MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND LIMITED
The Brussels Airport Management Roadshow
26 June 2007
Important Notice Disclaimer Macquarie International Infrastructure Fund Limited (MIIF) is a Bermudian registered mutual fund company listed on the Singapore Exchange Securities Trading Limited. Macquarie Infrastructure Management (Asia) Pty Limited (MIMAL) is the manager of MIIF. MIMAL is a wholly owned subsidiary of Macquarie Bank Limited (MBL). Investments in MIIF are not deposits with or other liabilities of MBL or of any entity in the Macquarie Bank Group and are subject to investment risk, including possible delays in repayment and loss of income and capital invested. Neither MIIF, nor any member of the Macquarie Bank Group, including MIMAL, guarantees the performance of MIIF, the repayment of capital or the payment of a particular rate of return on MIIF securities. This presentation has been prepared based on available information. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the information, opinions and conclusions contained in this presentation. To the maximum extent permitted by law, neither MBL, MIIF, MIMAL, their directors, employees or agents, nor any other person accepts any liability for any loss arising from the use of this presentation or its contents or otherwise arising in connection with it, including, without limitation, any liability arising from fault or negligence on the part of MBL, MIIF, MIMAL or their directors, employees or agents. In particular, no representation or warranty is given as to the accuracy, likelihood of achievement or reasonableness of any forecasts, prospects or returns contained in the information. Such forecasts, prospects or returns are by their nature subject to significant uncertainties and contingencies. Each recipient of the information should make its own independent assessment of the information and take its own independent professional advice in relation to the information and any action taken on the basis of the information. MBL is authorised by The Australian Prudential Regulation Authority in the Commonwealth of Australia and The Financial Services Authority in the United Kingdom, to carry out banking business or to accept deposits in those respective jurisdictions. MBL and its related bodies corporate are not otherwise currently authorised to carry out banking business or to accept deposits in any other country.
General Securities Warning This presentation is not and shall not in any way constitute an offer or invitation for subscription or purchase of or a recommendation of securities. It does not take into account the investment objectives, financial situation and particular needs of the investor. Before making an investment in MIIF, the investor or prospective investor should consider whether such an investment is appropriate to their particular investment needs, objectives and financial circumstances and consult an investment adviser if necessary. Information, including forecast financial information, in this presentation should not be considered as a recommendation in relation to holding purchasing or selling, securities or other instruments in MIIF. Due care and attention has been used in the preparation of forecast information. However, actual results may vary from forecasts and any variation may be materially positive or negative. Forecasts by their very nature, are subject to uncertainty and contingencies many of which are outside the control of MIIF. Past performance is not a reliable indication of future performance.
MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND
2
Brussels Airport Europe’s best airport* and Belgium’s only major airport Ownership Interest
MIIF Portfolio Composition by Value(1)
Investment
Description
Date of initial acquisition
27 May 2005
Cost of acquisition
S$71.7 million
Valuation
(1)
S$100.3 million
MIIF's ownership
3.2% interest
% of MIIF portfolio
7.1%
(1)
TanQuid 8.8%
CXP 8.6%
Canadian Aged Care 10.4%
MAp 12.2%
Brussels Airport 7.1%
MCG 10.6%
Arqiva 16.7%
DUET 5.0% MIC 2.5% MEIF 18.1%
Investment Performance acquisition Investment
Distribution (since acquisition)
Valuation (31 March 2007)
IRR (since acquisition)
S$71.7m
S$23.6m
S$100.3m
43.1% p.a.
