BUILD-OPERATE-TRANSFER MODEL AS AN
AIRPORT PRIVATIZATION STRATEGY:
APPLICATION OF BOT MODEL AT AIRPORT
TERMINALS IN TURKEY
Dr. Ünal Battal
Anadolu University
Turkey
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Air transportation sector requires large capital investments
– to modernize aircraft fleets,
– improve airport infrastructure and
– introduce more sophisticated air navigation systems.
These large investments, together with a redefined role for the state, are
transforming the air transportation sector.
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Private sector participation in airports, through ownership,
management, or new investment programs, can take many forms,
including sale, concessions and build-operate-transfer (BOT).
Developing countries trying to promote private sector participation in
airports could choose a combination of the two options, beginning
with a BOT model that gives way to corporatization with full or partial
divestiture.
OUTLINE
 In the first part of this presentation, airport privatization strategies are
generally defined.
 AIRPORT PRIVATIZATION STRATEGIES
– Introduction
– Privatization Strategies
 In the second part, BOT model is explained in details such as legal
issues in Turkey
 APPLICATION OF BOT MODEL AT AIRPORT TEMINALS IN TURKEY
– The Legal Frame and Basis of the BOT Model
– The Features and Contracts of the BOT Model
– Supervising in the Model of BOT
– The Schedule in the BOT Model
 in the last part, Airport BOT model applications in Turkey are
discussed.
 APPLICATIONS OF TERMINAL OPERATING WITH BOT MODEL
• CONCLUSION
AIRPORT PRIVATIZATION STRATEGIES
Introduction:
 Several motivations are driving the increasing interest in privatization
of airports:
– General constraints in public budgets
– Capacity bottlenecks on the ground and in the air
– Changes in airport markets, such as commercialization and
globalization
– Escalating investment requirements
– Interest in airports as catalysts for regional economic development
– A growing need, in the economic downturn, for airports to do more
with less
 From the perspective of the private sector, airports are an attractive
investment:
– Airports operate as part of the dynamic growth industry of
transportation.
– Airports are an essential element stimulating and benefiting from
both commerce and tourism.
– Airports generate substantial revenues in hard currencies.
– Airports represent an essential infrastructure with a near
monopoly on the services provided.
– Most airports enjoy good credit ratings.
All these elements combine to make privatization an attractive
investment.
Privatization Strategies
There are a variety of airport privatization strategies:
• Concessions (long-term):
– One airport
– System of airports
• Sale:
– Complete privatization
– Phased or partial privatization
• Acquisition of strategic investor generally followed by sale of
remaining shares in the open market and/or to selected
national groups
• Build-operate-transfer (BOT)
Privatization Strategies
• Approach to Airport Privatization: Options
Privatization Strategies
The BOT approach is widely used for several reasons:
• It taps into a different pool of capital than is normally
available for public infrastructure projects, thereby
expanding the range of potential funding sources.
• Private consortium are often able to design and build
large facilities in significantly less time than is possible
via traditional government procurement methods.
• Both the up-front cost and the operating costs may be
lower in a facility that is designed, built and operated by
a single team interested in long-term profitability.
• BOT is a way of shifting many of the risks of project
development from the public sector to the private sector.
APPLICATION OF BOT MODEL AT AIRPORT
TEMINALS IN TURKEY
The Legal Frame and Basis of the BOT Model:
• 3996 numbered “The Law about Having Investments and
Services done in the Frame of BOT Model”
• BOT model is known as the private financing model
upon its specified definition in the law numbered 3996
• Potential revenue rights giving by the government in the
frame of an administrative contract for a specific period
to a private law capital company
The Features and Contracts of the BOT Model:
• The model structurally acquires entity on the pivot of
privilege
• Services are given in the frame of public service The
Concession Agreement for a specific period of time
• Investments transfer to the public administration at the
end of the period of the concession agreement
• The model’s being successful is affiliated to the
feasibility and profitability of the investment
• The investors undertakes all the financial risks of
investment in the model
The BOT model under the roof of The Concession
Agreement consist of sub agreements:
• Financing agreement,
• Construction agreement,
• Operating agreement,
• Security agreement,
• Insurance agreement and
• Guarantee agreement of the services to be bought by
the public administration
Supervising in the Model of BOT:
• Public administration is responsible for auditing frame of
public service principles such as
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price,
Quality,
Continuity,
Regularity,
Equality,
Objectivity and
General benefits
The Schedule in the BOT Model:
• The agreements related to the application of the BOT
model are at most 49 years.
