The German airport operator is taking a 24.5% stake in Xi'an Airport for Ç50 million ($66.9 million) and will be in charge of the airport's operational optimisation and commercial development. Approvals for the deal are expected by the third quarter of 2007. The price suggests an equity value for the facility of $273 million.
State-owned China West Airport Group will continue to be the majority owner of the airport. China National Aviation Corporation (CNAC), an Air China subsidiary, with whom Fraport has been cooperating on other projects, is expected to hold a stake equal to that of Fraport.
The airport at Xi'an had traffic of 9.4 million passengers in 2006, showing growth of around 20% over the previous year. The volume is expected to increase further to about 11 million passengers in calendar 2007 as XiÆan continues to invest in tourist infrastructure in the city. The existing facility was constructed in the early-1990s and has only one runway. As part of a plan to upgrade facilities, a second runway will be constructed and the passenger terminals expanded.
Fraport executive board chairman Dr. Wilhelm Bender termed the investment ôa new chapter of activities in China û Asia's other booming growth market û following the company's airport concession contract signed in Delhi last year".
In January 2006, a consortium led by IndiaÆs GMR Group won a contract, through a competitive bidding process, to modernise, expand and operate Delhi Airport, IndiaÆs second largest airport. The GMR consortium will own a 74% stake in Delhi Airport of which Fraport owns 10%. Fraport will be the airport operator for the facility which handled 13 million passengers in the most recent fiscal year.
In China, Fraport is also pursuing other opportunities including Qingdao Liuting, Ningbo Lishe and a greenfield facility in Kunming.
FraportÆs investment in China comes close on the heels of a similar step by Changi International Airport of Singapore. On January 31, Changi announced its first airport investment in China through the acquisition of a 29% stake in Nanjing Lukou International airport in Jiangsu Province for $138 million. The facility, which is estimated to have handled 6 million passengers in 2006, is one of the top five cargo movement airports in China, thus not strictly comparable to Xi'an which is more of a passenger hub.
Airport operators from first world countries - like many consumer goods companies - see emerging markets as the catalyst for future growth. For its part, China is keen to ensure infrastructure is in place to handle the increased tourism the country is expecting due to the 2008 Olympics. Fraport must be hopeful that the XiÆan airport deal, which provides it a foothold in China, will be a precursor to other such deals for the German company.