Wolcome to Nuevo Pudahuel airport

March 2021. That is the date that the concessionaire of the Arturo Merino Benítez Airport, Nuevo Pudahuel, pinpointed as the most critical period of its financial problems. That month will go uphill, by getting on with coronavirus while keeping the operation afloat and continuing to finance the construction of the new international terminal, which includes four new breakwaters, 76 boarding gates and should be ready next June. The conflict between the French of Aéroports de Paris, Vinci and the Italians of Astaldi, on the one hand, and the Ministry of Public Works, on the other, is coming to a problematic stage, they say. The concessionaire states that it has seen its income fall by 90% this year, since last March, when global air transport went downhill, after the closure of borders and confinements. This has meant that they will close the year with a loss of US$ 30 million. This was unthinkable for a firm that started the concession in 2015 with 31 international routes and 17 airlines operating in Santiago and ended 2019 with 53 routes and 23 airlines. This 2020, the routes fell to 10 by September and the airlines to 9.

In addition, they stress, Governments all over the world have provided aid to their airport operators, as well as to their airlines. Not so in Chile. In fact, the last portion of the loans they had applied for four years ago was requested in August of this year. On the other hand, the Government argues that if Nuevo Pudahuel has lost money, they have also ceased to receive the income they were entitled to. To get the concession, the French-Italian consortium offered to hand over 77% of its income to the State. Moreover, the Minister of Public Works, Alfredo Moreno, has repeatedly stated that they cannot do much to help them. The law
prevents them from extending the airport concession, as Nuevo Pudahuel has requested. The concessionaire and experts in the world of public works have said that that is debatable. The issue is that the critical phase it is now entering has caused Nuevo Pudahuel to go to all possible scenarios, in order to avoid a legal conflict. Because if that occurs, either in Chile or abroad, it may take five years to have a resolution. And Nuevo Pudahuel cannot wait for five years.

Credit facilities requested in July 2016 from local and international banks to finance the expansion of Chile’s main airport by US$ 500 million began to mature at the end of this year. The agreements were made with BCI, Bice, Santander Chile, Itaú, as well as the insurance companies Penta Vida and Vida Security. As well as with international banks: the Italian IMI, the French Crédit Agricole and Société Générale and the Spanish Caixabank and Santander. However, given the current complex situation, the administration approached the banks and asked for a delay of the covenants. Thus, debt reimbursement now begins in June 2022. According to the airport’s 2019 report (the latest available), the bank controlled by the Yarur family is the one with the largest debt, with maturities between 2020 and 2024 amounting to almost $66 billion. The second largest amount was that of BICE, owned by the Matte group, with over $19 billion. While most of the interest maturities with foreign banks were with Caixa Bank, with nearly $50 billion. All these entities have pledged the concession and the shares of the concessionary company, among other assets.

Sources in the financial sector state that Nuevo Pudahuel has constantly been in touch with banks and relations between them are optimal. So much so that, notwithstanding the catastrophic situation, they gave their approval to hand over the last part of the financing agreed upon
last August. However, according to the sources, the banks are so alarmed that they have sent warning signals to La Moneda itself. Therefore, extending the concession would allow Nuevo Pudahuel to amend the financing contracts, for example, and borrow more money from the bank, or refinance. All
this, while waiting for a “new normal” that may only begin to happen by next year.

The main risk they face, the company has publicly stressed, is bankruptcy. Assuming the costs of construction and an airport that hosted 24.6 million passengers last year, but not more than eight million this year is something that they cannot afford. If that were to happen -which, incidentally, there is no record of a concession going bankrupt- the MOP is bound to call for a bidding process while Nuevo Pudahuel continues to operate. This new bidding must consider, among other things, the payment of two-thirds of Nuevo Pudahuel’s investment, about US$ 600 million; the fact that the new concessionaire must hand over at least 77% of its income to the State; and that the new occupant must finish the construction, that is, inject fresh funds into the offer. For a competitor to accept such conditions, with passenger flow that, according to global estimates, could only recover to 2019 levels in three to four more years, seems} technically impossible.

The MOP explained that Moreno did not have room in his schedule to give a statement on the subject, while Concessions declined to address it. What Minister Moreno has said, for example, in statements to Canal 13 is that “it is said that extending the contract has no cost to the Chilean State. That is simply false.” He also added that “it is not within their plans” to extend the concession, as Nuevo Pudahuel has requested. According to those who are aware of the reasons behind the minister’s refusal to reformulate the contract in any of its points, this could lead other concessionaires to see this as a precedent. “What happens if a highway concessionaire claims that the lower flow of cars caused by quarantines requires them to extend the contract to recover the investment?” wonders a senior official. Others remember that Moreno’s style is to be a tough negotiator. He displayed some of that with the Chacao Bridge, where he refused to reach a compromise until the very last-minute last October. A similar style to that of President Piñera, who would have given him carte blanche to negotiate the airport issue.

Sitting at the board of directors’ table of the concessionaire company are two of Piñera’s and the business sector giants. They are Pedro Pablo Errázuriz, current president of EFE and former Minister of Transport in the first administration of Sebastián Piñera and Susana Jimenez,
also former Secretary of State, and current Vice President of Sofofa. But they are not the only ones who have discussed with their circle what problems could arise if the dealership were to go bankrupt. There is a very high level of concern within the Office itself. According to Government sources, the heads of Transport, Gloria Hutt, of Economy, Lucas Palacios, and of Foreign Affairs, Andrés Allamand, have shown their concern. Hutt and Palacios personally attended Merino Benítez the day the borders were opened in late November, celebrating the good news for national recovery. While Allamand met with senior executives of the concessionaire’s
shareholders in Paris. Here lies another problem. The main shareholder of Aéroports de Paris is the French State, so this could escalate to an international court. Both parties have already shielded themselves for such a scenario. Nuevo Pudahuel signed Carlos Silva from Morales and Besa, while the MOP signed Andrés Jana, from Bofill Mir & Alvarez Jana, as external legal advisor. Jana has represented Chile in The Hague.

In the attached PDF you will be able to review what the governments of the world have done to protect their airports, which are engines of the economy and key to future recovery. 

Source: El Diario Financiero.