Think Tank Report: Kahului Airport Could Generate $935 Million with Private Lease

A new report by Reason Foundation, a nonprofit think tank dedicated to free markets, found Hawaiʻi’s two largest airports could be worth up to $3.6 billion combined via a long-term lease to private airport companies and investors, according to the organization’s press release.

According to the study, Honolulu’s Daniel K. Inouye International Airport could generate $2.7 billion and Kahului Airport could get $935 million through a long-term lease.

However, the airports that are owned and operated by the State of Hawaiʻi Department of Transportation have have more than $2.5 billion in debt, according to the press release. After paying off the state’s existing airport bonds, as required by federal law as part of any lease deal, the state’s net proceeds from such a long-term lease of the two airports would total about $1.1 billion.

Hawaii could spend that money modernizing existing infrastructure such as aging bridges and roads, funding new projects in its long-range transportation plans, or paying down existing debt, the press release said.

The repeated legislative efforts to shift control of Hawaiian airports to an airport authority are another consideration for the state. A long-term lease with the private sector, as described in the Reason study, would protect the state and the airports from such takeover threats for decades. Most long-term airport leases of this nature would be for 40 to 50 years. 

“Many of the world’s best airports are already managed by private companies under similar arrangements, including London’s Heathrow and Gatwick, Athens, Copenhagen, Paris, Rome and Sydney,” said Robert Poole, author of the report and director of transportation at Reason Foundation.

“The long-term lease would be a public-private partnership that would completely protect Hawaiʻi’s taxpayers and air travelers by setting specific customer service and performance benchmarks that must be met by the private partner. It would also lay out specific maintenance, upgrades and other investments the company would have to make throughout the lease.”

In July 2021, an unsolicited $17 billion offer to buy Sydney International Airport, Australia’s largest airport, was made by a group of infrastructure investors. Despite the airport’s traffic still being a fraction of its pre-COVID-19 levels, the offer was 26 times the standard multiple of Sydney’s pre-pandemic cash flow.

The Reason Foundation study used a 20-times multiple in its “high” value calculations for US airports like Honolulu and Kahului. The news from Australia suggests that infrastructure investors value airports for their long-term prospects, and Hawaiʻi could likely get the high-end values estimated in the Reason study, or perhaps even more.

The Reason Foundation study analyzed 31 large and medium US airports, finding that Los Angeles International could be worth $17.8 billion, San Francisco International and Dallas-Fort Worth International Airport could each be worth more than $11 billion, and Chicago O’Hare International Airport could be worth more than $10 billion.

The study— “Should Governments Lease Their Airports?”— is available here. The full pdf is here. And answers to frequently asked questions about airport leases and public-private partnerships are here.