PPP process starts for LMM

Written by  //  July 5, 2011  //  Tourism/Transportation  //  No comments

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Luis Muñoz Marín International Airport in Carolina.

Companies interested in pursuing the management contract for the Luis Muñoz Marín International Airport in Carolina have until Aug. 8 to submit their requests for qualifications to participate in the bidding process.

David Álvarez, executive director of the Public-Private Alliance Authority, announced Tuesday the start of the RFQ process, which should produce a short list of interested companies within two to three weeks.

The ultimate goal is to shore up investments for the facility that Álvarez said should be the “preferred facility to use for business, tourism, pleasure, visiting family or simply to make a stop-over. Passengers should always prefer Puerto Rico’s airport. That’s our vision.”

The multi-step process should conclude in May 2012, with the selection of the new operator. That would wrap up nearly three years of effort by the government to turn over the facility to private hands.

The government is justifying its initiative of turning over LMM to a private operator on several factors: it’s financial inability to invest the necessary millions into the facilty to turn it into a world-class airport; spur the LMM’s growth and competitiveness; and reposition the Port Authority’s finances.

During a meeting with members of the media, Álvarez said Ports does not have the ability to turn to the bond market to raise funding to perform the improvements the airport needs to keep up with demand. Annually, LMM requires $50 million for maintenance, which the agency does not have, government officials said.

Recently, Ports attempted to go to the bond market seeking $50 million in financing, for which it was turned down due to insufficient credit.

Leading up to Monday’s RFQ, Ports has been working with the LMM’s airlines, discussing the plan and working to obtain at least 65 percent of the to sign off on the proposal. So far, AirTran, American Airlines, American Eagle, Delta, Federal Express, UPS, JetBlue and US Airways are on board with the proposal, representing 80 percent of the LMM’s carriers.

“We have a need to transform. It is necessary for the airport and in facing the future because global competitiveness becomes more complicated every day,” said Álvarez noted.

Costly operation
The LMM requires between $30 million and $80 million in immediate investments, which would need to take place three months after the PPP is granted, Álvarez said.

A private operator could improve passenger experience at LMM. (Credit: © Mauricio Pascual)

The government’s inability to improve the airport facility’s physical plant has caused the LMM’s passenger to remain virtually unchanged for the past 20 years.

“The number of boardings has not exceeded four to five million passengers since 1990,” said Álvarez. “We’re not seeing a sustained effort to maximize the airport.”

Meanwhile, Alberto Escudero, executive director of the Port Authority, said Tuesday that at the time, 80 percent of the operations of the LMM are in private hands, from concessions to maintenance and the hotel.

“We have a quasi-private operation as it is, but we don’t have a single entity to the lead it without variations in port directors, among other things,” said Escudero. “The LMM is so important for economic development that there has to be a long-term vision for it, which is not how it is now.”

Among other things, the arrival of a private concessionaire could serve to improve passenger travel experience, through the necessary investments both within and outside the terminals, according to a presentation prepared by the P3 Authority outlining the benefits of APP proposal.

For airlines, the arrival of a private operator could represent an improvement in the rates to use the LMM’s facilities.

At present, there are a dozen airports operator that in one way or another have expressed interest in operating the LMM, including Fraport, Aeroports de Montreal, Grupo Aeroportuario del Pacifico, Aeropuertos del Sureste, Ferrovial Airports and Abertis, which last week became the new operator of the island’s PR-22 and PR-5 highways.

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