– The investment amount,
– the repayment periods of the loans provided for the investment,
– the concept of the project,
– the amount of the capital and
– operation principles
are taken into consideration for determining the agreement period
APPLICATIONS OF TERMINAL OPERATING
WITH BOT MODEL
State Airports Authority Directorate General (DHMİ) is
responsible for
• licensing,
• tendering,
• building and operating of airports,
• air traffic control,
• airport management,
• ground services,
• airlines and air safety in Turkey.
APPLICATIONS OF TERMINAL OPERATING
WITH BOT MODEL
Three passenger terminals consist of
• İstanbul Atatürk Airport International Terminal,
• Antalya Airport First International Terminal and
• Antalya Airport Second International Terminal
were given to private sector for operation by using BOT
model.
The same BOT model is to be used for the three new
passenger terminals including
• Ankara,
• İzmir and
• Dalaman Airports.
First and Second International Terminal of
Antalya Airport
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First Terminal:
Operation start on 01.04.1998
54,000 m2 terminal building
Capacity 5 million passengers/year
12 passenger gates
60 check-in desks
725 capacity multi-story car park
Cost of project is 65 million USD
Operation period 9 years
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Second Terminal:
Operation start on 07.04.2005
91,454 m2 terminal building
Capacity 5 million passengers/year
12 passenger gates
45 check-in desks
750 capacity multi-story car park
Cost of project is 85.5 million USD
Operate period 3 years, 5 months
and 26 days
Domestic and International Terminals of
İstanbul Atatürk Airport
• Private company operated the terminal from 10 January,
2000 to 2 July, 2005
• 264,000 m2 terminal building
• Capacity 20 million passengers/year
• 23 passenger gates, 224 check-in desks
• 7076 car capacity multi-story car park
• Cost of project is 600 million USD
• In 2005 same private company has won the concession
agreement to operate the Atatürk Airport for 15.5 years
at amount of 3 Billion USD
Domestic and International Terminals of
Ankara Esenboğa Airport
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Operation start on 16.10.2006
167,000 m2 terminal building
Capacity of 10 million passengers/year
18 passenger gates,
105 check-in desks
4000 capacity multi-story car park
Cost of project is 188.7 million USD
Operation period 15 years and 8 months
International Terminal of Dalaman Airport
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Operation start on 08.09.2006
95,587m2 terminal building
Capacity 5 million passengers/year
7 passenger gates
60 check-in desks
1000 capacity multi-story car park
Cost of project is 72.4 million USD
Operation period is 6 years, 5 months and 20 days
International Terminal of İzmir Adnan Menderes
Airport
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Operation start on 107,899 m2 terminal building
Capacity 5 million passengers/year
9 passenger gates
60 check-in desks
2200 capacity car park
Cost of project is 125 million USD
Operation period is 6 years, 7 months and 29 days
CONCLUSION
• Especially, because of DHMİ’s philosophy of selling the
citizens’ property to the companies who quoted the
highest and fill up its box, architectural projects being
told of are prepared costly and flamboyant
• Prequalification conditions are hold very high or detailed
and applicant numbers and varieties are restricted, and a
big sum is requested thus the costs of terminal operating
are increasing.
• Airline companies are squashed with increasing airport
costs, and tourism agents try to dissolve these cost in
hotel and voyage packets
• While privatizing the terminal the opinions of airline
sector, carriers and tourism agents are not asked
CONCLUSION
• Monopolistic terminal operating system, which will be
created in near future, will affect airline and tourism
associations in a negative way. Contracts done for 15-20
years are chaining the sector like a collar.
• It is a subject of critique to welcome tourists who have
20,000-30,000 $ national income to a country with
luxurious and magnificent terminals whose citizens have
6,000-7,000 $ national income, after comparing other
countries’ examples of terminals.
• Terminal constructions are finished before the required
period to extend the operating duration without paying
attention to its quality of construction. However, after the
start of using the terminal, because of lack of the quality,
malfunctions are encountered. In addition to this,
terminal’s being completed than the required time limit
creates no profit for the government.