After you have recovered 1.5 billion euros at the beginning of September in yielding 4.15 per cent of the share capital of Engie, the government is working on other disposals of assets in order to achieve the € 10 billion set aside to fund innovation. Among the records regularly cited by observers include The Française des jeux, Orange, Saffron, once the acquisition of Zodiac finalised… but also ADP, the manager of the paris airports of Roissy-Charles-de-Gaulle, Orly and le Bourget (as well as a dozen other smaller airports in the Île-de-France).
The part of the State is valued at 7.5 billion euros
The operation can bring a big check to the State. The participation of more than 50.6% in that the latter holds in the capital is in fact valued at close to 7.5 billion euros. Nevertheless, to sell its total or partial, cannot be launched overnight. A privatisation law is needed because of the act of 2005 on airports requires the State to hold more than 50 % of the share capital of ADP.
ADP is it strategic?
Beyond the accounting aspect, the hypothesis of the privatization of the ADP is open to debate : the group is a strategic asset for France ? And if yes, should it be privatised ? For many, the first question does not arise : the strategic nature of airports is obviously due to their weight in the French economy, their role in the attractiveness of the country and in the organization of transport for european and domestic, or even of their potential use in the event of war, as was the case during the first Gulf war in 1991, when Roissy has hosted aircraft the us military.
“Through its role in the organization of the territory, a group who control the two major airports of the country is necessarily strategic,” says Yan Derocles, analyst at Oddo Securities.
“These airports are the backbone of the accessibility of the France “, adds Alain Battisti, president of the Federation nationale de l’aviation marchande (Fnam). “These two airports have such importance that they affect the functioning of the country. Imagine the impact of a closure of Orly airport to develop activities that are more lucrative… The parisian airports are so strategic, ” says about him, Jean-Pierre Bes, the secretary general of the Syndicat des compagnies aériennes autonomes (Scara), the other professional association of French airlines. “This is the gate of France, which spends a good part of the millions of tourists we welcome each year in France,” says a good connoisseur of the French economy.
In short, as summarised by the former CEO of ADP, Pierre Graff, in an interview with The Tribune in 2008, ” the airports of Paris also have a mission of general interest by participating alongside the State in the actions of security, safety, environment and spatial planning. The paris airports are a strategic asset for the nation. “
Timer United States
Apart from a few columnists, everyone seems quite convinced of the particular value of the ADP. The government’s position on the subject is not as clear. In fact, he regarded ADP as strategic, could it be both a floor on its privatization and alarm at the same time the risk of TAKEOVER of foreign players, especially chinese, on strategic companies, to the point of pushing Brussels (with Germany and Italy) to develop rules to protect european firms ?
On the other hand, the debate is less clear-cut on the privatization. Several profiles emerge among opponents. For the more radical, a strategic asset that simply must be controlled by the State. The american position gives them grist for the mill. Across the Atlantic, with the exception of The Guardia in New York, the airports are the responsibility of the general interest and remain controlled by the State. In Europe, on the contrary, the trend is since several years the development of private players in the airports.
“The State sells an annuity”
ADP being a natural monopoly, some worry to see it go in the hands of private actors, who would be more concerned with their return on investment through the development or improvement of the platform.
“The Scara is completely against the privatisation of the airports. In the beginning we were rather positive in thinking that a private actor was synonymous with productivity gains and lower airport charges. In reality, the State sells an annuity and the one who pays to get it is to pay it off “, argues Jean-Pierre Bes, citing the example of the airport of Toulouse, sold partly to chinese investors whose claims for dividends can be sources of tension with the local communities.
In his eyes, even if the State sells its share of good managers in private, such as the Vinci group, there is no guarantee that one day the latter will not sell to turn its interest to another private group, perhaps less competent or less scrupulous.
This question of return on investment refers to the financing of the development of the airport to meet the growth in traffic. Knowing that there is nothing more cost-effective than airport capacity saturated, some draw attention to the need to maintain the investments.
The issue of investments
“A private investor will invest as much as the fact that ADP (600 million euros per year in average) ?” asks Alain Falque, a consultant in airport yet favourable “under certain conditions” to the privatization.
At Roissy, this question is central. With the current growth, the traffic will reach 80 million passengers in the middle of the next decade. At that time, the airport will have reached its maximum capacity and the construction of the first tranche of the new satellite, the S4, now considered by the current management, will have to be completed to accommodate future growth.
“Imagine for a moment that a private actor is obliged to make investment choices between multiple infrastructures, and he chooses not Paris a priority,” said a former president of the airport.
“Foreigners can buy? If yes I buy and farm”
There are more than thirty years, on the tone of the provocation, Bernard Lathière, president and CEO of ADP between 1986 and 1992, now deceased, had stressed the risk of seeing an airport controlled by the manager of another platform : at a meeting organised by the civil aviation authorities of britain to present the privatisation of British Airports Authority (BAA), the operator of Heathrow, he had launched :
“Is it that foreigners can buy it ? [At the time, they could not, editor’s note]. If yes, I buy and the farm, ” reports an old road of the French air transport.
The contract of economic regulation, a guard-crazy?
