The appointment of Jos? Blanco as Spain's Minister of Public Works in last week's government reshuffle will almost certainly delay the partial privatisation of the state-owned AENA airports company at the same that it is

still finalising the format for its E.300m ($387m) 14-strong airports' duty free mega tender, with regional packages of airports now said to be the favoured format.

The imminent timing of the tender was exclusively reported by TREND on October 26 2008 (see also www.trend-news.com/default.asp?newsid=5404) although protracted delays over recent years in deciding whether to tender this business and AENA's subsequent extension of Aldeasa's contract until December 31 2009 may now conspire to work against AENA if it is looking for top dollar bids for these businesses.

By AENA and Autogrill/Aldeasa's own separate admissions, passenger traffic figures in Spain have been very disappointing in the first quarter of 2009 with network traffic down by 18% and disappointing performances at the two leading airports of Madrid (-16.5%) and Barcelona (- 21%) even though Madrid is the only major Spanish airport not included in this imminent tender process.

Sources close to AENA have already told TREND that they are not confident that traffic figures will recover in the short term and some pessimistic managers are still expecting a shortfall of between 20% to 22% for the whole year.

Besides any impact on the amounts companies may be prepared to offer for the duty free businesses, falling traffic figures will also obviously have a negative effect on the revenues the government is planning to raise as a result of the privatisation process. As a result, some industry analysts are now predicting that this latter process is not likely to take place until late 2010, or even 2011.

At the same time, Blanco's appointment will inevitably lead to some minor delays and it is still not clear whether he is entirely happy with the senior management presently in place at AENA and rumours indicate that AENA President Encarnacion Vivanco – directly appointed by Magdalena Alvarez the former Minister of Public Works – could be a political casualty in this process. If there are to be changes, then further delays on the privatisation timetable will be inevitable, although the duty free tender is still expected to be called within this second quarter.

TREND understands that even at this late date, the internal debate within AENA on whether to offer one mega tender or a number of regional tenders has still to be fully resolved. A mega tender was understood to have been the favoured option last year, but with airports' traffic falling every month and with the short-term outlook unclear, senior executives at AENA are now said to favour a number of regional tenders, believing this to be the best way to maximise revenues for the airports management company.

Meanwhile, a number of interested travel-retail operators continue to look on with interest as they await clarification of the tender details. The degree of interest varies from company to company and one CEO with a leading operator did admit – on condition of anonymity to TREND – that he was totally fed up with the continual delays. He said that while his company would participate in the tender, his feeling was that most of the duty free retail community were annoyed and frustrated with AENA's lack of clear and concise information relating to the tender.

Having said this, incumbent retailer Aldeasa is still favourite to retain some – if not all – of these businesses and if, as expected, AENA breaks them up into geographically manageable packages then should make the prospect of new start ups for any new retailers more cost effective than if the business had been tendered as one large 14-strong airports' business spread across the country.

Both Dufry and Aelia are expected to be likely candidates to compete aggressively on a national or a regional basis and Gebr. Heinemann may also take a look on a regional basis, given that they are no longer involved in a buying pool with Aldeasa. At the same time, Nuance could well see some logic in trying to add some Spanish business to its existing joint-venture Portuguese activities at Lisbon, Porto and Faro where it has just gained a contract extension.

At the same time, Areas, the Barcelona-based speciality retailer and restaurant concession operator is also likely to be an aggressive bidder for some of the retail slots – especially in Catalunya.

Last year, Autogrill's travel retail and duty free sales in Spain reached E.594.5m ($767.1m) which was equivalent to 35.60% of the giant's E1.6bn ($2.1bn) total. But this figure was dragged down by a 12.7% fall in passenger traffic at Spanish airports in the last quarter of 2008. This result compared with Autogrill/Aldeasa's sales of E.634.2m ($820m) in 2007, or 36.6% of the total. The negative result in 2008 was also caused in part by the depreciation of the sterling against the euro (reducing the purchasing power of passengers to and from the UK).

The 14 airports currently operating under Aldeasa's existing concession which are due to go out to bid this quarter – along with their international passenger traffic for 2007 (shown in brackets) include: Barcelona (17.5m international passengers); Palma de Mallorca (16.6m); Malaga (10m); Alicante (7.1m); Girona (4.5m); Valencia (3.1m); Ibiza (2.6m); Reus (1.2m); Sevilla (1.2m); Bilbao (1m); Almer?a (0.6m); Jerez de la Frontera (0.5m); Menorca (n/a); and Santiago de Compostela (0.3m).

An added but significant dimension to the dynamics of this situation is that the new Public Works Minister Blanco is known to be a stickler for attention to detail. He has already indicated that the partial privatisation of AENA will go ahead, but he has also stressed that he wants to study all the documentation before indicating any definitive timetable. At the same time there could be more change ahead that potential duty free bidders should note, since some of these may occur during the term(s) of the new duty free contract(s).

For example, the government has stated on several occasions that it is keen to bring in private investment to a newly-formed airport management company, Empresa de Gesti?n de Aeropuertos del Estado SA (EGAESA) which is expected to begin to operate this year.

It says that this will operate as a subsidiary of AENA and equally significantly the State has also indicated that it will seriously look at the partial decentralization to the regional governments of the biggest airports, with Madrid, Barcelona and possibly Palma de Mallorca being the main candidates.