CAA to get $1.36b in upfront fee.

ISLAMABAD -- Pakistan Civil Aviation Authority (CAA) is expected to collect $1.36 billion in upfront fee over a period of 15 years following the outsourcing of key airports.

According to a presentation given to the cabinet last month, as far as the projected CAA share in revenues was concerned, 48% of the total airport revenues, including navigation, taxiway and baggage, over the concession period were outside of the project scope and would continue to accrue.

The approved transaction structure was based on a combination of upfront and variable fee.

With the upfront fee of $100 million, more than half of the revenues falling within the project scope will be provided to CAA.

Over 15 years, the variable fee accruing to CAA was estimated at $1.36 billion in nominal terms and $598 million in NPV terms while the actual value would depend on bids.

According to salient features of the concession agreement, the land tariff is unregulated while the air tariff will be revised by CAA every three years with 50% adjustment of cumulative inflation and the risk of remaining 50% increase will be passed on to the concession holder on expectation of operational efficiencies.

Read CAA issues new air traffic directives

The government will support the concession holder for opening and maintaining foreign currency accounts, making available foreign exchange, convertibility and transferability in order to meet foreign payment obligations.

design: Ibrahim Yahya

design: Ibrahim Yahya

Presentation was also given on the outsourcing of Islamabad International Airport.

The Aviation Division, in its presentation, explained that private sector participation in airport operations was an established and successful international practice for improvement in quality of services, unlocking the airport's revenue potential and attracting investment.

The cabinet was informed that worldwide privately operated airports accounted for 40% of the global air traffic, 40 of the highest...