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COLOMBO - San Francisco-based Bechtel Inc., Canada's Airport Development Corp. and Airways New Zealand are among the companies that may bid on a proposal to operate Sri Lanka's only international airport and invest $1.5 billion in expanding the facility, according to the head of a government panel.
 
The three are among a score of potential bidders that may submit formal expressions of interest to Airport & Aviation Services (Sri Lanka) Ltd. by October, said Ratna Sivaratnam, chairman of Sri Lanka's committee on airport and port development.
 
Sri Lanka needs an investor to expand the airport to meet anticipated annual growth of almost 10% in passenger and cargo traffic in the next five years, he said.
 
Tourism in the country is rebounding after government forces and Tamil Tiger rebels reached a cease-fire last year in the 20-year-old civil war that has left 65,000 people dead.
 
"Airport investments are much better than airline investments because they are essentially monopolies," said Peter Harbison, who heads the Sydney-based Centre for Asia Pacific Aviation. Sri Lanka, he added, "is a proven holiday destination and it's coming off a low base, so there's substantial upside potential."
 
The airport and port committee recommended to the government that Airport & Aviation Services, which runs Colombo's Bandaranaike International Airport, be sold for the funding, expertise development and efficient management'' of the facility.
 
The winning bidder will build the new facility, operate it for a specified number of years and then transfer control back to the government. In return for agreeing to fund the second stage of the airport's expansion, the buyer may get a stake of as much as 80% in Airport & Aviation Services, Sivaratnam said.
 
"Tenders will be opened early next year" after potential buyers evaluate the company, he said. 
Toronto-based Airport Development has reviewed the Sri Lankan project, said Nat Cohen, the firm's chief financial officer, adding the company hasn't yet decided whether it will bid.
 
Alterra Partners, co-owned by Bay Area-based Bechtel and Changi Airport Enterprise, a unit of the Civil Aviation Authority of Singapore, said the Sri Lankan airport expansion is an "interesting opportunity" and it will evaluate it "once the process becomes clearer."
 
About 550,000 tourists are forecast to visit Sri Lanka this year, from 396,000 in 2002, according to the government, which is trying to forge a permanent peace accord with the Liberation Tigers of Tamil Eelam to build on the cease-fire.
 
"If peace reigns, the main beneficiary will be the airport," Harbison said. Duty-free concessions and retail outlets will "add substantially to revenue and the value of the investment."
 
In July, 2001, rebels attacked the airport and the adjacent Sri Lanka Air Force Base, destroying half-a-dozen planes valued at $500 million belonging to SriLankan Airlines, the island nation's national carrier that's partly owned by Dubai's Emirates Air.
 
Earlier this year, the Sivaratnam panel released a report recommending the relocation of the air base to Hingurakgoda, where the Danish government has said it will invest $28 million to develop a runway.
 
"With the country regaining peace and as a result attracting more tourists there must be a visible reduction of military presence," the report said.
 
Mitsubishi Corp. and Taisei Corp. are already working on the first stage of Bandaranaike's expansion with a $100 million loan from the Japan Bank for International Cooperation.
 
The first stage involves improving and widening taxiways, the apron, water supply and sewerage systems, the construction of a 52,000 square-foot pier with boarding bridges, moving sidewalks and elevators and a 40,000 square-foot cargo facility.
 
Forecasts project that the airport will handle 3 million passengers and more than 140,000 tons of cargo this year with future growth pegged at 9% annually.
 
The second stage will involve the acquisition of 1400 acres of public land, the construction of a runway capable of accommodating new-generation airplanes, an aircraft repair and maintenance center, an arrival and a departure terminal, a shopping arcade, a cargo complex connected to the airport by rail and a multistory car park.
 
The existing airport will be converted to a domestic and regional terminal when the new complex is ready.
 
According to Sivaratnam, the Sri Lankan government can't afford the $1.5 billion needed for funding the airport and needs to take the build-operate-transfer option.
 
"We expect it to take one year to reach financial closure and get the project off the ground," he said.
 
Sri Lanka wants to make the airport a hub for travelers to South Asia and is modeling the airport on Dubai and Singapore's Changi. The Indian government plans to develop the southern Indian city of Bangalore, about 400 miles north of Colombo, into a hub airport.

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