Professional Documents
Culture Documents
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Request for Proposals for the Project (including the concession agreement and the other concession documents) (the RFP), the latter shall prevail. Bidders interested in
submitting a proposal for the Project shall carefully review the RFP, to make themselves fully aware of all terms and conditions governing the Project.
Project Description
Project Objectives
Project Objectives
Transfer Bring in
construction, international
financing and expertise to
operation risk to improve airports’
the private service quality
developer and efficiency
Improve level of
service
Islamabad Airport - Overview
• Islamabad International Airport serves the capital of Pakistan and acts as the gateway to the capital of the country and the
northern areas of Pakistan.
• It was operationalized in 2018 after which airport operations were shifted from old airport (called Benazir Bhutto International
Airport). It is located 30 km outside of the city and is easily accessible by road. The new airport marked an increase in
capacity from 3 mpax to 9 mpax.
• The airport served 4.8 mpax in FY22 making it the second busiest airport in Pakistan. It is also the third biggest airport in
terms of handling cargo traffic. Traffic has almost recovered to pre-COVID levels with significant spare capacity left.
• The airport serves as a base for the national flag carrier, Pakistan International Airlines and serves a wide range of Middle
Eastern carriers.
• The Civil Aviation Authority intends to outsource the Islamabad International Airport on design, built/rehabilitate, finance,
operate, maintain and transfer basis. (Note: Scope to be outsourced is summarized in subsequent slide)
Project Scope
Note: For more details please see the Concession Agreement and Technical Due Diligence Report available in the Data Room. Information (including
scope) in Concession Agreement will prevail.
Project Perimeter
Perimeter of PPP
Passenger Terminal (PTB) - Others Good condition. Public halls have PVC ceiling structure which require refurbishment
PTB – Int’l ASF Control Severe congestion; increase in entrance points & equipment upgrade required.
PTB – Int’l Passenger Boarding Bridge ~ Passenger boarding bridges working at full capacity with light congestion during peak hours
PTB- Int’l Customs Requirement of more scanners as hand carry baggage is not 100% scanned
PTB – Int’l Baggage Handling System ~ ~ Congestion caused by requirement to increase facilities
LF – Airport Access Lanes Expansion and equipment upgrade (vehicle scanners) required
Note: For more details please see the Technical Due Diligence Report available in the Data Room
Institutional Framework
Government of Pakistan
Policymaking, governance,
Ministry of Aviation oversight of aviation sector Federal Board Ministry of
and compliance with ICAO of Revenue Interior
standards
Public Private Risk Management Unit
Partnership
Authority Monitors and evaluates any Pakistan Federal
direct or contingent liabilities Customs
Pakistan Airport Security Investigative
Provides framework for arising out of PPP projects on
International Airlines Force Provision of customs Agency
procurement of PPP the Govt of Pakistan and any of
projects and approves its state owned enterprises Provide security to all screening / clearance Provision of
Pakistan’s national airline
PPP projects including CAA assets services for passengers, immigration
any forms of financial Civil Aviation baggage and cargo services
support required from Authority
Govt of Pakistan Regulator and operator of Other Stakeholders
airports across Pakistan
Airport Security • Security checks at airport entrance, terminal entrance, • Service level arrangements under the Concession Agreement between CAA and
Force (ASF) secondary check, passenger and baggage screening Concessionaire
• Impact on passenger experience and waiting time • GoP/CAA to enter into an arrangement with the relevant government agency for
• Use of space within the terminal effective performance of respective services
Other government • Use of space within the terminal • Same as ASF (if applicable)
agencies
Utility providers • Supply of electricity, water and gas • Utilities (water, electricity and gas) to project perimeter to be provided by CAA
• Concessionaire responsible for supply and maintenance from the point of delivery at
the perimeter boundary
Material Project Interfaces (2/2)
Party Interface Description Interface Management
Airlines • Use of space within the terminal (offices rentals) and key • Agreement between Airlines and Concessionaire for operations (space, services etc),
processing areas (access to check-in, boarding gates, etc) incentives and rebate schemes
• Interaction with other third parties; handlers (both passenger • Existing contractual arrangements with CAA to be novated to Concessionaire
and ramp handlers), fuel farm operators, CAA for • Relevant airline accounts to be transferred from CAA to the Concessionaire within the
airworthiness, certification, etc Concession Agreement
• Slot allocation • Participation in the coordination committee of slot allocation
• Fulfilment of any bi-directional service level agreements with third parties ( handlers, CAA
and others)
Ground handlers • Provide passenger and ramp handling services • Existing contractual arrangements with CAA to be novated to Concessionaire. Service levels
and payments are already agreed within the existing contracts
Fuel farm • Provide fuel services • Service level arrangements under the Concession Agreement between CAA and
Concessionaire
• CAA has entered into an agreement with joint venture of Pakistan State Oil and Attock
Petroleum Limited based on fixed flowage fee till 2046, i.e. most of the concession period
Retailers • Provisions of commercial services • CAA to ensure all new contracts are to be undertaken on short-term basis till the award of
the contract to the Concessionaire.
