BAA USA Purchased For $50M Investment Firm Sees Good Value In Airport Market
When BAA brought its developer model to Pittsburgh International (PIT) in 1992, industry professionals were baffled. What possible benefits could a third party bring to the table, they pondered. Why give up revenue to pay a developer? Determined to prove its critics wrong, BAA USA set out to demonstrate it could develop a quality program, and drive sales and customer service better than the traditional all-operator model – in effect paying for itself by increasing revenues. At PIT, the company has showcased many of these qualities, especially from a sales performance standpoint. Since 2000, PIT has posted the highest sales per enplanement in ARN’s Fact Book every year compared to all other airports reporting their sales.
The company has since convinced three other airports its approach to concessions would best suit their facilities: Baltimore/Washington International Thurgood Marshall (BWI), Boston Logan International (BOS) and Cleveland-Hopkins International (CLE). Apparently, the believers aren’t limited to airports. Investment firm Prospect Capital Corp. spotted good value and growth potential in BAA USA and last month bought it for $50M. Although the company’s name will change to AIRMALL USA, its current management team remains intact.
In the following interview, Mark Knight, president of AIRMALL, talks to Pauline Armbrust about his goals for the company, outlook for the developer model and why Prospect is a good fit.
Armbrust: How does this transaction benefit AIRMALL and its airport business partners?
Knight: We have an owner who really sees the value in our business model, is very excited by it and has embraced the concept. They will support our growth and help us prosper. That’s really exciting for us; we have a very strong owner that is very interested in our success and growth. From our business partner standpoint, the really good news is that our owner isn’t an operator, they are an investment company. They acquired us for our stability, our management and our ability to deliver over time. So from the airport standpoint, they’re going to get the same management team, style and commitment they’ve had over the last 20 years, building and sustaining great airport programs. That’s really exciting for all the key stakeholders.
Armbrust: You’re remaining as president. What about the rest of the management team?
Knight: The entire management team is intact and they [Prospect] wanted that commitment from management. I’ll lead the U.S. team as I have done for several years, and all of our key managers are in place, as well.
Armbrust: Do you have a personal investment stake in the company?
Knight: No, I do not have a personal investment stake.
Armbrust: Can you just explain a little bit more about Prospect Capital and why they saw you as a good fit for their investment portfolio?
Knight: Prospect is an investment company with an investment in interest in us. They provide financing many different companies, mostly small and medium-sized companies. It is my understanding we are Prospect’s largest single investment to date, which is pretty interesting. Their whole purpose is to buy stability. They buy companies with a proven track record, hold them. They’re not so much focused in one particular discipline but on companies that aren’t broke and provide a steady stream of income for their shareholders. They pay pretty heavy dividends, and that’s what they’re really looking for. They like our stability, but they also like the model; they can see the upside potential, as well, which excites them.
Armbrust: So they see growth in the airport marketplace?
Knight: Absolutely. They love the model. They think the model makes all the sense in the world and they certainly want to support us in our growth in the U.S.
Read the entire interview with Mark Knight in the September issue of Airport Revenue News. If you are not a subscriber, click here to subscribe.