Attractive IRR since acquisition
Based on 31 March 2007 valuations * Awarded by Airports Council International (ACI) in 2006 for customer service culture (1)
MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND
3
Brussels Airport Investment Characteristics
General airport characteristics – exposed to aviation growth but with defensive features, high EBITDA margins, high barriers to entry, trend to light-handed regulation
Specific Investment Requirements
In addition to the generally attractive characteristics of airports, MIIF looks for its investments to fit specific criteria
Requirement
Brussels
Dominant Market Position
Capital of Europe 10m people within 90 mins drive
Above Average Pax Growth
3.5% CAGR since 2004 Significant route expansion
Surplus Capacity
30m capacity vs 16.9m actual
Margin Growth Potential
EBITDA margin 44.7% on acquisition, 52.8% 2006
Underdeveloped Commercial Business
Concession renegotiations Sizeable landbank
4 MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND
Brussels Airport Capital Management
Improved operating performance allows capital structure optimisation ahead of schedule Refinancing secures capex requirements, improves debt terms & releases >€300m to equity
Expected Distributions to Equity
100%
80%
60% Original Investment
Expected Refi
40%
Distributions
~70% of original equity investment will have been returned post second drawdown
to Jun-07
20%
0% Acquisition
Prudent Financial Management MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND
Distributions
5
Brussels Airport Growing Returns
Traffic, Revenue & EDITDA Growth +14.0%
+12.9%
+12.6%
+12.0% +10.0% +8.0%
+6.9%
+6.4%
+6.0% +4.0%
+3.3%
+3.8%
+2.0% +0.0%
Traffic
Revenue 2006
EBITDA 1Q07
Brussels strong operational performance underpins refinancing
6 MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND
Brussels Airport Management introduction Wilfried van Assche, CEO Brussels Airport
Appointed CEO of Brussels Airport in October 2005 Previously with Proctor & Gamble for 18yrs
Leon Verhallen, Head of Airline Business Development Brussels Airport
Joined Brussels Airport in current role in 2006 Previously with Amsterdam Airport for 14yrs
7 MACQUARIE INTERNATIONAL INFRASTRUCTURE FUND
The Brussels Airport Management Roadshow Wilfried Van Assche - CEO, Brussels Airport
Contents • • • • • • • • • •
9
Background Location & Facilities Ownership & Regulation Operating Performance Organisation & Culture Brand & Positioning Investing for Growth Working with Macquarie Group Key Initiatives Outlook
Introduction A dynamic and exciting business •
Background - Wilfried Van Assche – – – –
•
Brussels Airport - An exciting challenge ! – – – –
10
Appointed CEO of Brussels Airport October 2005 Succeeded Luc Van den Bossche, now Chairman Previously with Proctor & Gamble for 18 years Belgian national, married with 4 children
Nationalised to Privatised business Many different challenges from a multi-faceted business Belief in the potential of Brussels Airport Support from leading global player in MAp
Location & Facilities Located at the heart of Europe with excess capacity •
Location – Principal airport serving in Belgium (population of 10.5m) – 16.7m passengers in 2006 – Located 12km from the city of Brussels – Good road/rail access
•
Facilities – 3 runways/2 piers – Capacity iro 30 mppa – Site 1,245 ha, approx. the size of London Heathrow
11
Ownership & Regulation Freehold interest with indefinite operating licence •
Ownership – Macquarie led consortium acquired 70% of airport operating company for €735m in December 2004 with Belgian Government retaining 30% – Airport operating company has freehold interest with an indefinite operating licence
•
Regulation – – – – –
12
Light-handed regulation moving to dual-till over time Airport charges reviewed every 5 years (next 2011) Current formula is HPI-0 Consultation process with airlines before final determination by Regulator Licence allows cost pass-through of additional security costs incurred due to change in legislation
Traffic Performance Robust and stable traffic base
eáë í ç êáÅ~ä=í ê ~ÑÑáÅ=ÇÉî Éäç éãÉåí =N V V R JO M M S ORKM
•
Sabena collapsed in 2001 Robust traffic mix: – High proportion of O/D traffic (91% in 2006) – 48% business traffic in 2006 Relatively low penetration in LCC market
OMKM
ãáääáçå=é~ ñ
• •
NRKM
NMKM
RKM
MKM NVVR
NVVS
NVVT
NVVU lCa
OMMM
OMMN
OMMO
OMMP
OMMQ
OMMR
qê~åëÑÉê=~åÇ=qê~åëáí
mppa
2004
2005
2006
CAGR
Mar 07 MAT
Intra-EU
10.9
11.1
11.6
3.2%
11.7
Extra-EU
4.7
5.1
5.1
4.2%
5.1
15.6
16.2
16.7
3.5%
16.8
Total
13
NVVV
OMMS
Revenues Focus on commercial leverage • • •
Traffic growth, HPI-0 and security cost pass-through Retail/catering initiatives, property recharges re-based Car parks pricing restructure and opening of Front Park 3
(€m)
2004
2005
2006
CAGR
Q1 2007
Aeronautical
196.8