• All the existing contracts are to be novated to the Concessionaire. After novation,
Concessionaire may continue or terminate the contracts.
Service Providers • Provisions of services that generate non-staff expenses for the • All the existing contracts are to be novated to the Concessionaire. After novation,
airport Concessionaire may continue or terminate the contracts.
Traffic Analysis
Note: For more details please see the Traffic Study Report available in the Data Room
Passenger Traffic Growth in Pakistan
• Historically, global demand for air transport has doubled about every 15 years and is highly correlated with
economic growth.
• Pakistan is part of the South Asian/Central Asian region that has experienced a Compounded Annual Average
Growth Rate (CAGR) of 7.7% against a global average of 4.7% between FY10-19.
• However, Pakistan is lagging behind its regional counterparts during the same period with a CAGR of 4.1%
compared to India (8.7%), Bangladesh (8.4%) and Kyrgyzstan (11.0%)
• Pakistan is the third biggest market in South Asia/Central Asia with a total supply of 27mpax after India and Iran.
• In terms of passengers, total number of passengers amounted to 17.1 million passengers (mpax) in FY22 of
which 62% were international passengers and 38% were domestic passengers.
• Growth in the passengers was predominately due to international traffic with a CAGR of 7.9%.
Post-COVID Recovery
• Post-COVID recovery of passenger traffic is within the regional average of 97%.
Traffic Growth at Islamabad Airport
• Passenger traffic at Islamabad airport has increased at CAGR of 5.3% between FY07-19 making it the highest in
Pakistan. During the same period cargo traffic has increased at CAGR of 5.2%
• The growth has mainly been driven by a rise in international passengers with domestic passengers remaining more or
less constant. This is because the domestic traffic is dominated by Islamabad-Karachi route accounting for 64% of
the traffic.
• Total passengers in FY22 equaled 4.8 million making it the second busiest airport in Pakistan having 31% of the
passenger traffic and 20% of cargo traffic.
• There are approximately 4 million passengers in the immediate catchment area of Islamabad airport which includes
major cities such as Rawalpindi, Gujrat and Sargodha.
• In terms of traffic dynamics the following are important considerations:
• Islamabad airport is the only airport in Pakistan which can accommodate the introduction of recent large
carriers such as the A-380,
• PIA has been moving its hub operations to Islamabad as a result.
Traffic Dynamics at Islamabad Airport
• Karachi is the main route from Islamabad airport accounting for 20% of all
routes. The route is almost entirely operated by domestic airlines with
varying market shares including PIA (27%), Air Sial (26%), Serene Air (23%)
and Air Blue (20%)
• Busiest international routes include Dubai, Jeddah, Riyadh, Doha, Abu Dhabi
and Istanbul with PIA enjoying the dominant share of around 30%
• Predominant foreign carriers include Saudia (9%), Qatar Airways (8%) and
Emirates (6%) which operate the Middle Eastern routes
• Most of the traffic is served by origin and destination (O&D) passengers with
an average of 77% over the last ten years. This is due to a combination of
religious reasons (Hajj and Umrah for Saudi Arabia), leisure (UAE) and
presence of a strong diaspora in Middle Eastern countries.
• The remaining traffic destined for US, UK and EU countries also utilizes the
Middle East for connections. This trend has increased since the ban of direct
PIA flights to these countries.
• International markets are served mostly by wide body aircrafts (B777, A330)
while domestic markets are served by the narrow bodied A320 and B737.
Indicative Passenger Traffic Forecast
• CAGR of 5.1% is expected during the till FY40 and 4.3% till FY55.
• Total number of passengers are expected to increase from current levels of 4.8 mpax to 23.5 mpax in FY55.
• Growth in international traffic is driven by macroeconomic variables, increase in pilgrims, diaspora traffic related to tourism and otherwise, unlocking of direct routes major
diaspora locations and increase in the affordability of air travel due to introduction of low cost carriers.
