South America’s ‘first airport city’ to be developed at Lima’s Jorge Chavez International

22 November, 2018

Lima Airport Partners (LAP) recently announced that Lima Jorge Chavez International Airport's expansion project seeks to develop "the first airport city in South America." (There is actually one already operational in Belo Horizonte in Brazil). LAP added that the project seeks to create synergies between Lima and the airport, generating new economic zones such as logistics and cargo zones, business zones, transport zones and duty free zones. The project is valued at around USD600 million.

The airport operator was due to make a formal announcement at the Expo Real Estate 2018 convention, on 20-Nov and 21-Nov-2018. "New opportunities will open for national and foreign investors, thanks to the Construction of the new Jorge Chávez International Airport" it said.

LAP is a limited liability company, founded in Feb-2001 and which held a 30-year concession to operate the airport, subsequently extended to 40 years. An additional 10-year extension is at the discretion of LAP with the concession then set to run until 2051. It is a fair bet that the Peruvian government is satisfied with this concession.

CHART - Lima is the furthest west of any part of the Fraport airport investment networkSource: Fraport (NOTE: Fraport Greece and some other consortium activities are not displayed on this map.)

It is currently 70% owned by Fraport, 20% by the International Finance Corporation and 10% by the Fund for Investment in Infrastructure, Public Services and Natural Resources, managed by AC Capitales SAFI S.A. US construction group Bechtel, Peruvian construction company Cosapi SA, and Latin America based operator Alterra Holdings have at various stages exited ownership.

In 2016 LAP completed 15 years of concession management. Throughout the period, it paid the Peruvian Government USD1.6 billion for the right to manage the airport, investing over USD340 million at the airport. According to the CAPA Airport Construction Database projects in place there now, apart from the airport city, include a second runway (2022), a new terminal, ATC tower, improved road access and auxiliary facilities to the value of USD1.2 billion.

The airport's capacity is due to increase to 38 million ppa upon conclusion of phase 1 of construction. Further expansion is planned to handle up to 60 million passengers per annum by 2040.

That USD1.8 billion bill makes it one of the largest projects in total at any Latin American airport. With the cancellation of the New Mexico City Airport project there is nothing else as comprehensive coming on line there through to 2024 but this collection of projects is unlikely to be complete before 2030.

CHART - With 20.6 million passengers in 2017, Lima is Latin America's fifth busiest airport, with around half the passenger traffic at Mexico City International (Juarez) AirportSource: CAPA - Centre for Aviation and Fraport

These more recent developments hide the fact that for many years some stakeholders manifested concern over the airport's apparently slow pace in increasing capacity in comparison to other Latin American airport such as Bogotá's El Dorado International Airport (in a city where a second airport will now be built).

It is the principal hub, among others, for LATAM Perú, which is part of the LATAM group, and Avianca. What is perhaps more interesting is the growth in cargo capacity, which underpins logistics-based airport cities like the one proposed here.

CHART - Already in 2018 cargo payload has increased by +17.3% over 2017, when a +7.3% rise over 2016 was reportedSource: CAPA - Centre for Aviation and OAG

The airport is situated 9.6 km northwest of Lima, the capital city and the political and economic heart of Peru. Lima accounts for approximately 60% of the country's GDP and is home to approximately 30% of the country's 31 million inhabitants.