 8.2% fee, Southeast is 8.8% and Central West is 0.2%. The change is to accommodate market fluctuation.

Bearing in mind, as The Blue Swan Daily and reports from CAPA - Centre for Aviation have highlighted previously, Brazil is down in "steak with bone" territory now, with usually one fairly well-used airport bundled in with a host of smaller and less attractive ones in each block, so the government has done well out of this financially. But, perhaps more importantly it has succeeded in capturing or recapturing global standard operators to invest in these smaller airports, some of which can barely be described as regional.

The winner of the Northeast Block is AENA Aeropuertos Internacional, at last finding its feet four years after the partial privatisation of the parent company. It beat off Flughafen Zurich in multiple bidding rounds to do so. The minimum bid was BRL171 million (USD44.8 million) but AENA bid BRL1.9 billion (USD498.2 million), over 10 times that amount. The minimum overall investment required is BRL2.1 billion (USD550.7 million).

This group includes Recife Guararapes International, Maceio Zumbi dos Palmares, Joao Pessoa Castro Pinto, Aracaju, Campina Grande and Juazeiro do Norte airports. AENA will be pleased to have hooked in Recife airport, serving Brazil's ninth-largest city which attracts many tourists. It is the jewel in the crown here and perhaps should really have been included in a previous tranche.

The (uncontested) winner of the Southeast Block is Swiss company Flughafen Zurich, which already operates Florianópolis airport (alone, 100%) since 2017 (Tranche 4) and Belo Horizonte Tancredes Neves airport with Brazil's CCR as 'BH Airport' (minority stake) since 2013 (Tranche 3). Technically, the bidder was Zurich Airport Latin America Ltda.

Like AENA, Flughafen Zurich is another experienced operator in this part of the world, and it surprisingly bid BRL437 million (USD114.6 million), or 9.3 times the minimum requirement of USD46.9 million or just USD12.3 million. The block consists of Vitoria Eurico Sales and Macae airports. In this case the minimum overall investment required is BRL591.7 million (USD155.1 million) but spread out over 30 years that isn't a great deal of money.

The final block, Central West, is the 'cheapest' financially, and the smallest, anchored on an airport, Cuiaba, which hosted just over three million passengers in 2018. It was unlikely that this block would attract the European big guns and it was won by Aeroeste, a new and wholly Brazilian consortium.

Aeroeste only had to beat a minimum bid price of BRL800,000 (USD209,658) but ultimately pitched an amount of BRL46.9 million (USD12.3 million) or 15.4 times the minimum. If you think about it that would have secured the much bigger Southeast Block at the minimum bid level. Aeroeste will invest BRL770.6 million (USD202 million) over the course of the concession, covering Cuiaba Marechal Rondon, Sinop, Rondonopolis and Alta Floresta airports.

If there is a winner here it is new President Jair Bolsonaro. While his predecessor Michel Temer initiated a programme of privatisation Bolsonaro made it a central plank of his policy to reduce soaring public debt and regain investor confidence. The sell-off was seen as a first test of market confidence in Bolsonaro's huge privatisation programme of state assets. He has said publicly the airport auctions would help provide better service to passengers and boost the economy.

All the winners have said they are interested in the next concession rounds, which are expected for 2020 and 2021 and the government has already announced feasibility studies for 22 airports.