• Growth in domestic traffic is driven by macroeconomic variables, expansion of middle class and increase in domestic tourism
Indicative Cargo Traffic Forecast
• Belly traffic is expected to remain as the core market in Islamabad Airport with freighters and express aircraft gaining progressively more market share
• CAGR of 2.6% is expected during the till FY55 with the mix of international and domestic cargo remaining constant
Tender Strategy
Bidding Process
The bidding process to be followed will entail the submission of a technical and financial proposal by the interested parties under a single stage two envelopes
procedure
Fail based
on either i) not
Reject bid
getting
minimum score or
ii) not meeting basic
eligibility criteria
Project Documentation Overview
Responsibility Matrix
Risk Description CAA/GoP Private Party
Responsibility for having clear ownership title and leasing land under the PPP perimeter free of any encumbrance
Project Site
and litigation
Primary risk of passenger and cargo traffic will be with private party. However, ability to manage risk is constrained
Demand
by not having the right to negotiate air service agreements or have approving powers in frequency/slot allocation
Site Security The risk of safeguarding the project site and existing facilities will be with Air Security Force
Immigration services Provision of immigration services will be with Federal investigative Agency
Navigation / ATCS Provision of air navigation / air traffic control services will be with CAA
Private party responsible for operating of landside assets under the PPP perimeter including apron management,
Landside Services
terminal management, public access, commercial zones, restaurants and parking.
Operating and Operations and maintenance of the terminal, apron and associated facilities according to key performance
Maintenance indicators.
Airside Services Operations, maintenance and construction/rehabilitation of runways and taxiways.
Inflation Regulated tariffs will be periodically adjusted for inflation. Partial inflation to be indexed.
Part of exchange rate risk mitigation through international traffic tariffs denominated in USD. However, risk allocated
Exchange Rate
to private party and no adjustments will be made in the tariff
Responsibility of construction, upgradation of equipment, maintaining and enhancing the capacity of the airport will
Design & Construction
be with the private party and will be triggered based on service levels prescribed in the PPP agreement
Financial Close Arrangement of finances required for expansion and maintenance CAPEX will be responsibility of private party
Project Agreements Overview
Agreement Parties High-Level Scope
Concession Agreement CAA and concessionaire • Grant of concession to the concessionaire.
• Operate, maintain, construct/rehabilitate (as applicable) and transfer to CAA the airport including
terminal, apron and ancillary facilities.
• Revenue sharing mechanism between the CAA and concessionaire.
• Rights, obligations, representations, warranties, events of defaults of the parties, compensation
events, termination payments etc.
Project Site Lease CAA and concessionaire • Grant of lease to the concessionaire of the land within the scope.
Agreement • Ensuring the land is free from all encumbrances and the concessionaire acquires possession at the
time of handing over.
State Support Agreement GoP, CAA and • Supports offered by GoP for the Project including (but not limited to) guarantees backstopping the
concessionaire payment of termination payments and rebalance compensation attributable to government users
(customs, security, etc) by the CAA.
Concession and Lease Concessionaire, CAA and • Assignment of concessionaire’s rights under the Concession Agreement and Lease Agreement, step-
Direct Agreement the financiers in rights of the financiers, and financier’s right to receive financing due.
State Support and GoP, Concessionaire and • Assignment of concessionaire’s rights under the State Support Agreement and the GoP guarantees,
Guarantees Direct the financiers and financier’s right to receive financing due.
Agreement
Concession Snapshot
6-month Conditions 12-month Construction 15-year Operations Period starting after Conditions
Precedent Completion Period Period Precedent completion
Project Timeline
Commercial Conditions Precedent Works Project End
Close Completion Completion Date Date
• Aeronautical revenues excluding air navigation, landing charges and aircraft rescue and fire fighting based on traffic forecast of passengers and air traffic
management and schedule of tariffs with periodic tariff adjustments indexed to inflation.
• Non-aeronautical revenues including revenues from cargo, food & beverage, parking, rentals and duty free.
(Note: Currently all USD denominated aeronautical revenue is credited by airlines in PKR equivalent).
Tariff
• Aeronautical tariffs will be revised every three years based on inflation. However, only 50% of the inflation will be adjusted.
• USD denominated tariffs will be linked to US CPI whereas PKR denominated tariffs will be linked to PAK CPI.
• There is no exchange rate indexation in the tariff.
CAA Upfront Fee
• An upfront fee of USD 100 Mn will be paid by the concessionaire at financial close.
Slot Allocation
• CAA will approve the flight schedule plan after consultation with the concessionaire.
