Jan 23, 2015

Kobe city to sell management rights of Kobe Airport

As of January 22, it was discovered that Kobe city finalized the policy to sell the management rights of Kobe Airport (concessions), and will enter into full-fledged preparatory work from the next fiscal year. The airport is a local management Airport, which opened in February 2006. Utilization of the airport has been little progress due partly to the limited landing slots at 30. According to an investment institution source, the city gave up the development of voluntary management and expects airport development from the private sector through concessions. Although there are three airports in the Kansai area, a concession selectee will be involved in the management of Kansai International Airport and Osaka International Airport (Itami airport) integrally, and without Kobe airport. The new system will start around next January, with those two airports first. Thus, Kobe city also hopes to start a concession system as soon as possible; thus, they are paying attention to the concession system in the other two airports, to use as a reference in the future for Kobe Airport.

The three Kansai airports held a meeting with public and private sectors and discussed ways of managing the three airports, including Kobe airport, where Kobe city's opinion was reflected. They discussed "three airports integral management"; however detailed plans were not clarified.

Kobe Airport is currently accepting 30 flights a day (in accordance to their landing slots); however, passenger demand is significantly less than that of originally predicted at the time of opening of the airport. Kobe city gave up on voluntary development and is watching the whereabouts of concessions of Kansai International Airport and Itami airport. It will start full-fledged preparatory work for concessions, including business value assessments of Kobe Airport, from next year.

New Kansai International Airport Co., Ltd. mentioned integrated management of the three Kansai airports in the Kansai International and Itami airport concession implementation policy last July. Kobe city's initiatives for Kobe airport concessions were the focal point. The enforcement policy regarding Kobe Airport was stipulated as follows: When the Kobe airport administrator (Kobe city) attempts to delegate airport management to a third party, a (Kansai-Itami) management proprietor is allowed to negotiate with the city, with the purpose of achieving regeneration, strengthening and expanding air transport demand as an international hub through integrated management of the airport. This means that the two-airport management proprietor can negotiate with Kobe city regarding management rights transfer for Kobe Airport.

In the 2-airport concession plan, a new system will be started by the management proprietor around January, next year. Therefore, Kobe city hopes to implement a concession system as soon as possible, however, according to an investment institution source, the negotiation period of concessions will depend on the 2-airport management expropriator's business judgment.

Kobe Airport (272 ha, with a 2,500-meter runway) is located offshore of Port Island in Kobe, which was installed and has been managed by Kobe city. Currently 30 flights per day in eight routes are in service, including flights to Haneda, Sapporo and Okinawa. Four companies, including Skymark and All Nippon Airways use this airport. Currently, Skymark, which is under reconstruction, is using this airport as their core airport, which accounts for 70% of the airport's flights (21 flights daily).

Although the number of arrival and departure flights per day has reached the upper limit of the airport (30 flights), passenger demand is significantly lower than previous estimations. The original estimation at the time of the opening of the airport was 3.19 million passengers in the first fiscal year, 4.03 million passengers in FY2010 and 4.34 million passengers in FY2015. So far the highest number of passengers was 2.97 million in FY2007 and followed by 2.35 million passengers in FY2013. Thus, Kobe city submitted the following requests to the government: (1) expansion of the landing slot number and operational hours (from the current 15 hours to 18 hours), (2) improvement of measures for convenience, including the deregulation of international charter flight operations, however, these requests have not been realized yet.

The Kobe Airport construction costs (except for the passenger terminal building. etc) were Y314 billion. The main source of revenue was Y210.8 billion from city bonds, Y67.7 billion from the sale of airport site and Y30.2 billion from government subsidies. They are planning to return the loan by selling land, but it has been a slow process. Even if the sale plan does not go well as they expect, city taxes will not be allocated. Development business funds, such as funds for an industrial park construction, will be temporarily allocated for the payment.

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