Lockheed Looks to Expand Its Airport Business : Aviation: Opportunities outside the U.S. are increasing as more countries improve and, in some cases, privatize facilities.
After quietly and profitably running Burbank Airport for decades, Lockheed Air Terminal Inc., expanded slowly in recent years to provide services to 20 other U.S. airports.
But the company’s most promising expansion may be overseas, thanks to worldwide demand for new, state-of-the-art airports and a privatization movement taking hold in many countries. That is, if Lockheed can keep its momentum in the face of competition from other companies awakening to the growing opportunities for airport management abroad.
“A significant number of international airports will be privately operated and we expect to have our fair share,” said Viggo Butler, president of the subsidiary of Calabasas-based Lockheed Corp.
At the moment, the only foreign airport Lockheed manages is the Lester B. Pearson International Airport in Toronto, Canada. The company was a partner in a group that built the $480-million terminal, which opened in 1991 and includes a shopping center. Lockheed is now a minority owner and still manages that terminal, which has been a money maker from the start, the company said.
But the next stage of growth in the airport market worldwide seems to be from developing nations that want to build modernized airports.
Lockheed is already involved in some airport projects in the former Soviet Union.
In Khanty-Mansiysk, an autonomous oil-producing region of Siberia, the government hired Lockheed to draft a development scheme for a new terminal. Currently, Khanty-Mansiysk depends on barges to transport cargo, but its waterways are frozen all but four months a year, so the region needs an airport ready to handle cargo year-round.
In Turkmenistan, also in the former Soviet Union, Lockheed led a consortium that is now finishing a $150-million runway and airport terminal, installing everything from conveyor belts to handle baggage, to air conditioning in the sweltering airport.
Regions once geared only for travel behind the Iron Curtain must now update their airports to accommodate Western air traffic, said Robert Aaronson, executive vice president of Lockheed Air Terminal.
“Airports, unlike most other infrastructure, generate most of their revenues in hard currency--hard foreign currency,” which is why developing nations are interested in privatizing airports, said Robert Poole, president of the Reason Foundation, a Los Angeles-based economic think tank that specializes in privatization issues.
Developing nations also see airport expansion as a necessary part of economic development, said Hensley Evans, manager of the international privatization group of Price Waterhouse in Washington.
Meanwhile, more developed countries are privatizing their airports in search of cheaper ways to run or expand them. Australia might sell some of its 23 airports to the private sector. Lockheed would like to bid on the Australian airports if they are put up for sale, and the company is looking into similar projects in Eastern Europe, South America and Asia.
In the airport development and management business, Lockheed Air Terminal “is really the only real U.S. player on a world scale now,” Poole said.
But others are hastening to get in on the boom. A unit of Hughes Aircraft Co. is completing negotiations with the airport authority of Trinidad and Tobago. Hughes will lead an international team that will build a new $80-million terminal in that sunny, oil-producing former outpost of the British empire.
And Hughes said it has completed studies for the Ukraine on ways to upgrade that country’s airports. One reason is that the Ukraine wants to transform the Crimea, site of successive military invasions, into a tourist spot, said Dan Reeder, spokesman for Hughes Aircraft Co.
Lockheed Air Terminal is girding itself to expand and meet any competition.
Since last fall, four new executives, including Aaronson, have been brought in to help steer the company into international markets. Aaronson is the former president and executive officer of the Air Transport Assn. of America, and was also director of aviation at the Port Authority of New York and New Jersey, where he was responsible for management of Kennedy International and La Guardia airports.
Lockheed is also awaiting word on its bid for a contract to supervise construction of a new airport terminal in Istanbul, Turkey. Lockheed has been asked by governments in Hungary, Argentina and Venezuela to make suggestions for possible airport improvement projects. And the company has completed a study on a possible new airport terminal in Beijing, at the government’s request.
The emerging airport market overseas, although promising, is marred by political uncertainties, warned Wolfgang Demisch, analyst for BT Securities Corp. In Canada, after last year’s parliamentary elections, the new government withdrew from an agreement to hire private companies, including Lockheed, to revamp two more terminals at the Toronto airport.
But Lockheed’s Butler said the risks of airport development and management are not as great as in other enterprises. After all, an airport amounts to a public utility, and so “You have a certain measurable traffic that goes through these cities and you can predict over time what that traffic will be,” he said.
The company’s roots in the airport business date back to 1929 when it was called United Airport Co., then a part of United Airlines. The company was sold to Lockheed Corp. in 1940, said Butler, and it once owned and operated Burbank Airport.
In 1978, it sold the airport to the Burbank-Glendale-Pasadena Airport Authority, but Lockheed stayed on as airport manager and now manages the complex there, overseeing aviation safety, maintenance, construction and a host of other operations.
Although Lockheed’s attention is mostly focused overseas, the company still hopes to line up more domestic contracts.
When Richard Riordan was campaigning for mayor, he talked of leasing all or part of Los Angeles International Airport to the private sector to raise additional money for the city. The suggestion has since been shelved, but not for lack of effort by Lockheed Air Terminal, which generates about $100 million of Lockheed’s $13 billion in annual revenue.
The company poured $158,000 into lobbying city officials for privatization in 1993--the second-largest corporate lobby to the Los Angeles city government that year.
And if Riordan ever revives his plans to privatize the airport, Lockheed officials promise they’ll be first in line to bid on that project, too.