Air Service Agreements (ASAs)
• Concessionaire shall have the right to propose changes in the existing ASAs or new ASAs with the objective of improving air traffic. However, the final approving
authority shall remain with GoP.
Project Documentation – Overview
Grantor CAA
Term Fifteen (15) years after the completion of conditions precedent under the concession agreement
Concession Site and The Concession site will remain under the CAA’s ownership. Immoveable and moveable assets financed by the Concessionaire will be
Assets Ownership owned by the Concessionaire until the end of the Term, when such assets will be transferred to the CAA.
Key Performance The Concessionaire will operate, manage and maintain the airport (under its scope) and perform such services in accordance with certain
Indicators KPIs. The KPIs of the Concessionaire will (without limitation): (a) be time-based (passenger waiting time, etc.); (b) cover maintenance
(baggage handling system, HVAC, etc.); (c) be safety related (response time to airfield safety, baggage processing system unavailability
period, etc.); and (d) be based on the latest applicable version of IATA Airport Development Reference Manual (ADRM).
As part of the government services, certain KPIs would apply to the CAA/government users (customs, security forces etc), including
checkpoint (parking and terminal access) delays, security control queuing, immigration queuing, customs queuing, etc.
Project Documentation – Overview
Reserved Activities/ The CAA (runway, taxiway, navigation) / government users (customs, security, etc) will continue to perform the services at the airport and
Government Users will continue to be allocated the space they require to perform such services. Government users will enter into service level agreements
Services with the CAA. The Concessionaire will not be liable for any non-performance that is attributable to the government users not performing
their services to the expected performance levels and will also be entitled to necessary compensation for any losses suffered as a result.
Revenue Share The Concessionaire will pay (a) a one-time upfront fee of USD 100 mn, and (b) a fixed percentage share of gross revenue to the CAA i.e. the
revenue share on a monthly basis.
Compensation Events The Concessionaire will be entitled to an economic rebalancing of the Project (e.g. through adjustment of the regulated charges,
adjustment of the Revenue Share and/or payment of financial compensation), including (without limitation) in case of: (a) breach of
contract by the CAA; (b) existing contamination of the Concession Site; (c) works variation approved or requested by CAA; (d) change in
law that has an adverse financial impact on the Concessionaire; (e) a failure to hand-over the Concession Site to the Concessionaire in a
timely manner; and (f) a political force majeure event.
Existing Contracts Existing contracts (licenses, leases, concessions, etc) will be transferred to the Concessionaire during the transition period.
CAA’s Employees The five hundred and four (504) existing employees currently working within the concession site will continue working for the first two (2)
years of the Term. Prior to expiry of the two (2) year period, the Concessionaire will be required to make offer of employment to at least
25% of such existing employees on terms which are no less beneficial than terms of existing employment with CAA. The existing
employees who accept such offer shall continue working within the concession site as employees of the Concessionaire. The existing
employees who do not wish to accept the Concessionaire’s offer will be transferred from the Airport by the CAA.
Aeronautical Charges All aeronautical charges (other than the excluded charges) will be collected by the Concessionaire in relation to the airport in accordance
with the laws of Pakistan and the contractual tariff setting/escalation procedure.
Project Documentation – Overview
Non-Aeronautical Non-aeronautical revenues will be unregulated and to be collected by the Concessionaire. These include all fees to be received as per
Charges commercial contracts with third-parties, including for retail, duty free, food and beverage, advertising, etc.
PIA Receivables The Concessionaire is entitled to set-off the amounts, due but unpaid by PIA, from the amounts payable by the Concessionaire to the
CAA. In such a case the GoP shall pay such amount to the CAA through an inter-government departmental mechanism to be agreed
between the GoP and the CAA.
Termination Payments Pursuant to the Concession Agreement, upon termination of the Concession Agreement the CAA will be required to make certain
termination payments to the Concessionaire. The quantum of termination payment will vary depending on cause of termination such as
termination due to Concessionaire’s default, CAA’s default, Political Force Majeure Event, Non-Political Force Majeure Event etc.
Depending on the cause of termination, the termination payment will include inter alia outstanding debt procured by the Concessionaire
for the project, equity of the Concessionaire, return on equity.
Governing Law and The Project will be governed by the laws of Pakistan.
Dispute Resolution
Disputes between the Parties shall be subject to: (i) amicable settlement; (ii) technical dispute resolution; and (iii) international arbitration
proceedings carried out in Pakistan in accordance with ICC arbitration rules with the seat of arbitration shall be London, United Kingdom.
The rendered arbitration award will be final, binding and irrevocable.