Puerto Rico Ports Authority Executive Director Víctor Suárez said Tuesday the Federal Aviation Administration has been “rigorously evaluating” the proposed public-private partnership deal for the Luis Muñoz Marín International airport because “everything they express will become precedent.”
For the past six months, the federal regulatory agency has been assessing the government’s proposed P3 through which Aerostar Holdings, a consortium composed by Mexico’s Grupo Aeroportuario del Sureste (ASUR) and Highstar Capital, would take over the management of the island’s main airport facility for 40 years.
While a decision was expected in early January, the agency’s requirements for specific documents and additional information prompted the local government to grant an extension of the contract with Aerostar through Feb. 26.
Despite opposition from many flanks — unions, politicians, economists, and island residents — Suárez said Ports is confident a decision will come down before then. If approved, the LMM will become the first airport on U.S. soil to be managed under a P3 structure.
“They’ve said they’re evaluating this very closely because everything they express will become precedent. There are other airports, like Midway in Chicago, that will probably be undergoing a similar process, so they’re being careful,” said Suárez, during an interview at the agency’s Isla Grande headquarters.Luis Muñoz Marín Airport in Carolina. (Credit: © Mauricio Pascual)
‘Purely financial’ transaction
In response to detractors, Suárez said simply: “The reason for this transaction is purely financial. Ports has a $1 billion debt, half of which is attributed to LMM, that is due. If we don’t repay the Government Development Bank, it would suffer and the island’s credit would suffer.”
If approved, the lease agreement involves an upfront payment of $615 million to the cash-strapped Ports Authority. During the 40-year term, Aerostar will be required to make annual revenue-sharing payments to the agency, fixed at $2.5 million per year for the first five years, 5 percent of gross airport revenues for the sixth through the 30th years and 10 percent of gross airport revenues for the years 35 through 40.
One of the loudest dissenters since the deal was announced by the Gov. Luis Fortuño administration has been House Speaker Jaime Perelló, who recently launched a probe and public hearings into the transaction, pointing out the negatives of the deal for Puerto Rico. Last week, he sent a letter asking the FAA to delay its decision until the House concludes its proceeding.
“One of his biggest concerns is the future development of the regional airports in Aguadilla, Ponce and Vieques, but our attorneys and their [Aerostar’s] attorneys are clear that the P3 will not affect that,” Suárez said. “Each of those airports has its niche to address, but we have to worry about the LMM being okay.”
“For the FAA to approve this transaction, they have to be very sure that the regional airports development plan is viable because they have investments there. If they thought the plan wasn’t viable, they wouldn’t approve it,” Suárez said.
Another major sore spot for P3 opponents is the issue of turning over the airport to “foreigners,” particularly regarding security issues.
To that, Suárez responded that as with any transaction involving non-U.S. companies, federal agencies have strict criteria in place with which proponents must comply to operate “sensitive infrastructure” such as the LMM.
Furthermore, he said regardless of who manages the airport — whether Aerostar, which is incorporated under U.S. laws — or Ports, security is and will remain the responsibility of local and federal law enforcement authorities.
If the approval were to come down next week, the final closing could take place in a few days, after which a transition period lasting several months would kick in, Suárez said.
Sources close to the transaction have hinted at the possibility of an FAA approval, with strict conditions.