A few days before Christmas, as London's Gatwick airport prepared to disclose a change of ownership, suspected drone sightings forced it to close its runway for 36 hours. Passengers were delayed; so was the deal.
A week after the crisis, Britain's second-busiest hub revealed it had been sold to Vinci, a French transport group, in a deal valuing it at $10.5 billion. The previous owners, including Global Infrastructure Partners (GIP), a U.S. fund manager, will keep 49.99 percent.
The acquisition cements Vinci's position as the world's largest private airport-operator, with Gatwick the biggest of the 46 it runs. It is also a reminder of how fast the industry has been privatized: more than 50 percent of European airports have some private participation, up from 22 percent in 2010.
Nearly half of winning bidders since 2008 have been financial investors, said Mergermarket, a research group. Returns have been juicy. GIP bought Gatwick for $1.9 billion in 2009. It and its co-investors have made twice that by selling half the airport, and earned more than $1 billion in dividends in the interim.
Infrastructure, such as bridges, telecom masts and utilities, typically enjoys monopoly positions and produces predictable long-term cash flows. Since the financial crisis, many sovereign-bond yields have been close to zero, tempting insurers and pension funds to switch to infrastructure assets.
Airports have added appeal. On top of airline fees, most make profits from car-parking and retail. And passenger numbers typically rise 5 to 10 percent each year, said Vincent Levita of InfraVia, a fund manager. So prices are, naturally, stiff.
Since 2014 most large deals have valued hubs at more than 15 times EBITDA (a measure of company profits). GIP sold London City Airport to Canadian pension funds for 28 times EBITDA in 2016. At 20 times EBITDA, Gatwick's pricing is a tad more conservative. That may reflect uncertainty linked to Brexit. But it also hints at caution as central banks tighten.
At its simplest, an airport's valuation is the sum of its future cash flows discounted by the cost of money. When interest rates increase, that cost rises and the valuation falls. But the effect is limited. And airport owners have learned from the pre-crisis years, when hubs often traded at more than 25 times EBITDA. They now raise longer-term debt and mix maturities, said Bruno Candès of InfraVia.