Osaka airports open gate to privatisation The airports serving Osaka, Japan's second-largest city, aim to raise between $7bn and $15bn from investors in the country's first airport privatisation, which is expected to pave the way for further investment opportunities in Japan's infrastructure assets. New Kansai International Airport Company has started sounding out foreign and domestic investors on managing the airports for 40-50 years, which could be the first of 29 airport privatisations, said Keiichi Ando, president of NKIAC. This is the first large infrastructure transaction in Japan and ... if it succeeds, the government intends to privatise regional airports as well. In addition, there is also talk that it will be necessary to privatise infrastructure, such as toll roads," Mr Ando said. The deal, which is expected to be completed in 2015, would bring private investors in to manage Kansai International and Osaka International airports, which were merged in May last year into NKIAC to become the sixth-largest airport group in Asia by revenue. While some passenger terminals have been privatised in Japan, this would be the first time that private investors would manage an airport, although the Japanese government would retain 100 per cent of NKIAC's shares. The privatisation of the Kansai airports represents a policy shift for the Japanese government, which has long been protective of its ownership of key infrastructure. While infrastructure privatisation is common in many developed countries, Japan has only privatised a few toll roads so far. However, faced with rising public debt, the Japanese government is under intense pressure to cut spending and generate more revenue from its assets to meet the growing social welfare needs of Japan's ageing society. "The government has changed its strategy to make it possible for airports to compete" with other regional airports, such as Inchon in South Korea, which has developed into a northeast Asian hub," Mr Ando said. Mr Ando said there would be no restrictions on foreign investment. The government has made it clear that foreigners are welcome to participate. Because of the large size of the transaction, it will be necessary to have the participation of both Japanese and foreign investors," he said. NKIAC had revenues of $1.3bn and earnings before interest, tax, depreciation and amortisation of $695m in the year ending March 2011. The company aims to increase revenues to $1.56bn and ebitda to $762bn in the year ending March 2015. However, NKIAC is weighed down by debts of Y1.2tn ($14.7bn) incurred as a result of the high costs of the construction of Kansai International Airport on landfill in Osaka Bay. This has led to particularly high landing fees at Kansai, which discourages airlines from using the airport, thereby limiting growth. Mr Ando said NKIAC is offering discounts on landing fees to encourage more airlines to fly there and also aims to increase revenues by expanding retail space at both airports.