CONFIDENTIAL: FINAL REPORT| 4TH MARCH 2016 CONFIDENTIAL: EUROBODALLA SHIRE COUNCIL 2 CONTENTS 1. EXECUTIVE SUMMARY- Page 4 2. ATTITUDE & SENTIMENT TOWARDS REGIONAL AIRPORT INVESTMENTS - Page 8 3. EXAMPLES OF REGIONAL AIRPORT PRIVATISATION - Page 11 4. REGULATORY REQUIREMENTS FOR PRIVATE SECTOR INVESTMENT IN REGIONAL AIRPORTS- Page 20 5. PRIVATE SECTOR MOTIVATIONS & DRIVERS - Page 22 6. TYPES OF PRIVATE SECTOR CONTRACTS & CONCESSIONS - Page 25 7. FORMS OF AIRPORT GOVERNANCE - Page 28 8. KEY CONSIDERATIONS REGARDING FULL PRIVATISATION - Page 30 9. EVALUATION OF PRIVATISATION STRATEGIES- Page 32 10. KEY STAKEHOLDER INTEREST - Page 39 11. SELECTING A PRIVATISATION MODEL- Page 43 12. WORKING OUT COUNCIL GOALS WHEN WORKING WITH PRIVATE SECTOR - Page 46 13. VALUATION & VALUATION DRIVERS - Page 48 14. EVALUATION FACTORS - Page 50 15. RISK & MITIGANTS - Page 53 16. POSITIONING OF MORUYA AIRPORT AS AN INVESTMENT CANDIDATE - Page 56 CONFIDENTIAL: EUROBODALLA SHIRE COUNCIL 3 EXECUTIVE SUMMARY CONFIDENTIAL: EUROBODALLA SHIRE COUNCIL 4 EXECUTIVE SUMMARY Eurobodalla is looking for ways to make the The Moruya Airport Master Plan 2015 has been airport as efficient, competitive and financially prepared based on traditional models for viable as possible. Private sector participation in growth and development of regional airports. Moruya Airport - through ownership, operations, management or new investment programs could It provides details on: take many forms, including outsourcing certain functions, management contracts, public-private partnership agreements, design-build-finance- • Current Airport Status operate developments, outright sale or long- • Vision and Strategic Direction term lease of assets and other types of private • Stakeholder Consultation sector initiatives. • Development Opportunities While Moruya Airport could have the potential to • Land Use Precinct Concept Plans deliver visitor growth to the Eurobodalla region, • Implementation its redevelopment would have broader based benefits. It is a key economic asset for regional development beyond tourism and in this document we have examined how Eurobodalla The key for current and future industry Shire Council (Council) could work with private development is tied to sustained growth in sector on developing such an asset. Eurobodalla tourism and industry. The airport can be one of the critical elements to realising such potential and help turn opportunity into Specifically we have examined: population growth, jobs and revenue. Each in- turn adding to possible future passenger growth at the airport. The airports proximity to water • Examples of private sector participation in the and adjacent properties that have their own development or build-out of regional airports unique value should also be key considerations • Regulatory considerations regarding foreign in any airport development. and / or domestic investment • Attitudes and structures for regional airport The Moruya Airport Master Plan and other investment amongst investors (e.g. Public related research does not take into account the Private Partnership and other risk-sharing ability to change the development agenda via schemes), regulators and the public attracting the right type of investment and • Attitudes amongst investors on landing rights, partners. It does not look at the region as an airport concessions and development rights ecosystem that can pursue non-organic growth on adjoining property in passengers - for visitors and enterprise - • A strategy and message that positions Moruya which push beyond the legislated monopoly of Airport favourably in the minds of private- the Sydney route. Instead, it relies on traditional sector investors. forecasts for growth, capacity and frequency. CONFIDENTIAL: EUROBODALLA SHIRE COUNCIL 5 EXECUTIVE SUMMARY It is important that Council establish a vision for Private sector investors would typically prefer what they want the airport to be. As can be seen to manage asset investments on their own. by some of the case-studies shared in this However, they do appreciate that for such research, the majority of airports are looking at public infrastructure, it needs to be managed ways to develop the non-aviation aspects of their in partnership with government. When private airports in an effort to underpin the future sector assess such regional airport viability of such important regional assets. This investments, the following key criteria have approach is being driven by private sector been identified as core considerations: enterprise who have broader based skill-sets and expertise to develop and commercially maintain • Unique destination experiences within the such assets. airport catchment that act as a draw card. • The opportunity for in and out-bound travel A future