206.9
229.5
8.0%
48.6
Retail
36.5
37.3
40.9
5.9%
9.3
Property
35.7
34.8
33.8
(2.7%)
8.4
Car Parking
17.4
19.0
20.8
9.3%
5.3
Other
15.6
22.5
18.6
9.2%
4.3
Total
302.0
320.5
343.6
6.7%
75.9
NB. Net of airline incentives and excluding land decontamination recharges
14
Operating Expenditure Continued operating cost control • • •
Headcount reduction, ICT re-organisation Maintenance contracts review Lower consultancy
(€m)
2004
2005
2006
CAGR
Q1 2007
Staff
62.5
58.4
58.6
(3.2%)
13.6
Security
20.1
22.2
29.3
20.7%
7.4
Maintenance
49.9
46.9
45.7
(4.3%)
11.1
Establishment
22.3
21.2
13.8
(21.3%)
5.0
Other
11.3
9.6
13.1
7.7%
2.5
Total
166.1
158.3
160.5
(1.7%)
39.6
NB. Excludes airline incentives and land decontamination costs
15
EBITDA Double digit EBITDA growth since privatisation • • • • •
Strong EBITDA growth performance since privatisation in December 2004 Revenues growing at +3.4% above traffic growth Good control and focus on operational efficiency Operating performance 1 year ahead of acquisition case Approximately 70% payback on investment (post conditional 2nd refi drawdown)
(€m)
2004
2005
2006
CAGR
Q1 2007
Revenue
302.0
320.5
343.6
6.7%
75.9
Operating Expenses
166.1
158.3
160.5
(1.7%)
39.6
EBITDA
135.9
162.2
183.1
16.1%
36.3
8.71
10.01
10.96
12.2%
10.55
EBITDA per pax (€)
16
Refinancing Returning equity to shareholders • • • • • •
Financial Close 22nd June 2007 Special distribution of €310m Investment grade expected New €230m capital expenditure facility Margin ~10bps below existing margin SPV (Brussels Airport Holding SA/NV)
MAp
MEIF
76.9%
14.2%
4.3% 100%
SFPI / FPIM (& Certification Office)
MABSA
30% New drawn debt
30% Voting Rights
70%
SPV / Borrower (Belgium)
30% Economic Rights
70%
The Brussels Airport Company (Brussels Airport)
17
GIF2
MIIF 4.6%
Organisation & Culture Creating a high performance organisation •
Organisational Structure – – – –
•
500 statutory employees, 250 contractual employees Pension liabilities transferred to the Belgian State Staff numbers reduced from 850 to 750 since privatisation Security, car parking, maintenance largely outsourced
Brussels Airport Vision – the most successful airport company in Europe – delivering outstanding performance year-in year-out – customers rate the airport, its facilities and services consistently among the best in Europe
•
High performance organisation – Performance management – Target focussed
18
Brand & Positioning Getting the message across •
Brand and Positioning: – Brussels National Airport? Brussels International Airport? Brussels Zaventem? – European, Efficient, Welcoming
•
‘Brussels Airport – Welcome to Europe’ – Brussels International Airport Company (BIAC) changed to The Brussels Airport Company
•
Awards: – ACI Best European Airport 2005, runner up in 2006 – ACI People Award in 2006
19
Investing for Growth Sustainable and balance investment programme •
Approximately €300m in the next 5 years primarily on projects that will deliver specific sector growth and commercial leverage: – – – – – – –
20
LCC infrastructure (€10m) Intra pier hub opportunities (€10m) Baggage system upgrade (€20m) Property development (€120m) Retail expansion (€40m) Car Parking (€20m) Maintenance (€80m)
Working with Macquarie Group An integrated and proactive approach to driving value Brussels Airport Board
Other SubCommittees • • • •
Audit Committee Strategy Committee Safety, Security & Environment Committee Nominations & Compensation Committee
Key:
Macquarie Group
Belgian Government Executive 21
Management
• • • • •
Executive Committee
Management Committee
Business Review Group
Business Leadership Team
Operational Review Forums
Outlook Group
Airline marketing Operational Efficiency Airport Infrastructure Commercial Development Financial Management
Key Initiatives Projects over the next 12 months •
Retail and catering – Topaz reconfiguration – Intra Pier B retailing
•
Low cost carrier infrastructure – Differentiated product
•
Long haul hub – Jet Airways, Other Asian airlines
•
Property development – Gateway project – BRUcargo
•
22
Enterprise Resource Planning (ERP)
Outlook A strong and flourishing business • • • • • •
23
Proactive marketing and incentive programme to encourage traffic growth Differentiated airport infrastructure to appeal to LCC and long-haul airlines Ongoing programme of retail and catering improvements Car parking product development including long-term car parking facility on north side Major investment in property development exploiting the airport’s sizeable land bank Continued focus on operational efficiencies and organisational performance
Thank you & Questions
24
Airline Marketing Brussels Airport Léon Verhallen, Head of Airline Business Development
Top 25 European Passenger Airports Primary gateways
O&D leisure & LCC
Secondary gateways
80
p a x m o v e m e n ts (m ln .)
