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Privatization has transformed the transport sector over past decade

Article - February 23, 2016

Mayor Jaime Nebot’s decision to the hand the management of the José Joaquín de Olmedo International Airport, the city’s main bus terminal and the Port of Guayaquil over to private firms has turned them into profit-making machines. And the companies in charge are using these profits to fund their expansion plans.

The first thing a visitor notices after landing at José Joaquín de Olmedo International Airport in Guayaquil is waterfalls and orchids. The second is the welcoming faces of well-trained airport staff. Then, they notice the shiny cleanliness of the installations.

Voted second in its category (8-12 million passengers) in the world for the last three consecutive years, the staff at José Joaquín de Olmedo International Airport have worked hard to present their best faces to visitors. It is, after all, where their first impressions of Guayaquil are formed. As Nicolás Romero Sangster, General Manager of the Guayaquil Airport Authority, says, “The airport is the city’s window to the world.”

Mr. Romero says the staff are taught that passengers are the most important individuals on the airport premises. A further emphasis is put on strict maintenance and upkeep of the terminal facilities. “The idea is to have the friendliest possible airport in order to alleviate any tensions that all passengers feel with the experience of air travel. This is achieved through the right environment, and with the right decor, but especially through thorough training for all staff so they transmit the most positive energy possible, with a constant smile and always being polite,” he says.

This winning culture dates back to 2000 when Mayor Jaime Nebot took over the reins of the city and launched a major overhaul of Guayaquil’s infrastructure. The mayor handed over the responsibility for the airport’s management to the private sector and its transformation over the next decade was such that José Joaquín de Olmedo became a regional engine of growth. Always the epicenter of Ecuador’s exports as the main maritime gateway, Guayaquil began growing its tourism sector little by little with its airport expansion; and today, it is the top destination in the country.

Though the infrastructure work that was carried out was extraordinary, says Mr. Romero, its effect on the city’s residents was even more significant. “I think that the most important part of the Nebot legacy has been regaining our pride in being from Guayaquil. We have recovered that strength,” he says, adding that when TAGSA, the winning concessionaire for the airport, took over, their main concern was that improvements to the facilities would not be respected by passengers.

They could not have been more wrong. The city’s residents were the first to take meticulous care of their new installations.

Today, José Joaquín de Olmedo International Airport is growing its passenger numbers by 14% per year and generates annual profits in excess of $20 million. Furthermore, it has managed to set aside $200 million from these revenues for the construction of a new international airport and airport city in Daular, some 25  miles from Guayaquil. And the new airport is set to become a regional cargo and transit hub extraordinaire.

Daular, the cherry on top of Guayaquil’s transformation
When completed in 2024, the Daular international airport will be one of Latin America’s largest. It will boast three landing strips (there are only six airports in the U.S. that have this capacity for simultaneous landings and none in Latin America) and capacity for 18 million passengers per year. It will also be an international logistics center, in the running with regional bigwigs like Lima and Panama.

Mr. Romero says that Daular will attempt to mimic the success of Dubai, which managed to become an engine of growth for the Emirates through capturing transit traffic between Europe and the Far East. Daular’s cargo facilities will solidly establish it as the most important commercial airport in the country, says Mr. Romero, who stresses that Guayaquil has been prudent in its planning.

“The logical way to do things is responsibly and with a cool head. We are not building a white elephant. We have known for some time that a new airport would be necessary but we wanted to build it when traffic actually demanded it. That moment will come around 2024,” he explains.

Construction on Daular is expected to begin in 2019 and plans are for a modern, top-of-the-line, environmentally friendly facility. “Architecturally speaking, we want it to become an icon of Latin America,” says Mr. Romero. All waste-water will be recycled for irrigation and the airport will be solar powered. Wooded areas will be cultivated to absorb as much carbon emission as possible, and abundant green areas will boast flora and fauna typical of the region. The city has already invested more than $6 million in municipal upgrades for the surrounding town, which will be home to Daular’s future staff.

“The logical way to do things is responsibly and with a cool head. We are not building a white elephant. We have known for some time that a new airport would be necessary but we wanted to build it when traffic actually demanded it. That moment will come around 2024”

Nicolás Romero Sangster, General Manager, Guayaquil Airport Authority

Watchful expansion is Guayaquil’s catchword
This emphasis on successful, yet sustainable, growth has also been a characteristic of Guayaquil’s land transport sector, and in particular its municipal bus transport. Since its rehabilitation in 2002, the city’s main bus terminal, Terminal Terrestre, has experienced a remarkable revival in both passenger numbers and local economic activity.

