Case Study of LMM Airport Concession in Puerto Rico

When the Federal Aviation Reauthorization Act of 1996 established the Federal Aviation Administration (FAA) Airport Privatization Pilot Program, it was the intent of Congress to explore new sources of capital and investment from the private sector and pass the benefits and improvements to the users. During the existence of the pilot program it received 10 applications; the first successful concession in 2000 of the Stewart International Airport in New York was ended prematurely in 2007. The second closing has come through the use of a public-private partnership (PPP) in Puerto Rico. This deal is very different to a privatization, because ownership of the asset remains in the public hands, and benefits to the users are linked to specific operating standards. Required improvement is to the asset inside the concession agreement. Puerto Rico's project involved the 40-year lease for the financing, operation, maintenance, and improvement of the Luis Muñoz Marín (LMM) International Airport, a transaction worth $2.6 billion. A case study of the LMM airport concession is presented, and features of it are compared with two other transactions in the pilot program.