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Middle East investors turn to airports for safe returns

Bahrain's Investcorp Capital is to invest in the $4.2 billion redevelopment of New York’s JFK International Airport’s Terminal 6 portauthoritybuilds.com/media gallery
Bahrain's Investcorp Capital is to invest in the $4.2 billion redevelopment of New York’s JFK International Airport Terminal 6
  • Airports seen as secure venture
  • Investment to hit $2.4bn by 2040
  • Opportunities in Africa and Asia

Middle Eastern money is making its way into airports around the world as investment in aviation assets continues to catch the eye.

Abu Dhabi Investment Authority (Adia), the UAE’s largest sovereign wealth fund, is the latest headline-grabber as its estimated $4 billion takeover bid as part of a consortium for Malaysia’s Airports Holdings was confirmed on Thursday.

Adia is no stranger to the sector. In October last year the Emirati fund announced plans to invest around $750 million in the debt of India’s GMR Group, giving it a foothold in one of the world’s fastest-growing markets.

India’s domestic passenger traffic is expected to double to 300 million by 2030, making this appear a sound investment.

“Airports are gateways to regions,” Linus Bauer, managing director of Singapore-based aviation consultancy BAA & Partners says.

“By investing in them, Gulf investors secure influence over critical infrastructure in regions they seek to strengthen economic ties with, such as Europe, Africa and Southeast Asia.”

Estimates suggest the global airport industry will be worth $194 billion in 2024. The Airports Council International projects that airport investment worldwide is likely to reach $2.4 billion by 2040.

“The increasing interest from the Middle East is partly sparked by a desire to show their global credibility as much as the pure investment side,” says John Grant, a partner at the UK consultancy Midas Aviation and an AGBI columnist.

“I’ve become aware of a number of local sovereign wealth funds attracted to airports as part of large government-to-government projects that are being explored or are underway.”

Airports historically appeal to wealth funds because of their longevity, multiple revenue streams and alternative use options.

Heathrow Airport is pouring cash into upgradesUnsplash/Belinda Fewings
London’s Heathrow Airport is pouring cash into upgrades

Heathrow Airport in London, which is partly owned by Saudi Arabia’s Public Investment Fund (PIF) and the Qatar Investment Authority, two Gulf sovereign wealth funds, reported revenues of almost $2.7 billion in its latest financial results for the first nine months of 2024, which was down 3 percent year on year.

The airport, however, did record an adjusted profit before tax of $431 million, turning around a $23.5 million loss made the previous year, excluding non-cash fair value gains and losses on investment properties and financial instruments.

In December, Heathrow announced $2.9 billion worth of upgrades over the next two years.

Ripe for investment

The International Civil Aviation Organisation predicts that by 2036 the air transport industry will contribute $1.5 trillion to global GDP. The Middle East already has an eye on this with investments in the US, Europe, Africa and Asia.

Investcorp Capital, the Abu Dhabi-listed alternative investor, last year agreed to invest in the $4.2 billion redevelopment of New York’s JFK International Airport’s Terminal 6.

“There is growing demand for infrastructure assets because of the opportunity for risk-adjusted returns it delivers for investors,” Yusef Al Yusef, global head of distribution at Investcorp, says.

Bauer says further opportunities for investment existed in South East Asia, in the Philippines or Indonesia, while Nairobi’s Jomo Kenyatta International Airport or Murtala Muhammed International Airport in Lagos “might attract attention as key hubs on a fast-growing continent”.

UK cities such as Birmingham or Glasgow may hold some appeal and in Eastern Europe, airports such as Budapest or Zagreb “may align with Gulf interests in emerging EU markets,” he says.

In Latin America, he adds: “Growth in tourism and limited capital among local governments makes airports like Lima or São Paulo attractive for foreign investment.”

Gulf investments in airports