70 60 50 40 30 20
67,5 56,8
Brussels Airport
52,8 46,1 45,5 34,2
30,8 30,1 30 25,6 23,7
22,8 22,4 21,8 21,1 20,9
19,2 17,7
16,9 16,7 16,6 15,1
12,3 12,1 12
10
Lo
nd
on P a /L H r is R / F r CD a G Am n k s t fu r t er da M m Lo n d ad o n r id /L G M W u Ro n m i ch e Ba / F C rc O P a e lo n L o r is / a n d OR M on / Y an S ch TN es te Pa r M il a l m a n/ M Co Du XP pe b n h l in ag e Zu n r ic h Os V i lo e B r nn a D u u ss s s e ls el d A t o rf he L i ns sb H e on ls H a in k m i bu rg
0
excl. Turkey and Russia 26 The Brussels Airport Management Roadshow June 2007
Large O&D Market LHR CDG FRA AMS LGW MUC CPH ZRH VIE BRU
0
10
20
30
OD
40
50
Transfer
60
70
millions
27 The Brussels Airport Management Roadshow June 2007
Belgium • Catchment area – Belgium 10.5 million – Cross border 11.4 million • within 120 minutes
• Business travel – Capital of Europe – Fortune 500 companies – European HQ’s
• Leisure travel – Brussels – Art cities: Antwerp, Bruges, Ghent
28 The Brussels Airport Management Roadshow June 2007
Airline Marketing Strategy
• Accelerate traffic growth – Network – Passenger traffic and cargo • Strategy – 1. Network carrier: Brussels Airlines & partners – 2. Long haul airlines – 3. Low fare airlines – 4. Cargo
29 The Brussels Airport Management Roadshow June 2007
Brussels Airlines •
New SNBA / Virgin Express merger airline is low fare / full service – 32% traffic share at BRU
•
Fares start from €49,99 all-in
•
780 weekly departures within Europe – new: Cagliari and Krakow – 45 ARJ / B737/ A319
•
Codeshares with European and long haul partner airlines
30 The Brussels Airport Management Roadshow June 2007
Brussels Airlines •
Unique network to Africa – 13 sub-Saharan destinations – 19 weekly flights
•
Fleet – 3 Airbus A330-300 – 4th A330 from next winter – 5th A330 planned
•
Network growth – Expansion Africa – North America
•
Alliance development – intention to join an alliance 31 The Brussels Airport Management Roadshow June 2007
Long Haul Airlines Brussels Airport objective 2011: connected with 20 of the 30 largest gateways to Europe Atlanta Boston Chicago Dallas/Fort Worth Detroit Houston Los Angeles Miami Montreal New York Philadelphia San Francisco Toronto Vancouver Washington
Abu Dhabi Dubai Johannesburg Nairobi
Bangkok Beijing Delhi Hong Kong Kuala Lumpur Mumbai Seoul Shanghai Singapore Tokyo
Sao Paulo
32 The Brussels Airport Management Roadshow June 2007
Year 2005: 6 Gateways
Atlanta Boston Chicago Dallas/Fort Worth Detroit Houston Los Angeles Miami Montreal New York Philadelphia San Francisco Toronto Vancouver Washington
Abu Dhabi Dubai Johannesburg Nairobi
Bangkok Beijing Delhi Hong Kong Kuala Lumpur Mumbai Seoul Shanghai Singapore Tokyo
Sao Paulo
33 The Brussels Airport Management Roadshow June 2007
Year 2006: 9 Gateways
Atlanta Boston Chicago Dallas/Fort Worth Detroit Houston Los Angeles Miami Montreal New York Philadelphia San Francisco Toronto Vancouver Washington
Abu Dhabi Dubai Johannesburg Nairobi
Bangkok Beijing Delhi Hong Kong Kuala Lumpur Mumbai Seoul Shanghai Singapore Tokyo
Sao Paulo
34 The Brussels Airport Management Roadshow June 2007
Year 2007: 13 Gateways
Atlanta Boston Chicago Dallas/Fort Worth Detroit Houston Los Angeles Miami Montreal New York Philadelphia San Francisco Toronto Vancouver Washington
Abu Dhabi Dubai Johannesburg Nairobi
Bangkok Beijing Delhi Hong Kong Kuala Lumpur Mumbai Seoul Shanghai Singapore Tokyo
Sao Paulo
35 The Brussels Airport Management Roadshow June 2007
Benchmark Airports Long Haul Network 2006
2005
2007
1. Zurich
21
1. Zurich
22
1. Munich
23
2. Munich
20
2. Munich
21
2. Zurich
22
3. Milan/MXP
15
3. Milan/MXP
16
3. Milan/MXP
17
4. Vienna
13
4. Vienna
13