Comprised of the City of Guayaquil, Guayas Province Transit Committee and the Citizens Commission, the non-profit Fundación Terminal Terrestre (FTT) capitalized on a remodeling of the existing terminal launched by Mayor Nebot that has since converted it into a city landmark. Located in a three storey shopping mall in the north of the city, the terminal boasts 250 commercial outlets along with spaces for events, holiday festivities and community activities. In 2009 current general manager Eduardo Salgado Manzano took over the helm, and has since pushed to complete this transformation with a solid operational strategy that has resulted in a $12 million surplus.  

Today, the FTT oversees transport for 25 million passengers annually, with annual revenues exceeding $18 million. Such is its success that it has become a reference for other countries in the region, like Colombia, for the outstanding modernity of its installations, its effective use of technology in managing more than 3,000 daily routes and 65,000 passengers per day, and for a business model that has successfully combined leisure and shopping with a passenger and cargo terminal.

An artist’s impession of the future Daular Airport

“A well-connected country with good infrastructure and highways is critical for the economic growth of the city. In addition to the 25 million annual passengers we have at the terminal, we receive another 90,000 visitors per day who come because of our cargo terminal, to visit the shopping center, or simply to eat and wander around,” comments Mr. Salgado Manzano. “So we actually receive around 55 million people per year. That just goes to show the economic and social impact and importance of the main bus terminal in what is now Ecuador’s largest city and its commercial heart.”

The FTT is using its excess funds to expand, with two new satellite terminals planned for the north and on the coast. The Daule terminal, which will begin operations in 2016, will provide service to an additional four million passengers and the coastal terminal will boast capacity for 3.5 million more when finished in 2019.

“Guayaquil is a port city, and historically an industrial city, with a lot of entrepreneurialism,” says Mr.  Salgado Manzano. “The mayor has been working for years to transform it into a center for conventions, commerce and now tourism. This successful transformation has not only given us more prestige, but also greater self-esteem, and has attracted greater numbers of visitors, who come now to see Guayaquil’s boardwalks and piers and its beautiful avenues. Now the bus terminal has become another feather in the mayor’s cap.”

Smooth sailing
It is true that Guayaquil has always been, and is, first and foremost a port city, and the transformation that the city has seen has not been absent in its traditional port sector.   Contecon Guayaquil has been managing the Simon Bolivar Maritime Port since 2007. Contecon’s continual investment in infrastructure, latest technology and capacity boosting aimed at maintaining and exceeding international standards has since resulted in higher productivity levels and more efficient loading times, along with increased capacity to 1.5 million TEUS (20-foot standard containers). “Since Contecon took over the Guayaquil Port, there have been big improvements in operations, technology, training and time management. The service of the port runs efficiently with reduced times of handling, customer service oriented and friendly with the environment” says José Miguel Muñoz, CEO of Contecon.

“We take pride in keeping the economic heart of the country and the city alive. We know that by having a world class port, we allow business to grow knowing that the international markets are within reach; the country’s economy will be stable with foreign investment coming; and we are promoting new investments to support our the country grow.”

The port is currently ranked ninth among the ports of Latin America and the Caribbean; and Contecon’s 20-year concession agreement allows the time for further growth. The company intends to position the Port of Guayaquil, through which pass 70% of the country’s container trade exports.

Consequently, Guayaquil’s investment in air, land and maritime transport over the last decade has paid off in spades, not only in terms of the city’s growth, but also for Ecuador, and it has served as a benchmark in South America. This is true not only in tourism growth, but also in international commercial expansion. Indeed, the city has become the main engine of economic, social and investment expansion for Ecuador. Much of this success is due precisely to the city’s decision to invest in transport infrastructure.

Mr. Romero  adds that Guayaquil has long been an incubator for modern ideas coming from Europe that ran contrary to the conservative status quo in the country, and that this is still the case. While in the rest of the country the concept of 21st century socialism is thriving, in Guayaquil the focus is on development and entrepreneurship, says Mr. Romero. This is, of course, a direct reflection of the people who reside there. Not only are the people of Guayaquil bold and resourceful, Mr. Romero concludes, but they are also, “frank and direct, they don’t like wasting their time.” Nor do they like building white elephants.