Proponents of privatization share a large part of these arguments, but argue that there is a plethora of private companies around the world that are just as strategic as the airports, or even more, but in which the State has kept in one form or another an important influence and even a veto power, including in the defence industries or the energy.
They believe that sensitive issues must be framed in a contract of economic regulation (CRE) between the State and ADP. A five-year period (2016-2021), this agreement sets forth the volume of investments and, for the fund, the maximum level of charges to apply to the airlines.
“The issue of ADP by the year 2050, is a problematic investment. There must be a specification of a binding and clear in this area, ” explains Alain Falque.
In this regard, the existence of a contract of economic regulation, which runs today until 2021 represents a barrier for any investor, which may be argued, rightly, the lack of visibility in the long term. The evolution of the prices of the airport (which accounted for 71 % of revenue for the ADP and 39 % of its operating income) and investment is governed by CRE of five years.
Main arguments most often cited by proponents of privatization : greater efficiency of management and improving the quality of services. Unlike the Scara, the Fnam is in favour of a privatisation of ADP, because, says its president, Alain Battisti, ” the management of private players is better than that of civil servants “.
Fnam hope an improvement of the productivity of the ADP which would thus require less fees to airlines for the financing of the service rendered. So far, according to Alain Battisti, privatization must be accompanied by a “true” CRE and the establishment of a supervisory authority is permanent and independent. Since the first contract in 2006, the airlines will not cease to denounce their content, judged to be favorable to ADP, because allowing him to continuously augment the airport charges in order to improve its financial results and, in turn, the dividends of the state-shareholder : the group reverse 60 % of its profits in dividends.
In the same spirit, the companies denounced the system of “double cash” in the accounting of ADP, which has separated in 2010, aeronautical services (that are part of the perimeter-regulated) services non-aeronautical, as shops, restaurants or car parks, where ADP has the freedom to set prices and generate strong margins. In contrast to a system of only fund that exists in almost all airports of the world, this system of double case prevents to subsidise aeronautical services by the results of the shops or the car parks would moderate charges.
Regulator and shareholder, the dual role of the State poses a problem
Because of this, estimated another actor in the air transport, the privatisation of ADP would ” remove the State his dual role as a State regulator and State-shareholder, the second having taken advantage on the first “. For him, the privatisation would put an end to a situation bâtarde in which the ” ADP is not really a public company, even if the State owns 50.6% of capital, or indeed private to the extent that its CEO is appointed by the State “. He also advocates ” an effective regulation for the air transport sector (…) to avoid that a private actor does not use the airport as a toll “. For all that, pushing the logic to the end, Alain Falque believes that if the State opts out of the ADP, it must also do Air France-KLM. A single checkout and a management by a private actor does not preclude Heathrow from view royalty the strongest of the major european airports.
The crucial issue of land
Especially, the privatization of ADP remains all the more complicated by the fact that, unlike the privatization of regional airports which are in a regime of concession, ADP has the distinction of being the owner of the land on which it is located. In 2005, the State has agreed to transfer the land to that ADP can have control of its development. The privatization would therefore be equivalent to giving the private a surface area equivalent to two-thirds of the capital. The topic is cringe.
“Sell ADP without the land would be tantamount to defrauding the shareholders whose value lies to a large part of the value of the land,” says a good connoisseur of the business, believing that it is ” impossible to spoil an asset that has been transferred by the act.”
The solution in the models Carrefour and Accor?
The services of the State are well aware of the legal difficulties. And some imagine a timeline that allows the State to recover the land. According to Yan Derocles, analyst at Oddo Securities, a solution, albeit a bit complex could settle the question of the land. It consists in separating ADP into two separate companies, one being the owner of the real estate assets (ADP PropCo) and the other operator of these assets (ADP-OpCo), as did, for example, Carrefour or Accor.
“The owner of the assets would then lease its assets to the operating company that would operate. In a first step, each company’s shareholders would be the same as those of ADP, and then in a second time, after the passing of the law on privatization, the State could sell its stake in the operating company to a private operator that would manage the company’s manager of airports. The State would remain, however, the majority of the real estate company. A new contract for the adjustment of a duration superior to existing contracts could then be signed between ADP operating company and the State. “
For him, this scheme would allow the State to control this strategic tool, while providing the airport operator visibility, longer on the evolution of tariffs and investments, because of the lengthening of the duration of the contract regulation. The heritage value of the minority shareholders would be unchanged, since the latter would be given a participation equivalent to their participation in ADP in each of the two companies.
Vinci the favourite
It is not there, of course. And the stakes will depend in fact on the level of the disengagement of the State in ADP, if disengagement there a. The State may sell only 20% of its shares and keep 30 % of the capital. It would always be the reference shareholder. Remains to be seen whether such an assembly would be a good operation for a private operator, which would have paid without having really in control. We obviously think about the French group Vinci, a shareholder in the amount of 8 % of the ADP, which has been waiting for ten years to put a hand on the parisian airports. The choice of a stranger could spark a controversy after the chinese experience in Toulouse or, more recently, accompanying the takeover of Alstom by Siemens, Vinci appears as the most credible in France, even if it does not maintain any airport (Lisbon, Lyon,…) the size of the ADP.