“We were looking for a partner that has a strong track record of value creation and one that goes beyond what current airport managers are doing and can achieve…GIP fits the bill and like most private equity funds, they will eventually exit after creating value, just as they have been doing with their other airports,” said a spokesperson from Khazanah.
GIP does come with serious credentials.
Ranked as one of the leading infrastructure managers in the world, GIP has a 17-year track record and currently has US$112 billion in assets under management. Apart from managing ports and airports, GIP also has extensive investments in renewable energy and oil and gas projects across the globe.
But critics of the privatisation plan noted that the airports under GIP’s management do not rank highly in international rankings such as Skytrax.
The London Gatwick Airport, in which the fund has a 49.99 per cent interest, is ranked 48th in Skytrax’s 2024 ranking, while the Sydney Airport, of which GIP owns 37 per cent, was in 55th place. By contrast, Singapore’s Changi was ranked second, after the Doha Airport, and South Korea’s Incheon was ranked third.
Unlike the standalone airports GIP currently manages, MAHB has 39 airports in its stable, all of them in Malaysia with the exception of the Sabiha Gokcen Airport in Istanbul.
FINANCIAL MUSCLE NEEDED FOR UPGRADES
The airports in Malaysia are in need of upgrades.
The Kuala Lumpur International Airport (KLIA), widely seen MAHB’s prized asset, was 71st in the Skytrax 2024 airport rankings. It suffered an embarrassing technical outage that left passengers stranded in 2019 and, in 2023, the airport management was forced to suspend its aged aerotrain network that is now being replaced.
Proponents of the privatisation plan noted that GIP would lend much-needed financial muscle and technical expertise to get MAHB back on course to compete with other international rivals.
The move by the Anwar administration in March to replace the operating and land lease agreement of the previous 25-year concession with a fresh 45-year term that will only expire in 2069 will also allow for better financial planning and airport expansion programmes, government officials said.
But there is concern that BlackRock’s participation could create other complications, particularly over the future prospects of the Sabiha Gokcen Airport in Istanbul.
Türkiye suspended all trade with Israel last month over what President Recep Tayyip Erdogan said was a “worsening humanitarian tragedy” by the Israeli offensive in Gaza.
Some bankers have speculated that unless ties between the two countries return to normal, MAHB could find itself in an awkward position when the concession for the Sabiha Gokcen Airport expires in 2023.
CGS International noted in a report to clients in late February that MAHB could opt to brighten its chance for an extension by bringing a new Turkish investor as a partner in Sabiha Gokcen, where it now has a 100 per cent interest.
Khazanah declined to comment on the prospects for the Istanbul airport.
