As the privatization of airports progresses throughout the world, the economic value of these strategic assets must be determined from a commercial perspective, rather than the economic impact perspective, which is typically used by governmental agencies to justify their construction. This paper applies financial theory of asset valuation to commercial airports. The authors have selected 3 airports for valuation purposes: Gimpo, Kimhae and Jeju. These airports are ranked as the top 3 in terms of annual traffic volume, among the 16 airports operated by Korea Airport Corporation (KAC). The authors estimate the intrinsic value of 3 major airports; Gimpo, Kimhae, and Jeju, based on the discounted cash flow model at $1.8 billion. The ultimate price achieved depends on the individual expectations of potential buyers, their opportunity costs and entrepreneurial abilities, as well as the ensuing negotiations. This paper, therefore, provides a benchmark for determining airport valuation in the event of privatization.
Abstract