Chinese operator sells Toulouse airport stake to French company for €200m profit
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On Monday, one of France’s largest infrastructure conglomerates closed the purchase of a near-majority share in Toulouse airport, under Chinese ownership since a 2015 privatisation. The Chinese company Casil is earning nearly €200 million on the sale, reigniting controversy over the original deal.
The French conglomerate Eiffage said in a statement Monday that it had concluded a deal with Casil worth just under €500 million.
“Eiffage has closed today the acquisition of 49.99% of the capital of the Aéroport Toulouse-Blagnac (ATB) company,” the company said, noting that the purchase was worth “close to 500 million euros”.
This amounts to a nearly €200 million profit for Casil, which bought the 49.99 percent share in the airport from the French state for €308 million in 2015 after it was privatised under then-economy minister Emmanuel Macron. The remaining 50.01 percent is owned by a combination of local public entities and the French state.
The sale comes at a sensitive time for the French government, which is currently facing a first-of-its-kind referendum initiative aimed at stopping a similar, partial privatisation of the much larger Paris Airports company (ADP).
The Toulouse case marks a controversial precedent. Local public authorities – which retain a 40 percent stake in the airport company – have long accused Casil of seeking above all to maximise dividends, to the detriment of the airport’s finances. In November, French news site La Depeche reported that Casil collected an additional €8 million in dividends on the company’s 2018 earnings, adding to the nearly €21 million already collected since 2015. The decision to distribute the dividends was backed by the French state against the objections of the airport’s other public shareholders.
Casil, for its part, has highlighted its contribution to the airport’s development, which is France’s third-largest regional airport, with 10 million annual passengers. The company says it invested €84 million in the airport even though its contract only required it to invest €60 million.
“We are confident that Eiffage will be able to combine its expertise in transport infrastructure management with its knowledge of the local economic environment to open a new chapter in ATB’s history, continuing the strong development we have initiated since 2015,” said Mike Poon, chairman of Casil’s European branch, in a statement.
Casil had announced its plans to pull out of the airport concession last year after the French government decided not to cede its 10.01 percent share to the Chinese company. President Emmanuel Macron’s government had initially proposed to sell its share to Casil, which would have given the company a controlling stake.
A ‘predatory shareholder’
David Cayla, an economist specializing in airports and member of the left-wing group Les Economistes Atterrés (The Appalled Economists), calls Casil’s role in the airport’s management a “scandal”.
“What we’re talking about is a kind of predatory shareholder,” Cayla told France Bleu radio. “In the end, Casil, which had no experience in airport management, was able to profit off an asset that it tried to get the most out of, and that it got rid of once it had bled it dry.”
Cayla points to a damning October 2018 report by the Cour des Comptes, France’s independent state audit office, which highlighted Casil’s lack of financial transparency and its links to the Chinese state, in addition to its lack of experience managing airports.
Earlier this year, an administrative court ruled that Casil had violated the terms of its original deal with the French state and said the privatisation should be cancelled. The privatisation deal was later upheld on appeal, however.
For Eiffage, France’s third-largest construction and public works company, the purchase is part of a wider strategy of investing in airports, following competitor Vinci, the largest French company in the sector. Vinci operates 46 airports in a dozen countries, including 12 in France. Eiffage until now operated just one, in Lille.
Cayla sees the Toulouse purchase as a logical extension of Eiffage’s construction business.
“For any company specializing in construction and public works, it’s always attractive to own airports because there’s always a need to renovate the runways, terminals, buildings, etc.,” he said. “It guarantees revenue for the construction industry.”
Paris airports loom large
The Toulouse case casts a long shadow over the pending privatisation of Paris’s airport system.
Under a wide-ranging economic law passed this March, the French state would sell its remaining 50.6 percent share of the Paris airport system to a private company. The process is currently suspended, however, by a referendum process launched by a motley coalition of lawmakers.
In April, some 250 lawmakers from the left and right banded together to introduce a Popular Referendum Initiative (RIP) over the privatisation. The initiative process, added to the French Constitution in 2008, has never before been used. It requires 10 percent of voters, or 4.7 million people, to sign a petition in favour of a national referendum over the airport sale.
>> Can a ‘people’s vote’ stop Paris airports from going private?
In early December, the official petition cleared one million signatures. Signature collection is lagging significantly behind the pace needed to clear 4.7 million signatures by the March 2020 deadline, however, barring a sharp acceleration over the next couple of months.
Opponents of the privatisation see the Toulouse case as an example of the kind of profiteering they hope to prevent. They also cite the case of France’s highways, which were privatised in 2005 and sold in part to private companies including Vinci and Eiffage. A Cour des Comptes audit showed that the highways were sold for €10 billion less than they were worth, allowing the companies to make hefty profits and fuelling wider anger over privatisation of public goods.
For economist Cayla, the Toulouse case is “proof that a private shareholder is not more competent than a public” one at managing airports.
“What the case of the airports shows, like the highways before it, is that … businesses that are practically in a monopoly situation, that manage strategic infrastructure, should be a common good,” he said.
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