According to local daily Milliyet, the tender specifications regarding the planned third airport in Istanbul are the following: (i) there will be minimum revenue guarantee (not passenger volume guarantee) for the initial 12 of the 25-year concession amounting to EUR6.3bn (for example EUR316.3mn for the first year, EUR541mn for the fifth year and EUR690mn for the 12th year). Note that if actual passenger fee revenues exceed the minimum guarantee, the excess amount will be transferred to the State Airports Authority, (ii) the winning party will charge a EUR20 passenger fee per each departing passenger for international routes; EUR5 per each intl' to intl' transfer passenger and EUR3 per each departing passenger for domestic routes. Currently, these fees are USD15, EUR2.5 and EUR3 at Istanbul Ataturk, (iii) airlines were not allowed to participate in the tender, (iv) the new airport will be the sole airport in the European side of Istanbul for scheduled flights, meaning that Istanbul Ataturk will be closed for scheduled flights. Unfortunately, no further details about the tender specifications were revealed in the media for the time being.

The minimum revenue guarantee will enable higher earnings visibility, a crucial factor while searching for external financing alternatives for participants. The upward revised passenger fees in the new airport when compared to current fees in Istanbul Ataturk is normal considering the size of the new airport. There have been reports in the market which we found to be simply redundant claiming that Turkish Airlines may also bid for the tender. However, the recently announced specifications even do not allow airlines to participate in the tender. Lastly, the closure of Istanbul Ataturk for scheduled flights is an expected outcome for us and a disappointment for those claiming that the airport will be a boutique airport serving domestic flights. As of today, we expect that this news should not have any material impact on the share performances of listed aviation companies, including TAV.

Source: bne