4 months ago
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The Pacific Airport Group, GAP, the operator of Jamaica’s two major airports, has renegotiated the terms of the concession agreements with the Government of Jamaica.
The adjustments flowed from the financial challenges faced by the airports during the COVID-19 pandemic.
Market filings by GAP indicate that fees at the Norman Manley International Airport, NMIA, in Kingston have been reduced, while the concession timeline for Sangster International Airport in Montego Bay has been lengthened.
“PACKAL is pleased to have reached this milestone with the Government and will continue to upgrade NMIA and improve on the service offered to our users,” said CEO Sitara English-Byfield in response to Financial Gleaner queries. PACKAL is short for PAC Kingston Airport Limited, the entity utilised by GAP to operate the NMIA concession.
“There will be no direct effect on passenger fees,” she added, while noting that the adjustments would only impact the government’s take.
GAP manages 12 airports across Mexico and two in Jamaica. The group took over operations of Sangster International Airport in Montego Bay in 2015 and Norman Manley International Airport in Kingston in 2019. Sangster is operated by MBJ Airport Limited.
The original agreement for NMIA stipulated payment of a concession fee of 62 per cent of gross revenues, to the Airports Authority of Jamaica. Under the new terms, that fee will drop to 53 per cent, effective September 11, 2023. The Government will allow PACKAL to claw back the funds at the lower rate, once they start the US$66 million runway extension project. As context, the original terms required both operators to invest millions in capital projects, including the runway extension at both airports and terminal developments. The runway extension in Montego Bay was recently completed and the extension in Kingston is slated to begin shortly.
The concession period for Sangster, which was initially set to expire in March 2033, has now been extended by one year, lengthening the concession period to 31 years ending in March 2024, GAP said. The NMIA concession runs for 25 years dating from 2018.
The extension for Sangster is to allow time for the company to recoup lost revenue in 2020 and thereafter, due to the travel shutdown during the pandemic.
As part of its operations, GAP manages 12 airports in Mexico and two airports in Jamaica. At the advent of the pandemic, GAP, or Grupo Aeroportuario del Pacífico in Spanish, took the decision to scrap or delay non-essential capital projects due to the effects of the pandemic.
The bustling airports were quiet during periods of 2020 and 2021 when local and overseas governments imposed travel bans to stem the spread of the virus. Passengers were also reluctant to travel during that period.
At the time, the Airports Authority granted GAP relief, allowing them to delay their regulated capital investments, based on the invocation of the pandemic as a force majeure event. Thereafter a team of government technocrats from the AAJ, Ministry of Transport and Mining, Ministry of Finance and Public Service, Attorney General’s Chambers, and the Development Bank of Jamaica, along with a consultant set about renegotiating the Jamaican airport concessions after requests by GAP to modify or rebalance deliverables under the agreements.
The local airports generated some US$155 million over the first six months of 2024 or about 1.2 per cent less than a year earlier, GAP reported on the weekend, while also disclosing signing of amended agreements arising from the renegotiations.
Travel has normalised since the pandemic. In Jamaica, total passenger traffic, inclusive of arrivals and departures, totalled 3.56 million in the first six months of this year, up from 3.5 million at half-year 2023.
In the current period, there was a two-per cent dip in passenger movements at NMIA but that was offset by a three per cent increase at Sangster, which is Jamaica’s largest airport.
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