Competition is heating up among major domestic and global institutional investors as $3.6 billion in airport stakes are currently on the market in Australia.
French and Japanese investors are poring over the books of North Queensland Airports, which owns Cairns and Mackay Airports. The company is currently owned by JPMorgan Infrastructure Partners and The Infrastructure Fund, managed by Macquarie. The asset carries an asking price of $3 billion.
Meanwhile infrastructure manager Igneo Infrastructure Partners is selling its 15.3 per cent stake in Adelaide Airport, valued at close to $4 billion, based on the last financial year’s earnings. Igneo’s co-investors are UniSuper (50.5 per cent), IFM Investors (15.1 per cent), Hostplus (15 per cent) and the Perth-based Perron Group (4.1 per cent).
All co-investors have pre-emptive rights to buy the Igneo stake. IFM Investors and Hostplus are reportedly the expected buyers seeking to increase their holdings in Adelaide Airport, which sits on some 800 hectares of land.
Strong Demand for Airports From Australian Super Funds
Australian super funds have consistently topped up on their shares of capital city airports when opportunities arise. For example, last year AustralianSuper increased its stake in Perth Airport from 5.25 per cent to 20.25 per cent – paying more than $500 million for the 15 per cent acquired from the Utilities Trust of Australia, at a multiple of 22–22.5 times earnings.
The purchase came shortly after AustralianSuper lost a bid for Queensland Airports, owner of Gold Coast Airport, and three smaller regional airports in Townsville, Mount Isa and Longreach. That portfolio sold to KKR and Skip Capital for $3 billion, or about 20 times earnings.
“Our increased shareholding in Perth Airport complements our investment in Sydney Airport. The mix of passengers and underlying drivers of demand differ between the airports, adding resilience to the portfolio,” Nick O’Neil, Head of Australian Real Assets Investments at AustralianSuper, told [i3] Insights.
O’Neil says the multi-billion-dollar expansion program now underway at Perth Airport will help it capitalise on its shared time zone with key markets in Asia and direct flights to Europe and cater well for the robust growth in international traffic forecast for the coming decade.
Our increased shareholding in Perth Airport complements our investment in Sydney Airport. The mix of passengers and underlying drivers of demand differ between the airports, adding resilience to the portfolio
He adds that Sydney Airport is one of Australia’s premier infrastructure assets – the largest airport by passenger numbers and the key international gateway. It’s the core hub in Australia’s aviation industry and continues to grow its network with new services.
“Our investment in Sydney Airport in 2022 and increased investment in Perth Airport last year have coincided with a strong rebound in passenger numbers following the impact of COVID-19, and new-generation aircraft are expected to drive further growth in international passenger numbers at both airports.
“More broadly, airports in Australia are a highly attractive asset class, offering characteristics of core infrastructure coupled with strong and growing demand for aviation services. They provide stable and predictable cashflows and they’re defensive in nature given Australia’s reliance on air travel,” says O’Neil.
Fierce Competition Plays out in Court
AustralianSuper has a 7.5 per cent stake in Sydney Airport which set a record for corporate takeovers in Australia when it was sold for $23.6 billion in 2022. The airport was privatised following its sale to a consortium led by IFM Investors, Global Infrastructure Partners (now part of BlackRock), AustralianSuper, and Australian Retirement Trust (ART). The then existing investor UniSuper rolled over its 15 per cent interest into Sydney Alliance, the private holding company for the airport.
Such is the demand for Australian airports that investors will readily face off in court for ownership. A dispute over Australian Pacific Airports Corporation (APAC), operator of Melbourne and Launceston airports, will head to the Supreme Court in November to decide the final ownership of Melbourne Airport — Australia’s second busiest.
Listed property and infrastructure manager Dexus is challenging a notice from APAC alleging it breached confidentiality agreements related to its stake in the airport. Dexus inherited a stake in APAC when it acquired the domestic infrastructure funds management business of former AMP Capital. Through its funds, Dexus represents several investors, including Rest Super and other super funds. Collectively, their interest represents a 27 per cent share in APAC and is referred to as the “Dexus bloc”.
Other co-investors in APAC include IFM Investors, the Future Fund, SAS Trustees (represented by TCorp), and a fund managed by Morrison & Co. The dispute centres on a technical point: whether Dexus had the right, under the shareholders’ agreement, to disclose information while undertaking a typical sale process. The other shareholders allege that Dexus breached confidentiality terms when it used a market confidentiality deed in seeking to sell a 9.7 per cent stake in APAC last year.
These co-owners are now attempting to force Dexus to relinquish its holding, which is valued at over $3.8 billion. Dexus secured a temporary reprieve when the case was first heard in May. It has been adjourned to November, when hearings for what is expected to be a costly and potentially protracted legal battle will begin.
This is not the first fight over an Australian airport stake. More than a decade ago, the Future Fund and AustralianSuper clashed over the pricing of Perth Airport.
The Dexus-APAC outcome will be closely watched by infrastructure investors, given the strategic value of Melbourne Airport. It was reported that before the sale process was halted, 18 potential bidders had expressed interest in the asset. Legal experts say the case also raises broader concerns about the concentration of ownership in Australia’s airport sector.
Over time, some of the largest investors may have exceeded the 15 per cent cross-ownership limit set by the Airports Act 1996, which also caps foreign ownership at 49 per cent.
Airports are Prized Assets for their Long-term Growth Prospects
Capital city airports are largely owned by major super funds – either directly or via IFM Investors, their jointly owned platform. Australian super funds invest heavily in major airports overseas, either directly or via global infrastructure funds.
ART has an 11.18 per cent interest in Heathrow Airport, alongside China Investment Corporation (10 per cent), Qatar Investment Authority (20 per cent), Public Investment Fund (15.01 per cent), Caisse de dépôt et placement du Québec (2.65 per cent), and Universities Superannuation Scheme (2.10 per cent).
IFM Investors is one of the largest airport owners globally. Its portfolio includes the Manchester Airports Group (Manchester, London Stansted, and East Midlands) and Flughafen Wien Group (Vienna, Malta, and Košice).
Besides, IFM Investors, Australian super funds also invest with the likes of Global Infrastructure Partners, which owns Gatwick, Edinburgh, and London City (exited in 2016).
Airports are prized assets for their strong long-term growth prospects. While they suffered heavily during pandemic border closures, recovery was swift; by 2024, passenger numbers had already surpassed the 2019 peak.
Industry data shows global passenger numbers are expected to rise 4 per cent this year to 4.99 billion. Montreal-based Airports Council International projects volumes will reach 17.7 billion by 2043 and 22.3 billion by 2053 — nearly 2.4 times 2024’s projected total.
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[i3] Insights is the official educational bulletin of the Investment Innovation Institute [i3]. It covers major trends and innovations in institutional investing, providing independent and thought-provoking content about pension funds, insurance companies and sovereign wealth funds across the globe.