As can be seen by the list of projects identified in these pages, there continues to be significant activity in the airport sector with a number of new regional airports currently under development. We have also witnessed a marked increase in the quantity of airport privatizations over the past few years as governments look to ‘recycle’ their capital out of these assets to shore up sagging balance sheets or fund new connectivity projects.
However, airports have also come under significant pressure of late. In London and Sydney, for example, local government clearly recognizes the need to add incremental capacity to its airports but is increasingly being stymied by local populations who are justifiably concerned about the increase in noise, air pollution and traffic related to expanded or new airports.
For its part, port traffic has recovered significantly from the low-tide of the global financial crisis and, today, we are starting to see renewed activity in the sector. Much like the airport sector, many ports are currently in the process of being privatized or refinanced and – in some cases – concessions are coming to the end of their lifespan, resulting in important renegotiations.
But while many ports are feeling the pressure of capacity constraints, it must be noted that these challenges often have more to do with their supporting infrastructure than the need to expand the port itself. City governments will therefore need to place increased focus on the interconnections between their ports and their cities to effectively enhance capacity and throughput. As a result, we will likely start to see a much greater focus being placed on the development of intermodal terminals on the periphery of both ports and cities. In this regard, global connectivity will be driven by an individual cities’ ability to deliver local connectivity.
While there are also a number of impressive railway projects currently under development around the world, it is the adoption of high-speed rail networks that will bring about some of the most important changes in global connectivity within the urban setting. Having proven itself as a viable technology in Europe and Asia, high-speed rail projects are now underway in almost every corner of the world from the Americas to Africa.
High-speed rail also offers cities a practical alternative to building or expanding airports and – in a growing number of cases – city governments have opted to link to airports or ports in neighboring cities using high-speed rail rather than develop duplicate assets within their own jurisdictions.
As governments and private enterprise look to improve their cities’ global connectivity, there are a number of looming challenges on the horizon that must be overcome. For one, planners must recognize the potential for ongoing economic turmoil in global markets. Given that most airports, ports and railways require high levels of throughput to be cost-efficient, the potential for economic slowdowns must be factored into the cost calculations of any given project.
The need for integrating planning and funding for the various primary and support assets must also be well understood. Indeed, there is little point in developing plans for a new airport or port without first gaining a clear view of how other connecting assets such as roads or railways are impacted. So, for example, while a port operator may want to expand its facilities, it would need to work closely with the related road and rail owners to ensure that capacity is increased in step, which often leads to complex funding challenges (particularly in instances where one or both are privatized).
Likely the biggest challenge, however, relates to the introduction of carbon pricing in many jurisdictions. On one level, the impact of a carbon price may very well change the economic viability of both ports and airports which tend to emit a significant amount of carbon in their operations. However, on another level, the resulting change in energy sources may also have a massive impact on ports which – in many jurisdictions – are driven by imports and exports of fuel such as coal and oil and the loss of this inbound or outbound traffic may change the economics of ports entirely.
However, regardless of these challenges, the outlook for global connectivity infrastructure looks fairly strong in the medium to long-term. And while much will depend on the aspiration and vision of local and national governments, it seems fairly clear that – to remain competitive and productive in global markets – activity in this sector will continue to grow.
By Graham Brooke, KPMG in Australia