Inchon Airport may be operated by foreign firm

In order to reduce the debt burden, Inchon Airport, slated to open in March, may see its operational rights transferred to a foreign company conditional to an investment being made. If this plan succeeds, this will be the first SOC project to have its operational rights transferred to a foreign entity.

The Ministry of Construction and Transportation and the Inchon Airport Corp. have devised this financial structure enhancement scheme following the Board of Audit and Inspection's judgment that normal operations will be difficult due to an excessive interest burden (410 billion won for next year).

Negotiations with the Ministry of Planning and Budget and other related agencies are currently underway.

MOCT and the airport authorities revealed that budget authorities have responded positively to the plan as the airport company, which is to be privatized, is able to legally transfer operational rights to raise foreign capital in accordance with Inchon Airport Corporation Regulations.

Henceforth, negotiations on the investment amount and management plan are being conducted with BAA (British Airport Authority), which operates more than 10 international airports, and Germany's Frankfurt Airport Authority.

These companies have demanded that the government make additional investments of 1-1.5 trillion won, considering the government support ratio is only 40% of the total 7.99 trillion construction cost. They are calling for the government's shareholdings to be raised to 50-60%. If this demand is accepted, a partial investment will be made to secure around 15% ownership and the companies will participate in the management of the airport. In addition, if operational rights are transferred, in the long term, foreign investors interested in the airport can be attracted and raise the shareholding ratio. After this, high-level restructuring will be implemented and proactive participation in the operation of the airport may be considered.

Song Jin-Hup jinhup@donga.com