4. Vienna
14
5. Manchester
12
5. Manchester
11
5. Brussels
13
10
6. Manchester
10 10
6. Copenhagen
9
6. Copenhagen
7. Dusseldorf
9
7. Brussels
9
7. Dusseldorf
8. Athens
7
8. Dusseldorf
9
8. Athens
9
9. Brussels
6
9. Athens
8
9. Copenhagen
8
10.Stockholm
5
10.Stockholm
6
10.Stockholm
6
Weekly frequencies development Brussels Airport: 51/week > 59/week > 96 week (5th ranking)
36 The Brussels Airport Management Roadshow June 2007
Brussels – USA Network 2007 • New: US Airways – daily to Philadelphia – as per 2 June
• New: Northwest Airlines – daily to Detroit – as per 16 June
• Network USA – 3rd European airport with all 6 main US airlines – 9 daily flights to 6 airports
37 The Brussels Airport Management Roadshow June 2007
Jet Airways Hub at Brussels Airport • ‘Brussels Inc’ – – – –
5 destinations India 5 destinations North America August 2007: 2 routes February 2008: 3 routes
• Partnership – Brussels Airlines – Brussels Airport
• Operations – B777-300ER and A330-200 – Westbound/Eastbound wave
• Passengers – 1 million passengers – OD/transfer/transit
38 The Brussels Airport Management Roadshow June 2007
Long Haul Opportunities 2008-2011
Atlanta Boston Chicago Dallas/FW Detroit Houston Los Angeles Miami Montreal New York Philadelphia San Francisco Toronto Vancouver Washington
Abu Dhabi Dubai Johannesburg Nairobi
Bangkok Beijing Delhi Hong Kong Kuala Lumpur Mumbai Seoul Shanghai Singapore Tokyo
Sao Paulo
39 The Brussels Airport Management Roadshow June 2007
Low Fare Airlines • ELFAA: European Low Fare Airline Ass.: 11 airlines – 106 million passengers – 83% of seats filled – 400 aircraft •
average age under 4 years
– minimised fuel burn and CO2 emissions
• Brussels Airport 2006 – Virgin Express integrated in Brussels Airlines •
offers B-lite one way fares
– 2 ‘ true’ low fare airlines • Vueling • SkyEurope
• modern aircraft • high seat load factors
– 30% share of scheduled intra European traffic
– only 2% of European scheduled frequency – growing competition from regional airports
40 The Brussels Airport Management Roadshow June 2007
Low Fare@Brussels 2007
41 The Brussels Airport Management Roadshow June 2007
Leisure & Low Fare • Homebase for the two main tour operator airlines • Jetairfly (TUI) – 8 B737 – 1 B767 for Caribbean flights
• Thomas Cook Airlines – 6 A320 – 1 B767 Caribbean, Africa, Asia (Martinair)
• Growing number of scheduled and seat only flights
42 The Brussels Airport Management Roadshow June 2007
Cargo: 6th Airport in Europe Frankfurt
2036
Paris/CDG
1772
Amsterdam
1521
London/LHR
1259
Luxemburg
743
Brussels
720
Cologne
691
Milan/MXP
412
Liege
412
Madrid
316
East Midlands
276
Hahn
254 0
200
400
600
800
1000
1200
1400
1600
1800
2000
2200
Tonnes cargo (000) 43 The Brussels Airport Management Roadshow June 2007
Cargo Marketing
Results (weekly calls) from 12 to 20 calls from 3 to 6 calls new with 5 calls new bilateral 7th freedom new belgian airline
44 The Brussels Airport Management Roadshow June 2007
Airline Marketing Team •
Léon Verhallen – 18 years at Amsterdam Schiphol – lead AMS to Routes Airline Marketing Awards in 1997, 2000, 2002, 2003, 2004 – joined April 2006
•
Stefan Hollands – 5 years Planning & Alliance Mgt. at Sabena and Swiss; 1 year SH&E – joined October 2003
•
Mark Povall – 3 years at British Aerospace; 6 years at Liverpool Airport – joined April 2006
•
Philippe Fierens – 10 years in the forwarding industry: Kuehne & Nagel, EGL, TNT Express – joined September 2006 45 The Brussels Airport Management Roadshow June 2007
Airline Marketing. In the Very Heart of Europe
46 The Brussels Airport Management Roadshow June 2007
Thank you & Questions
47 The Brussels Airport Management Roadshow June 2007
