Benetton-Backed Rome Airport May Win Fees for Revival
Feb. 5 (Bloomberg) -- Aeroporti di Roma SpA will probably win tariff increases this year to help pay for a 3.6 billion- euro ($5 billion) project to double capacity at Rome’s Fiumicino, according to the airport operator.
Higher fees would be a victory for the Benetton family, owner of Italy’s largest clothing maker, which started investing in the Gemina SpA division five years ago. An initial accord to raise charges for the first time in 10 years may be reached next month and a framework for increases through 2044 could be done by June, General Manager Franco Giudice said.
“We have the development plan for the next 10 years ready to go,” Giudice said in an interview at company headquarters in Rome. “We can turn Fiumicino into an A-class airport, while today we are a C-class.”
Fiumicino hasn’t had a major overhaul since it was opened in 1960. The terminal handles 40 percent of Italy’s air traffic and at least 4 million passengers a year more than it was designed for, Giudice said. The modernization plan, developed with help from Singapore’s award-winning Changi airport, would bring the facility up to the standard of terminals in the U.K., France and Spain, he said.
Alitalia SpA, Aeroporti di Roma’s biggest airline user and contributor of 40 percent of its aviation revenue, will benefit from better service and facilities, Giudice said. So will Deutsche Lufthansa AG, the No. 2 carrier at Fiumicino, and discount airline EasyJet Plc. AdR now spends about 2.5 euros per passenger per year on improvements, while the European standard is about 6 euros, Giudice said.
Initial Spending
The company has committed to spending about 170 million euros this year on new docking areas and a baggage handling system, after paying 70 million euros for improvements last year. The larger plan includes a new terminal, fourth runway, better baggage handling and technology for moving people, as well as a convention center and shops.
Higher tariffs are essential because they’ll ensure that AdR can raise funds on capital markets, Giudice said.
Part of the project would be paid for by landing fees and part would come from revenue generated by retail stores and concessions. The rest will be financed by bank loans or bonds, he said, without giving details.
“The capital markets will be waiting for the final regulatory agreement to be reached between the airport and the regulator, ENAC, before any material new debt can be raised, said Alexandre de Lestrange, a Madrid-based Standard & Poor’s credit analyst. “Visibility on the future level of fees and capital spending would likely be required.”
‘Interesting’ Debt
Debt maturities, according to Giudice, are 170 million euros in 2011, 500 million euros in 2013 and 400 million euros in 2015. “It will be interesting to see how they can finance expansion and repay existing debt,” Lestrange said.
Aeroporti di Roma intends to double operating profit and revenue by 2019 even without the tariff agreement as it boosts traffic and retail concessions, Giudice said. Operating profit may rise to 500 million euros, from 230 million euros last year, and sales may reach 1 billion euros.
Improving Rome’s airports is essential to tourism, Giudice said. Fiumicino’s baggage system broke down last year and extra staff were hired. The number of gates is insufficient for traffic, and the airport has few luxury shops. The plan includes more efficient connections to the rest of the country and to nearby Civitavecchia port for cruise-ship passengers.
More Passengers
The airport will be able to handle as many as 90 million people by 2030, Giudice said, compared with 34 million last year. Traffic may increase by 1 million passengers this year, after a decline of 4 percent in 2009. AdR also operates Ciampino airfield, used by Ryanair Holdings Plc. It doesn’t have similar plans there because of flight limitations due to neighbors.
The government has approved an initial increase of 1 euro to 3 euros per passenger that would be added to tickets, Giudice said. Airports recoup the charges through airline landing fees.
“We have received the legislative go-ahead and are talking with AdR about the first adjustment,” an ENAC spokesman said. “For the development plan we need to evaluate additional investments planned and expect to reach an agreement before the summer.”
Suffering Alitalia
Improvements at Rome airports were delayed as the government propped up Alitalia and didn’t want to alienate passengers by increasing fees. The carrier, unprofitable for years, sold its main assets to investors in 2008 and combined with Air One SpA. Tariffs also were frozen because crises from SARS to wars in the Middle East made higher fees counterproductive to travel, Giudice said on Feb. 3.
Aeroporti di Roma has called for engineering bids and will narrow the field by March 5 and select a winner by early June, the general manager said. Companies expected to bid include Britain’s Arup Ltd., U.S. firm Gensler, INECO of Spain, Foster & Partners, Aeroports de Paris and URS Corp.
The company has government permission to operate the Rome airports for 34 more years, said Giudice, 62, who previously worked for airlines Alitalia, Air One and Eurofly, and has been the general manager of AdR for four years.
The government privatized AdR in 2000 when it sold its 51 percent stake to investors led by Gemina. The Benettons bought an initial stake in 2005 as the family sought to boost investments in infrastructure companies. Gemina declined 0.7 percent to 61 euro cents today in Milan. The stock has advanced 64 percent in 12 months.
The Benetton family’s holdings include food services and retail provider Autogrill SpA, and Italy’s biggest toll-highway operator, Atlantia SpA, in addition to clothing maker Benetton.
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