state changed by the mobilisation of growth (business, leisure and VFR) and no funds and networks to bring large numbers of overlapping catchment areas. high-value tourists to the region could change • Repeat visitation opportunities. traditional growth models for the airport • Development opportunities not just on the facilities and passenger numbers. Growth in new airport, but also on adjacent property and routes, increases in flight capacity and/or land around the airport as they are additional flight times from Sydney can be considered part of the value equation. delivered by increasing demand through a higher • Control and tenure when a lease is offered. movement of people that are less price elastic. Our parallel work to this report is looking at creating a unique brand position and a destination experience that serves broader visitor needs. At this stage, there is no overlapping catchment areas for airline passenger traffic and, historically, Eurobodalla has a strong repeat visitor base that could fly As an individual project taken in isolation, the in/out if prices were to become more airport development may not meet investor affordable. A long-term lease arrangement is criteria, but taken as a package it creates the necessary and the 50-years leases offered for dynamics for a very different future state. It is “federal” airports should be referenced in any important to note that any agreement with level of privatisation planning. Regarding private sector would be done in an competitive development opportunities, there are many environment. Many airports under the control of paths that can be taken. As mentioned earlier, regional councils in Australia including Ballina it is important that Council has a clear vision Shire Council and Lismore City Council are also for the development / redevelopment of the considering private sector options to fund airport. A vision that does not address the redevelopment of their own regional airports. airport in isolation of the destination. CONFIDENTIAL: EUROBODALLA SHIRE COUNCIL 6 EXECUTIVE SUMMARY Moruya Airport is a unique airport facility given There are many different types of contracts its close proximity to major water destinations, and concessions that can be established with the race track and proposed equestrian centre. private sector investors. There is no right or With both beach tourist areas and Moruya river wrong approach and each has pros and cons - we need to ensure we communicate to for both parties. In this document we examine investors the connectivity of the airport with in detail the different type of public-private water and land based facilities. Such rare structures, the key attributes and issues of credentials in an asset need a proper feasibility each for both private sector investors and study and design. A creative concept and design Council as well as the motivations for one could make Moruya Airport an attraction and structure over another. Airports are ultimately destination in its own right. community assets so it is important that Council decides what it feels best for the The concept for Moruya Airport to be a community. We recommend that we position destination, including the value of adjacent land for and encouraged unsolicited proposals such as equine facilities, and not just a service (guided by a clear Council position) that can facility is a challenge that can be opened to the allow investors to bring their own vision of right investors. We can position Eurobodalla as Moruya Airport to Council for further a trend setter where the traditional market evaluation. perception of an airport can be changed with an eco-system approach. As highlighted, many airports are now looking at the non-aviation aspects of airport developments to make them viable in the future. It is understood that in the approved Moruya Airport Master Plan that the redevelopment of the airport can have many aspects including traditional airport services as well as the Aviation Tourism Precinct and Residential Airpark. As a next step, we would look to test the The key is in establishing an ecosystem which following message positions linked to the promotes the interconnectivity of air, water and broader Tourism work that we are conducting land that can become an enhanced experience in parallel to this report (see Phase 1/ Part 2: for all stakeholders. For example, the airport Core Assets vs. Visitors Needs & Economic together with a marina and small footprint Development report): luxury accommodation could have the potential •Destination vision vs. Airport function to create new destination experiences and open •Different types of privatisation offered up new type of demand in the airport area. •Type of bid process CONFIDENTIAL: EUROBODALLA SHIRE COUNCIL 7 ATTITUDE